Contravention of the provisions of Section 10 (6) r/w 10 (5) of FEMA - charges for 10 remittances made abroad - HELD THAT:- Contravention of the provisions of Section 10 (6) r/w 10 (5) of FEMA further r/w Regulation 6(1) of Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulations 2000 by M/s. Akzo Nobel India Ltd. earlier known as M/s. ICI India Ltd. are established. In so far as the three Directors viz Sarv/Shri Nihal Kaviratne, Amit Jain & Sanjiv Mishra are concerned the Learned Counsel for the Appellants has submitted Form 32 under the Companies Act which clearly show their appointments have been made in 2009 & 2010 that is much after the impugned transactions had occurred. Form 32 in the case of Shri R. Gopalakrishnan shows that he vacated office as an Additional Director and reappointed as a Director w.e.f. 22.07.1999.
In the appeal, pleading has been made that Shri R. Gopalakrishnan was nonexecutive and independent Director who was not involved in the day to day affairs of the Company. Adjudicating Authority has acknowledged that the Show Cause Notice has failed to spell out clearly the role of the Directors. Therefore, the aforementioned charges established for the Company fail to hold good under Section 42 of FEMA 1999 against the aforementioned four Directors of the Company.
While the charges against the Appellant Company stand established, in view of the fact that the Company has been making regular imports of substantial amounts and it is only in miniscule percentage of cases that the Company failed to submit proof of imports against 10 remittances, in the interest of justice the penalty under Section 13(1) of FEMA 1999 is reduced to Rs. 5,00,000/- (Rupees Five Lakhs Only). The amount already paid by the Appellant Company as pre-deposit of penalty vide demand draft dated 27.02.2018 is to be fully adjusted against the reduced penalty. Since, the charges under Section 42 of FEMA 1999 do not hold good against the four aforementioned Directors of the Appellant Company, the penalty of Rs. 1,00,000/- imposed on each of them under the impugned Adjudication Order dated 30.01.2015 is quashed.
Claim for credit in respect of advance tax paid by a declarant under the Scheme, 2016 - character of the advance tax - Income Declaration Scheme, 2016 - Is advance tax entitled to the same dispensation as is given to the TDS? - Can a legally sustainable distinction be made between ‘TDS’ and ‘Advance Tax’ in the matter of credit to be given against the liability under the Scheme, 2016?
As decided by HC [2022 (2) TMI 344 - BOMBAY HIGH COURT] in the case at hand, it is not the case of respondent No.1 that the advance tax paid by the petitioner was not relatable to the income for the relevant assessment years, which petitioner disclosed. If the said payment is not apportionable towards any other liability, there is no justifiable reason to deprive the declarant from getting the credit for the same against the liability under the Scheme, 2016
Petition stands allowed - Respondent No.1 shall issue certificate in Form 4 as required by Rule 4(5) of Income Declaration Scheme Rules, 2016, upon the petitioner complying with all the requirements under the said Scheme, 2016. However, the petitioner shall be entitled to and given credit for the advance tax already paid by the petitioner and the respondent No.1 shall not refuse to issue Form No.4 on the said count.
HELD THAT:- Issue notice to the respondent as well as on the application seeking condonation of delay.
Bogus purchases - bogus accommodation bills - hawala transactions from certain parties who were only providing accommodation sale bills - All decided by HC [2022 (2) TMI 1482 - BOMBAY HIGH COURT] purchases cannot be rejected without disturbing the sales in case of a trader and additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases
HELD THAT:- In terms of Circular No. 17/2019 dated 08.08.2019 issued by Government of India, Ministry of Finance, Department of Revenue, Central Board Direct Taxes, Judicial Section, since the amount of tax involved is low, we are not inclined to interfere with the impugned order.
The special leave petitions are, accordingly, dismissed.
Maintainability of appeal before the Tribunal - HELD THAT:- Considering the fact that proceedings has been initiated against the appellant under Insolvency and Bankruptcy Code 2016 (IBC) and resolution plan has already been approved, in that circumstances it is held that the appeals are not maintainable before the Tribunal.
Addition on account of unearned revenue - HELD THAT:- Tribunal has returned a finding of fact that these very amounts were offered to tax in the subsequent year, as and when services were offered.
Two findings of fact emerge that the money received by the respondent/assessee was offered for imposition of tax only when services were rendered.
