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Showing 141 to 160 of 1528 Records
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2022 (6) TMI 1388
Settlement of case by Income Tax Settlement Commission - petitioner was assessed before an authority in a different State - Writ Filled challenging Order of the Settlement Commission rejected on the ground that the petitioner was assessed before an authority in a different State - HELD THAT:- This Court in Mulberry Skills Ltd Vs. Settlement Commission [2020 (9) TMI 771 - MADRAS HIGH COURT] wherein a writ filed in identical circumstances, challenging an order of the Settlement Commission, came to be rejected on the ground that the petitioner was assessed before an authority in a different State. In that case the assessee in Karnataka, whereas, in the present case the Assessing Authority/R3, is in the State of Kerala. Writ appeal is dismissed leaving it open to the appellant to move the High Court of Karnataka if they are so advised
In this matter as well, it open to the petitioner to move the Kerala High Court, if they are so inclined. Writ Petition stands dismissed. Connected writ miscellaneous petitions are closed.
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2022 (6) TMI 1387
Validity of Government Order in G.O.Ms. 181, dated 09.04.2020, passed by the 1st respondent and the consequential Gazette Notification, issued by the 2nd respondent in S.O. No. 46, dated 14.06.2020 - investigation of the complaint made by the 3rd respondent - misappropriation - conspiracy - breach of trust - Jurisdiction of Delhi Special Police Establishment namely CBI - HELD THAT:- The petitioners are the office bearers of Indian Red Cross Society. The third respondent seems to have given a complaint on 27.03.2020, addressed to the fifth respondent, making certain allegations with regard to the affairs of the Indian Red Cross Society. Pursuant to which, the said Government Order has been passed by the first respondent granting consent of the State Government for investigation to be conducted by Central Bureau of Investigation (CBI). This Government Order is challenged on the ground that the nature of allegations made in the complaint is beyond the scope of Section 3 of the Delhi Police Establishment Act and the Society in question is neither financed by the State or Central Government and it is a Society registered under Societies Act.
In the present case on hand, A5 is the Deputy/Joint Secretary of Indian Red Cross Society, National Head Quarters, which is situated at India Red Cross Society at No. 1, Red Cross Road, New Delhi-110001, which is well within the jurisdiction of the Delhi Special Police Establishment namely CBI, which is also the contention of the petitioner/A5. Hence, in the logical view, the G.O.(Ms) No. 181, dated 09.04.2020 itself is not mandatory.
The attention of this Court was also invited to the Judgment of the Hon'ble Supreme Court in State Vs. N.S. Ghaneswaran, reported in ([2013 (1) TMI 966 - SUPREME COURT]), wherein it is held that CBI can register FIR as per the procedure traceable in CBI Manual 6.10.1. Hence, there is no illegality in CBI registering FIR.
With regard to the first contention that the Indian Red Cross Society do not receive any grants from the Government is not correct. Indian Red Cross Society has been formed on the corpus available from public donation, as could be seen from the Act. Further, prime properties have been allotted by the Central Government as well as respective Governments for the Headquarters and its branches throughout India on concessional charge recognizing the public service rendered by the IRCS. This is the special privilege given to IRCS - Though IRCS state that it was only for the service rendered payments received and Red Cross Society not earned income is not proper, as could be seen from the ledger account of the said two projects. The Health and Family Welfare Department confirms the Grants-in-Aid given to IRCS, Tamil Nadu Branch.
In this case, the petitioners herein are given privileged status and benefits on the office they held in IRCS. Thus, the position is clear that 'public duty' means, a duty in discharge of which, the State, the public of the community at large has an interest - the petitioners discharging the public duty is not in dispute. Hence, the case against the petitioners under the Prevention of Corruption Act can proceeded.
As regards the second contention is concerned, issuance of G.O.(Ms) No. 181, dated 09.04.2020, for fraudulent activities by issuing Notification under Section 6 of the Delhi Special Police Establishment Act is a colourable exercise, non-est and cannot be revisited - In this case, on the complaint of the third respondent, finding no involvement of State Government Officials and also finding seriousness of the offence and the involvement of Headquarters Officials and others, found it appropriate, for CBI to conduct investigation, hence the case was transferred. It is seen that Section 6 of the DSPE Act only stresses that consent has to be obtained only from the State. It is seen, that in this case, under Section 6 of the DSPE Act, the CBI obtained consent. The second respondent issued a Notification under Section 5 of the DSPE Act on 12.06.2020. Thereafter, 17-A approval under the Prevention of Corruption Act was obtained on 19.12.2020 from seventh respondent, thereafter, FIR registered on 28.12.2020. Consent obtained to avoid any future complication, in abundant caution. Nothing more.
Locus of the third respondent - HELD THAT:- The questioning of locus, of the third respondent is not proper, since it is settled legal proposition that anybody can set the law in motion, except where the statute enacting or creating an offence indicates to the contrary - the third respondent not only being Deputy Secretary of the Governor, even as a commoner, when an offence, coming to his knowledge as per Section 39 of Cr.P.C. has lodged the complaint.
