Direct Tax Annual Digest 2024: Part II
Pankaj Bajpai
8 Feb 2025 6:05 AM
Cash-In-Hand Out Of Business Profits Declared In Return U/s 44AD, Can't Be Plainly Added As Unexplained Money: Delhi ITATWhile allowing the appeal against the addition on account of unexplained money, the New Delhi ITAT held that if the assessee's contention is that it had turnover exceeding the limit u/s 44AD of the Income Tax Act, then CIT(A) ought to have acted in accordance with law....
While allowing the appeal against the addition on account of unexplained money, the New Delhi ITAT held that if the assessee's contention is that it had turnover exceeding the limit u/s 44AD of the Income Tax Act, then CIT(A) ought to have acted in accordance with law.
The Bench comprising of Kul Bharat (Judicial Member) observed that, “If the assessee's contention is that it had turnover exceeding the limit u/s 44AD, the learned CIT(A) ought to have taken action in accordance with law. However, he merely sustained the addition made by the AO. Therefore, the claim of the assessee regarding business transaction in cash is not adverted by the lower authorities by giving a clear finding.”
While allowing the appeal against the order passed u/s 271B of the Income tax Act, the Jaipur ITAT held that provision of section 273B gives power to the taxing authority not to impose the penalty if the assessee proves that there was a reasonable cause for failure to get the books of accounts audited and directed the AO to delete such addition.
The Bench of the ITAT comprising of Sandeep Gosain (Judicial Member) and Rathod Kamlesh Jayantbhai (Accountant Member) observed that, “Merely because the assessee has not challenged the finding of the CIT(A) in quantum in the penalty proceeding the assessee cannot be called upon to pay the penalty as failure to get the books of accounts audited and failure file the audit report. The reasons advanced by the assessee this he has offered the income under the head capital and under that head though the income / receipt 1 Cr there is no requirement to get the books of accounts audited and therefore, this being the reasonable cause for the assessee. The provision of section 273B gives power to the taxing authority not to impose the penalty if the assessee proves that there was a reasonable cause for such failure.”
On finding that the explanation against cash receipts offered against show cause notice before the authorities were reasonable, the Chennai ITAT held that levy of penalty u/s 271D of the Income Tax Act, is untenable.
The Bench of the ITAT comprising of V. Durga Rao (Judicial Member) and Manjunatha, G (Accountant Member) reiterated while referring the case of Ms. Nanda Kumari v. ITO that, “the assessee had shown a cause for having received the amount in cash. Therefore, if the assessee had shown a cause, the burden shifts on the Assessing Officer to establish that the cause shown is not a reasonable cause by examining the cause shown and establish that it lacks bona fides.”
On finding that the views adopted by the tax authorities are not in conformity with legal position and binding judicial precedents, the Pune ITAT set-aside the impugned order passed by the AO and reversed the denial of deduction u/s 80P(2)(d) of the Income Tax Act, 1961.
The Bench of the ITAT comprising of Partha Sarathi Choudhury (Judicial Member) and G. D. Padmahshali (Accountant Member) observed that, “On perusal of section 80P(2)(d), it is ostensibly clear that interest & dividend income derived by one cooperative society from its investment held with other cooperative societies is eligible for deduction u/s 80P(2)(d) of the Act. For the purpose the chief determinant factor entitling a claim of deduction u/s 80P(2)(d) in the hands of assessee society is that, interest & dividend income should have been earned by it from an investment made with any other cooperative society registered under the provisions of law, irrespective of its nomenclature with which such paying society i.e. the payer is known for.”
On finding that the dismissal of the application on the ground of being barred by limitation is not justified, the Chandigarh ITAT set aside the order of dismissal of final registration u/s 80G of the Income Tax Act and restored the matter to the file of the CIT(E) to decide the application after giving adequate opportunity to the assessee to present its case, irrespective of the fact that there was any delay in uploading the application.
The Bench of the ITAT comprising of Sanjay Garg (Judicial Member) and Vikram Singh Yadav (Accountant Member) observed that, “the assessee had duly tried to upload the application for final registration u/s 80G(5) of the Act within the extended period of limitation. However, the same could not be uploaded due to certain technical glitches, therefore, under the circumstances, the dismissal of the application on the ground of being barred by limitation by the CIT(E) is not justified.”
Referring to the decision of Varadagovind Parthasarthy Iyer (through the legal heir Arvind Iyer) vs. ITO (in ITA No.1716/Mum/2023), the Mumbai ITAT ruled that penalty u/s. 271B of the Income tax Act cannot be levied in the present facts of the case for non-auditing of the books of accounts where the assessee has failed to maintain the same.
The Bench of S. Rifaur Rahman (Accountant Member) and Kavitha Rajagopal (Judicial Member) observed that “It is a settled proposition of law that once the penalty has been levied u/s. 271A of the Act for non-maintenance of books of accounts, then penalty u/s. 271B of the Act cannot be levied”.
Finding that the view taken by the AO that interest u/s 28 of Land Acquisition Act received by the assessee is exempt u/s 10(37) of the Income tax Act is not contrary to law, the New Delhi ITAT quashed the revisionary exercise of powers by the PCIT by taking aid of Section 263.
The Bench of N.K. Billaiya (Accountant Member) and Astha Chandra (Judicial Member) observed that “Since the order of the AO is based on the decision of the Supreme Court in Ghanshyam HUF (supra) on the issue of taxability of interest received by the assessee under section 28 of Land Acquisition Act, it can at best be said to be a debatable issue on which two views are possible and the AO accepts one of the views”.
The New Delhi ITAT quashed the unabated assessment additions / disallowances made by AO in the absence of any incriminating material.
The Bench of Kul Bharat (Judicial Member) and Pradip Kumar Kedia (Accountant Member) observed that “additions/disallowances have been made without reference to any specific incriminating material/document found as a result of search and seizure action under section 132 of the Act and such additions are solely based on appraisal report against the subscribers of the assessee in the course of search in that case”.
While emphasizing that in the initial phase of a new technologically driven faceless regime, certain lapses of procedural requirements may occur, the Kolkata ITAT pointed that that such lapses should not lead to rendering prejudice to effective administration and disposal of the matter.
The Bench of Sanjay Garg (Judicial Member) and Girish Agrawal (Accountant Member) observed that “lapses cannot be attributed to any wilful default on either party owing to nascent stage of the faceless regime which may take some time for the purpose of its stabilization and acclimatization for all the stakeholders”.
Since the income accrues or arises or is deemed to accrue or arise in the hands of KSWPL and not in the hands of the assessee, the Kolkata ITAT held that by invoking second limb of section 2(22)(e) of the Income tax Act, accrual of income and its taxability cannot be held to be in the hands of the assessee.
Finding that both, the assessee and APL are in no way in a position to compel KSWPL in any way for exercising its voting rights in a particular manner, and it is the other way that KSWPL, because of its shareholding, is in a position to compel both the assessee and APL, by exercising its voting power, the Bench of Sanjay Garg (Judicial Member) and Girish Agrawal (Accountant Member) observed that “the beneficial shareholder in the present case is KSWPL under whose controlling interest and influence, APL has given loan/advance to the assessee. Accordingly, the deeming provisions of section 2(22)(e) under the second limb are attracted on KSWPL”.
On finding that there is no prejudice against the Revenue and the twin conditions to exercise the power u/s 263 of the Income Tax Act, 1961 have not been satisfied, the Ahmedabad ITAT set aside the order of PCIT to assess the assessee's case freshly.
The Bench of the ITAT comprising of Madhumita Roy (Judicial Member) and Waseem Ahmed (Accountant Member) observed that, “the value of closing stock becomes the opening stock in the next year, hence the same is also a tax natural exercise. Hence there is no loss of tax, causing prejudice to the revenue due to the method adopted by the assessee which was accepted by the AO in the assessment order. Even if the AO has not properly inquired about the same and assuming that the Action of the AO is erroneous. But in view of the above discussion, there is no prejudice against the revenue. Therefore, the twin conditions to exercise the power under section 263 of the Act have not been satisfied.”
On finding that AO as well as the CIT(A) was not right in making/confirming the addition on account of unaccounted business income, the Ahmedabad ITAT deleted the addition made by AO under the Income Tax Act, 1961.
The Bench of Suchitra R. Kamble (Judicial Member) observed that, “The summons issued to Shri Ramesh Ajwani, who is an entry provider as per the Assessing Officer, has nothing to do with the assessee and the said statement was not at all verified by the Assessing Officer as well as the assessee was not given any opportunity of confronting this statement. The assessee has rightly claimed the said trading as business income.”
The Ahmedabad ITAT ruled that when the period of holding of the plant and machinery is more than 36 months, then the same has to be treated as long-term capital asset in pursuant to the provisions of section 2(42A) of the Income tax Act.
The Bench of Waseem Ahmed (Accountant Member) and Siddhartha Nautiyal (Judicial Member) observed that “provisions of section 50 of the Act clearly specify that gain shall be deemed as short-term on the sale of depreciable assets irrespective of the period of holding provided under section 2(42A) of the Act”.
On finding no infirmity in the order passed by the CIT(A), the Ahmedabad ITAT confirmed that rights held by the assessee as a Confirming Party in the Sale Deed is a capital asset within the meaning of Section 2(14) and liable for LTCG and the assessee is also eligible to claim deduction u/s. 54B of the Income Tax Act, 1961.
The Bench of the ITAT comprising of T.R. Senthil Kumar (Judicial Member) and Annapurna Gupta (Accountant Member) observed that, “It is in the above registered Sale Deed, the respondents/assessees herein are shown as the Confirming Parties and received the consideration through various payment from the buyer/developer. Thus, the allegations and averments made by the Assessing Officer does not stand good in the eye of law namely Banakhat is unregistered and the Banakhat after 12 months period is invalid in law are not properly understood by the Ld. A.O. in legal prospective.”
Referring to Article 265 of the Constitution of India, the Mumbai ITAT remanded the case to the file of AO with direction to verify factual aspects, pertaining to the purchase of the shares in consideration and re-compute the liability accordingly.
The Bench of the ITAT comprising of Narender Kumar Choudhry (Judicial Member) and Padmavathy S. (Accountant Member) observed that, “May be the Assessee is at fault as she did not produce the relevant documents pertaining to the purchase of the shares before the authorities below specifically before the Assessing Officer, mainly on the ground that the same were not traceable. As the mandate of the Article 265 of the Constitution of India is that no tax shall be levied or collected except by authority of law.”
Finding that the difference in stock found out by I-T Authorities has no independent identity and is part & parcel of entire stock, the Chandigarh ITAT refused to treat such difference as undeclared business income and clarified that it cannot be said that there is an undisclosed asset which existed independently.
The Bench of Sanjay Garg (Judicial Member) and Vikram Singh Yadav (Accountant Member) observed that “the nature and source of such unaccounted stock is nothing but arising out of assessee's business operations. No doubt, these transactions were not recorded at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, the assessee has provided the necessary explanation about the nature and source of such unrecorded transactions and the necessary nexus with assessee's business has been established, thus, it cannot be said that these are unexplained transactions thus, doesn't satisfy the second condition for invoking the deeming provisions of section 69B of the Act”.
The New Delhi ITAT emphasized that the Revenue Authorities have to tax the right person in right manner and shall not disallow the eligible deductions on mere technicalities.
The Bench of M. Balaganesh (Accountant Member) and Yogesh Kumar U.S (Judicial Member) observed that “the Revenue has rejected the plea of the Assessee based on mere technicalities and it is not the case of the Revenue that the Audit Report was not ready as on the date of filing of the return or Assessee is not eligible for any other reason for claiming charitable status by claiming application of income for charitable purpose u/s 11 & 12 of the Act”.
Recently, the Delhi ITAT reiterated that object of deeming an unjustified premium charged on issue of share as taxable income u/s 56(2)(viib) of the Income tax Act is wholly inapplicable for transactions between holding and its subsidiary company where no income can be said to accrue to the ultimate beneficiary, i.e., holding company.
The Bench of Kul Bharat (Judicial Member) and Pradip Kumar Kedia (Accountant Member) observed that “the premium charged is supportable by the valuation report and the premium has been charged to existing shareholder. Thus effectively, the benefit if any arising to the company in turn benefits to the subscriber having pre-existing right in the company”.
Referring to the decision of Bombay High Court in the case of Principal CIT vs Mohammed Haji Adam & Co (Income Tax Appeal No.1004 of 2016 dated 11/02/2019), the Mumbai ITAT reiterated that the additions should be limited to the extent of the G.P. rate on purchases at the same rate of other genuine purchases.
The Bench of Aby T Varkey (Judicial Member) and MS Padmavathy S (Accountant Member) observed that “the AO has neither disputed the sales declared by the assessee nor any discrepancy is found by the AO in the books of accounts and therefore there is merit in the submission that the addition towards the impugned purchases should be restricted to the profit embedded in such transactions”.
Finding that the Appellant/ Assessee has valid Tax Residency Certificate (TRC) for United Kingdom, the Kolkata ITAT reiterated that the salary income received by assessee for his work during stay at United Kingdom is exempt from tax on account of treaty benefit.
The Bench of Dr. Manish Borad (Accountant Member) and Anikesh Banerjee (Judicial Member) observed that “the assessee possesses tax residency certificate of United Kingdom for a period from 06.04.2013 to 05.04.2014 and the instant year under the appeal pertains to FY 2013-14 and therefore since the assessee has offered to tax for the year in United Kingdom, assessee deserves DTAA benefit u/s 90 of the Act”.
Finding that the book value of assets and liabilities adopted for the purposes of NAV method of valuation is in consonance with last audited balance-sheet items, the Delhi ITAT clarified that the AO has misdirected himself on seeking valuation report which requirement do not emanate from the law codified in this regard.
The Bench of Kul Bharat (Judicial Member) and Pradip Kumar Kedia (Accountant Member) observed that “The phraseology of clause (a) to sub-rule (2) of Rule 11UA read with Explanation (a) to Section 56(2)(viib) do not thrust the requirement of Valuation Report for substantiation of valuation under NAV method”.
The Kolkata ITAT ruled that section 80AC of the Income tax Act puts a bar against claiming of deduction in respect of certain income provided under the head (C) of Chapter VIA which includes section 80P of the Act also if the return of income are not filed before the due date prescribed u/s. 139(1) of the Act.
The Bench of Rajpal Yadav (Vice President) and Girish Agrawal (Accountant Member) observed that “the issue is regarding prima facie adjustment made u/s. 143(1)(a)(v) of the Act and as discussed above, such power of making the prima facie adjustment towards deduction u/s. 80P of the Act came to CPC only from 1.4.2021 and thus, the alleged disallowance by CPC is beyond its Jurisdiction”.
Since the AO as well as the CIT(A) has not examined the issue with the angle of section 69, rather they took the conditions of section 68 where unexplained cash credit is required to be explained by the assessee and applied on the issue of investment, the Kolkata ITAT remanded the matter for re-adjudication. Finding that the CIT(A) has merely followed the decision of the ITAT, whereby appeals were dismissed for want of Prosecution, the Bench of Rajpal Yadav (Vice President) and Manish Board (Accountant Member) observed that “this procedure of disposal of appeal is not in accordance with the mandate given under subsection (6) of section 250”.
Finding that the nature and source of unaccounted investment in the hospital building is arising out of assessee's professional receipts, the Chandigarh ITAT ruled that there was no justifiable basis on the part of the AO in applying the provisions of Section 69 r/w Section 115BBE of the Income tax Act to the surrendered business income of the assessee which has been duly offered in the return of income.
The Bench of Sanjay Garg (Judicial Member) and Vikram Singh Yadav (Accountant Member) observed that “the assessee has provided a reasonable and acceptable explanation about the nature and source of such unrecorded transactions as that of professional receipts and the necessary nexus with assessee's profession has been established, it cannot be said that these are unexplained transactions, thus, doesn't satisfy the second condition for invoking the deeming provisions of Section 69 of the Act”.
Upon not finding justification on the part of the Income Tax Authorities in computing the capital gains by adopting the sale value as per the value estimated by the Departmental Valuation Officer, the Kolkata ITAT deleted the addition made by the AO in respect of capital gains by adopting the value of the property as per the DVO report.
The Bench of the ITAT comprising of Sanjay Garg (Judicial Member) and Girish Agrawal (Accountant Member) observed that, “The problems of the assessee continued over the years and the assessee during the period has made sincere efforts by approaching to the different authorities and requested them to stop the agitators from preventing the assessee from peaceful enjoyment of his property and running the cinema hall. After making entire efforts, when the administration failed to help the assessee, the assessee, under the circumstances, to get rid of the problem, sold the property at a lower rate.”
LTCG Tax Exemption Can't Be Denied Due To An Error Made By The Builder In Assigning Apartment: ITAT
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that tax benefits cannot be denied to taxpayers due to an error made by the builder in assigning the apartment. The bench of Rahul Chaudhary (Judicial Member) and Om Prakash Kant (Accountant Member) has observed that the appellant or taxpayer cannot be penalized for the mistake committed by the developer or seller by allotting a flat to the appellant and thereafter selling the same flat to Mr. C.N. Jha. Clearly, the developer/seller had accepted the mistake and accommodated the appellant by allotting a similarly placed flat in the same building.
Income Tax Exemptions Available To ST Individuals Can't Be Extended To Partnership Firm: ITAT
Mariya Paliwala
23 March 2024 4:30 PM
Income Tax Exemptions Available To ST Individuals Cant Be Extended To Partnership Firm: ITAT
The Guwahati Bench of the Income Tax Appellate Tribunal (ITAT) has held that the exemption under Section 10(26) of the Income Tax Act has been specifically conferred on members of the Scheduled Tribe residing in the specified area. The exemption cannot be extended to another separate and distinct "person," that is, the partnership firm, though such a firm consists of the individual partners who, in their individual capacities, are entitled to such an exemption.
The special bench of Rajpal Yadav (Vice President), Sanjay Garg (Judicial Member), and Dr. Manish Borad (Accountant Member) has observed that under the Income Tax Act, the exemption of 10(26) of the Act is available to the individual members of the Scheduled Tribe and that this benefit cannot be extended to a firm that has been recognized as a separate assessable person under the Income Tax Act. The advantages and disadvantages conferred under the Act on separate classes of persons are neither transferable nor interchangeable. The scope of the beneficial provisions cannot be extended to a different person under the Act, even after liberal interpretation, as it may defeat the mechanism and process provided under the Income Tax Act for the assessment of different classes or categories of persons.
Following the Coordinate Bench ruling in IT(IT)A No.2845/Bang/2017, wherein it was held that the payment made by Google India to assessee was not in the nature of royalty/ FTS and consequently it could not be brought to tax in the hands of assessee, the Bangalore ITAT ruled that amount received by Google Ireland (Assessee) from Google India towards marketing & distribution rights of AdWords program is not royalty.
While clarifying the position regarding taxability of receipts from sale of online advertisement space, the Division Bench comprising of George George K (Vice President) and Laxmi Prasad Sahu (Accountant Member) reiterated that “Unless the non-resident, who is engaged in sale of online advertisement space, has a PE in India, no portion of receipts earned by it from sale of online advertisement space in India can be brought to tax in India as Act read with the relevant DTAA”.
Payments Made To Doctors Would Be Covered By TDS Provisions U/S 194J Of Income Tax Act: ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) consisting of M. Balaganesh (Accountant Member) and Anubhav Sharma (Judicial Member) has held that the payments made to doctors would be covered by TDS provisions under Section 194J and not Section 192 of the Income Tax Act.
Contribution Made By NSE To Core SGF Is Not In The Nature Of Any Deposit/Contingency/Reserve: ITAT
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the contribution made by the assessee stock exchange to Core SGF is not in the nature of any deposit, contingency, or reserve.
The bench of Aby T. Varkey (Judicial Member) and S. Rifaur Rahman (Accountant Member) has observed that the AO/CIT(A) erred in holding that the contribution made by the assessee to Core SGF is an unascertained liability. Since the liability of payment to Core SGF by the assessee is certain, it cannot be added back as per clause (c) of Explanation-1 to Section 115JB(2) of the Income Tax Act.
The Chennai ITAT recently clarified that receipt of sale consideration of huge amount of Rs. 1.60 Crores in cash, which is, in violation of the provisions of section 269SS (this section restricts cash receipts over & above twenty thousand) of the Income tax Act, rightly deserves levy of penalty u/s 271D.
The Bench of V. Durga Rao (Judicial Member) & Manjunatha, G. (Accountant Member) observed that “The contention of the assessee is not acceptable by any Court of Law, claiming to have wrong entry has been made in a document, which was duly signed by both the vendor and purchaser and registered by the Sub-Registrar of the State Revenue Department in the absence of any material evidence”.
Relying on the decision of the Jurisdictional High Court in the case of PCIT vs. Asian Mills (P.) Ltd., the Ahmedabad ITAT that vehicle exclusively used by an entity for its commercial purpose becomes eligible for claim of depreciation.
The Bench of Waseem Ahmed (Accountant Member) and Madhumita Roy (Judicial Member) observed that “car is commercially used for the purpose of business of the company and the depreciation thereon cannot be denied; moreso, the interest on car loan and car insurance was allowed by the department”.
The New Delhi ITAT recently reiterated that once insurance policy is assigned by the employer to employee, the insurance policy gets converted into an ordinary policy, and in that case, the value received by employee would not be subjected to tax in view of section 10(10D) of the Act.
Referring to the decision of Delhi High Court in the case of CIT vs Rajan Nanda [2012] 18 taxmann.com 98 (Delhi), the Bench of N.K. Billaiya (Accountant Member) and Kul Bharat (Judicial Member) reiterated that “There is no prohibition as to the assignment or conversion under the Act. Once there is an assignment, it leads to conversion and the character of policy changes. The insurance company has itself clarified that on assignment, it does not remain a keyman policy and gets converted into an ordinary policy. In these circumstances, it is not open to the Revenue to still allege that the policy in question is keyman policy and when it matures, the advantage drawn therefrom is taxable”.
Finding that the assessee has not fulfilled either of the conditions mentioned in Section 54 of the Income tax Act, the New Delhi ITAT held that there is no infirmity in the orders of the I-T Authorities in denying the benefit of deduction of long term capital gains to the assessee u/s 54.
The Division Bench of N.K. Billaiya (Accountant Member) and Yogesh Kumar U.S (Judicial Member) observed that “For the purpose of claiming the benefit u/s 54 of the Act, within a period of one year before or two year after the date of transfer of old house, the tax payer should acquire another residential house or should construct a residential house within a specified period of three years from the date of transfer of old house”.
Finding that value determined by the DVO is less than the valuation adopted by assessee for computing fair market value (FMV), the Chennai ITAT ruled that the value adopted by the DVO cannot be taken for computing FMV.
The Bench of Mahavir Singh (Vice President) and Manoj Kumar Aggarwal (Accountant Member) observed that “where value of capital assets shown by the assessee being less than its fair market value, reference can only be made to DVO in that condition, but in case the value of capital asset shown is more than fair market value, reference cannot be made”.
The Ahmedabad ITAT ruled that mathematical incorrectness by AO cannot be said to be failure on the part of the assessee to disclose any material fact, so as to initiate reopening of assessment.
The Bench of Annapurna Gupta (Accountant Member) and Siddhartha Nautiyal (Judicial Member) observed that “as rightly pointed out by the counsel for the assessee, escapement of income as per the AO was attributable to the incorrect calculation of bad and doubtful debts. The facts, for the said purpose, of the amount of special reserve claimed by the assessee was admittedly on record, and even as per the AO itself, this incorrect calculation of the provision for bad and doubtful debts was material fact not disclosed by the assessee”.
Assessment Order Passed In The Name Of Non-Existent Entity Is Void Ab Initio: ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that an assessment order passed in the name of a non-existent entity is void ab initio.
The bench of Saktijit Dey (Vice President) and Dr. B.R.R. Kumar (Accountant Member) has observed that the merger of Boeing International Corporation India Ltd. with Boeing India Pvt. Ltd. was very much in the knowledge of the Assessing Officer much prior to framing the draft assessment order for the impugned assessment year.
On finding that the PCIT has held the assessment order passed by AO as erroneous and prejudicial to the interest of the Revenue simply based on incorrect assumption of facts, the Rajkot ITAT directed to set aside the order passed u/s 263 of the Income tax Act, 1963. The ITAT explained that the assessment order needs to be erroneous as well as prejudicial to the interest of Revenue, for purpose of initiating revision u/s 263.
The Bench of the ITAT comprising of Siddhartha Nautiyal (Judicial Member) and Annapurna Gupta (Accountant Member) observed that “The assessee had submitted that only that part of interest expenditure had been claimed by way of deduction under Section 57 of the Act, which had been incurred for earning interest income and the proportionate part of the interest expenditure which was not utilized for earning interest income had not been claimed by the assessee as deduction under Section 57 of the Act. However, the PCIT did not give any specific finding to controvert the written submissions filed by the assessee during the course of 263 proceedings and proceeded to hold that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue.”
While quashing the invalid exercise of jurisdiction by PCIT u/s 263 of the Income Tax Act, without satisfying the conditions precedent for such section, the Kolkata ITAT held that the PCIT cannot invoke the jurisdiction u/s 263 to substitute his view in place of AO on the ground that he does not agree with the view taken by the AO.
The Bench of the ITAT comprising of Sanjay Garg (Judicial Member) and Rajesh Kumar (Accountant Member) observed that “it can be said to be plausible and possible view on the basis of evidences before the AO and the PCIT cannot invoke the jurisdiction u/s 263 of the Act on the ground that he does not agree with the view taken by the AO and direct the AO to add the entire cash deposits in the hands of the assessee. In our opinion, the jurisdiction u/s 263 of the Act can be invoked if twin conditions are satisfied i.e. order is erroneous and is prejudicial to the interest of the revenue.”
While setting aside the order of deduction passed u/s 35AD of the Income Tax Act in relation to investment on warehouse, the Indore ITAT has remitted back the issue to the AO for proper verification and consideration of the bifurcated details of income from specified and non-specified business after finding that such bifurcation of income was not presented earlier before the AO.
The Bench of the ITAT comprising of Vijay Pal Rao (Judicial Member) and B.M. Biyani (Accountant Member) observed that “Since the assessee has not disputed the fact that warehouse facilities were provided for agricultural produce as well as non-agricultural produce therefore, the only dispute is regarding the bifurcated details of income earned from the specified business activities being the warehouse facility provided for storage of agricultural produce as well as non-agricultural produce. Now the Ld. AR has produced bifurcated income and expenditure details. Accordingly in the facts and circumstances of the case this issue of deduction u/s 35AD is set aside to the record of the AO for proper verification and consideration of the bifurcated details of income from specified and non-specified business of the assessee and then adjudicate the issue as per law.”
On finding that the CIT(A) has failed to examine the cash book presented by the assessee, the New Delhi ITAT deleted the addition sustained by CIT(A) u/s 69 of the Income Tax Act.
The Bench of the ITAT comprising of Yogesh Kumar U.S. (Judicial Member) and N. K. Billaiya (Accountant Member) observed that “The assessee having been produced the cash book and explained the cash found during the search and seizure operation contending that the cash found during the search are belongs to family members and considering the fact that even the Panchnama drawn during the search proceedings containing the names of the Assessee and other family members and the A.O. who has examined the cash book has not found fault on the same on the merit of it, in our considered opinion, the authorities have committed error in making/sustaining the addition.”
On finding that the addition is based upon conjecture and surmises and not on records which were available before the authorities, the Kolkata ITAT set aside the order passed by the CIT(A) and directed the AO to delete the addition made u/s 68 of the Income Tax Act. The ITAT held that besides the mere fact that the assessee has failed to produce the principals of the subscribing company due to which investment could not be verified, there was no other ground for making addition in the hands of the assessee.
The Bench of the ITAT comprising of Sonjoy Sarma (Judicial Member) and Rajesh Kumar (Accountant Member) observed that “the AO has to carry out further verification/examination of these evidences and then come to a conclusion as to how the share capital/share premium is not proved and not merely on the ground that the assessee has not complied with the summons issued u/s 131 of the Act. The amounts received by the assessee cannot be added to the income of the assessee for just non-compliance of summons.”
On finding that the assessee has failed to make out a case of reasonable cause much less sufficient cause for an abnormal delay of more than six years in filing the appeal, the Indore ITAT declined to condone the inordinate delay in filing of appeal and consequently dismissed the appeal filed against the revision order passed u/s 263 of Income Tax Act, being barred by limitation.
The Bench of the ITAT comprising of Vijay Pal Rao (Judicial Member) and B.M. Biyani (Accountant Member) observed that “Though, the expression “sufficient cause” for delay in filing the appeal must be construed liberally in favour of the litigant approached the court belatedly so that the dispute could be decided as far as possible on merits and not on technicalities. However, at the same time the litigant is not allowed to use the process of law to achieve an ulterior purpose in under hand way by filing the appeal belatedly. Therefore, the concept of liberal interpretation of expression “sufficient cause” would not mean that the requirement of some reasonable cause to justify the delay particularly an inordinate delay be ignored. Therefore, the concept of liberal interpretation cannot be applied by overlooking the apparent unacceptable and unsatisfactory reasons and when it is found that there is absolutely no justification for inordinate delay. The applicant cannot take shelter of liberal interpretation without explaining the satisfactory cause of delay.”
