2024 (11) TMI 1214 - AT - Income Tax

Treating Exempt dividend income as per the provisions of section 10(35) as taxable thereby increasing the total income - claim was denied by processing the return u/s 143(1) and assessee has moved an application for rectification u/s 154 of the Act which is pending disposal before the CPC, Bengaluru - HELD THAT - On such concession, we are of the considered view that the said application of the assessee should be disposed off at the earliest and till the disposal of the rectification application, the AO should not take any adverse action against the assessee. Ground No. 1 is accordingly disposed off. TP adjustment - international transaction of payment for intra-group support services availed by the Assessee from its AEs - HELD THAT - As assessee, pointed out that the quarrel has been settled through an unilateral Advance Pricing Agreement (APA) made on 27/03/2024 between the CBDT and the assessee and one of the terms of the agreement is that the agreement shall apply to consecutive five (5) years commencing from 2015-16 to 2019-20, meaning thereby for AYs 2016-17 to 2020-21, which includes the assessment year under consideration. The assessee has also filed modified return of income on 25/06/2024. Thus AO is directed to re-decide the issue afresh considering the APA (supra) and the modified return of income (supra). Accordingly, Ground No. 2 is allowed for statistical purposes. Deduction u/s 80G - Corporate Social Responsibility (CR) expenditure - HELD THAT - As decided in assessee own case in AY 2018-19 DRP concluded that even though deduction for CSR Expenses was not allowable under Section 37 of the Act (in view of the Explanation 2 to Section 37 of the Act inserted by the Finance Act, 2014, with effect from 01.04.2015), there was no bar for allowance of the same under Assessment Year 2018-19 Section 80G of the Act (except for the donations made to the Swach Bharat Kosh and the Clean Ganga Fund), provided all the other conditions of Sec. 80G are fulfilled. Therefore, the DRP issued specific direction to allow deduction u/s 80G of the Act after verifying whether the other conditions specified under Section 80G were fulfilled. As per mandate of Section 144C(13) of the Act, upon receipt of directions issued by DRP the Assessing Officer was required to complete the assessment in conformity with the directions issued by the DRP. The issue is remanded back to the file of Assessing Officer with the directions to pass the Final Assessment Order in conformity with the directions issued by the DRP. Levy of interest u/s 234A - Challenge levy on the ground that there was no delay in filing the return of income and the return of income has been filed before the extended due date by CBDT Notification No. 93/2020, F. NO. 370142/35/2020 TPL dated 31/12/202 0 - HELD THAT - AO is directed to verify whether the Board has extended the due date of filing the return of income and if so, verify whether the assessee has filed the return of income on or before the extended date and if found correct, not to levy interest u/s 234A of the Act. This Ground is also allowed for statistical purposes. Levy of interest u/s 234B of the Act which will be levied by the AO after giving appeal effect to our order as per the provisions of the law a Non-granting of the credit for dividend distribution tax (DDT) - AO is directed to verify the claim of the DDT from the challan to be furnished by the assessee and if found correct, allow the credit. These Grounds are also allowed for statistical purposes.

Summary

Issues:
1. Taxability of exempt dividend income under section 10(35)
2. Transfer Pricing adjustments and Unilateral Advance Pricing Agreement (APA)
3. Denial of deduction claimed under section 80G of the Act
4. Levy of interest under sections 234A and 234B of the Act
5. Non-granting of credit for Dividend Distribution Tax (DDT)
6. Initiation of penalty proceedings under section 270A for underreporting of income

Analysis:

1. The appeal raised concerns regarding the tax treatment of exempt dividend income under section 10(35) of the Act. The assessee argued against the inclusion of this income as taxable. The Tribunal directed the Assessing Officer (AO) to consider the pending rectification application before taking any adverse action against the assessee, thereby disposing of this ground.

2. The issue of Transfer Pricing adjustments was resolved through a Unilateral Advance Pricing Agreement (APA) between the CBDT and the assessee. The Tribunal instructed the AO to reconsider the matter in light of the APA and the modified return of income, allowing this ground for statistical purposes.

3. The denial of deduction claimed under section 80G of the Act was contested by the assessee, citing a Co-ordinate Bench decision in a previous assessment year. The Tribunal referred to the decision and directed the AO to re-examine the issue, allowing this ground for statistical purposes.

4. The levy of interest under sections 234A and 234B of the Act was challenged by the assessee. The Tribunal directed the AO to verify the filing date of the return of income and extend relief if the return was filed within the extended due date, allowing these grounds for statistical purposes.

5. The non-granting of credit for Dividend Distribution Tax (DDT) was also addressed by the Tribunal, instructing the AO to verify the DDT claim and allow the credit if found correct, allowing this ground for statistical purposes.

6. Lastly, the initiation of penalty proceedings under section 270A for underreporting of income was not specifically addressed in the detailed analysis provided in the judgment.

In conclusion, the Tribunal made various directions to the AO for reconsideration and verification of the disputed issues, providing relief to the assessee on several grounds for statistical purposes. The appeal of the assessee was allowed in part, with certain issues remanded back to the AO for further assessment in accordance with the Tribunal's directions.