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2022 (5) TMI 1576 - GUJARAT HIGH COURT
Grant of refund of excess tax alongwith interest - inter-state sales against the statutory declaration forms attracted concessional rate of tax under the CST Act - Input Tax Credit of the writ applicants exceeded output tax liability - HELD THAT:- It is not in dispute that after the filing of the annual return, the time limit for assessment and reassessment under the VAT Act expired and no assessment or re-assessment order was passed by the authority.
The issue is squarely covered by two decisions of this High Court inMALHOTRA GRAMALHOTRA GRAPHICS THRO' SANJAY MALHOTRA VERSUS STATE OF GUJARAT & 1PHICS THRO' SANJAY MALHOTRA VERSUS STATE OF GUJARAT & 1 [2012 (3) TMI 704 - GUJARAT HIGH COURT] and TORRENT POWER LTD. AND 1 OTHER (S) VERSUS STATE OF GUJARAT AND 1 OTHER (S) [2019 (6) TMI 893 - GUJARAT HIGH COURT]where it was held that Since the amount is deposited under protest by the petitioners and no order of assessment, reassessment or revision is passed till date, the amount retained by the authority is not backed by any authority of law in the light of Article 265 of the Constitution of India and, therefore, the respondents have no authority to retain the same.
This writ application is allowed with a direction to the respondents to grant the refund of Rs. 2,96,622/- due as per the self-assessment return under the VAT Act for the year 2013-14 along with the statutory interest payable on such refund within a period of six weeks from the date of receipt of the writ of this order.
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2022 (5) TMI 1575 - BOMBAY HIGH COURT
Validity of reopening of assessment u/s 147 - excess premium charged by assessee - notice issued after the expiry of four years - assessee has followed Discounted Cash Flow method (DCF) and valued the shares at Rs. 1,015/- per share as per valuation report relied upon to justify the share premium. AO feels that the assessee could have charged premium of only Rs. 249.70 per share - HELD THAT:- The reason for reopening is nothing but a change of opinion. Admittedly scrutiny assessment u/s 143(3) was completed on 26th November 2016 after accepting loss shown in the returns.
During the assessment proceedings, by a notice issued u/s 142(1) petitioner was called upon by respondent no. 1 to provide valuation report, bank statements and ITR of M/s. Kesar Motels Pvt. Ltd. for share premium received. This was provided by petitioner vide its Chartered Accountant’s letter dated 8th November 2016. Petitioner had also provided copy of ITR, valuation certificate and other details. After considering all these points, an assessment order dated 29th November 2016 came to be passed.
This is a case of reopening after expiry of four years from the end of the relevant assessment year. Respondent had to show that there was failure to truly and fully disclose material facts. Not only petitioner has disclosed but respondent has also raised queries during the course of assessment proceedings and has passed an assessment order u/s 143(3) of the Act.
On the issue of the assessment order being silent, it is settled law that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised [Aroni Commercials Ltd. V/s. Deputy Commissioner of Income Tax 2 (1) [2014 (2) TMI 659 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2022 (5) TMI 1574 - ITAT PANAJI
Disallowance of administrative expenses u/s 14A r.w Rule 8D(2)(iii) - HELD THAT:- AO had failed to record his dissatisfaction as regards the claim of the assessee that no part of the expenditure claimed as deduction could be attributed towards earning of exempt dividend income, therefore, he had wrongly assumed jurisdiction u/s. 14A of the Act, as a result whereof the disallowance determined by him by triggering the mechanism contemplated in Rule 8D(2)(iii) cannot be sustained and is liable to be vacated. As we have vacated the disallowance made by the A.O u/s. 14A(2)(iii) for want of valid jurisdiction on his part, therefore, we refrain from adverting to the other contentions that have been advanced by the Ld. AR qua sustainability of the said disallowance on merits which are left open. Ground of appeal No.2 raised by the assessee is allowed in terms of our aforesaid observations.
Disallowance of deduction of contributions to temple/panchayat - as contributions made by the assessee to the temple/panchayat were not eligible for deduction u/s. 80G, A.O disallowed the assessee’s claim for deduction of the aforesaid amount in question - HELD THAT:- Aforesaid contributions/expenditure which are neither in the nature of personal expenditure or capital expenditure and have been incurred by the assessee company in order to facilitate running of its business of mining smoothly, i.e., without any disturbance from the people in the surrounding villages thus, being in the nature of an expenditure incurred by the assessee wholly and exclusively for the purpose of its business was allowable as a deduction u/s. 37(1) of the Act - no infirmity in the view taken by the CIT(Appeals) who had vacated the aforesaid disallowance.
Addition u/s 41(1) - cessation of liabilities - Assessee had failed to furnish confirmations in respect of four creditors - HELD THAT:- Now when it is the claim of the assessee that the impugned liabilities had ceased to exist in the aforementioned succeeding years, then, in case the A.O was to hold otherwise, he was obligated to substantiate on the basis of irrefutable material that the said outstanding liabilities had in fact ceased to exist during the year under consideration itself, i.e., A.Y.2009-10. - Decided against revenue.
A.O could not have summarily concluded that the cessation of the aforementioned outstanding liability had occasioned during the year under consideration, i.e., AY 2009-10. We, thus, in terms of our aforesaid observations, finding no infirmity in the view taken by the CIT(Appeals) who had rightly vacated the addition of made by the A.O u/s. 41(1) uphold the same. - Decided against revenue.
