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Income Tax - Case Laws
Showing 261 to 280 of 168845 Records
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2024 (11) TMI 419
LTCG - exemption u/s 54F - “original asset” ownership - HELD THAT:- In an ordinary sense, property is something that a person exclusively owns and something peculiar to a person. Property is ownership of something, thus, giving an exclusive and unrestricted right - The “original asset” was in ownership of assessee and his wife. Both are the eligible owners of the “original asset”.
In the case of McAlister v. Pritchard Hon’ble Supreme Court of Missouri, Division One, held that the term ‘property’ is believed to be extended to every category of valuable rights and interests. Thus, anything that a person owns can be considered to be a person’s property.
Here, the assessee and his wife both are the beneficial owners of property and the income levied from this property will be taxed in the individual hands of both the parties.
So there is no question of estoppels in the statute. By selling of original asset, both the assessee and his wife gained the capital gain and the income will be distributed in both the hands, but not in assessee’s hand alone.
AO has taken a view that the assessee’s wife has no existence in case of ownership right. But it was taken from the different judicial pronouncement and as per the Transfer of Property Act, both the assessee and his wife has equal right on the ownership. So tax will be computed in specific hands.
Whether exemption u/s 54F will be applicable or not if the assessee has invested in new property with his son? - If we look back quickly in section 54F, the criteria should be fulfilled with the time limits for purchasing new property, the assessee should invest through selling the original property and assessee should be the owner of new property.
Amount assessee invested Rs. 46 lakhs from the bank account where the assessee received the sale consideration of “original asset”. The assessee is also the owner of flat No.508B.
Considering this, we respectfully rely on the order of Jennifer Bhide [2011 (9) TMI 161 - KARNATAKA HIGH COURT] So addition of son is not affecting the claim of deduction under section 54F of the Act. Considering the additional ground of the assessee, the income should be taken 50% of Rs. 1,30,00,000/- which works out to Rs. 65 lakhs on assessee’s hand. The assessee will be eligible for indexation of the property and the claim of deduction under section 54F of the Act, Rs. 46 lakhs and the stamp duty value, i.e. Rs. 2,12,600/-. The total amount works out to Rs. 48,12, 600/-. The income of the assessee only should be restricted on assessee’s income considering the order of Hon’ble Apex Court in case of CH Atchaiah [1995 (12) TMI 1 - SUPREME COURT] Accordingly, the additional ground of the assessee is allowed.
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2024 (11) TMI 390
Determination of Turnover for presumptive taxation u/s 44AD - assessee submits that receipts cannot be treated as ancillary receipts because assessee has already offered income @ 6% of the total turnover from eligible business in totality of his business income and not on item-wise basis - HELD THAT:- CIT(A) after considering the sale bills and ledger account considered the case of the assessee regarding his turnover being genuine. So, this point is not in dispute that total turnover of the assessee during the year under consideration was Rs. 64,74,859/- and not Rs. 74,26,060/-.
Calculation of turnover - We are in this view that Section 44AD of the Act is at all applicable to the case of the assessee for the relevant AY 2018-19. So far, the decisions relied upon by the CIT(A) are concerned, the said decision dealt in Section 80IB - As the present case is with regard to Section 44AD of the Act. There is a clear distinction in the facts of the decision of the Hon'ble Apex Court and the present case. As we have already discussed in our preceding paragraph that the assessee has offered tax which according to him inadvertently not offered earlier. He has already given a chart that he is ready to pay as per the provisions made u/s 44AD of the Act and offer to tax of total turnover considered for income @ 6%.
We are in this view to accept the contention of the assessee and accordingly, the appeal of the assessee is allowed by setting aside the order of the ld. CIT(A) and the ld. AO. The ld. AO is directed to accept the new offered to tax as mentioned by the assessee in chart (supra) and give effect to.
Appeal filed by the assessee is allowed.
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2024 (11) TMI 389
Disallowance of bogus purchases - assessee failed to prove identity of the suppliers and genuineness of such purchases claimed during the course of assessment proceedings by not producing these parties before - ITAT found that the disallowance of expenditure is not sustainable and found that the evidence and material produced by the assessee establish that it had incurred the expenditure as claimed
HELD THAT:- There is no material on record to indicate that there is any serious doubt as to the physical material shown to be purchased from the four entities in question, was used by the assessee in its activities. The stock registers produced by the assessee were not rejected by the AO. It is also apparent that the assessee had established that it made payments through banking channels against the supply of materials, which were duly reflected in its stock registers.