Additions U/s 69 Should Not Be Based Merely On Obtaining Surrender Statements: Chandigarh ITAT
On finding that the assessee in clear terms has surrendered the additional professional income covering the expenditure incurred on the building, the Chandigarh ITAT held that the invocation of Section 115BBE of the Income Tax Act, is not applicable and hence deleted the addition made by the AO on account of the addition in the value of building u/s 69.
The Bench of the ITAT comprising of Sanjay Garg (Judicial Member) and Vikram Singh Yadav (Accountant Member) observed while considering the contention of the assessee that “The Central Board of Direct Taxes has also issued instructions that the Income Tax Authorities at the time of survey/search action should not harp upon taking surrender/confession statements, rather they should collect the evidences relevant to unaccounted/unexplained income and that the additions should not be based merely on by obtaining surrender statements. However, in this case, the surrender statement has been obtained and there is no evidence nor any allegation of the Survey Party that the assessee had income from any other source. In fact, no such income has been found during the survey action. However, the assessee to keep his promise, has offered for taxation the surrendered additional professional income of Rs.30 lacs. Under the circumstances, the action of the AO in assessing the aforesaid surrendered income as income from unexplained sources u/s 69 of the Act cannot be held to be justified.”
On finding that the authorities have not considered the history of the assessee and not even rejected its books of accounts, the New Delhi ITAT deleted the addition sustained by the CIT(A) u/s 68 of the Income Tax Act. The ITAT found that the addition was made u/s 68 on account of huge cash deposits made during demonetization period.
The Bench of the ITAT comprising of Yogesh Kumar U.S. (Judicial Member) and B.R.R. Kumar (Accountant Member) observed that “The audited books of accounts of the assessee has not been rejected and the sales of the assessee has not been disturbed, then the Revenue Authorities are precluded from making any addition. Even after observing that the cash deposits of the Assessee was much lower than the previous year, the CIT(A) has not given any valid reason to sustain the addition.”
Taxpayer Must Substantiate Form 26AS Or Form 16 So As To Claim Credit Over TDS: Mumbai ITAT
While remanding the case back for re-adjudication, the Mumbai ITAT held that the prima facie onus would be upon the Assessee to substantiate its claim of non-granting of TDS credit, by providing relevant documents, such as an appointment letter, salary slips or Form No.16 or bank statements, or any other corroborative evidence/ documents.
The Bench of the ITAT comprising of Narender Kumar Choudhry (Judicial Member) and S. Rifaur Rahman (Accountant Member) observed that “the Assessee by filing TDS working which is though initiated by somebody but the same is neither on proper letter head nor there is a name of the person who signed such document and even otherwise, the Assessee has also failed to file any document, wherefrom it can be reflected that the Assessee has received any particular amount of salary on which TDS has been deducted and therefore, in absence of relevant documents, the Commissioner correctly held that the AO has not made any mistake in non-granting of credit of TDS, since, the Assessee did not furnish any salary slip or Form No.16.”
While accepting on one hand that the income found to be belonging to taxpayer's wife in scrutiny assessment was duly offered to tax, the Rajkot ITAT reprimanded the I-T Department from taking a contrary view and taxing it in the hands of the taxpayer on the ground that his wife was not actually carrying out any business.
The Bench of the ITAT comprising of Suchitra R. Kamble (Judicial Member) and Annapurna Gupta (Accountant Member) observed that “since the income of the wife of the assessee stands accepted in her hands by the Department in scrutiny assessment vide order passed u/s 143(3) of the Act, on returns filed in consequence to the search action conducted on her u/s 153A of the Act, we find that there is no case with the Revenue now to tax the same income in the hands of the assessee also in terms of the clubbing provisions of Section 64(1)(ii) of the Act.”
On finding a lack of inquiry on the part of AO in allowing cash sales, which renders the assessment order erroneous so far as it is prejudicial to the interests of revenue, the Indore ITAT upheld the order of disallowance u/s 40A(3) of the Income Tax Act, passed by Pr. CIT by invoking Section 263.
The Bench of the ITAT comprising of Vijay Pal Rao (Judicial Member) and Manish Borad (Accountant Member) observed that “If the assessee takes a plea that the payment in cash was made as per the demand of the seller then it is up to the AO to conduct inquiry to verify this fact from the seller itself, but in the absence of any query or inquiry conducted by the AO, the question of any explanation by the assessee to claim that the case of the assessee falls in the exception provided under Rule 6DD of the Income-tax Rules is pre matured.”
On finding that the facts of the case do not warrant application of section 263 of the Income Tax Act, the Indore ITAT set aside the revision order passed by PCIT and restored the original assessment-order passed by the AO. The ITAT explained that revocation of revisionary jurisdiction u/s 263 requires assessment to be erroneous as well as prejudicial to interest of Revenue.
The Bench of the ITAT comprising of Vijay Pal Rao (Judicial Member) and B.M. Biyani (Accountant Member) observed that “in the judicial rulings of ITAT, Indore and Hon'ble Rajasthan High Court referred by Ld. AR, it has been held that the excess-stock explained by assessee as relatable to business cannot attract section 69/69A/115BBE. In the light of those rulings, the AO has rightly assessed the income at normal rates of tax, hence there is no loss of revenue to department and consequently the order passed by AO is not prejudicial to the interest of revenue.”
On finding that a vague order has been passed by the AO by reshuffling the addition under different heads of income and without discussing the issue under the provision of section 154(3) of the Income Tax Act, the Bangalore ITAT remitted back the issue to the file of the AO for fresh consideration.
The ITAT explained that as per Section 154(3), an Amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee or the collector or the deductor shall not be made under this section unless the authority concerned has given notice to the assessee of this intention so to do and has allowed the assessee a reasonable opportunity of being heard.
While deleting the addition made by the AO u/s 68 of the Income Tax Act, the Indore ITAT held that once the cash sales and availability of the cash with the assessee is duly supported by the books of account of the assessee, then making deposit at one go in the circumstances after declaration of demonetization cannot be a reason for doubting the availability of cash with the assessee.
The Bench of the ITAT comprising of Vijay Pal Rao (Judicial Member) observed that “once the demonetization is declared then the currency notes which are declared demonetized w.e.f 08.11.2016 were required to be deposited in the bank account within the specified period as notified by the Government of India or RBI. Therefore, the reason for making deposits of Rs.5,00,000/- in the specified bank notes declared as demonetized is not an abnormal act on the part of the assessee as there was a limited window for depositing of those currency notes in the bank account of the person holding such notes.”
The Supreme Court recently held that pouches of chewing tobacco packed in High-Density Polyethylene (HDPE) bags would be considered a 'wholesale package' and could not be considered for imposing excise duty as per the provisions relating to retail sale price in the Central Excise Act, 1944.
The bench of Justices AS Oka and Pankaj Mithal upheld the decision of the Central Excise Appellate Tribunal which observed that chewing tobacco in HDPEs qualified as wholesale packages as they were sold only to intermediaries like distributors and dealers under Standards of Weight & Measures (Packaged Commodity) Rules, 1977 (Rules of 1977). Thus the HDPEs cannot be taxed as a retail product.
The Telangana High Court has held that the 10% duty is leviable on Himani Navaratan Oil and Himani Gold Turmeric Ayurvedic Cream as they are classified as ayurvedic medicine and not cosmetics.
The bench of Justice P.Sam Koshy and Justice N.Tukaramji has observed that the rapper in whom the cream is sold very emphatically highlights it as an ayurvedic medicine. The rapper also clearly indicates that the cream is highly effective for cracked skin, pimples, boils, and numerous other skin blemishes. Nowhere did the rapper claim it to be a cosmetic product or a product that could enhance the complexion or fairness. The licensing authority having granted a license for the product as an ayurvedic drug, the manufacture, sale, and distribution of the product as a drug and not a cosmetic are established, and it is being marketed only as a drug and not as a cosmetic.
Assessment Order Downloaded From Common Portal Amounts To A Valid Service: Kerala High Court
The Kerala High Court has held that the assessment order downloaded from the common portal amounts to a valid service.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has upheld the decision of the Single Bench in which it was held that the petitioner had downloaded the assessment order from the very same portal, and therefore, the delay occasioned in retrieving the assessment order from the portal was a predicament that the appellant found himself in because of his own latches.
The Kerala High Court has held that the disallowance operates against erring employer assessee when employees' contribution to EPF/ESI not made within the due date.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that where the employees' contribution to EPF/ESI was not made over by the employer to the statutory authorities within the due date prescribed for making those payments under the respective statutes, the disallowance under Section 36(1)(va) would operate against the erring employer assessee.
The Kerala High Court has held that the South Indian Bank is entitled to the deduction envisaged under Section 36(1)(viii) of the Income Tax Act in respect of the long-term finance provided by it for the construction and purchase of houses in India for residential purposes.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that a view has been expressed that the National Housing Bank was not entitled to the benefits of the unamended Section 36(1)(viii), on the ground that it was not engaged directly in the long-term financing for the construction or purchase of houses in India for residential purposes. The amendment was therefore deemed necessary to extend the benefit even to the National Housing Bank.
It follows therefore that the amendment was intended to widen the scope of the deduction in relation to Financial Corporations specified in Section 4A of the Companies Act, Financial Corporations that were Public Sector Companies, Banking Companies, and Corporative Banks other than Primary Agricultural Credit Society or Primary Corporative Agricultural and Rural Development Banks, and to confine the benefit available to a Housing Finance Company only in relation to the provision by it of long-term finance for the construction or purchases of houses in India for residential purposes.
The Bombay High Court at Goa, while upholding the order of the Income Tax Appellate Tribunal (ITAT), has held that the assessee cannot be expected to deduct tax at source from payments that became taxable owing to a retrospective amendment.
The bench of Justice M.S. Karnik and Justice Valmiki Menezes has observed that it is not open to the department to take a divergent view on the expenditure for renovation and construction of schools or temples when it has allowed the expenditure on the purchase of ambulances, which was allowed by CIT(A), based only on the reason that the expenditure was huge.
The Delhi High Court has held that the loans and advances extended by the New Okhla Industrial Development Authority (NOIDA) are not commercial activities and are eligible for exemption under Section 10(46) of the Income Tax Act.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the respondent department has erred in holding that the loans and advances extended by the petitioner would fall within the ambit of commercial activity. The conclusion not only fails to take into consideration the directives of the state government that prompted and facilitated the action, but the grant of those loans has also not been established to have been motivated with a view to profiteering.
TPO Lacks Jurisdiction To Question Commercial Expediency Or Genuineness Of Need: Delhi High Court
The Delhi High Court has held that the statutory authority conferred upon the Transfer Pricing Officer (TPO) can only extend to an examination of the appropriateness of the method adopted for the purposes of determining arm's length pricing (ALP) or evaluating the enlistment of comparables. However, the TPO would neither be justified nor could it be countenanced to have the jurisdiction to question commercial expediency or genuineness of need.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav, while upholding the Tribunal's order, held that the assumption of the respondent-assessee being a contract manufacturer as well as the premise of payment of royalty “to itself” could not be sustained.
The Kerala High Court has held that the non-filing of returns even after receipt of the assessment order is fatal for the assessee.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that it may be true that the respondents did not issue a formal notice as required under Section 62(1) of the Income Tax Act before completing the assessment on a best judgment basis under the said provision, but the fact remains that the appellant could have obtained a nullification of said assessment order if he had filed the return at least within thirty days of the receipt of the assessment order.
The Allahabad High Court has held that a registered dealer cannot withhold the tax realised by him from a purchasing dealer only because he had deposited an excess amount of tax at the time of the transaction.
The Court held that he cannot escape the liability of depositing the tax realized under the U.P. Trade Tax Act, 1948 because a refund is due to him from assessment proceedings.
“The registered dealer after realizing the tax cannot withhold the same on the pretext that some excess amount of tax was deposited. The amount realized on the strength of Act, must be deposited and in case any amount found excess, the same will be refunded to the actual person from whom the same amount was realized as tax. The revisionist cannot get the benefit of any refund of amount while passing the assessment order,” held Justice Piyush Agrawal.
Bombay High Court Quashes Customs Duty Reassessment Against Patanjali Foods On Crude Palm Oil Import
The Bombay High Court has quashed the customs duty reassessment against Patanjali Foods on the import of crude palm oil for home consumption.
The Bench of Justice K. R. Shriram and Justice Jitendra Jain has observed that the rate in force would be the rate that was in force on the date and time of presentation, and in Patanjali's case, since self-assessed bills of entry were already presented before the enhanced rate came into force, the rate payable would be USD 1163 PMT. The said notification enhancing duty applied only to bills of entry presented after 21:24:11 hours on May 13, 2021, and since Patanjali's four ex-bond bills of entry were presented even before 21:00 hours, the enhanced rates would not apply to Patanjali's case.
The Bombay High Court has held that the breakwater wall or accropode that are essential certainly do not qualify as plant and machinery. The breakwater wall can hardly be called “plant or machinery." Accropodes lose their identity when a breakwater wall is constructed using accropode.
The bench of Justice K. R. Shriram and Justice Jitendra Jain has observed that Explanation to Section 17 also provides that “plant and machinery” should be used for making outward supply of goods or services. The breakwater wall is used for protecting the vessel from tides while unloading the LNG received and not for making outward supplies of goods or services. Therefore, the petitioner does not satisfy the condition provided in the Explanation to Section 17 to be eligible for ITC.
SAD Refunds Can't Be Denied For Taking Away Facility Of Re-Crediting DEPB Scrips: Kerala High Court
The Kerala High Court has held that if the appellant/assessee satisfies the conditions in Notification No.102/2007-Cus dated 14.09.2007 for the purposes of refund of the 4% Special Additional Duty (SAD), then merely because the facility of re-crediting the Duty Entitlement Pass Book (DEPB) scrips has been taken away, the refund that the appellant is entitled to by virtue of the notification cannot be denied.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that since the Delhi High Court has already annulled the Circular dated April 29, 2013, the respondent-department is now legally obliged to consider the refund application preferred by the appellant independently, on its merits, to see whether the conditions specified in Notification 102/2007-Cus dated September 14, 2007 have been satisfied by the appellant.
Investment Allowance Available On Exchange Rate Fluctuation: Bombay High Court
The Bombay High Court has held that investment allowance is available on exchange rate fluctuations.
The bench of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan has relied on the decision of the Supreme Court in the case of Commissioner of Income-Tax vs. Ambika Mills Ltd., in which it was held that investment allowance, consequent to exchange rate fluctuation, would be allowable.
AO Can't Review Its Own Order: Delhi High Court
The Delhi High Court has held that the Assessing Officer (AO) cannot review its own order.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed in the extract of the impugned corrigendum that no new material has been found by the department, which would warrant reopening the assessment. The corrigendum has been issued merely on the basis of a change of opinion, as two different conclusions are being drawn on the basis of the same material, i.e., the audited final accounts of the petitioner. Thus, the AO has apparently reviewed its own decision, which is not permissible as per the settled law.
Transfer Of Depreciable Capital Assets Attracts Capital Gains Tax: Kerala High Court
The Kerala High Court has held that the transfer of the depreciable capital assets attracted capital gains tax under Section 45(4) of the Income Tax Act, in the absence of distribution of any capital asset among the partners following a dissolution of the appellant firm.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M., while upholding the order of the tribunal that the charge of short-term capital gains had to be in accordance with the provisions of Section 45(4) of the Income Tax Act, observed that the Appellate Tribunal did not, however, proceed to determine the tax effect, if any, that would follow pursuant to its finding as regards the charge of short-term capital gains.
ITSC Empowered To Make Income Tax Addition: Delhi High Court
The Delhi High Court has held that the Income Tax Settlement Commission (ITSC) does not lack jurisdiction to make an addition, which has also been duly recorded in the terms of settlement.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the objective of the settlement provisions is to strike a balance between the voluntary disclosure of income by the assessee and the income escaping assessment in order to expedite the closure of tax disputes.
Order Of ITSC Final And Conclusive For AY For Which Application Has Been Filed: Delhi High Court
The Delhi High Court has held that the order of the Income Tax Settlement Commission (ITSC) is final and conclusive for a particular assessment year (AY) for which the application has been filed.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the order of the ITSC is deemed to be conclusive for all the matters pertaining to the concerned AY for which the settlement application has been accepted and processed by the ITSC. If the Income Tax Department is not satisfied with the computation of income by the ITSC for the relevant AY, the same could only be assailed in accordance with the provisions contemplated under Section 245D(6) and Section 245D(7) of the Income Tax Act.
The Allahabad High Court has admitted the writ petition stating that the IGST Act lacks provision for appeals provided against an order passed by the state GST Officer.
The bench of Justice Saumitra Dayal Singh and Justice Anish Kumar Gupta while admitting the writ petition noted that order passed under the IGST Act, the appeal shall lie before the Central Tax Officer. However, Section 6(3) of the UPGST Act, 2017, specifically excludes the jurisdiction of the Central Tax Officers to entertain the appeal against an order passed by an officer appointed under the UPGST Act. Therefore, the Central Tax Officer does not have the jurisdiction to entertain the appeal against an order passed by an officer appointed under the UPGST Act, 2017.
The Delhi High Court has held that services provided by International Management Group (IMG) are utilized by the Board of Control for Cricket in India (BCCI) outside India, so the income determined as Fee for Technical Services (FTS) cannot be deemed to accrue in India and therefore cannot be taxed in India.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed that the Tribunal clearly erred in holding that the advice and consultancy services rendered by IMG enabled BCCI “to absorb and apply the information and advice." It clearly failed to bear in mind the distinction that must be acknowledged to exist between the mere utilization of technical or consulting services in aid of business and the transfer, transmission, and enablement that must occur in order for the twin conditions of Article 13 of the DTAA to be satisfied.
The Telangana High Court has held that deductions cannot be availed on expenditures incurred for overseeing the project of holding a company.
The bench of Justice P. Sam Koshy and Justice Laxmi Narayana Alishetty has observed that, as per Section 37 of the Income Tax Act, 1961, the prerequisites for allowing deduction are that the expenditure should have been incurred in respect of a business carried on by the assessee and should be spent wholly and exclusively for its own business.
The Calcutta High Court has held that the cellular mobile service providers are not obliged to deduct the tax at source (TDS) on income received by distributors/franchisees from customers.
The bench of Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj has relied on the decision of Supreme Court in the case of Bharti Cellular Limited Vs. Assistant Commissioner of Income Tax Circle-57, Kolkata and Anr. In Which It Was Held That The Assessees Would Not Be Under A Legal Obligation To Deduct Tax At Source On The Income/Profit Component In The Payments Received By The Distributors/Franchisees From The Third Parties/Customers, Or While Selling/Transferring The Pre-Paid Coupons Or Starter-Kits To The Distributors.
Admission Fee Charged From Students Forms Part Of Corpus Donation: Gujarat High Court
The Gujarat High Court has held that the admission fee charged by the students forms part of the corpus donation of the trust.
The bench of Justice Bhargav D. Karia and Justice Niral R. Mehta has observed that the donation is bound to have been given for material gain in securing admission; the same cannot be characterised as a donation towards a charitable purpose, and the appellant would not be entitled to have the benefit, but in the facts of the case, in the absence of any material on record, such a view cannot be taken in the circumstances. The Tribunal has committed an error by treating the admission fee charged from the students as not forming part of the corpus of the Trust.
The Gujarat High Court has upheld the decision of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) allowing the refund of Special Additional Duty (SAD) on betel nuts. The court observed that there is no distinction between industrial grade betel nuts and edible supari.
The division bench comprising Justices Bhargav D. Karia and Niral M. Mehta ruled, “Considering the facts of the case which is not in dispute that there is no distinction between the areca nuts betle nuts as certified under CTH 0802090 of HSN at the time of importation as edible goods which are not suitable for immediate consumption.”“It is also the case of the respondent-assessee that such imported goods were required further processing to make them edible. The Commissioner (Appeals) and the Tribunal has also referred to and relied upon the information available on DGFT website wherein also areca nut and supari has been considered as the same product in the minutes of ALC meeting No. 02/2007 held on 20.4.2006,” the bench added.
While pointing that scheme of faceless assessment is applicable from the stage of show cause notice u/s 148 as well as 148A, the Punjab & Haryana High Court ruled that notice u/s 148 cannot be issued by Jurisdictional Assessing Officer after introduction of faceless assessment scheme.
Since the Revenue Department had issued show-cause notice u/s 148 relying on the Board's Memorandum and Instructions, the High Court clarified that circulars, instructions and letters issued by Board or any other authority cannot override statutory provisions.
Interest Can't Be Levied When No Taxable Due Is Found: Gauhati High Court
The Gauhati High Court has held that once the assessment order of the authorities is set aside and the matter is remanded back and assessed, no taxable interest can be levied.
The bench of Justice Arun Dev Choudhury has observed that in a judicial system that is administered by the court, one of the primary principles to keep in mind is that the court under the same jurisdiction must have similar opinions regarding similar questions, issues, and circumstances. If opinions given on similar legal issues are inconsistent, then instead of achieving harmony in the judicial system, it will result in judicial chaos.
Not Permissible For TPO To Engage In Restructuring Of Transaction: Delhi High Court
The Delhi High Court has held that it is not permissible for the Transfer Pricing Officer (TPO) to engage in the restructuring of a transaction.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that it would also not be permissible for the TPO to engage in the restructuring of a transaction unless the economic substance of the transaction differed from its form, and if the form and substance of the transaction were the same but the arrangements relating to the transaction, when viewed in totality, differed from those that would have been adopted by independent enterprises acting in a commercially rational manner.
The Supreme Court recently held that any vendor who buys liquor from state manufacturers without obtaining it through auction and sells in retail at a fixed price would be excluded from the definition of 'buyer' under Section 206C of the Income Tax Act. Such a trade would be exempted from TCS (Tax Collected at Source).
"If the buyer is a public sector company or it has obtained the goods in further sale or if the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any state enactment, then such a person would not come within the ambit of “buyer” as per the definition in Explanation(a) of Section 206C," the Court stated.
The bench of Justices BV Nagarathna and Ujjal Bhuyan observed that a twin test is to be applied to be excluded from the definition of 'buyer' under S. 206 C of the Income Tax Act 1961 as provided under explanation (a)(iii). This includes (a) obtaining the goods without auction and (b) selling the goods at a price fixed by the state government.
The Court went a step further to observe that an auction of the right to sell the liquor (goods in this case) would not be considered as the auction of the liquor itself.
The Kerala High Court has held that the petitioner/assessee has paid tax at the prescribed rate on the materials procured by him from the Travancore Devaswom Board, and since this amount has already been paid over to the State Exchequer, any denial of credit to the assessee solely on the ground that the Travancore Devaswom Board/Truvabharanam Commissioner was not registered under the KVAT Act would be unjust.
The bench of Justice Gopinath P. has observed that the definition of 'casual trader' under Section 2(xi) of the KVAT Act will also indicate that the Travancore Devaswom Board may not even fall within the definition of a casual trader for the purposes of the KVAT Act. The provisions of Section 3(2)(c) of the KVAT Act indicate that the Commissioner shall have superintendence over all officers and persons employed in the execution of the Act, and the Commissioner may issue such orders, instructions, and directions to such officers and persons as he may deem fit for the proper administration.
The Delhi High Court has held that the revoking suspension of license cannot restrict the customs department from inquiring for imposition of penalty.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the mere fact that the suspension of license had come to be revoked cannot possibly be viewed as restricting the respondents from proceeding further in accordance with Regulation 17 of the Customs Broker Licensing Regulations, 2018. As is manifest from the provisions made for the suspension of license, it is liable to be invoked where the authorities are of the opinion that immediate action is warranted.
The Andhra Pradesh High Court has held that the trade notification issued by the Directorate General of Foreign Trade (DGFT) prohibiting export of non-basmati white rice cannot have retrospective effect.
The bench of Justice Ninala Jayasurya has observed that the Foreign Trade (Development and Regulation) Act-1992 does not confer any right to the authorities/department or enable them to issue any notification that has the effect of imposing prohibition with retrospective effect or take away the vested rights accrued to the petitioners by virtue of the Foreign Trade Policy, 2023, prior to the issuance of the notification.
The Rajasthan High Court, Jaipur Bench, has quashed the AAR's order rejecting the application for the advance ruling as not maintainable on the grounds that the applicant was not the supplier.
The bench of Justice Avneesh Jhingan and Justice Ashutosh Kumar has observed that the appeal against the advance ruling is provided under Section 100 of the CGST Act. The concerned officer, the jurisdictional officer, or the applicant can prefer an appeal against the ruling given under Section 98(4). No appeal is provided against rejection of the application under Section 98(2) of the CGST Act. The application of the petitioner was ousted at threshold under Section 98(2) as not maintainable. Section is unambiguous that an appeal can be filed only against the orders pronounced under Section 98(4) of the CGST Act.
The Kerala High Court has dismissed the writ petition filed by the Indian Medical Association challenging the levy of GST on supply of goods and services to its members.
The bench of Justice Dinesh Kumar Singh has observed that the Parliament/State Legislature has amended Section 7(a) by inserting Section 7(aa) by the Finance Act, 2021. The amendment is neither beyond legislative competence nor offends any of the fundamental rights guaranteed under Part III of the Constitution of India nor is manifestly arbitrary or capricious. Therefore, the amendment brought in Section 7(a) by inserting Section 7(aa) is well within the legislative competence and not ultra-virus.
The Kerala High Court has held that when a property kept not for trade but for investment purposes is sold, the gain has to fall under the head 'capital gains' and such a transaction is only taxable under capital gain and not under adventure of trade.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that the burden is upon the Department to show that a transaction effected by the assessee is an adventure in the nature of trade. Merely because the assessee makes some profit in a particular transaction, it cannot be treated as an adventure in the nature of trade so long as the initial intention or reason for investing money was to hold the property and use it for a different purpose.
The Bombay High Court has held that the expression 'built up area' introduced with effect from April 1, 2005, could not be applied retrospectively, and the Tribunal was justified in holding that up to April 1, 2005, the expression 'built up area' would exclude the balcony area.
The bench of Justice G. S. Kulkarni and Somasekhar Sundaresan has observed that for the first time, the Legislature has defined the expression 'built up area' in Section 80IB(10) by introducing clause (a) to Section 80IB(14) by Finance (No. 2) Act, 2004 with effect from April 1, 2005.
In a notable ruling relating to the Customs Act of 1962, the Supreme Court on Tuesday (July 23) held that the importer would be liable to pay customs duty in addition to fines and other charges upon redeeming the confiscated goods.
Non-Filing Of GST Return Due To Technical Glitch, Bank Can't Be Penalised: Telangana High Court
The Telangana High Court has held that the petitioner bank could not file its return in the GST portal because of a technical glitch and cannot be saddled with demand, penalty, and interest.
The bench of Justice Sujoy Paul and Justice Namavarapu Rajeshwar Rao has observed that it was the duty of the department to keep their portal functional. If the portal was not functional or had a technical glitch, and because of that, the petitioner was compelled to file a return in the portal of Telangana. The department cannot take advantage of its own wrong.
The Delhi High Court held that a custom broker cannot be held guilty of having failed to discharge the obligation placed in terms of Regulation 10(n) of CBLR 2018, simply because he has not carried out physical verification of the veracity of the exporter.
The Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja Observed that “the CB would not be in violation of its obligations if he has relied on “reliable, independent, authentic documents, data, or information” such as the IEC and GSTIN which are issued by the Director General of Foreign Trade and GST Officers respectively”.
The Calcutta High Court held that no service tax will be levied on activities such as cutting or mineral extraction which are part of mining operations, if mining operations are itself not subjected to service tax on the date of levy.
The High Court clarified that if the State seeking to recover tax, cannot bring the subject within the letter of law, then it goes without saying that the subject is free.
The Division Bench of Chief Justice T.S Sivagnanam and Justice Hiranmay Bhattacharyya observed that “Coal cutting or mineral extraction and lifting them up to the pithead: These activities are essential integral processes and are part of mining operations. As stated earlier, mining activity has been made taxable by legislation under the Finance Act, 2007(w.e.f.1.06.2007). Prior to this date, such activities, being part of mining operations itself are not subjected to service tax. Therefore, no service tax is leviable on such activities prior to the said date.”
The Supreme Court has recently held that regular entries under List I and II of the 7th Schedule of the Constitution cannot be given a wider interpretation to include taxation powers which are covered under the domain of specific tax entries under the 7th Schedule.
The 9 Judge Constitution Bench led by CJI DY Chandrachud observed this while holding that States have the power to levy tax on mineral rights under Entry 50 List II and that the Union law - Mines and Minerals (Development and Regulation) Act 1957 (enacted under Entry 54 List I) - do not limit such power of the States.
