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Showing 281 to 300 of 420205 Records
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2024 (11) TMI 1198
TP Adjustment - Rejection of comparable companies selected by the assessee in its TP study analysis - HELD THAT:- Unfortunately, the assessee has sought inclusion of these companies in the TP Study Report, however, for the reasons best known to the TPO, it was stated that these companies were not meeting the search matrix and accordingly, they were rejected by the TPO. Since the assessee has shown us that these companies are appearing in search matrix, therefore, it would be in the interests of justice the issue of inclusion of these companies are remanded back to the file of TPO with a direction to examine whether these companies are functionally comparable with the assessee company or not after applying the applicable filters. If these companies were functionally comparable, then the TPO is directed to include these companies for the purpose of computing the ALP. Thus, these grounds are allowed for statistical purposes.
Rejection of comparable on the ground of higher turnover - There is no dispute that while selecting the comparable companies, the TPO has applied one filter of turnover but only minimum turnover filter of Rs. 1 crore was applied by the TPO and no maximum turnover filter was applied. Once the turnover is applied as a filter while selecting the comparables, then there should be a consistent parameter of such turnover filter like 10 times of the turnover of the assessee in both higher as well as lower side. Therefore, applying one side turnover filter by the TPO is not proper and justified.
Accordingly, this issue of applying the turnover filter is set aside to the record of the TPO for carrying out necessary exercise for exclusion and inclusion of the comparable companies in the set of comparables while determining the ALP. We may clarify that once the turnover filter is applied as 10 times on the higher side and 1/10th of the lower side, then the same would be applicable to the entire set of comparables and not on the selective companies.
Treating deferred receivables as international transaction and adjustments made by the TPO on notional interest - To maintain rule of consistency, this issue is remanded to the record of the AO/TPO for applying savings Bank rate of 6%on the deferred receivables after allowing credit period of 60 days. This issue is partly allowed.
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2024 (11) TMI 1197
Addition of unexplained cash credit into bank account u/s 68 - rejection of books of accounts - HELD THAT:- On perusal of the judgment in the case of CIT vs. Bahubali Neminath Muttin [2017 (1) TMI 1375 - KARNATAKA HIGH COURT] it is revealed that in the said case the books were rejected u/s 145(3) by the Ld. AO and at the same time the addition on account of trade creditors, also for the purpose of arriving at a closing stock, books of accounts of the assessee were relied, whereas in present case, Ld. AO have not resorted to the estimation of profit of the assessee, also the books of account of the assessee are rejected, but the quantification of additions qua the cash deposits during the demonetization period was as per undisputed information available from the bank statement of the assessee. It can be safely concluded that the rejected books of accounts have never been relied upon by the Ld. AO.
The plea of assessee having been filed the annual VAT returns without filing the quarterly returns after one year cannot support, it was just to recharacterize the sham transaction into a genuine deal. Even the ITR for preceding year AY 2016-17 was filed by the assessee on 15.03.2017, much after the demonetization period, shows such steps are taken to cover bogus transactions. Further, nothing has been brought on record to show that the assessee is functioning with the similar magnitude in the business of trading of pulses in the preceding and succeeding year, thus, the finding of the Ld. AO on the basis of large transactions with the buyers without PAN / unidentifiable and were not produced before the Ld. AO, during the year of demonization and huge cash deposits.
CIT(A) had rightly appreciated the facts that the total turnover of assessee of Rs. 93.17 lac includes cash deposit of Rs. 75.69 lacs i.e., almost 81%, during the period 13.11.2016 to 16.12.2016, further the month wise stocks, sales and purchase along with details of cash deposits were not furnished by the assessee. Another aspect observed by the revenue authorities was that the most of transactions were exclusively executed with the sister concern of the assessee, which could not be located by the Income Tax Inspector during the physical verification. In absence of plausible explanations qua the addition’s u/s 68 on account of fictitious purchase and sale transaction and personal cash deposit the additions were confirmed by the Ld. CIT(A) correctly.
Also applicability of section 115BBE shall apply as per law. Decided against assessee.
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2024 (11) TMI 1196
Characterization of receipt - Taxability of arbitral award - taxability of the principal portion of the compensation received - pursuant to the directions of DRP passed the final assessment order wherein the addition in respect of the aforesaid sum was made by holding that the receipts are in the nature of income from other sources under the Act as well as “Other Income” under Article 22(3) of India-Japan Tax Treaty and brought the same to tax - HELD THAT:- The principal portion of the compensation received pursuant to an Arbitral Award in the sum would have to be construed only as business income of the assessee as it arises out of contractual obligation of the business. Undisputably there is no PE for the assessee in India. Hence in view of Article 7 of India Japan Tax Treaty, the same would not be chargeable to tax in India.
Taxability of interest received on the compensation arising out of an Arbitral Award - We find it difficult to comprehend how the interest receipts by the assessee can be treated as receipts which flow to it de hors the business which is carried on by it. In our view, the interest payable to it certainly partakes of the same character as the receipts for the payment of which it was otherwise entitled under the contract and which payment has been delayed as a result of certain disputes between the parties.
It cannot be separated from the other amounts granted to the assessee under the award and treated as “income from other sources”. Respectfully following the same, the interest portion also had to be treated as business income of the assessee and in the absence of PE in India, the same would not be chargeable to tax in India as per Article 7 of India Japan Tax Treaty.
No hesitation to hold that the compensation received by the assessee pursuant to an Arbitral Award would have to be construed only as business income of the assessee and in the absence of any PE of the assessee in India, as per Article 7 of the India Japan Tax Treaty, the same would not be chargeable to tax in India. Accordingly, the Ground raised by the assessee are allowed.
