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Income Tax - Case Laws
Showing 41 to 60 of 163922 Records
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2024 (5) TMI 503 - BOMBAY HIGH COURT
Levy of interest u/s 234B - HELD THAT:- In view of the decision of Manasarovar Commercial (P) Ltd. v. CIT (2023 (4) TMI 419 - SUPREME COURT) the first question is answered in favour of the Revenue and is not pressed by Appellant.
Deduction u/s 80-O - brandishing newspaper cuttings as proof to show 'information concerning commercial knowledge and experience'- Appellant was obliged to provide information to Arianespace regarding current regulations and market conditions in India - Deduction denied as information provided by Appellant pursuant to the said agreement comprised only of newspaper cuttings freely available and hence, cannot be treated as 'information concerning commercial knowledge and experience', there were no written reports of any analysis, Appellant had no experience in Satellite business and there was nothing to indicate that the information was utilized outside India - HELD THAT:- It is clear that approval was accorded by the CCIT on the basis of specific statements made by Appellant that information to be shared pursuant to the agreement was that collected and collated from User Departments and analysis and assessments were to be done during quarterly meetings. Newspaper cuttings are not precluded from being shared as information but by themselves they do not constitute any commercial expertise.
AO is well within his rights to request Appellant to furnish proof of sharing the information with Arianespace for which approval was granted by the CCIT. From the replies of Appellant to the AO, it is quite clear that Appellant has not provided material to Arianespace as represented by it before the CCIT while seeking approval as newspaper cuttings are not information collected or collated from User Departments. The application form for approval specifies providing commercial assistance to Arianespace as contemplated under Section 80-O of the Act based on which approval was procured. Thus, we have no hesitation in accepting the decision of the AO in rejecting this claim of Appellant.
AO is well within his jurisdiction to verify whether the information shared is attributable to the information or service contemplated by the provision. The AO is in fact required to make such an enquiry and for that purpose the assessee is required to place on record requisite material supporting its claim for deduction and on the basis of which approval was procured from the CCIT.
The present case displays an obvious attempt on the part of Appellant in creating an illusion of acting in aid of the agreement, on the basis of the approval granted by the CCIT, while at the same time refusing to produce any evidence in respect of which relief is being sought. Merely brandishing newspaper cuttings does not amount to proof of sharing commercial expertise with its French counterpart as mandated by Section 80-O of the Act. Decided against assessee.
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2024 (5) TMI 502 - BOMBAY HIGH COURT
Condonation of delay in filing of revised return of income - CBDT rejecting petitioner’s application u/s 119 - delay in filing the returns of Income based on the recasted accounts - Resignation by the statutory auditors happened before completing their term and reference made to unauthorised and undisclosed transactions - order passed by which the NCLT was pleased to grant permission to applicant, i.e., MCA for reopening of the books of account and recasting of financial statements of Respondent No. 1, i.e., petitioner herein and its subsidiary companies for past five years
HELD THAT:- By a letter dated 2nd December 2022 the PCCIT strangely advised that the condonation of delay application be rejected. This appears to have been made on the prompting made by the Board because by a letter dated 30th November 2022 the Board called upon the PCCIT to submit once again the specific comments/recommendations on the merits of petitioner’s application with reference to Board Circular No. 9 of 2015 dated 9th June 2015 governing condonation of delay under Section 119 (2) (b) of the Act. There is no explanation whatsoever why there was a change in the stand taken from what was taken earlier.
We fail to understand when the order under Section 130 (2) of the Companies Act has been passed by the NCLT to recast the accounts on an application filed by the MCA, Government of India and the accounts have been recasted and accepted by the NCLT and also filed with the RoC under the Ministry of Corporate affairs, how could the Income Tax Department raise such frivolous objections that the delay in filing the returns of Income based on the recasted accounts should not be even condoned.
This Hon'ble Court pleased to issue a writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, order or direction under article 226 of the Constitution of India directing the Respondent Nos. 1 to 5 to allow the Petitioner to file revised returns of income and revised computations of income prepared in accordance with/based on the re-casted/revised books of account and financial statements for assessment years 2015-16 to 2020-21 and to assess the Petitioner's income chargeable to tax based on the same.
Petitioner shall file physical returns of income based on books of account, revised/recasted under Section 130 (2) of the Companies Act, 2013, as taken on record by the NCLT for A.Y. 2015-16 to A.Y. 2020-21 before the JAO within 30 days from the date this order is uploaded.
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2024 (5) TMI 501 - MADHYA PRADESH HIGH COURT
Bogus LTCG - bogus penny stock script purchases - exemption u/s 10(38) denied - ITAT deleted addition - HELD THAT:- The shares of Sunrise Asian Ltd. are listed on Bombay Stock Exchange, shares have been purchased through D-mat Account and payment have been received through Banking Channel and Security Transaction Tax has been paid by Stock Exchange. Thus, all the conditions for availing exemption have been fulfilled.
