Research Team

63. S. 2(22)(e): Deemed Dividend – To be assessed only in hands of Shareholder of lender company, and not in the hands of company who is not a shareholder in the lender company, though closely held company, and having common shareholders holding more than20% shares in each company.

Assessee Company had shown unsecured loan which was in the nature of Inter corporate Deposit, from another company having common shareholders, wherein common shareholders were holding 50% share in assessee company and holding more than 20% share in lender company. However, the assessee company was not holding any share in the lender company.

The learned AO treated the unsecured loan as deemed dividend under section 2(22)(e) by observing that both parties were closely held company and having common shareholders holding more than 20% shares in each company. The learned CIT(A) deleted the addition made by A.O.

Tribunal, upheld the order of CIT(A), stating that the provisions of sec 2(22)(e) can only be invoked in case of a shareholder who is holding substantial interest, and as appellant assessee is neither the beneficial owner or an registered owner provisions of sec 2(22)(e) cannot be invoked on assessee. (ITA No. 2259/Ahd/2016 (AY. 2007-08) dt 28.02.2022

DCIT v. Amit Intertrade (P) Ltd (2022) 194 ITD 585 (Ahmedabad)(Trib.)

64. S. 9 r. w. Article 13 of India- Mauritius DTAA – Income deemed to accrue or arise in India – Concept of beneficial ownership being a sine qua non to entitlement to treaty benefits, cannot be inferred or assumed in the absence of specific provision to that effect

The assessee is a company based in Mauritius and sold shares of an Indian company during the year and earned long term capital gains which was claimed exempt by the assessee taking benefit of India-Mauritius DTAA. The AO held that the assessee is a subsidiary of a Cayman Islands company and has no independent existence and its entire activities were controlled by its affiliates. Accordingly, AO held that the entire scheme of purchase and sale of shares was designed for the benefit of Cayman Island entity and lifted the corporate veil and denied treaty benefit to the assessee holding that the assessee is not the beneficial owner of the shares. DRP upheld the addition made by AO.

Tribunal held that unlike in Article 10 or 11 of the India-Mauritius DTAA, which specifically provides for beneficial ownership of interest or dividend in order to be entitled for treaty protection, there is no such provision in Article

13 of the DTAA. Therefore, Tribunal has remitted the matter back to AO for deciding the fundamental issue as to whether the requirement of beneficial ownership can be read into Article 13 of the India-Mauritius DTAA and only if the answer is affirmative, the question of beneficial ownership of shares can be examined by way of passing a speaking order by the AO.

Blackstone Fp Capital Partners Mauritius V Ltd. v. Dy.CIT (International Taxation) (2022) 217 TTJ 753

/ 214 DTR 158 (Mum)(Trib)

65. Sec 9 r/w Article 12 of India- USA DTAA: (i) When there is no make available of technology, skill or knowledge involved in carrying out services to the Assessee, payment received cannot be characterized as Fee for Technical services.

(ii) The payment made by the assessee on behalf of its AE to third party vendors outside of India, when reimbursed to the Assessee, cannot be taxed as royalty as the same were pure reimbursement and not an income in hands of the Assessee.

i. The Assessee is a US based company which was in the business of providing design and development services and engineering services of vehicle safety norms. The Assessee had an agreement of sub-contracting with the AE in question, to provide for the services as aforementioned, concerning the vehicle safety norms for a certain brand of cars in India & for a certain sum of

It was the contention of the AO that such services were in the nature of technical services and the revenue so received ought to be treated as FTS/Royalty in terms of the article 12 of India-US DTAA. This contention found support and was upheld by the Hon’ble DRP.

The Hon’ble ITAT held that, the technology would be considered as made available only when the person acquiring such knowledge is possessed of the same enabling him to apply in future at his own, without any aid by the service provider. Without the existence of this

element, there is no make available to the service recipient and hence the engineering services cannot be taxed in India as FTS/Royalty in view of the relevant article of the India-US DTAA.

ii. The Assessee made purchases of software on behalf of all its group companies from the third-party vendors. Out of the payments made, some were allocated as recoverable from the AE in question. The same were reimbursed by the AE at cost basis without any profit whatsoever. The AO treated this reimbursement of software charges as income from Royalty under section 9(1)(vi) and article 12 of the India-US DTAA which was upheld by the DRP.

The Hon’ble ITAT held that, the revenue has not made any case that the reimbursement had in it embedded any profit element. Also, that the Assessee was neither the ultimate beneficiary of the sums received nor has any services been given in this connection. Hence the reimbursement towards software charges cannot be taxed as royalty, as the same does not represent any income at the hands of the assessee. AY: 2015-16

Autoliv ASP Inc. v. DCIT, ITA No. 8126 (Delhi) of 2018

66. S. 9 : Accrual of income – fees received as per academic year – accounting as per financial year – fees accounted for as advance received and taxable only in the year when the corresponding services are rendered. [S. 9]

Assessee ran two schools which had academic years from August to May and June to March respectively. However, the assessee maintained books as per the financial year i.e. April to March. The tuition fee collected by the assessee for the period relating to the academic year that falls in the succeeding financial year was recorded as an advance received and shown as a liability in the financial statements. However, the AO taxed this amount as the assessee followed mercantile system of accounting.

On appeal, the Ld. CIT(A) deleted the addition made by relying on the decision of the Hon’ble SC in the case of Madras Industrial Investment Corpn. Ltd. v. CIT [1997] 91 Taxman 340/225 ITR 802 Ld. and held that if the receipts pertaining to a period beyond the financial year are included in the income of the year, the same would lead to distortion of income.

On Departments appeal before the Hon’ble Tribunal, the Tribunal relied on the decision of the Hon’ble Delhi HC in the case of Dinesh Kumar Goel [2011] 9 taxmann.com 188/197 Taxman 375/331 ITR 10 (Delhi) and held that income accrues only when the right is accrued by rendering of services and not by promise for services. Where the right to receive is anterior to the rendering of services, the income would accrue only on the rendering of services. Thus, the Tribunal confirmed the decision of the Ld. CIT(A).

DCIT v. Alcatel Lucent International (2022) 194 ITD 368 (Delhi)(Trib.)

67. S. 9(1)(i): Income deemed to accrue or arise in India – Business connection – Shipping business – Indian company an agent of independent status – Cannot be assessed as Agency PE of the assessee – DTAA-India – Mauritius [Art. 5(5)]

Held that since Indian company was an agent of independent status, it could not be considered as constituting agency PE of assessee. Order of CIT (A) is affirmed. (AY. 2013-14)

DCIT v. Arc Line. (2022) 193 ITD 263 (Mum) (Trib.)

68. S. 9(1)(i): Income deemed to accrue or arise in India – Business connection – Support service – Outsourcing of work to India would not give rise to a fixed place PE – DTAA-India- Mauritius [Art.5]

Held that Indian entity was remunerated at arm’s length price by assessee, which was also accepted by TPO of both entities, assessee had no business connection in India in terms of section 9(1) and had no PE and, thus, no further attribution of profits was to be made. (AY. 2012 -13)

ESPN Star Sports Mauritius SNC Compagnie v. DCIT (2022) 193 ITD 275 (Delhi) (Trib.)

69. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty Business of transmitting telecommunication signals to/from its customers – Income earned was not in nature of royalties – Not liable to tax in India – DTAA- India-USA [Art. 12(3)]

Held that business of transmitting telecommunication signals to/from its customers, income earned was not in nature of royalties within ambit of Explanation 2 to section 9(1)(vi) and article 12(3) of India -USA and it was not liable to tax in India. (AY. 2015 -16)

Intelsat Corporation v. ACIT (2022) 193 ITD 259 (Delhi)(Trib.)

70. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Consideration for resale /use of computer software – Payment is not payment of royalty – Not taxable in India – Not liable to deduct tax at source – DTAA- India-USA [S. 195, 201(1), 201(IA Art. 12)

Dismissing the appeal of the asseasee the Tribunal held that the amount paid by assessee Indian end-users/distributors to non- resident computer software manufacturer/ suppliers as consideration for resale/use of computer software through EULAs/distribution agreement was not payment of royalty for use of copyright in computer software and, thus, said payment did not give rise to any income taxable in India. The assessee is not required to deduct tax u/s 195 of the Act hence not held to be assessee in default under section 201(1) & 201(IA) of the Act. (AY. 2011-12, 2012-13)

DCIT v. Petrofac Engineering Services (P.) Ltd. (2022) 193 ITD 532 (Chennai) (Trib.)

71. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Right to use of copy right in a program – Information products and services – Not royalty – DTAA-India-USA [Art. 12]

Assessee is engaged in business of providing information products and services containing global business and financial news to organisations worldwide. It had appointed its AE on a principal to principal basis for distributing its products in Indian market and accordingly, received purchase price at arm’s length price. Assessing Officer treated said Indian receipts as royalty under provisions of act as well as India-USA DTAA. On appeal the Tribunal held that payments made for acquiring right to use product itself, without allowing any right to use copyright in product were not covered within scope of royalty the assessee had only granted access to its database and received payments for right to use of copyright in a program’ and not right to use program itself. Addition was deleted. (AY. 2015 -16)

Dow Jones & Company Inc. v. ACIT (2022) 193 ITD 564 (Delhi) (Trib.)

72. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Merely provided alloys, lease rentals received for such leasing out of alloys could not be treated as royalty – DTAA-India-USA [Art. 12]

Assessee-company, formed and incorporated in USA, was engaged in manufacturing glass fiber in India. During year, assessee had leased out alloys including rhodium and platinum owned by it to two companies in India, namely, OCIPL and OCIIPL and received lease rentals in respect of same – OCIPL and OCIIPL further sent same to OCSPL, a Singapore based company, for re- fabrication of bushings. Assessing Officer held that receipts of assessee on account of lease rentals was taxable as royalty as per section 9(1)

(vi) and article 12(3) of DTAA as it was earned out of leasing out license to use intellectual rights of economic beneficial rights of drawing and design of bushings. On appeal the Tribunal held that the assessee merely provided alloys, therefore, consideration for alloys could not be treated as royalty under section 9(1)(vi) as well as article 12 of DTAA between India and USA. (AY. 2013-14, 2014-15)

Owens-Corning Inc. v. DCIT (IT) (2022) 193 ITD 824 (Mum)(Trib.)

73. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – amount received for embedded software supplied along with the telecommunication equipment cannot be treated as royalty

Assessee is a company leading in tele- communication equipment and infra-structure manufacturer and supplier and derived income

from supply of tele-communication equipment. During the year, income in nature of fee for technical services (FTS) was offered by Assessee to tax in India. However, income derived from supply of telecommunication equipments to customers in India on offshore basis was not offered to tax as royalty on plea software is inextricably linked to the equipment supplied and that Assessee does not have any Permanent Establishment (PE) in India in terms of Article 5 of India- France DTAA. The AO held that Assessee has a PE in India in terms of Article 5 of Tax-Treaty and attribution of profit to PE can be made only in respect of supply of hardware. The AO by relying on the decision of AO in own case for AY 2006-07 held that software embedded to equipment is taxable as royalty under the Act as well as Treaty.

The Tribunal noted that the CIT(A) had reversed the decision of AO after considering the decision of AY 2006-07 which was not only reversed by the Tribunal but also upheld by the Hon’ble Delhi High Court. Further, the said decision was also upheld by the Apex Court while deciding the issue alongwith the case of Engineering Analysis Centre of Excellence Private Ltd. (432 ITR 471). Further, Tribunal relied on the orders of co-ordinate bench in own case for earlier years, wherein it was held that the amount received for embedded software supplied along with the telecommunication equipments cannot be treated as royalty. Also, the AO in subsequent year in own case had following decision of Apex Court in case of Engineering Analysis Centre of Excellence Private Ltd., not made any addition. Thereby, the Revenue appeal was dismissed.

DCIT v. Alcatel Lucent International (2022) 194 ITD 368 (Delhi)(Trib.)

63. S. 9(1)(vii): Income deemed to accrue or arise in India – Fees for technical services – Offshore maintenance and support services to Power Grid Corporation of India Ltd. (PGCIL)-Not assessable as fees for technical services – DTAA-India-USA [Art. 12(4)]

Assessee-foreign company provided offshore maintenance and support services to Power Grid Corporation of India Ltd. (PGCIL). Assessing Officer held that services rendered by assessee to PGCIL were taxable as fees for included services (FIS) under section 9(1)(vii) of the Act. On appeal the Tribunal held that since nature of services provided by assessee were repetitive in nature, it could not be conducted that such services make available any technical knowledge, expertise, skill, know-how or processes to PGCIL thus, receipts from PGCIL would not qualify as fees for included services under article 12(4)(a) and 12(4)(b) of India US DTAA. (AY. 2008-09 to 2014-15)

GE Energy Management Services Inc. v. ACIT (IT) (2022) 193 ITD 485 / 215 TTJ 7 (Delhi) (Trib.)