Double deduction of tax - We find that assessee had already offered interest income to tax in the return of income. AO by adding the total compensation amount had made double addition as admittedly the said figure is included in the total compensation amount. Since the fact of double addition is proved and established beyond doubt, we direct the AO to delete the addition while computing the total income of the assessee in the instant case. Accordingly, the ground raised by the assessee is allowed.
Penalty proceedings u/s 270A - Since the entire additions made by the learned AO are hereby directed to be deleted, the penalty proceedings would have no legs to stand. Accordingly, ground is allowed.
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2024 (11) TMI 1195
Fee for Technical Services (FTS) - Income deemed to accrue or arise in India - beneficial provisions under India-USA DTAA - Assessee earned income from license of software where it provides the right to use the computer software license through End User License Agreements (EULAs) / reseller agreements to Indian customers which in its opinion, was neither taxable u/s 9(1)(vii) of the Act nor under Article 12 of the India-USA treaty - HELD THAT:- We find that the reliance placed by the assessee on the decision of Engineering Analysis Centre of Excellence Pvt. Ltd. [2021 (3) TMI 138 - SUPREME COURT] is well founded wherein the transaction of the assessee is specifically covered under the second category of software sale stated in the said decision and such sale of software as end-user model or a reseller model granting non-exclusive restrictive license model would not be covered in the definition of royalty as per DTAA and accordingly not taxable in India.
AO had relied on the agreement entered into with DXC Technology India Private Limited, wherein a separate clause for providing technical support services was present. In this regard, the assessee had submitted that the services rendered towards maintenance and support are only ancillary to the sale of software license and not any additional services rendered to Indian customers.
We find that in any event, the receipts by the assessee from DXC Technology India Private Limited is only Rs 1,20,931/- which constitute 0.11% of the total receipts. Therefore, the learned AO erred in concluding that the whole receipts of the assessee would fall under the same category of technical services, ignoring the fact that 99 percent of the receipts were from two major parties with whom assessee had merely entered reseller agreement without having any provision for technical services.
Article 12 of India US treaty defines fee for technical services and it insists that unless the technical services rendered result in “making available” technological support, technology, technical plan or design etc., only then the said services could be construed as fee for technical services so as to be taxable under the India US treaty. In the instant case, nowhere the lower authorities could bring with cogent evidence on record that the “make available clause” is duly satisfied so as to enable the end user to use the technology on his own. Hence the said services could not be construed as FTS as per Article 12(4)(b) of India US treaty.
Assessee had split its revenue into two components i.e license fees and the support fees and that the support fees are much higher than what has been offered now by the assessee - Assessee submitted that agreements entered into with DXC Technology India Pvt Ltd, JNR Management Resources Pvt Ltd, Adweb Technologies Pvt Ltd and Safe Cyber Solutions & Services Pvt Ltd. With respect to remaining customers, the assessee submitted that these parties agreed to the standard terms via “click through” agreements. The standard terms of these agreements were also furnished before the learned DRP by the assessee.
Assessee submitted that the Indian AE does not provide any technical services relating to software sale to the customers in India. We find that the earning of the Indian AE has no relevance to the issue in dispute before us. The learned Assessing Officer had stated that the Indian AE is rendering FTS for Indian customers. We find that there is no specific agreement in place between the AE and its Indian customers. Hence we are unable to comprehend ourselves to accept to the contention of the revenue that the services rendered by Indian AEs are FTS.
We hold that the assessee was duly justified in treating the receipts as exempt from tax both under the Act as well as under the treaty in the facts and circumstances of the instant case. Accordingly, the grounds raised by the assessee are allowed.
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2024 (11) TMI 1194
Taxability of receipts towards repairs and maintenance services rendered by the assessee - "Fee for Technical Services" (FTS) u/s 9(1)(vii) of the Income Tax Act or the DTAA between India-Singapore - 'make available' clause - assessee provides repair and maintenance service for aircraft equipment to Indian customers and primary business of the Assessee for which the assessee charge repair and maintenance fees - DR pleaded that the ld AO had applied “source rule” in the instant case and stated that services of Airbus are rendered in France which is in public knowledge
HELD THAT:- We find DRs argument to be completely absurd and devoid of merit in view of the fact that no consideration was received by the assessee from Airbus. Further, this was not even the case of the ld AO for treating the receipts as FTS in the hands of the assessee. We further find that the issue in dispute is squarely covered in the case of Goodrich Corporation [2024 (8) TMI 1489 - ITAT DELHI] which is a sister concern of the assessee, wherein, exactly the identical issue was subject matter of consideration as held that the repairs & maintenance services are 'not made available' to the clients so that in future they can repair & maintain their own. There is no transfer of technology, no transfer of skill or knowledge or processes. There is no imparting of experience or benefit. The Id. DRP wrongly interpreted that the 'enduring benefit' gained by the client by the way of repairs & maintenance is akin to 'make available' which cannot be accepted. As such 'make available' clause is not satisfied, the services cannot be treated as FTS as per India-USA DTAA.
We hold that the revenue earned by the assessee from rendition of repairs and maintenance services of aircraft equipment cannot be construed as FTS both under the Act as well as under the treaty. Accordingly, Ground Nos. 4 and 5 raised by the assessee are allowed.
Chargeability of interest u/s 234A and 234B - If the return of income is filed beyond the prescribed due date u/s 139(1) of the Act, then interest u/s 234A of the Act shall be leviable - AO is directed to examine this fact and decide accordingly. The chargeability of interest u/s 234B of the Act would be consequential in nature.
