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Income Tax - Case Laws
Showing 101 to 120 of 168846 Records
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2024 (11) TMI 851
Validity of proceedings against company dissolved/insolvent - HELD THAT:- As per the provisions of Insolvency and Bankruptcy Code, 2016, and the judicial pronouncements of various Courts including that of the Hon’ble Supreme Court and Hon’ble Bombay High Court and other Jurisdictional Benches which strongly support the case of assessee. The NCLT has prohibited all the proceedings against the assessee before any of the Courts including this Tribunal and also judgments relied upon by the learned A.R. for the assessee which covers the case of the assessee respondent. Hence, in view of the judicial pronouncements, as relied upon by the learned A.R. appearing for the assessee, the appeal filed by the Revenue is liable to be dismissed.
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2024 (11) TMI 850
Deduction u/s 80P(2)(a)(i) - interest income from investments treated as 'Business Income' or 'Income from Other Sources '- HELD THAT:- After the decision of Hon'ble Apex Court in the case of the Mavilayi Service Cooperative Bank Ltd. & Ors. [2021 (1) TMI 488 - SUPREME COURT] AO's case does not stand, as inclined to agree with its claim that being primary agricultural credit cooperative society registered and operating under the provisions of the Kerala Co-operative Societies Act, 1969, it is eligible for deduction u/s 80P of the Act.
Also decided in Peroorkada Service Co-Operative Bank Ltd. [2021 (12) TMI 1084 - KERALA HIGH COURT] interest earned from investment of surplus funds to be assessable as 'income from other sources and not as 'profit and gains of business. Further, the Hon'ble court has held the interest earned from Co-operative banks to be eligible for deduction u/s 80P(2)(d) holding the co-operative banks to be co-operative societies for the purposes of section 80P(2)(d). However, Hon'ble courts has held interest earned from treasury/commercial banks to be not eligible for deduction under section 80P as it is neither covered under section 80P(2)(a)(i) nor under section 80P(2)(d).
To sum up, even though such interest and dividends as received from entities registered with Cooperative Societies Act is income from other sources, it is eligible for deduction u/s 80P(2)(d) of the Act.
DR vehemently quotes Totagars Cooperative Sales Society Ltd. [2010 (2) TMI 3 - SUPREME COURT]; CIT vs. Totagars Cooperative Sale Society [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] that the assessee’s impugned interest income is not eligible for sec.80P(2)(d) deduction. He could hardly dispute that learned CIT(A)-NFAC has already considered the catena of case law (supra) whilst deciding the instant issue in assessee’s favour. That being the case, we did not find any substance in the Revenue’s instant sole substantive grievance - Decided in favour of assessee.
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2024 (11) TMI 849
Rectification of mistake - Addition made in respect of Reserve for Unexpired Risks (URR) u/s 115JB - HELD THAT:- We feel that the Tribunal made mistake in observing that the assessee agreed and hence, the above line may be read as under:-
“Hence, taking a consistent view, we remit this issue also back to the file of the AO with similar direction to the AO as mentioned in para 15.10 of this order.”
Provision made towards Claims Incurred But Not Reported (IBNR) and Claims Incurred But Not Enough Reported (IBNER) added to the Book profits u/s 115JB - Revenue pointed out that this issue is neither adjudicated by the CIT(A) nor the Tribunal, on merits and only some facts are available in the order of the Assessing Officer. Hence, this issue can be remitted back to the file of the Assessing Officer before whom the assessee will place all evidences and prove whether claim made by the assessee is ascertained liability or unascertained liability.
Rectification of mistake allowed as Tribunal has not adjudicated the addition grounds raised pertaining to considering of income as per 143(1)(a) of the Act and addition to book profit relating to URR, even though no amount have been debited to Profit & Loss account - We have gone through the order of the Tribunal and noted that the Tribunal has not adjudicated these two additional grounds and hence, to that extent we recall the order of the Tribunal and direct the Registry to fix this appeal for the assessment year 2018-19 for hearing.
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2024 (11) TMI 848
Rectification of mistake - Reopening of assessment u/s 147 v/s assessment u/s 153C - information or seized document pertains/ belongs to the assessee was found at searched person place - AR mentioned that the Hon’ble Tribunal has not considered the judicial decisions and dismissed the additional ground of appeal and sustained the decision of the CIT(A) upholding the validity of the reassessment proceedings U/sec147 of the Act
HELD THAT:- We support our view relying on the decision of the Hon’ble Supreme Court in the case of Honda Siel Power Productions Ltd. [2007 (11) TMI 8 - SUPREME COURT] reversing the decision of the High Court, that in allowing the rectification application the Tribunal gave a finding that the earlier decision of a co-ordinate Bench was cited before it but through oversight it had missed the judgment while dismissing the appeal filed by the assessee on the question of admissibility/allowability of the claim of the assessee for enhanced depreciation under section 43A. One of the important reasons for giving the power of rectification to the Tribunal under section 254(2) was to see that no prejudice was caused to either of the parties appearing before it. The rule of precedent was an important aspect of certainty in the rule of law, and prejudice had resulted to the assessee since the precedent had not been considered by the Tribunal. The Tribunal was justified in rectifying the mistake on record.