As noted by ITAT, there is no evidence to suggest that the amounts paid by the assessee for the supplies booked in its books of accounts had been returned to the assessee in a form of cash or through any accommodation entry.
It is clear from the above that the controversy involved is fact-centric and revolves on the question whether, in fact, the purchases booked in the books of accounts were wholly and exclusively for the purpose of business as claimed by the assessee. The findings of the learned ITAT in this regard cannot be held to be perverse. Decided against revenue.
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2024 (11) TMI 388
Denial of TDS credit - eligibility to to get credit of the entire amount deducted as tax at source u/s. 194Q & 194A - AR submitted that the assessee is only a commission agent HELD THAT:- As per case of Yagneswari General Traders [2024 (3) TMI 1344 - ITAT VISAKHAPATNAM] and in the case of Thota Venkateswarlu [2024 (8) TMI 1478 - ITAT VISAKHAPATNAM] following the principle of consistency wherein held as the assessee is acted only as an agent (kaccha arahtia) and therefore it is eligible to get credit of the entire amount deducted as tax at source and there is no short fall of TDS as concluded by the Ld. Revenue Authorities.
No hesitation to set-aside the orders of the Ld. Revenue Authorities and direct the Ld. AO - CPC to grant credit of the entire amount deducted as tax at source in the case of the assessee. Appeal of the assessee is allowed.
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2024 (11) TMI 387
Validity of Assessment u/s 153C or 143(3) - search material of a third party is being used against assessee - HELD THAT:- Since the search material of a third party is being used against her, then the right course of action on the assessee would be in terms of section 153C of the Act as the date of search in the hands of the assessee differs from that of Shri Parveen Kumar Jain. This law is already settled by the decision of Jasjit Singh [2023 (10) TMI 572 - SUPREME COURT] in favour of the assesseeThe assessment for the Asst Year 2021-22 should have been framed only u/s 153C of the Act and not u/s 143(3) of the Act as the year of search duly varies for the assessee.
Similar view was taken in the case of Raja Varshney [2024 (9) TMI 1625 - ITAT DELHI] which was rendered in the context of same search of Jainco Ltd on 6.1.2021.
As we have no hesitation to quash the assessment framed u/s 143(3) of the Act in the hands of the assessee for the Asst Year 2021-22 - Accordingly, the additional grounds raised by the assessee are allowed.
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2024 (11) TMI 386
Penalty u/s 271(1)(c) - Surrendered income as calculated on estimated basis on unrecorded sales - HELD THAT:- We find that the above decisions of this Tribunal in Hitech Construction [2023 (4) TMI 741 - ITAT GUWAHATI] is squarely applicable on the facts of the case of the assessee.
DR has failed to bring forth any other binding precedence in its favour before us. Under the given facts of the case we observe that the surrendered income of ₹ 5 crore was calculated on estimated basis on unrecorded sales and there is no specific incriminating material indicating the alleged income surrendered by the assessee.
Surrendered income stated in the statement recorded u/s 132(4) of the Act has been offered to tax in the income tax return and the same stands accepted by the Assessing Officer. It is also noticed that the assessee had declared loss of ₹ 54.99 crore in the original return filed on 30th April, 2019 and even after surrendering the undisclosed income of ₹ 5 crores, the ld. AO has accepted the income of the assessee at a loss of ₹ 44.99 crore.
No infirmity in the finding of the CIT (A) deleting the impugned penalty u/s 271(1)(c) of the Act on duly examining the facts of the case in light of the settled judicial precedence. The sole ground of appeal raised by the Revenue is dismissed.
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2024 (11) TMI 385
Validity of the assessment order u/s 144/147 - addition made by the AO on account of Long Term Capital Gain invoking S.50C on Agricultural lands - HELD THAT:- Assessee has furnished the details but the same has not been considered merely the same was filed late on 02.11.2023 by the assessee but before the decision is rendered on 29.11.2023. The bench also noted that the ld. CIT(A) has not dealt with the fact that the addition was made in the case of the mother of the assessee for the full amount of consideration and the property was sold by the father of the assessee. These facts are narrated of the assessment order thus cannot be disputed by the revenue. Therefore, the contention of the CIT(A) is not correct and prejudicial to the interest of the assessee and the revenue has to tax the correct income and in correct hand.