As truly contended that under Income Tax Act there is no provision which requires the Assessing Officer to investigate the genuiness of the shares because these share are listed, issued by the Company and records are maintained with the Register of Companies. Thus, these shares cannot be said to be bogus shares as have been issues and subscribed under the Companies Act. The revenue has failed to appreciate that how these shares can be termed as Bogus Shares, when these shares have been issued by the Company incorporated under the Companies Act by following the provisions and procedures prescribed under the Companies Act, 1956
Thus it is incorrect notion of the Revenue that these shares are bogus shares, on the contrary these shares are genuine and lawfully issued share by the company by following the law and procedure in this regard. The Assessing Officer has heavily relied upon report of Investigation Wing of Income Tax Department which was conducted in Kolkata in case of some of the Companies including M/s. Sunrise Asian Limited.
This report has never been provided to the respondent at any stage of the proceedings nor filed by the department before ITAT or before this Court. It is settled law that no material can be used against the assessee without providing the assessee to examine it and, if required, to cross examine. Thus, there was violation of principles of natural justice. That on similar set of facts and in respect of the same share script of M/s Sunrise Asian Ltd. the Mumbai Bench of ITAT in case of (1) Narayan Ramchandra Rathi[2019 (8) TMI 1520 - ITAT MUMBAI] (2) Dipesh Ranmeshchandra Vardhan [2020 (8) TMI 405 - ITAT MUMBAI] and, (3) Anraj Hiralal Shah[2019 (9) TMI 719 - ITAT MUMBAI] has dealt with the identical issue and decided in favour of the assessees.
Thus no substantial question of law arises from the order of the ITAT requiring consideration by this Court.
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2024 (5) TMI 500 - KERALA HIGH COURT
Assessment completed u/s 144C against a petitioner/Non-Resident Indian - definition of an "eligible assessee" - HELD THAT:- Section 144 C is not a substantive provision. It is machinery provision which has been incorporated for the benefit of the assessees including the eligible assessee. The NRI has been included in the definition of "eligible assessee" under Section 144C (15) (b) (ii) w.e.f. 01.04.2020 and, therefore, the assessment proceedings in respect of an NRI undertaken after the said date are to be governed under the provisions of Section 144C.
The objection of the petitioner that the petitioner ought not to have been proceeded under Section 144 C does not have merit. The assessment proceedings have been finalised u/s 144 C which is a machinery provision and in fact beneficial to the assessee. Therefore, find no substance in the 1st objection raised by the petitioner.
Question of limitation - timeline has been given in the statement which would clearly state that the final order of assessment has been passed strictly in accordance with the provisions of Section 144C and the general provision of Section 153 or 153B would not be applicable in the present case . Therefore, the 2nd objection also does not have merit and substance. Further, the petitioner has never raised objection in respect of the petitioner not being covered within the provisions of Section 144C before the assessing authority, which is evident from the assessment order itself. WP dismissed.
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2024 (5) TMI 499 - KARNATAKA HIGH COURT
Stay petition - interim order staying the enforcement of the demand pursuant to the respective demand notices in the light of the submission that 20% of the demand has been deposited - HELD THAT:- The net effect of the submissions is that the petitioner’s appeals as against the relevant assessment orders will have to be considered by the Commissioner of Income Tax [Appeals]-12 in the light of the Division Bench’s order in [2023 (7) TMI 1164 - KARNATAKA HIGH COURT] and there cannot be precipitation for recovery of the demand especially with the petitioner having deposited 20% thereof.
It would not be out of place to record that where the assessment orders have been called in question by the assessees in the writ petitions on the ground of jurisdiction, those writ petitions are being disposed of in the light of the Division Bench’s order [supra] but with liberty to the concerned assessees to seek revival of the petitions in the event the Revenue succeeds in the proceedings commenced before the Hon’ble Supreme Court as against the Division Bench’s order. This liberty is reserved wherever, apart from the ground of jurisdiction, the ground such as violation of principle of natural justice and other grounds are urged.
As it would be just to reserve liberty to the petitioner to seek early disposal of the pending appeals before the Commissioner of Income Tax [Appeals]-12. If the reason for the assessment and the present petition is the demand notices for recovery of 100% demand based on the impugned assessment orders, and if 20% of the demand is already deposited, it cannot be gainsaid that with the Division Bench’s order there cannot be further precipitation
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2024 (5) TMI 498 - ITAT VISAKHAPATNAM
Exemption u/s 10(23C)(iiiad) - Threshold limit of Rs. 1 Crore - denial of exemption as gross receipts of the assessee exceed the stipulated limit of Rs. 1 crore - DR argued that the assessee society is running educational institutions with single PAN, therefore, the gross receipts of the assessee required to be considered for the purpose of section 10(23C)(iiiad) and assessee neither has registration u/s 12A nor any approval u/s 10(23C)(vi) of the Act to claim exemption u/s 10(23C)(iiiad) of the Act as the gross receipts of the assessee exceeded Rs. 1 crore - HELD THAT:- The gross receipts of the society from Degree college was Rs. 84,81,714/- and the junior college was Rs. 18,66,811/-, which has not exceeded the threshold limit of Rs. 1 crore individually or even put together, if the receipts pertaining to F.Y.2015- 16 amounting to Rs. 10,82,585/- were excluded from the gross receipts of Rs. 1,03,48,525 and the balance comes to Rs. 92,65,940/-.