Interest Can't Be Demanded When Entire Stamp Duty Paid During Pendency Of Appeal: Madras High Court
The Madras High Court has held that interest cannot be demanded when the entire amount as demanded by the authorities has been paid even during the pendency of the appeal.
The bench of Justice R. Vijayakumar has observed that the present appeal has been filed under Section 47-A(10) of the Indian Stamp Act, 1899. Only after orders are passed by the Court will the liability get fastened upon the purchaser to pay interest on the belated payment. The entire amount as demanded by the authorities has been paid even during the pendency of the appeal. The interest cannot be demanded because the belated payment does not arise.
The Delhi High Court has held that the receipts from Indian customers for services provided outside' Indian Territory in connection with use or right to use of process or equipment by the assessee company cannot be taxed as royalty.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav, while dismissing the department's appeal, held that a person who is provided mobile communication services or access to the internet does not stand vested with a right over a patent, invention, or process. The consideration that the service recipient pays also cannot possibly be recognized as being intended to acquire a right in respect of a patent, invention, process, or equipment. The word “process” being liable to be construed ejusdem generis is lent added credence by clause (iii) employing the expression “or similar property,” which follows. It thus clearly appears to be intended to extend to a host of intellectual properties.
The Delhi High Court has held that the assessee is carrying on educational activities that are covered by the provisions of Section 2 (15) of the Income Tax Act, and it is neither business nor profession of the assessee.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed that the mode and manner in which education is imparted would be a concept that would have to necessarily be evaluated bearing in mind the march of technology and the myriad modes of imparting instruction that now exist and have enabled institutions to overcome barriers of distance and time. Imparting education through a virtual mode or by the adoption of new technologies would not detract from the said activity, otherwise fulfilling the requirements of structured education.
Dismissing a petition filed by the Income Tax Department, the Supreme Court recently upheld the view that Vodafone Idea is not liable to deduct TDS (tax deducted at source) on interconnectivity usage and bandwidth charges paid to non-resident telecom operators.
A bench of Justices BV Nagarathna and N Kotiswar Singh observed that the case was covered by the 2021 decision in Engineering Analysis Centre for Excellence Private Ltd v. The Commissioner of Income Tax and Anr., where it was held that payments made by Indian companies to non-residents for use of software cannot be taxed as 'royalty'.
The Rajasthan High Court has allowed the application seeking condonation of delay under Section 119(2)(b) of the Income Tax Act in order to claim a refund for the assessment year 2009-10 to 2014-15 on the grounds of genuine hardship.
The bench of Justice Pushpendra Singh Bhati and Justice Munnuri Laxman has observed that the depression, old age, long pendency of the issue, and the petitioner's status as a small-scale surveyor with no negativity in revenue collection by the tax authorities (like scrutiny) attached have to be considered as genuine hardship.
University Income From Rentals, Not Exempted From Service Tax: Karnataka High Court
The Karnataka High Court has held that the university is liable to pay service tax on the income earned from the rentals of buildings leased or licensed for banking facilities.
The bench of Justice Krishna S. Dixit and Justice Ramachandra D. Huddar has observed that when the university rents out its property for running a bank, the profit motive is abundant. It is not the case of the university that the banking services are agreed to be provided on a 'no profit, no loss basis' by prescribing a license fee as contradistinguished from rentals. However, providing banking facilities by no stretch of imagination can be held to be incidental to education. The term 'educational services' has been employed in these exemption notifications in a reasonable sense, if not restrictive.
The Punjab & Haryana High Court recently upheld the revisional order passed by the Principal CIT u/s 263 by setting aside the assessment wrongly passed by the AO u/s 44ADA.
The Division Bench of Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth observed that “the assessee had neither got his accounts audited from the accountant nor furnished report of such audit as per provisions of section 44AB. The assessee's case, prima facie was covered u/s 44ADA but the return of Income filed was not in accordance with the provisions of section 44ADA”.
The Delhi High Court has held that the power to assess the block period of ten years would clearly not be attracted in the case of a search that had taken place prior to April 1, 2017.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that since the date of search was April 7, 2016, the amendments that came to be introduced in Section 153C by virtue of the Finance Act of 2017 would not be applicable. The provisions stood prior to the Finance Act, 2017, and the assessment years that could be thrown open pursuant to a search stood at six assessment years.
By virtue of the Finance Act of 2017, the block period for search assessment was extended to ten assessment years on account of the introduction of the concept of “relevant assessment year or years." The expression came to be defined by Explanation 1 to Section 153A as extending to the period that falls beyond six assessment years but not later than ten assessment years from the end of the AY relevant to the previous year in which the search was conducted or a requisition made.
The Chhattisgarh High Court reiterated a settled position of law that the assessee would be liable to pay the income tax on the unexplained cash credited into its books if the assessee fails to prove the source of a sum of money found to have been received by an assessee.
The Court said that under Section 68 of the Income Tax Act, 1961 the initial onus to prove the genuineness of the money credited into the assessee's books of account falls on the assessee, and if the assessee fails to discharge the onus than the unexplained cash credited into the assessee's books of account would be deemed as a taxable income being earned from the previous year.
The Bombay High Court has held that it is not mandatory for assessment orders to contain reference and/or discussion to disclose its satisfaction in respect of each and every query raised.
The bench of Justice K.R. Shriram and Justice Jitendra Jain has observed that since there is no discussion or finding on the issue of hazardous waste in the order, the respondent department should be taken as having accepted the petitioner's explanation.
While Interpreting the definition of the 'Purchase Price' under the Gujarat Value Added Tax Act of 2003 (“GVAT”), the Supreme Court on Friday (August 2) observed that the value-added tax would not be included in the definition of the purchase price.
The Court held that no value-added tax would be added to the purchase price to calculate tax as the same is not mentioned in the categories of tax/duties enumerated under Section 2(18) of the GVAT.
The Madurai Bench of Madras High Court while quashing the detention order held that if an invoice, bill of supply, delivery challan, or bill of entry and a valid e-way bill in physical or electronic form for verification are available, then action may not be initiated.
The bench of Justice S.Srimathy has observed that the respondent department issued the notice, carried out the inspection on the same day, and also passed the order on the same day. As per the provisions prescribed, the respondents department ought to grant time for seven days to reply. Since the inspection, notice, and orders were passed on the same day, there is a clear violation of the principles of natural justice.
The Gauhati High Court has held that the State GST Authorities cannot take the benefit of Notification No. 56/2023-CE, which is also otherwise ultra vires the CGST Act, 2017.
The bench of Justice Devashis Baruah has noted that the GST Council has not made any recommendation till date, and in spite of that, the Central Board of Indirect Taxes and Customs issued a Notification bearing No. 56/2023-CE dated 28.12.2023, thereby extending the period to pass the order under Section 73(9) of the CGST Act, 2017 for the Financial Year 2018-2019 up to the 30.04.2024 and for the Financial Year 2019-2020 up to the 31.08.2024.
The Punjab and Haryana High Court has held that the construction of public libraries forms part of a charitable function and is eligible for the exemption under Section 80G of the Income Tax Act.
The bench of Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth has observed that the ancillary work, which may be carried out by the society for the purpose of enhancing education, would also be treated as work done for charitable purposes. The amount of Rs. 30,00,000/- has been utilized for construction of the public library, and it would have to be treated as work done for charitable purposes.
Finding major flaw in the fundamental premise of the Revenue Department that the investment made by the taxpayer in shares amounted to “income” which has escaped assessment, the Delhi High Court quashed the reopening proceeding initiated u/s 148A.
Observing that foundational material alone would be relevant for the purposes of evaluating whether reassessment powers were justifiably invoked, the High Court clarified that Revenue Department cannot take a fresh ground while passing order u/s 148A(d).
Resolution Plan Approved Under IBC, Income Tax Reassessment Not Sustainable: Delhi High Court
The Delhi High Court has quashed the income tax assessment order and held that the statutory injunct which would operate in respect of any claim which may pertain to a period prior to the Resolution Plan being approved.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that if a company is unable to pay its debts, which should include its statutory dues to the Government and/or other authorities and there is no plan which contemplates dissipation of those debts in a phased manner, uniform proportional reduction, the company would necessarily have to be liquidated and its assets sold and distributed in the manner stipulated in Section 53 IBC.
The Delhi High Court has held that the assessee to be eligible and entitled to exemptions under Section 11(1) and 11(2) of the Income Tax Act and the alleged ground of non-filing of audit report along with return of income, which was at the best procedural omission, could never be an impediment in law in claiming the exemption.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the electronic submission of Form 10B is essentially a matter of procedure as opposed to being a mandatory condition that may be recognized to form part of substantive law.
The Allahabad High Court has held that order Section 73 of the Goods and Service Tax Act, 2017 cannot be passed a company which is under the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016.
Section 73 of the Goods and Service Tax Act, 2017 empowers a proper officer to initiate proceedings if he is satisfied that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any willful-misstatement or suppression of facts to evade tax by any assesee.
Petitioner approached the High Court against the order passed by the respondent authority under Section 73 of the GST Act. The Court observed that show cause notice under Section 73 was issued to the petitioner on 10.04.2024. Petitioner, in its reply dated 12.04.2024, informed the authority that petitioner was under CIRP and requested authority for time for seeking instructions from the Interim Resolution Professional.
The Delhi High Court held that a decision to reopen or reassess cannot be based or sought to be justified either on additional reasons or those which may be supplied subsequently while disposing of objections preferred by an assessee.
At the same time, the High Court clarified that the statutory scheme of reassessment neither sanctions vacillation nor can a decision to trigger reassessment be sustained based upon an attempted supplementation aimed at bolstering or buttressing the original opinion.
Purchaser Can't Be Punished For Failure Of Seller To Deposit Tax: Gauhati High Court
The Gauhati High Court has held that a purchasing dealer cannot be punished for the act of the selling dealer in case the selling dealer had failed to deposit the tax collected by it.
The bench of Chief Justice Vijay Bishnoi and Justice Suman Shyam has observed that the Department is precluded from invoking Section 9(2)(g) of the DVAT to deny ITC to a purchasing dealer who has bona fide entered into a purchase transaction with a registered selling dealer who has issued a tax invoice reflecting the TIN number. In the event that the selling dealer has failed to deposit the tax collected by him from the purchasing dealer, the remedy for the Department would be to proceed against the defaulting selling dealer to recover such tax and not deny the purchasing dealer the ITC.
The Delhi High Court has held that the settlement consideration is liable to be recognized as capital gains and not “profits in lieu of salary.”.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the fundamental mistake which the Tribunal committed was failing to bear in mind the distinction between a “perquisite” and “profits in lieu of salary," both of which are dealt with separately in Section 17 of the Income Tax Act, 1961. “Profits in lieu of salary," which is spoken of in Section 17(3), deals with compensation received by an assessee from his employer or former employer in connection with the termination of his employment or on a modification of terms and conditions of service. However, the Tribunal has fundamentally erred in ignoring the indubitable position of the employment of the assessee having been brought to an end on 24 August 2010 itself and thus before the action came to be even laid or instituted before the Company Law Board (CLB).
'We Can't Run GST Administration' : Supreme Court Dismisses Plea For Rating Mechanism For GST Payers
The Supreme Court on Friday (September 6) dismissed a Public Interest Litigation seeking directions to the Union to formulate and implement a centralized rating mechanism of taxpayers under the Central Goods and Services Tax Act 2017 (CGST Act).
The bench led by CJI DY Chandrachud comprising Justices JB Pardiwala and Manoj Misra refused to entertain the PIL since such a relief would fall outside the scope of the Writ Jurisdiction.
The Punjab & Haryana High Court held that cash seized from possession of another person cannot be adjusted against Assessee's tax liability as advance tax paid by him.
The Division Bench comprising Justice Sanjeev Prakash Sharma and Justice Jagmohan Bansal observed “From sub-section (3) of Section 132B, it is evident that person from whose custody assets is seized is entitled to adjustment thereof against the tax liability. As per explanation, existing liability does not include advance tax”.
The Madurai Bench of Madras High Court has held that the taxpayer cannot be mulcted with an unjust penalty due to a minor discrepancy in the PIN code in the GST registration, and the tax invoices are to be construed as a minor violation of the provisions of the respective GST enactments.
The bench of Justice C. Saravanan has observed that the imposition of a penalty for technical venial breach of the provisions or the minor discrepancy in the variance in the address in the tax invoices and the e-way bill would not justify the penalty under Section 129(5) of the GST enactments.
NRIs Not Exempted From Mandatory Faceless Procedure: Telangana High Court
The Telangana High Court has held that the NRIs are not exempted from following mandatory faceless procedure.
The bench of Justice Sujoy Paul and Justice Namavarapu Rajeshwar Rao has observed that the taxpayer is nowhere distinguished between NRIs and Indian citizens. The reassessment notice issued under Section 148 must comply with the requirement of the scheme whether or not the taxpayer is an NRI or Indian citizen.
The Telangana High Court has held that GST is not payable on consideration received towards 'works contract service of construction' executed in the Maldives.
The bench of Justice Sujoy Paul and Justice Namavarapu Rajeshwar Rao has observed that the location of immovable property is located in the Maldives or outside India. Hence, the place of supply shall determine the 'location of the recipient'. The place of supply of services is Addu, Maldives. The 'location of recipient' is already interpreted by holding that, as per Section 2(14)(b), it will be the 'fixed establishment' of National Buildings Construction Corporation Ltd. (NBCCL), which will be the location of the recipient.
The Bombay High Court recently held that contribution to public welfare fund, if connected with or related to carrying on assessee's business, or if it results in benefits to assessee's business, should be allowable deduction u/s 37.
The High Court held so while deciding on the taxability of the contribution made by the employer/assessee (Tata Engineering & Locomotive) to its workers union under a memorandum of settlement.
The Allahabad High Court has held that if the goods in transit are not accompanied by proper documentation, including e-way bill, the authorities can survey the business premises of the assesee to determine the correctness of the transaction. However, it was held that if the e-way bill was produced before passing of seizure order under Section 129 of the Goods and Service Tax Act, 2017, then contravention of the Act or Rules thereunder could not be claimed by the Department.
VSV Scheme Is Non-Tax Benefit Applicable Even To Medium Enterprise, Clarifies Bombay High Court
While granting benefit under the 'Vivad Se Vishwas I-Relief for MSMEs Scheme' (VSV Scheme) to the Assessee, even when it was re-classified as 'not an MSME', the Bombay High Court held that even though the Petitioner was re-classified as “not an MSME” for a period of three years from May 09, 2023, it was entitled to avail of all non-tax benefits available to a Medium Enterprise. Since the VSV Scheme is a non-tax benefit applicable even to a Medium Enterprise, the High Court clarified that the Petitioner was entitled to make a claim under the VSV Scheme”
The Division Bench comprising Justice B. P. Colabawalla and Justice Firdosh P. Pooniwalla observed that the VsV scheme proposed to refund 95% of the liquidated damages deducted under contracts entered into with the Government/PSUs on the fulfilment of the specified eligibility conditions.
Finding that the AO has arbitrarily exercised jurisdiction by granting an extension of only two days to the Assessee in filing reply to the SCN, the Bombay High Court quashed the assessment and remanded the proceedings for passing fresh assessment order u/s 144 read with Section 144B.
The Division Bench comprising of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan observed that “approach on the part of the Respondents was clearly in breach of the SOP, which has also resulted in breach of the principles of natural justice, which guaranteed to the Petitioner a fair and reasonable opportunity to respond to the SCN under the procedure
prescribed, in undertaking the assessment proceedings”.
Taking note of Section 35G of the Central Excise Act, the Calcutta High Court clarified that an appeal shall lie to the High Court from “every order” passed in appeal by the Appellate Tribunal, though the maintainability thereof would be dependent on certain statutory limitations.
Single Judge Bench of Justice Raja Basu Chowdhury observed that “it cannot be said that the order passed by the Tribunal on 5th January, 2024 does not qualify as an order for preferring an appeal before the High Court, simply because the same does not seek to adjudicate the rights of the parties”.
The Bench went on to observe that it is altogether a different question whether the High Court would admit the appeal having regard to involvement of substantial questions of law.
Compensation To Discontinue Commodity Brokerage Business Chargeable To Income Tax: Kerala High Court
The Kerala High Court has held that the amount received by the assessee is under an agreement for not carrying out any activity in relation to any business that was carried on by the assessee; it would attract the provisions of Section 28(va)(a) of the Income Tax Act and make the receipt chargeable to income tax under the heading of “Profits and gains of business or profession.”.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that Section 28(va)(a) of the Income Tax Act does not restrict the operation of the provision to only amounts received by way of non-compete fee. The words used in the said provision do not admit any restricted meaning. So long as the amount received by the assessee was received for not carrying out any activity in relation to any business and the amount received was not on account of the transfer of the right to manufacture, produce, or process any article or thing or on account of the transfer of the right to carry on any business, which receipts would have been chargeable under the head “capital gains," there was no reason to interfere with the order of the Assessing Authority that brought the amounts received by the assessee from BNP Paribas to tax under the head “Profits and gains of business or profession”.
The Delhi High Court has held that the assessee was entitled to claim deductions even where the audit report had not been filed with the return but was submitted before the assessment was completed.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that Section 10B(8) is clearly couched in terms more imperative than Section 80-IA(7). This becomes manifest from a reading of that provision, which requires the assessee to furnish a declaration before the AO that it chooses not to be assessed in accordance with that provision, and the said declaration is liable to be furnished before the due date for furnishing a return of income under Section 139(1). The requirement has always existed in Section 10B since its inception and since its insertion by virtue of the Finance Act of 1988. It is a significant distinguishing feature, bearing in mind that the indisputable position of the audit report being tied to the specified date contemplated in Section 44AB was a stipulation that came to be introduced for the first time and with sufficient certitude by virtue of the Finance Act, 2020.
The Delhi High Court has quashed the reassessment proceedings initiated against the Assessee on the ground that interest income on Non-convertible debentures (NCDs) derived from Indian AE had been mischaracterized as interest instead of dividend.
While holding so, the High Court rejected the argument put forth by the Department that although the funds were taken out in the form of interest payments, they were in fact liable to be declared as dividend and was subjected to Dividend Distribution Tax (DDT).
Pointing out that the Assessee was merely the recipient of the interest income and it was clearly not the entity which had either declared or paid the dividend, the Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that DDT is liable to be paid by the company which declares, distributes, or pays the dividend.
While emphasizing that no tax can be levied on notional income, the Delhi High Court held that Valuation Report obtained by employer could have no application to a share which was subject to a lock-in stipulation and could not be sold in the open market. Since there was a complete embargo on the sale of those shares, the High Court held that value of shares allotted to the appellant under the Employees Stock Purchase Scheme (ESPS) cannot be treated as perquisite in terms of Section 17(2)(iiia).
The Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed that “in light of the restriction with respect to marketability and tradability of the stock in question, the FMV could not have been recognized to exceed the face value of the shares and thus the determinative being INR 15”.
Finding that the order of sanction passed by the Competent Authority is a general order of approval for 111 cases, and there was not even a whisper as to what material had weighed in the grant of approval u/s 151, the Delhi High Court held that although the PCIT is not required to record elaborate reasons, he must record satisfaction after application of mind.
Since the sanction order does not refer to the substantial material of any of the 111 cases, the High Court clarified that approval u/s 151 is a safeguard and must be meaningful and not merely ritualistic or formal.
The Division Bench comprising of Justice Yashwant Varma and Justice Ravinder Dudeja observed that “the PCIT has failed to satisfactorily record its concurrence and by no stretch of imagination, the approval granted by common order, could be considered to be a valid approval”.
While pointing out that the suspension/ revocation of license would be counterproductive and works against the interest of the revenue, the Calcutta High Court clarified that assessee in such a case would not be able to carry on his business in the sense that no invoice can be raised by the assessee and ultimately would impact recovery of tax.
Single Bench of Justice Raja Basu Chowdhury therefore set aside the order cancelling the registration of the assessee subject to the condition that the assessee files his returns for the entire period of default and pays requisite amount of tax and interest and fine and penalty, if not already paid.
Referring to the decision in case of Dinesh Kumar Pradeep Kumar Vs. Additional Commissioner [Writ Tax No. 1082 of 2022], the Allahabad High Court reiterated that even if excess stock is found at the business premises of the manufacturer, the proceedings u/s 130 of the UPGST Act cannot be initiated.
Single Judge Piyush Agrawal observed that “if excess stock is found, then proceedings under sections 73/74 of the GST Act should be pressed in service and not proceedings under section 130 of the GST Act, read with rule 120 of the Rules framed under the Act”.
The Delhi High Court has held that the deduction under Section 80-IA(7) of the Income Tax Act cannot be denied for the mere failure of the assessee to digitally file an audit report.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that Audit Report was duly furnished to the AO and was available to be scrutinised and examined by that authority during the assessment proceedings, the provisions of Section 80-IA(7), as it stood prior to the amendments introduced in 2020, would be recognized to have been substantially fulfilled. In any event, a failure to digitally file that report cannot be countenanced to be fatal to the claim that may be laid in terms of Section 80-IA(7).
The Delhi High Court has quashed the reassessment order and held that the amount paid for obtaining mining rights in e-auctions cannot be construed as income.
The bench of Justice Yashwant Varma and Justice Tara Vitasta Ganju has observed that the Department of Mines and Geology had merely provided to the AO the total amount paid by the petitioner for obtaining mining rights in the e-auctions that were conducted. The said amount clearly cannot be counted as the income of the assessee for the relevant year. The income of the assessee would only be that which was garnered from the sale of iron ore and other non-ferrous metals.
While pointing out that the payment by FPS was not made towards the ESOPs as the Assessee continues to hold the ESOP (Employee Stock Option Purchase) even after the receipt of the compensation, the Madras High Court held the receipt in hands of Assessee qualifies as perquisite and taxable under the head 'Salaries'.
Hence, the High Court refuses to allow 'Nil' certificate of tax deduction u/s 192 in reference to such compensation, which is to be treated as perquisite in lieu of 'salary'.
No IGST Is Payable On Ocean Freight Under Reverse Charge Mechanism; Madras High Court Directs Refund
The Madras High Court has directed the department to refund the GST paid by the assessee on the ocean freight under the reverse charge mechanism.
The bench of Justice Mohammed Shaffiq has relied on the decision of the Supreme Court in the case of Mohit Minerals Private Limited, in which it was held that no IGST is payable on ocean freight under the reverse charge mechanism for cost, insurance, and freight (CIF) imports.
The Bombay High Court has held that if the party is able to show proof of supply to the Special Economic Zone (SEZ) Unit, then non-submission of the “Bill of Export” cannot be treated as non-discharge of proof of export obligation (EO).
The bench of Justice K. R. Shriram and Justice Jitendra Jain has observed that failure to produce a copy of the assessed bill of export in respect of the supplies made to SEZ would not necessarily result in holding that there was a failure to discharge the export obligation where one is able to establish supplies made to SEZ by the production of copies of ARE-1.
The Gujarat High Court has ruled that the Geo Membrane, a textile fabric used for waterproof lining, is subject to a 12% GST rate rather than the previously applied 18%. The court has directed the GST department to refund the excess 6% GST paid by the petitioner.
The case involved a partnership firm that manufactures Geo Membrane, a type of textile fabric. The firm is registered under the Central and Gujarat Goods and Services Tax Act, 2017. The petitioner contended that Geo Membrane, being a textile product, should be taxed at the rate applicable to textile fabrics. However, the GST department classified the product as a plastic Geomembrane, thus applying an 18% GST rate.
The Allahabad High Court has upheld the Commercial Tax Tribunal, Lucknow's finding that Boro Plus Ayurvedic Cream is a 'medicated ointment' and not an 'antiseptic cream'. It was held that Boro Plus Ayurvedic Cream is taxable at 5% under Entry 41 Schedule II of the Uttar Pradesh Value Added Tax Act, 2008.
Heading “Drugs and Medicines” in Entry 41, with effective from October 11, 2012, excludes medicated soap, shampoo, antiseptic cream, face cream, massage cream, eye jel and hair oil but includes vaccines, syringes and dressings, medicated ointments, light liquid paraffin of IP grade; Chooran; sugar pills for medicinal use in homeopathy; human blood components; C.A.P.D. Fluid; Cyclosporin.
Justice Shekhar B. Saraf held that “even though antiseptic creams are excluded from Entry 41, medicated ointments would be included due to the use of the word “but”. The word “but” is a clear indication that the legislature intended to include, as an exception, medical ointment, even though certain medicated ointments may be categorised as antiseptic creams. If a product is more than just an antiseptic cream and qualifies as a medicated ointment, it will be included in Entry 41.”
The Bombay High Court held that the faceless mechanism would be applicable to all cases of Central Charges and International Taxation charges. However, the High Court clarified that it is only the assessment proceedings which would be required to be undertaken outside the faceless mechanism.
The Division Bench of G. S. Kulkarni and Somasekhar Sundaresan observed that “mandatory faceless procedure for issuance of notice u/s 148 falling within the purview of the scheme notified by the Central Government dated 29 March, 2022 would not exclude the Central charges and international taxation charges from the application of the faceless mechanism as notified u/s 144B read with section 151A of the Act”.
The Allahabad High Court has upheld the finding of the Commercial Tax Tribunal holding that "vitamins and minerals pre-mix" are unclassified goods, do not fall under "ores and minerals", "drugs and medicines" or "chemicals” under Schedule II of the U.P. Value Added Tax Act, 2008.
While overturning the AAR ruling in the case of Tiger Global - Flipkart transaction, the Delhi High Court allowed India Mauritius DTAA (Double taxation avoidance agreement) benefit to petitioner/ assessee on ground that the transaction stands grandfathered by Article 13(3A) of India-Mauritius Treaty.
Simultaneously, the High Court held that Tax Residency Certificate (TRC) issued by a jurisdiction is 'sacrosanct' unless any proof of tax fraud/sham transaction is substantiated by the Revenue Department.
Finding that the Assessee had transactions with certain Indian citizens, who were subject to search operation and whose assessments were centralized with the Central Circle at New Delhi, the Bombay High Court find sufficient reasons for proposing of Assessee's case to be centralised at New Delhi.
The High Court also found that the assessment of such persons would certainly have a bearing on the assessment of the Assessee, as there are inter se transactions between such parties.
Reopening Proceedings In Defiance Of Mandatory Procedure U/s 151A To Be Quashed: Bombay High Court
The Bombay High Court clarified that the Assessing Officer is required to adhere to the provisions of Section 151A read with CBDT Notification dated Mar 29, 2022 for resorting to a procedure u/s 148A and the consequent notice u/s 148.
The Division Bench comprising Justice G.S Kulkarni and Justice Somasekhar Sundaresan observed that “In view of the explicit declaration of the law in Hexaware, the grievance of the Petitioner-Assessee insofar as it relates to an invalid issuance of a notice is sustainable and consequently, the very manner in which the proceedings have been initiated, vitiates the proceedings”.
Finding that Assessee/ Petitioner had raised invoices on its AE (Ameriprise USA) based on cost-plus pricing methodology for the specified products & services provided by the Assessee, the Delhi High Court held that foreign exchange loss directly resulting from trading items could not be considered as a non-operating loss.
The Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja reiterated that “Since the foreign exchange loss directly resulted from trading items, it could not be considered as a non-operating loss”.
Finding that subsidiary company (KIPL) is only undertaking marketing enterprise, whereas contracts are finalized and signed by the assessee (Principal company) outside India, the Delhi High Court held that KIPL cannot be said to be habitually securing and concluding order on behalf of assessee, and hence it is not Dependent Agent PE (DAPE) of Assessee.
The Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that “for an enterprise to be considered as habitually securing orders wholly for the other enterprise, it is essential that the enterprise frequently accepts orders on behalf of the other enterprise or habitually represents to persons offering to buy goods or merchandise that acceptance of an order by such enterprise constitutes the agreement of the other enterprise to supply goods or merchandise”.
The Allahabad High Court recently reiterated that once working capital adjustment is granted to assessee, there is no need for further imputation of interest on outstanding receivables at the end of the year, as the same gets subsumed in working capital adjustment.
The Division Bench comprising Justice Shekhar B. Saraf and Justice Manjive Shukla reiterated that “In respect of bills raised on or after Apr 01, 2010 to its AEs, what was the date of realization and whether the same has been realized within the credit period allowed of 70 days. If not, interest is to be imputed on those bills also”.
Since the TPO has failed to answer the issue of international transactions bearing in mind Explanation (i)(c) of Section 92B, the Delhi High Court reiterated that no transfer pricing addition of arms' length interest is warranted on account of delayed receivables. Section 92B of the Income Tax Act lays down the method for computing the income arising from international transactions or specified domestic transactions.
Explaining on the issue of interest on outstanding receivables on account of debt due to AEs, the Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja reiterated that “the entire focus of AO was on just one assessment year and the figure of receivables in relation to that assessment year can hardly reflect a pattern that would justify a TPO concluding that the figure of receivables beyond 180 days constitutes an international transaction by itself”.