Second, this was an accounting practice followed consistently for several years.
Lastly, since the tax rate remained the same, no loss was caused to the revenue by the respondent/assessee offering the aforementioned amount for the tax in the subsequent period.
This position of law appears to have been, in a sense, recognized by the coordinate bench of this court in a judgment rendered in Commissioner of Income Tax-III vs Shyam Telelink Ltd. [2018 (12) TMI 585 - DELHI HIGH COURT]. Thus the proposed question no. (i) in our opinion does not require consideration.
Addition on account of provision for liquidated damages - We have in another appeal of the revenue [2023 (8) TMI 591 - DELHI HIGH COURT], remanded the matter to the Tribunal for reconsideration.
Tribunal, in the instant case, has followed decision rendered by it in AY 2004-05, which is the AY that is involved in the matter we have remanded for reconsideration.
Therefore, the impugned order is set aside on the issue concerning liquidated damages.
Directions contained in our order passed today [supra] will apply mutatis mutandis in this matter as well, as regards the issue concerning liquidated damages. Counsel for the parties will appear before the Tribunal on 28.08.2023.
Revision u/s 263 - exercise of jurisdiction under the said provision was done for the second time - period of limitation - HELD THAT:- Tribunal accepted the plea raised by the assessee as regards the aspect relating to the limitation, it examined the merits of the matter and has recorded a factual finding that the issue on which the PCIT proposed the revision of the order framed u/s 143(3) read with Section 263 dated 23.12.2019, issue which was directed by the PCIT in order u/s 263 dated 23.03.2022 was not the subject matter of revisionary proceedings in the first round.
Tribunal came to the conclusion that the period of limitation has to run from the date of assessment as framed under Section 143(3) dated 26.12.2016, that is at the end of the financial year, 31.03.2017. Therefore, it held that the exercise of jurisdiction u/s 263 of the Act is hopelessly barred by limitation.
Tribunal also took note of the decision of ARBUDA MILLS [1996 (1) TMI 11 - SUPREME COURT] wherein it was held that jurisdiction under Section 263(1) of the Act is sought to be exercised with reference to an issue which is covered by the original order of assessment under Section 143(3) of the Act, which does not form the subject matter of the reassessment. The limitation was necessarily begun to run from the date of order passed under Section 143(3) of the Act. Reference was also made to the decision of ALAGENDRAN FINANCE LIMITED [2007 (7) TMI 304 - SUPREME COURT]
Thus, we find that the order passed by the learned Tribunal had been passed taking note of the correct legal position and referring to the relevant decision and the said order does not call for any interference. Decided against revenue.
Validity of order passed u/s 148A(d) passed without approval from the “Specified Authority” as described u/s 151(ii) - as contented that the approval has been taken from the Principal Commissioner of Income Tax when admittedly the specified authority for approval in this case is Principal Chief CIT since three years has not been passed from the end of the relevant assessment year on the date when the aforesaid impugned order was passed as alleged by the petitioner.
HELD THAT:- As order u/s 148A(d) of the Act by excluding the time granted to the petitioner to file response to the notice under Section 148A(b) of the Act and a further period of seven days are excluded from the date of expiry of normal period of three years for the purpose of assessment, the impugned order passed under Section 148A(d) of the Act is very much within three years in this case and as such for passing the aforesaid impugned order Principal CIT and not the Principal Chief CIT is “Specified Authority” for approval of the same. In view of the aforesaid factual and legal position “Specified Authority” for the purpose of approval in this case is Principal CIT and the assessing officer has rightly taken approval from the Principal CIT concerned and such approval for passing the impugned order under Section 148A(d) is perfectly legal and valid and the aforesaid impugned order does not call for any interference by this Writ Court. WP dismissed.
Interest credited to “Interest Suspense Account”taxed in earlier years now written off during the year - whether the interest is taxable in the year of credit of the suspense account or in the year of recovery? -disallowance of contribution to SBI retired employees medical fund u/s 40(9) - ITAT directing AO to delete addition - As decided by HC [2019 (6) TMI 1714 - BOMBAY HIGH COURT] both these questions form part of the revenue’s grounds of appeal in Income Tax Appeal [2019 (6) TMI 1183 - BOMBAY HIGH COURT] which by an order passed today we have dismissed.