Thus as the gross receipts of the assessee society did not exceed the threshold limit of Rs. 1 crore. Hence, respectfully following the decision of St.Mary’s English Medium School Society [2020 (2) TMI 1139 - ITAT VISAKHAPATNAM] we hold that the assessee is entitled for exemption u/s 10(23C)(iiiad) of the Act - Decided in favour of assessee.
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2024 (5) TMI 497 - ITAT DELHI
Denial of deduction claimed under Chapter VI-A i.e. Section 80G/80GGA read with Section 35AC - donations paid to the eligible institutions - as argued appellant right since AY 1993-94, was computed in the status of AOP and deduction u/s 80GGA r.w.s. 35 AC was granted year after year - HELD THAT:- We find that admittedly the assessee has not claimed the benefit of Section 11 and 12 of the Act as it is reflecting the AO, CPC’s intimation order issued u/s 143 (1) of the Act.
If that be so, then we find that the assessee is entitled to deduction u/s VI-A/80G/80GGA r.w.s. 35 AC of the Act. We also note that the assessee has been granted relief as claimed for since 1993-94 and even also in the scrutiny assessment for Assessment Year 2013-14 which is also on record. In fact, such claim of the assessee has not been able to be controverted by DR by producing any evidence contrary to the same at the time of hearing of the instant appeal. As considered the order passed by the coordinate bench on the identical facts and circumstances of the case wherein the said assessee trust has been granted relief u/s 80GGA r.w.s. 35AC of the Act.
Paper book filed before us contains the details of donations made by the assessee to Janki Bajaj Gram Vikas Sansthan along with other donations made by the assessee to the other trusts. Veracity of the donations made by the assessee on which the claim u/s 80GGA r.w.s. 35AC of the Act has been made, has not been done by the authorities below.
We are disposing of this appeal with the direction upon the Ld. AO to verify the details of donations made by the assessee and grant relief to the assessee in the light of the observations made hereinabove.
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2024 (5) TMI 496 - ITAT AHMEDABAD
Penalty u/s 271(1)(c) - unexplained expenditure u/s 69C and unaccounted cash receipt - HELD THAT:- Tribunal’s finding vide order [2022 (1) TMI 1328 - ITAT AHMEDABAD] clearly reveals that the assessee has disclosed all the relevant material before the AO during the assessment proceedings and, therefore, the element of concealment of income or furnishing of inaccurate particulars of income will not arise in the present scenario. In respect of disallowance of interest incurred on unsecured loan, the assessee has not prayed this ground and, therefore, the addition was sustained. Thus, this cannot be stated as concealment of income or furnishing of inaccurate particulars of income. Thus, CIT(A) has rightly granted partial relief to the assessee and there is no need to interfere with the same. Appeal filed by the Revenue is dismissed.
Penalty u/s 271D - Directors of the Company given cash loans in order to enable the Company to incur various expenses including the investment in land - CIT(A) confirmed the penalty u/s 271D of the Act and deleted the remaining amount relatable to share application/investment - HELD THAT:- The very objection of the CIT(A) appears to be contradictory when documents shown by the assessee and the findings given by the Tribunal [2022 (1) TMI 1328 - ITAT AHMEDABAD]. Since the addition itself was deleted by the Tribunal and the Assessing Officer has taken partial penalty proceedings u/s 271(1)(c) and 271D, AO has not segregated the findings independently and has not pointed out how the violation of Section 269SS has taken place in the present 271D proceedings. Thus, appeal of the assessee is allowed.
Penalty u/s 271E - It is pertinent to note that the assessee has given explanation before the AO as to how the loan was repaid and that explanation in fact was accepted by the Tribunal vide order dated 13.01.2022. Thus, the very finding given by the Tribunal confirms that the assessee has categorically given the explanation related to the repayment of loans which was paid through directors/Preet Patel and Pravin Patel. In fact, Ghanshyam Gandhi also have repaid the loan. Thus, the imposition of penalty u/s 271E of the Act will not sustain.
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2024 (5) TMI 495 - ITAT AHMEDABAD
Application seeking approval u/s 80G(5)(vi) rejected - assessee trust was granted provisional registration u/s 80G in Form 10AC - application for regular registration was rejected stating that some of the objects of the applicant/assessee are religious in nature - HELD THAT:- It is evident that the assessee trust is granted registration u/s 12A by the CIT(E) with the same objectives as enlisted in the trust deed.
Though the assessee trust is established with some of the objectives involved in certain religious activities, on perusal of the audited financial statements, more particularly from the Income& Expenditure account for the periods, submitted as a part of paper book and also as submitted to Ld. CIT(E), it is not emanating that the assessee trust had incurred any expenditure on religious activities.
No show cause notice was issued to the assessee before rejecting the application u/s 80G by Ld. CIT(E). The show cause notice holds immense significance in income tax proceedings, ensuring procedural fairness and safeguarding the rights of taxpayers. There are many judicial pronouncements which have reinforced the indispensability of this notice, emphasizing that orders issued without its adherence may be deemed invalid.