We, thus find that non consideration of judicial decisions cited before the bench is a mistake apparent from the record Accordingly, in the interest of principles of natural justice, we recall the Hon’ble Tribunal order [2022 (11) TMI 443 - ITAT MUMBAI] and direct the registry to post the appeal for regular hearing and inform the parties.
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2024 (11) TMI 847
Deduction u/s 80P(4) - appellant is a co-operative bank - HED THAT:- As the appellant CIDCO Employee co-operative credit society was registered under Maharashtra state co-operative societies Act, 1960 on 11.10.1999. According to appellant's bye laws the main objective of the appellant society is to provide credit facility among its members and the membership is restricted to its employees only. The appellant assessee society’s members contribute their funds to society and same funds are given as loans on interest amongst its members only.
Assessee’s principal business is not banking business as it does not transact banking business with general public in India. The first and third conditions, thus do not exist in the functioning of assessee society. It is accordingly held that in absence of aforesaid two conditions, the appellant assessee does not fall under the category either of a co-operative bank or a “primary co-operative bank”, hence not hit by sub section 4 of section 80P of the Act.
Apart from the business income, certain small portion of income of the society was earned from the interest and dividend. It appears from the profit & loss A/C of paper book at page 37 that the appellant's co-operative credit society received interest income on investments and dividend income on bank shares. The investee institutions have not been questioned by the authorities below in respect of their status as co-operative societies.
The total income from profit & gains during the term under consideration is not disputed by the revenue. The income from interest on investment & dividend is eligible for deduction u/s. 80P(2)(d) and the remaining amount received from the interest from members on deposit is attributable to assessee society’s business income and is deductible u/s. 80P(2)(a)(i) - AO was thus not justified in denying the benefit of Section 80P of the Act to the assessee society. The aforesaid point is accordingly determined in favour of the assessee and against the revenue.
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2024 (11) TMI 822
Jurisdiction of DCIT Bengaluru to issue notice u/s 153C - transfer of case u/s 127 - assessee’s case was transferred from ACIT, Circle – 6(1), Bengaluru to DCIT, Central Circle, Bengaluru on 20.07.2009, as per the order passed under Section 127(2) - As decided by HC 2021 (10) TMI 1058 - KARNATAKA HIGH COURT] notice issued by the DCIT Circle 1(1), Bangalore, is without jurisdiction and as such, all further proceedings would render void ab initio. The arguments of the learned counsel for the revenue with respect to Sections 292B and 292BB do not merit any consideration.
HELD THAT:- Special Leave Petitions are dismissed.
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2024 (11) TMI 821
Deduction of TDS on salary u/s 192 - Taxability of income received by Nuns, Sisters, Priests, or Fathers working as teachers in religious institutions - As decided by HC [2019 (3) TMI 1253 - MADRAS HIGH COURT] there is no exemption available even to the charitable or religious institutions themselves, who have to secure registration as such and then, their income and application of income for charitable or religious purposes only is regulated strictly in accordance with the provisions contained in Chapter III of the Act. These provisions have no application to the individual Nuns, Sisters or Missionaries so as to claim any exemption from income tax.
As far as the provisions with which we are concerned, namely Sections 15 and 192 of the Act, we do not have an iota of doubt that these provisions have nothing to do with religion or any other special status of the person receiving the income described to be salary by the payer of the same.
HELD THAT:- We are not inclined to entertain the Special Leave Petitions under Article 136 of the Constitution.
Special Leave Petitions are accordingly dismissed.
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2024 (11) TMI 820
Unexplained cash credits u/s 68 - Addition invoking provisions of Section 115BBE (Enhanced Rate of Tax) - AO as well as Ld. CIT(A) doubted the source of cash deposits by taking view that assessee has not shown cash-in-hand in the ITR for assessment years 2015- 16 and 2016-17 - HELD THAT:- Considering the overall facts and circumstances of the case, and the facts that no independent investigation of fact was carried out about agricultural holding nor discarded / rejected the receipt of agricultural produce. Thus in order to avoid the possibility of revenue leakage at reasonable disallowance would be sufficient to avoid the possibility of revenue leakage. Thus, considering the various heads of income of assessee, find that ad hoc disallowance @ 10% of addition would be sufficient to avoid the possibility of revenue leakage. In the result, ground No.1 of appeal is partly allowed.
Enhanced Rate of Tax u/s 115BBE - Divisions Bench as well as SMC Bench of this Tribunal in a series of case has held that enhance rate prescribed under section 115BBE is not applicable for AY 2017-18, reference is made in case of Samir Shantilal Mehta [2023 (5) TMI 1279 - ITAT SURAT] Arjunsinh Harisinh Thakor [2023 (6) TMI 770 - ITAT SURAT] and in Jitendra Nemichand Gupta [2023 (6) TMI 1338 - ITAT SURAT] and Punjab Retail Pvt. Ltd [2021 (11) TMI 405 - ITAT INDORE] and Sandesh Kumar Jain [2022 (11) TMI 126 - ITAT JABALPUR] In the result, ground of the appeal is partly allowed.
