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Showing 1 to 20 of 467 Records
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2025 (1) TMI 467
Cancellation of GST registration of petitioner - petitioner is ready to deposit all the outstanding dues of tax including interest and penalty - HELD THAT:- The present writ petition is disposed of with a direction that if the petitioner deposits outstanding dues of tax including interest and penalty, if any, and submits his application for reversal of the cancellation of GST registration within one week from today, the competent authority shall consider the application of the petitioner and pass an appropriate order as per law within a period of one week from the date of production of the certified copy of this order along with the application.
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2025 (1) TMI 466
Challenge to impugned order on the limited ground that the impugned order suffers from violation of principles of natural justice inasmuch as it does not apply its mind to the material on record while confirming the levy of interest and penalty - HELD THAT:- Taking into account the peculiar facts of the case, wherein, the petitioner has already reversed the ITC which is in dispute, this Court is of the view that the petitioner may be granted one final opportunity to put forth his objections, which was not objected to by the learned Special Government Pleader for the respondent.
The impugned order, dated 07.12.2023 is set aside. The impugned order shall be treated as show cause notice and the petitioner shall filed their objections within a period of four weeks from the date of receipt of a copy of this order.
Petition disposed off.
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2025 (1) TMI 465
Input Tax Credit - services procured for the operation and maintenance of Diving Support Vehicle owned by them and used by it for supplying port and terminal handling services - services procured for hiring, and for operation and maintenance of Security Patrol Vessel used by it for supplying port and terminal handling services.
ITC in respect of services procured for the operation and maintenance of DSV and SPV - HELD THAT:- It is evident that section 17 (5) (ab) read with the proviso beneath, restricts ITC in respect of repair and maintenance of vessels. However, the proviso makes the ITC available if the vessels referred to in clause (aa) are used for the purposes specified therein.There are not much merit in it. GAAAR being a creature of the statute [ie CGST Act], is not permitted to either put words into the statute or stretch the statute. On a bare reading of the provisions, it is found that as far as ITC of repairs and maintenance of vessels is concerned it would not be available to the respondent since the vessels per se [DSV and SPV] are not being used for transportation of goods. The respondent therefore will not be eligible for availing ITC on input services in respect of repairs and maintenance received by them.
ITC in respect of hiring services of SPV - HELD THAT:- In terms of the proviso beneath section 17 (5) (b) (i), ITC is available on hiring of SPV, where an inward supply of such goods or services is used by a registered person for making an outward taxable supply of the same category of goods/service or as an element of taxable composite or mixed supply; that the services procured are not merely those of hiring of vessels but those of operation and maintenance of said vessels. It is an undisputed fact that hiring service was not used for making an outward supply of the same category of service. Further nothing has been produced to contend that the hiring service was used by the respondent for making an outward taxable supply of services which is an element of a taxable composite or mixed supply. There is no explanation forthcoming as to how the input hiring service of SPV was an element of the taxable output service operation and maintenance either as a composite or a mixed supply - ITC is blocked under section 17 (5), ibid in respect of hiring of vessel [SPV] wherein the contractor of the respondent has discharged GST under SAC code 996602 and 996609.
Conclusion - i) M/s. Sikka Ports and Terminals Ltd., [the respondent] is not eligible for availing ITC on input services in respect of repairs and maintenance received by them for DSVS and SPVs. ii) M/s. Sikka Ports and Terminals Ltd., [the respondent] is not eligible to avail ITC on hiring of SPVs in terms of section 17 (5) (b) of CGST Act, 2017.
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2025 (1) TMI 464
Levy of GST - recoveries made by the Applicant from the employees for providing canteen facility to its employees - free of cost bus transport facilities provided by the Applicant to its employees - Exemption under the Sl. No. 15 of N/N. 12/2017 – Central Tax (Rate) dated 28 June 2017 - admissibility of input tax credit to the Applicant for the GST charged/paid to the vendors on procurement of such services in terms of Section 16 of CGST Act, as the same are used in relation to furtherance of business.