On perusal of financials, facts, and circumstances of the present case, after thoughtful deliberations, we are of the opinion that the order passed by CIT(E) is bad at law. We are of the considered view that the assessee trust having not spent any money on religious purposes, is eligible for grant of approval u/s 80G(5) of the Act - Appeal of the assessee is allowed.
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2024 (5) TMI 494 - ITAT AHMEDABAD
Disallowance of employees' contribution to provident fund u/s. 43B - HELD THAT:- Issue decided against assessee in the light of decision of Hon’ble Apex Court in the case of Checkmate Services (P.) Ltd [2022 (10) TMI 617 - SUPREME COURT]
Disallowance u/s. 35D - AR submitted that the CIT(A) has not at all considered the alternative plea of the assessee while deciding the issue/ground and in fact has given his dismissal for which the Ld. AR requested that the matter may be remanded back to the file of the CIT(A) for proper adjudication of the issues - HELD THAT:- It is pertinent to note that in fact while deciding this issue, the CIT(A) has not given any independent finding and in fact has not considered or adjudicated the assessee’s alternative plea. Therefore, it is appropriate to remand back this entire issue to the file of the CIT(A) for proper adjudication of the same in consonance with the assessee’s plea before the CIT(A) and the issue be decided as per the Income Tax Statute. Needless to say, the assessee be given opportunity of hearing by following the principles of natural justice. Ground no.1 is partly allowed for statistical purpose.
TP Adjustment - Selection of MAM - CIT(A) affirming TPO’s action of rejecting most appropriate method (MAM) adopted by the assessee - AR submitted that the rejection of CUP method for benchmarking purchase transaction was not justified on the part of the TPO as the TPO himself has accepted CUP as most appropriate method for the same set of transactions carried with the Associated Enterprise (AE) in preceding years - HELD THAT:- CIT(A) has totally failed to take into account profit margins as well as how the comparables which were selected by the TPO are not as per the filters given by the TPO himself. The product is manufactured by the assessee as per the specification and quality needed by the AE for which necessary technical assistance for setting up, commissioning and running of plants and training of the Indian Technicians was provided by the AE.
All the functions of manufacturing are performed by the assessee according to the needs of the AE and in case the AE is unable to purchase the product, the AE will be liable to pay the entire amount equivalent to interest and instalment to the Bankers of the assessee. The risk factor was upon the AE and, therefore, the assessee while calculating the gross profit margin of the comparable has taken into consideration only the cost incurred in manufacturing process.
All these aspects including that of adjustments and other comparables in respect of actual rate of cost along with capacity utilisation adjustment were much below to that of assessee’s units. The TPO has not looked into these aspects along with the appropriate method taking into consideration the assessee’s manufacturing activities and its sale transactions. The assessee is 100% export unit (98%). Thus, the TPO as well as the CIT(A), both the Authorities have failed to take cognisance of the same and was not right in rejecting the contentions of the assessee. Therefore, the TPO is directed to look into the same. Matter is remanded back to the file of the TPO for proper adjudication.
Appeal of the assessee is partly allowed for statistical purpose.
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2024 (5) TMI 493 - ITAT AHMEDABAD
Revision u/s 263 - Bogus LTCG/Share transaction - as per CIT AO failed to make necessary enquiries to ascertain the actual strength of the company, investment profile of the assessee - assessee entered into transaction of only scrip (Suchak Trading Ltd) and the examination and inquiry of five entities, who purchased the shares sold by assessee, were left open without appropriate conclusion - as argued PCIT has not initiated this review on his own and therefore he was not right in assuming the jurisdiction - HELD THAT:- DR, in reply, explained that the review proposal sent by AO to PCIT is part of their internal procedure and Ld. PCIT has carried independent inquiry of the subject matter of review.
It is also clear from the material available on records that the AO in his proposal itself has stated that the assessment order is passed without proper examination of the facts.
We also take into consideration the fact that LD. PCIT, in his order, has distinguished the judicial pronouncements on which the assessee relied on.
Clause (a) of the Explanation 2 to section 263 empowers PCIT to invoke section 263. Clause (a) talks about the inquiry or investigation having not been made by the A.O., which ‘should have been made’. The phrase ‘should have been done’ as provided in this clause means the verification/ enquiry which ought to have been done. Considering this provision coupled with the observations recorded by the Ld. PCIT as mentioned in the facts of the case above, we are of the opinion that the Ld. PCIT has exercised his discretion reasonably. Ld. PCIT has applied his mind to the record his reasons for assuming the jurisdiction - no infirmity in the order of the Ld. PCIT in directing the AO to pass a fresh assessment order after allowing adequate opportunities of being heard to the assessee. Appeal filed by assessee is dismissed.
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2024 (5) TMI 492 - ITAT MUMBAI
MAT provision applicability on banking company u/s 115JB - HELD THAT:- Whether the provision of Section 115JB of the Act is applicable to a banking company has already been decided in case of Union Bank of India [2019 (5) TMI 355 - BOMBAY HIGH COURT] wherein it has been held that prior to its amendment by Finance Act, 2012, the provision of the computation of book profit tax u/s 115JB of the Act would not be applicable to banking company governed by the provision of Banking Regulation of 1949.