Thus, it is seen that the grant of consent under Section 6 of the DSPE Act, 1946, is more in the nature of an administrative Order and does not require enormous rejigging, as the issue is whether to allow the investigation to be done by the CBI or not.
This Court finds the contentions raised by the petitioners are unreasonable, not sustainable. Hence, all the Writ Petitions are dismissed.
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2022 (6) TMI 1386
TP adjustment - interest on trade receivables balances from associated enterprises by applying interest rate of 14.75% being SBI short term deposit interest rate - As per assessee if interest is charged, such interest should only be at LIBOR and not SBI short term deposit rates - HELD THAT:- In our view, in the present case, the outstanding receivables by the assessee are required to be benchmarked. It is an admitted fact that the outstanding receivables by the assessee are more than 30 days as held by the DRP.
In the light of the above, respectfully, following the decision of Zeta Interactive Systems (India) Pvt. Ltd. [2022 (6) TMI 1383 - ITAT HYDERABAD] we modify the order passed by the DRP and direct the TPO to compute by applying 6% interest rate on outstanding receivable at the year end as against 14.75% and recompute the adjustment to be made to the total income of the assessee.Appeal of the assessee is partly allowed.
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2022 (6) TMI 1385
Denying of exemption u/s 11 by invoking the first proviso to section 2(15) - assessee argued that civil works carried out by him are not commercial in nature by mentioning that they are fund-raising activities - HELD THAT:- We are of the opinion that similar issue came for consideration before this Tribunal in the case of Zilla Nirmithi Kendra [2022 (2) TMI 1362 - ITAT BANGALORE] as held that the application of income generated by the business is not relevant consideration and what is relevant is whether the activity is so inextricably connected or linked with the objects of the trust that it could be considered as incidental to those objectives. It was contended by the assessee that the surplus funds generated from the construction business was spent towards charitable activities and therefore, the assessee is entitled for exemption under section 11(4). This contention is not acceptable. Initially, the assessee carried on the business itself which is not at all property held under trust. This activity is a business activity and the provisions of section 11(4A) is applicable. The tribunal held that there is no nexus between the activities carried on and the objects of the assessee that can constitute an activity incidental to the attainment of the objects, namely, to promote cause of charity, mission activities, welfare, employment, diffusion of useful knowledge, upliftment and education and to create an awareness of self reliance among the members of the public etc. Being so, the assessee is not entitled for any exemption under section 11. Decided against assessee. Also see M/S. NIRMITHI KENDRA case [2018 (11) TMI 117 - ITAT COCHIN]
Income tax liability - tax on income of a State - assessee being a State under Article 12 of the Constitution, is exempted from the levy of Union Tax under Article 289 of the Constitution - HELD THAT:- Assessee is not a State but it is registered as a Society and hence it is to be treated as an AOP or Trust for the purpose of Taxation.
The assessees Dakshina Kannada Nirmithi Kendra & Udupi Nirmithi Kendra are separate entities and distinct from state, having its own legal identity. It could sue or be sued in its own name. It has its own assets & liabilities. But only when the State Government decides that purpose of Nirmithi Kendra has been achieved and there is no need to continuation of this Nirmithi Kendra, then it may pass the order of dissolution of the same. In that event, the income, assets, liabilities of the Nirmithi Kendra will be vested with the State Government and not otherwise. Thus, it is apparent from the record that the Hon’ble Supreme Court has already dealt with this matter and we are completely agreeing with the argument of Ld. D.R. and the Article 289 of the Constitution cannot be applied to the assessee’s case. Accordingly, this additional ground of the assessee is dismissed.
Disallowance u/s 43B - AO disallowed an amount in respect of expenditure claimed towards labour cess outstanding - HELD THAT:- As per this Act, certain payments could be claimed as expenses in the year in which they have been paid and not in the year in which the liability to pay such sum was incurred. In other words, certain statutory expenses are allowed to be claimed in the year of payment only. In the case of this payment of it has not been paid within the due date of filing return of income and which was paid only on 21.3.2014 and the said payment cannot be allowed as in the assessment year under consideration. Accordingly, we dismiss this ground of the assessee in AY 2013-14. However, the assessee has liberty to claim on actual basis in the year in which it was paid.
Activities carried on by the assessee along with object clause of the Trust Deed - No infirmity in the order of the lower authorities in observing that the assessees’ herein carried out activities not in accordance with the object clauses mentioned in Trust Deed. Accordingly, this additional grounds in both cases are also dismissed.
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2022 (6) TMI 1384
TDS u/s 195 - remittance of amount to the co-broker in Singapore - assessee company is an Indian broker for placement of reinsurances placed with insurers domicile in India to work in conjunction with overseas brokers - reinsurance contract is between Indian insurers and the non-resident insurance companies - HELD THAT:- From the perusal of the profit and loss account of the assessee, it is seen that it reflects only brokerage as its income. All the monies received by the Assessee from the Indian Insurance companies, i.e., Indian Cedents is held in a bank account which is classified as the “Client Money Account” and this is required to be maintained in accordance with Clause 27 of the Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2013 read with Schedule V thereto.