As is also evident that the order of the assessment in fact passed u/s 144 of the Act and the contention raised by the assessee needs to be appreciated based on the evidence placed on record by the assessee before the ld. CIT(A).
Considering that peculiar aspect of the matter we deem it fit to remand the matter to the file of the ld. AO who will considered the factual aspect of the matter as raised by the assessee after due verification of the facts and charge the correct income in hands of the assessee after affording due opportunity to the assessee. However, the assessee will not seek any adjournment on frivolous ground and remain cooperative during proceedings before the ld. AO.
Restore the matter back to the file of the ld. AO shall in no way be construed as having any reflection or expression on the merits of the dispute.
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2024 (11) TMI 384
GP estimation - estimation of the percentage of profit that is to be applied in the case of the assessee based on the facts that the assessee has disclosed the turnover which is not matching with that of the form no. 26AS - AO applied the profit at the rate of 8%, CIT(A) considering the past order in the case of the assessee estimated at 7%
HELD THAT:- As the assessee has already disclosed @ 5.99 % there is no need to further add the estimation of profit and moreover the profit of the Sri Lanka project for which the dispute is raised the profit of which is also forms part of the total profit declared by the assessee. Appeal of the assessee is allowed.
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2024 (11) TMI 383
Revision u/s 263 - deduction allowed u/s 54EC & 54F by the AO was erroneous in so far as it was prejudicial to the interest of revenue - HELD THAT:- The assessee had entered into joint development agreement with M/s R.K. Construction on 10.02.2012 for a total consideration of Rs. 1,95,00,000/- along with 8 flats and 8 car parks upon construction. The total consideration therefore, was not only Rs. 1,95,00,000/- but the fair market value of the 8 flats and car park which the assessee was to receive from the developer.
Instead of showing capital gain in the year of transfer i.e. AY 2012-13, the assessee showed capital gains of Rs. 38,00,000/- in AY 2013-14 and Rs. 24,00,000/- in AY 2014-15 which is not in accordance with the provisions of the Act relating to computation of capital gains.
The capital gains is to be computed in the year of transfer, which was AY 2012-13 and after reducing the cost of acquisition. The cost of acquisition in the case of gifted property is governed by section 49(1) of the Act. Since, the agreement dated 03.11.2011 and the subsequent unregistered agreement dated 10.02.2012 with M/s R.K. Construction, a proprietary concern of Dr. Malaya Mukherjee, could not materialise, therefore, subsequently the assessee entered into another joint development agreement with M/s Tanvee Green City (P) Ltd. on 26.09.2014 which was a registered development agreement.
The powers of attorney were also issued in the name of the directors of the company for getting all the formalities completed. The developer adjusted the amount of Rs. 62,00,000/- received by the assessee earlier and accordingly, the assessee was to receive only the balance of Rs. 1,00,00,000/- along with one flat and one car par. The total consideration was therefore, Rs. 1,62,00,000/- plus market value of one flat and one car park from which the cost of land owned by the assessee, which was gifted to him by his mother was to be deducted to arrive at the capital gains, which was assessable in AY 2015-16. The assessee contends that if the transfer is considered in AY 2013-14 then there is no discussion regarding the taxation of Rs. 90,00,000/- received in AY 2015-16 by the Ld. PCIT.
Since the second registered agreement and the balance payment was received from M/s Tanvee Green City (P) Ltd., therefore, the Ld. PCIT was not correct in holding that claiming and allowing the date of transfer as the date of registration was not in order for availing exemption u/s 54EC and 54F in FY 2014-15.
AO allowed the claim of deduction u/s 54EC but disallowed the claim of deduction u/s 54F of Rs. 43,00,000/- since as per the Inspector’s report, the residential house was not completed till date and he had also added the sum of Rs. 10,00,00,000/- on account of difference in market value for development agreement and computation of income.