It is not in dispute that assessee is a banking company. Accordingly, we do not find any infirmity in the order of the learned CIT (A), who relied upon the decision of the Hon'ble Bombay High Court and also the decision of the co-ordinate Bench in assessee’s own case. Accordingly, as such impugned assessment year i.e. A.Y. 2005-06, we do not find any reason to hold that provision of Section 115JB of the Act applies to the assessee company prior to 1st April, 2013. Accordingly, ground Nos., 1 and 2 of the appeal are dismissed.
Allowability of interest u/s 244A(1A) - HELD THAT:- Admittedly, in this case, the co-ordinate Bench has passed the order on 30th March, 2016. The order giving effect of such order was passed by the learned Assessing Officer on 19th March, 2021. This order was served to the assessee on 3rd September, 2021, therefore, apparently the assessee is entitled to interest from the date of receipt of the order by PCIT till the order is received by the assessee.
Therefore, the assessee is held to be eligible for interest from 1st January, 2017 to 3rd September, 2021. The appeal effect order is passed after the introduction of this section and therefore, despite the assessment year being 2005-06, the assessee is eligible for the above interest because of the reason that when appeal effect order was passed, such provision was there on the statute book. - Decided against AO.
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2024 (5) TMI 491 - ITAT MUMBAI
Disallowance u/s 14A - Mandation to record satisfaction - assessee has computed a suo moto disallowance of administrative cost and Demat charges - HELD THAT:- According to Section 14A (2) of the Act, it is the duty of the AO to first record his satisfaction that why the claim of the assessee is not correct according to him on verification of the accounts of the assessee. There is no whisper in the assessment order about examination of claim of the assessee, holding such claim as not correct on examination of accounts of the assessee. Thus, The AO has failed to record his satisfaction as provided under that section.
Thus without recording of the satisfaction about the correctness of the claim of the assessee, the learned Assessing Officer does not have any authority to compute the disallowance by application of Rule 8D. The learned CIT (A) is also incorrect in holding that the learned Assessing Officer has recorded any satisfaction as provided under Section 14A (2) of the Act. Decided in favour of assessee.
Charging of interest u/s 234D - HELD THAT:- We direct the AO to verify whether the provision of Section 234D is applicable or not in this case and, if no such interest is chargeable, delete the demand of interest to that extent.
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2024 (5) TMI 490 - ITAT NAGPUR
Addition u/sec. 56(2)(vii) - Difference in value of agricultural land purchased from value of property for stamp duty purpose - HELD THAT:- DR failed to rebut the clinching fact that the foregoing differential amount nowhere 10% of the actual sale price as per sec. 56(2)(vii)(b) 3rd proviso adopting the tolerance margin given in sec. 50C(1) 3rd proviso mutatis mutandis.
As argued that the tolerance margin of 10% in sec. 50C(1) 3rd proviso substituting 5% by the Finance Act, 2020 is applicable w.e.f. 01.04.2021 whereas the impugned assessment year herein is 2014-2015. No merit in the Revenue’s instant arguments in light of C. Maria Fernandes vs. ITO [2021 (1) TMI 620 - ITAT MUMBAI] holding the foregoing tolerance margin as carrying retrospective effect. We delete the impugned addition made u/sec. 56(2)(vii) in very terms since falling within the statutory tolerance margin of 10% - Assessee’s appeal is allowed.
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2024 (5) TMI 489 - ITAT BANGALORE
Denial of 80P(2)(a)(i) deduction - interest income earned on its investments amount made with SBI out of internal fund (Share Capital plus other Funds) constituting its income from the business of providing credit facilities to the members - allowing the proportionate interest paid to the members of the society as well as administrative expenses u/s. 57(iii) - HELD THAT:- As relying on Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd [2022 (1) TMI 1309 - GUJARAT HIGH COURT] interest received on such investments by assessee is not eligible for deduction u/s. 80P(2)(a)(i)/80P(2)(d) on such interest received from State Bank of India (SBI). Since the interest income received on such investments from State Bank of India is not attributable to main business of the appellant, hence needs to be assessed as “income from other sources”.
Since the interest income received by the appellant was not attributable to the main business of the appellant the same should not be allowed as deduction u/s 80P of the Act. We further note that the revenue authorities have treated the entire income as income from other sources. The entire interest income cannot be taxed if the assessee has incurred expenses towards earning of such income.
We further note from the financial statement as on 31.03.2016 that FD with SBI is Rs. 4,36,328,811, however the internal fund is Rs. 5,17,72,069/- which is more than investments made with SBI, it shows that the assessee has not utilized external funds for investment with SBI. Therefore, relying on the judgment of Totgars’ Co-operative Sales Society Ltd [2015 (4) TMI 829 - KARNATAKA HIGH COURT] the assessee is eligible for claim of its expenditure towards earning of such interest income. Accordingly, the assessee is directed to provide the details of expenditure for earning interest income before the assessing officer. Therefore for allowing expenditure, we are remitting this issue to the assessing officer for determining the cost of funds for earning interest income. Appeals of the assessee are partly allowed for statistical purposes.