The Delhi High Court held that when the determination as carried out by the Designated Authority has finality, it cannot possibly be reopened or revised by any authority under the Income Tax Act by taking recourse to a power u/s 154 which may otherwise be available to be exercised.
The High Court held so after finding that the Revenue initiated the rectification action after the Assessee had already obtained a settlement of all disputes pertaining to Income Tax for the relevant AY by virtue of Direct Tax Vivad Se Vishwas Act, 2020 (VsV Act).
The Punjab and Haryana High Court stated that merely having information that suspicious suppliers are not located in the same state would not be ground to transfer proceedings from the state to the centre.
The Bench consists of Justices Sanjeev Prakash Sharma and Sanjay Vashisth stated that “merely because the DGGI has information relating to similar fraudulent availment of ITC by other firms who may be related to the firm against which the proceedings have been initiated under Section 74 of the HGST Act by the State authority itself would not be a sufficient ground to presume that the State GST authority would not be able to conduct the proceedings or examine the culpability of the firm against whom proceedings under Section 74 of the HGST Act have been initiated. Merely because there may be other firm also against whom proceedings are initiated, there is no concept of joint proceedings.”
The Madras High Court stated that the Tax Concession cannot be denied just because the vehicle is registered in the name of Trust and not school.
The Bench consists of Justice G.K. Ilanthiraiyan observed that “the Regional Transport Officer, Chennai failed to see the objects of the assessee/petitioner Trust, it is an educational Trust. That apart, the Regional Transport Officer made demand with retrospective effect. The permits of the assessee/petitioner buses were already renewed under the caption of Educational Institution Bus.”
Finding that Assessee has satisfied conditions for reduced rate of tax u/s 115BAA, the Gujarat High Court pointed that the Revenue Department should have condoned delay in filing of Form 10-IC instead of rejecting it on technical ground.
The Division Bench comprising Justice Bhargav D. Karia and Justice Niral R. Mehta “the petitioner has exercised option merely because in absence of any provision for exercising the option in Column (e) as per the Circular No. 19/2023, the petitioner cannot be deprived of lower rate of tax”.
The Chennai ITAT recently clarified that once the timeline prescribed for filing Form No.10AB for recognition u/s.12A has been extended, the same may be treated as extended for Form No.10AB for renewal of approval/recognition/registration under clause (iii) of the first proviso to section 80G of the Income Tax Act.
The ITAT held so while agreeing with the contention of the assessee that the timeline prescribed under clause (iii) of the first proviso to section 80G(5) should be treated as directory and not mandatory especially considering the transitional nature of the amendment as brought out by the taxation of other laws (relaxation and amendment of certain provisions) Act 2020 (TOLA) for bringing new regime.
Finding that assessee in the present case is not a cooperative bank, since the office of Central registrar of cooperative societies, New Delhi has issued a certificate of registration to the assessee registering it u/s 11 of Multistate Cooperative Societies Act, 2002, the Mumbai ITAT ruled that the income earned by a co-operative society by way of interest derived by from its investment with any other cooperative society, is deductible u/s 80P.
The Bench of Amit Shukla (Judicial Member) and Prashant Maharishi (Accountant Member) observed that “even if it is accepted that bank interest on from cooperative banks by the assessee is not the income from the business of the assessee and therefore the claim of the assessee fails under section 80 P (2) (a) of the act, but the claim is still allowable and therefore cannot be denied under section 80P(2)(d)”.
The Ahmedabad ITAT recently ruled that actual expenditure, the source of which has not been explained, attracted the deeming provisions provided u/s 69 of the Income tax Act.
The ITAT at the same time clarified that no addition can be made in the hands of the assessee merely on the reason that the assessee got the property transferred through registered sale without making the payment to the vendor.
Referring to the decision of High Court of Delhi in the case of CIT versus Lubtec India Ltd - 311 ITR 175, the Bench of Waseem Ahmed (Accountant Member) And T R Senthil Kumar (Judicial Member) reiterated that “provisions of section 69C of the Act are applicable with respect to the expenditures which have actually been incurred by the assessee and the assessee fails to offer any explanation about the source of such expenditure”.
The New Delhi ITAT recently clarified that the cash sales already been offered as income, cannot be taxed in the garb of inflation sales to cover up demonetization currency.
The Bench of N.K. Billaiya (Accountant Member) and Astha Chandra (Judicial Member) observed that “Merely because there was a minor variation in the cash sales during the alleged period compared to previous year would not mean that the assessee has inflated its sales to cover up demonetized currency”.
While deleting the enhancement made u/s 56(2)(vii)(a) of the Income Tax Act, the Mumbai ITAT explained that as per the provisions of section 56(2)(vii)(a), any sum of money, the aggregate of which exceeds Rs.50,000, received by an individual without consideration is taxable as income from other sources, and thus, u/s 56(2)(vii)(a), the incidence of taxation is at the stage of receipt of money.
The ITAT clarified that the fact that the money received as a security deposit was subsequently refunded by the assessee to the developer is not relevant for the determination of taxability under section 56(2)(vii)(a) of the Act.
The Bench of the ITAT comprising of Sandeep Singh Karhail (Judicial Member) and Prashant Maharishi (Accountant Member) observed that “under section 56(2)(vii)(a) of the Act, one of the preconditions for the taxability of the money received by the assessee is that the same should have been received without consideration, which, in our considered view, is not fulfilled in the present case, as the amount of Rs.25 lakh was received by the assessee as a security deposit towards the development agreement entered into by the assessee with the developer for development of non-agriculture land.”
While deleting the addition made u/s 68 of the Income Tax Act, the Mumbai ITAT directed the assessee to file the details of the services rendered by the commission agents for availing the commission payment from the assessee.
The ITAT clarified that if the assessee satisfies the AO about the services rendered by these commission agents and that they had shown their income as the commission paid by the assessee, then such commission expenses are to be allowed under law.
While quashing the proceedings initiated u/s 153C of the Income Tax Act based on the material impounded in course of survey action, the Mumbai ITAT clarified that the material considered for initiating action u/s 153C in the case of assessee was not seized in the course of search action but was impounded in the course of the survey action, and hence assessment u/s 153C is not as per provisions of law.
The Mumbai ITAT upheld the order of CIT(A) in deleting the addition made by the AO u/s 68 of the Income Tax Act, since the assessee has successfully established the genuineness and creditworthiness of the share subscribers alleged for the bogus transactions.
The Bench of the ITAT comprising of Aby T. Varkey (Judicial Member) and B R Baskaran (Accountant Member) observed that “merely because the lenders did not appear before the AO, cannot be the sole reason for drawing adverse view against the assessee/transaction in question. Since the assessee filed the aforesaid relevant documents (supra) by the assessee, we find it had discharged the burden to prove the identity and creditworthiness of the lender parties and genuineness of the loan given to assessee.”
Finding that the returns of the assessee have been processed in the Computer Processing Centre, the Kolkata ITAT ruled that if the Auditors have reported in the Audit Report that employees' contribution have been deducted by the assessee from the salaries of the employees but not deposited within due date provided under PF&ESI Act then no deduction can be claimed by assessee.
The ITAT gave such ruling while referring to the law laid down by the Apex Court in the case of Checkmate Services (P) Limited –vs.- CIT reported in 143 taxmann.com 178.
The Bench of Rajpal Yadav (Vice-President) and Dr. Manish Borad (Accountant Member) observed that “if employees' contribution is not being paid to the respective PF & ESI Acts, then, deduction cannot be claimed by an assessee”.
The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) has held that Primary Agricultural Credit Society is entitled to benefit under Section 80P(2)(i) of the Income Tax Act for providing credit facilities for non-agricultural purposes to its members.
The bench of Rajpal Yadav (Vice President) and Manish Borad (Accountant Member) has observed that the appellant society is eligible for deduction u/s 80P(2)(i) of the Act, but only to the extent of the income that has been earned from the facilities extended to its members.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the manual cash book contained entries related to cash withdrawals and expenses of the company, which were duly recorded and reconciled with its books of account, as well as cash introduced, withdrawn, and expenses on behalf of the assessee.
The bench of Anubhav Sharma (Judicial Member) and M. Balaganesh (Accountant Member) has observed that to offset the negative cash balance reflected in the manual cash book qua the transactions of the appellant, the disclosure of Rs. 50 lacs was made by the appellant in the Income Declaration Scheme, 2016 (IDS). Hence, there is no scope for making any addition at all in the hands of the appellant, as the appellant would be entitled to telescoping benefits.
On finding that when the assessee has incurred the amount in question to complete the transfer as per the scheme of arrangement approved by the NCLT, without which the transfer could not have been effected, the Mumbai ITAT held that the CIT(A) has rightly and validly decided the issue in favour of the assessee and directed the AO to allow the stamp duty and registration charges after due verification.
The Bench of the ITAT comprising of Kuldip Singh (Judicial Member) and Padmavathy S (Accountant Member) observed that “when it is proved on record that the assessee is entitled for upfront lease rental expenses incurred in relation to the transfer of slump sale business while computing the capital gains under section 48(i) of the Act the assessee is also entitled for deduction of stamp duty and registration charges.”
The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) has held that the penalty order on the ground of misreporting of income was not justified when show cause notice and the assessment order alleged under-reporting.
The bench of Laliet Kumar (Judicial Member) has observed that once the assessee himself admitted the fact that there was under-reporting of income, which was also accepted by the Assessing Officer, then the penalty should have been levied only on account of under-reporting of income and not for mis-reporting of income.
The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that payments received by the assessee towards interconnectivity utility charges from Indian customers or end users cannot be considered royalties to be brought to tax in India.
The bench of Beena Pillai (Judicial Member) and Laxmi Prasad Sahu (Accountant Member) has observed that at no point in time, any possession, physical custody, control, or management over any equipment is received by the end users or customers.
The bench noted that the process involved in providing the services to the end users or customers is not “secret” but a standard commercial process followed by industry players. Therefore, the process also cannot be classified as a “secret process," as is required by the definition of “royalty” mentioned in clause 3 of Article 12 of the India-Japan DTAA.
Estimation Report By DVO Alone Can't Form Basis For Reopening Completed Assessment: Delhi High Court
The Delhi High Court held that the sole ground for re-opening of assessment u/s 148 by AO being the report/estimate of the Valuation Officer is unsustainable.
Proximity of the reasons with the belief of escapement of income is the determinative factor for re-opening of the assessment, as absence of reasons would obviate the possibility of a belief and would bring the case in the realm of mere suspicion which cannot be a ground for reopening of assessment. added the Court.
The Division Bench comprising Justice Ravinder Dudeja and Justice Yashwant Varma observed that “There is no statement or discussion by the AO as to what was the basis and why he should proceed on the valuation report, its contents and why he should rely on the same. The reasons do not reflect that AO has applied his mind to the facts of the case to ascertain as to whether in fact the assessee had already declared the value of the aforesaid property under “Fixed Assets and Capital WIP” or whether such valuation is correct and proper and not”.
While examining the ratio laid down by the Apex Court in landmark judgment of Union of India and Ors. vs Ashish Agarwal [(2023) 1 SCC 617], the Delhi High Court clarified that the said decision was principally concerned with the correctness of judgments rendered by various High Courts on challenges raised by Assessees to the initiation of reassessment in accordance with the unamended procedure and which had existed prior to April 01, 2021.
Opining that Ashish Agarwal case neither intended nor mandated concluded assessments being reopened, the High Court held that the Respondent/ Revenue clearly erred in proceedings along lines contrary to the above as would be evident from the reasons which follow.
Firstly, Ashish Agarwal case was principally concerned with judgments rendered by various High Courts' striking down Section 148 notices holding that the Revenue had erred in proceeding based on the unamended family of provisions relating to reassessment, added the Court.
The Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that “The directions in Ashish Agarwal case intended to resolve the impasse which ensued in light of the conflicting views expressed by different High Courts, the assessees being deprived of the salutary safeguards which Finance Act, 2021 had introduced in respect of reassessment as well as the element of public interest which warranted the Revenue being enabled to take curative action and thus saving the reassessment notices which High Courts had struck down”.
The Punjab and Haryana High Court ruled that local sales assessment does not exempt assessee from inter-State Sales tax claims.
The Bench consists of Justices Sanjeev Prakash Sharma and Sanjay Vashisth observed that “merely because the concerned respective States has assessed the assessee/petitioner for the local sales, it cannot absolve itself from the claim raised by the State of Bihar and the assessee/petitioner was required to pay the same.”
Income Tax Refund Can't Be Denied To Taxpayer For Discrepancy In Form 26AS Filed: Delhi High Court
While observing that tax was duly deducted by the Land Acquisition Collector but was not disclosed for some reasons and hence the credit was not reflected in Form 26AS, the Delhi High Court held that the assessee/ petitioner cannot be penalized for the mere reason that the Form 26AS suffered from a discrepancy.
Therefore, condoning the delay u/s 119 of the Income tax Act, the High Court quashed an order, by which the Revenue Department had rejected the Assessee's application to submit a revised return for the relevant AY.
The Delhi High Court held that the Proper officer under Customs Act cannot detain the goods or stall the process of importation, without forming a requisite opinion regarding any forgery in import.
The High Court clarified that the proper officer does not have any unfettered power to initiate a verification process, and it is incumbent upon him to form a requisite opinion in support of a suspicion that he had regarding the issue of Country-Of-Origin (COO) certificate or the origin of the imported articles.
Since upon the completion of Corporate Insolvency Resolution Process (CIRP), the Assessee has changed hands and commenced under a new ownership and management, the Bombay High Court held that tax proceedings pertain to period prior to the CIRP, and consequent to the approval of the resolution plan, the tax proceedings stand extinguished.
The Division Bench of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan observed that “provisions outlined in Section 31(1) of the Insolvency and Bankruptcy Code (IBC) stipulates that approval of resolution plan by the adjudicating authority is binding on Central Government and its agencies in respect of any statutory dues arising under any law for the time being in force, thus binding tax authorities and their enforcement actions”.
Referring to Article 7 of the Double Taxation Avoidance Agreement (DTAA) entered into between the Government of United Arab Emirates and the Republic of India, the Delhi High Court held that the right of the Holding company (source State) to allocate or attribute income to the Permanent Establishment (PE) cannot be restricted on the basis of the global income or loss that may have been earned or incurred by a cross-border entity.
If an enterprise is carrying on business through a PE situated in the other Contracting State, then its profits is liable to be taxed in the other State, subject to the extent of profits attributable to that PE, clarified the Court. The High Court explained that Article 7(1) of the Indo-UAE DTAA clearly casts a dichotomy between the profits that may be earned by an enterprise on a global scale and those which are attributable to a PE situate in the Contracting State.
Finding that the Show cause notice (SCN) issued to the petitioner/assessee did not set out any intelligible reasons for cancellation of its GST registration, the Delhi High Court quashed the said SCN.
The High Court found that the SCN issued to the petitioner, simply mentioned the provisions of Section 29(2)(e) of the CGST Act, 2017 which authorises the proper officer to cancel the taxpayer's GST registration if it is obtained by means of fraud, wilful mis-statement, or suppression of facts, without pointing any specific fact of allegation.
The Madhya Pradesh High Court stated that GST authorities cannot bypass the procedural safeguards under the GST Act by directly invoking IPC provisions without first applying the penal provisions of the GST Act.
The Division Bench of Justices Sushrut Arvind Dharmadhikari and Duppala Venkata Ramana observed that “GST Act, 2017 is a special legislation which holistically deals with procedure, penalties and offences relating GST and at the cost of repetition this court cannot emphasise more that the GST Authorities cannot be permitted to bypass procedure for launching prosecution under GST Act, 2017 and invoke provisions of Indian Penal Code only without pressing into service penal provisions from GST Act and that too without obtaining sanction from commissioner under Section 132(6) of GST Act especially when the alleged actions squarely fall within the precincts of offence as enumerated under GST Act, 2017.”
The Kerala High Court held that income tax authorities have the power to seek interim custody of currency notes seized and produced before the jurisdictional magistrate by any other officer or authority if there is any reason to believe that the seized currency is part of any asset that has not been disclosed for the purpose of the Income Tax Act.
The Division Bench of Justice P. B. Suresh Kumar and Justice C. Pratheep Kumar was answering a question referred to it by the Single Bench. The Single Bench had noted that there is contradiction in the High Court decisions in Union of India v State of Kerala (2022) and R. Ravirajan v State of Kerala (2023).
The Himachal Pradesh High Court stated that the State and Central Governments have been extended the same powers under the CGST and SGST Act and if one of the officers has already initiated proceedings, the same cannot be transferred to another and he alone is to issue process under the Act and take it to its logical end.
The Bench of Justice Tarlok Singh Chauhan observed that “….where a proper officer under the CGST Act had initiated proceedings on a subject matter, no proceedings would be initiated by proper officer authorized under the SGST Act or UGST Act on the same subject matter.”
The Orissa High Court has held that tractor trailer/trolley is not a 'motor vehicle' as per Section 2(h) of the Orissa Entry Tax Act, 1999 ('OET Act') and therefore, not amenable to entry tax as per the said statute.
Interpreting the meaning of 'motor vehicle' as per the Motor Vehicles Act, 1988 ('MV Act') as well as the OET Act, the Division Bench of Justice Arindam Sinha and Justice Mruganka Sekhar Sahoo held: “We have already seen definition given of 'motor vehicle' and 'vehicle' in section 2(28) (Act of 1988). Section 2(h) in the Entry Tax Act defines only motor vehicle to mean the same as defined in clause (28) of section 2 (Act of 1988) excluding, inter alia, tractor.”
The Supreme Court allowed a Special Leave Petition (SLP) filed by the assessee/accused, granting bail in a case registered under Section 132(1)(b), 132(1)(f), and 132(1)(i) of the Central Goods and Services Tax Act, 2017.
The Bench of Justices J.K. Maheshwari and Rajesh Bindal granted bail on the basis that the department failed to file any documentary evidence against the assessee/accused to substantiate the allegations made in the case, despite the court's direction.
The Andhra Pradesh High Court stated that National Company Law Tribunal (NCLT) order prevails over Goods and Services Tax (GST) demand, even if the state government is not notified about the pending NCLT proceedings.
The Division Bench of Justices R. Raghunandan Rao and Harinath N. observed that “the contention of the department that the order of NCLT is not binding on the State of Andhra Pradesh in view of Section 88 of the GST Act would have to be negatived in as much as Section 238 of the Insolvency and Bankruptcy Code provides for a non-obstante clause overriding all other laws.”
The Delhi High Court held that consideration received by Assessee from aircraft leasing activity is not taxable as royalty either u/s 9(1)(vi) of Income Tax Act or under India-Ireland DTAA.
Pointing out that the treaty provisions would override Income tax Act being more beneficial to the assessee, the Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that “it would be wholly impermissible for the AO to invoke Section 9(1)(vi) of the Act in light of the express exemption under the DTAA”.
The Andhra Pradesh High Court stated that when the assessee files an appeal against an order of assessment, the enforcement actions that have been taken, such as property attachment and garnishment notices, should not continue.
The Division Bench of Justices R Raghunandan Rao and Harinath. N observed that the assessee has preferred an appeal and has paid 10% of the disputed tax, as required under Section 107 of the CGST Act, no further tax can be recovered from the assessee, in pursuance of the order of assessment under appeal.
The Andhra Pradesh High Court has dismissed a petition alleging that cess levied by State's Agricultural Market Committee on sale of 'Basmati rice' amounts to “double taxation”.
One of the petitioners, a trader of Basmati rice, claimed that it sources the rice from Punjab where it already pays agricultural market committee tax and thus contended that if the State of Andhra Pradesh imposes tax on the very same stock, it amounts to double taxation.
The Market Committee argued they are not collecting any tax from the petitioners and they are only collecting fee under Section 12 of the AP (Agricultural Produce and Live Stock) Markets Act 1966, for providing services to the petitioners.
Agreeing with the Committee, Justice Tarlada Rajasekhar Rao held, “The respondents herein have levied fee for service rendered to the petitioners...The judgments relied by the learned counsel for the petitioners relates to imposing double taxation and the said judgments are not applicable to the facts in these cases and it trite that levy of tax is for the purposes of general revenue which when collected forms part of the public revenue of the State, that a fee is generally defined to be a charge for a special service rendered to individuals by some Governmental agency.”
The Punjab and Haryana High Court ruled that an institute registered as an educational trust, using its earnings solely for educational advancement, should not be denied the benefits of Section 12AA of the Income Tax Act, 1961.
The Bench of Justices Sanjeev Prakash Sharma and Sanjay Vashisth observed that “the institute is a duly registered educational trust and whatever earnings it receives are also utilized for the purpose of advancement of education, the institution could not have been denied the benefit of Section 12AA.”
The Bombay High Court recently clarified that just because the verification of input-output ratio was not submitted before the export of goods, it does not mean that same cannot be verified post export of goods.
While giving such relaxation, the Division Bench of Justice K. R. Shriram and Justice Jitendra Jain observed that the procedure for submitting input-output ratio is inconsequential for claiming rebate under Central Excise Act when the claim of petitioner/ assessee is only qua excise duty paid on chassis purchased and used in the manufacture of buses which are exported.
The Himachal High Court held that once the corporate debtor is directed to be liquidated by the NCLT u/s 33(5) of Insolvency & Bankruptcy Code (IBC), no legal proceeding could be instituted by or against him by the Tax Authorities.
Thus, the High Court clarified that the red entry/charge created by the Revenue Department on the property of the petitioner-company during the currency of the moratorium imposed by the NCLT, would be void in law.
Emphasizing that shares which is subject to a lock-in stipulation, could not be sold in an open market, the Delhi High Court held that valuation report obtained by the employer for ascertaining its withholding tax obligations during allotment of such shares to its employees as a perquisite, cannot be considered for purpose of Fair Market Value (FMV) of those shares.
Referring to the decision in case of Principal Commissioner of Income Tax vs. M/s Religare Securities Ltd. [ITA 311/2018], the Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja reiterated that Staff Welfare expenditure incurred by the assessee/employer in respect of Employees Staff Option Plan (ESOP) and Employees Staff Purchase Scheme Guidelines, is allowable expenditure.
The Punjab and Haryana High Court held that a society that imparts knowledge or skills qualifies for the 'education' label under the Income Tax Act, making it eligible for tax exemptions under Section 12A of the Income Tax Act, 1961.
The Division Bench of Justices Sanjeev Prakash Sharma and Sanjay Vashisth observed that “……Vocational training has been now recognized to be an important as any other filed of education, and it is for this reason that National Council for Vocational Training has been established to streamline and lay down a systematic pattern of providing education.”
Continuation Of Proceedings On Ceased Entity Is Not Curable U/s 292B: Delhi High Court
While following the decision of Apex Court in Principal Commissioner of Income Tax, New Delhi vs Maruti Suzuki (India) Limited [(2020) 18 SCC 331], the Delhi High Court held that the initiation or continuation of assessment or reassessment proceedings after a company cease to exist due to merger pursuant to a Scheme of Arrangement, is not sustainable, and cannot be cured by applying Section 292B.
The Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that “the factum of merger had been duly brought to the attention of the AO. The merger was taken into consideration at more than one place in the order of assessment that came to be framed. Despite the above, the AO proceeded to draw the order in the name of an entity which had ceased to exist”.
The Bombay High Court held that deduction claimed by bank u/s 36(1)(vii) in respect of write off bad debts is allowable without any adjustment to the credit balance in the provision for bad and doubtful debts u/s 36(1)(viia) which was adjusted with the bad debts claimed in the subsequent AY.
The High Court held so after finding that the taxpayer had utilized the opening balance in the “bad and doubtful debts account” to reduce the total bad debts written off in claiming the deduction u/s 36(1)(vii).
The Division Bench of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan observed that “It is inconceivable that the amount of bad debts claimed as deduction u/s 36(1)(vii) could have any bearing so as to require any deduction/ subtraction from the provision for bad debts, made by the assessee u/s 36(1)(viia)”.
The Delhi High Court held that the once the relief is already accorded to assessee in the original assessment order, then Designated Authority (DA) can rectify the mistake apparent on record by allowing the assessee to file a fresh Form 3 under VSV Act.
On examination of the relevant provisions outlined under Vivad Se Vishwaas Act (VSV Act), the Division Bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that the legislation takes into consideration the time and resources consumed on account of tax disputes, which acted as a burden for both the Government and taxpayers, and hindering the timely collection of Revenue.
The Kerala High Court held that taxpayer cannot be prosecuted u/s 276B of Income tax Act simply because of failure to deduct and pay TDS to the government, once the non-compliance was sorted out and the tax along with penalty was sufficiently deposited to the government, after being informed of the delinquency.
Single Bench of Justice P.V. Kunhikrishnan observed that “the entire amount with penal interest is already paid by the petitioners. If that be the case, the continuation of prosecution is not necessary against the petitioners”.
Technological impediment cannot be a reason to harass an assessee, said the Supreme Court while asking the Income Tax Department to upgrade its software to ensure that mistakes do not occur in the future. The Court directed that the Central Board for Direct Taxes should also take necessary steps for rectifying the software.
A bench comprising Justices PS Narasimha and Sandeep Mehta was hearing an appeal filed by an assessee questioning the imposition of surcharge on Rs. 1.57 Crores and demanding Rs. 2.01 Crores for the Assessment Year 2022-23.
The Delhi High Court recently clarified that the TOLA [Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020] authorisation merely enables the competent authority to take action within the extended time period which would have otherwise been regulated by Sections 148 and 149, but does not amend the structure for approval which stands erected by virtue of Section 151.
“Sanction”, when used in Section 3 of TOLA caters to those contingencies where a specified Act may have prescribed a particular time limit within which an action may be approved, observed the Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja.
The Bench added that once it is conceded that the notice came to be issued four or three years after the end of the relevant AY, the approval granted by the JCIT would not be compliant with the scheme of Section 151.
The Patna High Court has held that failure on part of the customs officer to record reasons for confiscating goods under Section 110 of Customs Act, renders the provisional attachment “illegal”. The provision empowers a customs officer to seize goods if he has 'reason to believe' that such goods are liable to confiscation under the Act, and prescribes subsequent procedure.
Bench of Justices PB Bajanthri and Alok Kumar Pandey observed, “For seizure of goods, unless there are strong and compelling reasons to believe that goods are 'imported', one cannot draw inference that officer who had seized goods believe it to be foreign goods etc. It will be an instrument of oppression, misuse, and arbitrariness clothing officers with uncanalized, draconian and arbitrary powers thereby rendering opinion itself violative of Article 14 of the Constitution.”
The Calcutta High Court has held that an enterprise contracting with the assignee of a government recognised concessionaire for infrastructure development can, based on facts and circumstances of the case, be given the benefit of deduction under Section 80IA(4) of the Income Tax Act 1961.
The provision prescribes deductions in respect of enterprises engaged in infrastructure development. Sub-section (b) of the provision stipulates that the enterprise claiming deduction must have entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility.
In the case at hand however, the Respondent (assessee) had entered into agreement with Kakinada Sea Port Limited (KSPL), special purpose company of ISPL, which had in turn contracted with the Andhra Pradesh government for development of the Kakinada Deep Water Port.
In its appeal against an ITAT order allowing the assessee to claim deduction, Revenue claimed that assessee never had an agreement either with the Government or even with the entity having such an agreement with the Government.
After perusing all the agreements involved in the matter, the division bench of Chief Justice TS Sivagnanam and Justice Hiranmay Bhattacharyya pointed that Andhra Pradesh government had, in agreements with International Sea Ports Limited (ISPL), agreed that KSPL (formerly CPCL) would be the assignee of ISPL and shall be treated as successor to ISPL's rights, duties and obligations under the concession agreement.
The Gauhati High Court recently held that the recourse to Sub-Clauses (b) & (c) of Clause 37C (1) of the Central Excise Act, is not permitted if the show cause notice was not sent at the proper address of the registered taxpayer.
The High Court also clarified that Sub-Clause (b) and Sub-Clause (c) of Section 37(C)(1) of the Act of 1944 can only be pressed into service, if the service of notice under Sub-Clause (a) cannot be affected.
The Delhi High Court has held that merely because an assessee made self-assessment under Section 143(1) of the Income Tax Act 1961, is not reason to preclude reassessment proceedings initiated by the Department. “The assessment of tax under Section 143(1) of the Act is a self-assessment and in a strict sense cannot be stated as assessment framed by the AO,” observed a bench of Justices Vibhu Bakhru and Swarana Kanta Sharma.
The Delhi High Court has made it clear that non-payment of dues in the form of tax, interest or penalty, by a registered entity to the account of Central/State Government beyond a period of three months after due date, is not a ground to cancel its registration under the Central Goods and Services Tax Act.
A bench of Justices Vibhu Bakhru and Sachin Datta took note of Section 29 of CGST Act which prescribes for cancellation of a tax payer's GST registration and observed, “The only reason set out in the said SCN for proposing to cancel the petitioner's GST registration is failure to pay tax, interest or penalty within a period of three months from the date on which the said amount became due. However...non-payment of dues for a period of three months is not a prescribed ground for cancelling the petitioner's GST registration.”