Levy of GST - recoveries made by the Applicant from the employees for providing canteen facility to its employees - free of cost bus transport facilities provided by the Applicant to its employees - Exemption under the Sl. No. 15 of N/N. 12/2017 – Central Tax (Rate) dated 28 June 2017 - HELD THAT:- The respondent has arranged free of cost transportation facility to its employees in non -AC bus, which is provided by a third party vendor, as a part of its HR policy and as per employment agreement. These facts are not in dispute.
The perquisite of providing free bus transportation by the respondent to their employee in terms of contractual agreement entered into between the respondent and their employee are in lieu of the services provided by employee to the employer in relation to his employment and will not be subjected to GST when the same are provided in terms of the contract between the employer and employee. M/s. Emcure [respondent] is not liable to pay GST on free bus transportation facility provided to its employees.
Admissibility of ITC - HELD THAT:- ITC is admissible for transportation services with a seating capacity of more than 13 persons.
Conclusion - Respondent is not liable to pay GST on free bus transportation facility provided to its employees. ITC is admissible for transportation services with a seating capacity of more than 13 persons.
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2025 (1) TMI 463
Validity of Revision proceedings u/s 263 - period of limitation - Delay filling SLP - HC [2024 (2) TMI 1381 - RAJASTHAN HIGH COURT] decided for the purposes of exercising powers u/s 263 the period of limitation for passing the order has to be reckoned from the date of original assessment order and not from the date of reassessment order, thus decided issue in favour of assessee - HELD THAT:- There is a delay of 180 days in filing the Special Leave Petition which has not been satisfactorily explained. Even otherwise, we have gone through the Special Leave Petition and do not find any merit in the same.
Special Leave Petition is, therefore, dismissed on the ground of delay as well as on merits.
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2025 (1) TMI 462
Reopening of assessment u/s 147 - claim of deduction u/s 36(1)(viia) - Petitioner filed its return of income (“ROI”) for AY 2010-11 declaring a total income but subsequently, filed a revised ROI as added back an amount being a provision for Non-Performing Advances as per the RBI Regulations. Petitioner has also claimed an amount as deduction u/s 36(1)(viia) being 7.5% of the profit of Petitioner and claim was disclosed in the computation of income - As decided by HC [2024 (3) TMI 731 - BOMBAY HIGH COURT] allow the claim of Petitioner for deduction u/s 36(1)(viia) of the Act and clear case of change of opinion and that cannot be a basis for reopening the assessment, thus decided in favour of assessee - delay filling SLP - HELD THAT:- There is a delay of 162 days in filing the Special Leave Petition which has not been satisfactorily explained. Even otherwise, we have gone through the Special Leave Petition and do not find any merit in the same.
Special Leave Petition is, therefore, dismissed on the ground of delay as well as on merits.
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2025 (1) TMI 461
Order u/s 127 (2) transferring the petitioner’s case from the jurisdictional officer in Mumbai to the counterpart in New Delhi - HELD THAT:- The impugned order notes that the cases are centralised with Central Circle for coordinated investigation in group cases to protect the interest of revenue. The convenience of the assessee is adverted to, but the impugned order observes that this aspect is secondary and may have to yield to the more significant interest of centralised and coordinated investigation. The order also records that the centralisation is for a limited period, and once the assessment concludes as per the norms, then there would be de-centralization. The impugned order also refers to certain precedents of the Hon’ble Supreme Court and the jurisdictional High Courts.
The impugned order reasons that the contentions of the inconvenience raised by the assessee can always be addressed through modern technological advances, thereby obviating the necessity of extensive travel by the assessee or its representatives. The impugned order also refers to protecting the revenue’s interest, which a coordinated investigation could fairly achieve. The impugned order records that all cases of Pacific Group are being assessed at Delhi in a centralised place. Consequently, there would be no good reason to exclude only the case of the petitioner-assessee.
The charge that the impugned order is unreasoned must fail. At least prima facie, the reasons cannot be considered irrelevant or extraneous. Therefore, we find no infirmity in the impugned order on the ground that it is bereft of reasons.