64. S. 9(1)(vii): Income deemed to accrue or arise in India – Fees for technical services – Royalty –  Reimbursement of expenses

– Costs recovered by assessee a non-resident for third party software which was integrated into assessee’s information technology infrastructure used for rendering services to an Indian company, would be taxable as fees for technical services/Royalty –  DTAA-India-Switzerland. [S. 9(1)(vi), 12]

Held that costs recovered by assessee a non- resident for third party software which was integrated into assessee’s IT infrastructure used for rendering services to an Indian company would be taxable as fees for technical services/ Royalty as per DTAA between India and Switzerland. on the facts of the case neither

undiluted benefit of software cost was passed on to RIPL nor did assessee recover amount as it is from RIPL authorities below were fully justified in including Rs. 3.89 crores in total income of assessee and charging it to tax at 10 per cent in parity with assessee suo motu offering Rs.20.04 crores to tax at same rate. (AY. 2016-17)

Rieter Machine works Limited v. ACIT (IT) (2022) 193 ITD 687 /93 ITR 447/ 217 TTJ 726 (Pune) (Trib)

65. S. 11: Charitable Trust – Registration granted u/s. 12A- Amendment to objects of trust- CIT(Exemption) approved objects- Exemption u/s. 11 valid. (S. 10(1)] , 12A, 13(1)(d))

Assessee was granted registration under Section 12A of the Act on 25 April 1975 and in year 1986, Assessee made certain modifications and amended the objects of the trust. The AO denied exemption under Section 11 of the Act on the ground that the Assessee has amended the objects without intimating the CIT(Exemption) and thus has violated the registration granted under Section 12A of the Act. Further the AO also held that the trust was formed for the benefit of a particular community and thus attracted Section 13(1)(d) of the Act. In the meanwhile, the CIT(Exemption) initiated proceedings for withdrawal of registration under Section 12A of the Act and then subsequently dropped the proceedings. Aggrieved by the AO order, the Assessee preferred an appeal before the CIT(A). The CIT(A) upheld the order of AO and denied exemption under Section 11 of the Act.

On appeal to the Tribunal, the Tribunal held that the main object for which the trust was registered was for the benefit of the members of the Daivadnya community. The purpose and objects of the trust was never changed or modified. The amended object clause was also for the benefit of members of the Daivadnya

community. The CIT (Exemption) approved the objects of the trust for registration under Section 12A which means that he was satisfied that it is not a particular group, rather, it is for the benefit of whole members of the Daivadnya community. Even after amendment to the object clause, there is absolutely no change. Accordingly, CIT(Exemption) initiated the proceedings for withdrawal of registration and then subsequently dropped the proceedings. Thus, the assessment order is void and thus, the Tribunal directed the AO to consider the exemption as per section 11 of the Act.

Daivadnya Samjonnati Parishad Mahajanwadi Mandal v. ITO (2022) 184 ITD 152 (Mum.)(Trib.)

66. S. 11 : Charitable Trust – Deficit – Allowed to be carry forward – Explanation 2 to Section 10(23C) applicable from AY 2022-2023

– Not applicable for year under consideration.

The Assessee had claimed deficit during the year under consideration and had also carry forward earlier year ’s deficit. However, the Ld. AO disallowed such carry forward of deposit holding that provision of Section 11 of the Act does not permit determination of deposit. On appeal to CIT(A), the CIT(A) relied on jurisdictional High Court judgment and various judicial precedents and allowed the deficit of the Assessee to be carried forward. Aggrieved by the same, the Department preferred an appeal before Tribunal.

The Tribunal relied on the decision relied by CIT(A) in case of MIDE (ITA No. 2652 of 2011) dated 20 March 2013 which is also approved by Supreme Court held that the deficit should be allowed to be carry forward in case of Assessee. Further, the Tribunal also drew attention to Explanation 2 to Section 10(23C) of the Act which states that income required to be applied or accumulated during previous year shall be made without any set off or deduction or allowance of any excess application of any of the year preceding

to the previous year. However, the Tribunal further stated that the amendment is applicable from 1 April 2022 i.e. AY 2022-2023 and thus will not be applicable to the year under consideration.

DCIT (Exemption) v. UTI Institute of Capital Markets (2022) 194 ITD 149 (Mum.)(Trib.)

67. S. 11 : Property held for charitable purposes – Application for registration for pending before CIT(E) – Pendency of appeal before CIT(A) – Justified in rejecting exemption [S.12A(2), 12AA]

Assessee was registered under Societies Registration Act and main object of assessee society was imparting education. Assessee was not registered under section 12AA. It filed its return of income claiming exemption under section 11. Assessing Officer disallowed same on ground that assessee was not registered under section 12A and made addition treating corpus fund receipts/donations as income of assessee. CIT(A) affirmed the addition. On appeal before the Tribunal the assessee contended that an application in Form no. 10A seeking registration under section 12A/12AA was pending before Commissioner (E) during course of appellate proceedings before Commissioner (Appeals) and same was granted by Commissioner (E) subsequently and, therefore, assessee was eligible to get benefit as per amendment in proviso of section 12A(2) of the Act. On appeal the Tribunal held that the assessee was unable to explain specific purpose for which such corpus fund was said to receive by it. Further since assessee society was not registered under section 12A/12AA, Assessing Officer was justified in rejecting exemption under section 11 and making addition treating corpus fund receipts/ donations as income of assessee. (AY. 2014-15)

Bhagawan Sree Mahayogi Lakshmamma Educational Society, Adoni v. ITO (2022) 193 ITD 591 (Hyd) (Trib.)

68. S. 12AA : Procedure for registration – Trust or institution- Education – Providing education and training in field of remote sensing for preservation of environment through optimization of land use and natural resources – Specialized post-graduate degree – Constituted education for charitable purpose – Entitled [S. 2(15)]

Held that the assessee society which is providing education and training in field of remote sensing for preservation of environment through optimization of land use and natural resources and it also provided specialized post-graduate degree courses in that subject in association with a recognized university, it will, therefore, be clear that objectives of assessee constituted education for charitable purpose as understood under section 2(15) of the Act Entitled registration. (AY. 2019-20)

Haryana State Remote Sensing Application Centre v. CIT (E) (2022) 193 ITD 706 / 94 ITR 10 (SN) (Delhi) (Trib.)

69. S. 14A : Disallowance of expenditure – Exempt income – Interest – Own capital and free reserves – More than investments- No disallowance is to be made [R. 8D]

Held that own capital and free reserves of assessee were much more than investment made by assessee which was yeilding exempt income to it, a presumption would arise that investment was made out of interest free funds generated or available with company . No disallowance under section 14A is to be made (AY. 2011-12)

DCIT v. Godawari Power & Ispat Ltd. (2022) 193 ITD 869 (Raipur)(Trib.)

70. S. 23: Income from house property –  Annual value – Builder – Unsold flats – Stock in trade – No addition can be made on account of deemed rental income could be made in respect of unsold stock of flats held as stock in trade up to assessment year 2017-18. [S. 22,  23(5)]

Held that where assessee had been showing income derived from sale of flats as and when they were sold and flats remaining unsold were shown as inventories in balance sheet of assessee as stock-in-trade no addition on account of deemed rental income could be made in respect of unsold stock of flats held as stock in trade upto assessment year 2017- 18. Amendment had been brought in statute in section 23(5) from assessment year 2018- 19 providing a moratorium period of two years, hence, no addition could be made for assessment year 2018-19. (AY. 2016-17 to 2018 -19)

Pegasus Properties (P.) Ltd. v. DCIT v. (2022) 193 ITD 514 (Mum)(Trib.)

82. S. 32: Depreciation – Additional depreciation – Put to use in earlier year – 20 per cent of actual cost of plant or machinery – Put to use less than 180 days – 50 percent of additional depreciation allowable. [S. 32(1)(iia)]

Assessee engaged in manufacturing of ball bearing and rubber products acquired and installed certain plant and machinery. Assessee claimed depreciation at rate of 50 per cent of allowable additional depreciation i.e. at rate of 10 per cent instead of 20 per cent of actual cost. Assessing Officer disallowed the additional depreciation on the ground that machinery was installed in earlier year. CIT (A) allowed the additional depreciation. On appeal the Tribunal held that very objective of insertion of a new proviso to section 32(1) is to remove discrimination and therefore it could be safely said that same is just a curative amendment and even under section 32(1) there is no provision prohibiting balance additional depreciation in succeeding year. (AY. 2015-15)

DCIT v. National Engineering Industrial Ltd. (2022) 193 ITD 420 (Kol) (Trib.)

83. S. 35AB : Know-how – Technical know-how – Allowed in initial year – Balance of claim in succeeding 5 years should be allowed as deduction without adjudicating on admissibility of claim.

Held that once claim was allowed in first year of payment of lump sum consideration, balance 5 instalments had to be allowed as deduction in succeeding 5 years without necessity of looking into admissibility or otherwise of claim. (AY. 2000-01, 2001-02)

Mercedez-Benz India (P.) Ltd. v. DCIT (2022) 193 ITD 624 (Pune)(Trib.)

84. S. 35AD: Deduction in respect of expenditure on specified business – Hotel – The assesseee need not to construct entire building by itself or own building and land – Eligible deduction on the amount spent in the part of construction of building. [S. 35AD(4)]

Assessee engaged in business of running hotels and resorts. It claimed deduction under section 35AD on ground that it had incurred expenditure towards construction of new Five Star Hotel. The Assessing Officer disallowed the expenditure on the ground that the assessee

did not build hotel building and had been operating same on leasehold land and building and intention of section 35AD is to promote fresh investment but not to accommodate old investments and give tax benefits. CIT (A) confirmed the disallowances. On appeal the Tribunal held that section 35AD do not specify that assessee has to construct entire building by itself or own building and land. Provisions only specify that specified business should be in nature of building and operating a new hotel of 2 star or above category as classified by Central Government. From lease deed produced by assessee it was apparent that assessee was also required to spend considerable amount for constructing a portion of building such as interior civil works, plumbing works, electrical works and other civil work relating to erecting equipment, elevators, fire fighting equipment, etc. Therefore, it could not be said that assessee had not participated in constructing building, though basic civil structure was constructed by lessor. Therefore, where entire investment made by assessee was for constructing a portion of building and for operating a new hotel of category specified under Act, assessee would be entitled for benefit of deduction under section 35AD and accordingly, Assessing Officer was to be directed to grant deduction to assessee under provisions of section 35AD of the Act. (AY. 2012-13)

Taj GVK Hotels & Resorts Ltd. v. ACIT (2022) 193 ITD 304 (Hyd)(Trib.)

85. S. 35DDA : Amortisation of expenditure – Voluntary retirement scheme – Slump sale – Allowable as deduction [S. 50B]

Assessee sold one of its division under slump sale and paid VRS payment to workers of said division. Assessee claimed VRS expenditure under section 35DDA. The Assessing Officer denied said claim. On appeal the Tribunal held that section 35DDA would not prevent assessee from claiming deduction with respect to VRS expenditure even in case of slump sale. (AY. 2005-06)

Peninsula Land Ltd. v. DCIT (2022) 193 ITD 366 (Mum)(Trib.)

86. S. 36(1)(iii) : Interest on borrowed capital – Land – Interest cost on capital asset – Not put to use – Not allowable as revenue expenditure. [S. 43(1)]

Assessee purchased a piece of land from Gujarat Industrial Development Corporation. Assessee was required to make part payment for purchase of land in 12 quarterly instalments along with interest at rate of 12.5 per cent. Assessee treated amount of balance payment as loan in its books of account on which interest was incurred.

Assessing Officer worked out amount of interest pertaining to such acquisition of land and added same to total income of assesse. On appeal the CIT (A) held that interest directly related to capital assets being land and therefore same had to be capitalized. On appeal the Tribunal held that as per Explanation 8 to section 43(1) entire interest cost if incurred in connection with capital asset has to be capitalized. Therefore, where interest cost was incurred by assessee with respect to capital asset being land which was not put to use in year under consideration, it could not have been allowed as revenue expenditure. (AY. 2004-05 & 2011-12)

Khyati Chemicals (P.) Ltd. v. DCIT (OSD)(2022) 193 ITD 446 (Ahd)(Trib.)

87. S. 36(1)(vii) : Bad debt – Unutilized CENVAT and Service Tax credit – Not allowable as bad debt – Failure to establish irrecoverable during year under consideration the amount not allowable as business loss. [S. 28(i), 36(2), 37(1)]

Held that unutilized CENVAT and Service Tax credit could not be considered as trade debts of assessee, deduction for same on being written off could not be allowed under section 36(1)(vii), read with section 36(2). Further, since assessee had not been able to bring anything on record to establish that unutilized CENVAT and Service Tax credit amount in question had become irrecoverable during year under consideration, same could not be allowed as business loss in that year. (AY. 2015-16)

Meena Circuits (P.) Ltd. v. ACIT (2022) 193 ITD 318 (A

88. S. 36(1)(iii) : Investment made by the holding company into equity of subsidiary company through the aid of the borrowings, is in the nature of furthering business interests and hence cannot be disallowed as funds diverted for non-business purposes.

The Assessee is a company which is into the business of Toll collection and repairs and maintenance of the roads. The Assessee out of its borrowings had invested into the equity capital of another company. The AO was of the opinion that there was no commercial expediency in the investment made and that the same was a capital transaction without any relation to the revenue generated. And thus held the belief that this would entail disallowance of the interest as the borrowed funds had been utilized for non-business purposes.

The Assessee asserted that the investment in its wholly owned subsidiary was for the purpose of business and so interest allowable. The Ld. CIT(A) held that the holding company has made investment in furtherance of its business interest. When both the holding company and subsidiary are in the business of toll collection, such an investment is a strategic investment to wrest control over the subsidiary.