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2024 (11) TMI 819
Assessment u/s 153C - determination of six years prior to the relevant assessment year - HELD THAT:- We observed that the search in the case of Sunstar Group was carried on 19.12.2013 and as per records submitted before us, we observed that the notice u/s 153C was issued only on 20.01.2016.
Therefore, the satisfaction in the case of the assessee was recorded by the jurisdictional Assessing Officer prior to issue of notice issued u/s 153C, therefore, the relevant searched assessment year pertains to AY 2016-17. Accordingly, six years prior to the relevant assessment year covers AYs 2010-11 to 2015-16. In the case of the assessee, notice u/s 153C was issued to the assessee covering AY 2009-10 which is beyond jurisdiction as per the judicial precedence as held in the case of CIT-14 vs. Shree Jasjit Singh [2015 (8) TMI 982 - DELHI HIGH COURT]
We note that AY 2009-10 which was covered by the AO u/s 153C is beyond jurisdiction. Accordingly, we set aside the assessment made in this case. Assessee appeal allowed.
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2024 (11) TMI 818
Computation of deduction u/s 80IB/80IC and 10B - AO took the view that the assessee has increased the profits of eligible units by not allocating common expenses. Accordingly, he allocated Head office expenses to various units eligible for deduction and resultantly, the deduction u/s 80IB/80IC and 10B of the Act came to be allowed at a lower figure - HELD THAT:- We notice that the Tribunal is consistently restoring this issue to the file of the AO with certain directions.
A.R invited our attention to the order passed in assessee’s own case for AY 1993-94. In this order, the Co-ordinate Bench has followed the order passed for AY 2006-07 [2012 (12) TMI 458 - ITAT MUMBAI] in respect of deductions claimed u/s 80HH and 80I of the Act and restored the issue to the file of AO with the instruction to follow the directions given in AY 2006-07 with regard to allocation of common expenses incurred at the Head Office. It is also pertinent to note that the Co-ordinate Bench has also accepted the plea of the assessee that certain “common income” should also be allocated to the eligible units.
We notice that the CIT(A) has restored this issue to the file of the AO with the direction to follow the ITAT's order. Accordingly, we also direct the AO to allocate both common expenses and common income to the eligible units while computing deduction u/s 80IB/80IC and 10B of the Act as per the direction issued by the ITAT in the earlier years.
Miscellaneous income earned on sale of scraps and by products in eligible units are eligible for deduction u/s 80IB/80IC - We notice that the AO did not allow deduction in respect of these kinds of receipts, without making any specific discussion. CIT(A) also did not adjudicate this issue specifically.
As brought to our notice that the Mumbai Bench of Tribunal has examined an identical issue in the context of deduction u/s 80IC of the Act in the case of Addl.CIT vs. Sterlite Technologies Ltd. [2017 (1) TMI 1249 - ITAT MUMBAI] wherein it was held that the income arising on sale of scraps is held to be eligible for deduction u/s 80IB/80IC.
In the instant case, the amount received by the assessee is on account of sale of scraps and by products and they are generated out of manufacturing process. Hence, the scrap & by-products are inextricably connected with the manufacturing activities carried on by the eligible units. Accordingly, we are of the view that there is merit in the submission of the assessee that the sale value of scraps/by-products, in fact, will go to reduce the cost of materials used in manufacturing and hence it should be considered as "profits and gains derived from" industrial undertaking. The decision rendered by the Co-ordinate Bench in the case of Sterlite Technologies Ltd [2017 (1) TMI 1249 - ITAT MUMBAI] support the case of the assessee.
We direct the AO to allow deduction u/s 80IB/80IC of the Act in respect of sales value of scraps/by-products generated in the eligible units.
Adjustment on account of CENVAT credit - AO, following sec.145A of the Act, assessed the unutilized CENVAT amount as income of the assessee - HELD THAT:- Since, it is a case of method of accounting and since it is stated that there will be no impact on the profit under both Exclusive method and Inclusive method of accounting, following the decision rendered by the Co-ordinate Bench in AY 2006-07, we restore this issue to the file of the AO for examining the claim of the assessee.
Deduction of cost of Relief materials given to Tsunami victims - allowable business expenditure u/s 37(1) or not? - HELD THAT:- When the dominant objective is philanthropic in nature, the same cannot be considered as an expenditure laid out or incurred wholly and exclusively for the purposes of business. It is pertinent to note that the assessee has not shown that there existed any business connection in incurring this expenditure.
Assessee has also taken a plea that this expenditure should be considered as Sales promotion expenses. We are unable to accept the same. It is inconceivable that a business man would promote its products amongst the badly affected Tsunami victims, who have been rendered penny less. Hence, this plea of the assessee deserves rejection.
Assessee has also taken a plea that this expenditure should be considered as CSR expenditure. It was not shown that this expenditure has been incurred as per the requirement of Companies Act as CSR expenditure. It may be akin to CSR expenses, but it would not qualify as CSR expenses. Hence, we are of the view that the assessee cannot take support of the decisions rendered in respect of CSR expenses.
We are of the view that the Ld. CIT(A) was justified in confirming the disallowance of sum incurred on the relief materials given to the victims of Tsunami.