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2024 (5) TMI 488 - ITAT KOLKATA
Revision u/s 263 - setting aside assessment order passed u/s 147 of the Act for de-novo assessment - HELD THAT:- We note that for reopening of the assessment u/s 147 r.w.s. 148 of the Act, the Assessing Officer must have reasons to believe that the income of the assessee for the relevant assessment year has escaped assessment. The said reasons to believe could be based on any tangible material or information received by the Assessing Officer. In this case, the letter written by the assessee to the AO was nothing else, but an information received by the Assessing Officer of escapement of income of the assessee for the year under consideration. However, merely because the information of escapement of income was received from the assessee itself that itself did not give any jurisdiction to the AO to surpass the mandate of the statutory provisions as provided u/s 151 of the Act to get the necessary approval from the competent authority before issuing notice u/s 148 of the Act. Therefore, the reopening of the assessment u/s 147 r.w.s. 148 of the Act in this was bad in law for want of jurisdiction of the Assessing officer to reopen the assessment without approval of competent authority u/s 151 of the Act.
Thus since the base order passed u/s 147 r.w.s. 148 of the Act was bad in law being without jurisdiction for want of approval of the competent authority, therefore, the subsequent proceedings/orders which were on the basis of the said order passed u/s 147 of the Act are also held as bad in law. In view of the above discussion, the assessee succeeds on the legal ground.
PCIT exercised his revision jurisdiction in respect of order passed u/s 147 wherein the issue of share subscriptions was not the subject matter of reassessment - As assessment was reopened on a particular issue of the escapement of income earned by the assessee as profit on share dealing. The Assessing Officer examined that particular issue and made addition in respect of the said profits earned by the assessee. The issue relating to any other transaction i.e. share application money received by the assessee, was not the subject matter of the reassessment proceedings. Since, the issue of share application money on which the ld. PCIT has sought to revise the order was not the subject matter of the reassessment order, therefore, in the light of the decision of Alagendran Finance Ltd [2007 (7) TMI 304 - SUPREME COURT] it cannot be said that the reassessment order passed by the Assessing Officer was erroneous, therefore, the revision jurisdiction exercised by the ld. PCIT, in this case, cannot be held to be justified. In view of the discussion, since, the revision order passed by the Ld. PCIT u/s 263 of the Act was without jurisdiction, therefore the consequential assessment order passed by the Assessing Officer u/s 143(3) r.w.s. 263 of the Act was also not sustainable.
Addition u/s 68 - assessee had failed to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction - Assessing Officer to get the identity and creditworthiness of the said share subscribers verified, had issued notices u/s 133(6) of the Act, which were duly complied with by all the share subscribers during the remand proceedings and they furnished the necessary details. Not only this, the Assessing Officer also issued summons u/s 131 of the Act and all the directors of the share subscribing companies personally appeared and their statements were recorded. Copies of the bank accounts of all the share subscribers were also furnished and all the share subscribers duly confirmed that they had made share subscription in the assessee company. The ld. CIT(A) has also noted that the Assessing Officer, himself, has admitted that the directors of the share applicant companies and source of such investor companies belonged to the same family and he produced the family tree to prove that funds were coming from the same companies with common family members. The ld. CIT(A) observed that this fact, itself, establishes that the share subscribers were interested parties for promotion of the assessee company and therefore, justification of premium was also proved.
CIT(A) had discussed the creditworthiness and financials of each of the 9 shareholders and has also observed only a part of their net worth was invested by the share subscribers into assessee company. The ld. CIT(A) has also relied various case laws including that of Sagun Commercial P Ltd. [2011 (2) TMI 1555 - CALCUTTA HIGH COURT] CIT(A), thereafter, impugned order has concluded that the identity, creditworthiness and genuineness of the transactions were duly established in this case. Decided in favour of assessee.
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2024 (5) TMI 487 - ITAT KOLKATA
Validity of Revision u/s 263 - assessment order passed u/s 147 r.w.s 143(3) set aside - as per CIT order AO passed u/s 147 r.w.s. 143(3) was erroneous and prejudicial to the interest of revenue because there was a report of the investigation wing that the assessee had received accommodation entry and that It was, therefore, unaccounted income of the assessee - HELD THAT:- A perusal of the revision order passed by the ld. Pr. CIT shows that the ld. Pr. CIT has not pointed out any error or discrepancy in the explanations and details furnished by the assessee and without examining such evidence and without counter questioning the assessee on the relevant points and even without considering the submission of the assessee furnished in reply to the show-cause notice, the ld. Pr. CIT, in our view, was not justified in setting aside the order, simply stating that in his view more enquiries were needed to be carried out by the AO.
Pr. CIT, taking shelter in Explanation 2 to Section 263(1) of the Act, held that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue on the ground of lack of enquiry, which, in our view, is a general observation and no specific observation has been made in respect of any of the details or evidence furnished by the assessee and as to why the ld. Pr. CIT was not satisfied about such details/replies furnished by the assessee.