The advantage derived may not be in money terms but wresting control over the board of directors of the subsidiary is an advantage in itself, which furthers the business interest of the holding company. There being nexus between the expenditure and purpose of the business, the interest on borrowed funds cannot be disallowed.

The Hon’ble Tribunal held that – an equity investment is inherently and materially different vis-a-vis an interest free loan and advance. In concurrence with the findings of the CIT(A), the Hon’ble Tribunal declined to interfere in the matter, holding the position of the CIT(A) as correct. (AY 2017-18)

ACIT v. Rideema Toll (P.) Ltd, (2022) 194 ITD 439 (Mum)(Trib.)

89. S.37(1): Business expenditure –  ESOP Scheme – Discount on shares allotted by assessee to its employee under ESOP Scheme is revenue

Held that Commissioner (Appeals) was justified in deleting addition on account of disallowance of ESOP expenses by holding notional discount on shares issued under ESOP scheme as revenue expenditure. (AY. 2014-15)

ACIT v. People Strong HR Services (P.) Ltd. (2022) 193 ITD 105 (Delhi) (Trib.)

90. S.37(1): Business expenditure – Professional fees – Prior period expenditure – Expenses pertaining earlier year – Crystallized during the year – Allowable as deduction – Commission payable – Expenses pertaining to earlier year – Not allowable as [S. 145]

Held that expenses had arisen and crystallized in year under consideration when bills for same by concerned parties were raised on

assessee, even though said expenses pertained to earlier year, assessee would be entitled to claim deduction for same in year under consideration when liability on account of said expenses had arisen and crystallized. Commission payment no evidence was brought on record hence not allowable as deduction. (AY. 2015-16)

Meena Circuits (P.) Ltd. v. ACIT (2022) 193 ITD 318 (Ahd) (Trib.)

91. S.37(1): Business expenditure  – Real estate business – Expenses for certification work, management consultancy, fees for appearance before Tax Authorities and company secretarial work as professional fee – Allowable as

Held that professional fees paid for certification work, management consultancy, fees for appearance before Tax Authorities, company secretarial work are allowable as business expenditure. (AY. 2005 -06)

Peninsula Land Ltd. v. DCIT (2022) 193 ITD 366 (Mum) (Trib.)

92. S.37(1): Business expenditure – Annual share listing fees paid to stock exchange – Allowable as revenue expenditure – Community development donation – Allowable as business expenditure.

Held that annual share listing fees paid to stock exchange is allowable as revenue expenditure. Expenditure incurred on community development which included donation for festivals, construction of market, cash paid for Puja, construction of water tanks and renovation of roads so as to maintain good relationship with villagers of nearby places where it was carrying on its drilling operation, said

expenditure incurred by assessee was wholly and exclusively incurred for business purposes and was driven by business prudence, thus, same was to be allowed as business expenditure. (AY. 2011-12, 2012-13)

DCIT v. Great Eastern Energy Corporation Ltd. (2022) 193 ITD 404 (Delhi) (Trib.)

93. S.37 (1): Business expenditure – Capital or revenue – Corporate Social Responsibility expense – Explanation 2 to section 37(1) inserted by Finance Act, 2014 with effect from 1-4-2015 is prospective in

Held that Explanation 2 to section 37(1) inserted by Finance Act, 2012 with effect from 1-4-2015 is prospective in nature and; accordingly, prior to 1-4-2015, CSR expenses incurred by assessee were to be allowed as revenue in nature. (AY. 2013 -14)

NTPC-SAIL Power Co. (P.) Ltd. v. DCIT (2022) 193 ITD 473 (Delhi) (Trib.)

94. S.37(1): Business expenditure – Capital or revenue – Royalty paid as percentage of sale in consideration of supply of Technical Know-how is allowable as revenue expenditure- Telephone and travelling expenditure – Self-made vouchers – Disallowance of 10 % of expenditure is held to be not

Held that royalty paid in case of running business and in terms of number of vehicles sold there was no increase in capacity and existing productivity, therefore, royalty paid to extent of 2.75 per cent of number of vehicle sold was a revenue expenditure. Disallowance of Disallowance of 10 % of expenditure is held to be not valid when there is no allegation of bogus expenditure. (AY. 2000-01, 2001-02)

Mercedez-Benz India (P.) Ltd. v. DCIT (2022) 193 ITD 624 (Pune) (Trib.)

95. S.37(1): Business expenditure – Provision for warranty – Replacement of batteries – Allowable as deduction – Sales promotion expenses – Expenditure for giving valuable gifts to certain parties – Disallowance cannot be made on ad-hoc basis – Travelling expenses of partner for personal trip – Not allowable as business [S. 145]

Held that provision consistently for replacement of batteries qua computers and in past, whatever provisions remained unutilized were offered as income by assessee, assessee would be entitled to claim deduction of provision for warranty for replacement of batteries in toto. Allowable as deduction. Held that expenditure for giving valuable gifts to certain parties and claimed it as sales promotion expenditure and had shown bills and vouchers for purchases and all details had been maintained scientifically, expenditure incurred by assessee could not have been disallowed on ad hoc basis. Held that travelling expenses of partner for personal trip is not allowable as business expenditure (AY. 2012-13, 2014-15)

ACIT v. Armee Infotech (2022) 193 ITD 728 (Ahd.) (Trib.)

96. S.37 (1): Business expenditure – CSR expenses – Welfare of local community and thereby improving corporate image  – Allowable as business  expenditure – Expenditure incurred towards Pooja and purchase and distribution of sweets for Pooja was allowable as business expenditure.

Assessee-company had incurred CSR expenses towards payments for yagyashala, drinking water hut, purchase of PC for village Collectorate, donation for eye camp, donation/ expenses for Gram Panchayat, payment to Gram Vikas Samiti, development and beautification of village pond and donation to a school for physically handicapped etc. Tribunal held that these CSR expenses were incurred for welfare of local community and thereby improving corporate image therefore such CSR expenses incurred by assessee was allowable as deduction. Tribunal also held that expenditure incurred towards Pooja and purchase and distribution of sweets for Pooja was allowable as business expenditure. (AY. 2011-12)

DCIT v. Godawari Power & Ispat Ltd. (2022) 193 ITD 869 (Raipur)(Trib.)

97. S.37(1) of the Income Tax Act, 1961 – Expenses incurred for production of tele serials and films carries no enduring advantage nor creates any asset and thus, are revenue in nature

The Assessee is into the business of production and marketing of tele serials and tele films. The assessment had been completed u/s 143(3). However subsequently the case got re-opened u/s 147 of the Income Tax Act, 1961 where in the AO opined that the deduction claimed by the Assessee on production expenses of tele serials as revenue was incorrect, and that the same qualified as a capital expenditure. This prompted the AO to disallow the expenses claimed and provide for 25% depreciation on the expenses treating it as capital in nature.

The Assessee before the Ld. CIT(A) relying on the judgement of the Delhi HC in CIT v. Television Eighteen India Ltd. [2014] 46 taxmann. com 283, contended that the expenditure incurred for production of tele serials and films are revenue expenditure, because income derived from exhibition of tele serials is recognized as income from operations and thus, any expenditure incurred for production of such feature films is revenue in nature, which cannot be considered as capital in nature. The Ld. CIT(A) in concurrence with the averments of the Assessee and further placing reliance on the judicial precedents, stated that the expenses had no enduring benefit to the assessee and that the production expenses for tele serials were revenue in nature.

The Hon’ble Tribunal held that, the revenue derived from exhibition of tele serials is offered as income from operations but may be in one or two or three years, however, except cost of production of feature films, the assessee does not have any other major expenses. Therefore, in case where assessee involved in production and exhibition of tele serials, expenditure incurred for production of tele serials cannot be considered as capital in nature, because it does not give enduring benefit to the assessee and it also does not lead to creation of any asset since the major expenditure of the assessee involved in production and exhibition of tele serials, is cost of production of said tele serial, same needs to be allowed as revenue expenditure as and when such expenditure has been incurred by the assessee, despite the revenue from exhibition of tele serial or film being spread over for more than one year. AY 2009-10;

ACIT v. Radaan Media Works (I) Ltd, [2022] 194 ITD 505 (Chennai)(Trib.)

98. S. 37(1): Business expenditure – Commission paid to agents on supply to Government departments for various activities associated with supply – Disallowance on ground that there cannot be any middlemen for procurement of orders for Government supplies – Held not justified.

Assessee manufacturer of patented medicines paid commission to agents for obtaining supply order from Government agencies. AO disallowed the commission being non-genuine on ground that:

1. Assessee had shown commission expenditure for reducing the actual profit, and
2. That, there cannot be any middlemen for procuring orders for Government

CIT(A) deleted the disallowance on facts, stating that :

1. Commission agents are involved in pre- tender and post tender work. Their use of persuasive skills in garnering Government orders, their involvement in getting all the conditions of contract being properly complied and their help are al parts of commercial expediency.
2. Assessee, had submitted a detailed note on various tasks performed by agents, and also PANs of agents, supporting vouchers, confirmations, deducted TDS wherever applicable
3. In the case of Assessee, there is no allegation of illegal gratification or commission payment to governments which is against the public policy.
4. That, the reasoning of AO, that, there cannot be any middlemen for procurement of orders for government supply ignoring the factual submissions, is not justified.

Tribunal, deleted the addition stating that, CIT(A) has considered and narrated all the

factual submissions in detail in his order, and having being satisfied, the addition was deleted by him, and held there is no infirmity in the order of learned CIT(A).

(ITA No. 547&548/Ind/2018 (AY. 2009-10 & 2010-11) dt 21.02.2022

DCIT v. Alpha Laboratories (P) LTD (2022) 217 TTJ 1 (Indore)(UO)(Trib.)

99. S. 37(1): Business expenditure – Allowability of Legal fees to defend Lawsuit for infringement of patent rights – Allowabilty of amount paid for settlement of suit – Held allowable as Revenue

Assessee company engaged in manufacturing and trading of healthcare and nutraceutical products had incurred expenditure for :

1. Expenses for maintenance of patents and to safeguard its patent products,
2. settlement amount paid against suit for infringement of patent rights
3. Legal Fees paid to defend the existing patent rights

All the above payments were claimed as revenue expenditure , and shown under the head exceptional items.

The learned AO treated the said expenditure as capital expenditure, on observing that said expenditure has resulted in higher sales & increasing of profits in subsequent years, which has the benefit of enduring nature.

The learned CIT(A) , held that deduction for expenditure incurred on litigation as well as the settlement amount paid is a Revenue expenditure.

Tribunal, upheld the order of CIT(A), stating that such expenditure incurred for protection of

its business and IPR cannot be held as an capital expenditure, even if it results into an higher profits and increase in sales, and enduring benefit.

(ITA No. 28 & 29/Mum/2020 (AYs. 2010-11 & 2011-12) dt 07.01.2022

DCIT v. Omni Active Health Technologies Ltd (2022) 194 ITD 783 (Mum)(Trib.)

100. S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident – Fes for technical services- Sales commission to foreign agents – Permanent Establishment (PE) in India -Not liable to deduct tax at source- OECD Model Convention Arts. 5, 7 , 12 – DTAA-India-Australia [S. 9(1)(i), 9(1)(vii), 195 Art. 7]

Held that the Assessing Officer was not correct in law in holding that commission was paid to agents for rendering technical services in form of managerial services and since foreign agents did not have permanent establishment in India, no business profit was taxable in India. Disallowance was deleted. (AY. 2010-11, 2012-13)

Deccan Creations (P.) Ltd. v. DCIT (2022) 193 ITD 5 (Bang) (Trib.)

101. S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident attorneys – Professional fees – Reimbursement of expenses – No obligation to deduct tax at source – Disallowance was deleted – Article 12 of the OECD Model [S. 9(1)(vii), 195]

Held that payment made towards reimbursement of expenses there is no  obligation to deduct tax at source. Disallowance was deleted. Payment made to foreign attorneys are not chargeable to tax under the provisions of section 195. Therefore the assessee was not required to withhold tax on the payments made. Disallowance u/s 40(a)(i) is deleted. (AY. 2015  -16)

Chander mohan Lall v. ACIT (2022) 193 ITD 352/ 215 TTJ 498 (Delhi) (Trib)

102. S. 40(a)(ia): Amounts not deductible – Deduction at source – Interest to an NBFC – Certificate was produced before CIT(A) – Matter was remitted to file of Assessing Officer to examine and verify said [S. 194A, 201(1)]

Held that the Commissioner (Appeals) had failed to take same into consideration the certificate which was produced before him. Matter remitted to file of Assessing Officer to examine and verify said certificate. (AY. 2013 -14)

Amit Mehra v. ITO (2022) 193 ITD 109 (Delhi) (Trib.)

103. S. 40(a)(ii) : Education cess allowability – Finance Bill 2022 – Overruled Jurisdicational High Court and other judicial precedents- Finance Bill has not received enactment – Assessee at liberty to move rectification application

The Assessee raised additional ground for allowing deduction towards Education cess. The Tribunal held that the Tribunal in the assessee’s own case for earlier years has allowed such additional ground by relying on the judgment of Hon’ble jurisdictional High Court in Sesa Goa Ltd. v. JCIT as well as the judgment of Hon’ble Rajasthan High Court in Chambal Fertilisers and Chemicals Ltd. and Another v. JCIT (2018) (102 CCH 202) (Raj-HC). The Finance Bill 2022 has proposed amendment to neutralize the effect of above mentioned judgments granting deduction of education cess with retrospective effect from 1 April 2005. However, the amendment proposed in the Finance Bill, 2022 is yet to take the shape of an enactment, but practically it will become operative very shortly on the Hon’ble President of India granting assent to the Finance Bill. However, the Tribunal did not grant such deduction of education cess and gave liberty to the Assessee to move rectification application in case the proposed amendment in the Finance Bill is either not enacted or enacted prospectively so as to align our decision with the resultant modification.