HELD THAT:- This Court is of the opinion that the impugned order does not call for interference. The special leave petition is accordingly dismissed.
Validity of assessment order - Shorter period given to file response - violation of principles of natural justice as the show cause notice was issued on 10.05.2023 seeking for reply before 15.05.2023, which time for response is contrary to the SOP applicable for faceless assessment - HELD THAT:- It is clear that the notice has been issued on 10.05.2023 by 18.14 hours. The response was directed to be made by 15.05.2023. The time that is stipulated for response is in clear violation of the applicable SOP at Clause N.1.3 which requires that at least 7 days time to be given for the purpose of making out a response.
It is clear that the plea of prejudice caused to the petitioner and violation of principles of natural justice is a contention that requires acceptance. Accordingly, on the sole ground, the matter is remanded to the stage post show cause notice at Annexure-J dated 10.05.2023. The petitioner is at liberty to make out his reply to the show cause notice at Annexure-J and the Authority to afford all opportunities as is permissible under the law to complete the proceedings. All contention of the petitioner are kept open.
Petitioner submits that the aspect of limitation is also to be kept open. Said submission of the petitioner is taken note of. Accordingly, Annexures-A1 to A4 are set aside.
The Appellate Tribunal allowed the Appellant's claim as not time-barred based on a Supreme Court ruling. Notice issued to Respondents for filing replies. The Appeal C.A. (AT) Ins. No. 913 of 2023 was dismissed as withdrawn to focus on another related case.
Reopening of assessment - validity of order passed u/s 148A(d) - Petitioner failed to submit any documentary evidence for double reporting of sale of property and details of cost of acquisition and the entire sale consideration will be treated as capital gain and this will be the escaped income in the year under consideration - HELD THAT:- We fail to understand how a person can prove the negative. The onus was on the AO to prove that what the Petitioner has stated in the Reply was incorrect and in fact there were two transactions linked to Petitioner as against Petitioner’s stand that there was only one transaction during the relevant Assessment Year.
Moreover, how can the entire sale consideration be treated as capital gain. There must have been some cost price which after applying the required formula has to be reduced from the sale consideration to determine capital gain. In the circumstances, though Mr. Shirsat had requested for some time to take instructions and file reply, we see no reason to grant any time.
In the circumstances, we quash and set aside the order u/s 148A(d) of the said Act. Consequently subsequent notice issued u/s 148 is also quashed and set aside.
Matter is remanded to the concerned officer to pass a correct order.
TDS u/s 195 - payment made by assessee to various bank as Nostro account maintenance charges - Addition u/s 40(a)(i) on non deduction of TDS - Nostro Accounts Maintenance Charges were levied by overseas banks/branches on the Assessee were with respect to the Nostro Accounts maintained outside India.
HELD THAT:- Tribunal in the case of Oman International Bank SAOG [2014 (1) TMI 191 - ITAT MUMBAI] held that the provisions of Section 40(a)(i) of the Act cannot be attracted in case of the deemed remittance of Nostro Account Maintenance Charges without deduction of tax at source. In the case before us also the CIT(A) has concluded that the Assessee was not under obligation to withhold tax from Nostro Account Maintenance Charges in terms of Section 195 of the Act and therefore, could not be treated as an ‘assessee in default’. Accordingly, demand raised by the Assessing Officer on the Assessee under Section 201(1) and 201(1A) of the Act was deleted by the CIT(A). In our view, the order passed by the CIT(A) does not suffer from any infirmity to this extent.
We do not find merit in the contention advanced by Ld. Departmental Representative that Nostro Account Maintenance Charges are in the nature of ‘interest’ as defined under Section 2(28A) of the Act.
The service fee and other charges included in the above definition of ‘interest’ are those charged in respect of (i) moneys borrowed, or (ii) debt incurred or (iii) in respect of any credit facility (which has not been utilized). In the case before us, the Assessing Officer has not brought on record any material to establish that the Assessee has borrowed money or incurred debt or availed any credit facility, and the Nostro Account Maintenance Charges have been charged in respect of the same. - Decided in favour of assessee.