Simply because the ld. Pr. CIT felt that the Assessing Officer should have made further enquiries on the same issue or that the case was to be examined from some another angle, the same, in our view, cannot be a valid ground to set aside the assessment order. If such an action is allowed by the ld. Pr. CIT in his revision jurisdiction then, there would be no end to litigation and there would not be any finality to the assessment. The Explanation 2 to Section 263(1) of the Act does not give unbridled powers to the ld. Pr. CIT to simply set aside the assessment order by saying that the Assessing Officer was required to make further enquiries without pointing out as to what was lacking in the enquiries made by the Assessing Officer and why the ld. Pr. CIT was not satisfied with the reply and evidence furnished by the assesse
As decided in Usha Polychem India (P) Ltd [2023 (5) TMI 419 - CALCUTTA HIGH COURT] where Principal Commissioner involved revision jurisdiction under section 263 in case of assessee on basis of an information received from Dy. Director (Investigation) regarding huge amount of unaccounted funds received in bank account of assessee, since a reassessment proceeding was already invoked and completed on basis of same information, impugned revision was unjustified - Decided in favour of assessee.
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2024 (5) TMI 486 - ITAT DELHI
Income deemed to accrue or arise in India - Revenue earned from supply of software - ‘royalty’ u/A 13 of DTAA between India and United Kingdom - software is Shrink wrap software or customized software? - assessee was incorporated under the laws of United Kingdom (UK) with the primary objective of carrying on the business of specialist, engineers and dealers in computer system - HELD THAT:- As decided in assessee own case [2022 (8) TMI 1497 - ITAT DELHI] the software catered to by the assessee is a customized software and not a shrink wrap one as it is exclusively developed for the organization to suit its business requirement and that it is very expensive which is a logical corollary to the customized software.
The issue of royalty or not on software has been examined by the Hon’ble High Court in case of Nokia Networks OY [2012 (9) TMI 409 - DELHI HIGH COURT] Where in it was held that supply of software is not ‘royalty’ despite the amendments made by Finance Act 2012 to section 9(1)(vi) of the Act. It has been observed that though Explanation 4 was added to section 9(1)(vi) by the Finance Act 2012 with retrospective effect to provide that all consideration for user of software shall be assessable as “royalty”, the definition in the DTAA has been left unchanged. Following the decision in case of Siemens AG [2008 (11) TMI 74 - BOMBAY HIGH COURT] it was held that amendments cannot be read into the treaty. Once assessee has opted to be assessed by the DTAA, the consideration cannot be assessed as “royalty” despite the retrospective amendments to the Act.
The right to reproduce and the right to use computer software are distinct and separate rights, the former amounting to parting with copyright and the latter, in the context of nonexclusive EULAs, not being so. At this juncture, we have examined the written submission of the ld. DR and find that it would not make any material difference to the fact that the buyer of the software in the instant case also has the user right only. The buyer has no right to re-sale the product and it still remained a copyrighted article which the buyer cannot alter modified, reproduced i.e. own will unless authorized. And such authorization has been given to re-supply to BSNL for their use, at the same time, keeping the all other rights with the assessee.
Holding thus, the Hon’ble Supreme Court [2021 (3) TMI 138 - SUPREME COURT] decided the issue in favour of the taxpayer and laid down that the payments made by resident Indian end-users/distributors to non-resident computer software manufacture/suppliers as consideration for use/resale of shrink-wrapped software does not amount to payment for royalty for the use of copyright in the computer software considering the definition of royalty under the DTAAs. Hence, keeping in view the judgment of Hon’ble Apex Court, we hereby allow the appeal of the assessee on merits. Appeal of the assessee is allowed.
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2024 (5) TMI 485 - ITAT DELHI
Disallowance of various expenses debited in the P&L account, either in full or on ad hoc basis by the learned CIT(A) - non rejection of books of accounts - HELD THAT:- When the books of account and the book results had not been rejected by the Revenue, by pointing out specific defects therein, there is no scope for making disallowance of expenses on ad hoc basis or in full. In the instant case, the books of account have been duly subjected to audit by a Chartered Accountant and the audited books of account together with audited financial statements, were also duly placed on record before the learned AO. It is not the case of the Revenue that the said expenditures were not incurred by the assessee wholly and exclusively for the purpose of business. These expenses were subjected to disallowance only on flimsy grounds that on the vouchers, revenue stamps are not affixed. In this case, it is pertinent to note that the turnover of the assessee is Rs. 160.46 crores and the total administrative expenses debited by the assessee is hardly Rs. 58.64 lakhs. Hence, we have no hesitation to delete the entire disallowance of expenses debited in the P&L A/c. - Decided in favour of assessee.
Disallowance of interest paid on unsecured loans - HELD THAT:- No addition has been made by the learned AO for the receipt of unsecured loans - unsecured loans received by the assessee have been accepted as genuine by the learned AO. Assessee had duly furnished the confirmations from the unsecured loan creditors, which fact is also confirmed by the CIT(A) in his order. It is not the case of the Revenue that the said loans were not utilized by the assessee for the purpose of his business. Absent such findings, interest paid on unsecured loans which were considered as genuine, cannot be subjected to any disallowance. Hence, we direct the Ld. AO to grant deduction for interest - ground raised by the assessee is allowed.