Claim of enhancement of Written Down Value (WDV) of assets by the amount of Insurance claim not received - HELD THAT:- We do not find any merit in the contentions of the assessee that the insurance claim amount of Rs. 8.00 crores refunded to the assessee should be considered as refund of part of purchase consideration, since the insurance claim of Rs. 8.00 crores was received by the then parent company in connection with destruction of Salt Pans and the said amount only was refunded to the assessee. Hence, in our view, it would fall within the meaning of “moneys payable”. In this connection, we are of the view that the mode or manner of paying the insurance compensation by M/s Conopco Inc to the assessee is irrelevant. In Ground No.12, the assessee is contending that the above said amount should be treated as capital receipt, which is liable to be rejected for the reasons discussed above.
We modify the order passed by Ld.CIT(A) on this issue and direct the AO to increase the WDV of AY 2005-06 in the following manner:-
(a) Increase the WDV of AY 2001-02 of the relevant block by Rs. 14.44 crores.
(b) Re-compute the WDV of AY 2005-06 of that block by reducing the depreciation amount of AY 2001-02 to 2004-05.
(c) Allow depreciation in AY 2005-06 on the WDV so computed. We order accordingly.
Reduction of Capital subsidy amount from the WDV of assets - HELD THAT:-Following the decision rendered by the co-ordinate bench of Kolkata in the case of Gloster Ltd. [2016 (2) TMI 700 - ITAT KOLKATA] we hold that the amount of subsidy referred above is not required to be deducted from the WDV for the purpose of computing depreciation, since the objective of subsidy scheme is to promote industrialization of backward areas and not to fund part of cost of assets. We also notice that identical view has been expressed in the case of Harinagar Sugar Mills [2017 (1) TMI 853 - BOMBAY HIGH COURT] Accordingly, we set aside the order passed by CIT(A) on this issue and direct the AO not to reduce the amount of subsidy from WDV while computing depreciation.
Dispute of rate of tax applicable to the dividend distributed to Non-resident shareholders - HELD THAT:- We notice that this issue has been decided against the assessee by the Special Bench of ITAT in the case of Total Oil India P Ltd. [2023 (4) TMI 988 - ITAT MUMBAI (SB)]
TP adjustment made by TPO/AO on various items of international transactions - assessee had selected TNM Method as most appropriate method and bench marked the international transactions at entity level - HELD THAT:- Since the Ld.CIT(A) has followed the decision rendered by the Co-ordinate Bench in the assessee’s own case in AY.2006-07 [2012 (12) TMI 458 - ITAT MUMBAI] wherein entity level bench marking under TNM Method has been accepted by the Tribunal, we do not find any reason to interfere with the order passed by the Ld.CIT(A) on Transfer Pricing issues urged before us.
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2024 (11) TMI 817
LTCG - deduction u/s 54 - assessee received two flats in exchange for old properties under a redevelopment agreement - HELD THAT:- As perused the provision of section 2(47) of the Act which define the terms ‘transfer’ to include various kinds of transactions. This section defines transfer as the ‘transfer of capital asset including the sale, exchange relinquishment or extinguishment of the capital asset or extinguishment of any right therein or the compulsory acquisition thereof under any law’. Since in the case of the assessee there is an exchange of capital asset (old flats no. 266 and 273) for another capital assets (new flats no. 23 and 23B) as discussed as per the re-development agreement entered with the developer therefore we direct the assessing officer to allow the claim of deduction u/s 54 of the Act as directed by the ITAT in the above referred case of Shri Dilip P. Ahuja [2014 (10) TMI 1078 - ITAT MUMBAI]
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2024 (11) TMI 816
Disallowance u/s 14A r.w.r.8D - suo-moto disallowance made by assessee - AO held that nowhere in the section 14A provides that disallowance is to be made only, if assessee has earned exempt income during the year - as argued AO without recording his dissatisfaction issue a Show Cause Notice to the assessee to explain as to why provisions of Rule 8D r/w section 14A should not be invoked - HELD THAT:- We hold that the reliance placed by the Ld AO of the CBDT Circular No.5 of 2014 to make disallowance u/s. 14A is legally not tenable and liable to be deleted.
Scope of Amendment to Section 14A by the Finance Act, 2022 - Since very recently Hon’ble Guwahati High Court reversed the decision of the ITAT Guwahati Bench in Williamson Financial Services Ltd [2024 (9) TMI 1571 - GAUHATI HIGH COURT] and others and held that the Amendment to Section 14A by the Finance Act, 2022 is to be applicable Prospective only.
Own funds of the Assessee were much more than the investments made by the Assessee, hence no disallowance be made u/s. 14A of the Act on account of interest expenditure - Hon'ble Supreme Court in the case of CIT -Vs- UTI Bank Ltd [2022 (10) TMI 613 - SC ORDER] held that where interest free own funds available with assessee exceeded their investments in tax free securities, investments would be presumed to be made out of assessee’s own funds and proportionate disallowance was not warranted u/s. 14A. Thus we hold that the disallowance made by the Ld AO u/s. 14A is legally not tenable and liable to be deleted.