The Delhi High Court held that once the PCIT in the revisionary proceeding u/s 263, had decided in favour of assessee after having considered its reply, then AO had no authority to reassess and reopen the assessment u/s 148.
The High Court held so, after finding that the reasons for issuing notice u/s 148A(b) were exactly similar to the reasons on which the PCIT had invoked Section 263. Section 263 of Income tax Act is a proactive step taken by tax authority to rectify potential errors in the original assessment, where the Commissioner issues a notice to taxpayer, informing them of the intention to revise the order.
The Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed that “at the time of initial assessment, as also while conducting proceedings u/s 263, the authorities were aware of shares held by the assessee for a consideration which was considered to be less than fair market value. However, Revenue still proceeded further to purpose initiation of reassessment proceedings by issuing notice u/s 148A(b)”.
The Delhi High Court held that the amount of debit to be disallowed from the Electronic Credit Ledger (ECL) should not be more than the amount of the Input tax credit (ITC), which is believed to have been fraudulently availed by taxpayer.
At the same time, the High Court clarified that Rule 86A of CGST Rules 2017 is an emergent measure for protection of revenue by temporarily not allowing debit of available ITC in the ECL, which the Commissioner or an officer authorized by him has reasons to believe has been wrongfully availed.
While explaining that Section 43A is a non-obstante provision, which positively imposes an obligation notwithstanding anything contained in the Income tax Act, the Bombay High Court held that losses due to exchange rate changes on a foreign currency loan taken for import of a capital asset must not be treated as revenue expenditure.
The Division Bench comprising Justice G.S. Kulkarni and Justice Somasekhar Sundaresan explained that just because the assets were not imported into India from abroad, any loss on exchange rate fluctuation on a foreign currency loan taken for acquiring capital assets would necessarily not be a capital expenditure.
While expounding on the positive mandate of 43A as against the negative caveat in 37(1), the Bench observed that the essential jurisdictional fact for the mandatory capitalization of such an expense u/s 43A is that the capital asset financed by the foreign currency loan in question, must have been brought into India from a country outside India.
Referring to the decision of Shanta Mani Hand Made Paper Industries Vs. The State of Bihar & Ors [CWJC No. 2941 of 2010], the Patna High Court reiterated that supplementary bills which are punitive in nature, cannot be raised upon taxpayer and benefit granted by State government cannot be withdrawn based on mere audit objection.
The High Court reiterated so after finding that the subsidy granted to the petitioner by the State government in the form of Industrial Incentive policy was withdrawn simply based on an audit objection.
Single Bench of Justice G. Anupama Chakravarthy observed that “the Intensive Policy, which was being extended to the petitioner cannot be withdrawn based on the audit report”.
The Delhi High Court held that fees received by the foreign branch of banking company for extending a credit line to the account holder outside India, would not be taxable in India.
While noting that the amount payable by the credit card holders would clearly be a debt incurred outside India, the Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed that fee in respect of such transactions would not be taxable in India.
The Supreme Court on Thursday (October 3) outlined the principles governing the interpretation of taxation statutes in the context of the Central Goods and Services Tax (CGST) Act, 2017.
A bench of Justice Abhay Oka and Justice Sanjay Karol summarised the principles of interpretation while dealing with a case involving the interpretation of Section 17(5)(d) of the CGST Act, which disallows Input Tax Credit (ITC) on goods and services used in the construction of immovable property, except for "plant or machinery."
Unexplained Cash Credit In Bank Account Would Be Treated As Income : Chhattisgarh High Court
The Chhattisgarh High Court recently upheld an ex-parte assessment under Section 144 of the Income Tax Act, 1961, against an assessee who failed to participate in assessment proceedings or explain the source of a cash deposit of ₹11,44,070 in his bank account.
The bench comprising Justices Sanjay K Agrawal and Amitendra Kishore Prasad noted that under Sections 68 and 69A if an assessee does not provide a satisfactory explanation for unexplained credits, those amounts can be treated as taxable income. Despite multiple notices from the Assessing Officer, the appellant did not respond or appear before the authorities, leading to an ex-parte assessment order being issued.
The Kerala High Court held that the 'interest income' on the short-term deposits of the funds infused by the Government, which are sanctioned for purpose of setting up of business, are in nature of 'capital receipt' and not 'revenue receipt'.
The Division Bench of Justice Sathish Ninan and Justice Johnson John observed that “if the funds invested are not surplus funds as such, and the funds and interest accrued thereon are inextricably linked to them setting up of the business, then the 'interest income' from such funds would be in the nature of capital receipts”.
The Jammu and Kashmir and Ladakh High Court has held that the time limit for refund of GST is to be determined from the date the original application is filed by an assessee, and not from the date of follow-up application. In the case at hand, the Petitioner, a garment manufacturer, was issued a deficiency memo and the follow up application, which it had filed for GST refund at the advice of the Department, was rejected as time barred.
The Supreme Court held that if construction of a building is essential for supplying services such as renting out, it could fall into the "plant" exception to section 17(5)(d) of CGST Act which provides that Input Tax Credit cannot be claimed for construction material (other than plant or machinery) for immovable property construction.
“If the construction of a building was essential for carrying out activity of supplying services such as renting or giving on lease or other transactions in respect of the buildings or part thereof which are covered by clauses 2 and 5 of the Schedule 2 of the CGST Act, the building could be held as a plant. Functionality test will have to be applied to decide whether building is a plant”, the Court held.
A bench of Justice Abhay Oka and Justice Sanjay Karol held that the functionality test will have to be applied to the facts of each case to decide whether a building is a plant.
The Court further held that it is not necessary to read down Section 17(5)(d) of the CGST Act so that it does not apply to cases where immovable property is constructed for the purpose of letting out on rent. The bench held that the challenge to Section 17(5)(d) of the Central Goods and Services Tax (CGST) Act 2017 was rejected.
The Supreme Court set aside the judgments of the High Courts which held that the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions Act) (TOLA) 2021 will not extend the time limit for issuing notices for re-assessment under the Income Tax Act.
A bench comprising Chief Justice of India DY Chandrachud, Justice JB Pardiwala and Manoj Misra delivered the judgment allowing a batch of 727 appeals filed by the Income Tax Department against the various orders passed by the High Courts.
Observing Cash Credit account or overdraft is capable of being attached u/s 226(3) of Income tax Act, the Himachal Pradesh High Court turned down the decision of Tax recovery officer in passing the order of attachment of Cash Credit Account.
Explaining the relationship between debtor & creditor, the High Court clarified that bank does not become a debtor to its customers and cannot hold money for account of its customers merely because it has provided a facility of overdraft to its customers.
The Gauhati High Court has held that Summary of Show Cause Notice in Form GST DRC-01 along with an attachment of the 'determination of tax' does not constitute a valid Show Cause Notice (SCN) under Section 73 of the Central Goods and Services Tax (CGST) Act, 2017.
“The Summary of the Show Cause Notice in GST DRC-01 is not a substitute to the Show Cause Notice to be issued in terms with Section 73(1) of the Central Act as well as the State Act. Irrespective of issuance of the Summary of the Show Cause Notice, the Proper Officer has to issue a Show Cause Notice to put the provision of Section 73 into motion,” said a single-judge bench of Justice Devashis Baruah.
The Delhi High Court exempted members of Taxation Bar Association from the Court appearance requirement.
The Bench, consists of Chief Justice Manmohan and Justices Vibhu Bakhru and Yashwant Varma, noted that, in light of the judgment in Lalit Sharma and Ors. v. Union of India and Ors. [W.P.(C) 10363/2021], dated 19th March 2024, a majority of the advocate members of the Delhi Tax Bar Association, despite active practice, have now become ineligible to contest, vote, or participate in the election process for the selection of the Executive Committee, scheduled for 19th October 2024.
The Delhi High Court has held that GST exemption on foreign reinsurance services in relation to government insurance schemes applies with retrospective effect, from July 1, 2017 onwards.
This was in light of the fact that though the exemption was notified only on July 27, 2018, the government regularized GST liability on such services for the period from July 01, 2017 till July 26, 2018. Entry 40 in Notification No.12/2017 exempts GST liability on reinsurance services provided to the Government under insurance schemes for which total premium is paid by the Government.
A division bench of Justices Yashwant Varma and Ravinder Dudeja said though Entry 40 was included in the above notification dated 28 June 2017, only with effect from July 27, 2018, “The GST Council as well as the Union Government…appear to have taken a conscious decision to regularize the period between 01 July 2017 and 26 July 2018.” Significant to note that Entries 35 and 36 of the said notification exempt certain specified general insurance and life insurance schemes from GST.
S.107 CGST Act | Appellate Authority Cannot Suo Moto Enhance Tax Liability: Calcutta HC
The Calcutta High Court recently set aside an order of the GST Appellate Authority, suo motu enhancing tax liability on an assessee, without following the procedure under Section 107(11) of the CGST/ WBGST Act.
Pankaj Bajpai 6 Oct 2024 12:41 PM Listen to this Article The Karnataka High Court held that voluntary determination by the assessee himself as regards the liability of tax, is sine qua non for 'self-ascertainment of tax' under CGST Act.
The High Court therefore clarified that when notice sought to be issued u/s 74(1) indicate a fresh and complete adjudication and does not refer to short fall of actual tax required to be paid as contemplated u/s 74(7), the State itself is estopped from contending that there was self-ascertainment by the assessee.
The Madhya Pradesh High Court has dismissed a petition moved by the Customs and Central Excise Department seeking priority over other secured creditors, for recovery of dues from an assessee's property.
Justices Vivek Rusia and Binod Kumar Dwivedi relied on Punjab National Bank V/s Union of India and others (2022) where the Top Court had held that SARFAESI Act will have an overriding effect on the provisions of the Central Excise Act and therefore, dues of the secured creditor will have priority over the dues of the Customs and Excise Department.
The Andhra Pradesh High Court has prima facie held that Section 81 of the Central Goods and Services Tax Act, 2017 cannot be invoked to declare transfer of property void, unless there is a specific finding regarding sham nature of transaction.
The Madhya Pradesh High Court has held that merely because payment is deferred by the State in terms of the works contract, the same cannot be grounds for a dealer to seek exemption from payment of taxes under the MP Commercial Tax Act, 1994 and MP Entry Tax Act, 1976.
In the case at hand, the Petitioner-company had entered into Build, Operate and Transfer (BOT) contract with the government for development of a by-pass road. As per the agreement, no explicit consideration was to be paid by the State but, the dealer was permitted to recover toll for next 10 years, following which the road would be transferred to the State Government.
The Kerala High Court held that tax/ penalty under Section 129(1)(a) or 129(1)(b) of the CGST/ SCGST can be imposed only for violations which may lead to evasion of tax or which was done with the intention to evade or in case of repeated violations.
Justice P. Gopinath observed: “It is declared that the provision of Section 129 of the CGST/ SGST Acts do not authorize the imposition of tax/ penalty as contemplated by the provisions of Section 129(1)(a) or Section 129(1)(b) in cases where only minor discrepancies are noticed and such penalty can be imposed only for violations which may lead to evasion of tax or where the transport was with the intention to evade tax or in cases of repeated violations (even of a minor nature)”
The Supreme Court in its recent decision allowed the revenue authorities to issue notices for reassessment under the Income Tax Act for the period between 01.04.2021 and 30.06.2021 by granting the benefit of time extensions under Taxation and Other Laws (Relaxation and Amendment of Certain Provisions Act) (TOLA) 2021.
The Kerala High Court stated that provisions of section 74 of CGST Act can be invoked if assessee fails to report actual sales to evade tax.
The Bench of Justice Gopinath P. observed that “It is for the assessee to get his claim adjudicated by the statutory authorities under the CGST / SGST Acts. The procedure under Article 226 of the Constitution of India cannot be invoked to determine disputed questions of fact especially on account of the procedure adopted in this Court in respect of writ petitions under Article 226 of the Constitution of India.”
The Gujarat High Court stated that there cannot be any blocking of the credit in electronic credit ledger if there is no sufficient balance available.
The Division Bench, comprising Justices Bhargav D. Karia and Niral R. Mehta, was hearing a case where the assessee contested the blocking of Input Tax Credit (ITC) amounting to ₹2,44,05,567 in its electronic credit ledger.
The Gujarat High Court stated that there cannot be any income escapement by the assessee if there is no unexplained amount in the bank statement on record.
The Bench of Justice Bhargav D. Karia and Mauna M. Bhatt observed that “the reason given by the Assessing Officer for alleged escapement of Rs.3,25,00,000/- is not sustainable since there is no unexplained amount in the bank statement on record since the assessee did not retain the amount of Rs.3,25,00,000/- and as such the ingredients of Section 68 are not attracted……”
Pointing that the Department has delayed the refund on customs duty that was due & payable to assessee for almost ten years, the Bombay High Court ruled that such action of Department in avoiding the payment of interest on delayed refund by raising frivolous pleas, cannot be sustained.
Referring to Supreme Court decision in Union of India Vs. Hamdard (Waqf) Laboratories [AIR 2016 SC 1124], the High Court reiterated that the liability of the Revenue to pay the interest u/s 11BB, which corresponds to Sec 27A of the Customs Act, commences from the date of expiry of 3 months from the date of receipt of the application for refund or on the expiry of the said period from the date of which the order of refund is made.
Finding that the payments were received by the bank from third parties, specifically named in the tripartite agreement, which was backed by a firm irrevocable purchase order, the Delhi High Court ruled that duty drawback could not be denied to an exporter.
Since the e-BRCs were issued by the DGFT after verification from the bank confirming the receipt of payments, the High Court held that payments made to local supplier through banking channels, could not be regarded as non-existence, without carrying out a proper investigation.
The Calcutta High Court recently confirmed the deduction u/s 80IA(4) to an Infrastructural development company, regarding development of a mechanised port handling system by entering into an agreement with a nodal agency recognised by the Andhra Government.
The Division Bench comprising Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya observed that deduction u/s 80IA(4) is legislated to promote industrial undertaking engaged in the infrastructural development, and therefore, its interpretation should advance the object of its introduction and should not frustrate it.
The Gujarat High Court recently allowed an assessee, who failed to claim 'Long Term Capital Loss' in its Income Tax return, to seek revision under Section 264 of the Income Tax Act, 1961.
A division bench of Justices Bhargav D. Karia and Mauna M. Bhatt also reiterated that a Commissioner has to decide an assessee's revision application under Section 264, on merits. The provision empowers the Income Tax Commissioner to revise certain orders. This revision can be initiated by the authority or upon application by the assessee.
The Jammu and Kashmir and Ladakh High Court has upheld the UT government's decision to withdraw the 'Budgetary Support Scheme', notified in the year 2018 for providing budgetary support to manufacturing units in the UT, by reimbursement of Integrated Goods and Service Tax.
A division bench of Justices Sanjeev Kumar and Rajesh Sekhri observed that the Scheme did not create any legitimate expectation in the units nor did it attract promissory estoppel on the government.
Recently, an issue cropped up, where it was emphasized that technicalities created by the Department and not the taxpayer, should not be put forth by the department to defeat the statutory rights and entitlement of the taxpayers.
The Bombay High Court ruled that concerned Revenue officials (Respondent) cannot deny the benefits of accrued ITC (input tax credit) to the assessee (Petitioner) only because the prescribed forms were not filed electronically but were filed manually.
The Kerala High Court stated that assessee cannot claim input tax credit for transportation services if transportation costs are not included in assessable value of goods for payment of central excise duty.
The Division Bench of Justices A.K. Jayasankaran Nambiar and Syam Kumar V.M. observed that “………the assessee did not include the transportation costs in the assessable value of the goods for the purposes of payment of Central Excise duty. Under such circumstances, the assessee cannot claim input tax credit in respect of the transportation services availed by it for the purposes of transporting the goods from the place of removal to the buyer's premises.”
The Supreme Court held that banks can claim tax deductions for broken period interest on held to maturity (HTM) government securities if they are held as trading asset.
“Therefore, on facts, if it is found that HTM Security is held as an investment, the benefit of broken period interest will not be available. The position will be otherwise if it is held as a trading asset”, the Court held.
A bench of Justice Abhay Oka and Justice Pankaj Mithal observed that whether HTM securities are held as investments or stock-in-trade depends on the facts of each case. If a bank holds HTM securities until maturity and values them at cost, they may be considered investments, in which case the broken period interest would not be deductible. If held as trading assets, the deduction would be available
Value Of Free Fuel Can't Be Added To Value Of Taxable Supply U/S 15 Of CGST Act: Uttarakhand HC
The Uttarakhand High Court held that when as per the agreement, the cost of fuel was to be borne by recipient, then such cost cannot be subjected to charge of GST by adding its value in the transaction value of GTA service.
Pointing that the cost of fuel cannot be added in the account of the transporter, as was governed by the GST rules, the Division Bench comprising Justice Ritu Bahri and Justice Rakesh Thapliyal observed that “value of free fuel cannot be added to value of taxable supply under Section 15(1) and Section 15(2)(b) of the CGST Act, 2017”.
The Delhi High Court has held that sale deed is not a document issued by the revenue authorities or any government authority which would certify the agricultural nature of a land.
“A sale deed primarily reflects the transaction between the parties and the terms of sale, but it does not, in itself, verify the land's classification as agricultural for the taxation purposes. Therefore, heavy reliance on the sale deed to establish the agricultural character of the land would be misplaced,” a division bench of Justices Vibhu Bakhru and Swarana Kanta Sharma held.
The Supreme Court today (November 7) held that the officers of the Directorate of Revenue Intelligence (DRI) have the power to exercise powers under the Customs Act, 1962 to issue show-cause notices and recover duties
The Court held that DRI officers are "proper officers" to issue show cause notices under Section 28 of the Customs Act, 1962. "Subject to the observations made in the judgment, the officers of the Directorate of Revenue Intelligence, Commissionerate of Customs-Preventive, Directorate General of Central Excise Intelligence, and Commissionerate of Central Excise and other similarly situated officers are "proper officers" for the purposes of Section 28 of the Customs Act and are competent to issue show-cause notices," the Court held.
A bench comprising Chief Justice of India DY Chandrachud, Justices JB Pardiwala and Manoj Misra allowed the review petition filed by the Customs Department against the 2021 Supreme Court Judgment in Canon India Private Ltd. versus Commissioner of Customs, which had held that officers of the Directorate of Revenue Intelligence do not have powers under the Customs Act ,1962.
The Madhya Pradesh High Court ruled that if an assessee has already included income from an Association of Persons (AOP) or Body of Individuals (BOI) in their taxable income, any post-tax share received from the AOP/BOI cannot be taxed again in the assessee's hands.
The Division Bench of Justices Sushrut Arvind Dharmadhikari and Anuradha Shukla observed that “……the assessee was a member of an association of persons or body individuals, share of members of such association of persons or body individuals were determinate and known. Such association of persons or body individuals were chargeable to tax on their total at the maximum marginal rate or any higher rate……”
The Gujarat High Court on 25th September (Wednesday) held/clarified the Goods and Services Tax (GST) applicable to fly ash bricks and blocks with less than 90% fly ash content. The court ruled that the products qualify for the lower GST rate of 5%, than 18% GST rate on products not meeting the 90% fly ash threshold and quashed and aside the orders of the Advance Ruling Authority and Advance Ruling Appellate Authority.
The Kerala High Court struck down Rule 96(10) of the Central Goods and Service Tax Rules holding that it was ultra vires to the Section 16 of the Integrated Goods and Service Tax Act and was manifestly arbitrary.
Justice P. Gopinath noted that Section 16 has not imposed any restriction in availing refund of taxes paid on input goods and input services or claiming refund of IGST after payment of IGST on the exports. The Court, therefore held that the restriction imposed under Rule 96(10) on claiming refund is ultravires to the Act.
The Bombay High Court held that authorities under MVAT Act while exercising powers under Maharashtra Settlement of Arrears of Taxes, Interest, Penalties or Late Fees Act, 2022, cannot invoke provisions of Section 50 of MVAT and that too in review proceedings under Settlement Act.
The Division Bench of Justice M. S. Sonak and Justice Jitendra Jain observed that there is no provision under Settlement Act which provides for calculation of outstanding arrears of a particular year to be arrived at after adjustment of refund for another year more so in a case where there is no such adjustment of refund order on date of application or on date of settlement order u/s 13 of Settlement Act.
The Telangana High Court has held that the expenditure incurred by a hotel on replacement of damaged items is a current expenditure, allowable under Section 37 of the Income Tax Act, 1961.
A division bench of Justices Sujoy Paul and Namavarapu Rajeshwar Rao was dealing with a Hyderabad based 5-Star Hotel's plea to decide whether the expenditure incurred by it comes under current expenditure or capital in nature.
The Madras High Court stated that assessee is liable to tax on consideration received from sale of unredeemed articles by auctioneers.
The Division Bench of Justices Anita Sumanth and G. Arul Murugan observed that “the levy of penalty under Section 12(3)(a), in the case of non-filing of returns, is, automatic. Admittedly, the assessee has not filed the returns and hence, the basis of assessment would be irrelevant.”
The Gauhati High Court has made it clear that interest on refund under Section 244A of the Income Tax Act, 1961 applies only to those cases where refund is delayed by the Income Tax Department.
Justice Devashis Baruah thus declined interest to a construction contractor, whose TDS was deposited in the wrong PAN number by the Defence Ministry's Border Roads Organisation. The bench also noted that even if the amount was deposited in the correct PAN number, Petitioner was not entitled to any refunds, rendering the provision inapplicable to the case.
The Allahabad High Court has held that the owner of an electric vehicle which was purchased prior to October 14, 2022 cannot seek refund of tax citing a subsequent notification exempting the payment of One Time Tax.
Petitioner had sought refund of One Time Tax paid in respect of his Hybrid Vehicle purchased on October 13, 2022.
The relief was sought on the strength of a notification issued by the State providing tax exemption for electric vehicles purchased and registered from the date of notification of the Uttar Pradesh Electric Vehicle Manufacturing and Mobility Policy, 2022 i.e. October 14, 2022.
The Himachal Pradesh High Court has dismissed a writ petition challenging notifications issued by the Central government for levy of GST on Royalty paid by a Mineral Concession Holder for mining concession granted by the State.
The Delhi High Court has held that initiation of prosecution under Section 51 of the Black Money (Undisclosed Foreign Income and Assets and Imposition of Tax) Act, 2015 is not dependent on completion of assessment proceedings initiated against an accused under Section 10 to determine tax evasion.
The Black Money Act, 2015 is designed to address "undisclosed assets located outside India" that are held by an assessee either as the owner or as the beneficial owner.
The Delhi High Court has made it clear that incorrect mention of assessee's name in a notice issued to it for default in deduction of tax at source is a mere clerical error.
A division bench of Justices Yashwant Varma and Ravinder Dudeja thus held that show cause notice and penalty order passed under the previous name of a company cannot be rendered void.
“In the light of the fact that there was no change of entity, there being only change of name of the company, Show Cause Notice issued and the Penalty Order passed in the name of M/s. Infovision Information Services Pvt. Ltd. is not such a defect which cannot be cured and is therefore not fatal,” it observed.
The Himachal Pradesh High Court recently directed the Punjab Roadways to clear the interest due upon it for delayed payment of passenger tax and surcharge to the HP government.
A division bench of Acting Chief Justice Tarlok Singh Chauhan and Justice Satyen Vaidya observed that the body first failed to deposit any tax with the authorities of Himachal Pradesh despite the fact that it had been running its buses within its territory, and then disputed liability of interest.
The Bombay High Court recently clarified that an exporter (Petitioner) is entitled to interest u/s 56 of the CGST Act for the period starting from the expiry of 60 days from the date of filing the shipping bill up to the date of grant of refund, although during the interregnum, the exporter's name was red flagged on the Customs' portal.
The High Court held so while considering the prayer for interest on delayed payment of refund of tax as per Section 56 of the CGST Act, 2017.
The Division Bench of Justice M. S. Sonak and Justice Jitendra Jain observed that “Admittedly, the Petitioner has paid the amount of IGST, which the Respondents have utilized up to the date of grant of refund. Having used the money of the Petitioner, there is no justification for denying interest more so when the delay is attributable to the Respondents”.
The Madras High Court recently ruled that the expenditure incurred for payment of foreclosure premium for restructuring loan and obtaining fresh loan at a lower rate of interest is allowable as business expenditure u/s 37(1) of the Income Tax Act.
Such ruling came while dealing with a case where scrutiny proceedings were initiated, leading in revisional assessment u/s 263, based on the assumption that assessment order was prejudicial to the interest of Revenue Department, and resultant disallowance of payment of foreclosure premium as a business expenditure.
The Division Bench of Justice Anita Sumanth and Justice G. Arul Murugan observed that “Though mere disagreement with the view taken by the AO would not be a sufficient ground for invoking power u/s 263, it is quite another matter if the conclusion of the authority is palpably erroneous or contrary to settled law or judgment of the superior Courts”.
The Bench referred to the decision of CIT v Gujarat Guardian, where it was held that the prepayment premium represented present value of the differential rate of interest that would be payable by the assessee if the loan had not been restructured.
The Delhi High Court has made it clear that an investor of 'Capital Gain Tax Exemption Bonds' cannot seek premature withdrawal through judicial intervention.
A single bench of Justice Sanjeev Narula ruled that such an act would defeat the legislative intent behind Section 54EC of Income Tax Act, 1961. The provision stipulates that long-term capital gain will not be charged on an assessee if he invests in certain specified bonds (which come with a lock-in period).
The Delhi High Court has held that 'capital grant subsidy' which may be extended by the National Highways Authority of India to its contractors is not liable to TDS deduction under Section 194C of the Income Tax Act, since such grant cannot be construed as payment for a “work”.
A division bench of Justices Yashwant Varma and Ravinder Dudeja observed, “As we read Section 194C, it becomes evident that the same is principally concerned with the undertaking of a physical or tangible activity as opposed to the mere grant of subsidy or financial assistance…The infusion of equity capital as a measure of financial support, while surely a contractual obligation, cannot consequently be understood to mean the payment for a work undertaken.”
The Telangana High Court has held that for purposes of taxation, “accumulated profits” of a company are to be calculated after adjusting depreciation as per the Income Tax Act, 1961.
In ruling so, a division bench of Chief Justice Alok Aradhe and Justice J. Sreenivas Rao cited two rulings of the Bombay High Court which held that “depreciation as granted in accordance with the rates prescribed by the Income-tax Act would have to be deducted for ascertaining the accumulated profits.”
The Gauhati High Court has held that the words “Turnover” and “Income Tax Return” are different and exemption to a bidder from submitting the former in a tender process would not exempt it from furnishing the ITR, for the prescribed years.
“The primary purpose of reporting Annual Turnover is to provide a clear picture of a company's revenue-generating capacity. It is often a critical criterion for assessing a bidder's financial strength in tender applications. An Income Tax Return serves to comply with tax obligations and inform the government about the taxpayer's financial status, ensuring accurate taxation based on total income,” Justice Michael Zothankhuma held.
No Adhoc Disallowance Is Permitted Without Rejecting Books Of Account: Mumbai ITAT
On finding that the AO had audited and still not rejected the books of account, the Mumbai ITAT held that the ad hoc disallowance made by the AO was not justified and needed to be deleted.
The Bench of the ITAT comprising of Kuldip Singh (Judicial Member) and S. Rifaur Rahman (Accountant Member) reiterated while considering the findings of the CIT(A) that “because the books of accounts of the assess were audited and the AO did not find any infirmity in them, and also because, had the AO found any discrepancy/infirmity, he should have rejected the books of account of the appellant, which he clearly had not done, before proceeding further Moreover, in earlier cassessment years such expenses were allowed which is apparent from the earlier assessment orders. Even if the submission of the assessee may be considered not complete or considered as insufficient evidence, it will not grant a right to the AO to make an ad-hoe disallowance. What the AO should have done was to ask for specific evidence before making a decision in such specific instances.”
While allowing deduction u/s 54 of the Income tax Act, the New Delhi ITAT explained that under the light of section 54, exemption of capital gain from being charged to income tax as income of the previous year is attracted when another residential house has been purchased within one year before or two years after the date of transfer or has been constructed within three years after the date of transfer of the residential house.
The Bench of the ITAT comprising of Challa Nagendra Prasad (Judicial Member) and B.R.R. Kumar (Accountant Member) observed while referring the decision of Punjab & Haryana High Court in the case of CIT Vs. Kapil Kumar Aggarwal (382 ITR 56) that “section 54F of the Act, nowhere envisages that sale consideration obtained by the assessee from original capital asset is mandatorily required to be utilized for purposes of meeting cost of new asset. It was, therefore, held that where investment made by the assessee although not entirely sourced from capital gains but was within stipulated time and if more than capital gain earned by assessee, the assessee is entitled to exempt u/s 54F.”