Addition u/s. 28(iv) - assessee had received advances/deposits in the preceding years from 6 parties, i.e., for providing handling services in connection with its business which stood reflected in its ‘balance sheet’ on 31.03.2009 - HELD THAT:- We find substantial force in the claim of the Ld. AR that the invoking of provisions of section 28(iv) of the Act pre-supposes any benefit or perquisite whether convertible into money or not, arising from business or the exercise of a profession.
As observed in the case of Commissioner Vs. Mahindra & Mahindra Ltd. [2018 (5) TMI 358 - SUPREME COURT] for invoking the provisions of section 28(iv) of the Act, benefit received has to be in some form other than in shape of money. Observing, that as the waiver of loan for acquiring a capital asset in the case before them represented cash/money, the Hon’ble Apex Court in its aforesaid order had concluded that the provisions of section 28(iv) of the Act would not be applicable.
As stated by the AR, and rightly so, as cessation of a capital receipt of an amount by the assessee, i.e., deposits/advances for providing handling services that were received by the assessee in the normal course of its business in the preceding years, would undisputedly represent cash/money and is not in the nature of benefit or perquisite other than any shape of money, therefore, the provisions of section 28(iv) of the Act would not get triggered.
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2022 (5) TMI 1573 - ITAT JABALPUR
Rectification of mistake - Maintainability of the Revenue‘s appeal u/s. 268A - Tribunal dismissed the Revenue‘s captioned appeals as not maintainable u/s. 268A inasmuch as the tax effect is below Rs. 50 lakhs - Revenue‘s case is that there has been an omission on the part of the Tribunal while considering its‘ instant appeals to have regard to the fact, expressly brought forth and conveyed to the Tribunal, that the same were covered under exceptional Cl.10 (c) of the Board Instruction 03/2018, dated 11/07/2018 and, that, therefore, the same stand wrongly dismissed as being in violation of the said Board Instruction (BI) and, thus, not maintainable - whether the Tribunal holding, per the impugned order, that there is nothing on record to prove the Revenue‘s contention, is correct or not? - HELD THAT:- A perusal of the appeal folder/s reveals a clear mention of the exceptional clause under which the instant appeal/s stands preferred, filed along with the appeal papers, as indeed the communications between the ld. Departmental Representative and the field officer confirming this position, again duly furnished to the Tribunal prior to the date of hearing of the appeal/s. There being no reference to these documents, admittedly relevant, in the impugned order, reproduced in it‘s operative part hereinbefore, there has clearly been an omission on the part of the Tribunal in not noticing the same, much less have regard thereto, incumbent on it under law.
The assessee‘s principal objection concerns the disregarding of the same by the Tribunal inasmuch as the same, having not been supplied to the assessee, could not form part of it‘s record. We, for the several reasons afore-stated, find the said argument misconceived. The argument presumes the non-consideration of the said material by the Tribunal in the first instance for this reason, even as there is no whisper of the same in it‘s order. That is, is wholly presumptuous.
It further presumes that the Tribunal, though conscious of the said material, yet chose not to direct either the Revenue or it‘s Registry to supply a copy thereof to the assessee, as in that case, forming part of it‘s record, it would be obliged to take cognizance thereof. That is, acts in a partisan manner. Rather, where so, i.e., the material was not admitted by the Tribunal on this ground, the same ought to form part of it‘s order, which only would qualify the same as a judicial order inasmuch as the same has to be, by definition, a speaking order.
On merits, to even suggest that the AM u/s. 253(2), which forms part of the appeal papers, is not a part of the Tribunal’s record, is, to our mind, perverse. There is no requirement in law for the Revenue to have filed the same with the assessee – who could though seek a copy of the same, nor any prescribed manner for communicating the same. Rather, inasmuch as the same concerns the legal competence for filing an appeal, mention thereof in and as part of the authorization memo u/s. 253(2), authorising the filing of an appeal with the Tribunal, which forms part of the appeal memo and, thus, part of the Tribunal‘s record, it‘s mention therein is most appropriate
Ignoring the attendant circumstance, besides being in clear violation of the clear mandate of law (s. 268A(4)), itself constituting a mistake, liable for rectification, which extends to both mistakes of fact and law, could only be at the peril of causing a serious prejudice to the appellant, negating it‘s right of appeal. It is trite law that no Court or Tribunal could by it‘s action or, as the case may be, non-action, cause prejudice to any of the party before it, which, where so, is to be regarded as mistaken, liable for rectification u/s. 254(2), even as explained in Honda Siel Power Products Ltd. [2007 (11) TMI 8 - SUPREME COURT]
For us, it is therefore no more than a simple case a bona fide omission by the Tribunal in, while adjudicating the matter, failing to take note of the compelling documents on it‘s record in support of the contention of the ld. DR – nothing more, and nothing less, and which therefore warrants being addressed by taking due notice of the said documents, all forming part of the appeal papers themselves (inasmuch as the communication between the Departmental officers is only toward and in substantiation of the eligibility note at para 2 of the AM, which is to accompany an appeal by the Revenue. The argument advanced – which has been considered in all it‘s different facets, serving, to our mind, only to obfuscate the issue.
The second argument, i.e., of an order, though mistaken, yet cannot be recalled inasmuch as scope of the instant proceedings is limited to making to amendments in respect of mistake/s apparent from record, the same glosses over the fact that the impugned order is not an order on merits, but an in limine dismissal of the appeal/s under reference for want of competence on technical, albeit mandatory, grounds. That a judgment is to be read as a whole, and it is the principle of law enunciated, it‘s ratio decidendi, that is binding, is trite law. The said argument is wholly misplaced and, if anything, itself mistaken.