Mandatory for the AO to record dis-satisfaction as required u/s. 14(2) -Disallowance made invoking Rule 8 without recording dis-satisfaction by the Assessing Officer is against the provisions of section 14[2] and the addition is liable to be deleted.
MAT computation on section 14A addition - Provisions of section 14A cannot be applied for computing the book profit u/s. 115JB of the Act and thereby delete the addition made by the AO.
Depreciation on goodwill arising from amalgamation u/s. 32 - HELD THAT:- The basic fallacy in the approach of the Ld AO in this case is that he has proceeded further on the premise that the goodwill in question was transferred from "amalgamating company" to "amalgamated company" and hence depreciation on the same is not allowable in the eye of law. However, in the present case, as a matter of fact, "goodwill in question" is a "result of amalgamation" and has come into existence only pursuant to Scheme of Amalgamation duly approved by competent authority namely Hon’ble NCLT. Thus all the provisions relied upon by the Ld AO (enlisted hereinabove) would apply only in a case where an "asset" is "transferred" in the course of "amalgamation" by "transferor company" to the "transferee company" and would not apply when a particular "asset" is a "result" of amalgamation.
The reasoning given in the Memorandum explaining the Finance Bill, 2021 for excluding ‘goodwill’ from the ambit of intangible assets is that the actual calculation of depreciation of goodwill is required to be carried out in accordance with various other provision of the IT Act. Once those provisions are applied, in some situations (like that of business re-organization) there could be no depreciation on account of actual cost being zero and the WDV of that asset in the hands of the predecessor/amalgamating company being zero.
Goodwill, in general, is not a depreciable asset and it depends upon how the business runs, goodwill may see appreciation and in the alternative no depreciation to its value. Hence, for the said reasons assessee’s have been barred from claiming depreciation on goodwill. These amendments are to take effect from 01st April 2021 and will accordingly apply to the assessment years 2021-22 and subsequent assessment years. Therefore the amendments in question will have no impact on the claim of the assessee company in this appeal which pertains to the Asst. Years 2016-17 and 2017-18. In view of the above findings depreciation on goodwill created as a result of amalgamation is allowable and directed the JAO to allow the same by passing appropriate orders. Decided in favour of assessee.
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2024 (11) TMI 815
Taxability of income in India - Receipts under code sharing arrangements - Denial of benefit of exemption under Article 8 of the India-USA Tax Treaty -receipts with the third parties where the assessee has only booked the tickets and the actual transportation has been done by third parties - Disregarding alternative methodology for computing taxable income submitted by the Appellant
Assessee is a foreign airline company and a tax-resident of USA engaged in the business of operation of aircrafts in the international traffic. The assessee obtained an approval from the Director General of Civil Aviation (“DGCA”) to undertake scheduled air services in India on the routes specified under the India-US Air Transport Agreement (“ATA”) and established a branch office in India, to undertake activities related to the booking of air passenger tickets and air freight in India, with the approval of the Reserve Bank of India (“RBI”), which is an admitted Permanent Establishment (“PE”) in India.
HELD THAT:- It is relevant to note that in assessee's own case for AY 2010-11 [2015 (5) TMI 681 - ITAT DELHI], the coordinate bench has considered the same issue and held that the receipts under code sharing arrangements cannot avail the benefit of Article 8 of India-US DTAA and accordingly taxable in India.'
Since the terms of Treaty are negotiated between the two countries it is clear that the terms agreed between India and US while entering into the agreement, that India-US DTAA, generally follows the pattern of the US model tax convention but is different in a number of respects to reflect India's status as a developing country. This is supported by the fact that a combined reading of the above Article 8 as per US Model and Article 8 of India US DTAA, and accordingly leads to us to see the merit in the argument that the OECD commentaries have to be read into Article 8 while considering the applicability of the same to code-sharing arrangement.
One of the reasons for the coordinate bench to decide the issue against the assessee in AY 2010-11, is that there is no agreement to substantiate the terms under which code-sharing arrangement have been entered into by the assessee. For the year under consideration the assessee during the course of hearing provided a sample copy of the agreement entered into with Air France and submitted that similar agreements are available for all code-sharing arrangements with third party airlines. Therefore, the contention of the revenue that the receipts from code sharing agreement are not substantiated by any underlying agreements is not tenable for the year under consideration.
On perusal of records we notice that the assessee had filed an application with the Competent Authority (“CA”) under Art.27 of the India-US DTAA requesting that the authorities invoke Mutual Agreement Procedures(“MAP”) for resolving the impugned issue for the year under consideration along with the earlier years. US authorities have responded stating that despite prolonged efforts, a consensus could not be reached with the Indian authorities and that the US authorities are in agreement with the view that all of assessee's profits including revenue associated with interline and code sharing arrangement are to be exempt from Indian Taxation.