The monies lying in this account are not assessee’s money and the assessee is only the trustee of the monies as per IRDAI Regulations and hence the monies are not available to it. Monies in this account are to be paid to the NRRs either directly or through co-brokers not later than 2 weeks from receipt thereof. This account is reflected in the balance sheet of the Assessee with a corresponding liability "Reinsurance Premium payable to Reinsurers" and hence to assume that said premium is Assessee’s income is fallacious.
CIT(A) has rightly held that, when assessee is merely a broker and does not have any ownership on the premium amount transferred to NRR, then there was no liability to deduct TDS for remitting the said amount to the co-broker in Singapore.
AO’s contention that assessee is DAPE of AB Singapore - The assessee has earned brokerage during FY 2015-16 (AY 2016-17) from 275 transactions for doing brokerage business with various NRRs without any involvement of AB Singapore and hence, assessee cannot be recognised as DAPE of AB Singapore.
Applicability of para 8 of Article 5 - As here it is not the case where assessee has any authority to conclude contracts on behalf of AB Singapore and conditions with respect to stock of goods are also not applicable. It is also not a case here that assessee secures order only on behalf of AB Singapore. Thus, Article 5 (8) is not applicable in the present case.
Applicability of Article 5(9) - In any case, assessee is an independent broker under IRDAI and has earned majority of brokerage (73%) from NRRs without having any transaction with AB Singapore or involvement of AB Singapore. Its activities are not wholly or exclusively devoted to AB - financial statements of the assessee for the relevant financial year i.e. FY 2015-16 have been filed. This break up of its revenue was filed before the Ld. CIT (A) as additional evidence which has been accepted by CIT (A)- as seen that assessee received brokerage from more than 76 NRRs and majority of them without involvement of AB Singapore. Thus, the condition of Article 5(9) is also not satisfied.
Thus hold:
Firstly, the assessee and AB Singapore are independent brokers facilitating payments between Cedants and NRRs.
Secondly, the premium paid by the assessee to NRRs through AB Singapore is not the income of AB Singapore, but a remittance of funds received by the assessee from insurer AICI for onward transfer to NRRs.
Thirdly, neither NRR nor co-broker AB Singapore have PE in India and thus, premium is not chargeable to tax in India.
Lastly, the assessee received its brokerage income from more than 76 NRRs and not done work wholly and exclusively for AB Singapore and hence, assessee is not a DAPE of AB Singapore.
Decided against revenue.
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2022 (6) TMI 1383
TP Adjustment - Comparable selection - HELD THAT:- E-Zest Solutions Ltd - we deem it fit and proper to remand this issue back to the file of the CIT (A) for the purpose of considering afresh whether E-Zest Solutions Ltd is having functional dissimilarities with that of the assessee or not. The assessee is directed to produce all the financials including the Annual General Report and other documents to prove that E-Zest Solutions Ltd is functionally dissimilar to that of the assessee.
Comparables Acropetal Technologies (Seg)., ICRA Techno Analytics Ltd. and Persistent Systems & Solutions Ltd. Acropetal Technologies (Seg.) - Admittedly, once the assessee itself is making a case of inclusion of these 3 companies before the lower authorities and the CIT (A) based on the submission of the assessee is passing the order, then it cannot be stated that the assessee is aggrieved by the order passed by the CIT (A). Since the assessee is not aggrieved by the order passed by the CIT (A) with respect to inclusion of these three companies, therefore, the assessee does not have a right to challenge the order of the CIT (A) for exclusion of these companies before us.
Interest on receivables - CIT (A) fixing the interest at 8% - HELD THAT:- Outstanding receivable by the assessee from its AE, is required to be benchmarked, so as to ensure that they should not be any shifting of profit from assessee to its AE.
Application of 8% interest, though in strict sense, would be contrary to the principles of TP analysis as the transfer pricing officer was required to bring the comparable either internal comparable or the external comparable by applying CUP method and then fix the rate of interest on the delayed receivables from the AE. However, with a view to give a quietus to the issue , we are of the opinion that instead of 8% interest rate, rate of interest of 6% be applied on outstanding receivable at the year end .
In our considered opinion, the submission of the assessee that LIBOR+200 points require to be applied, cannot be upheld in these facts of the case , as it will amount to shifting of profit from assessee to its AE, which cannot be countenanced under Chapter X of the I.T. Act. Moreover, the rate of interest on loan transaction ( LIBOR + points ) cannot be equated with delayed receipt of the outstanding amount by assessee from its AE, as both stands on different premises having different purpose and nature. In fact if outstanding receivable are due for a longer period, then assessee would be required to deploy more resources either in the form of debt/equity to meet out the cash flow/working capital requirements. Ground partly allowed.
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2022 (6) TMI 1382
Income deemed to accrue or arise in India - income from Information Technology Support Services and income from Management Services - royalty or Fees for Technical Services (FTS) - HELD THAT:- As relying on assessee's own case [2019 (7) TMI 402 - ITAT PUNE] Extant payment received by the assessee can neither be considered as royalty u/s 9(1)(vi) of the Act nor as fees for technical services and therefore, the same cannot be included in the total income of the assessee. Grounds No. 1 and 2 of the assessee's appeal are allowed.