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2024 (11) TMI 1193
Denial of Exemption u/s 11 - Applicability of Section 2(15) - assessee is systematically exploiting its property in commercial way by rendering its services in relation to business of parties to whom it is allowing its space to be utilized commercially like exhibitions of commercial entities, professional artists, corporate meetings, functions etc. - as AO held that the assessee has been using its space for other parties for various purposes which was not related to the objects of the trust and therefore not incidental to the attainment of the objects of the trust - also the assessee has not maintained separate books of accounts and separate balance sheet for these income receipts as required under proviso Section 11(4)A
HELD THAT:- As clear from case law Ahmedabad Urban Development Authority [2022 (10) TMI 948 - SUPREME COURT] observation that while actually carrying out the objectives of the general public utility, if some profits are generated, it cannot be granted exemption provided the quantitative limit of 20% under 2nd proviso to Section 2(15) of the Act for the receipts from such profits is not exceeded?
The prohibition against carrying on business or service relating to business is not attracted - if the quantum of such profits does not exceed 20% of its overall receipts. These facts and aspect of the case has not been adjudicated upon either by the Ld. AO or by the Ld. CIT(A). Hence, these facts need to be examined by the Ld. AO, therefore we agree with the arguments advanced on behalf of the revenue by the Ld. DR that matter needs to be restored to the Ld. AO.
For the above discussions and the submissions made on behalf of parties, the impugned order is accordingly set aside and matter is restored to the file of the Ld. AO for deciding afresh keeping in mind the ratio of the judgment Ahmedabad Urban Development Authority (supra) as discussed.
Appeal filed by the revenue is partly allowed for statistical purposes.
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2024 (11) TMI 1192
Bogus commodity loss - transaction of purchase and sale of shares effected between the two parties as a mere accommodation entry - capital gain returned by it on the transaction of the sale of land was a mere accommodation entry which it had provided to M/s. Ardor Overseas Pvt. Ltd. - statement of the Directors relied upon - HELD THAT:- Revenue’s investigation has revealed the entire modus-operandi of the transactions. And the unusual facts & circumstances of the purchase and sale transaction coupled with the modus-operandi revealed which is corroborated by the entire money trail revealed from and back to M/s. Ardor Overseas Pvt. Ltd. through M/s. Matrix International, seals the case of the Revenue of the impugned transactions being the mere accommodation entry for M/s. Ardor Overseas Pvt. Ltd. and M/s. Nikshal Properties Pvt. Ltd. being only a conduit therein. M/s Ardor Overseas Pvt. Ltd. has made no attempt whatsoever to negate the admission by the directors of M/s Nikshal Properties Pvt. Ltd and the other parties involved in the transaction of the same being only an accommodation entry.
The admission of the transaction being accommodation entry by the directors/ parties of M/s Nikshal Properties Pvt. Ltd. coupled with the revelation of the modus operandi adopted for this accommodation entry duly corroborated, sufficiently make out a case against M/s Ardor Overseas Ltd. and the onus shifted to them to prove otherwise of the transaction not being an accommodation entry. Mere filing of documents of purchase and sale of land, without controverting the factual averments of the modus operandi of the transaction or for that matter the admission by the directors/ parties of M/s Nikshal Overseas Pvt. Ltd. of the transaction being accommodation entry, we hold, does not discharge the onus of the assessee to prove the genuineness of the transaction.
We concur with the Ld.CIT(A) in the case of M/s Ardor Overseas Pvt. Ltd. holding the transaction of purchase and sale of shares effected between the two parties before us as a mere accommodation entry for the benefit of M/s Ardor Oversea Ltd. Accordingly, we confirm the order of the ld. CIT(A) in the case of M/s Ardor Overseas Pvt. Ltd. reducing the cost of land acquired by M/s. Ardor Overseas Pvt. Ltd. by Rs.35 crores and treating it cost to be Rs.8.5 crores only..
Unexplained credit addition - addition made by the AO in the hands of AOPL of loan received from M/s Matrix International treating it as unexplained credit - The reason being the case of the Revenue itself is that M/s Matrix International is only a conduit of M/s AOPL for enabling purchase of land at many times its actual price. That M/s Matrix International is a proprietary concern of the director of AOPL who has transferred funds from M/s Matrix for purchasing land at inflated price and also taken the extra money back through the same route. Money in effect, for funding the bogus purchase transaction from Nikshal Properties, moved from and to M/s Matrix International. And from Matrix International to M/s AOPL as loan. This modus operandi was found to be true. We have agreed with the Revenue on this count while adjudicating the issue of genuineness of transaction of land sold/purchased between AOPL & NPPL, above.
There is no doubt of the source of money coming into AOPL from M/s Matrix International being genuine. CIT(A), we hold, has rightly deleted the addition made u/s 68 of the Act in the hands of AOPL.
Interest disallowance relating to interest paid on unsecured loans from M/s. Matrix International - Since the amount introduced by way of unsecured loans from M/s. Matrix International, has been held to be genuine, we have no hesitation in deleting the disallowance of interest made u/s 36(1)(iii) of the Act.
Disallowance u/s 14A - The fact on record is that no exempt income was earned by the assessee. It is settled law now that where no exempt income is earned, no disallowance u/s 14A is warranted. Therefore, the deletion of disallowance of expenses u/s 14A of the Act by the ld. CIT(A) in the case of M/s Ardor Overseas Ltd. is hereby confirmed by us.
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2024 (11) TMI 1191
Disallowance of expenditure u/s 14A r.w.r. 8D - as argued assessee has not earned any exempt income during the captioned assessment years - basis for the impugned disallowance by the AO is the amendment brought in the Act which according to the AO was effective from the AYs under consideration whereas the contention of the assessee is that the amendment is prospective and is effective from 01/04/2022 - HELD THAT:- After finding that the assessee has not earned any exempt income during the captioned AYs, we are of the considered view that the issue is no more res integra in light of plethora of judgments of the various Hon’ble High Courts.
The Hon’ble High Court of Delhi in the case of PCIT vs. McDonald’s India (P) Ltd. [2018 (11) TMI 1057 - DELHI HIGH COURT] had the occasion to consider a similar issue and decided in favour of the assessee and against the revenue.