We cannot help observing the assessee‘s conduct in the matter. The Bench had in the instant proceedings on an earlier occasion, in response to Sh. Purohit‘s contention as to the assessee having not been supplied a copy of authorization memo by the Revenue, directed for the same to be provided to the assessee inasmuch as the same were relevant toward the maintainability of the Revenue‘s appeal u/s. 268A, as well as copy of the Revenue‘s Audit Objection, also called for by the Bench during hearing. Further instructions were also passed for the assessee to make arrangements for collecting copy thereof from the Registry. This is borne out by order sheet entries dated 11/9/2020, 18/9/2020 and 25/9/2020. The assessee, however, did not take the copy thereof. As it transpires, this was as that would defeat the assessee‘s case. We have, however, at our end, confirmed that the Revenue Audit Objections are in respect of the grounds assumed by the Revenue per it‘s instant appeals, validating it‘s assertions, which we have done for our satisfaction as indeed in discharge of the obligation cast on the Tribunal u/s. 268A(4).
We, thus reject the assessee‘s contentions, and admit and decide the instant MAs by it in favour of the Revenue inasmuch as its‘ instant appeals were wrongly dismissed u/s. 268A(1) r/w s. 268A(4) of the Act.
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2022 (5) TMI 1572 - ITAT AHMEDABAD
Penalty u/s 271E - contravention of the provision of Section 269T - repayment of loan/deposits through account payee cheque or account payee drafts - whether assessment proceedings are necessary to levy penalty u/s 271E? - HELD THAT:- As relying on SHRI MANOHAR LAL THAKRAL [2011 (1) TMI 538 - PUNJAB AND HARYANA HIGH COURT] the impugned penalty under Section 271E is not permissible in the absence of regular assessment framed against the assessee by the Revenue. Hence, the same is not found to be sustainable in the eye of law and, thus, quashed. The appeal preferred by the assessee is, therefore, allowed.
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2022 (5) TMI 1571 - ITAT RAIPUR
Penalty u/s 271(1)(c) - non specification of clear charge - HELD THAT:- AO is under obligation to specify the appropriate limb of clause c of section 271(1)(c) of the Act at the time of initiation as well as at the time of levy of penalty notice.
In this case it has been drawn our attention that while recording the satisfaction in the assessment order as well as while issuing the notice at two occasion failed to specify the charge under which the assessee is liable for penalty and therefore we set aside the order of CIT(A) and direct the Assessing Officer to delete the levy of penalty imposed upon the assessee, relying on the various decision cited by the co-ordinate bench while rendering the decision in the case of Shri Swapnil Kumar Jain [2022 (4) TMI 178 - ITAT RAIPUR] - In the result the appeal of the assessee is allowed on legal issue.
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2022 (5) TMI 1570 - ITAT DELHI
Disallowance of deduction u/s 80IC - interest income earned on fixed deposits - profits and gains derived from manufacture/production of any article or things - HELD THAT:- In case of Liberty India Ltd.[2009 (8) TMI 63 - SUPREME COURT] while reiterating identical view has observed that the income qualifying for deduction must have a first degree relationship with the eligible business. In the facts of the present appeal, admittedly, the interest income which the assessee has claimed as deduction u/s 80IC was earned on fixed deposits kept in bank for the purpose of securing the entry tax which was under dispute. However, it cannot be said that such interest income has any direct nexus with profits and gains derived from manufacture/production of article or things.
In our view, the dispute relating to entry tax would not have any impact on the manufacturing activity of the assessee, since in the worst case the assessee would have brought the raw materials/goods on payment of entry tax. Thus, payment or nonpayment of entry tax would not have stalled the manufacturing activity of the assessee.
Thus it cannot be said that the interest income earned by the assessee is part of profits and gains “derived from” manufacture or production of article or things. Therefore, in our humble opinion, the interest income earned by the assessee would not qualify for deduction u/s 80IC of the Act.
Disallowance made u/s 14A r.w.r. 8D. - HELD THAT:- Insofar as assessment year 2013-14 as before us, the assessee has submitted that it had sufficient interest refund available to take care of the investment made. In this regard, we must observe, neither before the departmental authorities nor before us the assessee has furnished any working computing the disallowance u/s 14A r.w.r. 8D. Therefore, in absence of any such computation/working by the assessee, we are unable to record any conclusive finding regarding assessee’s claim.
Necessity of recording satisfaction - For assessment year 2014-15 submission of learned counsel for the assessee that the AO has not recorded any valid satisfaction is unsustainable. Recording of satisfaction by the AO regarding correctness of assessee’s claim would arise when the assessee itself has computed disallowance u/s 14A r.w.r. 8D on its own in the return of income furnished to the department. When the assessee has not made any such claim in the return of income, AO cannot record satisfaction in vacuum.
Having held so, it is necessary to observe, before us, assessee has submitted that the assessee had sufficient interest free refund with it to take care of the investment. Since, the aforesaid claim of the assessee has not been examined factually by the departmental authorities with reference to availability of funds in the books of account; we deem it appropriate to restore this issue to the AO for factual verification of assessee’s claim.
Disallowance of administrative expenses under Rule 8D(2)(iii), AO has to compute the disallowance by considering only those investments, which have yielded exempt during the year. With the aforesaid observations, the issue is restored back to the Assessing Officer for fresh adjudication.