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2022 (6) TMI 1381
Assessment u/s 153A - incriminating material found at the time of search or not? - HELD THAT:- It is not in dispute that the impugned additions are devoid of any incriminating material whatsoever found at the time of search. There is not even a whisper of any incriminating evidence found at the time of search basis which the AO made the addition. The ratio laid down by the Hon’ble High Court of Delhi in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] squarely apply on the facts of the case. Appeal of assessee allowed.
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2022 (6) TMI 1380
Condonation of delay filling appeal before ITAT - Revision u/s 263 - delay of 581 days - HELD THAT:- Once, the assessment order passed by the AO, went against the assessee, then she consulted a different professional, who advised her to file the appeal against the order of the PCIT u/s.263 which is clearly evident from the fact that in all proceedings, including assessment proceedings before the AO and revision proceedings before the PCIT and consequential assessment proceedings before the AO, she had appeared through her Authorized Representative and filed necessary details.
From the above sequence of events, it is very clear that subsequent filing of the appeal against the order of the PCIT passed u/s.263 is only an afterthought, but not a case of ignorance of law or unaware of provisions in filing of the appeal before the Tribunal against the order of the PCIT u/s.263 - Therefore, we are of the considered view that there is no merit in the reasons given by the assessee in her petition for condonation of delay in filing of the appeal.
As time and again, held that when merits and technicalities pitted against each other, then merit alone deserves to be prevailed, because, if you throw out a meritorious case out of judicial scrutiny on the grounds of technicalities, then you may deprive the right of the petitioner in pursuing their case. Various Courts have held that rules of limitation are not meant to destroy the rights of parties, they are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly, within the time bound prescribed under the Act.
Where, for the reasons beyond the control of the petitioner, the appeal could not be filed, then the Courts are well equipped with power to condone the delay, if the petitioner explains the delay in filing of the appeal with a reasonable cause. However, there is no law or mandate in the Act, to condone the delay in each and every case. But, it depends upon all facts of each case and the reasons given by the parties for condonation of delay.
One has to go by the facts of its own case and the reasons given by the petitioner for condonation of delay. In this case, on perusal of reasons given by the assessee for delay in filing of the appeal, we find that although it appears, the assessee is not deriving any benefit by not filing the appeal within the due date prescribed under the Act, but, from the contents of petition filed by the assessee, we could easily make out a case that the assessee has made an afterthought to file the appeal against the order of the PCIT u/s.263 only when she did not get a favourable order from the AO, consequent to the order passed by the PCIT u/s.263. Therefore, in our considered view, for these vague reasons, such huge delay of 581 days in filing of the appeal, cannot be condoned.
Reasons given by the assessee in her Affidavit does not come under reasonable cause as prescribed under the Act, for condonation of delay. Hence, we reject the petition filed by the assessee for condonation of delay and dismiss the appeal filed by the assessee.
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2022 (6) TMI 1379
Accrual of income - Taxability of maintenance advance in the hands of assessee - assessee received advances from the customers at the time of handing over of the possession of apartments, which is accounted as current liabilities in its balance sheets - HELD THAT:- CIT(A) expressed categorical view that, advances do not partake the character of income and that the maintenance advances received by a sissy cannot be characterised as income unless the maintenance services are rendered. CIT(A) rightly directed the Ld.AO to compute the amount of expenditure incurred out of the search total advances received for the year under consideration which is based on percentage completion method.
Direction issued by the Ld.CIT(A) to the Ld.AO is in accordance with law and cannot be found fault with. Decision relied by the Ld.AO in case of Sundaram Finance Ltd [2012 (9) TMI 373 - SUPREME COURT] are rendered on different facts and are distinguishable with that of assessee in the present case.
We direct the Ld.AO to compute the maintenance attributable for the years under consideration based on the expenditure incurred and the services rendered by the assessee.
Unpaid service tax liability - AO made addition invoking section 43B - AR that the assessee collected amount from its customers, towards service tax liability, however the same was not remitted - HELD THAT:- Section 43B does not contemplate liability to pay the service tax before actual receipt of the funds in the account of the assessee. In our opinion, when the assessee collected the amount, it should not kept it with them and same should be deposited to the Government exchequer within the specified date and time.
Hon'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. [2014 (3) TMI 386 - KARNATAKA HIGH COURT] has categorically held that the assessee would be entitled to deduction of employees' contribution to PF and ESI provided the payment was made prior to the due date of filing of return of income u/s 139(1)
We note that in the event the liability stood discharged by the assessee before filing of the return of income, a liberal view can be adopted in view of the decision of Coordinate Bench of this Tribunal in case of The Continental Restaurant & Café Co [2021 (10) TMI 843 - ITAT BANGALORE].
We also note that Hon’ble jurisdictional High Court in case of Essae Taroka (P.) Ltd [2014 (3) TMI 386 - KARNATAKA HIGH COURT]and Spectrum Consultants India (P.) Ltd. [2013 (7) TMI 414 - KARNATAKA HIGH COURT] has affirmed the above view.