Absence of agreement between the two Commissioners - As noted earlier, Section 127 (2) of the Income Tax Act contemplates granting the assessee a reasonable opportunity to be heard. Such opportunity was given to the petitioner-assessee. In the objections filed by the petitioner-assessee, specific issues were flagged. Therefore, by communication dated 29 December 2022, the Principal Commissioner of Income Tax-4, Mumbai, wrote to the Principal Commissioner of Income Tax (Central)-2, New Delhi, to provide evidence/documents so that the objections raised by the petitioner-assessee would be considered fairly and reasonably.
By response dated 16 February 2023, the Principal Commissioner of Income Tax in New Delhi clarified the matter. Reference was made to the bogus transaction allegedly undertaken by the petitioner as a service provider to the extent of Rs.1 crore during FY 2021-22. Reference was also made to the entities belonging to “Pacific Group” having claimed bogus expenses in their transactions with the petitioner-assessee. This communication records that the transactions, if assessed without considering the modus of evasion carried out by the Pacific Group, may result in a loss of revenue.
Thus, the communications dated 29 December 2022 and 16 February 2023 were in the context of the fair hearings offered to the petitioner. Based on these communications, we cannot sustain any argument regarding the alleged absence of agreement between the two Commissioners.
Accordingly, we are satisfied that the impugned order is not vulnerable on the two grounds alleged by the petitioner. We see no infirmity in it that warrants interference in the exercise of our extraordinary jurisdiction.
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2025 (1) TMI 460
Capital gain computation - Transfer of capital asset u/s 2(47) - JDA - applicability of Section 53A of the Transfer of Property Act, 1882 - real ownership - assessee handed over the possession of the land to the developer - HELD THAT:- Even though there is a contract to transfer the immovable property, which is signed by the parties, yet the contract has not been executed for consideration.
A sum of Rs. 2,00,000/- mentioned in paragraph 6 of the development agreement is only the performance guarantee which is refundable. The aforesaid amount has not been paid by way of consideration of the transaction. The developer has been handed over the possession for the limited purpose of carrying out the development work. Therefore, in pursuance of the development agreement, the possession of the immovable property has not been handed over to the developer as contemplated u/s 53A of the Transfer of the Property Act, 1882. Therefore, the same does not fall within the definition of ‘transfer’ under Section 2 (47) of the Act.
Reliance placed by the Revenue in Potla Nageswara Rao [2014 (8) TMI 636 - ANDHRA PRADESH HIGH COURT] the same is an authority for the proposition that element of factual possession and agreement are contemplated as transfer within the meaning of Section 2 (47) of the Act. It has further been held that when the transfer is complete, the consideration mentioned in the agreement for sale has to be taken into consideration for the purpose of assessment of income.
In the instant case, under the development agreement there is no transfer and the consideration has also not been paid. Therefore, the aforesaid decision of the Division Bench has no application to the fact situation of the case.
Similarly, in the case of Arvind S Phake [2017 (12) TMI 1235 - BOMBAY HIGH COURT], the possession was handed over to the developer and the entire consideration was paid. In the instant case, consideration has not been paid. Therefore, the Division Bench decision of the Bombay High Court also does not apply to the fact situation of the case.
The finding has been recorded by the Tribunal that the appellant has handed over the possession of the entire property enabling the developer to enjoy 60% of the constructed area of the building cannot, but be said to be perverse. Similarly, the finding that the assessee is liable to pay capital gains tax during the assessment year 1997-98 also cannot be sustained.
Substantial questions of law framed answered in favour of the assessee and against the revenue.
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2025 (1) TMI 459
Reopening of assessment u/s 147 - violation of the principles of natural justice due to the denial of a personal hearing requested by the petitioner - HELD THAT:- Circular No. F.No.225/97/2021/ITA-II dated 6 September 2021 in the context of approval for the transfer of assessments/penalties proceedings to jurisdictional AO. This Circular provides that the request for personal hearings shall generally be allowed to the assessee with the approval of the Range Head, mainly after the assessee has filed a written submission to the show cause notice.