The assessee had shown capital gains being the instalment of sale proceeds received in AY 2013-14 and 2014-15 at Rs. 38,00,000/- and Rs. 24,00,000/- respectively, which was not correct. It has been judicially held that income is to be assessed in the correct AY and since the unregistered joint development agreement with M/s R.K. Construction could not materialise and another JDA with M/s Tanvee Green City (P) Ltd. was executed, the capital gains was chargeable only in AY 2015-16 and not in the earlier assessment year(s). Accordingly, the order of the Ld. PCIT is modified and the appeal of the assessee is partly allowed.
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2024 (11) TMI 382
Denial of exemption u/s 11 - delay in filing of audit report in form 10B - HELD THAT:- As relying on case Manav Seva Trust [2024 (8) TMI 1476 - ITAT KOLKATA and Bangarh Educational Welfare Trust [2022 (1) TMI 1321 - ITAT KOLKATA] we hereby hold that since filing of audit report is procedural requirement and assessee has e-filed the report post prescribed due date and delay was on account of technical glitches, therefore, condone the delay in filing of audit report on form 10B and direct the jurisdictional AO to give benefit of Section 11 of the Act if the assessee is otherwise found eligible - Appeal of the assessee is allowed.
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2024 (11) TMI 381
Denial of TDS credit on salary - employer of the Assessee has not reflected the TDS in Form No.26AS - Assessee mainly claimed that employer of Assessee in fact, not provided Form No.16 - as per assessee if the employer has deducted TDS on salary u/s.192 and may not have deposited the same in the Government Treasury, then also, the Assessee is entitled to get the claim of TDS as the Assessee cannot be denied the benefit of TDS which is benevolent in nature
HELD THAT:- No doubt, the contention raised by the Assessee seems to be reasonable and logical, however, Assessee is required to discharge its primary onus by producing relevant documents, then only, can claim the right in its right perspective.
We observe that the Assessee by filing TDS working which is though initialed by somebody but the same is neither on proper letter head nor there is a name of the person who signed such document and even otherwise, the Assessee has also failed to file any document, wherefrom it can be reflected that the Assessee has received any particular amount of salary on which TDS has been deducted and therefore, in absence of relevant documents,
Commissioner correctly held that the AO has not made any mistake in non-granting of credit of TDS, since, the Assessee did not furnish any salary slip or Form No.16. We also observe that in the aforesaid case i.e. Chandrashekhar Sadashiv Potphode (supra) the Assessee was able to prima facie establish its case by producing relevant documents, whereas in this case the Assessee has failed to do so.
We by considering peculiar facts and circumstances of the case, observe that in absence of relevant documents, the issue remained to be adjudicated properly and in its right perspective and therefore, for proper and just decision of the case and for the end of the justice, we deem it appropriate to remand the instant case to the file of the Ld. Commissioner for decision afresh.
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2024 (11) TMI 369
Provisional attachment orders u/s 281B - absence of extension of provisional attachment orders - HELD THAT:- In the present case, the attachment orders were passed in terms of Section 281B (1) of the Act on 10.01.2024 and the said orders will be in existence for a period of six months in terms of Section 281B(2) of the Act. The respondents are empowered to extend the said provisional attachment orders for further period of two years by virtue of proviso to sub-section (2) of Section 281B of the Act.
In the present case, admittedly, no such extension order has been passed before the expiry of the original provisional attachment orders dated 10.01.2024. Therefore, the said order would cease to have effect after expiry of the period of six months from the date of provisional attachment orders dated 10.01.2024. As rightly contended by the learned Senior Counsel for the petitioner, the period of six months from the date of impugned provisional attachment dated 10.01.2024, has been elapsed on 10.07.2024.
Admittedly in the present case, after the expiry of six months of original provisional attachment orders in terms of Section 281B(2) of the Act, no further extension was made in terms of proviso to Sub-clause (2) of Section 281B of the Act. In the absence of any extension, the original provisional attachment orders dated 10.01.2024, shall cease to have effect after the period of six months, that is, from 10.07.2024 onwards, the said order has been ceased to have effect. Therefore, once the attachment order is ceased to have effect, the question of continuation of provisional attachment orders does not arise unless and otherwise, the Department extends the same in terms of proviso to Sub Section (2) of Section 281B.
In the absence of extension of provisional attachment orders dated 10.01.2024, the same should ceased to have effect from 10.07.2024 onwards, i.e. after expiry of six months period. Of course, the original interim order granted by this Court, dated 15.02.2024 would continue as long as the impugned provisional attachment order is in existence.