We therefore remand this issue to the Ld.AO, to verify and consider the claim in accordance with the principles laid down in case of Essae Taroka (P.) Ltd.(supra). Ground raised by the assessee stands allowed for statistical purpose.
Admission of additional ground - Disallowance made in respect of the sales tax liability discharged - AO disallowed the same holding that since the demand pertains to AY 2009-10, the same could not be allowed in AY 2010-11 - HELD THAT:- We note that no new documents needs to be verified for adjudicating this ground and respectfully following the decisions of National Thermal Power Co. Ltd. Vs. CIT [1996 (12) TMI 7 - SUPREME COURT] and Jute Corporation of India Ltd. [1990 (9) TMI 6 - SUPREME COURT] we are admitting the additional ground raised by the assessee.
We note that the demand notice was received by the assessee during financial year relevant to the assessment year 2011-12, and the assessee discharged the liability during assessment year 2011-12. We therefore agree with the submissions of the Ld.AR that the disallowance is to be deleted for AY 2011-12 as per the additional ground raised by the assessee in appeal filed for AY 2011-12.
Disallowance of interest u/s 201(1A) by treating it to be penal in nature - as submitted that the interest under section 201(1A) is not penal but is compensatory and does not represent tax of the assessee as it pertains to the tax liability of a third party - HELD THAT:- As decided in Resolve Salvage & Fire India (P.) Ltd [2022 (4) TMI 906 - ITAT MUMBAI] interest was paid for delayed payment of service tax & TDS. The interest for the delay in making the payment of service tax & TDS is compensatory in nature. As such the interest on delayed payment is not in the nature of penalty in the instant case on hand.
The issue of delay in the payment of service tax is directly covered by the judgment of Lachmandas Mathura v. CIT [1997 (12) TMI 16 - SUPREME COURT] in favour of assessee. Thus we hold that the interest paid on delayed payment of TDS u/s 201(1A) is an allowable deduction - grounds raised by the assessee stands allowed.
Disallowance of interest paid to the NBFC u/s 40(a)(i) - AR submitted that though the assessee did not deduct taxes at source on the interest paid to NBFCs, it is submitted that where the payee has paid the taxes directly, no disallowance under section 40(a) would be warranted - HELD THAT:- We remand to the Ld.AO to verify if the payee has paid the taxes on the interest component paid by the assessee. If the submission is found to be correct, the disallowance is directed to be deleted.
Disallowance of depreciation on computer software for non deduction of TDS under section 40(a)(ia) of the Act - HELD THAT:- This issue is covered in favour of assessee by the decision of Hon’ble Karnataka High Court in case of PCIT vs.Tally Solutions (P.) Ltd [2020 (12) TMI 1160 - KARNATAKA HIGH COURT] as held that the depreciation is not an outgoing expenditure and therefore, provisions of Section 40(a)(1) and (ia) of the Act are not applicable. In the absence of any requirement of law for making deduction of tax out of expenditure, which has been capitalized and no amount was claimed as revenue expenditure, no disallowance under section 40(a)(i) and (ia) would be made. Depreciation is a statutory deduction available to the assessee on a asset, which is wholly or partly owned by the assessee and used for business or profession. The depreciation is an allowance and not an expenditure, loss or trading liability.
Disallowance of contributions made towards superannuation fund by the assessee - AO disallowed the contribution made to superannuation fund on the ground that the approval for the same had not been received, while noting that as and when the CIT accords approval, the assessee could claim the deduction - HELD THAT:- We note that the assessee had applied for approval of the fund as on 27/02/2008. The Ld.AR prays for the issues to be remanded to the Ld.AO for due consideration of the approval dated 18.09.2017. The Ld.DR did not object for the submission made by the Ld.AR.
We are therefore remanding this issue back to the Ld.AO with a direction to consider the approval dated 18/09/2017, in accordance with law.
Disallowance u/s 14A - working disallowance u/s 14A by considering the investment which have yielded tax free income - HELD THAT:- We find force in the submission of Ld.AR. As decided in case of CIT vs. Holcim India Pvt. Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT], case of CIT vs. Corrtech Engineering Pvt. Ltd. [2014 (3) TMI 856 - GUJARAT HIGH COURT] and decision of CIT v. Shivam Motors (P.) Ltd. [2014 (5) TMI 592 - ALLAHABAD HIGH COURT] has held that Section 14A of the Act, cannot be involved when no exempt income was earned. The contention of the assessee that, it received dividend only from certain investments has not been controverted by the revenue - we are of the view that disallowance u/s 14A needs to be re-worked on the basis of the investments which have yielded tax free income. We therefore direct the Ld.AO to work out disallowance u/s.14A r.w.r 8D on the basis of investments which had yielded dividend.
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2022 (6) TMI 1378
Assessment u/s 92CA(3A) r.w.s. 153 - time limit for passing the transfer pricing order - HELD THAT:- Since the order passed by the TPO u/s 92CA of the I.T.Act is beyond the period of limitation and bad in law, the addition in respect of international taxation (TP adjustments) stands quashed. Therefore, grounds on merits on TP adjustments, both in assessee’s and revenue’s appeals are not adjudicated.