The Rajkot ITAT held that the claim of the assessee cannot be denied as it was not reported in the tax audit report, especially in the circumstances where other evidence is available on record suggesting the deduction in pursuance to the provisions of section 43B on payment basis is available.
The Bench of the ITAT comprising of TR Senthil Kumar (Judicial Member) and Waseem Ahmed (Accountant Member) observed that “the tax audit report is a significant piece of evidence/ document but based on that the genuine claim of the assessee cannot be denied especially in the circumstances when other details are available on records. As such the assessee has claimed deduction u/s 43B of the Act on payment basis and therefore in our considered view, the same should have been allowed by the authorities below.”
On finding that none of the orders passed by I-T Authorities doubted the services so rendered by the administrative head nor alleged to have been paid salary excessive or unreasonable which is sine qua non in invoking the provision of Section 40A(2)(b) of the Income Tax Act, the Ahmedabad ITAT allowed the deduction u/s 40A(2)(b).
The Bench of the ITAT comprising of Madhumita Roy (Judicial Member) and Annapurna Gupta (Accountant Member) observed that “payment of salary and granting of interest free loan are two different transactions and there is no scope of clubbing the same to attract the provision of Section 40A(2)(b) of the Act. The same salary would have been given to any other person recruited by the appellant for the said post. Thus, question of diversion of funds or routing of funds does not and cannot arise as these two transactions i.e. payment of salary as well as loan is through journal entry and the amounts stands payable, on the other hand, in the form of creditor or lender as rightly pointed out by the appellant. As Smt. Palak A Shah did not withdraw salary, the amount was lying as unsecured loan as per normal accounting principle. Had the interest been paid the Revenue would have at loss because the appellant firm attracts 30.9% tax whereas Smt. Palak A shah, an employee falls under 20.6% tax slab.”
While holding that mere disallowance of expenditure or enhancement of returned income does not ipso facto call for the imposition of penalty u/s 271(1)(c) of Income Tax Act, the Delhi ITAT deleted the said penalty.
The Bench comprising of Kul Bharat (Judicial Member) and Pradip Kumar Kedia (Accountant Member) observed that “No allegation towards the nature of default has been specified. No satisfaction contemplated under Section 271(1B) has been found towards the nature of default qua the disallowance. In the absence of any firm satisfaction towards alleged default, the AO is not entitled to invoke Section 271(1)(c) of the Act.”
On finding that the assessee has issued share application money and subsequently allotted shares which shows that the transactions are genuine and there is no material brought on record by tax authorities that the assessee has benefited from round-tripping, the Mumbai ITAT deleted the addition made u/s 68 of the Income Tax Act, 1961.
The Bench of the ITAT comprising of Narendra Kumar Choudhry (Judicial Member) and S. Rifaur Rahman (Accountant Member) observed that “As per the record of ROC the assessee has issued share capital and assessee also brought on record that all these companies are in existence and in the books of the assessee the assessee has declared its capital liability in its financial statements. This clearly shows that the transaction of issue of share application money is genuine. Nothing is brought on record by the tax authorities that assessee has involved in any manipulation transaction or cash transactions which suggest that assessee has attained any directly or indirect benefit out of this transaction.”
While rejecting the appeal challenging the validity of notice issued u/s 153A, the New Delhi ITAT held that section 292CC of the Income Tax Act empowers an officer to presume that the books of account or other document found during search u/s 132 or survey u/s 133A belongs to a person upon whom search or survey has been done.
The Bench of M. Balaganesh (Accountant Member) and Yogesh Kumar U.S. (Judicial Member) reiterated while referring the decision of Orrisa High Court in the case of Shiva Cement Ltd. Vs. Director of Income Tax (Inv.), Bhubaneswar reported in (2021) 132 Taxmann.com 286 (Orissa) that “there is nothing in either in Section 132 or 133A of the Act that prohibits the Department from undertaking a survey of an entity exclusive to one location of its operations, whereas it may have credible information for search as regards the operations in another location. As rightly pointed out by the Department, search is qua a 'place' and not necessarily qua the 'Assessee'. Survey by its very nature could be of the entity and any place from where such entity may operate. It is perfectly possible that while conducting survey and search of the premises of an entity, for which an authorisation has been issued, the Department can come across material pertaining to some other person or entity. The provisions like Section 153C of the Act deal with such contingencies.”
The Chennai ITAT held that since the notice issued by AO for subject assessment year falls beyond the stipulated six assessment years and four relevant assessment years, considering the satisfaction note, the notice issued by AO u/s 153C of Income tax Act for initiation of proceeding against assessee and consequent assessment order passed u/s.143(3) r/w/s 153C is barred by limitation, void ab initio and liable to be quashed.
The Bench of Manjunatha. G (Accountant Member) and Manomohan Das (Judicial Member) observed that “Since, the Assessing Officer of the searched person cannot hand over the books of accounts and other documents to the Assessing Officer having jurisdiction over any other person, unless he records the satisfaction for proceedings u/s. 153C of the Act, in our considered view, for the purpose of second proviso to section 153A(1) of the Act, the date of receiving the books of accounts or other documents by the Assessing Officer having jurisdiction over such other person should be considered”.
On finding that the liability of payment to Core SGF by the assessee is ascertained, the Mumbai ITAT held that it cannot be added back as per clause (c) of Explanation-1 to section 115JB(2) of the Income Tax Act.
The Bench of the ITAT comprising of Aby T. Varkey (Judicial Member) and S Rifaur Rahman (Accountant Member) observed that “in assessee's own case for AY 2016-17 this Tribunal had allowed the claim made by assessee on account of contribution made to the Core SGF u/s 37(1) of the Act as expenditure incurred exclusively in the course of carrying on its business and the Tribunal also held that the contribution made by the assessee stock exchange to Core SGF is not in the nature of any deposit/contingency/reserve. And therefore, the AO/Ld. CIT(A) erred in holding that contribution made by the assessee to Core SGF is an unascertained liability.”
While deleting the addition made u/s 68 of the Income Tax Act, the Mumbai ITAT held that in the absence of any dispute and discrepancy in the sales, the addition should be restricted to the extent of gross profit at the same rate of the genuine purchases.
The Bench of the ITAT comprising of Rahul Chaudhary (Judicial Member) and Prashant Maharishi (Accountant Member) observed while referring the decision of the Bombay High Court in case of PCIT vs. Mohd. Haji Adam and Co. that “where sales are not disputed, no discrepancy between purchases shown by the assessee and the sales declared; only the addition should be restricted to the extent of bringing the gross profit on purchases at the same rate of other genuine purchases.”
The Mumbai ITAT rules on TP-adjustments w.r.t administrative support services in relation to interbank indemnities, provision of IT-enabled services, and purchase of precious metals in case of company carrying out banking activities.
With respect to purchase of precious metals like gold & silver imported from London branch, the Bench comprising Vikas Awasthy (Judicial Member) and Amarjit Singh (Accountant Member) found that even though assessee justified transaction price by making reference to KITCO and Reuters database, the TPO however took the view that London Bullion Market Association (LBMA) was the primary source for estimating price of trading in bullion.
The Ahmedabad ITAT remitted the issue of granting business volume discount adjustment and geographical difference adjustment for determination of ALP in case of company engaged in the business of manufacturing chemicals like dyes, agro chemicals, bulk drugs, commodity chemicals and intermediates.
While referring to the Coordinate bench ruling in assessee's own case for AY 2006-07, the Bench comprising Annapurna Gupta (Accountant Member) and T.R. Senthil (Judicial Member) reiterated that the assessee company shall be allowed adjustment to the sale price to its AEs on account of volume discount and geography of sale.
Ahmedabad ITAT Explains Difference Between Letter Of Credit From Corporate Guarantee
While upholding ALP adjustment on LOC in case of Axis Bank, the Ahmedabad ITAT rules on difference between letter of comfort (LOC) and guarantee commission.
With respect to LOC being equated to bank guarantees, the Bench comprising Annapurna Gupta (Accountant Member) and T.R Senthil (Judicial Member) explains that bank guarantee is a kind of guarantee from a lending organization to cover a debtor's liabilities if they fail to meet them, thus, serving as a promise to pay off a borrower's debt in case of default.
While referring to the decision of Chennai Bench of Tribunal in the case of M/s. Shriram Properties Limited (ITA No. 431/Chny/2022), the Mumbai ITAT held that the notional interest income credited by the assessee to the profit and loss account as per the requirement of Indian Accounting Standard has not actually accrued to the assessee and hence the same is not liable for taxation under Real Income principle.
The Bench of B.R. Baskaran (Accountant Member) and Sandeep Singh Karhail (Judicial Member) reiterated while referring to the case of M/s. Shriram Properties Limited (ITA No. 431/Chny/2022 dated 20.3.2023) that “when there is a contractual obligation for not charging any commission, merely for the reason that the assessee has passed notional entries in the books for better representation of financial statements, it cannot be said that income accrues to the assessee which is chargeable to tax for the impugned assessment year.”
The Mumbai ITAT confirmed the CIT(A)'s action in deleting the addition made on account of waiver of royalty received from two subsidiaries.
The Bench comprising Prashant Maharishi (Accountant Member) and Sandeep Singh Karhail (Judicial Member) observed that considering the financial position of subsidiaries located in Bangladesh and Sri Lanka, the assessee agreed to waive part of the royalty and thereby credited 1% of the royalty amount to the P&L account instead of 3% as per the agreement.
On finding that there is no short fall of TDS and the assessee is eligible to get credit of the entire amount, the Visakhapatnam ITAT directed the AO to grant credit of the entire amount deducted as tax at source u/s. 194Q of the Income Tax Act.
The Bench of Duvvuru Rl Reddy (Judicial Member) observed while referring the CBDT Circular No. 452 that “kaccha arahtias are concerned, the turnover does not include the sales effected on behalf of the principals and only the gross commission has to be considered for the purpose of 44AB.”
The Mumbai ITAT recently ruled on selection of comparable and transfer pricing adjustment on account of non-recovery of charges for providing letter of comfort/support and royalty in case of company engaged in manufacturing paints and enamels.
Under the assessee's support services and intragroup services segment, the Bench excluded two companies, namely, Axis Integrated Systems Ltd, and Inmacs Management Services Ltd citing functional dissimilarity and unavailability of complete data relating to nature of services being available in the public domain.
Separately, the Bench comprising Prashant Maharishi (Accountant Member) and Sandeep Singh Karhail (Judicial Member) held that letters of comfort issued by the assessee would be an international transaction u/s 92B of the Income tax Act.
Finding that the assessee has properly explained the source of cash deposit, the Visakhapatnam ITAT directed the AO to delete the addition made u/s 69A of the Income Tax Act.
The Bench of Duvvuru Rl Reddy (Judicial Member) observed that “the assessee has mentioned about the receipts of sale consideration as per the sale of agreement in his books of accounts. As per the agreement of sale, the purchaser has paid the sale consideration of Rs. 30 lakhs to the assessee. But the contention of the Revenue is that the purchase agreement was not signed by the purchaser. On this aspect, on perusal of the Agreement of Sale, it is clear that the stamp paper is also in the name of the purchaser. Apart from the above, the assessee is engaged in the real estate business. Considering the above facts and circumstances of the case, it is apparent that the assessee has received sale consideration of Rs. 30 lakhs as per the agreement of sale and filed the confirmation letter saying that the purchaser has paid the sale consideration to the assessee.”
Finding that except for filing copies of so-called invoices of the contractor through whom the work was done, which were also deficient in several respects, no other evidence was filed by the assessee, the Chandigarh ITAT held that the assessee had failed to discharge the initial burden of proof rested on him to substantiate his claim of having incurred expenditure on improvement of the property.
The Bench of Aakash Deep Jain (Vice President) and Vikram Singh Yadav (Accountant Member) observed that “merely making entries in the books of accounts and producing bills which are deficient in providing basic information regarding the transaction, is not sufficient for discharge of initial burden of proof on the assessee regarding its claim of cost of improvement”.
The Chennai ITAT held that there is no requirement that specific money as deposited in capital gain account scheme should be utilized towards new investment, and the assessee may make investment from other funds as available with him and the same would not jeopardize the claim of the assessee.
Referring to the decision of Sohanlal Mohanlal Bhandari vs. ACIT (104 Taxmann.com 161), the Bench of Mahavir Singh (Vice President) And Manoj Kumar Aggarwal (Accountant Member) reiterated that “it is open for the assessee to use either own or borrowed funds for purchase or construction of new residential house and it is nowhere provided that only sale proceeds of original asset should be utilized for this purpose”.
The Chennai ITAT clarified that the Assessing Officer has to record his satisfaction before initiating penalty under section 271D of the Income tax Act in respect of violation of the provisions of section 269SS of the Act. As per the provision of Section 269SS, the assessee had to explain the bonafide or genuineness of the cash transaction towards payment of interest in cash, added the ITAT Bench.
The Bench of V. Durga Rao (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member) observed that “Once the Assessing Officer decided to initiate penalty under section 271(1)(c) of the Act, subsequently, reference was made to Addl. CIT to initiate penalty proceedings under section 271D of the Act, the Assessing Officer ought to have been recorded his satisfaction. However, AO has failed to do so. The same is in violation of CBDT Circular no. 09/DV/2016 dated 26.04.2016 advising Assessing Officer to make a reference to the Range Head regarding violation of provisions of Sec.269SS and 269T during the course of assessment proceedings itself. Thus, the action of AO was in gross violation of departmental circular”.
The Ahmedabad ITAT held that in the absence of the Assessing Officer pointing out as to how despite the assessee's explanation, there was no nexus between the interest-bearing funds and their utilization for making advances for earning interest income, no disallowance u/s 57(iii) of the Income tax Act was tenable.
The ITAT explained that the only requirement to be fulfilled for claiming expenses u/s 57(iii) is that they must have been incurred wholly and exclusively for the purpose of earning income from other sources.
The Mumbai ITAT clarified that as per the provisions of Section 68 of the Income tax Act, the Assessing Officer is required to make addition of unexplained cash credit only in the previous year in which such cash credit has been made and the assessee is not in a position to offer satisfactory explanation relating thereto.
The Bench of Vikas Awasthy (Judicial Member) and Padmavathy S. (Accountant Member) observed that “the addition under section 68 could be made only during the year in which such credit has been received and that if the credit balance appearing in the account of the assessee is not pertaining to the year under consideration, the Assessing Officer cannot make addition under section 68 in the subsequent previous year i.e. the year under consideration”.
The Bangalore ITAT reiterated that the distinction between an employer's contribution which is its primary liability under law, in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it is crucial. The former forms part of the employers' income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date, added the Bench.
The Bench of George George K (Vice President) and Laxmi Prasad Sahu (Accountant Member) observed that “the Apex Court judgment in the case of Checkmate Services Pvt. Ltd. will squarely apply. The Apex Court in the aforesaid judgment has categorically held that if the employees' contributions are not paid within the due dates specified under the respective Acts, assessee will not be entitled to deduction under section 36(1)(va) of the Act”.
The Chennai ITAT explained that a typographical error in mentioning incorrect amount of expenses in Form 3CD does not call for any addition by the Assessing Officer to assessee's income.
The Bench of Mahavir Singh (Vice President) and Manoj Kumar Aggarwal (Accountant Member) observed that “details were available before the CIT(A) at the time of hearing and complete details which are available is only supportive of the order of the CIT(A). Hence, we find that the CIT(A) erred in restricting the addition at Rs.79,99,559/- because the expenditure claimed to have incurred on which the tax is collected is Rs.2,19,38,339/- is wrongly entered in form 3CD and it should have been Rs.1,45,83,780/-”.
The New Delhi ITAT held that Section 44AB of the Income tax Act casts an obligation upon the assessee to get accounts audited before the specified date and furnish by that date the report of such audit.
However, finding that there was reasonable cause for failure in furnishing the Tax Audit Report in time, the ITAT clarified that the present case is not a case of not getting the accounts audited in time, and therefore, held that the penalty u/s 271B is not exigible
Finding that the assessee has explained the details of the earning of the amount which was rightly deposited during the demonetization period, the Rajkot ITAT held that the addition confirmed by the CIT(A) u/s 69A of the Income tax Act is not justified.
The Bench of Suchitra Kamble (Judicial Member) and Waseem Ahmed (Accountant Member) observed that “The assessee has also given the land revenue record as well as the bank statement including professional accounts for earning agricultural income which was not at all considered by the CIT(A) while confirming the addition to the extent of Rs. 10,00,000”.
The Chennai ITAT held that assessee's claim on the fair market value cannot be termed as concealment of income, if such claim was based on the valuation report of an approved valuer.
The Bench of Manjunatha. G (Accountant Member) and Manomohan Das (Judicial Member) observed that “The basis of the assessee's claim is the report of the approved valuer. Further, differences of opinion will always be there regarding the fixation of value of a particular property. Showing of different value of a particular property by different valuers is not uncommon. It is possible. Therefore, there were different opinions on the assessee's matter and for different opinions penalty cannot be levied on the assessee”.
While explaining Section 11(3) of the Income tax Act, the New Delhi ITAT held that any income referred to u/s 11(2) which is paid to any trust/ institution registered u/s 12AA or to any fund/ trust/ university/ educational institution/ hospital referred to u/s 10(23C)(v) shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid, as the case may be, or of the previous year immediately following the expiry of the period aforesaid.
The Bench of Shamim Yahya (Accountant Member) and Yogesh Kumar Us (Judicial Member) observed that “as per Explanation to Section 11(2) of the Act, any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust of any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter”.
The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that loss due to the sale of government securities by banks is a “business loss” and the income tax deduction is allowable under Section 37 of the Income Tax Act.
The bench of T.R. Senthil Kumar (Judicial Member) and Narendra Prasad Sinha (Accountant Member) have observed that the depreciation of government securities was a deterioration in the value of security. In essence, this was a loss claimed on the valuation of the security. As clarified by the CBDT in Circular No. 599, the loss claimed by the banks on the valuation of their securities was a business loss and an allowable deduction.
Referring to the decision of the Calcutta Bench in ITA No. 994/Kol/2023, the Ahmedabad ITAT reiterated that the assessee, who has been granted provisional registration, is eligible to apply for final registration irrespective of the fact that the assessee had already commenced its activity even prior to the date of grant of provisional approval.
The ITAT explained that Section 80G of the Income Tax Act provides tax exemptions for donations made to specified charitable institutions and funds. The tax exemption under Section 80G is intended to encourage philanthropy by allowing individuals and entities to deduct the amount of donations made from their taxable income.
SBI Not Liable To Deduct TDS On Transactions Related To Assignment Of Loans By NBFC: ITAT
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the State Bank of India (SBI) is not liable to deduct tax at source (TDS) on transactions related to the assignment of loans by non-banking financial companies (NBFC).
The bench of Om Prakash Kant (Accountant Member) and Sandeep Singh Karhail (Judicial Member) has observed that since the NBFC is not acting as an agent of the assessee in respect of the loans advanced to the borrowers, therefore, we are of the considered view that no question arises of deduction of tax at source under Section 194H of the Income Tax Act, 1961, and the findings of the CIT(A) in this regard are set aside.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has deleted the income tax addition and held that mark-to-market losses, losses on forward contracts, and losses on forward premium accounts are not speculative in nature.
The bench of Yogesh Kumar U.S. (Judicial Member) and Pradip Kumar Kedia (Accountant Member) has observed that CIT(A) has committed no error in deleting the addition, observing that the forward mark contracts on foreign currency are incurred during the normal course of business and the losses incurred are part and parcel of the business activity of the assessee, which are allowable as business expenditure and not speculative in nature, thus any expenditure incurred for such premium account computed as the difference between the forward rate and the spot rate in such contract is also to be treated as business expenditure incurred in the course of business by the assessee.
The Delhi ITAT deleted the addition made u/s 68 being unsecured loan obtained from a firm by the Assessee for further investment in a company on the ground that the identity, creditworthiness, and genuineness of the transaction stands proved.
Finding that lender firm's AO did not find anything alarming with regard to cash deposits made in its bank account and did not doubt about its sources, the Division Bench comprising Amit Shukla (Judicial Member) and M. Balaganesh (Accountant Member) observed that “once the cash deposits made in the bank account of the lender firm had been accepted as coming from explained sources by the revenue under scrutiny assessment of the lender, the revenue cannot take a divergent stand in the case of the Assessee that those cash deposits had emanated out of undisclosed sources of the Assessee which had been deposited in the lender's bank account and monies received by Assessee in the form of unsecured loan”.
The Delhi ITAT held that receipts by a foreign entity from provision of software services to oil companies in India being in the nature of business profits are not taxable in India in the absence of its Permanent Establishment (PE) during the relevant AYs.
The Division Bench comprising G.S. Pannu (Vice President) and Astha Chandra (Judicial Member) observed that “the impugned receipts of the assessee are not taxable in India under the provisions of Section 44BB of the Act for the reason that the assessee does not have a PE in India in the relevant AYs under consideration and that being a resident of Canada, the assessee is governed by the more beneficial provisions under the India-Canada DTAA”.
Date Of Possession Of New Property To Be Considered As Date Of Acquisition; ITAT Allows Deduction
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the date of possession of new property to be considered as date of acquisition and the assessee is entitled to deduction under Section 54 of the Income Tax Act on the purchase of new property.
The bench of Raj Kumar Chauhan (Judicial Member) and Prashant Maharishi (Accountant Member) has observed that the date of possession of new property should be considered as the date of acquisition of the property. By entering into an agreement to purchase, the assessee has acquired the right to purchase the property and did not purchase it as it was under construction.
The Mumbai ITAT held that rectification order passed in the name of a non-existent entity, despite informing Revenue regarding its merger, is non-est in the eyes of law.
The Division Bench comprising Prashant Maharishi (Accountant Member) and Raj Kumar Chauhan (Judicial Member) observed that “the internal correspondence of the Revenue also shows that the Assessing Officer was aware about the merger. Still the Assessing Officer chooses to pass the rectification order in the name of a non-existent entity”.
Referring to the provision of Article 12 and 7 of the India-France DTAA which demonstrate that interest payment made by the permanent establishment to the head office are not taxable in the hands of the head office, the Mumbai ITAT held that interest received by the overseas head office (HO) from its Permanent Establishment (PE) is not taxable under beneficial provision of DTAA.
The permanent establishment concept creates a minimum threshold of business presence below which the source country doesn't attempt to tax a foreign enterprise's business income. That threshold is set in terms of a minimum physical presence in the jurisdiction.
Noting that the assessee has a right to receive a repayment from the PE branch as the debt has been given by the assessee and it could not be established how the PE can pay interest on the debt/loan given by the PE itself, the Division Bench comprising Amarjit Singh (Accountant Member) and Kavitha Rajagopal (Judicial Member) observed that “even though the interest paid by the branches (PE) to the head office are taxable as per the provision of Sec. 9(1)(v)(c) of the Act, however, because of beneficial provision of DTAA i.e Article 12(5) such interest received by the overseas head office is not taxable under the provision of DTAA”.
CSR Expenditure Is Mandatory, Does Not Justify Disallowance Of Section 80G Deduction: ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that expenditures under corporate social responsibility (CSR) are mandatory and does not justify disallowance of these expenditures under Section 80G of the Income Tax Act if other conditions of Section 80G are fulfilled.
The bench of Anubhav Sharma (Judicial Member) and M. Balaganesh (Accountant Member) has observed that the voluntary nature of donation is by nature the fact that it is not on the basis of any reciprocal promise of donee. The CSR expenditures are also without any reciprocal commitment from the beneficiary, which is philanthropic in nature. The Income Tax Act permits deduction of donations as per Section 80G, even though the assessee is not gaining any benefit from any reciprocity from the donee. Similar is the case with CSR expenditure.
Receipts From CRM Services Not Taxable In India As Royalty Or FTS: ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that receipts from Customer Relationship Management (CRM) services are not taxable in India as royalty or Fee for Technical Services (FTS).
The bench of Saktijit Dey (Vice President) and Brajesh Kumar Singh (Accountant Member) has observed that on November 26, 2019, the assessee filed a revised return of income, declaring income of Rs. 2,94,91,40,080 towards the subscription fee from CRM services and Rs. 2,69,11,689 towards interest on the income tax refund. However, while computing the assessee's income in the final assessment order, the assessing Officer erroneously included the interest on the income tax refund in the receipts of CRM services.
While referring to the provisions of section 80M of the Income Tax Act, that the assessee company would be allowed a deduction of an amount equal to and not exceeding the amount of dividend “distributed” on or before the due date, the Kolkata ITAT held that assessee is rightly within law to claim deduction u/s 80M.
The Bench of the ITAT comprising of Pradip Kumar Choubey (Judicial Member) and Dr. Manish Borad (Accountant Member) observed by plain reading of section 80M(1) that “in the year in which the dividend was received, the assessee company would be allowed a deduction of an amount equal to and not exceeding the amount of dividend “distributed” on or before the due date.”
Finding that the AO has nowhere examined the order of the Pollution Control Board asking the assessee to make the payment, the Kolkata ITAT held that every payment made by the assessee to the Board for violation of environmental norms would not be penal, and hence, deleted the addition made by AO.
The Bench of the ITAT comprising of Rajpal Yadav (Vice-President) and Rajesh Kumar (Accountant Member) observed that “The Assessing Officer has nowhere examined the order of the Pollution Control Board asking the assessee to make the payment. Every payment made by the assessee would not be in penal in nature, therefore, disallowance is not sustainable”.
On finding that the assessee has a valid reason to consider the payments on account of 'transactional charges' to be not covered by section 194J(1)(ba) of the Income Tax Act, the New Delhi ITAT ordered to delete the penalty order passed by the CIT(A) u/s 271C.
The Bench of the ITAT comprising of Anubhav Sharma (Judicial Member) and Dr. B.R.R. Kumar (Accountant Member) observed that “After considering the explanation given by the assessee in regard to the 'Transaction charges which the tax authorities have considered as 'Professional charges' paid to directors falling in limb (ba) of sub-section (1) of section 194J of the Act, it comes up that the PCIT has accepted the plea of the assessee that payments made to directors on account of sitting fee is allowable. The assessee seems to have had valid reasons to consider the payments on account of 'transactional charges' to be not covered by Section 194J(1)(ba) of the Act as there is no such head in this section. Thereby not deducting the TDS seems to be out of bonafide belief. Imposition of penalty is thus not justified.”
On finding that the CIT(A) has failed to point out any defect and discrepancy in the evidence and details furnished by the assessee but simply upheld the order of the AO in a mechanical manner, the Kolkata ITAT held that once the assessee has proved the identity and creditworthiness of the share subscribers, the burden shifts upon the AO to examine the evidence and made independent inquiries.
Since the AO has failed to conduct proper examination of evidences relating to share premium, the ITAT deleted the addition made u/s 68 of the Income Tax Act.
The Bench of the ITAT comprising of Sanjay Garg (Judicial Member) and Dr. Manish Borad (Accountant Member) observed that “The assessee having discharged initial burden upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, the burden shifted upon the Assessing Officer to examine the evidences furnished and even made independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee and confronting with the same to the assessee”.
Noticing that against the alleged credits in the form of share capital & share premium, an equal amount of investment in equity of other entity has been made, the Kolkata ITAT confirmed the addition made u/s 68 of the Income Tax Act.
The Bench of the ITAT comprising of Anikesh Banerjee (Judicial Member) and Dr. Manish Borad (Accountant Member) observed that “finding of the CIT(A) is only to the extent of fund not received in cash form during the year. Neither any details have been filed by the assessee nor there is any specific finding of the CIT(A) dealing with the evidence filed by the assessee to explain the nature and source of alleged sum. We also note that against the alleged credits in form of share capital and share premium, an equal amount of investment in equity of other entity has been made but there is no explanation about the said transactions.”
No Addition Is Permitted U/S 41(1) In Absence Of Evidence Showing Cessation Of Liability: Delhi ITAT
The New Delhi ITAT held that unless and until there is evidence to show that the liability has ceased to exist, there cannot be any addition u/s 41(1) of the Income Tax Act, and hence, deleted the addition made by AO.
The Bench of the ITAT comprising of Yogesh Kumar U.S. (Judicial Member) and Dr. B.R.R. Kumar (Accountant Member) observed that “When the inspector has visited the premises, it was reported that the firm was not operative from that address in the year 2015. However, the transaction took place prior to 01.04.2009 and the non-existence of this firm in 2015 cannot be reason to sustain addition and the report of the inspector cannot be relied in its entirety since there was no basis for such information so recorded by him by following the due procedure as stipulated in Code of Civil Procedure. Hence, unless and until there is evidence to show that these credits are ceased to exist, there cannot be any addition u/s 41(1) of the Act.”
The New Delhi ITAT held that no tax is deductible at source u/s 195 on payments made to overseas logistics company for rendition of logistics services, as such services cannot be treated as fees for technical services (FTS) as defined in Explanation 2 to Section 9(1)(vii).