Contention of the revenue that post amendment, brought by Finance Act, 2022, the provisions of Section 14A has been amended and disallowance can be made even if there is no exempt income - The Hon’ble High Court of Delhi in the case of PCIT vs. Era Infrastructure (India) Ltd [2022 (7) TMI 1093 - DELHI HIGH COURT] has held that “Amendment made by Finance Act, 2022 to section 14A by inserting a non-obstante clause and Explanation will take effect from 1-4-2022 and cannot be presumed to have retrospective effects”. Moreover, within the memorandum explaining the provision of Finance Bill, 2022, it has been categorically mentioned that “This amendment will take effect from 01/04/2022”. Accordingly, appeals of the assessee are allowed.
Addition on account of ESOP expenses - CIT(A) deleted the additions - HELD THAT:- Since the decision of the Special Bench of the ITAT Bangalore in Biocon Ltd [2013 (8) TMI 629 - ITAT BANGALORE] has been affirmed by the Hon’ble Karnataka Hight Court [2020 (11) TMI 779 - KARNATAKA HIGH COURT] which has been rightly followed by the ld. CIT(A), we do not find any reason to interfere with the findings of the ld. CIT(A). Accordingly, the captioned appeals by the revenue are dismissed.
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2024 (11) TMI 1190
Addition u/s 68 - unexplained cash deposits during the demonetization period - HELD THAT:- Assessee has submitted detailed submissions before the AO that the assessee has regular cash sales and deals only cash sales and regularly deposited the same in the bank and in support of the same, assessee has submitted month-wise cash sales and cash deposits in the bank.
It also disclosed the cash sales during demonetization period and cash deposits. Assessee also submitted comparative chart of cash sales and cash deposits during the year in the form of chart before the AO and demonstrated that all the cash deposits are only out of cash sales.
AO rejected the same by making certain analysis in the assessment order and further observed that the SBN was banned from 09.11.2016 to use in general market except to meet out some basic necessities and proceeded to make the addition u/s 68 of the Act for total cash deposits made by the assessee during demonetization period.
As AO has rejected the cash sales during demonetization period and also observed that SBN was banned from 08.11.2016 and technically rejected the sales from 09.11.2016 with the observation that the assessee should not have accepted the SBN after 08.11.2016. The abovesaid observation of the Assessing Officer is not proper considering the fact that as per the Ordinance No.10/2016 dated 30.12.2016 the prohibition of holding SBN was after 31.12.2016 as per Section 5 of the Ordinance not 08.11.2016. This is supported by RBI Circular on demonetization 2016. Therefore, we are inclined to dismiss ground no.1 raised by the Revenue.
Salary expenditure claimed by the assessee paid to brother of the Director/Satya Prakash Sharma - HELD THAT:- Satya Prakash Sharma is a regular employee and key employee of the assessee and whatever salary received by him is properly disclosed in its return of income not only during this year but also in the past which was accepted by the Revenue. Therefore, the disallowance made by the Assessing Officer in the name of Satya Prakash Sharma is not justified and we are inclined to accept the findings of ld. CIT (A) by considering the fact that it is a family owned business.
Coming to the other salaries received by the sister-in-law of the Director and wife of the Director- No evidence was brought on record to show that they are employees of the company and no evidence was brought on record to show their rendering of the services in the company. During the hearing, we directed the ld. AR to bring on record appointment letter and qualification of these employees. Even before us, nothing was submitted till now. We are inclined to treat the salary paid to sister-in-law and wife of the Director as unsubstantiated and accordingly, salaries paid to them are sustained as disallowed. The grounds raised by the Revenue are partly allowed.
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2024 (11) TMI 1189
Assessment u/s 153A - Unexplained investment in construction of Hotel building - during the course of search proceedings, incriminating documents regarding investment in the construction of Hotel building were found and seized from the premises of the assessee and the valuation of building was done by DVO - CIT(A) deleted addition - HELD THAT:- Action of revenue challenging the addition has no merits and lacks the jurisdiction of the AO u/s. 153A of the Act because the material found in the search of any other person than the assessee in appeal cannot be considered in the assessment under 153A of the assessee. Even that finding of the ld. CIT(A) in the case of the assessee has been decided in detailed in the appeal of the assessee for A. Y. 2010- 11 wherein the ld. CIT(A) categorically held that “if any income on this count, is liable to be assessed in the hands of the partnership firm and accordingly, the appellant succeeds on this issue in these terms.”
Bench further noted that CIT(A) considered the submission and allowed the ground of the assessee. Further, it is noticed that ld. CIT(A) after considering the assessment order, documents and judgments placed on record, remand report and submissions of the assessee passed a detailed and reasoned order. Moreover, the department has merely challenged the quantum addition and not decision of the ld. CIT(A) with respect to allowance of legal ground no. 1 of the assessee in Form No. 35 wherein the legal ground as to challenging the assessment order as time barred and without jurisdiction was decided by the learned CIT(A) in favour of the assessee - Ground No. 1 raised by the revenue is dismissed.
Undisclosed income from Garden Mahaveer Paradise - CIT(A) after considering the assessment order, documents and judgments on record, remand report and submissions of the assessee passed a detailed and reasoned order wherein we find no reason to interfere in his order. In this view of the matter, the Ground No. 2 of the Department is dismissed.
Unexplained investment u/s 69 in respect of construction of residential house property - Assessee is engaged in the business of sale of construction material viz. Timer, Plywood, Sunmica etc, hence, the assessee is well conversant with various construction persons/business viz. Architects, Builders, Contractors, Carpenters, Other Construction material suppliers etc. As a result, the assessee has taken good advantage of his contacts in construction line, material goods as well as construction services, resulting in further reduction in construction costs to a significant extent. Hence the assessee is further able to save around 10% of the construction costs in this regard.