Thus we hold that the profits derived from the transportation of passengers under code sharing arrangement by the assessee is to be treated as profits from operation of aircrafts for the reason that –
i. the transportation of passengers either fully or party in third party aircrafts in a specific journey by way of a code sharing arrangement, would fall within the ambit of the word "charterer" and, accordingly would be within the scope of "operation of aircrafts " as defined in Article-8(2) of the India US DTAA.
ii. The passengers under code sharing arrangements are transported on behalf of the assessee by the third party airlines under the code sharing arrangement on a principal to principal basis where the ticket for the entire journey is issued by the assessee bearing specific code. Hence the same would fall within the scope of "operation of aircrafts"
iii. The transportation of passengers by the assessee under code sharing arrangement either fully or partly in a third party aircrafts is inextricably linked which is established in assessee's case here
Accordingly the receipts of the assessee under code sharing arrangement are covered under Article-8, of India US DTAA and cannot be taxed in India. The grounds including the additional ground raised by the assessee in this regard are allowed.
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2024 (11) TMI 814
Reopening of assessment after four years - Addition u/s 68 - independent application of mind v/s borrowed satisfaction - HELD THAT:- As undisputed fact that the original assessment in the case of the assessee u/s 147 was already completed on 27.11.2018. The notice u/s 148 for the second time for reopening of the case was issued on 22.03.2019 after the end of the four years period from the end of assessment year 2011-12.
The four years period was expired as on 31.03.2017. We have perused the return of income filed by the assessee as referred supra in this order wherein the assessee has disclosed the information and facts relating to the receipt of share capital from the three entities in the ITR Form 6 and in the financial statements filed before the AO at the time of original assessment order passed u/s 147 of the Act on 27.11.2018.
AO failed to substantiate that there was any fault on the part of the assessee to disclose fully and truly all material facts.
As decided in case of Everest Kanto Cylinder Ltd. [2024 (2) TMI 163 - BOMBAY HIGH COURT] since the notice u/s 148 has been issued more than 4 years after the expiry of the relevant assessment year, proviso to section 147 shall apply in as much as re-assessment is not permissible unless there has been failure to truly and fully disclosed necessary facts required for the assessment.
We have also perused the decision of Ananta Landmark (P) Ltd.[2021 (10) TMI 71 - BOMBAY HIGH COURT] wherein it is held that after a period of 4 years even if the assessing officer has some tangible material given to the conclusion that there is an escapement of income from assessment, he cannot exercise the power to reopen unless he discloses what was the material fact which was not truly and fully disclosed by the assessee.
Thus as considered that the assessee had already disclosed the detail of all the shareholder who have subscribed to the share capital of the assessee in the case of the shareholders, the assessing officer has already made addition in the case of one shareholder in the original reopening assessment order passed in the case of the assessee as already discussed above in this order.
It is categorically mentioned in the proviso to section 147 of the Act that condition of reopening of the assessment beyond the period of 4 years of the assessment year in which the return was filed is also applicable to the cases reopened u/s 147 of the Act. Therefore, we consider that reopening of the assessment in the case of the assessee made by the assessing officer beyond the period of 4 years without bringing on record any lapses on the part of the assessee for not disclosing fact of the case truly and fully is invalid. Appeal of the assessee is allowed.
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2024 (11) TMI 813
Stay the demand sought of assessment order passed u/s 143 (3) r.w.s. 144C - AR submitted that assessee is a wholly owned subsidiary of Multi-Accord Limited, a Hong Kong based company which holds 99.99% of share capital of the assessee - HELD THAT:- We observed that the issue under consideration is more or less covered by various decisions of Hon’ble Delhi High Court and other High Courts. We also observed that assessee has already remitted 20% of the total outstanding demand and relevant bank challan is already filed in the form of paper book. Considering the above facts on record and balance of convenience is in favour of the assessee, we are inclined to grant stay for a period of 180 days from the date of this order or till the date of disposal of present appeal, whichever is earlier, subject to the rider that the assessee shall not take unnecessary adjournment to prolong the appeal otherwise stay order would cease to operate.
The case of the assessee is also posted for hearing on 16.12.2024 along with other pending appeals which are posted on the same date. Since the date of hearing is announced in the open court, there is no requirement for issue of separate notice.
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2024 (11) TMI 812
TDS u/s 195 - addition u/s 40(a)(i) - assessee being resident corporate assessee is stated to be engaged in semi-conductor IC assembling and testing - Payment of marketing fees to entity without deducting tax at source - same was in pursuant to Marketing and Sale agreement as entered into by the assessee with that entity - income taxable in India u/s 9(1)(i) & Article-7 of respective DTAAs or not?
HELD THAT:- Upon perusal of clauses of the relevant agreements, it would appear that impugned payments are for marketing and sales services. The assessee has paid marketing fees to the payees. In such a case, in our opinion, the ‘make available’ condition would not be applicable at all. The arguments of Ld. AR are multifold i.e., these services do not constitute ‘Fees for Technical services’ since these are more of commission agent services which have been rendered in foreign territory. Since both the payees do not have any PE in India, the same would not be taxable in India in terms of cited judicial decisions.
Another argument of Ld. AR is that the impugned payments would be business profits for the payees and therefore, the same, as per the terms of applicable DTAAs, would be taxable in Singapore and US only.