Finding that the sole basis of the Revenue for holding that the payment made to overseas logistics company is towards consultancy services is that as per one of the terms of contract executed between Assessee and the overseas parties, the said parties advised the Assessee on change into tariff ratio, the ITAT observed that such advice would not partake character of rendering consultancy service and that mere provision of such information would not be sufficient for treating the entire services as managerial or consultancy services.
The Ahmedabad ITAT remitted the issue of transfer pricing adjustment regarding interest on overdue trade receivables in case of entity engaged in manufacturing of pharmaceutical products, while emphasizing that no further adjustment is warranted on outstanding receivables from AEs once working capital adjustment is already factored in.
The credit period means the time period provided to the AEs/Non-AEs to clear their outstanding dues towards the export proceeds. The dispute over trade receivables from AEs arises when as per the Department, the Assessee company provides more credit period to AEs as compared to Non-AEs.
Most of the time Department considers this extra credit period as ALP (Arm's length price) adjustment and points that the Assessee should charge notional interest for the same.
The Bench comprising Suchitra Kamble (Judicial Member) and Waseem Ahmed (Accountant Member) observed that “working capital adjustment given by the assessee company while fixing the sale price and which has an impact of outstanding trade receivable on profitability while having sale proceeds realisation which is incidental to transaction of sale of finished goods as per the submission of the AR appears to be not verified by the AO/TPO”.
The Bombay High Court ruled that the demand for interest u/s 28AA of the Customs Act raised for non-payment of demand, within three months of raising the demand, is properly tenable on the part of the Customs Authority.
Interest u/s 28AA is automatic, when there is a default or delay in payment of duty, added the Court.
The Division Bench of Justice M.S Sonak and Justice Jitendra Jain observed that “since the payment was not made within the time specified in the said demand notice, an order of attachment was passed for failure to make the payment demanded on 18th Oct 2012 and interest payable u/s 28AA for the period commencing after that date, i.e. after 18th Oct 2012 was demanded”.
The Bombay High Court held that assessee had correctly accounted income from leasing out of properties under the head 'income from profits & gains of businesses', and not as 'income from house property'.
The High Held so after finding that income of assessee is derived from letting out of the properties, which in fact, is the principal business of the assessee as seen from its main objectives contained in its memorandum of association.
The Division Bench of Justice G. S. Kulkarni and Justice Firdosh P. Pooniwalla observed that “what must be borne in mind for the Court is to consider the main objective of the assessee as contained in the Memorandum of Association, and that the deciding factor, is not the ownership of land or leases but the nature of the activity of the assessee and the nature of the operations in relation to them”.
The Supreme Court recently ruled that a card issuing bank is not liable to separately pay service tax on the interchange fee when the said tax already stands paid on the Merchant Discount Rate (MDR).
The Three Judge Bench of Justice Sanjiv Khanna, Justice Sanjay Kumar, and Justice R. Mahadevan observed that “the entire amount of the service tax payable on the MDR has been paid to the Government and there is no loss of revenue”.
Section 67 CGST Act | Whether Cash Can Be Seized During GST Search ? Supreme Court To Consider
Taking into account conflicting views of the Delhi High Court and the Madhya Pradesh High Court, the Supreme Court is set to consider the issue as to whether authorities can seize "cash" under Section 67 of the Central Goods and Services Tax Act, 2017.
The development comes as a bench of Justices PS Narasimha and Sandeep Mehta recently issued notice on a petition filed by tax authorities assailing Delhi High Court's direction for refund of seized cash to the respondents.
Assessee Entitled To Charge Depreciation On Purchase Of Goodwill: Delhi High Court
The Delhi High Court has made it clear that goodwill is not 'income' but rather 'expenditure' for acquisition of assets and therefore, an assessee is entitled to charge depreciation on the amount spent towards it.
A division bench of Justices Vibhu Bakhru and Swarana Kanta Sharma cited Commissioner of Income Tax, Kolkata v. Smifs Securities Ltd. (2012) whereby the Supreme Court had held that goodwill could be considered as an intangible asset eligible for depreciation.
The Telangana High Court has held that the capital expenditure made prior to June 1998, for purchasing shares in any 'infrastructure facility', cannot be included in an assessee's total income.
A division bench of Justices Sujoy Paul and Namavarapu Rajeshwar Rao reasoned, “The capital expenditure for purchasing shares falls under the category of infrastructure facilities and shall not be included in total income. This is because merely purchasing shares does not contribute to the income of the respondent/assessee. Since it does not count as income, no amount needs to be paid in taxes.”
Finding that proper officer passed the order cancelling taxpayer's GST registration with retrospective effect, the Delhi High Court clarified that such order does not indicate any reason for cancelling the GST registration much less from retrospective effect.
The High Court found that the only allegation against the assessee was that it was non-existent, which was sufficiently addressed by the assessee in his reply by claiming that he had to go to Rajasthan due to ill health of his father.
Mentioning Proposed Penalty In Declaration Under SVLDR Scheme Not Incorrect: Gujarat HC
The Gujarat High Court has held that Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) is applicable to any show cause notice for penalty/late fee, irrespective of whether it is under adjudication or appeal.
A division bench of Justices Bhargav D. Karia and Mauna M. Bhatt cited FAQs of the scheme as per which, any person who has a show cause notice (SCN) for demand of duty/tax and where the final hearing has not taken place as on June 30, 2019, is eligible to file declaration under SVLDRS.
The Supreme Court in a recent decision held that mobile service providers (MSPs) could avail the benefit of Central Value Added Tax/CENVAT Credit over excise duties paid on items such as mobile towers and prefabricated buildings.
The bench of Justice BV Nagarathna and Justice N Kotiswar Singh observed that since mobile towers and PFBs could be detached and relocated, they qualified as movable properties and accessories in enhancing the functionality of the mobile service antenna attached on top of the tower. Thus, the items qualified as 'capital goods' or 'inputs' which were indispensable to provide effective mobile services (output) and MSPs can get a credit set-off on these items.
“Putting together a structure of plywood sheets cannot be construed as constructing a residential house,” the Delhi High Court has held.
It thus upheld an ITAT order which disallowed capital gains exemption to the appellant-assessee under Section 54 of the Income Tax Act, 1961 on the ground that a mere 'makeshift' structure was raised in the name of residential house.
The Telangana High Court has held that the amount received by the developer of Hepatitis-B vaccine, under a co-marketing agreement with PFIZER Company, is a capital receipt not liable to tax.
A division bench of Chief Justice Alok Aradhe and Justice J. Sreenivas Rao reasoned that the developer-assessee's right to promote, market, distribute or sell the vaccine or a new competitive product to a third party was taken away under the agreement.
The Delhi High Court has held that it is not the technology which is used in the product that decides its HSN classification under the Customs Tariff Heading (CTH) for the purposes of Customs Tariff Act, 1975.
A division bench of Justices Vibhu Bakhru and Swarana Kanta Sharma held that it is rather the product, which may be created using a particular technology, which decides the HSN classification.
The Delhi High Court has held that where enhancement of valuation of goods by the proper officer for the purpose of determining Customs duty is accepted by the importer under protest, for expeditious clearance, it cannot be said that the importer has waived its right to question the reassessment.
Pertinent to note that Section 17 of the Customs Act, 1962 relates to 'Assessment of duty'. Sub-section (5) provides that in a case where the importer confirms his acceptance of the reassessment in writing, the proper officer would stand relieved of the obligation of passing a speaking order in respect of such reassessment. In all other cases where the reassessment is not acceded to, the proper officer is obliged to pass a speaking order.
A division bench of Justices Yashwant Varma and Ravinder Dudeja held, “In our considered opinion, the perceived concession made in respect of the opinion harboured by the proper officer cannot possibly be interpreted or construed as detracting from or depriving the importer of the right to question the decision of the proper officer in accordance with law. The right to question the correctness of the decision of the proper officer, be it with respect to the formation of opinion or even on merits, is one which is protected by statute.”
The Kerala High Court stated that financial grants provided to the assessee for covering daily operational expenses do not qualify as payment (consideration) for any services that the assessee might be providing and are not liable to tax.
The Bench of Justice Gopinath P. observed that “The assessee has only received grants to meet its day-to-day expenses including salary, allowances etc. Such payment cannot be deemed to be a consideration for the alleged services rendered or for goods supplied by the assessee. The revenue has no case that the activity of the assessee falls within Scheduled-I”.
The Delhi High Court has held that a misclassification or an incorrect classification of goods to be imported or exported would not ipso facto amount to collusion, wilful misstatement, or suppression of facts under Section 28AAA Customs Act, 1962. The provision provides for recovery of duties in cases where an instrument issued to a person has been obtained by him by means of collusion; or (b) wilful mis-statement; or (c) suppression of facts.
The division bench of Justices Yashwant Varma and Ravinder Dudeja was dealing with three petitions challenging the action initiated under Section 108 of the Customs Act by the Centre, against the Petitioners, exporters of 'handcrafted articles of stone'.
The Telangana High Court has held that the loss of fixed deposit investments by an assessee does not qualify as a 'trading loss' for the purposes of claiming deduction from income under Section 28 of the Income Tax Act, 1961.
The division bench of Chief Justice Alok Aradhe and Justice Sreenivas Rao agreed with the Revenue, stating, “the principles laid down in the above said judgments are not applicable to the present facts and circumstances of the case on the ground that the deposits made by the assessee were in the nature of fixed deposit investments.”
The Telangana High Court has held that the benefit of exemption under Section 11 of the Income Tax Act, 1961, can be denied only on income from such investments made by charitable or religious institutions, which are in violation of Section 13(1)(d) of the Act.
The Delhi High Court has made it clear that neither Section 160 nor Section 87 of the Central Goods and Services Tax Act, 2017 enable the Department to issue notice in the name of an entity which ceased to exist post amalgamation.
The Delhi High Court has held that an audit report determining liability towards tax dues is not a notice or an order of determination as contemplated under Section 106(1) of the Finance Act, 2013.
A division bench of Justices Vibhu Bakhru and Swarana Kanta Sharma held, “…for the said exception to apply, it would be necessary that an order of determination under Section 72, Section 73 or Section 73A of the 1994 Act had been issued. Clearly, an audit report is not an order of determination under either of the aforesaid sections, as mentioned in the opening sentence of Section 106 (1) of the 2013 Act.”
The Gauhati High Court has dismissed a challenge to an order under Section 148A(d) of the Income Tax Act, 1961, deeming the Petitioners' case fit for issuance of notice for escapement of income assessment under Section 148.
In doing so, it held that the order cannot be faulted merely because the alleged bogus transactions, whose existence the Petitioners (X and Y) did not deny in their reply, were perceived to be that of sale instead of purchase.
The Delhi High Court recently declared that Telecommunications Consultants India Limited, a central public sector undertaking which secured a Project floated by BSNL for laying down Optical Fibre Cable Network, is exempt from service tax since the service is in the nature of setting up a civil infrastructure so as to benefit the defence forces in having a better communication network.
A division bench of Justices Yashwant Varma and Dharmesh Sharma observed, “The said services are clearly exempted from imposition of services tax for the ultimate beneficiary being the Government of India.”
The Supreme Court ruled that the 'subsequent purchaser' of an imported motor car cannot be called an 'importer' to attract the liability under the Customs Act, 1962 to pay customs duty on the import of the vehicle.
The bench comprising Justice BV Nagarathna and Justice N Kotiswar Singh heard the appeal preferred by the subsequent purchaser of a Porsche Car against the High Court's decision upholding the demand of custom duty of ₹17,92,847 from the appellant along with other individuals on the allegation of misdeclaration of the car's model, tampering with its chassis number, and undervaluation to evade customs duty.
Foreign National Wearing Personal Jewellery To India Not Subject To Import Duty: Delhi High Court
The Delhi High Court has held that the jewellery worn to India by a foreign national is not subject to customs duty.
A division bench of Justices Yashwant Varma and Ravinder Dudeja thus declared as illegal the action of the Customs Department, confiscating a Thai national's gold chain and kara.
It observed, “In the present case also, petitioner is a foreign national, who brought a chain and a kara by wearing them on his body while arriving from Bangkok. The same was not brought in a concealed manner…We accordingly hold that the order of confiscation, customs duty and the penalty imposed is without any legal foundation.”
The Telangana High Court recently set aside Moosarambagh RTO's direction imposing 2% additional tax on a resident's purchase of a Mahindra XUV 700 car by labelling it to be his 'second vehicle'. As per the Telangana Motor Vehicles Taxation Act, 1963, vehicles that cost over Rs 20 lakh will be charged 18%. A second vehicle purchased in the name of the owner will be charged an additional 2% tax.
Justice Nagesh Bheemapaka clarified that the additional tax on a second vehicle is applicable only if an individual owns two vehicles at the time of registration of the new vehicle (not at the time of its purchase). It observed, “petitioner annexed the copy of screenshot evidencing transfer of [first] vehicle to a third party as material papers. Hence, it can safely be said that tax [on new vehicle] should be levied at 18% only.”
The Kerala High Court stated that the provisions of the Foreign Trade Policy cannot by itself authorise the levy of interest under Section 28AA of the Foreign Trade (Development and Regulation) Act, 1992, as such levy must be supported by plenary legislation.
The Bench of Justice Gopinath P. was considering a case where the assessee challenged the interest imposed upon him under the provisions of Section 28AA of the Customs Act, 1962 on the amounts repaid by the assessee on the assessee being found ineligible for the benefit of the Scheme introduced by the Foreign Trade Policy.
The Kerala High Court stated that loss in derivatives is not a speculative transaction and can be set off against business income of the assessee. Further, this is not a case where Section 73 of Income Tax Act is attracted since it deals with losses in speculation business.
The Bench of Justice A.K. Jayasankaran Nambiar observed that “……..a loss in the derivative business would consequently be a business loss for the purposes of Section 72, and a set off of such business loss would have to be permitted against profits and gains of business as computed in terms of the I.T. Act……..”
"Personal Jewellery" Of Person Coming To India Not Subjected To Customs Duty: Delhi High Court
The Delhi High Court recently granted relief to a woman whose over 200 gm gold jewellery was confiscated by the Customs on her return from Dubai.
In doing so, a division bench of Justices Yashwant Varma and Ravinder Dudeja held that “personal jewellery” which is not found to have been acquired on an overseas trip and was always a “used personal effect” of the passenger would not be subject to duty under the Baggage Rules, 2016.
The Allahabad High Court has upheld the finding of the Income Tax Appellate Tribunal and Commissioner of Income Tax (Appeals) that when an agreement between parties specifies a direct transfer of money, doing so indirectly by keeping the funds in a distinct account before sending them to the final account, does not place the money under the definition of 'unexplained money' as per Section 69A of the Income Tax Act, 1961.
“The CIT(A) and the Tribunal were justified in coming to the conclusion that only on account of purported infraction of the Agreement between the FRB and the assessee, without there being any dispute regarding the amount collected by the assessee which, in turn, has been deposited with the FRB, the deposits in the bank account of assessee cannot be termed as unexplained cash deposits by the assessee,” held Chief Justice Arun Bhansali and Justice Vikas Budhwar.
The Delhi High Court has held that mobile/ telecommunication towers are movable properties, eligible for availing input tax credit under the Central Goods and Services Tax Act, 2017.
A division bench of Justices Yashwant Varma and Girish Kathpalia further held that telecom towers fall outside the scope of Section 17(5) of the CGST Act which sets out various goods and services which are not liable to be taken into consideration for the purposes of availing input tax credit.
The Supreme Court has held that pure coconut oil, packaged and sold in small quantities ranging from 5 ml to 2 litres, would be classifiable as 'Edible oil' for the purposes of the Central Excise Tariff Act, 1985. It will be classifiable as "hair oil" if it is packaged and sold as a cosmetic.
"we are of the opinion that pure coconut oil sold in small quantities as 'edible oil' would be classifiable under Heading 1513 in Section III-Chapter 15 of the First Schedule to the Central Excise Tariff Act, 1985, unless the packaging thereof satisfies all the requirements set out in Chapter Note 3 in Section VI-Chapter 33 of the First Schedule to the Central Excise Tariff Act, 1985, read with the General/Explanatory Notes under the corresponding Chapter Note 3 in Chapter 33 of the Harmonized System of Nomenclature, whereupon it would be classifiable as 'hair oil' under Heading 3305 in Section VI- Chapter 33 thereof," the Court held.
The Delhi High Court has held that under the Direct Tax Vivad Se Vishwas Act, 2020, an Assessee is entitled to confine the settlement of disputes which were subject matter of its appeal, and exclude the disputes which were subject matter of the Revenue's appeal for the same assessment year.
It thus allowed a real estate company's plea against the certificate issued by Commissioner of Income Tax, whereby the declaration furnished by the Assessee under Section 3 of the DTVSV Act was modified to include settlement of certain disputes that were not the subject matter of appeal preferred by the Assessee.
A division bench of Justices Vibhu Bakhru and Swarana Kanta Sharma cited MUFG Bank Ltd. v. Commissioner of Income Tax 2 & Anr. (2022) whereby the Delhi High Court had held that “Even assuming that the DTVSV Act is a taxing statute, there is no restriction on an assessee to choose an appeal to be settled under the DTVSV Act as Section 2(1)(j) uses the words “any appeal” which even on a literal interpretation would mean any one or more appeals.”
The Allahabad High Court has held that an assesse claiming refund of excess TDS (tax deduction at source) is not required to fill Form 26B under the Income Tax Rules once Form 5 of the Vivad Se Vishwas Act, 2020 has been issued to them.
“A perusal of the Rules would reveal that Form 26B is required to filled up if the assessee claims refund paid under Chapter XXVII-B of the Act, 1961. The Stage of requirement of filling up the Form 26B was long over in the year 2008-09 itself and the present refund was being sought by the petitioner in terms of the provisions of the VSV Act, 2020, which did not require filling up any form, as claimed by the respondents, and as such, the demand made has no sanction in law”, held Chief Justice Arun Bhansali and Justice Kshitij Shailendra.
The Delhi High Court has held that the supply of helicopters by Pawan Hans Ltd. to the Andaman & Nicobar Islands administration, under an agreement executed in the year 2003, is not exigible to tax under the Central Sales Tax Act, 1956.
A division bench of Justices Yashwant Varma and Ravinder Dudeja reasoned that the agreement did not qualify as a 'sale' between the parties. It noted that while Pawan Hans (appellant) was obliged to place a helicopter at the service of the A&N Administration, the right to operate and maintain it remained with the appellant.
The Kerala High Court stated that notice issued against a dead person is invalid and participation of legal heirs of deceased in the proceedings won't make it legal.
The Division Bench of Justices A.K. Jayasankaran Nambiar and K.V. Jayakumar observed that “the consent of the parties cannot confer jurisdiction to the assessing authority for initiation of an action which is otherwise illegal and 'non-est'.”
The Delhi High Court has reiterated that “activities such as market research, promotional activities, training or deployment of software would clearly not breach the threshold of auxiliary functions as are envisaged under the DTAA.”
In its 72-page judgment, a division bench of Justices Yashwant Varma and Ravinder Dudeja noted that the LO was only engaged in activities relating to liaising with governmental authorities, training of personnel and undertaking other peripheral functions in aid of the business of Western Union Financial Services.
“The gamut of activities which it undertook cannot thus be described to be the undertaking of an essential or significant part of the principal business activity of Western Union Financial Services,” it said.
The Delhi High Court has prima facie observed that service tax is not leviable on amounts claimed by an Assessee as commission or performance linked benefit.
A division bench of Justices Yashwant Varma and Dharmesh Sharma cited the decision of a Larger Bench of the CESTAT in Kafila Hospitality & Travels Pvt. Ltd. vs. Commr. Of S.T., Delhi (2023).
The Bombay High Court held that bonafide delay in filing Form 9A on part of trust, has to be construed as procedural lapse and shall be condoned by exercising powers u/s 119(2) of Income tax Act.
The Division Bench of Justice G S Kulkarni and Justice Advait M Sethna observed that that the jurisdictional AO completely lost sight of the fact that at the time when assessee claimed deductions towards depreciation and capital expenditure u/s 11(1) by filing the revised computation, the time limit for submission of Form 9A had lapsed, due to change of procedure.
The Delhi High Court recently accepted that the interest received on borrowed funds, which were temporarily held in interest bearing deposit, is a part of the capital cost and is required to be credited to Capital Work In Progress.
The Division Bench of Acting Chief Justice Vibhu Bakhru and Justice Swarana Kanta Sharma observed that if the interest is earned on the amounts temporarily kept in fixed deposits in course of acquisition of coal mine to set up its business, then interest earned would require to be accounted for as part of capital value of business/ asset.
The Calcutta High Court recently reiterated that when the settlement applications were filed before the date on which the Finance Act 2021 did not come into effect, then taxpayers had vested right of preferring the application in absence of any statute prohibiting the said application.
The Division Bench of Justice Harish Tandon and Justice Hiranmay Bhattacharyya reiterated that retrospective legislation cannot affect the vested rights.
On finding that the approval granted u/s 153D is not in accordance with the provisions of the Income Tax Act, the New Delhi ITAT held the approval granted u/s 153D is invalid and set aside the order passed by the First Appellate Authority as he acted as a mere rubber stamp. Section 153D of the Income Tax Act, mandates that no order of assessment or reassessment shall be passed by an AO below the rank of Joint Commissioner without the prior approval of the Joint Commissioner or a higher-ranking officer.
The Bench of the ITAT comprising of Saktijit Dey (Vice President) and Naveen Chandra (Accountant Member) observed that “the approval granted u/s 153D of the Act clearly indicates that the Approving Authority has neither examined the assessment records nor the seized materials. In fact, the letter of the Assessing Officer seeking approval also makes it clear that only draft assessment orders were sent for approval without any assessment record or seized material. It is further clear that on the very same day the letter of the Assessing Officer with draft assessment orders were received, approval u/s 153D of the Act was granted by the Approving Authority. The aforesaid facts clearly reveal that the Approving Authority, while granting approval u/s 153D of the Act has acted as a mere rubber stamp. The approval granted is completely mechanical without application of mind.”
On finding that Department had acted without any evidence to make disallowance u/s 69 r.w.s 115BBE of the Income Tax Act, the New Delhi ITAT held that treating the cash deposit as unexplained cash without rejecting the books of account, is legally not permissible.
On finding that the AO has failed to prove that the seized documents were related to the assessee, the Mumbai ITAT held that the addition made by the AO u/s 68 of the Income Tax Act, without bringing any concrete evidence on record incriminating the assessee is not sustainable, and deserves to be deleted.
The ITAT went on to hold that the order passed is an un-reasonable order and in cryptic manner, as the entire loan pertaining to assessee was added as unexplained credit without providing the assessee any opportunity to explain those.
On finding that all the basic amenities desired for a living, were not available in the subjected property rendering it to be non-habitable, the New Delhi ITAT held that the assessee had not constructed the residential house, and hence, deduction u/s 54 of the Income Tax Act, was rightly denied by the AO. Section 54 of the Income Tax Act, indicates that an individual or HUF selling a residential property can avail tax exemptions from Capital Gains if the capital gains are invested in the purchase or construction of residential property.
The Bench of the ITAT comprising of Saktijit Dey (Vice President) and M. Balaganesh (Accountant Member) observed that “the assessee had not constructed the residential house within the prescribed time and in fact had not constructed a residential house at all on or before 25.09.2017 which could be construed as a residential house, habitable for its dwelling. Accordingly, deduction u/s 54 had been rightly denied by the AO in the instant case.”
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the computation of six assessment years for search assessments under Section 153C of the Income Tax Act starts from the date of receiving seized documents.
The bench of Saktijit Dey (Vice President) and Naveen Chandra (Accountant Member) has relied on the decision of the Supreme Court in the case of CIT vs. Jasjit Singh, in which it was held that under Section 153C, a third party would only have to furnish income tax returns for the preceding six years, starting from the date when the Assessing Officer assigns the third party's documents to the concerned Assessing Officer and not from the date of the original search.
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that disallowance has to be worked out on the basis of investment which yielded dividend during the year and not by factoring in the total amount of investment. The bench of Amit Shukla (Judicial Member) and Renu Jauhri (Accountant Member) has observed that no disallowance under section 14A of the Income Tax Act is warranted in respect of investments not yielding tax free income for the appellant.
Salary Reimbursements Of Seconded Employees Is Not Taxable As Fees For Technical Services: ITAT
The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) has held that salary reimbursements of seconded employees are not taxable as fees for technical services.
The bench of Beena Pillai (Judicial Member) and Chandra Poojari (Accountant Member) has observed that the conduct of assessees is bona fide, though it was not agreed upon by the department, and it is also noted that assessees have all material time to disclosing these secondment receipts in their Form 3CB filed with the department and also with a bona fide explanation before the lower authorities regarding not offering the said receipts for taxation, when the assessees themselves have voluntarily offered the said receipts for taxation, either at the stage of the original assessment, at the stage of reassessment, or in return filed in response to a notice issued under Section 148 of the Act, penalty could not be levied.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has denied the exemption under Section 54F of the Income Tax Act on the 500-meter shed made on agricultural land that cannot be considered a residential house.
The bench of Kul Bharat (Judicial Member) and B. R. R. Kumar (Accountant Member) has observed that the size of the residential house is not a criteria for claiming exemption under Section 54F. The very fact that there existed any residential house and whether the assessee constructed any house subsequent to the purchase of the land has not been proved in this case. At the same time, it has also been proved by the Revenue that there is no such residential dwelling or residential house that is entitled to exemption under § 54F. Thus, based on the evidence collected, collated, examined, verified, and investigated by the department, the covered area, which is 500 m2 of agricultural land, cannot be considered a residential house.
Non-Compete Fee To Be Treated As “Revenue Receipt” From 01.04.2003: ITAT
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the non-competitive fee received by the assessee is treated as 'revenue receipt' in the hands of the assessee but only post-amendment, i.e., w.e.f. 01.04.2003.
The bench of Kavitha Rajagopal (Judicial Member) and Om Prakash Kant (Accountant Member) has observed that the amendment to Section 28(va) of the Finance Act, 2002 is only w.e.f. 01.04.2003 relevant to A.Y. 2004-05 onwards and does not have a retrospective effect for taxing the non-compete fee received prior to the period.
The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition made by the department as the cash deposits made from the assessee's parents accumulated savings and income from agricultural activities.
The bench of Suchitra Kamble (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) has observed that when the assessee provides a plausible explanation supported by affidavits, it is the duty of the revenue to conduct proper verification before making any adverse conclusion. Neither the AO nor the CIT (A) conducted any verification of the affidavits or the claims made by the assessee.
Income From Reselling Of Subscription Based Product Is Royalty: ITAT
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the income from the reselling of subscription-based products is royalty.
The bench of Kavitha Rajagopal (Judicial Member) and Om Prakash Kant (Accountant Member) has observed that the assessee has sold not only the digital product but also all copyrights therein, which squarely falls under the definition of 'royalty' both under Article 12 of the Double Taxation Avoidance Treaty (DTAA) between India and Ireland and provisions of the Income Tax Act.
Assessments Concluded U/s 153A Without Mandatory Approval U/s 153D Would Be Void: Delhi ITAT
The Delhi ITAT allowed the Assessee's appeal challenging assessments completed u/s 153A r/w Section 143(3) as void, in absence of mandatory approval u/s 153D. Section 153D of the Income Tax Act, mandates that no order of assessment or reassessment shall be passed by an AO below the rank of Joint Commissioner without the prior approval of the Joint Commissioner or a higher-ranking officer.
The Division Bench comprising G.S. Pannu (Vice President) and Anubhav Sharma (Judicial Member) observed that “prior approval of competent authority u/s 153D of the Act is mandatory and same is required to pass rigor of the law, to show that the approval was granted after due consideration of the assessment record and it was not a mechanical approval”.
The Delhi ITAT ruled that though income received by a non-resident entity towards services provided to Indian associate enterprises (AE) are in nature of 'fees for technical service' (FTS), but same cannot be taxed in India simply in absence of FTS clause under respect treaty provisions.
The Division Bench comprising G.S. Pannu (Vice-President) and Anubhav Sharma (Judicial Member) also clarified that the services provided to AE are in nature of business activity covered under Article 7 of Indo-Thai DTAA, but in absence of a permanent establishment (PE) of the Assessee in India, the same cannot be brought to tax.
RPM Is Most Appropriate Method To Benchmark Transaction Of Purchase Of Solar Goods: ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the Resale Price Method (RPM) is the most appropriate method to benchmark the transaction of the purchase of solar goods.
The bench of Vikas Awasthy (Judicial Member) and Pradip Kumar Kedia (Accountant Member) has observed that where there is no value addition made before reselling the product, RPM is the most appropriate method. Except for suspicion, the revenue has not been placed on record, and there is no documentary evidence to substantiate that the assessee has undertaken any other activity resulting in value addition to the solar goods purchased by the assessee from the AEs.
Income Tax Deduction Allowable On Expenditure Incurred On Warranty Claim: ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the income tax deduction is allowable on expenditures incurred on warranty claims.