No discrepancy was pointed out by the AO in the registered valuer report, meaning thereby, it was duly accepted otherwise discrepancies have been pointed therein. Moreover, no further opportunity of being heard was provided in respect of variations pointed out in the case of registered valuer report and DVO report. Instead, AO made the addition without considering the objections raised by stating that the objections should have been raised before the DVO.
A.O. generally mentioned in the remand report that there are various discrepancies in the valuer report but no specific discrepancy is mentioned in the remand report except PWD rate. CIT(A) considered this and allowed the ground of the assessee considering the assessment order, documents and judgments on record, remand report and submissions of the assessee passed a detailed and reasoned order and we do not find any infirmity in his order. Thus Ground No. 1 read with ground no. 4 of the Department is dismissed.
Scope of incriminating documents/ material - After hearing both the parties and perusing the materials available on record, it is noted that incriminating material and not merely material should be found during the course of search for making addition in respect of unabated assessments. The term “incriminating” is a negative term which means “to provide evidence that somebody is guilty of a crime”. There is no whisper about any incriminating material found during search in the assessment order or in the remand report.
As noted from the query raised by the A.O. as to whether any incriminating material was found and seized during search. Hence, it is evident that no incriminating material was found during search otherwise the AO would have directly asked queries by confronting the incriminating material. As far as construction bills are concerned, these are duly recorded and declared by the assessee as construction investment. These are in the nature of material and not incriminating material. Each and every material found during search cannot be treated as incriminating. The assessing authorities nowhere pointed out any specific bill / document which was not declared by the assessee. CIT(A) duly considered all submissions, judgments, material on record, AO’s remand report and allowed the appeal of the assessee by passing a detailed and reasoned order.
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2024 (11) TMI 1188
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- As the exempt income earned by the assessee is out of the shares/stock held as stock-in-trade, therefore respectfully following the above decision of the Co-ordinate Bench in assessee's own case for AY 2014-15 [2020 (11) TMI 1076 - ITAT MUMBAI], we direct the AO to delete the disallowance made u/s 14A r.w.r. 8D.
Disallowance of interest paid on IPDI Bonds - interest is not admissible as a deduction u/s 36(1)(iii) for the reason that the bonds are of Perpetual nature, High Loss Absorption Capacity – Provisions for write down of principal or conversion to equity on trigger and Discretionary pay out with existence of full coupon discretion - HELD THAT:- We notice that the Co-ordinate Bench in the case of DCIT Vs. State Bank of India [2022 (9) TMI 1640 - ITAT MUMBAI] has considered a similar issue and hold that the interest claimed by the assessee is allowable as deduction u/s 36(1)(iii) and the AO is directed to delete the disallowance made in this regard.
Taxation of recovery of bad-debts - assessee has reduced an amount from its computation of total income on account of recovery in respect of accounts written off of Rural Branches - AO did not accept the submissions made by the assessee with regard to such adjustment held any recovery in respect of accounts written off of rural branches required to be added back in computation of income - HELD THAT:- AR brought to our attention that a similar issue in assessee's own case for AY 2013-14 [2024 (3) TMI 1371 - ITAT MUMBAI] as clear that the AO has held the recovery to be taxable for the reason that the adjustment made to the provision is indirectly charged to P&L A/c. This scenario is considered in the above decision and therefore respectfully following the same, we hold that the recovery of bad-debts which has not been claimed as a deduction u/s 36(1)(vii) in earlier years is not taxable. Accordingly, the AO is directed to delete the addition made in this regard.
Applicability of provisions of section 115JB on assessee bank - HELD THAT:-As in assessee's own case for AY 2015-16 [2024 (9) TMI 789 - ITAT MUMBAI] the question referred to Special Bench is decided in favour of the assessee banks that clause (b) to sub section (2) of section 115JB of the Income-tax Act inserted by Finance Act, 2012 w.e.f. 1-4-2013, that is, from assessment year 2013-14 onwards, are not applicable to the banks constituted as 'corresponding new bank' in terms of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and therefore, the provision of Section 115JB cannot be applied and consequently, the tax on book profits (MAT) are not applicable to such banks.
Addition towards broken period interest - assessee has treated the said amount as revenue and claimed deduction accordingly - HELD THAT:- As relying on Citi Bank [2008 (8) TMI 766 - SUPREME COURT] and HDFC Bank [2014 (8) TMI 119 - BOMBAY HIGH COURT] AO is not correct in making the disallowance towards broken period interest and accordingly we see no infirmity in the order of the CIT(A) in deleting the said disallowance.
Amortization of premium paid on HTM Securities - as per AO specific clauses in RBI Circular with regard to accounting treatment cannot be considered for Income tax purposes and accordingly disallowed the amortized premium claimed by the assessee as a deduction - HELD THAT:- We notice that in the case of HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] while considering the question of law as to whether the ITAT is right in law in holding that the assessee is entitled for deduction with respect to the diminution in value of investment and amortization of premium on investment held to maturity on the ground of mandate by RBI Guidelines thereby ignoring the decision of the Hon'ble Supreme Court in the case of Southern Technologies [2010 (1) TMI 5 - SUPREME COURT] has held that identical question of law was framed and answered in favour of the Assessee by this Court in its judgement of Lord Krishna Bank Ltd. (now merged with HDFC Bank Ltd.) [2014 (7) TMI 997 - BOMBAY HIGH COURT] Decided against revenue.
Taxation of unrealized interest on NPA - AO noticed that the assessee has not recognized the interest income pertaining to the NPA on accrual basis and called on the assessee to furnish details and provide explanations - HELD THAT:- As relying on case of ICICI Bank Ltd. [2022 (8) TMI 1346 - ITAT MUMBAI] we uphold the decision of the CIT(A) in deleting the addition made towards interest on NPA.