The terms of DTAA or the provisions of the Act, whichever are more beneficial to the assessee, would apply. All these arguments as stated by Ld. AR need to be re-examined by lower authorities. The terms of the agreement, nature and place of services rendered would be decisive factors to ascertain the nature of payment. Beside this, the finding that whether the payees have PE in India or not, would also be vital to adjudicate the issue. Therefore, we set aside the impugned order and restore the impugned issue back to the file of Ld. AO for de novo adjudication in terms of various arguments as advanced by Ld. AR. All the issues are kept open. The assessee is directed to substantiate its case.
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2024 (11) TMI 811
Penalty imposed u/s 270A(9) - underreporting and misreporting of income - non specification of clear charge - HELD THAT:- Admittedly, in the notices issued u/s 274 r.w.s. 270A of the Act, no specific charge/limb is specified. Misreporting of income and under reporting of income, are having two different connotations and having its own different consequences.
We observe that the identical issue was dealt in Jaina Marketing & Associates [2024 (3) TMI 1007 - ITAT DELHI] wherein as relying on Schneider Electric South East Asia (HQ)[2022 (3) TMI 1295 - DELHI HIGH COURT] dealt with a cases wherein the ingredients of sub section 9 of section 270A of the Act, were not specified while imposing the penalty. The Hon’ble High Court ultimately affirmed the deletion of the penalty imposed u/s 270A(9).
Coming to the instant case, admittedly in the assessment order, the AO initiated the penalty proceedings u/s 270A of the Act without mentioning any sub clause of the section 270A of the Act or not specifying any limb of the penalty proposed to be levied. As the AO issued the vague notice without specifying any particular limb or sub clause for levying the proposed penalty. There is no whisper at all in the notice issued u/s 270A r.w.s. 274 of the Act about “misreporting of income” whereas the penalty has been levied ultimately for both 'under reporting' and 'misreporting of income' @ 200% in terms of section 270A(9) of the Act, for which show cause notice was never issued to the Assessee. Decided in favour of assessee.
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2024 (11) TMI 810
Assessment u/s 153A - Disallowance of wages payable, Unexplained investment u/s 69 AND Addition u/s 69C - HELD THAT:- The assessee, thus, denied that the entries as mentioned therein represent unaccounted cash expenditure and the same was nothing but a MIS report for the purpose of discussion. The notings were approximate project expenditure of different sites of the assessee’s projects. Thus, the statements have been contradicted and therefore, the same would loose its evidentiary value. Before lower authorities, the assessee has taken a stand that the aforesaid sheet has no evidentiary value since the same merely contain approximate project expenses only.
It was the further submissions that whatever the expenses were incurred, the same was accounted for in the regular books of accounts and therefore, the impugned addition would not be sustainable in the eyes of law.
Upon perusal of aforesaid notings, it could be seen that, on standalone basis, no inference of cash payment could be drawn against the assessee. The notings lack even the basis details i.e., date of payment, the persons to whom payments were made and the source of such payments. The notings are bald notings which do not convey much meaning. The figures as mentioned in the sheet are round figures without any more details which support the fact that these are mere estimations only. The sheet, in our considered opinion, is merely in the nature of dumb document having no evidentiary value.
These sheets even lack basic details so as to form an opinion of cash payment by the assessee. The complete details of the transactions could not be deciphered from the same. Under these circumstances, not much credence could be given to this document to make impugned additions in the hands of the assessee in the absence of corroboration of entries as contained therein. Therefore, the presumption of unaccounted / unexplained expenditure in terms of Sec. 69C is arbitrary and without any corroborative evidence establishing the same. There is no direct evidence of any cash payment by the assessee. Not even a single concrete evidence has been brought on record to establish that the assessee, in fact, has incurred cash expenditure which was not accounted for in the regular books of accounts. It could be seen that the assessee was subjected to search proceedings and after considering every incriminating material as found therein, the assessee already admitted additional income and Ld. AO made further additions in earlier years. Therefore, even otherwise, each and every unaccounted income whatever has been earned by the assessee-firm in earlier years, the same has already been brought to tax and therefore, no further addition could be made in the hands of the assessee at the time of expansion thereof. All these facts lends credence to the arguments of Ld. AR.
Similarly, Mumbai Tribunal, in the case of ITO vs. Kranti Impex Pvt. Ltd. [2018 (3) TMI 424 - ITAT MUMBAI] held that when the seized papers were undated having no acceptable narration and did not bear the signature of any party, they are in the nature of dumb documents having no evidentiary value and could not be taken to be the sole basis for determination of undisclosed income of the assessee. The onus would be on revenue to collect cogent evidences to corroborate the nothings therein. The ratio of other decisions as cited by the assessee during first appeal also supports the case of the assessee.
Upon cumulative consideration of aforesaid facts and reasoning, we would hold that impugned additions as made by Ld. AO merely on the basis of loose sheets without corroboration thereof, was not adequate enough to draw adverse inference of unexplained cash expenditure. Therefore, we delete the same and allow the corresponding grounds as raised by the assessee. The Ld. AO is directed to recompute the income of the assessee in terms of our adjudication.
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2024 (11) TMI 809
Bogus LTCG - Addition u/s 68 OR 69A - transactions of the assessee, in shares, leading to Long Term Capital Gain are sham transactions - HELD THAT:- Claim of exemption in respect of long term capital gains cannot be denied merely on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences filed by the assessee in support of such transaction viz., broker's contract notes, confirmation of receipt of sale proceeds through regular banking channels, payment of STT and the demat account.