DCIT v. Atlas Copco (India) Ltd. (2022) 213 DTR 1 (Pune)(Trib.)

104. S. 40A (2): Expenses or payments not deductible – Excessive or unreasonable – Salary paid to daughter of Director – Disallowance is held to be not justified.

Assessing Officer disallowed claim for deduction of salary paid to daughter of director. On appeal the Tribunal held that the Assessing Officer did not disclose as to how said expenditure was found by him to be either excessive or unreasonable having regard to fair market value of services which were rendered by her for legitimate needs of business of assessee company. Disallowance was set aside. (AY. 2014-15)

Kimaya Impex (P.) Ltd v. ITO (2022) 193 ITD 710 (Mum)(Trib.)

105. S. 40A(3) : Business disallowance – Payments to state government entities by way legal tender is covered by exception as per rule 6DD(b) – Not liable for Disallowance u/s 40A(3). (r.w.rule 6DD)

Assessee engaged in retail business of purchase/ sell of wines made cash payment exceeding 20,000/- to entities which were state Govt companies. AO disallowed the payments on ground of contravention of 40A(3). Tribunal upheld the decision of CIT(A), deleting the disallowance, on ground that the payments which were made in legal tender to state Govt undertakings are covered by exception carved out in rule 6DD(b), and same cannot be disallowed u/s 40A(3). (ITA No. 489/ASR/2017 (AY. 2014-2015) dt 21.02.2022

DCIT v. Vinod Arora (2022) 194 ITD 605 (Amritsar)(Trib.)

106. S.43(5) : Speculative Transactions – Forex Derivative Loss – Hedging contract for fluctuations in foreign currency by exporter having huge receivables – Loss suffered treated as revenue expenditure – Held allowable as business

Assessee exporter entered into hedging contract with Bank to hedge foreign currency risk to minimize possible fluctuation in foreign currency, which resulted in Loss, and was treated as business loss, since covered by proviso (d) to sec 43(5) of the Act.

The learned AO treated the loss as speculative Loss, and opined that proviso does not give blanket exclusion to all derivatives contracts, but only to contracts covered in recognised stock exchange, and disallowed the Loss.

On appeal by revenue, the Tribunal held that the hedging transactions entered into by assessee, to minimize the possible loss from fluctuation in foreign currency, and the profit or loss arising

on account of appreciation or depreciation, would be a trading profit/loss, if the foreign currency is held by assessee on revenue account or as a trading asset or as a part of circulating capital embarked in the business, and the underline asset is more than the amount of forward contracts entered into by the assessee. In the instant case, assessee achieved the export turnover which is much more than the amount of derivatives contract with the bank, and as held by CIT(A) after considering all the facts, the loss incurred is in nature of business loss, and not speculative loss which is covered u/s 43(5). (ITA No. 357/CHNY/2020 (AY. 2009-10) dt 10.02.2022.

DCIT v. Kunnam Granite Works (2022) 194 ITD 238 (Chennai)(Trib.)

107. S. 43(6) : Written down value – Demerger – Accounted by both entities on written down value – Entitle to depreciation on written down value [S. 32]

Assessee took over assets and liabilities of a company incorporated by Government of Uttar Pradesh, namely, UPJVNL during its demerger. Assessee claimed depreciation on WDV of such assets. Assessing Officer disallowed same on ground that assessee had taken over assets without corresponding any liability i.e. assets were taken over by UJVNL from UPJVNL free of cost. On appeal the Tribunal held that demerger led to division of assets in a fixed ratio which was duly accounted for by both entities as per WDV and that there was no twice claim of depreciation on said assets by both companies. Entitled to depreciation on WDV of said assets took over by it. (AY. 2014-15)

ACIT v. Uttaranchal Jal Vidyut Nigam Ltd. (2022) 193 ITD 454 (Dehradun)(Trib.)

108. S.43B: Deductions on actual payment – Service tax payment – For granting deduction only when amount of such tax, , is actually paid by assessee, that deduction will be allowed. [S. 43B(a), 145A(ii)]

Held that incurring of liability to pay tax, duty, cess or fee, etc., in a particular previous year is not a relevant criterion for granting deduction, and when amount of such tax, etc., is actually paid by assessee, then only deduction will be allowed to assessee. (AY. 2014-15)

Shirode Automobiles (P.) Ltd. v. ACIT (2022) 193 ITD 777 / 217 TTJ 382 (Pune) (Trib.)

109. S. 44AD : Presumptive taxation – Civil construction business – depreciation – Rejection of books of account and estimate of income applying rate of 8 percent – No separate claim of depreciation is allowable [S. 32, 144]

Assessee, a civil contractor, filed his return of income declaring total income. Assessing Officer rejected books of account and estimated income by applying rate of 8 per cent of total contract receipts and disallowed the depreciation. On appeal the Tribunal held that when the income is estimated no separate claim of depreciation is allowable. (AY. 2014-15)

Sudhakar Pandey v. ACIT (2022) 193 ITD 557 (SMC) (All.) (Trib.)

110. S. 44B : Shipping business – Non- residents – Service tax receipts do not form part of receipts for computation of income.

Held that service tax receipts do not form part of receipts for computation of income. (AY. 2011-12)

DCIT v. Schlumber Solutions (P.) Ltd. (2022) 193 ITD 293 (Dehradun)(Trib.)

111. S. 44BB : Mineral oils – Non -Resident – Computation – Service tax being statutory levy should not form part of gross receipts.

Held that Service tax being statutory levy should not form part of gross receipts as per provisions of section 44BB of the Act. (AY.2005 -06, 2006-07)

DCIT (IT) v. Deepwater Pacific 1 Inc. (2022) 193 ITD 11 (Dehradun)(Trib.)

112. S. 44BB: Mineral oils – Computation – Contract with ONGC for replacement of well fire shut down panels at offshore platform on a turnkey basis – Amounts were remitted directly to UAE by ONGC – DRP erred in apportioning 10 per cent of gross receipts as taxable income- Section 44BB did not override provisions of section 5 of the Act- DTAA -India-USA [S. 5, 9(1)(i), Art. 5, 7]

Assessee, a UAE based company, was engaged in a contract with ONGC for replacement of well fire shut down panels at offshore platform on a turnkey basis . It submitted that all these activities were carried out in Dubai and thus, related revenues were not taxable in India under section 5 read with section 9 and under article 5 read with article 7 of India-USA DTAA. Assessing Officer held that entire project was turnkey project and, hence, no bifurcation could be made in income accruing inside and outside India and total income was income accruing in India under section 5 but as assessee had not maintained books of account, Assessing Officer estimated income at 25 per cent of gross receipts. DRP applied deemed profit rate of 10 per cent of gross revenue of assessee under section 44BB. On appeal the Tribunal held that Whether since

engineering designs were prepared entirely at assessee’s specialities outside India and sent to ONGC from UAE and amounts were remitted directly to UAE by ONGC and keeping in view supply of material outside India, designs conducted, list of material and presence of employees in India, DRP erred in apportioning 10 per cent gross receipts as taxable income as provisions of section 44BB do not override provisions of section 5 of the Act. (AY. 2008-09, 2009-10)

Petronash FZE. v. ADIT (IT) (2022) 193 ITD 846 (Dehradun)(Trib.)

113. S. 45 : Capital gains – Short term – Transfer – Joint Development Agreement (JDA) – Construction of an apartment project – Merely a license for developer to enter property- Provisions of section 53A of Transfer of Property Act and provisions of section 2(47)

(v) would not be applicable to JDA – Not liable to capital gains tax – Failure to file JDA agreement – Reassessment notice is valid [ 2(47)(v)), 147, 148, Transfer of Property Act, 1882, S. 53A]

Assessee builder had entered into a Joint Development Agreement (JDA) with developer for construction of an apartment project in respect of a land owned by it. Assessing Officer took view that assessee had purchased land for investment purposes and held same as capital asset and thus, by invoking provisions of section 2(47)(v), Assessing Officer held that there was transfer of asset within meaning of section 53A of Transfer of Property Act and accordingly, computed short term capital gain and assessed same in hands of assessee. On appeal the Tribunal held that what was given was not possession contemplated under section

53A of Transfer of Property Act, 1882, but was merely a license for developer to enter property. Thee assessee had given permissive possession and not legal possession as contemplated within meaning of section 53A,therefore, provisions of section 53A of Transfer of Property Act and provisions of section 2(47)(v) would not be applicable to JDA and thus, capital gains assessed in hands of assessee under section 2(47) (v) were liable to be deleted. Reassessment is held to be valid. (AY. 2006 -07)

Anugraha Shelters (P) Ltd. v. DCIT (2022) 193 ITD 119 (Bang) (Trib.)

114. S. 45 : Capital gains – Transfer – Joint development agreement

– Neither any consideration received nor handed over possession of immoveable property during relevant assessment year – Not liable too be assessed as capital gain [S. 2(47)(v), 45(2), Transfer of Property Act, 1882 S. 53A]

Assessee had entered into a development agreement, to extend her land for joint development with a company. Development agreement provided that an amount of Rs. 7 crores was to be paid to assessee and possession of property was to be handed over to developer by assessee, Assessing Officer held that as per section 2(47)(v) read with section 53A of Transfer of Property Act said transaction had culminated into transfer of immovable property thereby attracting long term capital gain. On appeal CIT (A) allowed the appeal. On appeal by the Revenue the Tribunal held that the assessee had only entered into a joint development agreement with promoter and when her share in developed property was sold, she would be benefitted by gain or loss .On facts, assessee would not be liable to be taxed for entering into a joint development agreement when neither assessee

had received any consideration nor handed over possession of immovable property during relevant assessment year. (AY. 2013-14)

DCIT v. Nagam Suguna (2022) 193 ITD 436 (Hyd) (Trib.)

115. S. 48: Capital gains – Computation – Amount paid for removing encumbrance to a property without which sale or transfer could not be effected, is allowable as [S. 48(1)]

Held that amount paid for removing encumbrance to a property without which sale or transfer could not be effected, is allowable as deduction under section 48(i) of the Act. (AY. 2013-14)

Mahesh Pratapsingh Asher v. ACIT (2022) 193 ITD 336 (Mum)(Trib.)

116. S. 50C : Capital gains – Full value of consideration – Stamp valuation – Reference to DVO- Where the reference is made DVO the Assessing Officer completed the assessment adopting deemed sale consideration before receipt of valuation report by DVO – Matter remanded – For purpose of computing exemption under section 54F, deeming fiction provided under section 50C could not be enlarged. [S. 45, 48, 54F]

Tribunal held that before adopting deemed

consideration, it is the duty of Assessing Officer to refer valuation to DVO, in case assessee files objection for adopting deemed consideration. Where the Assessing Officer had referred valuation to DVO, Assessing Officer could not have completed assessment by adopting deemed

sale consideration as per provisions of section 50C before DVO determined value of property. Matter remanded. Tribunal also held that section 50C is only applicable for determining full value of consideration as defined under section 48 and thus, for purpose of computing exemption under section 54F, deeming fiction provided under section 50C could not be enlarged. Matter remanded. (AY. 2016-17)

Baskarababu Usha. (Mrs.) v. ITO (2022) 193 ITD 573 (Chennai) (Trib.)

117. S. 50C : Capital gains – Full value of consideration – Stamp valuation – Guidance value to be taken on the agreement for sale and not on the date of Registration – Proviso to section 50C(1) inserted by Finance Act, 2016 is retrospective.[S. 45]

Assessee entered into a registered Joint Development Agreement dated 1-3-2013, pursuant to which it had also entered into a MOU dated 8-4-2013 as per which assessee had paid a part of sale consideration on date of such MOU, guidance value had to be computed as prevailing on date of MOU dated 8-4-2013. The Assessing Officer computed the capital gains on the basis of date of registration of document. On appeal the Tribunal held that proviso to section 50C (1) deals with cases where date of agreement fixing amount for consideration and date of registration for transfer of capital asset are not same and in such cases, value adopted or assessed or assessable by stamp valuation authority as on date of agreement is to be taken for purposes of computing full value of consideration for such transfer. Followed CIT v. Vummudi Amarendran [2020] 429 ITR 9[2021] 277

Taxman 243 (Mad) (HC) (AY. 2014-15)

Bellandur Chikkagurappa Jayaramareddy v. ACIT (2022) 193 ITD 757 (Bang) (Trib.)

118. S. 54: Deduction from capital gains – Merely because sale agreement describes the property as land, the same would not deny deduction under section 54 if assessee has proved that the property sold was a building with land appurtenant thereto

The assessee is an individual and non-resident during the year. Assessee sold a residential house and computed long term capital gain and purchased a new residential house property and incurred expenditure to make it habitable and claimed exemption under section 54 of the Act. The AO noticed that at the time of execution of sale deed, assessee described the property as a plot and therefore the exemption claimed by the assessee under section 54 cannot be allowed. Further, assessee did not produce any evidence to show satisfaction of condition under section 54F and therefore the same also was not allowed to the assessee. The CIT(A) allowed the claim of deduction under section 54F but restricted the cost of making the house habitable holding that the said amount was incurred for luxury items and thus not allowable as deduction.