Disallowance on account of difference in purchases debited by the assessee vis a vis corresponding value shown by the suppliers in their response to notice issued u/s 133(6) - HELD THAT:- Though there are certain differences in terms of accounting policies/ deficiencies carried out by the suppliers in their respective books, still the closing balance outstanding as on 31.03.2010 reflected by the said supplier duly matches in both the parties books. This clearly goes to prove that the reconciliation submitted by the assessee hereinabove is factually correct and no adverse inference could be drawn thereon. Hence, the disallowance made by the Ld. CIT(A) based on the remand report of the Ld. AO with regard to Thiru Arooran Sugar Ltd. deserves to be deleted and is hereby deleted.
With regard to difference in balance in the case of Dwarikesh Sugar Industries Ltd., we find that the assessee had duly explained the same by way of proper reconciliation that the purchases has been duly accounted by the assessee after 01.04.2009 on the date on which the goods were actually received by him, whereas the supplier had shown it as sales in the month of March 2009 itself. This had admittedly led to the difference. We find, the assessee had clearly explained the difference in the value and hence no addition is required to be made.
Appeal of the assessee is partly allowed.
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2024 (5) TMI 484 - ITAT MUMBAI
TP Adjustment - addition on account of corporate guarantee - international transaction or not? - HELD THAT:- This issue is decided against assessee by the Coordinate Bench in earlier assessment year [2020 (9) TMI 1101 - ITAT MUMBAI] for the A.Y.2012-13 the arguments that the said transactions could not be considered to be international transaction do not convince us and therefore, we hold that the same was to be benchmarked on ALP principles.As assessee’s risk in such a case would be very low since both the AEs were assessee’s subsidiaries only. Therefore, considering the fact that it was a corporate guarantee for which no fees was paid by the assessee we estimate the TP adjustments against both the transactions @0.20% - Decided against assessee.
Short credit for the taxes paid in Kenya u/s 90 - HELD THAT:- During the course of the assessment proceedings the assessee submitted proof of tax paid in the foreign countries based on which corresponding Double Taxation Avoidance Relief was allowed to the assessee. The assessee also claimed relief in respect of tax paid at Kenya but the same was denied invoking Rule 128 of the I.T. Rules wherein it has been provided that the tax paid in foreign countries on such income will be allowed only on furnishing of Form No. 67 for availing tax credit. We find that Rule 128 of I.T. Rules has been inserted by income tax 18th Amendment Rules, 2016 and has made applicable w.e.f 01.04.2017. We fail to understand how the Rule which came into effect from 01.04.2017 be made applicable to the return filed on 27.11.2015. Thus set-aside this issue to the file of the AO as directed to allow the credit of tax paid in Kenya after due verification.
Short credit of TDS credit arising on account of payment made by Madhya Pradesh Government to KEC TNR Infra JV - tax credit has been denied to the assessee on finding that the impugned income has not been shown as its income by the assessee - It is the say of the counsel that the impugned income belongs to KEC TNR Infra JV and the TDS has been deducted in the name of KEC TNR Infra JV - HELD THAT:- We have given a thoughtful consideration to the orders of the authorities below, in the interest of justice and fair play, we deem it fit to set-aside this issue to the file of the AO. AO is directed to verify in whose hands the income has been shown and allow the credit of Tax Deducted at Source as per the relevant provisions of the law. This ground is allowed for statistical purpose.
Disallowance u/s 14A while computing the book profits u/s 115JB - HELD THAT:- As decided by this Tribunal in assessee’s own case in A.Y. 2014-15 [2023 (12) TMI 1312 - ITAT MUMBAI] we find that this issue is squarely covered in favour of the assessee by the decision of special bench in case of Vreet investments private limited [2017 (6) TMI 1124 - ITAT DELHI] Even otherwise it is stated that assessee has not received any exempt income during the year and therefore there is no question of making any disallowance under section 14 A of the income tax act even in the normal computation of total income and therefore the same also cannot be imputed while computing the book profit under section 115JB - Decided in favour of assessee.
TP adjustment in respect of business advances given to EJP KEC Joint Venture, South Africa - HELD THAT:- As decided in own case A.Y. 2013-14 [2023 (5) TMI 1324 - ITAT MUMBAI] advances were more in the nature of capital contribution and by advancing the same, the assessee had protected its own business interest which is evident from the financial statements of JV. The advances were towards fulfilment of the assessee’s obligation of being a JV partner as any financial incapacitation of JV would adversely affect the continuation of the project and ultimately jeopardize the interest of the assessee. Therefore, the said advances could not be put in the category of loans as done by the lower authorities. Further, it could not be said that JV entity derived / gained certain benefits out of such advances but rather it was the assessee who would ultimately gain by continuing with the projects and taste the fruits of the success of project. Hence, not convinced with impugned adjustments. Decided in favour of assessee.
Restricting guarantee commission in respect of guarantee given to ICICI Bank, U.K. in favour of U.S. subsidiaries at 0.2% of the guarantee - HELD THAT:- Respectfully following the latest decision of the Coordinate Bench [2023 (9) TMI 1466 - ITAT MUMBAI] for the A.Y. 2018-19 we direct the Assessing Officer to apply corporate guarantee rate @0.6%. This ground is partly allowed.
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