AO is required to bring on record cogent corroborative material to establish that the appellant had unaccounted income which was routed back into the books and payments have actually been made to the brokers – suspicion cannot take the place of proof. Mere appreciation in the value of shares cannot justify the transactions being treated as fictitious and the capital gains being assessed as undisclosed income. Merely on the basis of report received from Investigation Wing conducting certain enquiries, the assessing officer cannot treat the share transactions as sham on the basis of suspicion. No adverse inference can be drawn against the appellant merely on the basis of ex-parte statements of the third party(ies) which were not confronted to the assessee.
The principle of law thus is that the AO cannot treat a transaction as bogus only on the basis of suspicion or surmise. AO has to bring material on record tangible material to support his finding that there has been collusion or connivance between the broker and the assessee for the introduction of its unaccounted money. A transaction of purchase and sale of shares, supported by contract notes and demat statements and account payee cheques cannot be treated as bogus.
In the case of the appellant, shares were acquired by way of preferential allotment directly by the Company and not from any broker. Payment was made through banking channels. Deliveries were taken in the DEMAT account, where shares remained for more than one year. Contract notes were issued and shares were also sold on a recognized stock exchange. The SEBI has nowhere held the investee company to be a bogus or sham company.
Additions u/s 69A OR 68 - CIT(A) held section 68 is only applicable in case when there are credits in the books of account of the appellant and that the bank statement of the appellant cannot be considered as books of account - In the present case, the CIT(A) had directed to make addition under section 69A of the Act merely on the basis of the presumption that the assessee had redeployed his ‘undisclosed income’ in the form of capital gains. In concluding so, the CIT(A) had not placed on record any independent tangible material or evidence to both establish that the assessee had undisclosed income and further, that the share transactions undertaken by the assessee were bogus.
In the present case, undisputedly, the transaction is duly accounted for and recorded in the books of the assessee and there is no doubt whatsoever as to disclosure of the transaction. All the relevant documentary evidence qua sale of shares, viz., contract notes, copy of demat account, bank statements, etc., was duly furnished. Thus, section 69A of the Act was not at all applicable and the addition made deserves to be deleted.
Addition at the rate of 6.5% being unaccounted commission paid u/s 69C - AO presumed that the assessee had paid 6.5% commission to unidentified brokers, for providing accommodation entries in order to introduce the aforesaid bogus capital gains in the books of the assessee. The addition had been made merely on the basis of assumption, surmises and conjectures and accordingly calls for being deleted on this ground alone. Further, even otherwise, the addition made by the Assessing Officer, merely on the basis of presumption, without any corroborative evidence to substantiate that such payments were actually made, is wholly unjustified and calls for being deleted in view of the legal position, as discussed. The ld. CIT(A) has relied on the Hon’ble Supreme Court’s Judgement in the case of McDowell & Co Ltd. [1985 (4) TMI 64 - SUPREME COURT]. In this regard, it has been held that the act of questioning the very basis of a transaction and branding it as illegitimate or a camouflage has to be based on substantial, concrete and cogent evidence, wherein the proof of wrong-doing has to be clear and succinct.
Assessee appeal allowed.
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2024 (11) TMI 774
Deduction u/s 80IA - Application of the principle of mutuality - Disallowance of depreciation - as submitted that where non-members are offered facilities on payment of charge then the assessee is liable to be taxed on the income generated therefrom but there is no liability in respect of the profits made by the assessee company from the members who avail themselves of the facilities provided for members - HELD THAT:- Tribunal has rightly followed the decision of this Court in the case of Sports Club of Gujarat Limited [1987 (10) TMI 21 - GUJARAT HIGH COURT] which now stands fortified by the Hon'ble Apex Court in the case of Secunderabad Club [2023 (8) TMI 925 - SUPREME COURT] by remanding the matter to the Assessing Officer to verify the claim of the assessee company as to whether any outsider is provided service or not so as to tax accordingly.
In the facts of the case, the assessee company has received the contribution from its members for the services to be provided for the treatment of the effluent. The company is formed pursuant to the directions/suggestions made by this Court so as to reduce the pollution which is in the public interest and therefore, the form in which the company is incorporated is irrelevant.
The objects of the company also makes it clear that the surplus, if any, would not be paid to its members and in case of dissolution of the respondent company, only Rs. 100/- would be paid to its members. Thus, the submissions made by the learned advocate for the appellant revenue relying upon the findings arrived at by the CIT (Appeals) are contrary to the settled legal position and the Tribunal has rightly therefore held in favour of the assessee by applying the principle of mutuality by holding that the income/surplus of the respondent assessee company would not be liable to tax on principle of mutuality. We are therefore, of the opinion that no question of law much-less and substantial question of law has arisen from the impugned orders passed by the Tribunal.
Disallowance of depreciation - Tribunal has also rightly held that if the entire income/surplus of the respondent assessee company is not liable to be taxed on the principle of mutuality, the disallowance of depreciation and deduction under section 80IA of the Act is not required to be considered. The questions are answered accordingly against the revenue and in favour of the Assessee.
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