Tribunal noted that the assessee had furnished valuation report from a registered valuer and also filed house tax and water tax receipts to justify that the property that was sold was a building along with land and not only land. Accordingly, Tribunal held that merely because in the sale deed and agreement, the description of the property was mentioned as land, the same could not go against the assessee to deny benefit of deduction under section 54 of the Act. However, even Tribunal did not grant deduction for the additional cost incurred to make the house habitable as the same was incurred for luxury items as held by CIT(A).

Charu Agarwal and Anr. v. Dy. CIT (International Taxation) And Anr. (2022) 194 ITD 478 / 216 TTJ

428 (Delhi)(Trib.)

119. S.54F: Capital gains – Investment in a residential house – Residential house – Purchase of residential property on first floor of a complex having shops constructed on ground floor – Entitle to exemption. [S. 45]

Assessee purchased a property on first floor of a complex having shops constructed on ground floor and claimed exemption. Assessing Officer denied the exemption considered property to be of commercial nature. Commissioner (Appeals) confirmed the order of Assessing Officer. On appeal the Tribunal held that the assessee had purchased property as a residential property and registering authority had also registered said purchase considering it as a residential property.

-Electricity Department had also considered use of said premises as a residential use and had charged electricity rates accordingly. Further, Municipal authorities had also charged property tax treating it as a residential property. Denial of exemption was held to be not valid. (AY. 2010 -11)

Ashok Kukreja v. ITO (2022) 193 ITD 888 (Indore) (Trib.)

120. S. 54 read with S 54F – Capital Gains – Deduction while computing capital gains from sale of Industrial plot with office cum residential area without necessary attributes of residential house cannot be taken under section 54 but under section 54F of the Act

The Assessee, an individual, filed ROI wherein he declared LTCG on sale of immovable property an NIL after claiming deduction under section 54 of the Act. The assessee had sold a property comprised of plot of land with an office-cum-residential structure built upon it (i.e. office built up on the ground floor and

residential area on the first floor). The AO held that the plot sold by assessee was an industrial plot as apparent from documents submitted and not a residential house and accordingly denied deduction under section 54 of the Act and granted deduction under section 54F of the Act and accordingly recomputed the capital gain at certain amount as against NIL as computed by assessee. CIT(A) upheld the order of AO.

Tribunal observed that the limited dispute was whether the assessee has transferred a residential house or not. Tribunal held that as per the sale deed, it can be noticed that what is transferred is an industrial plot along with construction thereon, and not a residential plot. Further, the construction did not have all necessary attributes of a residential house in terms of bedrooms and kitchen facility. Accordingly, Tribunal held that the same cannot be held to be a residential house and therefore assessee was not eligible for exemption under section 54 but was eligible for exemption under section 54F of the Act.

Chain Singh Mundra v. ITO (2022) 194 ITD 718 / 216 TTJ 761 / 211 DTR 377 (Chd)(Trib)

121. S. 55A : Capital gains – Reference to valuation officer – Prior to 1-7- 2012, no reference to DVO could be made under section 55A where AO was of view that FMV of property as on 1-4-1981 was less than value declared by assessee. [S. 45]

Assessee converted land into stock-in-trade and part of it was sold. Assessee computed long-term capital gains on said sale. Assessing Officer on doubting assessee’s valuation made a reference to DVO to value land as on 1-4-1981 as well as on date of conversion and enhanced amount of long-term capital gain. On appeal the Tribunal held that FMV as on 1-4-1981 and as on date of conversion of land was duly supported

by valuation report of registered valuers. Since prior to 1-7-2012, no reference to DVO could be made under section 55A where Assessing Officer was of view that FMV as on 1-4-1981 was less than value declared by assessee, substitution of FMV by Assessing Officer could not be held in accordance with law. (AY. 2005-06)

Peninsula Land Ltd. v. DCIT (2022) 193 ITD 366 (Mum) (Trib.)

122. S. 56: Income from other sources – Share capital at premium –

Discount cash flow method (DCF) – Net asset method (NAV) – AO could not adopt NAV method merely for reason that there was deviation in actual figures from projected figures shown in DCF method – Deletion of addition is [S. 56(2)viib), R. 11U, 11 UA]

Assessee issued share capital at premium and valued shares adopting discounted cash flow method (DCF method). Assessing Officer directed assessee to furnish valuation of shares as per rules 11U and 11UA by using net asset method (NAV) on ground that actual performance of assessee-company showed losses whereas DCF statement showed projected profits. Assessing Officer held that there was wide variation between valuation of shares as per NAV method and DCF method and thus, made additions under section 56(2)(viib) of the Act. CIT (A) deleted the addition. On appeal the Tribunal held that for purpose of determining fair market value of unquoted shares provisions of rule 11UA (2) gave right to assessee to exercise options available for valuation of shares, therefore, Assessing Officer could not withdraw DCF method exercised by assessee by adopting NAV method of valuation merely for reason that there was deviation in actual figures from projected figures the Assessing Officer was

not justified in rejecting the method adopted by the Assessee required to examine method adopted by assessee and additions. (AY. 2013-14)

Dy.CIT v. Credtalpha Alternative Investment Advisors (P.) Ltd. (2022) 193 ITD 502 / 94 ITR 596/ 215 TTJ 801/ 210 DTR 100 (Mum) (Trib.)

123. S. 56 : Income from other sources – Fair market value of property

– Purchase of property – Stamp valuation – Addition was not valid – Matter remanded. [S. 56(2) (vii)(b)(ii)]

During year, assessee made on investment towards purchase of a property. Assessing Officer held that market price of said property as per Stamp Valuation Authority was higher hence made addition u/s 56 of the Act. On appeal the Tribunal held that the as property under consideration was situated in a slum area, market value of same was much lower than value of other buildings in neighbouring areas hence the Assessing Officer should have referred the matter to valuation Officer. Matter remanded.(AY. 2014-15)

Kiran R. Sawlani v. ITO (IT) (2022) 193 ITD 852/ 215 TTJ 654 (Mum)(Trib.)

124. S. 68: Cash credits – Share application money – Not furnished explanation about nature and source of credit- Addition is confirmed.

Assessing Officer made addition as cash credits in respect of share application money received by the assessee on the ground that the identity and creditworthiness of creditors and genuineness of transactions were not found to be established. CIT (A) deleted the addition. On appeal by the Tribunal held that parties in whose name such credit was recorded in books of assessee did not give any explanation about

nature and source of such credit hence addition made by Assessing Officer under section 68 was restored . (AY. 2012-13)

ITO v. Parsoli Motor Works (P.) Ltd. (2022) 193 ITD 585 (Ahd.)(Trib.)

125. S. 68: Cash credit – Share Capital – Share application money from share applicant companies – All basic relevant documents produced to prove identity, creditworthiness and genuineness of transactions – Impugned additions u/s 68 deleted

The assessee company received substantial amount of share application money from companies, and during scrutiny all the documents called upon were furnished, and notice u/s 133(6) issued to share applicant companies were complied with, and investigation/examination of Director of share applicant companies has not thrown up any contrary facts.

The learned AO made additions u/s 68 on ground that 2 of the share applicant companies had meagre income and were only engaged in providing accommodation entries.

Tribunal, upheld the order of CIT(A) deleting the addition u/s 68 , on ground that :

1. the share applicants are income tax assessee’s,
2. the share applicants are having substantial creditworthiness which is represented by a capital and reserve,
3. share application money was made by account payee cheques,
4. in none of the transactions there were cash deposits before issuing cheques to the assessee company,
5. there is no finding of involvement of any hawala operator or entry provider,
6. the statement of director of share applicant company has not been rebutted or discredited by the (ITA No. 2922/ Ahd/2016 (AY. 2012-13) dt 25.01.2022

DCIT v. Gandhi Capital (P) Ltd (2022) 194 ITD 396 (Surat)(Trib.)

126. S. 69C: Unexplained expenditure – Bogus Purchases – When Sales are not doubted, 100% disallowance for bogus purchases cannot be done, drawing adverse inference for inability to produce suppliers, as no sales is possible without actual purchase

The learned AO added 100 % of the amount paid as sub contract charges, on ground that,

1. onus cast upon assessee was not proved either during the assessment proceedings or remand proceedings, and assessee failed to substantiate his claim of
2. Assessee by making purchase through grey market got savings on account of non payment of tax at expenses of exchequer

Tribunal, upheld the order of CIT(A) restricting the disallowance to 12.5%, stating that assessee having provided the documentary evidence for the purchases, adverse inference cannot be drawn due to inability of assessee to produce the suppliers, and the disallowance of 12.5% out of bogus purchases meets the end of justice.(ITA No. 6224/Mum/2018 (AY. 2012-13) dt 25.03.2022

DCIT v. DBM Geotechnics and Construction (P) Ltd (2022) 194 ITD 579 (Mum)(Trib.)

127. S. 69C: Unexplained expenditure – Bogus purchases – Sales accepted – Disallowance restricted to 5% of aggregate value of alleged bogus purchases.

Assessee made purchases from two parties, however, same were disallowed on ground that purchases so made were not genuine. Assessee in support of its claim of having made genuine purchases, placed on record, copy of confirmation of aforementioned parties and also placed on record copy of invoices pertaining to purchases claimed to have been made – However, on a perusal of invoices, it was found that nowhere, details of lorry receipt number and date, vehicle number etc. was mentioned therein. The Assessing Officer disallowed the purchases. On appeal the Tribunal held that since sales of assessee company had been accepted by department, it could be safely concluded that assessee had purchased goods in question not from aforementioned parties but at a discounted value from open/grey market . Therefore, disallowance was restricted to 12.5 per cent of aggregate value of impugned purchases. (AY. 2014-15)

Kimaya Impex (P.) Ltd v. ITO (2022) 193 ITD 710 (Mum)(Trib.)

128. S. 80GGC: Contribution – Political parties – Failure of done to use it for object for which eligible – No disallowance can be made in the hands of donor.

Held that when the funds were given by assessee as donation to political parties and charitable Institutions (donees) under section 80GGC could not have been disallowed treating same as bogus on ground that donees failed to use it for object which had been eligible to receive donation. Act nowhere puts obligation upon donor to ensure how funds are utilized by donee towards their objects. (AY. 2012-13, 2014-15)

ACIT v. Armee Infotech. (2022) 193 ITD 728 (Ahd) (Trib.)

129. S. 80IA : Industrial undertakings – Infrastructure development – loss of one eligible unit is not to be adjusted or set off against profit of another eligible unit – Captive power plant – Market value of power supplied by assessee to steel division should be computed considering rate of power charged by Chhattisgarh State Electricity Board for supply of electricity to industrial consumers.

Held that while computing deduction under

section 80-IA, loss of one eligible unit is not to be adjusted or set off against profit of another eligible unit. Tribunal also held that the Assessee had established a captive power plant in State of Chhattisgarh to supply electricity to its steel division, for purpose of section 80-IA deduction, market value of power supplied by assessee to steel division should be computed considering rate of power charged by Chhattisgarh State Electricity Board for supply of electricity to industrial consumers. (AY. 2011-12)

DCIT v. Godawari Power & Ispat Ltd. (2022) 193 ITD 869 (Raipur)(Trib.)

130. S. 80IA: Industrial undertakings

– Infrastructure development – A partnership firm – engaged in works contract – not eligible to claim deduction as section 80IA (4)(i) applies only to an enterprise being a company

The Assessee is a contractor for Indian Railways and carried on the work of construction of rail over bridges (ROB), foot over bridges (FOB) etc. The Assessee had claimed deduction under section 80IA(4) of the Act on the ground that work executed by it was in capacity of a developer and not a contractor, which was denied by AO on the ground that w.e.f. 1 April

2000, the provisions of section 80IA(4) were amended whereby deduction would not be applicable if it is in nature of works contract. The CIT(A) relying on the decisions of co- ordinate bench of Tribunal allowed the claim. Aggrieved, Revenue was in appeal before the Tribunal.

The Tribunal noted that the issue was squarely covered against the Assessee in own case for AY 2008-09, wherein the Tribunal had held that for a taxpayer to be eligible to claim section 80IA(4) deduction, the provisions of sub-section 4(i)(a) to (c) cumulatively needs to be satisfied. Accordingly, since the Assessee was a partnership firm and not a company as per section 4(a)(i), it was not eligible to claim deduction under section 80IA(4) of the Act. Further, on the issue of contractor v/s developer, the Tribunal held that on merits, as per amendment to section 80IA(4), an Assessee which is into works contract is not eligible to claim deduction in view of section 80IA(13) of the Act. Since the Assessee could not controvert to the submissions of Revenue, the appeals filed by the Revenue were allowed.

DCIT v. M/s Eshwarnath Construction (2022) 194 ITD 592 (Chennai)(Trib.)