Deduction u/s 80G - deduction was disallowed due to non-furnishing of supporting evidence - HELD THAT:- Commissioner (Appeals) has observed that the assessee not only failed to furnish the receipt issued by the donee but also could not furnish the eligibility certificate of the donee. In our view, for claiming deduction under section 80G assessee is required to furnish the supporting evidence, if called upon to do so by the AO. In absence of such supporting evidence, assessee’s claim of deduction could not have been allowed.
To enable the assessee to furnish the supporting evidences to prove the claim of deduction u/s 80G we restore this issue to the AO for fresh adjudication after due opportunity of being heard to the assessee.
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2022 (5) TMI 1569 - SUPREME COURT
Refusal to condone the delay in filing the written statement - computation of time limitation - HELD THAT:- In that view of the matter, the period from 15.03.2020 till 28.02.2022 shall have to be excluded for the purposes of limitation as may be prescribed under any General or SPECIAL LAWS in respect of all judicial or quasi-judicial proceedings. The Commercial Courts Act, 2015 being a Special Law, the said order shall also be applicable with respect to the limitation prescribed under the Commercial Courts Act, 2015 also.
In view of the above and for the reasons stated above and more particularly when the 120 days period expired in the present case on 09.05.2020 which was during the aforesaid period as prescribed by this Court in the aforesaid order, the High Court ought to have excluded the aforesaid period for the purpose of filing the written statement and ought to have permitted to take the written statement on record. The impugned judgment and order passed by the High Court refusing to condone the delay and take on record the written statement is hereby quashed and set aside.
The Appeal is accordingly allowed.
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2022 (5) TMI 1568 - DELHI HIGH COURT
Exemption u/s 11 - Claim denied as activities are commercial in nature and cannot be held to be charitable in view of the proviso (ii) to section 2(15) - ITAT allowed deduction - ITAT allowing the claim of accumulated funds u/s 11 (2) in absence of benefit of exemption u/s 11 and 10(23) - HELD THAT:- Appellant fairly admits that the first question of law is covered by the decision of this Court [2018 (3) TMI 1601 - DELHI HIGH COURT] in favour of the assessee. Also admits that the second question of law is a consequential question of law and accordingly, the same stands covered by the aforesaid judgment.
Application of income on the account of depreciation - The third proposed question of law is also covered by the decision passed in Rajasthan & Gujarati Charitable Foundation Poona [2017 (12) TMI 1067 - SUPREME COURT].
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2022 (5) TMI 1567 - ITAT DELHI
TP Adjustment - interest on outstanding inter-company receivables - TPO estimated the delay on estimated average of outstanding receivables of 6 months and calculated interest for 182 days @ 4.31% (LIBOR + 400 basic points) - HELD THAT:- The decision of Hon’ble Delhi High Court in the case of Kusum Healthcare [2017 (4) TMI 1254 - DELHI HIGH COURT] is still the binding precedent on the issue of interest on outstanding receivables as held with the Assessee having already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability vis-a-vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and re-characterized the transaction.
Needless to mention that the law laid down by the Hon’ble High Court in the case of Kusum Healthcare was followed by the Co-ordinate Benches of the ITAT.
There is complete uniformity in the act of the assessee in not charging interest from both the AE and Non AE debtors and the delay in realization of the export proceeds in both the cases is same. Reliance is being placed on the decision of case of Indo American Jewellery Ltd. [2013 (1) TMI 804 - BOMBAY HIGH COURT]. Thus neither interest has been charged nor paid, we hereby allow the appeal of the assessee on this ground.
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2022 (5) TMI 1566 - ITAT DELHI
Delayed deposit of employee’s contribution towards provident fund and ESI fund - intimation issued by CPC as contribution received towards PF/ESIC by the assessee from its employees was not deposited before the due date - as submitted that since the amounts have been deposited before the filing of return of income, no disallowance is called for - HELD THAT:- The issue is no more res-integra. The issue has already been settled in favour of the assessee by various judicial pronouncements by the Tribunal. As in the case of PCIT vs Pro Interactive Service (India) Pvt. Ltd. [2018 (9) TMI 2009 - DELHI HIGH COURT] held amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee’s Provident Fund (EPD) and Employee’s State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x).
AO was not justified in denying the deduction claimed by the assessee on account of late deposit of PF/ESI/EPF, albeit before filing the return of income.
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2022 (5) TMI 1565 - ITAT MUMBAI
Delayed Employees contribution to Provident Fund and ESI - due date determination - amounts were not remitted within the due date prescribed u/s. 36(1)(va) but were remitted before the due date of filing of income tax returns u/s. 139(1) - intimation u/s 143(1) - HELD THAT:- It is not in dispute that assessee had remitted the employees’ contribution of PF & ESI with much before the due date of filing of return u/s. 139(1) of the Act, though the same has been remitted belatedly beyond the due dates specified under the respective PF & ESI Acts. We find that this issue is no longer res integra in view of the recent decision in the case of Kalpesh Synthetics Pvt. Ltd[2022 (5) TMI 461 - ITAT MUMBAI] “For the purposes of this clause, ‘due date’ means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise”, one cannot find fault in what has been reported in the tax audit report. It is not even an expression of opinion about the allowability of deduction or otherwise; it is just a factual report about the fact of payments and the fact of the due date as per the Explanation to Section 36(1)(va).
This due date, however, has not been found to be decisive in the light of the law laid down by Hon'ble Courts above, and it cannot, therefore, be said that the reporting of payment beyond this due date in the tax audit report constituted “disallowance of expenditure indicated in the audit report but not taking into account in the computation of total income in the return” as is sine qua non for disallowance of Section 143(1)(a)(iv).