Validity of Prohibition of Behami Property Transaction Act - Challenge to show-cause-notice on the ground of jurisdiction of the respondent authority concerned - petitioners submits that the alleged transaction against which the impugned show-cause-notice has been issued relates back to the financial year 2014-15 - HELD THAT:- We are not inclined to interfere with the impugned show-cause-notice at this stage and extending the time to file objection/response to the aforesaid impugned show-cause-notice by a period of two weeks from date and the respondents authority concerned shall consider the same in accordance with law and pass a reasoned and speaking order after giving an opportunity of hearing to the petitioners of its authorised representative and shall also consider the applicability of the aforesaid judgment of Ganpati Dealcom (P.) Ltd. [2022 (8) TMI 1047 - SUPREME COURT] and such final order on the impugned show-cause-notice will be passed by the respondents authority concerned within a period of four weeks form the date of receipt of such objection/response.
Legality of imposing monetary conditions for granting anticipatory bail - Discretion of the courts in imposing conditions under Section 438 of the Code of Criminal Procedure - HELD THAT:- There seems to be little doubt that the Appellant had volunteered to deposit Rs. 22,00,000/- (Rupees twenty-two lakh) without prejudice to his rights and contentions and that he had also applied for extension of time to make such deposit which was also granted; but having failed to arrange for sufficient funds, he is questioning the condition imposed by the High Court for grant of pre-arrest bail.
Law regarding exercise of discretion while granting a prayer for bail Under Section 438 of the Code of Criminal Procedure having been authoritatively laid down by this Court, we cannot but disapprove the imposition of a condition of the nature under challenge. Assuming that there is substance in the allegation of the complainants that the Appellant (either in connivance with the builder or even in the absence of any such connivance) has cheated the complainants, the investigation is yet to result in a charge-sheet being filed Under Section 173(2) of the Code of Criminal Procedure, not to speak of the alleged offence being proved before the competent trial court in accordance with the settled procedures and the applicable laws. Sub-section (2) of Section 438 of the Code of Criminal Procedure does empower the high court or the court of sessions to impose such conditions while making a direction Under Sub-section (1) as it may think fit in the light of the facts of the particular case and such direction may include the conditions as in Clauses (i) to (iv) thereof.
The version in the FIR, even if taken on face value, discloses payment through cheques of Rs. 17,00,000/- (Rupees seventeen lakh) in the name of the Appellant and not Rs. 22,00,000/- - the High Court ought to have realized that having regard to the nature of dispute between the parties, which is predominantly civil in nature, the process of criminal law cannot be pressed into service for settling a civil dispute. Even if the Appellant had undertaken to make payment, which we are inclined to believe was a last ditch effort to avert losing his liberty, such undertaking could not have weighed in the mind of the High Court to decide the question of grant of anticipatory bail. The tests for grant of anticipatory bail are well delineated and stand recognized by passage of time. The High Court would have been well-advised to examine whether the Appellant was to be denied anticipatory bail on his failure to satisfy any of such tests. It does seem that the submission made by counsel on behalf of the Appellant before the High Court had its own effect, although it was far from being a relevant consideration for the purpose of grant of bail.
It also does not appear from the materials on record that the complainants have instituted any civil suit for recovery of money allegedly paid by them to the Appellant. If at all the offence alleged against the Appellant is proved resulting in his conviction, he would be bound to suffer penal consequence(s) but despite such conviction he may not be under any obligation to repay the amount allegedly received from the complainants. This too is an aspect which the High Court exercising jurisdiction Under Section 438 of the Code of Criminal Procedure did not bear in mind - the High Court fell in grave error in proceeding on the basis of the undertaking of the Appellant and imposing payment of Rs. 22,00,000/- as a condition precedent for grant of bail.
Validity of assessment u/s 147 or 153C - incriminating material was found and seized during the search carried out of ‘some other person’ - HELD THAT:- As the incriminating material was found and seized during the search carried out of ‘some other person’ that a sum had been paid by the assessee during the Financial Year 2011-12 to Santosh Medical College, Ghaziabad, and since the assessee was not assessed u/s 153C of the Act, which provision specifically exclude the operation u/s 147 of the Act, in our considered opinion, the A.O erred in invoking provision to Section 147 of the Act instead of those of Section 153C of the Act.
The reasons recorded u/s 147 of the Act and all proceedings pursuant to thereto, cumulative the order under Appeal are quashed.
Revision u/s 263 - bogus purchases - HELD THAT:- Apart from purchase vouchers, the assessee also furnished transport built is in respect of these purchases to show that these were genuinely purchased and received at its business premises.