Deduction u/s 36(1)(viii) - CIT(A) remitted the issue back to the AO with a direction to recomputed the deduction based on actual interest on eligible advances after deducting cost and expenses on reasonable basis - HELD THAT:- As in assessee's own case for AY 2014-15 [2020 (11) TMI 1076 - ITAT MUMBAI] decided Tribunal vide order [2016 (1) TMI 1427 - ITAT MUMBAI] has remitted the issue back to the file of Assessing Officer to allow the deduction based on actual interest earned from eligible advances after deducting cost and expenses on reasonable basis. The CIT(A) has restored the issue to Assessing Officer to follow the directions of Tribunal. The Id. Departmental Representative has not brought before the Bench any material to controvert the findings of Tribunal in immediately preceding assessment year. Thus, we see no reason to interfere with the decision of the CIT(A).
Sale of Asset to Asset Reconstruction Company (ARC) - assessee has incurred loss on sale of assets to ARC - AO disallowed the said claim rejecting the contention of the assessee that the said amount has been debited in accordance with RBI Guidelines - HELD THAT:- As decided in Bank of India [2017 (11) TMI 1812 - ITAT MUMBAI] following of RBI instruction by a banking company cannot be basis for denying or allowing any claim. It is said that the entries in the books of accounts are not conclusive proof of taxability of any income. What has to be seen is the substance of the transaction. Considering the fact that the assessee had suffered loss while carrying out normal business activity i.e. selling its assets. Therefore, we hold that there was no justification for disallowing the loss suffered in the transaction. We uphold the decision of the CIT(A) in deleting the disallowance made by the AO.
Disallowance on payment made to RBI for not following the internal regulations laid down by the AO - CIT(A) deleted Addition during appellate proceedings - HELD THAT:- It is relevant to note that the Explanation-1 to section 37 provides that any expenditure incurred by the assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to be incurred wholly and exclusively for the purpose of business or profession and no deduction shall be allowed in respect of such expenditure.
In the above decision of IDBI Bank [2021 (2) TMI 608 - ITAT MUMBAI] ratio laid down is that the penalty levied by RBI for violation of internal regulations does not fall within the purview of Explanation-1 to section 37. In the given case, the amount claimed as deduction by the assessee is with regard to the levy by the RBI for non-compliance of internal regulations with respect to maintenance of currency chest. Accordingly, in our considered view, the ratio laid down by the Co-ordinate Bench is applicable to assessee's case also and therefore we see no infirmity in the decision of the CIT(A) to delete the disallowance made by the AO. Assessee appeal allowed.
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2024 (11) TMI 1187
Unexplained Cash deposits during demonetization - Huge sales made by the Assessee from a comparatively smaller station like Parwanoo in comparison to the big station Ludhiana - CIT(A) deleted addition - HELD THAT:- We are of the view that the finding of the ld. CIT(A) is logical and therefore, correct to the extent that once the purchase and stock of the Assessee has been accepted, there is no reasons to deny sale out of such stock and purchase. We also find that the A.O. has not rejected the books of account of the Assessee, so, once cash purchases / sales based on vouchers had been accepted, there is no point in making addition on the deposit of such cash in the bank account, particularity on cash sales.
Assessee has explained the source of such cash deposits and it has also explained that such cash sales are subject to VAT where VAT has been collected and deposited with the Government treasury. In support of her explanation, the Assessee has furnished the documents of the relevant period of VAT returns, copy of trading and profit and loss accounts and balance sheets, which are duly audited.
We find that the AO has accepted the cash sales and has also accepted the VAT collected and deposited in the Government account. Even the Assessing Officer has accepted the VAT returns filed by the Assessee and accepted by the Indirect Taxes Department. Therefore, it clearly shows that the Assessing Officer has not doubted the availability of cash in the hands of the Assessee. Once availability of cash in the hands of the Assessee is accepted, then deposit of such cash in bank account cannot be rejected.
Accepting the cash sale by the Assessee offered to tax, and then addition of same cash deposited in the bank, will amount of double taxation and the same is clearly unsustainable in the law and cannot be justified. Therefore, we find that the explanation offered by the Assessee is genuine, reasonable and duly supported by the documentation, books of account and audited accounts of the Assessee. Therefore, we find no reason to disturb the findings of the ld. CIT(A). Accordingly, Departmental appeal on this issue is dismissed.
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2024 (11) TMI 1186
Seeking equitable treatment with that of other creditors in class - seeking amendment of the Information Memorandum (IM) reflecting the units of the Appellants as cancelled - seeking refund of the amount paid - HELD THAT:- It is to be noted that it is the duty of the RP to collate all the claims filed before him and verify the same from the books of the Corporate Debtor. The submission of the RP agreed upon that it lacks adjudicatory powers on the claims filed before him. The RP could not have reversed the action of cancellation taken by the Corporate Debtor prior to the initiation of CIRP.
Even though the allotment were cancelled by erstwhile management of the Corporate Debtor, the Resolution Plan had provided treatment to the said cancelled allottees. And this Resolution Plan was approved by the CoC with 100% majority in their 12th CoC meeting held on 03.08.2023 - Resolution Plan was prepared and filed by the Resolution Applicant in compliance with Section 30 of the Code and later it has been duly approved by the CoC in its commercial wisdom. It is well settled position of law that the Resolution Plan, duly approved by the COC as per their commercial wisdom has a very limited scope of judicial review and which is circumscribed by the provisions contained in Section 31 of the Code.
In the instant case, the Appellants had already approached UPRERA, seeking refund of their entire amount, along with the interest which was decreed in their favour. The Applicant had accepted partial amount paid to them from the erstwhile management. The conduct of the allottees in accepting the refund towards their allotment, indicates that allottees have accepted the cancellation of the allotments. In this conspectus, the submissions of the Respondent that the refund, which was initiated by the erstwhile management at the instance of the Appellants, cannot be given a colour of unilateral cancellation of allotment, agreed upon.