Foreign tax credit claimed - HELD THAT:- We restore the matter to the A.O. for de novo consideration. A.O. is directed to compute foreign tax credit that is due to the assessee as per law after affording a reasonable opportunity of hearing to the assessee - Grounds allowed for statistical purposes.
Computation of deduction u/s 10A - CIT(A) had directed the A.O. to reduce the impugned expenses from both the export turnover as well as from the total turnover while computing the deduction u/s 10A - HELD THAT:- The directions of the CIT(A) is in accordance with the judgment of HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] - Therefore, we see no reason to interfere with the order of the CIT(A) on this issue. It is ordered accordingly.
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2022 (6) TMI 1377
Suspension of licence of petitioner - failure to carry out due diligence and follow KYC norms in respect of a export for which the petitioner had filed documents - in a consignment of oil tanks in respect of which the documents were filed, 2150 Kgs. of red sanders which, is prohibited for export, was found by the Directorate of Revenue Intelligence.
HELD THAT:- Taking note of the fact that Ext.P4 does not show any reason compelling the authority to take immediate action, it is opined that Ext.P4 can be set aside directing the respondent to reconsider the matter after affording further opportunity of hearing to the petitioner. Accordingly, Ext.P4 order is set aside. Considering the urgency expressed by the petitioner, the respondent shall pass fresh orders within a period of ten days from the date of receipt of a certified copy of this judgment. Though Ext.P4 order has been set aside, it is made clear that the suspension imposed by Ext.P4 will continue to operate till a fresh decision is taken by the respondent.
Petition disposed off.
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2022 (6) TMI 1376
Rectification of mistake - mistake apparent on record in the order on the issue of section 40(a)(ia) - Tribunal had decided the issue as been reversed by the Hon’ble Supreme Court - Tribunal had followed the decision of CIT vs. Victor Shipping Services Pvt Ltd. [2015 (12) TMI 1131 - SC ORDER] which had been reversed by the Hon’ble Supreme Court in the case of Palam Gas Services vs CIT [2017 (5) TMI 242 - SUPREME COURT] HELD THAT:- The judicial precedence provides that when there is a speaking order by the Hon’ble Supreme Court, that, takes the precedence over the simple rejection of SLP by the Hon’ble Supreme Court. The Hon’ble Supreme Court having reversed the proposition laid down in Victor Shipping Services Pvt Ltd (supra) in the case of Palam Gas Services Ltd (supra) that principles become the law of the land from beginning of time. In these circumstances, as clearly there is a mistake apparent on record in the order on the issue of section 40(a)(ia) decided by the Tribunal the same stands recalled and the issue is restored to the file of the Tribunal for readjudication. The date of hearing is fixed on 24.8.2022. As the date is pronounced in the open court, the notice of hearing is dispensed with.
M,.A. of the revenue is allowed.
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2022 (6) TMI 1375
Valuation - inclusion of amount received on account of VAT subsidy shown in notes to the profit and loss account in assessable value - divergence of views - HELD THAT:- In view of the difference of opinion between the Members of the Division Bench, the following questions arise for consideration by the ld. Third Member:-
(A) Whether in the facts and circumstances, the capital/wage subsidy in question reduces the selling price of goods, as held by the Member (Technical).
OR
As held by the Member (Judicial) that the subsidy in question does not reduce the selling price of the goods. Nor does it amount to indirect flow from the buyer to the seller.
(B) The amount of subsidy under dispute is an independent amount of subsidy received from the Government on the basis of the capital investment and employment generation/wages paid and thus, is not an additional sales consideration, as held by the Member (Judicial).
OR
The amount of subsidy under dispute is not an independent amount received by the appellant. Rather it is computed with reference to the sales tax paid and thus, is an additional consideration for sales, as held by the Member (Technical).
(C) The facts in this appeal are similar to the facts in the case of COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II VERSUS M/S. SUPER SYNOTEX (INDIA) LTD. AND OTHERS [2014 (3) TMI 42 - SUPREME COURT], as held by the Member (Technical)
OR
The facts in the present case are difference and hence, ruling of the Apex Court in the case of Super Synotex India Ltd. is not applicable.
(D) Under the facts and circumstances, the appellant have received VAT subsidy (directly affecting the selling price of the goods), as held by the Member (Technical)
OR
It is not a case of VAT subsidy, affecting or depressing the selling price of the goods, as held by the Member (Judicial).
(E) The provisions of Section 9 of Rajasthan VAT Act has not been considered in the case of Shree Cement Ltd. [2018 (1) TMI 915 - CESTAT NEW DELHI] leading to erroneous judgment in the said case, as held by the Member (Technical)
OR
The provisions of Section 9 of Rajasthan VAT Act 2003 has got no application in the facts of the present case, as held by the Member (Judicial).
(F) It is an appropriate case for reference to the ld. Third Member on the questions framed by the ld. Member (Technical)
OR
There is no case for reference to the Ld. Third Member and the appeal is fit to be allowed, as held by the Member (Judicial).
Registry is directed to place this appeal before the Hon’ble President for appropriate orders and/or for appointing the 3rd Member to hear and decide the questions on the difference of opinion between the Members of the Division Bench.