131. S. 90 : Double taxation relief

– Foreign Tax credit – Salary income – Rule 128(9) of Rules does not provide for disallowance of Foreign Tax Credit in case of delay in filing Form No. 67

– Filing of Form No. 67 is not mandatory but a directory requirement – DTAA-India

-Australia [S. 91, 139(1), 154, 192, R. 128(9), Form no 67, Art. 24(4)(a)]

Assessee-individual offered to tax salary income earned for services rendered in Australia and claimed foreign tax credit for taxes paid in Australia under section 90 read with article 24

in a revised return of income. Assessee filed Form 67 in support of claim of foreign tax credit. Revised return of income was processed by Centralized Processing Centre (CPC) electronically and claim of FTC was disallowed. Assessee filed a rectification application before Assessing Officer and submitted that credit for FTC as claimed in return should be given. Assessing Officer upheld disallowance on ground that assessee had failed to furnish Form 67 on or before due date of furnishing return of income as prescribed under section 139(1) which is mandatory according to rule 128(9). CIT(A) affirmed the order of CIT(A). On appeal the Tribunal held that filing of Form No. 67 is not mandatory but a directory requirement and DTAA overrides the provisions of the Act and Rules cannot be contrary to the Act. Issue is not debatable. In view of legal position the assessee had right to claim Foreign tax Credit. (AY. 2018-19)

Brinda RamaKrishna. (Ms.) v. ITO (SMC) (2022) 193 ITD 840 (Bang)(Trib.)

132. S. 92C: Transfer pricing – Arm’s length price – CUP method – Applying of ‘QUOTE’ from third party for economic analysis using CUP method was not a justifiable method – Matter remanded.

The assessee had sub-contracted work to MIOL in relation to a contract awarded by ONGC to assessee. However, subsequent to a global acquisition by group to which assessee belonged MIOL had become a part of said group and, consequently, an AE of assessee. CUP method had been applied by assessee to determine arm’s length price for inter- company transactions between assessee and its AE in relation to availing of sub-contractor services. TPO held that assessee had applied CUP method by using a QUOTE from a third party and since a quotation may not be a good base to apply CUP method in normal

circumstances, TNMM was MAM. Tribunal held that – CUP method is most direct and reliable way of applying arm’s length principle and price an inter-company transaction but applying of ‘QUOTE’ from third party for economic analysis using CUP method was not a justifiable method, matter was set aside to file of Assessing Officer to determine ALP using CUP method taking into consideration appropriate comparable. (AY. 2011-12)

DCIT v. Schlumber Solutions (P.) Ltd. (2022) 193 ITD 293 (Dehradun)(Trib.)

133. S. 92C : Transfer pricing – Arm’s length price – Comparable – Filter – Filter applied by TPO was to be included in list of comparable regardless of fact that it was low margin earning [S. 133(6)]

Assessee is engaged in providing software development services to its AEs. TPO identified

17 comparable companies and computed additions on account of determination of ALP. CIT (A) excluded one company from list of comparable on ground that it was in multiple businesses and segmental information was not available. On appeal the Tribunal held that since, said company passed 75 per cent software development services filter applied by TPO, same was to be included in list of comparable regardless of fact that it was low margin earning company. (AY. 2005-06)

Infor (Bangalore) (P.) Ltd. v. DCIT (2022) 193 ITD 478 (Bang) (Trib.)

134. S. 92C : Transfer pricing – Arm’s length price – Resale Price Method (RPM) – Resale of goods imported from its AE to third party customers without any value addition – Resale Price Method (RPM) is Most Appropriate Method (MAM).

Held that resale of goods imported from AE to third party Indian customers without any value addition, in such case, Resale Price Method (RPM) would be Most Appropriate Method (MAM) to determine ALP of said transaction. Directed the Assessing Officer to apply Resale Price Method (RPM). (AY. 2015-16)

Randox Laboratories India (P.) Ltd. v. ACIT (2022) 193 ITD 609 / 94 ITR 163 (Bang)(Trib.)

135. S. 92C: Transfer pricing – Arm’s length price – Related transactions constituted 96.30 per cent of total turnover for which margin was agreed to be 15.85 percent under MAP resolution – Same rate to be applied for non USA related transactions under EDS segment.

Assessee, a subsidiary of US based company undertook engineering design services (EDS) for its AEs. Assessee submitted that issue related to transfer pricing adjustment made in respect of EDS had been settled through Mutual Agreement Procedure (MAP) and margin was determined at 15.85 per cent for USA related transactions. Tribunal held that since USA related transactions constituted 96.30 per cent of total turnover of EDS segment for which margin was agreed to be 15.85 per cent under MAP resolution, same rate was to be adopted for non-USA related transactions under EDS segment. (AY. 2011-12)

Textron India (P.) Ltd. v. DCIT (2022) 193 ITD 829/93 ITR 58 (SN)(Bang)(Trib.)

136. S. 92C : Transfer pricing – Arm’s length price – Aggregation is not a rule of blind application and should be applied (on scientific or rational basis) only when the characteristic of ‘closely-linked’ is satisfied.

Transfer pricing adjustments were made in respect of instances where sale price to AEs were lower than those charged to non-AEs. The assessee argued that cherry-picking of transactions done at lower prices and ignoring the transactions done at higher prices is unwarranted and that the transactions should be aggregated and average prices for AEs and Non-AEs be worked out.

On appeal, the Tribunal held that rule 10A(d) defines transaction as including a number of closely linked transactions and therefore, aggregation is possible only if the characteristic of ‘closely-linked’ is satisfied. Further, it observed that the OECD Guidelines prescribe that ideally the arm’s length principle should be applied on a transaction by transaction basis and aggregation is allowed only when separate transactions are so closely linked or continuous that they cannot be evaluated adequately on a separate basis. Accordingly, the Tribunal concluded that aggregation is not a rule of blind application and should be applied (on scientific or rational basis) only when the characteristic of ‘closely-linked’ is satisfied. Since the assessee had failed to give any scientific or convincing reason for aggregation and annual averaging of the prices except for favorable arithmetical calculation. The Tribunal further went on to explain how blanket application of aggregation/ averaging would be detrimental to both the taxpayers and the Department.

During the course of the appellant proceedings, the assessee contended that alternatively the transaction can also be benchmarked using TNMM. However, it did not give a go-bye to CUP and selected TNMM during the appellant proceedings. Accordingly, the Tribunal observed that the assessee is putting equal force on both the methods and such flip-flop is inadmissible.

Accordingly, the Tribunal remanded the issue with a direction that the assessee make its choice of method crystal clear and TPO take necessary action after affording the assessee an opportunity of being heard. (ITA Nos. 2682 & 2683 (Ahd.) of 2016 dt. 15-06-2022) (AY. 2011-12 & 2012-13)

DCIT v. Gujarat Microwax (P.) Ltd. (2022) 218 TTJ 432 (Ahd)(Trib.)

137. S. 92(1), 92C: Transfer Pricing Adjustment – Receipt of Commission – TNMM Rejected – Other Method applied – Received Commission at ALP – Addition deleted

The Assessee recorded international transaction of Receipt of Commission amounting to Rs. 44,29,79,820. The Assessee had benchmarked the said transaction using TNMM method. The TPO adopted ‘Other Method’ and had attributed amount of profit to marketing effort in the overall manufacturing segment of the Assessee under Rule 10AB for determining ALP and made transfer pricing adjustment, On appeal to CIT(A), the CIT(A) deleted the addition by relying on earlier years’ order without discussing any merits. Aggrieved by the same, the Department preferred an appeal before Tribunal.

The Tribunal held that the TPO’s approach in attributing profit in Other Method was incorrect since the TPO only considered Marketing expense and Manufacturing expense while computing profits instead he should have also considered Material Cost and Depreciation since they also contribute to generation of income in the same way as the Manufacturing and Marketing expense. If all the four costs are taken together the percentage of Marketing profit to sale will reduce as compared to that computed by TPO and when such percentage of marketing profit is applied to sales the resultant gross

amount which should have been received by Assessee as commission comes to 42.38 crores and Assessee has received Rs. 44.30 crores and thus, the transaction is at ALP.

The Tribunal also held that CIT(A)’s reliance on earlier year’s Tribunal order is misplaced since there is difference in facts like TPO applied Other Method as most appropriate method only for year under consideration and not for other years. Also for earlier years, the amount of sale considered for determining ALP consisted of sale of manufactured traded goods and commission as compared to year under consideration which comprised of manufactured goods and has no components of traded goods or commission. However, as stated earlier, the transfer pricing addition under “Other Method” as per Rule 10AB was not justified.

DCIT v. Gujarat Microwax (P.) Ltd. (2022) 218 TTJ 432 (Ahd)(Trib.)

138. S. 139: Return of income – There could be several reasons for not getting the statutory audit/tax- audit done within prescribed time

– unless there is specific/express provision which stipulates that if the audit is not done within prescribed time – the loss shall not be allowed to be carried forward, the scope of the statute cannot be expanded.

Assessee is engaged in business of Manufacturing of Engineering goods and filed its return of income and enclosed provisional financial statements along with its return of income as accounts were not audited by that time. Assessee’s accounts were finally audited which were filed with Revenue during course of original assessment proceedings. However, the Assesse did not file revised return of income after getting its accounts audited with

revised figure of income (loss) post audit. Revenue initiated proceedings against assesse for infringement of provisions of Section 44AB for not getting tax-audit done within prescribed time and the AO completed the assessment proceedings by accepting returned loss but with the rider that the loss returned cannot be allowed to be carried forward on the ground that the same was arrived provisionally without audit. The CIT(A) allowed the appeal of assessee but the Tribunal set aside the order passed by CIT(A) and restored the matter to the file of AO since the AO had not taken any support of provisions of the Act to show that Assessee was not entitled to carry forward the loss. Accordingly, matter was set-aside to the AO with directions to assess the income/loss of the assesse on the basis of audited financial statements.

In second round of proceedings, the AO did not allow carry forward of business loss as no revised return was filed but allowed loss on account of depreciation. The CIT(A) in second round had held that the return was filed with the time limit and hence Assessee will be eligible to carry forward business loss. Aggrieved, the Revenue filed an appeal with the Tribunal.

The Tribunal noted that Explanation to Section 139(9) clearly stipulates that tax-audit report as well audited accounts are to be accompanied with return of income, otherwise return will be a defective return and consequences are also stipulated u/s 139(9). However, the provision of Section 139(9) did not stipulate that such return which is not accompanied with the prescribed documents shall be treated as non-est, but it is treated as a defective return. The AO is under obligation u/s 139(9) to issue notice to the assesse giving fifteen days’ time or such further extended time to rectify the defect, and once the assesse rectifies the defect within stipulated time, the return will be treated as valid return. It is only when the assesse fails to rectify the defect within stipulated time, then the return will be treated as invalid return and it will be deemed that the assesse has never filed return of income. It is also an admitted position that the audited accounts and tax- audit return was filed by the assesse during the course of assessment proceedings, albeit the assesse did not file revised return of income.

The Tribunal held that if the assesse has not got its statutory audit done under Companies Act, 1956 within the prescribed time, or has not got its tax audit done under the provisions of Section 44AB there are penal provisions provided under the statute for such non- compliances.

There could be several reasons for not getting the statutory audit/tax-audit done within prescribed time, but unless there is specific/ express provision which stipulates that if the audit is not done within prescribed time, the loss shall not be allowed to be carried forward, the scope of the statute cannot be expanded. Accordingly, the order of CIT(A) was confirmed and the Revenue’s appeal was dismissed.

DCIT v. Bramhos Aerospace (Thiruvananthapuram) Ltd (2022) 194 ITD 561 (Cochin)(Trib.)

139. S. 140A: Self-assessment – Failure to deposit admitted self-assessment tax – Financial difficulty – Levy of penalty is not valid [S. 140A (3), 221(1)]

Dismissing the appeal of the Revenue the tribunal held that amended section 140A(3) with effect from 1-4-1989 does not envisage any penalty for non-payment of self-assessment tax, hence, no penalty as per post-amended sub- section (3) to section 140A read with section 221(1) could have been imposed on assessee for its failure to deposit its admitted self-assessment tax liability. Tribunal also held that where acute financial stringency which was further supplemented by absence of any other source of income had triggered failure on part of assessee to discharge its admitted self-assessment tax

liability at time of filing its return of income, and for a period thereafter, no penalty under section 221(1) read with section 140A(3) could have been imposed.(AY. 2011-12, 2012-13)

DCIT v. Karanja Terminal & Logistic (P.) Ltd. (2022) 193 ITD 385 / 215 TTJ 41 (Mum) (Trib.)

140. S. 143(3): Assessment – Charge of income-tax – Order passed by National Company Law Tribunal under section 31 of Insolvency and Bankruptcy Code, 2016 has overriding effect over anything inconsistent contained in Income- tax Act and it shall be binding on all respective entities including other stakeholders, which include Central Government, State Government and other local bodies – Matter remanded to the Assessing Officer. [S. 4, Insolvency and Bankruptcy Code, 2016, S 31, 238]

Assessee-company, engaged in the business of

Railway Siding Utilization Activity, filed return of income. The Assessing Officer completed assessment after making various additions. The Commissioner (Appeals) confirmed the additions. On appeal before the Tribunal the assessee raised additional ground and submitted that in the light of the order of the National Company Law Tribunal and peculiar facts of the case, the Tribunal would ascertain that realisable tax liability of assessee for the assessment year under consideration, i.e., assessment year 2010- 11 as Nil. The order passed by the National Company Law Tribunal under section 31 of the Insolvency and Bankruptcy Code, 2016 has overriding effect over anything inconsistent contained in the Income-tax Act and it shall be binding on all the respective entities including other stakeholders, which include

Central Government, State Government and other Local Bodies. Since the present appeal involving assessment year 2010-11 relates to the period prior to the acquisition of control by the Resolution Applicant over the assessee- company pursuant to this plan, all dues under the provisions of the Income-tax Act, 1961 including taxes, duty, penalties, interest fines, cesses, etc. shall stand extinguished by virtue of the order of the National Company Law Tribunal and all proceedings including the appellate proceedings pending on the date of the order of the National Company Law Tribunal including the present proceedings relating to the prior period to the date of order shall stand extinguished and all consequential liabilities, if any, should be deleted and should be considered to be not payable by the company. In the light of the order of the National Company Law Tribunal (NCLT) dated 12-2-2018 passed in assessee’s case, it would be fit to restore the case for the assessment year under consideration to Assessing Officer for taking necessary action in accordance with law.