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2024 (11) TMI 368
Revision u/s 263 - AO had not conducted the necessary inquiries and verified the facts for accepting the assessee’s claim that its income was not chargeable to tax under the Act by virtue of the DTAA - HELD THAT:- A plain reading of the SCN indicates that the CIT had called upon the petitioner to show cause why the proceedings u/s 263 of the Act not be taken in view of what was stated to be the failure on part of the AO to conduct the necessary enquiries.
CIT had faulted the AO for not undertaking certain enquiries including verifying whether the assessee has a PE in India; whether in terms of Section 9(1)(vii) of the Act, the income is chargeable as fees for technical services (FTS); whether TDS at the rate of 10% on all the remittances made to the assessee were deducted; whether the condition as set out in Article 12 of the DTAA in regard to taxation of FTS were satisfied. In a similar vein, the learned CIT had also faulted the AO for not making enquiries regarding the commercial substance of the assessee in Singapore and whether it was a conduit company form for obtaining the tax benefits under the DTAA. The said observations were made only for the purposes of calling upon the assessee to show cause why the proceedings not be initiated u/s 263 of the Act. However, thereafter, the learned CIT had not put the issue regarding treaty shopping to the assessee.
Undisputedly, the tentative opinion formed by the learned CIT that the assessee was a conduit company for the reasons as articulated in the order dated 25.03.2022, was not put to the assessee. Clearly in the circumstances, the assessee had not given any opportunity to satisfy the learned CIT regarding its view, which has found its way in the aforesaid order of the learned CIT’s conclusion.
We are unable to find any fault with the decision of ITAT in setting aside the order dated 25.03.2022 on the ground that the assessee was not afforded an opportunity to counter the allegation that it was a conduit company without any substance.
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2024 (11) TMI 367
Delay of 35 days in filing the appeal before CIT(A) - CIT(A) dismissed the Appeal filed by the Assessee on the grounds of delay in latches - HELD THAT:- In our opinion, the Assessee has explained the sufficient reason for condoning the delay of 35 days in filing the Appeal before the Ld. CIT(A).
CIT(A) ought to have condoned the delay of 35 days in filing the Appeal and should have decided the Appeal on its merits. Thus, we condone the delay of 35 days in filing the Appeal before the CIT(A) and restore the matter to the file of the Ld. CIT(A) to decide the Appeal of the Assessee
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2024 (11) TMI 366
Penalty u/s 271(1)(c) - addition pertaining to the alleged bogus purchases - AO has added 100% value of bogus purchases but CIT(A) has restricted the addition to the extent of 12.5% - HELD THAT:- Addition has been sustained by the Ld.CIT(A) on estimated basis.
As decided in KRISHI TYRE RETREADING AND RUBBER INDUSTRIES [2014 (2) TMI 21 - RAJASTHAN HIGH COURT] penalty u/s. 271(1)(c) of the Act is not leviable when the addition is made on estimation basis. Accordingly, we hold that the penalty u/s. 271(1)(c) of the Act is not leviable in the present cases - Also see SANGRUR VANASPATI MILLS LTD. [2008 (2) TMI 285 - PUNJAB AND HARYANA HIGH COURT] and JATIN ENTERPRISES case [2024 (3) TMI 1073 - ITAT MUMBAI] - Decided in favour of assessee.
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2024 (11) TMI 365
Bogus LTCG on accommodation entries - deductions u/s 10(38) denied - AO observed that assessee had made huge profit out of this investment because of this, it makes the script as suspicious and penny stock - HELD THAT:- The assessee has purchased the shares directly from the company and through share transfer from other party, subsequently, sold the same in the stock exchange. However, there are no discrepancies in the documents filed by the assessee claiming the deductions u/s 10(38) of the Act. At the same time, even though all the characteristics of the penny stock exists in the present case, still the revenue has not brought on record any materials linking the assessee in any of the dubious transactions relating to entry, price rigging or exit providers.
Even in the SEBI report, there is no mention or reference to the involvement of the assessee. We can only presume that the assessee is one of the beneficiaries in these transactions merely as an investor who has entered in investment fray to make quick profit. Even the Assessing Officer has applied the presumptions and concept of human probabilities to make the additions without their being any material against the assessee.