While preparing the tax audit report, the auditor is expected to report the information as per the provisions of the Act, and the tax auditor has done that, but that information ceases to be relevant because, in terms of the law laid down by Hon’ble Courts, which binds all of us as much as the enacted legislation does, the said disallowance does not come into play when the payment is made well before the due date of filing the income tax return under section 139(1). Viewed thus also, the impugned adjustment is vitiated in law, and we must delete the same for this short reason as well.
The impugned adjustment in the course of processing of return under section 143(1) is vitiated in law, and we delete the same.
We find that the law prevailing prior to A.Y.2021-22 would rule the field and the case laws rendered by various High Courts would rule the field. Prior to the amendment, the Hon’ble Jurisdictional High Court in the case of CIT vs. Ghatge Patil Transport Ltd. [2014 (10) TMI 402 - BOMBAY HIGH COURT] had held that employees contribution to PF & ESI if remitted within the due date prescribed u/s. 139(1) of the Act for filing the income tax returns, would be allowed as deduction u/s. 43B of the Act.
This issue has been decided in favour of the assessee after considering various decisions of Hon’ble Supreme Court, High Court and this Tribunal in the case of Force Point Software Consulting India P. Ltd., [2022 (6) TMI 95 - ITAT MUMBAI] Decided in favour of assessee.
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2022 (5) TMI 1564 - ITAT DELHI
Deduction u/s 80P (2) (d) - receipt of dividend income from other cooperative societies - HELD THAT:- As case of the assessee that the assessee society has received dividend from other cooperative societies such as IFFCO and UP State Cooperative Bank, that being so, the dividend received from cooperative societies are expressly exempt u/s. 80P(2) (d). See assessee own case [2018 (7) TMI 2314 - ITAT DELHI] and [2018 (9) TMI 1172 - ITAT DELHI] - Decided in favour of assessee.
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2022 (5) TMI 1563 - ITAT BANGALORE
Delay in filing the appeal against the order levying interest u/s 234E - delay of 255 days - Covid -19 pandemic Lockdown situation - HELD THAT:- In Re: Cognizance for Extension of Limitation the Hon’ble Supreme Court [2021 (5) TMI 564 - SC ORDER] decided to extend the period of limitation of filing cases in various legal fora with effect from 14.03.2021 until further orders in view of hardships faced by litigants due to the alarming Covid-19 situation. It was directed vide order dated 23rd March, 2020 that the period of limitation in filing petitions/ applications/ suits/ appeals/ all other proceedings, irrespective of the period of limitation prescribed under the general or special laws, shall stand extended with effect from 15th March, 2020 till further orders
Apex Court on 23 September 2021 recalled the limitation extension w.e.f. 2 October 2021. However, the Apex Court was mindful in stating that the recall order was subject to the uncertainties pertaining to the third wave of Covid-19 pandemic. As India witnessed a sharp rise in the Covid-19 cases in January 2022, the Hon'ble Supreme Court decided to restore the limitation extension. As per the order of the Apex Court dated 10 January 2022, the period from 15 March 2020 to 28 February 2022 would stand excluded for the purpose of limitation.
It is therefore clear that even the Hon’ble Supreme Court has taken cognisance of the pandemic situation and extended the period of limitation. It is clear from the order of the CIT(A) that the notices in question were issued during the covid period and the Assessee’s contention that it could not respond to the notices in view of the pandemic situation has to be accepted as a reasonable cause. Appeals of the Assessee are allowed for statistical purposes.
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2022 (5) TMI 1562 - ITAT PUNE
Benefit of exemption u/s. 11 - receipts in the nature of Membership Fees, Program Fees, Publication Revenue, Certificate of Origin, Other activities, Activities and Prize Fund, Entrance Fees, Life Membership Fees and Use of facilities etc. - HELD THAT:- It is found that the CIT(A) has followed his orders for earlier years in order to allow the benefit to the assessee. Earlier years’ orders passed by the ld. first appellate authority came up for consideration before the Tribunal.
Vide order [2017 (9) TMI 1892 - ITAT PUNE]Tribunal for the assessment years 2010-11 and 2011-12 has countenanced the action of the CIT(A) in restoring the benefit of exemption as claimed in the returns. Once again, similar issue travelled to the Tribunal for the assessment years 2009-10 and 2012-13.
Vide order .[2018 (7) TMI 2313 - ITAT PUNE] Tribunal has re-affirmed such decision and dismissed the appeals filed by the Revenue. In view of the fact that the issue raised in this appeal is squarely covered in favour of the assessee by the orders passed in the assessee’s own case for earlier years, respectfully following the precedents, we uphold the impugned order.
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2022 (5) TMI 1561 - ITAT PUNE
Excess sugarcane price paid to the members & non-members - HELD THAT:- We find that the same issues have been adjudicated in the case of Karmaveer Shankarrao Kale Sahakari Sakhar Karkhana Ltd.[2020 (12) TMI 1330 - ITAT PUNE] wherein excess sugar cane price paid to Members and Non-members and the issue of sale of sugar at concessional rate to Members are remanded to the file of the ld. A.O for fresh adjudication for the purpose of giving effect to the directions of the Hon’ble Apex Court KRISHNA SAHAKARI SAKHAR KARKHANA LTD. [2012 (11) TMI 669 - SUPREME COURT] in its proper perspective. The ld. A.O shall comply with the principles of natural justice and adjudicate the issues as per law.