Palogix Infrastructure (P.) Ltd. v. (2022) 193 ITD 329 (Kol) (Trib.)

141. S. 143(3): Assessment – Protective assessment – Excess cash recovered from registered office of assessee – No substantive addition was made in hands of any other person – Addition u/s 69A would not survive. [S. 69A, 132]

During course of search proceedings at registered office of assessee, excess cash was found. The assessee explained that cash belong to Fisher Health Resorts (P) Ltd. Assessing Officer, made the addition on protective basis under section 69A of the Act. On appeal the Tribunal held that no substantive addition had been made in hands of Fisher Health Resorts (P) Ltd or in hands of any other person.

Accordingly protective addition made in hands of Assessee Company did not survive and thus addition made in hands of assessee on protective basis under section 69A was deleted. (AY. 2016-17 to 2018-19)

Pegasus Properties (P.) Ltd. v. DCIT v. (2022) 193 ITD 514 (Mum)(Trib.)

142. S.143 (3): Assessment – Provision for gratuity – Disallowed in the return – Addition is held to be not valid. [S. 37(1)]

Held that in the return of income filed along with computation of income the provision for gratuity which had been debited in profit/loss account had been disallowed by assessee itself and no claim for provision for gratuity had been made by assessee while filing its return of income, addition made towards provision for gratuity was not valid. (AY. 2019-20)

Shakti Apifoods (P.) Ltd. v. Assessing Officer (2022) 193 ITD 751 (Chd.)(Trib.)

143. S. 144C: Reference to dispute resolution panel – Draft assessment order with demand notice – Initiating penalty proceeding – Draft assessment order being contrary to provisions of section 144C could not survive in eyes of law. [S. 156, 271(1)(c)]

Assessing Officer passed draft assessment order which was accompanied with demand notice issued under section 156 and notice initiating penalty proceeding under section 271(1)(c), draft assessment order passed by Assessing Officer being contrary to provisions of section 144C could not survive in eyes of law. (AY. 2013-14)

Cisco Systems Services B.V. v. DCIT (IT)(2022) 193 ITD 809 (Bang) (Trib.) 

144. S. 145: Method of accounting – Real estate business – Percentage completion method – Not justified in rejecting the method of accounting followed by the Assessee.

Assessee is engaged in real estate business. Assessee converted its land held as capital into stock-in-trade and constructed building on this land. During, relevant assessment year, assessee entered into agreement for sale of these premises and for purpose of revenue recognition followed percentage completion method of accounting. Assessing Officer rejected said methodology and estimated business profits on sale of land as well as profits from construction activities separately on ground that land was converted into stock- in-trade and premises including undivided share in land was sold to various buyers during year. On appeal the Tribunal held that project was completed to extent of 11 per cent during relevant assessment year as certified by architect and same was recognised as revenue in books of account. Since method adopted by assessee was recognized method of accounting as per accounting standards issued by ICAI and this method was consistently followed in subsequent years to recognize revenue, Assessing Officer was not justified in rejecting methodology adopted by assessee for revenue recognition. (AY. 2005-06)

Peninsula Land Ltd. v. DCIT (2022) 193 ITD 366 (Mum)(Trib.)

145. S. 149 : Reassessment – Time limit for notice – amendment made by the Finance Act, 2012 – increase time limit from six to sixteen years – also applicable for any assessment year beginning on or before the 1st day of April, 2012 and will have retrospective applicability

The Assessee is an individual and a Chartered accountant in whose residential premises search and seizure operation was carried in August 2011. In this proceedings, there was allegation of income from an asset located outside India that the assessment for the assessment year 1990-2000 was reopened on 27th March 2015. The Assessee had challenged the validity of proceedings on the ground that as on 1st July 2012, i.e. when enhancement in time limit for reopening assessment from six to sixteen years was introduced in section 149, the assessment had reached finality. The CIT(A) accepted the position of the Assessee and held that even though the period for reopening the assessments in case of income from assets located outside India stood increased to 16 years with effect from 1st July 2012, it could only take prospective effect and the assessments having already reached finality i.e. till AY 2005-06, will remain unaffected by this amendment. Aggrieved, the Department filed an appeal before Tribunal.

The Tribunal noted that the statutory provisions are quite clear and unambiguous and section 149(1)(c) provides that no notice for reassessment can be issued if “more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment”. As for the retrospective application of this provision, Explanation to Section 149 unambiguously provides that “the provisions of sub-sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012”.

The Tribunal held that interpretation adopted by the CIT(A) is thus clearly contrary to the specific words of the statute and unambiguous intent of the legislature. Tribunal further concluded that so far as escaped income from an asset outside India is concerned, any completed assessment can be reopened as long as sixteen

years have not elapsed from the end of the relevant assessment year. Admittedly, that is not the position in the present case, as the relevant assessment year was completed on 31st March 2000, and the assessment was reopened on 27th March 2015. Thereby, the Tribunal reversed the findings of the CIT(A) and allowed the contentions of the Revenue.

However, since the CIT(A) had not considered the issue on merits, the matter was restored back to CIT(A) to decide on merits with timeline to complete the same within 180 days from date of service of Tribunal order.

DCIT v. Dilip J. Thakkar (2022) 216 TTJ 121) (Mum)(Trib.)

146. S. 149: Income escaping Assessment – Time Limit – Notice for re-assessment in relation to any asset situated outside India – Retrospective applicability of Sec 149(1)(c) introduced on 01.07.2012 upheld.

AO issued notice u/s 148 for A.Y 1999-2000 by taking shelter of sec 149(1)(c), which came into effect from 01.07.2012, which extends the period to 16 years, where income in relation to any asset located outside India, has escaped assessment.

Assessee challenged the reopening, on ground that same has been done beyond the limitation period of 6 years, as by the time s 149(1)(c) was introduced, the time limit for issue of notice u/s 148 as per the law prevailing on that day has expired. CIT (A), accepted the plea of assessee, and held that assessment for AY 1999-2000 could not be reopened beyond six years by invoking the provisions of Sec 149(1)(c).

Tribunal on appeal by Revenue held that the amendment in sec 149(1), introduced w.e.f 01.07.2012, is thus expressly stated to be retrospective in nature, and there is no bar on

the validity of the retrospectively of the taxing statute as long as it is clearly specified to be so. (ITA No. 967/MUM/2020 (AY. 1999-2000) dt 15.03.2022

DCIT v. Smt Mitali R Lakhanpal (2022) 194 ITD 424(Mum)(Trib.)

147. S. 149 : Limitation – Reassessment – Issue of Notice u/s 148 for

A.Y 1999-2000 – Retrospective applicability of Sec 149(1)(c) introduced on 01.07.2012 – Held, assessment for AY 1999-2000 could not be reopened beyond six years by invoking sec 149(1)(c)

AO issued notice u/s 148 for A.Y 1999-2000 by taking shelter of sec 149(1)(c), which came into effect from 01.07.2012, which extends the period to 16 years, where income in relation to any asset located outside India, has escaped assessment.

Assessee challenged the reopening, on ground that same has been done beyond the limitation period of 6 years, as by the time s 149(1)(c) was introduced, the time limit for issue of notice u/s 148 as per the law prevailing on that day has expired. CIT (A), accepted the plea of assessee, and held that assessment for AY 1999-2000 could not be reopened beyond six years by invoking the provisions of Sec 149(1)(c).Tribunal held that the Reassessment has been rightly quashed by CIT(A). (ITA No. 969/Mum/2020 (AY. 1999 – 2000) dt 14.02.2022

DCIT v. Smt Indira D Thakkar (2022) 217 TTJ 529 (Mumbai)(Trib.)

148. S. 153A: Search & Seizure – Impugned addition on landowner of on-money declared by developer before settlement commission – Held addition on basis of cloud data, in absence of any evidence rightly deleted.

Addition was made u/s 68 on Assessee a landowner based on on-money declared by developer on basis of cloud tally data found during search on developer. AO made additions stating that assessee has not given any proof that no such amount of on-money was received, and simple denial is not acceptable. Further when developer has owned up the transaction, the same is correct for other party. The CIT(A) deleted the additions.

On appeal the Tribunal held that addition made is rightly deleted by CIT(A) for following reasons :

1. In search of the appellant, no document or material was found to indicate that assessee has received any on-money, and hence said cloud data can’t be used against
2. The documents and cloud data were seized from the business premises of developer, and not from residence of assessee, so, same can be considered as true only in respect of that person, more so when developer has not stated that the on-money recorded in tally data has been shared with the
3. It was also noted that no new facts have been brought by the revenue in controverting the order of the learned CIT(A),

(ITA No. 1299 to 1301/Jp/2019 (AY. 2013-14 to 2015-16) dt 03.01.2022

DCIT v. Late Smt Pushpa Goyal (Through Legal Heir, Shri Munna Lal goyal) (2022) 217 TTJ 65 (Jp) (UO)

149. S. 154: Rectification of mistake – Interest – Compensation on Agricultural land – Failure to claim statutory deduction – Mistake apparent hence amenable for rectification [S. 57(iv), 143(1)]

Assessee was entitled for a statutory deduction of fifty per cent of interest income, but he failed to raise such a claim in his return, he moved an application under section 154 before Assessing Officer. Assessing Officer rejected the claim. On appeal the Tribunal held that since assessee had in his return of income duly reflected interest on compensation qua compulsory acquisition of his agricultural land, failure on his part to raise a claim for deduction under section 57(iv), being clearly in nature of glaring, apparent, patent and obvious mistake from record, rendered order passed by Assessing Officer amenable for rectification under section 154 and, thus, Assessing Officer was directed to allow assessee’s claim for deduction under section 57(iv) of the Act. (AY. 2012-13)

Dhanesh Kumar Jain. v. ACIT (2022) 193 ITD 1 (Delhi)(Trib.)

150. S. 154 : Rectification of mistake – Un utilisation of MODVAT – Order of Assessing Officer and Commissioner (Appeals) got merged with order of Tribunal – Rejection of rectification application is justified [S.254(1)]

Dismissing the appeal of the assessee the Tribunal held that where order of Assessing Officer and Commissioner (Appeals) got merged with order of Tribunal, rectification of a mistake being apparent from record could only be effected in order of Tribunal and not in order of Assessing Officer or Commissioner (Appeals). (AY. 2004-05 & 2011-12)

Khyati Chemicals (P.) Ltd. v. DCIT (OSD)(2022) 193 ITD 446 (Ahd.)(Trib.)

151. S. 195 : remittance of amounts collected on behalf of foreign universities – not in the nature of FTS – amount paid for teaching in or by educational institutions is not FTS – The expression ‘teaching in or by educationalinstitution’ cannot be confined to the activity of imparting the instructions alone. [S. 195]

The assessee imparts instructions in India as per

the syllabus set by the foreign universities, and subsequently, foreign universities are conducting the examinations before issuing the degrees. For this, the assessee collected examination fee and fees for syllabus from students and remitted the same to non-residents without making any deduction u/s. 195. However, the AO was of the opinion that skilled educational services were rendered by these foreign universities to the assessee and, therefore, such services fell in the ambit of the expression ‘FTS’ under the India- UK and India-Switzerland DTAAs and tax was deductible u/s. 195. On appeal the CIT(A) held that the assessee is only a pass through entity in the sense that they are only collecting the exam fee on behalf of the foreign universities and no TDS was warranted u/s. 195.

On Department appeal, the Hon’ble Tribunal held that the definition of ‘fee for technical services’ does not include any amount paid for teaching in or by educational institutions. The expression ‘teaching in or by educational institution’ cannot be confined to the activity of imparting the instructions alone, in a broader sense, teaching includes not only imparting the instructions but also the verification of the extent of perception of such instruction by the pupil and thereby includes the activity of examinations also. In this sense, this particular activity fell in the ambit of the exemption clause

i.e. Article 13(5)(c) of the India-UK DTAA and

Article 12(5)(a) of India-Switzerland DTAA which exempted the amounts paid for teaching in or by the educational institutions. Hence, the Tribunal upheld the decision of the CIT(A).

DCIT v. Hyderabad Educational Institutions (P.) Ltd. (2022) 195 ITD 746 (Hyd.)(Trib.)

152. S. 195: Deduction at source – Non- resident – Transponder service fee – Not in nature of royalty in hand of recipient – Not liable to deduct tax at [S.9(1)(vii), 195(2)]

Dismissing the appeal of the revenue the Tribunal held that transponder charges were not in nature of royalty in hands of recipient despite amendment to section 9(1)(vi) and, therefore, there was no liability on part of assessee to deduct TDS on payments. Followed PCIT v. NEO Sports Broadcast (2019) 107 taxmann.com 17

(Bom)(HC) (AY. 2015-16, 2016-17, 2020-21)

ACIT (IT) v. Viacom18 Media (P.) Ltd. (2022) 193 ITD 716 (Mum) (Trib.)