It is to be noted that the Appellants did not challenge their cancellation of allotment, which was pre-CIRP. It is also clear from records that they have accepted the partial payments basis the decretal amount of UPRERA. Now their primary grievance is qua the cancellation of their respective units. Since earlier they had accepted the money and while filing their claims they misrepresented and filed full claim and are now seeking the revocation of the cancellation of the units - The CoC, RP could not have revoked the cancellation as it was beyond their jurisdiction. In fact, they had gone ahead as per the information collated from the records of the Corporate Debtor. Therefore, the contention of the Appellant that there is a failure to comply with the UPRERA Decree cannot be accepted.
The cancellation of the units was based on the UPRERA’s Order which was not challenged. The Information Memorandum contained this information and CoC could not have revoked the cancellation and acted within its commercial wisdom approving the Resolution Plan - there are no fault in the due process which was followed by AA - appeal dismissed.
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2024 (11) TMI 1185
Service tax on reverse charge basis in respect of monthly remuneration paid to its Director or otherwise - As argued remuneration paid to the Director is accounted for as ‘Salary’ and the TDS under the Income Tax Act, is also deducted under the head of ‘Salary’ in form-16, thus is not liable for service tax as per negative list under Section 65 B (44) (b) of the Finance Act,1994
HELD THAT:- As the issue in hand is no longer res-integra as it has been conclusively held that any amount paid to the Director under the head of ‘Salary’ and the TDS is deducted u/s 192 of Income Tax Act, 1961 which is evident from form 16 in the present case, there is no existence of service whereas the payment is towards salary and the relation between the appellant and its Director in this case is of employer employee relationship. Accordingly, as per Section 65 B (44) (b) of Finance Act, 1994 the salary paid to the employee is into negative list and not amount to any service. Appeal allowed.
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2024 (11) TMI 1184
Liability to pay service tax on reverse charge basis when service provider has already paid 100% service tax - as argued entire 100% service tax has been paid by the service provider on the manpower supply service and the security and the demand of service tax on the appellant is duplicacy of the demand and the same in any case will not sustain.
HELD THAT:- We find that the appellant has received the service of manpower supply and security service. No doubt as per the statute, the appellant being a body corporate is liable to pay the service tax on receipt of such services on reverse charge basis. However, it is also fact that the service provider have paid 100% service tax, in this position, once a particular service suffered the total amount of service tax, demanding the same service tax on the same service even from some other person is not correct as this will amount to double taxation on the same service which in any case is not permissible as decided in the judgment of this Tribunal in the case of Shah Foods Limited. [2024 (8) TMI 1405 - CESTAT AHMEDABAD]
Thus it is settled that even though, the service recipient is liable to pay service tax on reverse charge basis but once the service provider has paid the service tax, the same service tax cannot be recovered twice from the service recipient. Since, the service tax payment made by the provider of service is correct, the same is admissible as Cenvat credit in the hands of the appellant being a recipient of service. Accordingly, neither the service tax demand against the appellant nor the demand of Cenvat credit of the same amount is sustainable. Appeal allowed.
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2024 (11) TMI 1183
Liability of service tax - consideration towards the provision of Business Support Services under Section 65(104c)of the Finance Act,1994 for the purpose of charging service tax - reimbursement of expenses recovered by the appellant from its group companies pursuant to common cost sharing - appellant is a power distribution Company which came in to existence pursuant to the Gujarat Electricity Industry Reorganization & Regulation Act 2003
HELD THAT:- Firstly, the sharing of actual expenditure among the group companies does not amount to service. Hence, the same is not taxable. Secondly, by stretch of imagination such activity is not classifiable as business auxiliary service.
Sharing of the common expenditure among the group companies does not amount to business support services. Even the said activity does not amount to service. Therefore, following the aforesaid decisions which are on the identical facts of the present case service tax demand is not sustainable. Accordingly, the impugned orders are set aside, appeals are allowed.
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2024 (11) TMI 1182
Classification of services - appellant were providing ‘Intermediary’ services classifiable as business auxiliary services within taxable territory to different foreign recipient - Service Tax returns showing their activity as “Export of Service - no Service Tax has been paid on the Commission earned by them from their foreign Service recipient for the period July, 2012 to September, 2015 - department is of the view that the appellant falls under the category of provider of ‘Intermediary’ services classified under the business auxiliary service within the taxable territory of India to various companies of Schott groups located outside India
Invoking extended period - whether the impugned show cause notice is barred by the period of limitation or not? - contended by the appellant that the similar demand was also raised by the department for the period from March, 2005 to September, 2008 and which was dropped by the department and no further demand has been raised after October, 2008 - HELD THAT:- We are of the view that this fact has not been denied by the Adjudicating Authority as well as by the Commissioner (Appeal) in his Order-In-Appeal. We also find that this Tribunal in case of M/s. SNQS International Socks Pvt. Ltd. Vs. CGST & C. Ex [2023 (11) TMI 898 - CESTAT CHENNAI], which has also been endorsed by the Apex Court [2024 (3) TMI 1045 - SC ORDER], has decided similar issue in favour of the assesse. We also take note of the fact that the learned Advocate has also submitted certain extra document including certain copies of the purchase orders which indicated that the order were placed directly to foreign supplier and the appellant has relied upon these evidences to support his stand that they have not been working as intermediary rather they have worked as an agent for sale and promotion of the product in India and thus the exported the services to their principals situated outside India.
We feel that all the facts were not available with the Adjudicating Authority at the time of adjudicating the matter. We therefore, remand back the matter for the fresh consideration and direct the Adjudicating Authority to give specific finding as to how the extended period of limitation is applicable in the present case.