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2022 (5) TMI 1560 - ITAT BANGALORE
Two different and contradictory computation sheets computing total income - HELD THAT:- As any one of them will only survive it is a matter requiring verification, we restore this matter to the file of AO for verifying the claim of the assessee. Since the assessing officer is required to give effect to the order passed by this Tribunal, the grievance of the assessee may get redressed at that stage.
Nature of expenses - Capitalisation of Salaries and Wages - assessee herein has developed certain technologies and software platforms based on AI, IOT and Machine learning - AO noticed that the assessee has claimed all expenses incurred in development of these software products as revenue expenditure - HELD THAT:- The common practice followed by information technology companies is to expense all the expenses incurred on development of a software mean for sale/license/rent. We noticed earlier that, in the instant case, the applications developed under CTO projects are the products developed by the assessee for sale/license. These products are revenue assets. The development was complete in respect of first four products and the development work was continuing for the remaining two products. We noticed that the business of the assessee itself is development of software products or providing of software services and hence the revenue generated on their sales or providing of services is its income, in which case, the expenditure incurred on development of those applications shall constitute related expenditure.
Even if the expenditure does not result in creation of any successful software product/application/tool etc., considering the business nature of the assessee, those expenses shall constitute revenue expenditure in the hands of the assessee, as it is necessary for the assessee to keep updating itself and keep trying new products to be afloat in the competitive market - Thus we hold that the impugned expenses incurred by the assessee are allowable as revenue expenditure and accordingly, the disallowance made by the assessing officer could not be sustained.
TP Adjustment - Adjustment for interest on advances given to Overseas subsidiaries - HELD THAT:- We direct AO/TPO to adopt ALP rate of interest at Libor rate of relevant outstanding period of loan + 150 basis point. In the grounds of appeal, the assessee has pointed out that the TPO has computed annual interest on month end balances. As submitted that the month end balance of a particular month may include opening balance and it has resulted in duplication/multiplication. We have directed AO/TPO to compute interest for “the outstanding period of loan” only. Accordingly, the assessee is directed to furnish the outstanding period of each advances in order to enable AO/TPO to compute correct amount of interest.
TP Adjustment made in respect of corporate guarantee given by the assessee to its Associated Enterprises - HELD THAT:- As relying on in the assessee’s own case in AY 2011-12 to 2014-15 [2020 (10) TMI 605 - ITAT BANGALORE] we direct the AO/TPO to adopt the rate of guarantee commission @ 0.50% and accordingly delete the addition made by estimating the commission in excess of 0.50%.
TP adjustment - Specified Domestic Transaction (SDT) - HELD THAT:- This issue requires fresh examination at the end of TPO/AO by duly considering various other contentions of the assessee and also by considering the discussions.
Disallowance of expenses u/s 14A against exempt income - HELD THAT:- This issue has been restored by ITAT in assessment year 2008-09 to the file of the A.O. A perusal of the assessment order passed by A.O. would show that the A.O. has observed that he was not satisfied with the working furnished by the assessee. However, the A.O. has not examined the basis of the allocation and apportionment of expenses towards the exempt income. Hence, the coordinate bench has restored this issue to the file of the A.O. for examining it afresh. Accordingly, following the decision rendered by the coordinate bench, we restore this issue to the file of the A.O.
Taxability of Marked to Market income on reinstatement of forward contracts - HELD THAT:- An identical issue has been examined by the co-ordinate bench in the assessee’s own case in AY 2009-10 to 2014-15 [2020 (10) TMI 605 - ITAT BANGALORE] as noticed that the details of underlying assets in respect of outstanding forward contracts are not available on record. There should not be any doubt that the value of underlying assets (in the form of debtors, creditors and other monetary assets) as on the balance sheet date, against which the outstanding forward contracts have been taken, should be more than the value of outstanding forward contracts. In that case, the loss arising on restatement of forward contract is fully allowable as deduction. Since the AO has not examined this aspect, we are of the view that this issue needs to be restored to the file of the AO for the limited purpose of examining as to whether the value of underlying assets is more than the value of the forward contracts.
Setting off the loss arising from SEZ units against income earned by non-tax holiday units - HELD THAT:- An identical issue has been examined by the co-ordinate bench in the assessee’s own case in AY 2009-10 to 2014-15 [2020 (10) TMI 605 - ITAT BANGALORE] held that the loss arising in eligible SEZ/STPI undertakings are not required to be adjusted against the profits arising from other SEZ/STPI undertakings and the said loss can be adjusted against profits arising from non-SEZ/non-STPI units.
Taxability of profits from development centers located outside India - AO took the view that these development centres are independent units and accordingly estimated income from these centres and correspondingly reduced the said profit from the units eligible for deduction u/s 10A/10AA/10B - HELD THAT:- Remit this issue to the file of the A.O. for examining it afresh.
Exclusion of “other income” for the purpose of computing deduction u/s 10AA - HELD THAT:- We hold that the income generated on sale of scrap/newspaper should be included in the profits of the undertaking eligible for deduction u/s 10AA. In this year also, the break-up details of “Other income” are not available. Accordingly, we restore this issue to the file of AO with the direction to examine the break-up details of other income and decide the issue accordingly.