AO, on the basis of such evidences, got satisfied and also discussed the issue in the assessment order.
AO recorded that the assessee was called upon to produce books of accounts, bills/vouchers of purchases and sales. The same were produced by the assessee and duly verified on test check basis.
AO, further recorded that the assessee “furnished purchase register along with purchase bills and transportation details”, which were verified by him and found to be correct. As against this, the ld. CIT revised the order on the ground that: `The order was passed without due verification of the above information’, namely, accommodation entries were obtained from the five parties. It is, therefore, evident that the initiation of revision proceedings on this score is not valid.
Not only, no such transactions were entered into with the first 4 parties, the genuineness of the 5th party, whose purchases were recorded, was also substantiated with relevant purchase bills and transportation details. Such details were produced before the AO, who recorded this fact in the assessment order and also the correctness of the assessee’s claim. As manifest that the assessment order cannot be construed as erroneous much less prejudicial to the interest of the Revenue. We, therefore, overturn the impugned order.
Withdrawal of the earlier complaint - Breach of insurance policy condition regarding delay in intimation of theft - breach of condition concerning safeguarding the vehicle - Settlement of insurance claims on a non-standard basis.
Whether the delay of 6 days in intimating the Insurance Company about the theft comes within the purview of breach of Condition No. 1 and also whether on facts there was breach of condition No. 5 of the insurance policy to justify the rejection of the claim in toto?
HELD THAT:- A careful perusal of Condition No.1 shows that notice is to be given in writing to the Insurance Company immediately upon occurrence of any accidental loss or damage. The later part of the clause says that in case of theft or criminal act, which may be subject of a claim under the policy, the insured shall give immediate notice to the police and cooperate with the Insurance Company in securing the conviction of the offender - In the present case, after the incident of theft on 26.06.2008, FIR was registered on 27.06.2008. The intimation was also given to the Insurance Company admittedly on 02.07.2008. The Police have also reported the vehicle as untraced as the records indicate.
Insofar as the alleged breach of Condition No.5 is concerned, it is seen from the record that the driver of the claimant left the key in the keyhole of the vehicle when he got down to search the location of “Mittal Farm”, where he had to unload the stone dust. The investigator recommended the repudiation of claim because, according to him, steps to safeguard the vehicle insured were not taken by the driver. It is contended by the appellant that breach of condition No.5, if any, cannot result in total repudiation of the claim - It is noticed in the repudiation letter that the driver Mam Chand had, after alighting from the vehicle, gone to enquire about the location of Mittal’s Farm and that after he went some distance, he heard the sound of the starting of the vehicle and it being stolen away. The time gap between the driver alighting from the vehicle and noticing the theft, is very short as is clear from the facts of the case. It cannot be said, in such circumstances, that leaving the key of the vehicle in the ignition was an open invitation to steal the vehicle.
Nitin Khandelwal [2008 (5) TMI 763 - SUPREME COURT] and Amalendu Sahoo [2010 (3) TMI 1290 - SUPREME COURT] lay down the correct formula that where there is some contributory factor, a proportionate deduction from the assured amount would be all that the Insurance Company can aspire to deduct.
The judgment of the National Commission set aside - Appeal allowed.
Disallowance of commission expenses - As alleged that assessee has not furnished the addresses of customers who were provided the services by these companies and that the Principal Officers of these companies were not produced before the AO - HELD THAT:- This issue has already been dealt by the Coordinate Bench of ITAT, Kolkata in assessee’s own case for AY 2010 -11 [2018 (7) TMI 2356 - ITAT KOLKATA] wherein commission and brokerage was allowed. Accordingly, we allow the claim of the assessee in respect of commission of Rs. 15 lakh. Thus, the ground taken by the assessee in this respect is allowed.
Unexplained share capital and share premium - onus to prove - HELD THAT:- We note that Ld. AO without even going through and discussing the details submitted by the subscriber company, insisted for personal appearance to prove the identity, creditworthiness of the subscriber and the genuineness of the transaction. To our mind, Ld. AO could have taken an adverse view, only if, he could point out the discrepancies or insufficiency in the evidence and details furnished in his office and also as to what further investigation was needed by him by way of recording of statement of the directors of the assessee and the subscriber company.