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2024 (11) TMI 1181
Maintainability of appeal - monetary limit fixed by the Board for filing appeal - HELD THAT:- In view of the Circular dated 2-11-2023 issued by the Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes & Customs fixing the monetary limit upto Rs.2 Crore so far as filing the appeal before the Supreme Court is concerned, these appeals are not pressed.
The appeals are accordingly disposed of as not pressed, in view of the monetary limit fixed by the Board. However, the questions of law, if any, are kept open.
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2024 (11) TMI 1180
Refund of unutilized CENVAT credit under Rule 5 of CCR 2004 - rejection on the ground that physical export is essential for a refund under Rule 5 ibid and the warehousing procedure did not confer any export benefit to the DTA supplier - procedural infirmities viz. the copy of ARE1 of the export warehouse has not been marked after endorsement by the customs to the range officer in charge of the factory - HELD THAT:- The SCN has pointed to certain procedural defects and the fact that the appellant appears to have sold the goods domestically to the export warehouse from where the ultimate exports were made. Thus as far as the appellant is concerned the clearance remained domestic clearance only, which has not been specified as the clearances due to which the unutilised credit of the Cenvat account can be refunded under the provisions of rule 5 of CCR 2004. The OIO has further found that the appellant herein has not engaged in any manufacturing activity to claim refund under Rule 5 of CCR 2004.
The impugned order has also cited the Tribunal decision in Commissioner Vs Tiger Steel Engineering [2010 (7) TMI 324 - CESTAT, MUMBAI]. The facts in the said case are not identical as they relate to the case of an appellant who made supplies to a SEZ unit, who in turn used the goods as raw materials and the resultant final products were exported or cleared to DTA. In this case the fact that the goods are subsequently physically exported by the export warehouse under ARE-1 procedure as laid down under rule 20 of Central Excise Rules read with notification No.46/2001 - Central Excise (N.T.) dated 26/06/2001 and is not in dispute.
In its judgment in K.P. Verghese v. Income Tax Officer, Emakulam and Another, [1981 (9) TMI 1 - SUPREME COURT], the Hon’ble Apex Court held that for the purpose of interpretation of a taxing statute, the fiscal philosophy, a feel of which is necessary to gather the intent and effect of its different clauses, should be applied.
It is found that in the case of a beneficial provision for the export of goods the law should be read liberally. When dealing with a complex economic policy a pragmatic and beneficial solution is to be adopted. As per Circular No. 581/18/2001 CX Dt. 29.06.2001, it has been clarified that refund under Rule 5 of the CCR, 2004 is admissible for supplies to export warehouses also. In such a situation when the ultimate export of the goods are not contested, the refund should be allowed to a DTA unit, even if the physical export was not done by the unit itself, but by the exporter who is registered under Rule 20 of C. Ex. Rules, 2002 and is availing a mechanism provided for as per Boards Circular. Moreso when Rule 5 of CCR, 2004, does not differentiate between deemed exports and physical exports and grants the benefit to any products / goods cleared for export.
The impugned order is set aside and the appeals are allowed.
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2024 (11) TMI 1179
Application of exemption under exemption N/N. 12/2013-CE dated 17.03.2012 at Sr. No. 332 read with List 8 - “paints” applied/coated on wind mills for giving protection to non-conventional energy device - HELD THAT:- The parts and component of the main unit namely “wind operated electricity generator” are those articles which along with others would make up the whole and those were constituents or components or a member of the original unit/goods but “paint” is something which is applied externally on the whole unit or goods to provide it protection, beauty and perfection. It would be like skin of an organic living being and therefore in the inorganic articles, it acts in the same manner as ‘skin’ has acted in organic leaving organism.
It would be a futile discussion to enter into an argument saying that skin neither helps in pumping the blood in the heart or digesting the food or the like, for which human being can also be considered as a human being without a skin covering its body. In the same manner paints are used to all components as an essential requirement for its protection & safety and as an auxiliary requirement to retain its life and beauty. Disallowing exemption to ‘paints’, which are applied to exempted goods would be like removal of skin from a human being so as to treat him as skinless individual that can only be possible when he/she is kept in a hospital.
The paint is a “part and parcel” or an “essential feature” of an element or to say an essential or integral feature of a component as a whole. In a manufacturing industry also, powder coating and painting are used at completion of finishing processes and if the goods are exempted from payment of duty at the time of manufacture, it would also be applied to the goods having colour on it, which could be either an external coating or an internal ingredient and therefore, we consider painted wind mills also as wind operated electricity generator irrespective of its colour to which benefit of exemption notification was all along available and it would be immaterial to bring into it an artificial distinction as to if it is to be treated as ‘component’ or ‘parts’ since it is integral to the products itself.
The reference made to Hon'ble Bombay High Court order in JOTUN INDIA PRIVATE LIMITED, VERSUS THE UNION OF INDIA THROUGH THE SECRETARY OF FINANCE, DEPARTMENT OF REVENUE, NEW DELHI, THE STATE OF MAHARASHTRA, THE MAHARASHTRA AUTHORITY FOR ADVANCE RULING FOR GOODS AND SERVICES TAX, MUMBAI, THE MAHARASHTRA APPELLATE AUTHORITY FOR ADVANCE RULING FOR GOODS AND SERVICES TAX MUMBAI, [2022 (12) TMI 1135 - BOMBAY HIGH COURT] by learned Departmental Representative for the Respondent-Department, since confined to the limited power available under writ jurisdiction, which is completely different from appellate jurisdiction, it is not required to venture into discussion on the applicability of that judgment to the issue which is extraneous to the issue raised here since Hon'ble Court had refrained itself from giving any finding on the observation of the Authority for Advance Ruling that paint is not a part.
The order passed by the Commissioner of Central Excise & GST, Pune-I vide Order-in-Original No. PUN-EXCUS-001-COM-022-17-18 dated 24.04.2018 is hereby set aside - Appeal allowed.
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