Deduction u/s 10A/10AA/10B of the Act in respect of interest income earned by the assessee - HELD THAT:- The assessee may be given an opportunity to show that the nexus between SEZ/STPI divisions and the fixed deposits from which interest income was earned. If the assessee is able to show the nexus to the satisfaction of the AO, then the interest income to that extent should be eligible for deduction u/s 10A/10AA/10B of the Act. With these observations, we restore this issue to the file of the AO for examining it afresh in the light of discussions made supra.
Eligibility of the assessee to claim deduction u/s 10AA of the Act for deemed exports, i.e., sales made to own units located in SEZs - HELD THAT:- As in the assessee’s own case in AY 2009-10 to 2014-15 we direct the A.O. to include deemed exports as part of turnover while computing deduction u/s 10A/10AA/10B.
Reimbursements received to be excluded from the export turnover for the purpose of computing deduction u/s 10A/10AA/10B - HELD THAT:- We noticed that during the year, the break-up details of reimbursements are not given in the assessment order. In the above said decision, detailed discussions have been made with regard to this issue. Accordingly, we restore this issue to the file of AO with the direction to obtain break-up details of reimbursements and follow the directions given in AY 2009-10 to 2014-15 for computing deduction u/s 10A/10AA/10B of the Act.
Expenditure incurred in foreign currency as deducted from the export turnover while computing deduction u/s 10A/10AA/10B - HELD THAT:- As expenditure incurred in development of software and which forms part of “direct cost of development of software” would not fall under the category of “technical services” or “services” rendered outside India, as contemplated in the definition of Export turnover. Hence the same is not required to be excluded from export turnover. Accordingly, what is required to be excluded is the expenses specifically mentioned in the definition of “export turnover”, viz., the expenditure incurred on freight, telecommunication charges or insurance attributable to the delivery of the computer software outside India or expenses, if any incurred in foreign exchange in providing technical services outside India alone are required to be excluded from the export turnover.
If any amount is excluded from “export turnover”, the same is required to be excluded from “total turnover” also, as held in the case of Tata Elixi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] and HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] - we set aside the order passed by AO on this issue and direct him to compute deduction u/s 10A/10AA/10B of the Act following the discussions made supra.
Eligibility of the assessee to claim deduction u/s 10A of the Act in case of Delayed collections of export proceeds - HELD THAT:- We direct the AO to include sale amount in the Export turnover while computing deduction u/s 10A/10AA/10B of the Act, wherever the applications have been filed by the assessee to RBI through its bankers seeking permission to receive the export proceeds beyond the prescribed period.
Foreign tax credit - allowability of quantum of foreign tax credit - HELD THAT:- We set aside the order passed by AO on this issue and direct him to allow foreign tax credit claimed by the assessee in terms of the decision rendered by Hon’ble High Court of Karnataka [2015 (10) TMI 826 - KARNATAKA HIGH COURT]
FTC to be allowed as Business expenses - We direct the AO to allow the foreign tax paid by the assessee, to the extent not allowed as tax credit u/s 90 & 91 of the Act, as deduction from the business income of the assessee.
TDS u/s 195 - Disallowance of payment made u/s 40(a)(ia) for non-deduction of tax at source - HELD THAT:- We are of the view that this issue requires fresh examination at the end of AO. Accordingly we restore this issue to the file of the AO with the direction to examine this issue afresh applying the principles laid down in the case Engineering Analysis Centre of Excellence P Ltd. [2021 (3) TMI 138 - SUPREME COURT]. If the AO comes to the conclusion that the decision rendered by Hon’ble Supreme Court [supra] is applicable to the payments made to Gartner group and there is no requirement to deduct tax at source, then there is no requirement of making any disallowance u/s 40(a)(i) - if the AO comes to the conclusion that the above said decision of Hon’ble Supreme Court is not applicable and the assessee is liable to deduct tax at source, then the AO shall grant enhanced deduction u/s 10A/10AA/10B of the Act by increasing the profits of undertaking by the amount of disallowance so made.
Disallowance of interest expenditure incurred on investment in Foreign Subsidiary u/s 115BBD - HELD THAT:- We direct the AO to delete the disallowance u/s 115BD of the Act, if the assessee has not received any dividend during the year under consideration.
Deduction of Education Cess as expenditure - This ground is liable to rejected in view of the amendment brought in by Finance Act 2022 inserting specific provision in the Income tax Act providing for disallowance of Education Cess. Accordingly, we reject this ground.
Claim for credit of TDS credit on the basis of additional TDS certificates - AO did not grant TDS credit on the reasoning that the said TDS amount were not reflected in Form 26AS - HELD THAT:- The assessee cannot be penalised for the fault of the TDS deductor in not filing statement of TDS. It is also possible that the deductor of TDS would have filed the statement of TDS belatedly. Accordingly, we are of the view that this issue requires verification at the end of AO. Accordingly, we restore this issue to the file of AO with the direction to examine the claim of the assessee and allow TDS credit in accordance with law.
Addition of amount disallowed u/s 14A of the Act under clause (f) of Explanation 1 to sec. 115JB of the Act to the net profit for the purpose of computing book profit - HELD THAT:- An identical issue was examined by the co-ordinate bench in the assessee’s own case in AY 2014-15 [2020 (10) TMI 605 - ITAT BANGALORE] special bench of ITAT in the case of Vireet Investments Pvt. Ltd [2017 (6) TMI 1124 - ITAT DELHI] has expressed the view that the amount disallowed u/s 14A of the Act cannot be adopted for the purpose of computation of book profit u/s 115JB of the Act and the disallowance to be made u/s clause (f) to explanation 1 has to be computed independently without having regard to the provisions of section 14A - we are unable to sustain the addition made by the A.O. Since the addition required to be made under clause (f) to explanation 1 is required to be computed independently, we restore this issue to the file of the A.O. for examining it afresh.