Personal hearings may be allowed for the assessee, preferably through video conference. If Video Conference is not technically feasible, personal hearings may be conducted in a designated area in the Income-Tax Office. The hearing proceedings may be recorded. Given this Circular, the defence raised, or the justification offered in paragraph 6(e) of the Respondents’ affidavit cannot be accepted.
In this case, though the assessment order was appealable, we have entertained this petition because a case of complete failure of natural justice was made out. No personal hearing was granted to the Petitioner, and such denial was not for valid reasons.
We set aside the impugned assessment order dated 26 March 2024 and remand the matter to the concerned Respondent to dispose of the show cause notice issued to the Petitioner following the law and after granting the Petitioner a personal hearing. The concerned Respondent should complete the assessment proceedings within three months of uploading this order on this Court’s website.
Now that we have set aside the impugned assessment order, the consequential demand notice and penalty notice based on this order are also set aside. All contentions of all parties are left open for consideration of the AO in the first instance.
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2025 (1) TMI 458
Validity of Reopening of assessment u/s 147 - issues already examined - objections raised by the petitioner non addressed - validity of approval granted u/s 151 - HELD THAT:- The first submission of petitioner that these issues were examined and, therefore, the proceedings are without jurisdiction is required to be rejected. The issue of alleged cash receipt was not examined during the course of the regular assessment proceedings since the information from Faridabad Officer was received after the conclusion of the assessment proceedings. The assessment proceedings were concluded on 30 November 2018 whereas the information of alleged cash receipt was received on 21 February 2022.
From the questionnaire issued to examine issues in the regular assessment proceedings there is no query on credit card expenses or alleged cash receipt. Therefore, both issues do not appear to have been examined. The assessment order further records that the assessment was limited scrutiny assessment only for verification of deduction under Chapter VI. The Petitioner has not enclosed the submissions made during assessment proceedings in the present petition, and therefore, we cannot give any conclusive findings in the writ proceedings. Therefore, on these counts, the submissions made prima facie are required to be rejected.
Non addressing of objections raised by the petitioner - Second submission that in the annexure to notice u/s 148A(b), it is stated that the return is not filed is incorrect since the return was, in fact filed and the same has not been disputed in the order rejecting the objections. In our view, the reopening has to be done based on “information” and the said information has been reproduced in the annexure to the notice under Section 148A(b). It is based on the said information that the present proceedings are initiated. Although the respondents in the said annexure to the notice have stated that the return has not been filed, but in our prima facie view, that is not the basis on which the reopening is sought. '
The reopening is based on the information in accordance with the Risk Management Strategy Formulated by the CBDT. The respondents in their replies have stated that the statement in the information annexed to the notice that the petitioner has not filed return of income is a typographical error. In our view, without going into the same, prima facie since the reopening is based on the information, this submission made by Ms Pawar is rejected and can better be examined in appellate proceedings.
Submission concerning approval u/s 151 - Appelant submitted that the approval is without application of mind. We have perused the approval memo, which was annexed to the petition and we do not find prima facie that the approval is without application of mind. In the remarks column in Item 21 and 22 it is stated after going through the annexure, the authority has given its approval by referring to the material available on record and consideration of the same. This is not a case where in the approval column, the approving authority has only stated ‘yes’, but the approval records the perusal of the draft order submitted by the assessing officer, material available on record, consideration of the same and the information as per Risk Management Strategy. Therefore, prima facie we are not impressed with the submission of the petitioner on this count.
No reason to interfere in the impugned proceedings to quash the notices challenged in the present petition. However, the petitioner is at liberty to raise the same in normal reassessment / appellate proceedings if and when the occasion arises.