AO and CIT(A) has applied the concept of human probabilities and held the above said scrips to be a penny stock without bringing on record how the assessee is involved in any of the scrupulous activities or directly linked to one of the person who has involved in manipulation/rigging of share prices, entry operator or exit provider as observed in the case of Ziauddin A Siddique [2022 (3) TMI 1437 - BOMBAY HIGH COURT] Therefore, there is no material with the tax authorities to substantiate their findings that the impugned transaction is non-genuine - Decided in favour of assessee.
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2024 (11) TMI 364
Taxability of income earned from sale of software license as business income - Income deemed to accrue or arise in India - assessee is a non-resident corporate entity incorporated in Austria - AO proceeded to compute the profit in relation to sale of software licenses by estimating at 15% and brought such profit to tax by applying the rate of 40% in both the assessment years under dispute - primary allegation of the AO is to the effect that the assessee is not the economic owner of the IPs as majority of them have been registered outside Austria and mostly in USA and further the assessee has not incurred any expenditure for developing such IPs
HELD THAT:- Assessee has brought to our notice the financial statements of the assessee, which reveal that the assessee has earned substantial revenue from its operations in different geographical jurisdictions, including Austria. The assessee also files its tax returns regularly in Austria and has been assessed to tax by the Austrian Revenue Authorities. Copies of the assessment orders clearly establish the aforesaid factual position. The financial statement further reveal that the assessee has incurred expenditure in Research and Development (R&D) segment towards employee cost and other R&D.
Receipts from sale of software licenses in India formed a very small part of the total revenue earned by the assessee from its operations. Therefore, the allegation of the department that the assessee has entered into treaty shopping arrangement to escape taxation, is without any credible reasoning and merely based on conjectures and surmises rather than corroborative evidence.
Allegation of the AO that the assessee has been incorporated in Austria as part of treaty shopping arrangement to avoid taxation in USA, in our view, is totally irrelevant and should not have bothered the Assessing Officer. In any case of the matter, there cannot be any manner of doubt that the Revenue earned from sale of software licenses could not have been taxed as royalty income in India in view of the ratio laid down in case of Engineering Analysis Centre of Excellence Pvt. Ltd. [2021 (3) TMI 138 - SUPREME COURT] and various other judicial precedents. Therefore, it is immaterial whether the assessee is located in Austria or USA. Even, assuming that in place of assessee, the entity earning revenue from sale of software licenses would have been located in USA, still, the revenue earned would not have been taxable in India as royalty income, in view of the law laid down by the Hon’ble Supreme Court.
Therefore, the receipts in dispute would not have been taxable in India, irrespective of the jurisdiction where the entity earning Revenue from sale of software is located. Whether the assessee has been set up in Austria to avoid tax liability in USA is a matter which should concern the tax authorities in USA and not the Assessing Officer in India. There is no mandate on the AO in India to take up cudgel on behalf of the USA tax authorities.
There is nothing on record to suggest that the USA tax authorities or tax authorities of other overseas jurisdictions have raised any dispute regarding the genuineness of assessee company and the status of its tax residency. When other tax jurisdictions including USA have not raised any doubt regarding the tax residency of the assessee, in our view, the AO in India cannot question the tax residency of the assessee, that too, in absence of any corroborative evidence to establish any fraud or illegal activity of the assessee.
Thus, Assessing Officer could not have doubted the tax residency and the genuineness of the assessee company in the teeth of the TRC issued by the Austrian tax authorities.
Insofar as reference to BEPS Action Plan by the Assessing Officer is concerned, as held by the coordinate Bench in case of Additional Director of Income Tax Vs. Bakers Hughes (Singapore) Pte. Ltd. [2015 (5) TMI 582 - ITAT DELHI] it cannot have a role in judicial decision-making process. That too, in absence of any material brought on record by the Assessing Officer to conclusively establish that the assessee has no commercial or economic substance. Merely because, majority of the IPs are registered in different jurisdictions, that by itself would not divest the ownership rights of the assessee over the IPs. No evidence has been brought on record by the Departmental authorities to demonstrate that revenue earned by the assessee has been repatriated to either the parent company or any other related party.
Thus, we hold that the assessee is entitled to the benefits under India – Austria DTAA.