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2022 (5) TMI 1559 - BOMBAY HIGH COURT
Refund claim - effect of name change - in whose name the refund should be issued? - According to Respondents, after the change of name of Petitioner, Petitioner ought to have filed revised returns to be entitled to a refund ? - HELD THAT:- The name change has been reflected in the records of the Income Tax Department. Notwithstanding this, Petitioner has been issued a notice dated 9th February, 2019 stating that the name mentioned in the return of income does not match with the name as per the PAN database and Petitioner has been advised to correct the name in the return of income as per PAN allotted to Petitioner.
PAN database correction would certainly indicate what was the original name and therefore, Petitioner’s name when it filed the return of income tax was the correct name as it then existed. Therefore, there can never be a defect and notice issued u/s 139(9) was not a valid notice. If only Assessing Officer had bothered to check the data base, he would have found answer and would not have to issue a notice thereby wasting precious time of the assessee, his own department and more importantly judicial time.
In these circumstances, notice dated 9th February, 2019 is hereby quashed and set aside.
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2022 (5) TMI 1558 - ITAT PUNE
TP Adjustment - comparable selection - Cybercom Datamatics Information Solutions Ltd. rejected as it is super abnormal profit making company and also it is into the diversified activities, apart from the software development services such as an advisor and consultant on IT/IT space - HELD THAT:- A perusal of the annual report of the said company clearly shows that it was engaged in providing technical software services, contrary to the assessee company which is engaged purely in rendering software development services. The financial statements of the said company do not give any segmental information between the technical services and software services. Further, this company was chosen by the TPO in the list of the comparables, the onus of proving the comparability lies upon the TPO. We also find that this company had reported super profit of 83.99% which is abnormally high profits, the TPO should have caused enquiry to ascertain whether such abnormally profits reflected normal business conditions or arising from abnormal conditions.Thus we direct the Assessing Officer/TPO to exclude this company from the list of comparables.
Thirdware Solutions Ltd. is a product development company which is quite different from a software services provider - Revenue from sale of licence is only 7.98 crores which is very-very minimal compared to the total revenue of Rs. 20,675.00 crores. Further, the balance sheet does not indicate the presence of any intangible assets or closing stock. Therefore, it cannot be said that this company cannot be compared with software development provider. Therefore, we do not find any merit in the contentions raised on behalf of the assessee company. Hence, we uphold the action of the AO/TPO/DRP in inclusion of this company in the list of comparables.
Infobeans Systems India Ltd rejected on the ground of earning super normal profits - Merely because the company is earning super normal profits cannot be excluded without enquire into whether the profits are earned under normal business conditions or abnormal business conditions. Reliance can be placed on case of CIT vs. Quark Systems India (P.) Ltd. approved by the Hon’ble Punjab & Haryana High Court [2011 (5) TMI 508 - PUNJAB AND HARYANA HIGH COURT] - Thus, we uphold the action of the Assessing Officer/TPO/DRP in inclusion of this company in the final list of the comparables.
Admission of additional ground - Exchange operations on account of foreign currency conversion - whether foreign exchange gain or loss should be considered as part of operating revenue while determining PLI of the assessee and the comparable companies? - HELD THAT:- Admittedly, the issue whether gain or loss arising out of foreign currency conversion is forming part of the income or loss is not subject-matter of proceedings before the lower authorities. Whether gain or loss arising out of conversion of foreign currency form part of the operating income or not is indicated question of fact and law as the gain or loss arising out on trading alone can form part of the operating income. Therefore, it requires examination and verification of the financial statements of the tested party as well as the comparable entities to form an opinion whether gain or loss arising out of foreign exchange fluctuation shall form part of the operating income or not?. Therefore, it cannot be said that it is a pure question of law as canvassed by the ld. AR for the appellant company.
Appellant contention is not based on the material on record in support of the additional ground of appeal. He could not establish that it is a pure question of law. Additional ground of appeal no.1 cannot be admitted for adjudication and hence, additional ground of appeal no.1 stands dismissed.
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2022 (5) TMI 1557 - SUPREME COURT
Constitutional validity of the provisions of Sections 130, 131, 134 and 140 of the Finance Act 2021 and certain provisions of the Life Insurance Corporation Act 1956 - process which led up to the enactment of the amendment to the Life Insurance Corporation Act through Parliament was on the basis that it was a Money Bill - existence of a prima facie case - balance of convenience - irreparable harm and injury.
HELD THAT:- On the construction of Section 28, the submission which has been made on behalf of the petitioners would warrant further deliberation. The Court has been apprised of the fact that as many as 73 lakh applicants, both from within India and beyond have subscribed to the IPO. The IPO has been over subscribed six times even in the category which has been specially reserved for policy holders.
It is necessary to note that (i) the dilution of the share holding of LIC as a result of the Offer for Sale is to the extent of 3.5%; (ii) 22.13 crore equity shares of a face value of Rs 10 each are being offered at a premium of INR 939; (iii) the expected receipts into the Consolidated Fund of India are estimated to be INR 20,500 crores; (iv) the IPO opened for anchor investors on 2 May 2022 and for members of the general public on 4 May 2022 and closed on 9 May 2022; and (v) the IPO has been over subscribed by 2.95 times by the general public, that is, net of anchor investors.
No case for the grant of interim relief has been made out - the interim relief is declined - petition dismissed.
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