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2025 (1) TMI 457
Refund as reflected in the TDS certificate - Petitioner, on instructions submitted that the Petitioner will not claim any interest on the refund, however, since the TDS certificate has been placed on record, the Respondents should at least verify the position regarding deductions and grant a refund to the Petitioner - HELD THAT:- In the peculiar facts of this case, we think that the Respondent must dispose of the Petitioner’s representation dated 19 June 2019 within three months from today. For this, the Respondents must verify the status of deductions, if any, carried out by Percept Pictures Company Pvt Ltd. If the Petitioner has any further material regarding the deductions, the Petitioner is granted liberty to place the same before the concerned Respondent within two weeks from today. The concerned Respondent must hear the Petitioner, consider the material placed by the Petitioner on record, verify the status of deductions, if any, made by Percept Pictures Company Pvt Ltd and the other material available with the department and dispose of the Petitioner’s representation, dated 19 June 2019.
Suppose the concerned Respondent is satisfied that deductions were indeed made as reflected in the TDS certificate. In that case, this amount should be refunded to the Petitioner within a month from such determination.
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2025 (1) TMI 456
Assessment completed putting reliance on Special Audit Report of the External Auditor appointed for this purpose u/s 142(2A) - HELD THAT:- Prima facie, a reliance on the report generated for the earlier Assessment Years cannot be basis to conclude that the similar pattern would have been followed by an assessee during the subsequent Assessment Years to do so and would amounting to assessment by sampling which is frowned upon by this Court.
Therefore, to that extent, the Impugned Assessment Order deserves an interference. That apart, it appears that the entire amount of expenses incurred by the petitioner towards the salaries of its staffs has been disallowed.
Thus, a reading of the table in the Impugned Assessment Order particularly the table which has been extracted stated that no allowance has been made for the expenses incurred by the petitioner towards administrative and salary expenses of the petitioner.
Under these circumstances, the Impugned Assessment Order is liable to be set aside and is accordingly set aside and the case is remitted back to the respondents to pass a fresh order on merits and in accordance with law independently without getting influenced from the Special Audit Report dated 02.06.2017 u/s 142(2A) of the Income Tax Act, 1961 generated for the Assessment Year 2014-2015.
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2025 (1) TMI 455
Dividend Distribution Tax paid by the Company is a tax on shareholders income or the company itself - HELD THAT:- The aforesaid issue is squarely covered against the assessee by decision of Total Oil India Pvt. Ltd.[2023 (4) TMI 988 - ITAT MUMBAI (SB)] hold that where dividend is declared, distributed or paid by a domestic company to a non-resident shareholder(s), which attracts Additional Income-tax (Tax on Distributed Profits) referred to in sec.115-O of the Act, such additional income tax payable by the domestic company shall be at the rate mentioned in section 115-O of the Act and not at the rate of tax applicable to the non-resident shareholder(s) as specified in the relevant DTAA with reference to such dividend income.
We are conscious of the sovereign's prerogative to extend the treaty protection to domestic companies paying dividend distribution tax through the mechanism of DTAAs. Thus, wherever the Contracting States to a tax treaty intend to extend the treaty protection to the domestic company paying dividend distribution tax, only then, the domestic company can claim benefit of the DTAA, if any. Decided against assessee.
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2025 (1) TMI 454
Penalty u/s 271G by TPO - as argued TPO had not asked for specific information/data in statutory notice u/s 92D(3) and that it is not the case where the documents were not furnished at all by the assessee and that there was a reasonable cause for delay in furnishing the details/documents - HELD THAT:- Hon’ble Bombay High Court in the case of Undercarriage and Tractor Parts (P.) Ltd. Vs. Dispute Resolution Panel[2023 (9) TMI 759 - BOMBAY HIGH COURT] wherein the assessee challenged the validity of the assessment order passed u/s 143(3) r.w.s. 144C(13) and the Hon’ble Bombay High Court quashed and set aside the directions issued by the Ld. DRP and consequent assessment order. However, the Ld. CIT(A) has failed to take cognizance of the said decision of the Hon’ble Bombay High Court while allowing the penalty appeal of the assessee. Before us, the Revenue has not brought on record any decision of the Higher Forum against the said decision of the Hon’ble Bombay High Court (supra).
Thus, in our considered view, the impugned penalty is not exigible. Consequently, we reject the appeal of the Revenue being devoid of any merits and substance.