We find that assessee has discharged its onus to prove the identity and creditworthiness of the share subscribing company and the genuineness of the transaction towards sum received during the impugned year. Accordingly, considering these facts and in the light of the judicial precedence referred above, we set aside the order of the ld. CIT(A) and delete the addition so made. Accordingly, grounds taken by the assessee in this respect are allowed.
Disallowance of expenditure in respect of payment made for mediclaim insurance which was paid for the staff members of the assessee, by Director of the company, through his credit card - HELD THAT:- We find that claim of assessee is justifiable as the disallowance has been made owing to the mode of payment which is through the credit card of the Director but for the benefit of the employees of the assessee which is towards mediclaim insurance premium and the same has been adequately corroborated by the documentary evidence placed on record. We thus, delete the addition made in this respect. Accordingly, ground taken by the assessee in this respect is allowed.
Disallowance made towards prior period expenses - HELD THAT:- At the time of maturity of fixed deposit, it was observed that excess provision of income had been made and this excess provision was reversed and written off under the head “Prior Period expenses” in the P&L Account for the year under consideration. Thus, Ld. Counsel asserted that there is no expenditure which has been claimed during the earlier years and the disallowance so made deserves to be deleted. We agree with the submissions made by the ld. Counsel and delete the addition so made. Accordingly, ground taken by the assessee in this respect is allowed.
Disallowance on interest accrued on the aforesaid unsecured loans - HELD THAT:- Reference was made to first proviso to sec. 201 of the Act according to which payer shall not be deemed to be an assessee in default in respect of non-deduction of tax if the payee has furnished its return and taken into account such sum for computing the income and paid the taxes due thereon. Considering the overall factual matrix on this issue, we accept the finding of the Ld. AO as stated in the remand report allowing the interest expense. We also allow the claim of interest which has been sustained by the Ld. AO based on the submissions made by the Ld. Counsel of the assessee as discussed above. Accordingly, disallowance of interest expense on the unsecured loan amount is allowed. Grounds taken in this respect are allowed.
Addition made on account of share application money including share premium u/s. 68 - HELD THAT:- Assessee had furnished all the relevant details and evidence for the entire sum and there is no basis and reason to give a partial allowance and sustain the balance though the evidence and explanation applied to the entire sum. Having perused the material on record and the submissions of the assessee, we are in agreement with the contention of the Ld. Counsel and accordingly, delete the addition.
Disallowance made in respect of payment made by the assessee for weighted deduction u/s. 35 (1)(ii) - HELD THAT:- As decided in case of DCIT Vs. A. R. Stanchem (P) Ltd [2023 (7) TMI 1510 - ITAT KOLKATA] assessee is not entitled for the deduction claimed u/s. 35(1)(ii) of the Act in respect of payments made to both SHGHP and MIERE(the done trusts). Relief granted by ld. CIT(A) on this issue is set aside. Grounds taken by the Revenue are allowed.
Disallowance on account of interest expenses for late payment of statutory liabilities - an interest paid on delayed payment of sales tax etc. being adding to the cost/purchase price or decreasing the profit margin on sales may be taken into account for computation of profit or to say computation of taxable income, but that concession is not available in respect of interest on Income tax. Hence, any case laws dealing with the levy of indirect taxes and interest thereupon are not applicable for the purpose of interpretation of the relevant provisions of the Income Tax Act.” The Coordinate Bench in Premier Irrigation Adritec Pvt. Ltd. [2023 (1) TMI 1124 - ITAT KOLKATA] thus, held that the interest payment on delayed deposit of income tax whether TDS or otherwise is not an allowable expenditure.
Disallowance u/s 43B - disallowing the amounts paid or written back during the previous year - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee’s own case in Grasim Industries Ltd. [2023 (6) TMI 665 - ITAT MUMBAI] for the assessment year 2003–04, dismissed similar issue while following the decision rendered in assessee’s own case in preceding years as decided against assessee.
Taxability of Sales Tax exemption received by the assessee - assessee availed Sales Tax exemption benefit from the State Governments for setting–up of industries in the notified area - assessee claimed that the Sales Tax exemption is a capital receipt not chargeable to tax and, therefore, is to be excluded from the profit while computing the income taxable under the head “Income From Business” - HELD THAT:- We find that the coordinate bench of the Tribunal, vide order dated 23/06/2023, passed in assessee’s own case in Grasim Industries Ltd. [2023 (7) TMI 555 - ITAT MUMBAI], for the assessment year 2004–05, after considering the Sales Tax subsidy received under the aforesaid schemes held the same to be capital in nature and thus not taxable in the hands of the assessee.