153. S. 195 :Deduction at source – Non- resident – Income deemed to arise in India – Computer software through EULA/distribution agreement, is not payment of royalty for use of copyright in computer software and, thus, same does not give rise to any income taxable in India – Not liable to deduct tax at source- DTAA-India-USA [S. 9(1)(vi), Copy Right Act, 1957, S. 14(a), 14(b), 52(1)(aa), Art. 12(4)(b)]

Held that the amount paid by assessee

Indian end user/distributors to non-resident computer software manufacturers/suppliers, as consideration for resale / use of computer software through EULA/distribution agreement,

is not payment of royalty for use of copyright in computer software and, thus, same does not give rise to any income taxable in India. Not liable to deduct tax at source. (AY. 2009-10)

Bain & Company India (P.) Ltd. v. ITO (TDS) (2022) 193 ITD 787 (Delhi) (Trib.)

154. S.234E: Fee – Default in furnishing the statements – Amendment in section 200A by way of insertion of clause (c) was only with effect from 1-6-2015 – Levying late fee for f period prior to 1-6-2015 is not valid [S. 200A]

Held that amendment in section 200A by way of insertion of clause (c) was only with effect from 1-6-2015 and therefore no fees would be payable by assessee for any period prior to 1-6-2015. Accordingly levying late fee prior to 1-6-2015 would not be sustainable. (AY. 2013 -14 to 2015-16)

Bhaskar Roy v. ITO (2022) 193 ITD 668 (Kol)(Trib.)

155. S. 251: Appeal – Commissioner (Appeals) – Powers – Assessee could not level baseless allegations against CIT (A) – Matter remanded. [S.250]

Held that Commissioner (Appeals) repeatedly granted adjournments on all applications moved by assessee but assessee remained unrepresented and thereafter, on basis of material available on record order was passed. Assesse could not level baseless allegations against CIT (A). Order was set aside solely on grounds that taxpayer should not suffer on account of either his ignorance or inability due to some extenuating circumstances on account of which he could not come clean with all his facts and explanations qua issues before revenue. (AY. 2012-13)

Abdul Wahab v. ITO (2022) 193 ITD 746 (SMC)  (Delhi)(Trib.)

156. S. 254(2): Appeal (Tribunal) – Rectification – mistake apparent – Department filed miscellaneous application contending that certain vital submissions made were ignored/not considered by the Tribunal – Tribunal held that the miscellaneous application moved by revenue is not maintainable, as there is no mistake apparent from the

After pronouncement of the Order by Hon’ble Tribunal, Revenue moved the miscellaneous application stating that there are certain apparent mistakes of fact and law which deserves to be rectified u/s 254(2)of the Act. Revenue further alleged that vital submissions were ignored or not considered by the Tribunal, and reliance placed on various decisions were also not taken into consideration.

Tribunal held that the miscellaneous application is not maintainable, based on following :

1. That, all the relevant findings and the arguments advanced by the counsels, including rejoinder have been discussed in detail in the order,
2. That, all the submissions and the case laws relied upon by the counsel for revenue find the place in the impugned order,
3. That, the correctness of the decision cannot be challenged by revenue in grab of rectification petition u/s 254(2), and it appears that department wants to get the order passed by the Tribunal reviewed which is not permissible, as Tribunal has no power or inherent right to review or modify its order.
4. That, the mistake should be apparent from the record, which is patent, self- evident, glaring and obvious, and whose discovery is not dependent on argument or elaboration and does not require complicated process of investigation, arguments or proof, which needs rectification.
5. In the instant case since there is no mistake apparent on record the misc application moved by the department is not maintainable.

(Misc Appln Nos. 31 to 33/Chd/2020 in ITA Nos 706,707 & 709/Chd/ 2018 (AYs. 2008-09, 2010-11 & 2012-13) dt 18.03.2021

DCIT v. Sanjay Singal (2022) 217 TTJ 18 (Chd) (Trib.)

157. S. 263: Revisionary proceedings – Revision cannot be made by CIT pursuant to order under section 147 on any other issue if the issue for which reopening was done does not survive

The assessee filed Return of Income (‘ROI’) declaring NIL income which was processed under section 143(1) of the Act. Subsequently, the Assessing Officer (‘AO’) reopened the assessment mentioning in the reasons for reopening that assessee has transferred capital asset (an industrial plot) during the year, income from which has escaped assessment. However, on completing the reassessment proceedings, the learned AO passed the assessment order accepting the Returned income of the assessee.

Subsequently, on perusing the reassessment order, Commissioner of Income Tax (‘CIT’) issued notice under section 263 of the Act to initiate revisionary proceedings on a new issue of taxability of Long Term Capital Gains (‘LTCG’) from sale of shares and deduction claimed under section 54/54F etc and according made addition.

Tribunal observed that reassessment was made on the issue of capital gains from sale of

industrial plot on which the CIT did not find any error. However, CIT took up altogether new issue of taxability of LTCG from sale of shares.

Tribunal relied on decisions of Delhi Tribunal in case of Ranbaxy Laboratories Ltd (336 ITR 136) (Del) and Bombay High Court in case of Jet Airways India Ltd (331 ITR 236) (Bom) and held that if no addition is being made on the point for which assessment has been reopened, then any other addition cannot be made. Therefore, CIT cannot explore any other issue under section 263 which cannot even be explored by the AO in reassessment proceedings and accordingly quashed the order of CIT.

Binal Parixit Patel v. Pr. CIT (2022) 217 TTJ 10 (Ahd)(Trib)

158. S. 263: Commissioner – Revision of orders prejudicial to revenue – Business expenditure – Corporate social responsibility expenses – Amendment brought by way of Explanation 2 to section 37(1) by Finance Act, 2014, with effect from 1-4-2015 is not retrospective in nature – Revision is held to be not valid [S. 37(1)]

The Assessee expenditure incurred towards same as corporate social responsibility (CSR) expense. Assessing Officer allowed the said expenditure. Principal Commissioner invoked revision jurisdiction on ground that CSR expenses claimed by assessee was not incurred wholly and exclusively for its business purposes as per provisions under section 37(1) of the Act. On appeal the Tribunal held that amendment brought by way of Explanation 2 to section 37(1) by Finance Act, 2014, with effect from 1-4-2015 providing for disallowance of CSR expenditure was not retrospective in nature. Therefore expenditure incurred by assessee towards CSR was allowable as deduction for both relevant assessment years 2013-14 and 2014-15. Revision is held to be not valid. (AY. 2013-14, 2014-15)

Garden Reach Ship Builders & Engineers Ltd. v. PCIT (2022) 193 ITD 649 (Kol)(Trib.)

159. S.270A : Appeal (Tribunal) – Maintainability – Order imposing Penalty u/s 270A – Appeal filed directly before Tribunal under general provisions of S 246A(1) (q)- Held appeal filed against such penalty order directly before Tribunal is not maintainable.

Assessee filed the Appeal against Penalty order u/s 270A levied by AO, directly before Tribunal on pretext that Sec 246A which lists out the appealable orders before the CIT(A) does not refer to an order passed by AO u/s 270A, whereas Sec 253(1)(a) which sets out provisions for appeals before Tribunal , specifically refers to order passed u/s 270A.

Learned DR took objection, and stated that the Appeal should be first filed before CIT(A).

Tribunal held that the objection of DR is correct, as Sec 246A(1)(q) included in orders appealable before learned CIT(A), “an order imposing a Penalty under chapter XXI” and chapter XXI of I T Act,1961 covers ss 270 to 275, and thus Sec 270A is covered by said provision, and dismissed the appeal as not maintainable.

Tribunal, on assessee’s seeking intervention of Tribunal and seeking liberty to file appeal before CIT(A), stated that there is no cause of action for intervention, and it is for the assessee to file Appeal with condonation petition.(ITA No. 2072/Mum/2021 (AY. 2017-18) dt 17.05.2022)

Desmond Savio Theodore Fenandes v. ITO (2022) 217 TTJ 84 (Mumbai)(UO)(Trib.)

160. S. 271(1)(c) : Concealment – Return of Income filed showing

Loss under normal provisions, and Tax was paid on Income as per provisions u/s 115JB – Loss was reduced on account of prior period adjustments, of an expenditure not set-off against prior period income, as per order u/s 147 r.w.s 143(3) – No change to Income under MAT – Penalty levied by AO deleted

The penalty levied by AO which was deleted by CIT(A), in view of the fact that the assessee’s income under the regular provisions of the Act is loss even after disallowance of claim of prior period expenditure, while its income under the MAT regime is positive and remains unchanged after order u/s 147r.w. 143(3), as the issue is covered by circular no 25 of 2015 dt 31.12.2015, which being a benevolent circular, is binding on IT authorities u/s 119.

On Appeal Tribunal held that the appeal filed by revenue against order of CIT(A) deleting the levy of penalty is not maintainable. (ITA No. 251/Jab/2018 (AY. 2008-09) dt 23.03.2022

DCIT v. Madhya Pradesh Power Generating Co Ltd (2022) 217 TTJ 875 (Jab)(Trib)

161. S. 271(1)(c) : Penalty – Concealment – Not referring specific charge in the notice or assessment order – Levy of penalty is not valid.

Held that the Assessing Officer had neither mentioned in assessment order nor in his penalty notice as to whether penalty was initiated for concealment of income or for furnishing inaccurate particulars of income and he had also not mentioned in order that he intended to levy penalty under Explanation 5 of section 271(1)(c), said penalty under section 271(1)(c) was not justified and was to be deleted. (AY. 2014-15, 2015-16)

Chandra Suresh Kothari v. DCIT (2020) 193 ITD 547 (Nagpur)(Trib.)

162. S. 271AAB: Penalty – Search initiated on or after 1st day of July, 2012 – Surrender of income

– Neither surrendered income nor penalty was initiated on the basis of undisclosed income found during search – Levy of penalty is not valid. [S.132]

Held that where assessee had neither made any surrender of any undisclosed income during search, nor penalty had been initiated on basis of undisclosed income found during such search, impugned order of Assessing Officer imposing penalty on assessee under section 271AAB did not pass mandate of provisions of section 271AAB, therefore, same being bad in law was to be quashed. (AY. 2014-15, 2015-16)

Chandra Suresh Kothari v. DCIT (2022) 193 ITD 547 (Nagpur)(Trib.)

163. S. 271B : Penalty – Failure to get accounts audited – Project completion method – Advance received – Not turnover or gross receipt – Bonafide belief – Failure to get audited – Levy of penalty is not valid [S. 44AB]

Assessee, an individual, engaged in business of construction filed her return of income declaring loss. Assessing Officer held that the assessee was a developer and had incurred huge expenditure by way of compensation as well as received advance for various projects and, therefore, looking at total business receipt, assessee should have got her accounts audited under section 44AB, which admittedly was not done by assessee; hence, he initiated penalty proceedings under section 271B of the Act. CIT (A) affirmed the order of the Assessing Officer. On appeal

the Tribunal held that assessee was following project completion method, assessee had shown cost of project as work-in-progress and advances received for sale of property had been disclosed and thus, was under a bona fide belief that provisions of section 44AB did not apply and hence, no audit under section 44AB was got done. This being a reasonable cause penalty levy of penalty is not valid. (AY. 2012-13)

Sushila Sureshbabu Malge (Smt.) v. ITO (2022) 193 ITD 416 (Mum)(Trib.)

164. S.271D: Penalty – Takes or accepts any loan or deposit – Amount received from husband – Purchase of plot – Family arrangement – Levy of penalty is not valid [S. 269SS, 273B]

Held that the assessee offered explanation that payment towards construction expenses like purchase of construction material and payment to labourers were required to be incurred in cash. Further, all transactions including cash transactions were duly documented in registered sale deed. Also pooling of family funds was done by assessee due to her family’s requirement and as she didn’t have any known sources of funds. Tribunal held that since assessee offered a reasonable explanation justifying said cash transactions, penalty could not be levied under section 271D for violation of section 269SS of the Act. (AY. 2009-10)

Meera Devi Kumawat. (Smt.) v. JCIT (2022) 193 ITD 250 (Jaipur)(Trib.)

165. S. 14, 31 of Insolvency and Bankruptcy Code, 2016: Moratorium period – Continuation of pending suits during moratorium period prohibited – Department and Assessee appeal dismissed – Liberty to file appeal afresh after completion of moratorium

The Assessee’s case is pending before The Insolvency Professional in terms of Insolvency and Bankruptcy Code, 2016 and moratorium period has been declared as per Section 14 of the Code. The Tribunal held that as per Section 14 of the Code, institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority shall be prohibited during the moratorium period. The period of moratorium shall have the effect from the date of such order till completion of corporate insolvency resolution process.

As per Section 31 of the Code, resolution plan shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in resolution plan. Thus, this will prevent authorities, regulatory bodies including direct and indirect tax department from questioning resolution plan. Thus, the Tribunal dismissed the appeal filed by Revenue and Assessee with the liberty to file appeal afresh after completion of moratorium period upon revival of Corporate Debtor as per Resolution Plan as approved by the Adjudicating Authority or upon appointment of the Liquidator as the case may be.

DCIT v. Global Softech Ltd. Raghuvanshi Mill and Anr (2022) 217 TTJ 1 / 212 DTR 133 (Mum.)(Trib.)