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2025 (1) TMI 453
Revision u/s 263 - exemption claimed u/s 11 - DR argued that while the ITAT considered the gross receipts as exempt in the hands of the assessee, it made no specific observations regarding Section 11, retaining it for academic purposes only - HELD THAT:- A critical aspect of the decision was that the assessee’s role was purely custodial, with ownership of the collected funds (lease premiums, etc.) remaining with the State Government. As the assessee merely acted as an agent, the income could not be taxed in its hands, thereby obviating the need for a detailed analysis under Section 11.
The revenue’s contention that the assessee’s activities were commercial in nature was also examined. This issue was conclusively addressed in Ahmedabad Urban Development Authority [2022 (10) TMI 948 - SUPREME COURT] wherein it was held that similar activities did not constitute commercial activity.
Further, in the revisional order under Section 263 of the Act, the Ld. CIT(E)directed the Ld. AO to verify the exemption claimed under Section 11 of the Act. However, the nature of gross receipts had already been examined in the ITAT’s ruling, which was duly followed by the Ld. AO. Despite issuing notices under Section 263, the Ld. CIT(E) was unable to identify any new income sources beyond what had already been disclosed by the assessee. Consequently, the Ld. AO adhered to the directions of the higher authority. We respectfully rely on the rulings in Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT], NYK Line (India) Ltd. [2012 (2) TMI 283 - BOMBAY HIGH COURT], and M/s Paul Brothers [992 (10) TMI 5 - BOMBAY HIGH COURT] as well as N.N. Agrawal [1991 (1) TMI 119 - ALLAHABAD HIGH COURT] all of which underscore that Section 263 cannot be invoked merely on the basis of a change of opinion.
In our considered view, the direction to verify Section 11 is inapplicable in this case. Accordingly, the revisional order passed by the CIT(E) under Section 263 is unjustified and is hereby quashed. Assessee appeal allowed.
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2025 (1) TMI 452
Rejection of application for registration of trust u/s 12AB and provisional registration u/s 80G(5) - applicant failed to file documentary evidences to enable him to satisfy about (i) genuineness of activities of the trust or institution, (ii) that the activities of trust or institution are in consonance with the objects of the trust or institution and (iii) that other laws material for the purpose of achieving objects are complied with - HELD THAT:- CIT(E) has decided the matter ex parte due to non-compliance by the applicant to the two notices issued by him. There was also no adjournment request by the assessee.
AR has contended that the assessee-trust is ready to submit all the details and evidences needed by the CIT(E). He requested that in the interest of justice, one more opportunity may be given to the assessee to plead its case, which is strong on merits. We are of the view that one more opportunity should be given to the assessee to file requisite documents and evidences before the CIT(E) and to plead its case before him. It is a settled law that the principles of natural justice require the affected party to be granted sufficient opportunity of being heard to contest his case. Grounds of appeal raised by the assessee are allowed for statistical purposes.
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2025 (1) TMI 451
Revision u/s 263 - excess claim of depreciation on the part of the assessee while computing the book profit u/s 115JB - HELD THAT:- CIT invoked the provisions of section 263 on the basis of incorrect facts, whereas the claim of depreciation in the return of income filed by the assessee i.e. FDPL was found in order by the Assessing Officer as per the details furnished by the assessee. We also notice that there is no discrepancy in the claim of the assessee in the book depreciation while computing the book profit u/s 115JB of the Act as the amount of claim is same as reflected in the P&L Account.
All these details were available before the learned Pr. CIT as well as before the AO. However, without considering the facts and details objectively, the learned Pr. CIT has passed the impugned order and directed the Assessing Officer to re-verify the claim of the assessee. It is pertinent to note that as per the order sheet in details and office note of the National E-Assessment Centre, the Regional Assessing Officer of the Assessment Unit has admitted the fact that the assessment order passed in the case of the assessee is not sustainable being passed against the non-existing entity.