Disallowance of depreciation on the let out property - assessee has claimed depreciation on the let out premises and is also claiming a deduction equal to 30% of annual rental value while computing income from house property the assessee cannot be allowed both deductions - HELD THAT:- In view of the above, once the property forms part of the block of assets, carving out the depreciation for the said property and disallowing the same goes against the spirit of allowing depreciation on the entire block of depreciable assets. Before concluding, we may note that in this appeal the Revenue has not disputed the claim of deduction u/s 24 of the Act in respect of the property which forms part of the block of assets. Thus, merely because the Revenue has accepted the claim of deduction u/s 24 of the Act doesn’t mean that the property which forms part of the block of assets will cease to be so. Therefore, the disallowance of depreciation made by the AO is deleted. As a result, ground raised in assessee’s appeal is allowed.
Miscellaneous receipts from business profits while computing deduction u/s 80IA - HELD THAT:- As various receipts under the broad category of ‘miscellaneous receipts’, except excess provision written back, were not examined by the lower authorities, therefore, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication as per law, after examining each and every receipt under the category of ‘miscellaneous receipts‘, which were excluded from the business profits by the learned CIT(A) for computing the deduction u/s 80IA. Thus, to this extent, the impugned order on this issue is set aside. Accordingly, ground in assessee’s appeal is allowed for statistical purposes.
Taxability of interest received from the Income Tax Department - HELD THAT:- As if in the subsequent year refund of interest is withdrawn, then the same should be reduced from the total income of the assessee. Accordingly, we direct the A.O. to tax interest income in terms of the order of the tribunal for A.Y. 1993-94 keeping in view our above observation.
Income taxability in India - taxability of dividend received from Egyptian company - dividend received from Alexandria Carbon Black Company, a company incorporated and registered in Egypt (U.A.R.) - HELD THAT:- We find that the coordinate bench, [2023 (7) TMI 555 - ITAT MUMBAI], passed in assessee’s own case for the assessment year 2004-05 decided a similar issue against the assessee as the mere fact of taxability in the treaty partner jurisdiction will not take it out of the ambit of taxable income of an assessee in India and that "such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income-tax Act, 1961 (43 of 1961), and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement". A coordinate bench of this Tribunal, in the case of Essar Oil Ltd. [2013 (9) TMI 126 - ITAT MUMBAI] also proceeded to hold that this notification was retrospective in effect inasmuch as it applied with effect from 1st April 2004 i.e. the date on which sub-section 3 was introduced in Section 90.
Treating the subsidy received by the assessee under Technology Upgradation Fund (“TUF”) Scheme as capital receipt and thus not chargeable to tax - HELD THAT:- As relying on M/s Grasim Industries Ltd. [2023 (6) TMI 611 - ITAT MUMBAI] the issue is squarely covered in favour of the assessee wherein it has been held that interest subsidy received under technology upgradation fund scheme, though credited in the net off against the interest expenditure in the books of account is still capital in nature and therefore not chargeable to tax. Further the argument of the learned departmental representative has also been negated about the applicability of explanation 10 to section 43 (1) of the act by the decision of Orbit exports [2020 (9) TMI 617 - ITAT MUMBAI] In view of this both the grounds of appeal raised by the learned assessing officer are dismissed.
Disallowance of Education Cess under section 40(a)(ii) - HELD THAT:- We find that Finance Act, 2022, with retrospective effect from 01/04/2005, inserted Explanation 3 to section 40(a)(ii), whereby it has been provided that the term 'tax' shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax. We further find that in JCIT Vs. Chambal Fertilisers & Chemicals Ltd. [2022 (12) TMI 1098 - SC ORDER] allowed the Revenue's appeal against decision in Chambal Fertilisers & Chemicals Ltd. [2018 (10) TMI 589 - RAJASTHAN HIGH COURT] and held that education cess paid by the respondent-assessee would not be allowed as an expenditure under Section 37 read with 40(a)(ii) of the Act.