Once the receipts from sale of software licenses are held as business income, they cannot be taxed in India in absence of PE. Accordingly, we direct the Assessing Officer to delete the additions. In view of our decision above, we refrain from examining as to whether the receipts are taxable under section 9(1)(i) through business connection. Assessee appeal allowed.
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2024 (11) TMI 363
Expenses claimed against the Capital gains - AO disallowed administration expenses claimed by the assessee as not genuine and excessive - HELD THAT:- After careful consideration of the facts on record, we observed that the assessee is dealing in the business of shares and securities, the monitoring of such securities, the assessee has to incur certain expenses on PMS. Therefore, this expenditure is directly relating to the securities transaction. The nature of transaction demands such expenditures, therefore, on the similar facts on record, the ITAT Pune has considered the same and allowed such expenses.
After careful consideration of findings of CIT(A), he has decided the issue in favour of the assessee and he has also considered the conflicting decisions and came to conclusion based on decision of Vegetable Product [1973 (1) TMI 1 - SUPREME COURT] The decision of Ld CIT(A) is reasonable findings on the issue of allowability of PMS expenses. Therefore, we are not inclined to disturb the same.
Disallowance of General administrative expenses - assessee has incurred these expenditure on salaries, administration, depreciation etc - HELD THAT:- The income tax provisions allows the assessee’s to compute the income under different heads of income and the assessee is allowed to claim the expenses based on the relevant heads of income. In the given case, the assessee can claim the general expenses of running the business only under the head business income. Even there is no income declared under the head business income, the assessee is allowed to claim these expenses as business expenditure, if there is no business income, the assessee is allowed to carry forward the same in case the assessee does not have income under other heads of income other than loss under the head Capital Gains. Since the assessee has declared profit under the head Capital Gains, the assessee is allowed to adjust the same u/s 71 - Hence, the above said expenses cannot be claimed under the head Capital Gains u/s 48 of the Act. Therefore we are inclined to decide the issue of claim of administration expenses in favour of the revenue. Ultimately, the assessee may get the benefit of claim of these expenses as business expenditure under the head business income. As such there is no impact for the same in this AY
Treating transaction entry with the assessee as business transaction - We observed that the assessee has classified the investments made in the various shares including HCL shares for the purpose of investment only. The various circulars issued by the CBDT allows the assessee to choose the method of accounting relating to dealing in securities transactions either on the line of treating the same under the head business income or Capital Gain depending upon the treatment of various shares for the purpose of pure investment or not. Whatever the method adopted by the assessee, the same has to be followed consistently. The ld CIT(A) has considered the various circulars particularly Circular no 6/2016 dated 29.02.2016, which has settled the issues under consideration. Therefore we do not see any reason to disturb the findings of ld CIT(A). Therefore, we are inclined to dismiss the ground no.2 raised by the revenue.
Bogus Loss on purchase and sale of shares - introduction of unaccounted money (difference between the purchase and sale price) without suffering any tax - assessee submitted that assessee has sold these shares on distress - HELD THAT:- Assessee has entered into agreement with the management of PDK to investment in their company. He presumed or expected to invest to the extent of 51% of total shareholding. He invested in their shares @ Rs. 100 per share including share premium. However, as per the submissions made before us, it was claimed that the management of PDK has refused to allow him to invest to the extent of 51%. Due to the above disagreement, the assessee has to disinvest the same at much lower price of Rs. 40/- per share to one of the existing Director of the same PDK group. In support of the above submissions, the assessee has filed certain communications from 07.04.2023 to 07.07.2023.
We are not able to understand, why the dispute has to be settled with in such short period of time and also to reduce the sale price from Rs. 100 to Rs. 40 per share. There is not substance to show why he has agreed to invest Rs. 100/- per share in first place and also to reduce the share price to sell the same shares to one of the directors of PDK and sell the shares at such huge loss. The whole transaction entered by the assessee does not display any prudence and the explanations offered to exit the project does not impress us. Decided against assessee.