The impugned order passed by the learned Pr. CIT u/s 263 is based on incorrect facts is not sustainable in law and liable to be quashed.Appeal filed by the assessee is allowed.
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2025 (1) TMI 450
Addition u/s 56(2)(viib) - issue of share at premium - Addition of share premium and share capital treating the value of share value at Rs. Nil u/s 56 - valuation report submitted by the assessee rejected - AR submitted share valuation report which was not as per rule 11UA but valuation of shares was done as per 'Adjusted Net Asset Method and as per 'future earning analysis - AO noted that future earning analysis method not allowed in rule 11UA but that rule allow two methods discounted free cash flow method and 'Book value of net asset method.
HELD THAT:- As during Assessment Proceedings Appellant-assessee company filed Valuation Report obtained from an Accountants as per requirement of Rule 11UA of the Income Tax Rule. In the said report valuation of Equity Share is carried out on various methods i.e. Fair Market Value, Net Asset Value, Future Earning Method and Discounted Cash Flow method.
CIT(A) did not discuss as to why the report of an accountant placed on record which is based on the relevant rule for valuation of shares is not considered and he has simply confirmed the view of the assessing officer. Before us ld. AR supported that valuation done was as prescribed by the rule and that report of the independent accountant submitted by the assessee was not doubted or challenged on any of the aspect. The assessee has discharged his onus by submitting the relevant report in support of the fair market value adopted by the assessee.
Assessee-appellant having placed on record the report of the accountant dated 05.01.2015 that the fair market value of the share shall be determined under various methods of valuation including discounted cash flow method. However as per explanation given under provision of section 56(2)(viib) of the Act, the fair market value of the shares shall be the value as may be determined in accordance with rule 11Uand 11UA of I. T. Rules. Therefore it is mandatory that the fair market value of the shares for the purpose of section 56(2)(viib) of the Act is determined as per the method prescribed under rule 11U and 11UA of the I. T. Act only and thus the fair market value of shares determined by any other method is not to be considered. See Idana Pet Industries P. Ltd [2023 (12) TMI 1393 - ITAT JODHPUR]. Thus direct the AO to delete the addition so made in the hands of the assessee. Decided in favour of assessee.
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2025 (1) TMI 449
Income taxable in India - Taxability of income from domain name registration services - royalty receipts - whether income from domain name registration services squarely fell within the definition of ‘royalty’ as per section 9(1)(vi) of the Act as well as Article 12(3)(a) of India-USA DTAA - HELD THAT:- Appellant, being a Registrar, is not the owner of domain name that it helps to register and does not hold any proprietorship rights in the names used domain names. This is affirmed by clause 3.5 of the Accreditation Agreement between the Appellant and ICANN and reference and clause 2 of the agreement between the Appellant and its customers, was made. It was contended that in the absence of ownership over the domain names, the Appellant cannot confer the right to use or transfer the right to use such domain names to another person / entity. Therefore, the income earned by the Appellant from domain name registration services is not chargeable to tax in India as ‘royalty’ under the provisions of section 9(1)(vi) of the Act as well as Article 12(3)(a) of India-USA DTAA.
We find that this view has also been affirmed by Hon’ble Delhi High Court in the Appellant’s own case for AY 2013-14 to AY 2015-16 [2023 (12) TMI 718 - DELHI HIGH COURT] wherein, vide order dated December 11, 2023, it has been held that the income earned by the Appellant from assisting customers in registration of domain names cannot be treated as ‘royalty’ under the provisions of section 9(1)(vi) of the Act itself.
DR could not cite before us any new or different set of facts for the present years to claim that the clauses of the relevant agreements are not identical to the years for which the above mentioned order was passed by the Hon’ble Delhi High Court. Thus the ratio of the said decision should apply and the income earned by the Appellant from providing domain name registration services to Indian customers during the year under consideration cannot be held to be taxable in India under the provisions of section 9(1)(vi) of the Act as well as Article 12(3)(a) of India-USA DTAA. Ground no. 3 is sustained.