Disallowance on account of rural development expenses - HELD THAT:- As we find that the coordinate bench of the Tribunal vide order [2023 (6) TMI 665 - ITAT MUMBAI] passed in assessee’s own case for the assessment year 2003–04 decided issue in favour of assessee.
Expenses incurred for making advertisement films is to be allowed as revenue expenses as observing that advertisement film was made only for advertisement and its useful life is very short and such films do not add to the capital structure of the company.
Disallowance made on account of earning exempt income - HELD THAT:- As it is sufficiently evident that during the year under consideration, the assessee's own funds are more than investments, including the investments for earning exempt income. We including the investments find that HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] held that where assessee's own funds and other non-interest bearing funds were more than the investment in tax-free securities, no disallowance under section 14A of the Act can be made. We further find that the Hon'ble Supreme Court in South Indian Bank Ltd. [2021 (9) TMI 566 - SUPREME COURT] held that disallowance under section 14A of the Act would not be warranted where interest-free own funds exceed the investment in tax-free securities and in such a case the investment would be presumed to be made out of assessee's own funds. Therefore,no infirmity in the impugned order in deleting the disallowance made under section 14A.
Apportionment of Head Office expenses to the Units eligible for deduction u/s 80IA of the Act - HELD THAT:- We find that the coordinate bench of the Tribunal [2023 (6) TMI 665 - ITAT MUMBAI] passed in assessee’s own case for the assessment year 2003–04 decided similar issue in favour of the assessee.
Denial of deduction u/s 80IA in respect of profit derived from Rail System at Raipur, and Hotgi - only plea raised by the learned DR is that such an agreement is post the commencement of operation and, therefore, the assessee does not satisfy the conditions as provided in section 80IA(4) for availing the benefit of the said section - HELD THAT:- We find that the language of the section does not support the submissions so made by the learned DR, as there is no specific requirement in the section that such an agreement should be prior to the operation. We find that the said section only requires that there has to be an agreement, which condition as noted by the coordinate bench of the Tribunal in the preceding year is duly satisfied. In the absence of any allegation of change in facts and law as compared to the preceding year, we find no reason to deviate from the view so taken by the coordinate bench in the preceding year. Thus, we find no infirmity in the impugned order in allowing deduction under section 80IA of the Act to the assessee in respect of profits from Rail System, Raipur, and Hotgi.
Addition of bogus donation as expenditure claimed u/s. 35(1)(ii) - During the course of assessment proceedings, assessee took note of its mistake in claiming deduction in respect of donation made to MIERE u/s. 80G instead of u/s. 35(1)(ii) - HELD THAT:- From the judgment of Batanagar Education and Research Trust [2021 (8) TMI 139 - SUPREME COURT] the apprehension on the factual aspect of utilization of money by the recipient donee trusts for the approved programme which remained open, is set to rest by the fact-based conclusion arrived at, as quoted above. Hon'ble Court has made reference to the outcome of the survey at SHGPH and the post survey enquiry conducted upon Batanagar Education and Research Trust to conclude about the organized fraud.
This very judgment of Batanagar Education and Research Trust (supra) was relied upon and analysed in the decision of Tarasafe International Pvt. Ltd. & ORs [2022 (12) TMI 1545 - ITAT KOLKATA] recorded finding of facts, based on the material placed before it by the Revenue in voluminous paper books gathered in the course of survey conducted u/s. 133A in the case of the donee trusts as well as post survey enquiries.
In the present case before us, the donee trusts are the same whose facts and credible material were brought on record by the Revenue and considered by the Coordinate Bench. Claim of deductions by the donors have already been disproved by the Revenue by dispelling the claim of first onus discharged by the donors, on the strength of credible material. These fact findings are substantive and cannot be overlooked in the present case wherein the donee trusts are the same. There is nothing brought on record by assessee to rebut these factual findings except for relying on the judgment of Chotatingrai Tea [1998 (12) TMI 81 - GAUHATI HIGH COURT] which is distinguished in the light of recent judgment of Batanagar Education and Research Trust (supra) as discussed above.
Thus, we hold that assessee is not entitled for the deduction claimed u/s. 35(1)(ii) of the Act in respect of payments made to both SHGHP and MIERE(the done trusts). Relief granted by CIT (A) on this issue is set aside. Grounds taken by the Revenue are allowed.
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