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2024 (11) TMI 362
Penalty u/s 271(1)(c) - Addition made u/s 50C on difference between the stamp duty value and sale consideration as deemed income of the assessee and addition on account of negative cash in the books
Addition u/s 50C - HELD THAT:- Question as to whether the penalty u/s 271(1)(c) of the Act could be levied on this kind of addition made on account of deeming fiction came to be examined in the case Madan Teatres Ltd. [2013 (6) TMI 96 - CALCUTTA HIGH COURT] wherein it was held that the addition made on account of deeming fiction would not lead to levy of penalty u/s 271(1)(c) of the Act, when the assessee has not actually received any money over and above the sale consideration declared in the sale deed. The facts prevailing in this case are identical with the facts of the above said case.
There is no finding that the assessee has actually received any money over and above the actual sale consideration declared in the sale deed. Accordingly, the impugned addition has been made on account of deeming fiction only and penalty u/s 271(1)(c) of the Act is not leviable.
Penalty levied on negative cash balance found in the books of account - We notice that the assessee could not offer any explanation with regard to the cash deposited into the bank account over and above the cash balance available in the books of account.
As held in the case of MAK Data P. Ltd. [2013 (1) TMI 574 - DELHI HIGH COURT] that voluntary disclosure does not release the assessee from mischief of penalty proceedings u/s 271(1)(c) of the Act. However, in this case, the surrender was after being found out that there was negative cash balance. Hence, it cannot be said that it was a case of voluntary surrender of income. Hence, it is a clear case of warranting addition. penalty u/s 271(1)(c) of the Act was rightly levied by the AO and confirmed by the Ld. CIT(A).
Decided partly in favour of assessee.
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2024 (11) TMI 361
Taxability of interconnectivity usage charges received by the assessee from Vodafone, an Indian entity - Receipts can be considered as FTS or alternatively as other income - DRP recharacterized the interconnectivity usage charges as FTS both under the domestic law as well as the treaty provisions - HELD THAT:- If we proceed to analyze the nature of services provided by the assessee to the Indian entity, it can be seen that such services were provided without any human intervention at any stage. The roaming services and termination of international voice traffic services were provided by the assessee using its own system located outside Indian and the entire process of providing such services is fully automated without any human element involved therein.
DRP has acknowledged the fact that the interconnectivity usage involves high degree of machines powered by sophisticated software. Thus, the facts on record clearly indicate that the assessee has provided the services to the Indian entity through a standard facility and system set up by it, which is fully automated.
In case of CIT Vs. Bhari Cellular Limited [2008 (10) TMI 321 - DELHI HIGH COURT] while deciding identical nature of dispute has held that the expression ‘technical services’ as used in Explanation 2 to section 9(1)(vii) takes colour from the expression ‘managerial and consultancy services’, which necessarily involve a human element or human interface. The Hon’ble Court proceeded further to hold that the interconnect/port access facility is only a facility to use the gateway and the network of service provider. Hence, such service provider does not provide any assistance or aid or help to the service recipient in managing, operating and setting up their infrastructure and network. While interpreting the expression ‘technical services’ it cannot be construed in the abstract and general sense but in the narrower sense as circumscribed by the expression ‘managerial service and consultancy service’ as appearing in Explanation 2 to section 9(1)(vii) of the Act, which requires rendition of service through human interface.
Thus, we hold that the receipts towards interconnectivity usage charges cannot be treated as FTS.
Whether the receipts can be treated as other income under section 56 of the Act and under Article 24 of India – Oman DTAA? - The departmental authorities themselves were not sure regarding the true nature and character of the receipts. Merely, because a particular item of income cannot be treated as royalty or FTS, as such, receipts may not fit into the definition of royalty/FTS provided under the Treaty, that by itself would not make it taxable under the residual clause of the treaty. It needs to be seen, whether such income can come within the ambit of any other Article preceding Article 24 of the Treaty. Undisputedly, the roaming and termination of international voice traffic services were provided by the assessee in course of its regular business activities. Hence, it cannot be said that provision of such facility is not connected to assessee’s business activity.
That being the factual position on record, the interconnectivity usage charges have to be treated as business income, hence covered under Article 7 of India – Oman DTAA. However, since, the assessee did not have any Permanent Establishment (PE) in India, the business profit has to be taxed in the country of residence in Oman. Merely, because the income is not taxable in India under a particular head due to beneficial provisions under the Treaty, it cannot automatically lose its character, as in the present case, and made taxable as other income.
Thus, interconnectivity usage charges received by the assessee are not taxable in India, either as FTS or as other income. Assessee appeal allowed.
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