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2022 (6) TMI 1374
Rejection of books of accounts - action of the AO in invoking the provisions of section 145(3) of the Act and rejecting the trading results of the assessee - HELD THAT:- In the present case, admittedly and undisputedly, there were no major defects pointed out by the AO warranting the rejection of books of account.
The entire case of the AO is built around the suspicion of the assessee making huge cash sales of jewellery during demonetization period wherein each cash sale was below Rs.2 lacs each, not requiring submission of Permanent Account Number of the buyer of such jewellery items. However, it remains beyond doubt that all the sales had been routed through regular books of account and there is no dispute regarding availability of stock also. Therefore, there appears no justifiable reason for the AO to reach a conclusion that the books of account had to be rejected.
No incriminating material had been unearthed during the course of search which would indicate that the assessee had either concealed sales in quantity or price-wise and, therefore, we do not agree with the action of the Ld.CIT(A) in upholding the rejection of books of account by the AO. Accordingly, ground No.3 of assessee’s appeal stands allowed.
Restricting gross profit percentage to 20% - CIT(A) did provide some relief to the assessee by restricting the addition on account of gross profit to 20% of sales instead of 38.63% as made by the AO. However, while doing so the Ld.CIT(A) also conveniently ignored that the assessee’ gross profit rate for financial year 2014-15 was 15.75% and for financial year 2016-17, it was 16.28%. At most, even if the profits had to be estimated, the Ld.CIT(A) could have proceeded to work out an average rate of profit for these three years rather than applying gross profit rate of 20% arbitrarily and without any justification. This adhoc confirmation of addition, in our view, is not sustainable as it lacks any reasoning and is not supported by any data/figures. Therefore, in such a situation, we have no option but to set aside the order of the Ld.CIT(A) on the issue and direct the AO to delete the addition.
Addition u/s 68 - unexplained cash credit (being alleged undisclosed money introduced by the assessee as sales) - HELD THAT:- CIT(A) has observed that there is merit in the arguments of the Ld. AR that once the revenue has been duly recorded in the books of account, the same cannot be treated or said to be unaccounted money or income and that there was no allegation against the assessee that these sales were not recorded in the books at all and the only allegation is that they were entered on a later date. The Ld.CIT(A) has also given a finding that on perusal of the day-to-day cash book, it is seen that there was sufficient cash in hand on those dates and even if the sales were taken out, the cash in hand did not become negative. No perversity has been pointed out by the CIT DR in this finding of the Ld.CIT(A) even during the course of arguments before us - Decided against revenue.
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2022 (6) TMI 1373
Disallowance of mark to market loss - whether loss arising out valuation of stock-in-trade (also termed as marked to market loss in this case) is allowable as deduction or not? - HELD THAT:- As relying on case of M/s. Edel Commodities Limited [2018 (4) TMI 562 - ITAT MUMBAI] we hold that the claim made by the assessee is allowable as deduction. Accordingly, we direct the AO to delete this disallowance.
MAT computation - AO has added the above said amount to the net profit while computing book profit u/s 115JB of the Act treating it as “contingent liability” - HELD THAT:- In the preceding paragraph, we have held that it is not a contingent liability and accordingly we direct the AO to delete addition of the above said amount made in computing book profit u/s115JB of the Act.
Disallowance made u/s 14A - HELD THAT:- There is no dispute with regard to the fact that the assessee did not earn any exempt income during the year under consideration. The Hon’ble Delhi High Court has held in the case of PCIT vs. IL & FS Energy Development Company Ltd (2017 (8) TMI 732 - DELHI HIGH COURT] has held that the no disallowance u/s 14A of the Act was called for in case of no exempt income earned by the assessee. Accordingly, we direct the AO to delete the disallowance made u/s 14A of the Act for computing total income under normal provisions of the Act.
AO has added the amount of disallowance computed as per Rule 8D r.w.s. 14A of the Act to the net profit while computing book profit u/s 115JB - In the instant case, the assessee has not earned any exempt income. Hence the question of making any addition under clause (f), referred above, does not arise. Accordingly, we direct the AO to delete the addition made to the net profit while computing book profit u/s 115JB.
Adjustment made in respect of specified domestic transactions - A.R submitted that the clause (i) of sec. 92BA has been omitted by the Finance Act, 2017 w.e.f. 1st July, 2017 without making any ‘saving clause’ and hence the said omission shall have retrospective effect as if the said clause was never in existence - HELD THAT:- As relying on TEXPORT OVERSEAS (P.) LTD. [2019 (12) TMI 1312 - KARNATAKA HIGH COURT], MAHINDRA TWO WHEELERS LTD [2022 (8) TMI 482 - ITAT MUMBAI] we hold that the reference made to TPO under clause (i) of sec.92BA is not valid and consequently, the transfer pricing adjustment made in respect of Specified Domestic Transaction is liable to be deleted. Accordingly, we direct the AO to delete the transfer pricing adjustment.
As issue is required to be examined afresh in terms of sec. 40A(2)(a) of the Act. Accordingly, we restore this issue to the file of the AO with the direction to examine the claim of expenditure mentioned above in terms of the provisions of section 40A(2) of the Act.