Eligibility of assessee for benefit of DTAA and taxability of income from non-domain services such as web hosting, web designing services etc. - AO has erred in giving a findings that being a LLP the assessee is not eligible for treaty benefits. The law in this regard is quite settled as it is now settled that the term, ‘liability to taxation’ has to be distinguished from actual payment of taxation. ‘Liability to taxation’ indicates the powers of taxing an income though the incidence of taxation and actual payment may be different. The reliance of the ld. counsel on the decision of Wild West Domains, LLC [2024 (8) TMI 356 - ITAT DELHI] certainly takes care of the issue wherein relying the decision of Linklaters LLP [2010 (7) TMI 535 - ITAT, MUMBAI] and Herbert Smith Freebills LLP [2022 (10) TMI 903 - ITAT DELHI] the coordinate bench has given benefit of DTAA, irrespective of the fact that the assessee in that case was fiscally transparent entity in USA, like the present assessee. Accordingly, ground No.2 is sustained in favour of the appellant.
Income from provision of non-domain services (such as web hosting, web designing services etc.) - A web host provides multiple web servers to host many different websites, ensuring they are accessible on the internet. One can even set up a web site on two separate servers from two different hosting companies with the same domain just by ensuring that domain names are set up on both servers.
A person may buy domain and hosting from different providers. It even has benefits like buying domains and hosting from different providers can give you more flexibility and control over your website, as such person is able to choose the best provider for each service. It is sometimes more cost-effective, as one may find better deals on either domain or hosting by shopping around. AO has fallen in error to consider web hosting charges and other non-domain services charges as FTS, being ancillary and subsidiary to the application or enjoyment of domain name registration.
The customized technology and services of the provider are fairly available to everyone who proceeds to acquire a domain name or pays for web hosting services. There is no transfer of any knowledge or know-how by the service provider which can deliver any enduring benefit to said person. In fact, to make the website operational on the basis of ownership of a domain name and having services of web hosting, the person creating a website has to independently engage its technological inputs which may be unique to the needs of that person in terms of the objectives of the website.
Thus the income from provision of non-domain services (such as web hosting, web designing services etc.) do not ‘make available’ any technical knowledge, experience, skill, know-how, or processes or result in transfer of any technical plan or technical design to the users. Accordingly, the consideration received by the Appellant for rendering such services should fall outside the ambit as FIS as per Article 12(4)(b) of the India-USA DTAA. Ground no. 4 is sustained.
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2025 (1) TMI 448
Penalty u/s 270A - willful negligence or a misreporting of income - assessee has claimed both the capital expenses and depreciation as application of income - scope of mens rea - HELD THAT:- It is well settled law that mens rea is not an essential condition for imposing penalties under civil acts. This is because the intention of the legislation is clear, and the penalty is levied once a specific eventuality occurs as prescribed under section 270A of the Act. The Apex Court has also ruled that penalty provisions are for breach of civil obligation, so mens rea is not an essential ingredient. Further the Mens rea is not necessary for a conviction in strict liability crimes. This means that someone can be held accountable for the deed itself, regardless of whether they intended to commit the crime.
Therefore, following the precedent set in Dharmendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT] we hold that mens rea is not an essential element for imposing penalties for breach of civil obligations as held by the ld. CIT(A)/NFAC and finding of the contravention is sufficient to attract penalties under the Income Tax Act, irrespective of the intention behind the contravention.
Thus, even in the Audit report filed way before the filing of return of Income, the total revenue expenditure claimed as application of income includes the depreciation claim and the assessee has also claimed the capital expenditure as application of income which amounts to claim of double deduction. Further in the present case as observed by the AO, the assessee had option to rectify its mistake by filing revised return of income as per section 139(5) of the Act and during the proceedings it was noticed by AO that assessee has not filed it voluntarily. More remarkably during the course of Assessment proceedings, as observed by the AO, the assessee submitted that depreciation on assets has not been claimed as application of Income.
Thus we set aside the Order of the ld. CIT(A)/NFAC & sustain the order of the AO in levying the Penalty U/s 270A of the Act by allowing the appeal filed by the Revenue.
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