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2022 (6) TMI 1372
Capital gain - CIT(A) adopting the fair market value u/s 50C - difference in sale consideration and guidance value - HELD THAT:- AO considered the guideline value adopted for registration as sale consideration to determine the capital gain. There is a substantial difference between the value adopted for registration and valuation made by different valuers. The argument of the D.R. is that the assessee has not furnished copy of registered valuer report to AO at the time of assessment and only at the time of first appellate proceedings, he has produced it.
Hence, no credence has been given. In our opinion, an appropriate opportunity ought to have been given to the assessee to reconcile the value mentioned by DVO and registered valuer and also with regard to the method of valuation followed by the different valuers. As submitted by A.R. that DVO has considered the value of certain property, which was not in the impugned sale deed which has to be excluded while determining the FMV of the impugned property. We also direct the authorities to bring more comparable cases for deciding the issue. With this observation, we remit the entire issue to the file of AO for reconsideration in the light of above.
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2022 (6) TMI 1371
Income from other sources - compensation received by the appellant against compulsory acquisition of agricultural land along with interest - AO treated the interest u/s 56(2)(viii) r.w.s. 145A(b) and allowed deduction u/s 57(iv) - HELD THAT:- CIT(A) grossly ignored the judgment of Hon’ble Supreme Court in the case of CIT Vs. Ghanshyam (2009 (7) TMI 12 - SUPREME COURT] and difference between interest received u/s 28 and Section 34 and interest received u/s 37 of the Income Tax Act, 1961. The interest u/s 28 is a part of the amount of compensation whereas interest u/s 34 is only for delay in making payment after the compensation is determined. Interest u/s 28 is a part of enhanced value of the land.
The certificate from the DRO has been given to the AO during the assessment proceedings and could not have been treated as additional evidence. In any case, if a request has not been made under Rule 46A, the ld. CIT(A) being the senior functionary of the Department is expected to guide the assessee instead of summarily dismissing the appeal. In case the veracity of the certificate is suspected, the same could have been enquired from the DRO and in case of any falsification, prosecution provision could be invoked against the assessee/AR who has filed the certificate. Decided in favour of assessee.
Unexplained addition to the capital account - As we find that the amount of Rs.3.91 Cr. and Rs.3.80 Cr. has been reconciled and the capital account as on 31.03.2013 stands at Rs.6.31 Cr. which includes the compensation received. Hence, the addition is liable to be deleted.
Appeal of the assessee is allowed.
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2022 (6) TMI 1370
Income taxable in India u/s 44B with respect to its shipping income - freight collections derived from operation of ships in international traffic - HELD THAT:- As decided in own case [2021 (8) TMI 1355 - ITAT MUMBAI] after examining the facts and the decision rendered in the case of CIT vs. Balaji Shipping (UK) Ltd [2012 (8) TMI 681 - BOMBAY HIGH COURT] uphold the plea, of the assessee and direct that benefit of article 8 must be extended to entire freight receipts-irrespective of whether the earnings are relating to feeder] vessels or by the ships in international traffic. The assessee gets the relief accordingly
Benefit of Article 8 of the India - UAE Tax Treaty on Inland Haulage Charges - Denial of benefit and taxing the same at 10% as per Rule 10 of the Income-tax, Rules 1962 - HELD THAT:- Though Article-8 of India -UAE DTAA does not spell out explicitly that rental of containers include trailers and related equipment for the transport of container as has been mentioned in India-Belgium DTAA Article 8(2)(c) or India-Denmark DTAA , Article-9(4)(b), nevertheless, considering the nature of activity and the services provided by the assessee to its customers vide a composite Bill of Lading it can be safely inferred that the activity of Inland Haulage is directly connected with transportation of goods in international traffic. The leg of transportation of containers from Inland to Port for further transportation in International traffic is a composite activity for which single Bill of Lading is issued by the assessee.
No hesitation in holding that Inland Haulage Charges earned by the assessee are inextricably linked to shipping business in international traffic. The activity of shipping container from inland to the Port for further shipping it to international traffic is an integral part of operation of ships. Hence, ‘IHC’ cannot be disintegrated from profit derived from shipping business as envisaged under Article -8 of India-UAE DTAA. Ergo, ‘IHC’ are not taxable as business profit in India. The ground No.5 of appeal is allowed.
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2022 (6) TMI 1369
Capital gain - Transfer of right in asset - land was converted into stock in trade in earlier assessment year - agreement between the assessee and Unitech is not an agreement for sale and there is no consideration - HELD THAT:- Where assessee converted his land into stock in trade and thereafter a development agreement was entered into by the assessee with the developer, the capital gain arising from the conversion of land into stock in trade is assessable in the previous order in which the property is sold by the assessee and not in the year of development agreement.
We are of the firm belief that the assessee has not transferred his right to Unitech there is no transfer of any right in title or interest in stock in trade during the year under consideration and hence no income accrues to the assessee we, therefore, decline to interfere with the findings of the CIT(A). The appeal filed by the revenue is accordingly dismissed.
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