The bench of Kul Bharat (Judicial Member) and M. Balaganesh (Accountant Member) has relied on the decision of the Supreme Court in the case of Rotork Controls India (P) Ltd., in which it was held that if the facts establish or show that defects existed in some of the items manufactured and sold, then the provision made for warranty in respect of the army of sophisticated goods would be entitled to deduction under Section 37 of the Income Tax Act.
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that income tax disallowance based on presumptions of earning dividend income in the future is not sustainable.
The bench of Raj Kumar Chauhan (Judicial Member) and Padmavathy S (Accountant Member) has observed that the AO has proceeded for disallowance made on the basis of presumptions that the investment was made from borrowed funds bearing interest expenditure, which may earn dividend income in the future, and the disallowances and additions are permissible under Section 14A read with Rule 8D of the Income Tax Rules, 1962.
https://www.livelaw.in/tax-cases/seized-documents-information-receipt-money-itat-addition-260982
Seized Documents Lack Information About Receipt Of Money: Mumbai ITAT Deletes Addition
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has deleted the income tax addition of Rs. 1.61 crores on the grounds that the seized documents lack information as to date and mode of receipt of “on money.”.
The bench of Anikesh Banerjee (Judicial Member) and B.R. Baskaran (Accountant Member) has observed that the entries made in the document fall short of certain material facts, viz., date and mode of receipt of “on money," who had paid the money, to whom the money was paid, date of agreement, etc.
Submission Of Form-67 Is Not Mandatory For Availing Foreign Tax Credit: Delhi ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that submission of Form-67 is not mandatory for availing foreign tax credit (FTC).
The bench of Sudhir Pareek (Judicial Member) and S. Rifaur Rahman (Accountant Member) has observed that filing Form-67 is a procedural or directory requirement and is not a mandatory requirement. Therefore, a violation of procedural norms does not extinguish the substantive right to claim credit from the FTC.
Purchasing Of Agricultural Land Is Outside Definition Of Capital Asset; Delhi ITAT Deletes Addition
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the assessee has purchased agricultural land, which is outside the definition of a capital asset; therefore, the deeming provision under Section 56(2)(x) of the Income Tax Act cannot be invoked.
The bench of Sudhir Pareek (Judicial Member) and S.Rifaur Rahman (Accountant Member) has observed that the assessee purchased agricultural land and paid a sum of Rs. 20,00,000 as purchase consideration. The assessee also filed the relevant information before the assessing officer. As per the information available on record, it is clear that the assessee has purchased agricultural land on 23 bighas.
The Banglore Bench of Income Tax Appellate Tribunal (ITAT) has deleted the income tax addition of Rs. 1.36 crore on alleged unaccounted sales and purchases that were solely based on loose slips.
The bench of Keshav Dubey (Judicial Member) and Chandra Poojari (Accountant Member) has observed that the onus lies upon the Department to collect cogent evidence to corroborate the notings on the loose sheets. The additions cannot be made merely on the basis of notings on the loose sheet papers, which are in the nature of “dumb documents” having no evidentiary value.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the profit on sale of listed shares held for more than twelve months should be taxed as long-term capital gains.
The bench of G.S. Pannu (Vice President) and Anubhav Sharma (Judicial Member) has observed that provisions of Section 28(iv) of the Income Tax Act per se do not apply to the disputed transaction, as the assessee has held such shares in the capacity of promoter shareholder and not for the purpose of trading and has been consistently showing it as long-term capital investment in the books of accounts and balance sheet. It is established that the assessee has held the shares since inception for more than 25 years as long-term investments, and not a single share has been sold by the assessee during those 25 years.
Bank Charges & Bank Guarantee Charges Wrongly Included As Interest: ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that bank charges and bank guarantee charges do not partake in the character of interest and had been wrongly included as interest while making disallowance under section 14A of the Income Tax Act.
The bench of G.S.Pannu (Vice President) and Kul Bharat (Judicial Member) has observed that the assessee had disallowed the expenditure related to administrative expenses. However, in respect of the disallowance for the interest, it was stated that the assessee was having sufficient interest free funds and also it was stated that the AO has wrongly computed the disallowance by including the bank charges and bank guarantee charges.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that long-term capital gain on sale of shares by Mauritius Company is not liable to be taxed in India.
The bench of Vikas Awasthy (Judicial Member) and Naveen Chandra (Accountant Member) has observed that the assessee had claimed long-term capital gains arising from the sale of shares as exempt from tax in light of Article 13(4) of India-Mauritius DTAA. LEI Singapore Holdings Pte. Ltd. deducted tax at source on the payments made to the assessee. The assessee is seeking a refund of the withholding tax deducted on the aforesaid transaction. A similar transaction of transfer of shares of Pearl Retail Solutions Pvt. Ltd. was undertaken by the assessee in AY 2018-19. The assessee claimed refund of TDS deducted on sale of shares.
Tamil Nadu Advocates Welfare Fund Entitled For Income Tax Exemption: ITAT
The Chennai Bench of Income Tax Appellate Tribunal (ITAT) has held that the Central Act is not applicable to the Tamil Nadu Advocates Welfare Fund and is eligible for Income Tax exemption.
The bench of Manu Kumar Giri (Judicial Member) and S. R. Raghunatha (Accountant Member) has observed that since the assessee fund is enacted prior to the formation of the Central Act, namely the Advocate's Welfare Fund Act, 2001, and the saving clause is provided u/s. 38 by the Advocate's Welfare Fund Act, 2001, there is an exemption for the applicability of the Central Act of the State of Tamilnadu. Since Section 23 of the Central Act provides for exemption of income tax to the Advocates Welfare Fund of the State against the provisions of Section 11, Section 2(15) of the Act is not applicable to the Tamil Nadu Advocates Welfare Fund.
Even If STT Not Paid At Time Of Acquisition, Trust Entitled To Claim LTCG Exemption: ITAT
The Mumbai Bench Income Tax Appellate Tribunal (ITAT) has held that even if the Securities Transaction Tax (STT) was not paid at the time of acquisition, the assessee-trust would be entitled to claim exemption of long-term capital gain (LTCG) under Section 10(38) of the Income Tax Act.
The bench of C.V. Bhadang (President) and B.R. Baskaran (Accountant Member) has observed that as per the notification issued by the Central Government as per the third proviso to Section 10(38) of the Income Tax Act, and hence, even if the assessee did not pay STT at the time of acquisition of shares, it is still eligible for exemption under Section 10(38) of the Income Tax Act.
The New Delhi ITAT held that that date of acquisition of property has to be reckoned from the date of its allotment, for purposes of computing short-term capital gain or loss.
The ITAT while holding so, accepted the submissions of assessee that where an asset is acquired by gift, the period of long-term capital asset shall be reckoned from the date when the previous owner acquired such asset and the indexation shall be allowed accordingly from the year of acquisition by the previous owner.
Contribution Towards NPS Made Prior To Filing Of Return: ITAT Deletes Addition
The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has deleted the addition of employees contribution towards the National Pension System (NPS) as the contribution towards NPS made prior to filing of the return.
The bench of T.R. Senthil Kumar (Judicial Member) and Annapurna Gupta (Accountant Member) has observed that NPS is regulated by the Pension Fund Regulatory and Development Authority Act, 2013 (PFRDA Act). There is no due date prescribed by the PFRDA as to when the payment is required to be made to the NPS account. Further section 12(3)(iii) of the PFRDA Act, 2013 clearly prohibits the provisions of this Act from applying to the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. Thus the adjustment made on the payment under NPS by CPC is not justified as there is no due date prescribed in the respective PFRDA Act, 2013 and all the payment has been duly made before filing of the Return of Income.
Bangalore ITAT Grants TCS Credit To IMFL Dealer Even Though License Was In Name Of Another Person
Referring to the case of Million Traders Bhopal Pvt. Ltd. vs. ADIT [ITA Nos. 124 & 125/Ind/2023], the Bangalore ITAT allowed TCS credit to the entity conducting the business of IMFL, irrespective of the fact that the license was in the name of another person. The ITAT maintained the status quo observing that identical issue was decided in similar fashion in all previous assessment years.
ITAT Allows Section 54F Deduction On Construction Of The New Dwelling/Residential Unit
The Chennai Bench of Income Tax Appellate Tribunal (ITAT) has allowed the deduction under Section 54F of the Income Tax Act on construction of the new dwelling/residential unit.
The bench of Aby T. Varkey (Judicial Member) and Amitabh Shukla (Accountant Member) has observed that the assessee had discharged the burden to prove construction of a residential house/dwelling unit (first floor with separate staircase, kitchen, new electrical connection, water connection, etc.), and it is not disputed that construction of the new dwelling/residential unit was within the time stipulated under Section 54F of the Income Tax Act.
ITAT Deletes Income Tax Addition On Interest Income Received Out Of FDs
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition on the interest income received out of the fixed deposits.
The bench of Kavitha Rajagopal (Judicial Member) and B R Baskaran (Accountant Member) has observed that AO has failed to corroborate the fact that the FD made by the assessee is out of the surplus funds held by the assessee in a case where the assessee has borrowed huge advances from banks and has also availed of an of an overdraft facility for the purpose of its business, resultantly expending a higher rate of interest than that received out of the FD.
Deeming Provisions Of Section 50C Can't Be Applied For Leasehold Rights: Delhi ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that deeming provisions of Section 50C of the Income Tax Act cannot be applied for leasehold rights.
The bench of Kul Bharat (Judicial Member) and Avdhesh Kumar Mishra (Accountant Member) has observed that only if a capital asset, be it land, a building, or both, is transferred and the consideration received or accruing as a result of such transfer is less than the value adopted, assessed, or assessable by the stamp valuation authority, the deeming fiction under Section 50C (1) shall be activated to substitute the adopted, assessed, or assessable value as the full value of the consideration received or accruing as a result of the transfer.
Deeming Provisions Of Section 50C Can't Be Applied For Leasehold Rights: Delhi ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that deeming provisions of Section 50C of the Income Tax Act cannot be applied for leasehold rights.
The bench of Kul Bharat (Judicial Member) and Avdhesh Kumar Mishra (Accountant Member) has observed that only if a capital asset, be it land, a building, or both, is transferred and the consideration received or accruing as a result of such transfer is less than the value adopted, assessed, or assessable by the stamp valuation authority, the deeming fiction under Section 50C (1) shall be activated to substitute the adopted, assessed, or assessable value as the full value of the consideration received or accruing as a result of the transfer.
The Ahmedabad ITAT held that the services rendered for product certification, which include evaluating technical quality and issuing certificates, do not fall under the definition of Fees for Technical Services as per Section 9(1)(vii) of the Act.
Referring to Supreme Court decision in CIT Vs. Kotak Securities Ltd, the Division Bench of T.R. Senthil Kumar (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) reiterated that “routine services not involving technical knowledge do not constitute technical services and it is mere in the nature of facility offered or available”.
The New Delhi ITAT held that when the taxpayer company has utilized the service of a company outside India and payment has also been made outside India, then taxpayer company would not be liable for deduction of tax at source u/s 195.
As per Section 195 of the Income Tax Act, TDS must be deducted at the time of credit or payment on certain payments made to non-residents, and it applies to interest, royalty, fees for technical services, and other sums chargeable for tax in India.
The Bench of B.R.R. Kumar (Accountant Member) and Sudhir Kumar (Judicial Member) observed that “except in two circumstances, firstly, where the fees paid in respect of services utilized in a business carried on by the assessee outside India or secondly fee is paid for the purpose of earning any income from any source outside India, in all other cases the assessee is liable to deduct tax on the amount of technical fee paid to non-residents”.
Finding that the genuineness of loan transactions is not verified by the Income tax Authorities, the Mumbai ITAT held that no additions are permitted on account on unsecured loans by disregarding the confirmations & identity of loan creditors produced by assessee.
The Divisional Bench of Anikesh Banerjee (Judicial Member) and Prashant Maharishi (Accountant Member) observed that “Related to other loans, which are taken during this year, the assessee submitted the confirmations, PAN, entry in bank account and the identity of loan creditors. There is valid reason to assessee for non-submission of evidence before the authorities”.
The Mumbai ITAT held that merely because the transactions are made through banking channel does not itself prove the creditworthiness of the lender and genuineness of the transaction.
The Bench of Prashant Maharishi (Accountant Member) observed that “Subsequent repayment of the accommodation entry naturally does not show that the originally credit is genuine and provider of the credit is creditworthy of the same”.
The Bangalore ITAT held that payment made by Assessee (Indian entity) to its foreign AE (Parent entity) for obtaining administrative services will not be taxable as FTS/FIS in India in terms of Indo USA DTAA, in absence of 'make available' clause in the agreement between both the parties.
Article 12(4) of India USA DTAA states that 'fees for included services' means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provisions of services of technical or other personnel) if such services.
The Delhi bench of Income Tax Appellate Tribunal (ITAT) has held that the deduction under Section 80P(2)(d) of the Income Tax Act is allowable to the co-operative society on interest earned from co-operative banks.
The bench of Kul Bharat (Judicial Member) has observed that the assessee is a Co-operative society and it has earned interest and dividend income by making deposits with the Delhi State Co-operative Bank Ltd. which is registered under Co-operative Societies Act and the Division Bench of the Tribunal after considering the binding precedents, held that Co-operative Bank is primarily a Co-operative Society. Therefore, for the purpose of section 80P(2)(d) of the Income Tax Act, the assessee would be entitled for deduction under section 80P(2)(d) of the Income Tax Act.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the licence fees received by the assessee towards live transmissions of cricket matches held in Australia are not taxable in India as royalty.
The bench of G.S. Pannu (Vice President) and Anubhav Sharma (Judicial Member) have observed that Balkrishna Industries Limited (BAL) as sponsor did not have any exclusive rights in the use of the logo of the assessee or the event of Big Bash League. The logo was to be used in restricted spaces and on limited goods and services of BAL. Then as sponsor the responsibility of BAL was, to use the log and other rights in intellectual property of assessee, to increase the viewership of the event. The rights were merely for advertising, communications, and sales and marketing campaigns showcasing the Sponsor's association with the Big Bash League (BBL). The use of intellectual property rights like logo of assessee or BBL, was incidental to the objective of promotion of BBL and products of sponsor.
The rights given were not of the nature of 'copyright' but a simplistic right to represent in the advertising, communications, and sales and marketing campaign showcasing the Sponsor's association with the BBL. Any payment falling within the scope of royalty, there has to be some kind of transfer of rights.
Income Tax Addition Can't Be Made On Cash Deposits During Demonetization Period: Delhi ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the department is precluded from making any addition under Section 68 of the Income Act in respect of the cash deposits made into bank accounts during the demonetization period.
The bench of Challa Nagendra Prasad (Judicial Member) and Avdhesh Kumar Mishra (Accountant Member) has observed that there cannot be any addition under Section 69A of the Income Tax Act in respect of cash deposits made by the assessee into its bank account as unexplained income in the case of the assessee.
No Material To Prove Cheque Paid For Donation Has Been Ploughed Back By Way Of Cash: ITAT
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has allowed deduction to the assessee as there was no material to prove that the check paid for donation has been ploughed back by way of cash.
The bench of Sunil Kumar Singh (Judicial Member) and B.R. Baskaran (Accountant Member) has observed that the AO has not brought any material to disprove the evidence furnished by the assessee with regard to the donations it has made to the institutions. There is also no proof to show that the check paid by the assessee has been ploughed back by way of cash to the assessee. It is a settled proposition that the subsequent withdrawal of recognition granted under Section 35(1)(ii) will not be a bar for granting deductions for the donations paid earlier.
Scrip Can't Be Called Penny Stock When Shares Retained For More Than 10 Years; ITAT Deletes Addition
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT), while deleting the addition, held that scrip cannot be called penny stock when shares are retained for more than 10 years.
The bench of Kavitha Rajagopal (Judicial Member) and Amarjit Singh (Accountant Member) has observed that the assessee, being a SEBI-registered FPI, is engaged in investment in various companies out of which the assessee earns income and is also the only source of income for the assessee. The A.O. has failed to substantiate how the assessee is involved with Shri Naresh Jain, alleged to be an accommodation entry provider who has even otherwise not specifically mentioned the assessee as the beneficiary of accommodation entry and the scrip of International Conveyors Ltd. (ICL) as a penny stock.
The Bangalore ITAT held that once the Department has accepted the capital gain offered by the seller upon transfer of its business, then said transaction cannot be doubted in the hands of purchaser.
The ITAT held so after finding that the AO not established that the main purpose of transfer of such asset was reduction of liability to income tax by claiming extra depreciation on enhanced cost.
Reasonable Cause Excludes Operation Of Sec 271D: Bangalore ITAT Deletes Penalty
The Bangalore ITAT held that that Revenue Department cannot adopt the tactics of pick and choose while assessing the citizens of India, as it would be violative of Article 14 of the Constitution.
Hence the ITAT deleted the penalty levied by AO u/s 271D on assessee for receiving excessive cash in contravention of taxation statute, upon sale of property.
Additions Can't Be Made In Cases Of Unabated Assessments Without Incriminating Material: Mumbai ITAT
The Mumbai ITAT held that no addition can be made by AO in respect of completed/unabated assessments, in absence of any incriminating material found during the course of search u/s 132 or requisition u/s 132A. Section 132A of Income tax Act empowers income tax authorities to carry out a search and seizure of books of accounts, documents, cash & jewellery.
Referring to the decision rendered by the Supreme Court in the case of Abhisar Buildwell – [(2023) 149 taxmann.com 399 (SC)], the Bench of Satbeer Singh Godara (Judicial Member) and Girish Agarwal (Accountant Member) reiterated that “in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments”.
Referring to the decision in case of Gillette India Ltd. Vs. ACIT (66 Taxman.com 221), the New Delhi ITAT held that once assessee had given details about inventory written off along with ledger codes, then assessee would be eligible for deduction on written-off obsolete inventory.
The Bench of Yogesh Kumar U.S (Judicial Member) and Pradip Kumar Kedia (Accountant Member) reiterated that “when the taxpayer has prepared obsolete inventory in accordance with the system of accounting regularly followed by it in compliance to section 211(3C) of the Companies (Accounting Standards) Rules, 2006 and has duly got prepared audited report of an independent auditor on the basis of physical verification and in view of the maintenance of inventory, the disallowance made by the AO/DRP is not sustainable in the eyes of law”.
Finding that the TPO did not present compelling evidence to establish that the guarantee fee was unwarranted, the Ahmedabad ITAT held that benefits derived, as seen in lower interest rates and favorable operating margins, substantiate the transaction's arm's length nature.
The ITAT added that the effective borrowing cost, including the guarantee fee, was lower than the bank's quoted interest rate, thus justifying the economic rationale for the guarantee fee.
The New Delhi ITAT held that the assessee is entitled to avail the benefit of carry forward of long-term capital loss on sale of residential property against long term capital gain computed on sale of commercial property.
The Bench of Saktijit Dey (Vice-President) and M. Balaganesh (Accountant Member) observed that “as on the date of the conveyance deed, the value of the property is more than Rs.45 lakhs. Moreover, there is direct evidence on record, which indicates that the assessee, in fact, had paid the consideration of Rs.45 lakhs to Mr. Rajan Chanana through cheques for purchasing the property. Therefore, the cost of acquisition, insofar as the assessee is concerned, has to be taken at Rs.45 lakhs and indexation benefit has to be given to the assessee based on the cost of acquisition of Rs.45 lakhs”.
The New Delhi ITAT held that a business man deposits consideration from sale of his products on respective dates of sales as per his needs and prudence, and therefore, the AO cannot tax the receipts and income embedded therein together. Hence, the ITAT deleted the addition made u/s 69A on account of cash sales during demonetization.
The Bench of Madhumita Roy (Judicial Member) and Avdhesh Kumar Mishra (Accountant Member) observed that “The purchases are entirely through imports. Further, the revenue has also failed to place any material on the record to demonstrate that the VAT returns of the relevant year have not been accepted by the VAT authority and the Custom authority has not accepted the imports/purchases”.
Exhibition By Gem And Jewellery Export Promotion Council, Not Trade And Commerce: Mumbai ITAT
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the exhibitions conducted by the assessee, the Gem and Jewellery Export Promotion Council, are not in the nature of trade and commerce.
The bench of Anikesh Banerjee (Judicial Member) and B.R. Baskaran (Accountant Member) has observed that the assessee's transaction in the impugned assessment year exhibition in India and outside, after deleting the membership fees and the interest from investment, incurred a loss in exhibitions for promotion of trade and business of the members, as well as that the benefit should be carried over to other business entities that run as members of the assessee's organization. In a larger sense, the assessee's general public utility (GPU) is duly covered under Section 2(15) of the Income Tax Act.
The Kolkata ITAT held that delayed deposit of amount collected towards employees' contribution to PF renders claim of deduction u/s 36(1)(va) ineligible. Section 36(1)(va) of Income tax Act states that if the amount received towards employees' contribution to PF is not deposited by the employer in the respective welfare account within the due date, then the same will be treated like income from business/profession.
The Bench of Sanjay Garg (Judicial Member) and Sanjay Awasthi (Accountant Member) reiterated that deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees' contribution to PF cannot be claimed even though deposited within the due date of filing of return even when read with Section 43B.
While granting exemption on agricultural income u/s 10(1), the Delhi ITAT held that assessee being an agriculturalist, is not supposed to maintain books of account as per Sec 44AA.
Section 44AA of Income tax Act deals with the maintenance of books of accounts by certain persons carrying on business or profession.
Finding regularity and consistency of declared agricultural income over the years and subsequent assessment years, Single Bench of S. Rifaur Rahman (Accountant Member) observed that assessee's income from agriculture falls u/s 10(1).
The Delhi ITAT held that when the project under consideration is not yet completed, the advance collected by infrastructure companies from the buyers cannot be charged to profit and loss account.
The Division Bench of S. Rifaur Rahman (Accountant Member) and Anubhav Sharma (Judicial Member) observed that “the assessee has collected the same for providing the common services on the approval of HUDA, this is only based on reimbursement and there is no profit element. Therefore, it cannot be forming part of Profit and loss Account”.
While observing that the Assessee submitted a valid Tax Residency Certificate (TRC) which is certainly statutory evidence, the Delhi ITAT granted India-Singapore DTAA benefit under Article 13(4) on long term capital gains on sale of share of an Indian company.
The Tribunal emphasized that the burden is on the Revenue Department to establish that the entity has been formed and operated in a manner that the only intention was to take DTAA benefit without there being actual intention of an economic activity.
The transaction of sale of shares of Indian company which the AO alleged to be out of tax evasion and treaty shopping was, in fact, a long-term investment decision by the Singapore based Assessee which has sufficient managerial and operational structure to run an entity based in Singapore, added the Tribunal.
The Division Bench of Dr. B.R.R. Kumar (Accountant Member) and Anubhav Sharma (Judicial Member) observed that “the burden is on the Revenue to establish that the entity has been formed and operated in a manner that the only intention was to take DTAA benefit without there being actual intention of an economic activity”.
Referring to Explanation to Section 56(2)(viib), the Delhi ITAT held that the assessee is entitled to suitably modify the Net Asset Value (NAV) as long as the NAV is capable of being substituted by some proof or competent evidence.
Further, finding that the assessee has produced the valuation report as well as the market valuation of Hotel Residence AG Switzerland in German currency, the Tribunal observed that the valuation of shares of subsidiary company to determine the FMV of the holding company, i.e., the assessee company for the purposes of issuance of shares at premium, thus is in accord with the deeming provision.
The Bench of Pradip Kumar Kedia (Accountant Member) and Yogesh Kumar Us (Judicial Member) observed that “The method adopted for reworking of the subsidiary company by applying the DCF method or any known method is permissible as long as the assessee is able to establish the correctness of the valuation in the light of the valuation report furnished”.
Emphasizing that ownership is a sine qua non for availing depreciation, and roads/ bridges are public properties, the Mumbai ITAT held that an infrastructural development company which has laid down roads cannot claim depreciation over same.
The Division Bench comprising Amarjit Singh (Accountant Member) and Sandeep Singh Karhail (Judicial Member) denied depreciation claim on toll road to a company engaged in the business of infrastructure development (assessee), who, in execution of agreement with NHAI had constructed a road on BOT (build, operate and transfer) basis on land owned by the Government.
The Ahmedabad ITAT held that since the assessee/ appellant was consistently filing her returns under the original PAN and had also paid penalties for holding two PANs without contesting, the appellants effort reflects compliance of the provisions of Income tax Act rather than an intent to conceal any income.
The Bench of T.R. Senthil Kumar (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) observed that “the AO could not verify the books of account, tax audit report, or the return of income filed under original PAN-AFBPV2339B. This failure led to an unsustainable assessment u/s 69A of the Act, based solely on the existence of substantial cash deposits linked to the second PAN”.
The Hyderabad ITAT held that the capital gain arising on account of conversion of capital asset into stock-in-trade should be proportionately computed by considering the stock-in-trade sold by the assessee and not the entire extent of land converted by the assessee.
The Tribunal held so, after finding that the assessee has sold part of the stock-in-trade for the current financial year and remaining stock-in-trade is still held as closing stock.
Finding that all the additions made by the Assessing Officer u/s 68 r/w/s 115BBE are in consonance with the Income Tax Statute, the Ahmedabad ITAT quashed the revisional exercise of power by the PCIT u/s 263.
The power under section 263 of the Income tax Act can be exercised where the order of the Assessing Officer is erroneous and prejudicial to the interest of the revenue. Further, Section 154(1A) of the Income tax Act lays down that rectification can be done for any matter other than the matter considered and decided in appeal/revision.
The Ahmedabad ITAT held that sum credited to sales account can't be treated as unexplained cash credits u/s 68 if they are already included in the total sales declared and taxed.
As per Section 68 of Income tax Act, where any sum is found credited in the book of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year
The Division Bench of Suchitra Kamble (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) held that “the AO did not reject the books of accounts or question the quantitative details of the stock. The AO has also not placed any conclusive evidence on record to prove that the credits in assessee's bank account are accommodation entries”.
The Ahmedabad ITAT held that no addition is permitted u/s 68 once assessee had properly substantiated that cash deposits are made out of his known source of income.
Section 68 of Income Tax Act aims to ensure individuals and corporations transparently disclose their income by addressing unexplained cash credits in their books of accounts, placing the responsibility on the taxpayer to prove the legitimacy of such credits.
The Division Bench of Suchitra Kamble (Judicial Member) and Narendra Prasad Sinha (Accountant Member) observed that “component of cash deposit cannot be corelated with the sale receipts of the property as the cash component is related to the assessee's savings account for which the assessee has given explanation are out of cash deposits made by the assessee out of his known source of income”.
Remittance Made To Foreign Subsidiary Companies Are Not Taxable In India: ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the remittance made by the assessee to the foreign subsidiary companies have been held to be not taxable in India in the hands of the recipient company, there would be no obligation for the payer i.e. assessee company to deduct tax at source under section 195 of the Income Tax Act.
The bench of Saktijit Dey (Vice President) and M. Balaganesh (Accountant Member) has observed that the moment a remittance is made to a non resident; obligation to deduct tax at source under section 195 of the Income Tax Act does not arise. It arises only when such remittance is a sum chargeable to tax under the Income Tax Act under sections 4, 5 and 9 of the Income Tax Act.
Referring to the decision of the Bombay High Court in case of Sarfaraz S. Furniturewall [Writ Petion No. 4958 of 2024], the Mumbai ITAT held that rehabilitation allowance paid by the developer to its resident customer who had suffered hardship due to dispossession on account of re-development, cannot be treated as income in hands of recipient.
Single Bench of Prashant Maharishi (Accountant Member) observed that “It is undisputed fact that assessee is also receiving the hardship allowance from the developer. Thus, the amount of hardship allowance received by the assessee of Rs. 25,21,508/- is not income of the assessee”.
Referring to the decision in case of DCIT v/s M/s First Advantage Private Limited [ITA No. 6659/Mum/2013], the Mumbai ITAT held that software license expenses incurred by assessee to carry out its routine operations in a more efficient manner, has to be treated as revenue expenditure.
The ITAT held so after finding that the fixed capital of assessee did not undergo any change as a consequence of the acquisition of the licensed software.
The Division Bench of Sandeep Singh Karhail (Judicial Member) and B.R. Baskaran (Accountant Member) observed that “the issue whether software license expenditure incurred by the assessee is revenue or capital expenditure, is recurring in nature and has been decided in favour of the assessee by the coordinate bench of the Tribunal in preceding years”.
Gift Received From Non-Resident Brother Is Exempt From Taxation In India : Mumbai ITAT
Finding that Assessee has proved identity, creditworthiness and genuineness of the gift received as well as relationship with donor, the Mumbai ITAT held that gift from brother is not chargeable to tax in the hands of the assessee being relative of the donor.
Single Bench of Prashant Maharishi (Accountant Member) observed that “the amount of Rs. 20,00,000/- received by the assessee clearly shows that above amount is not the income of the assessee. Despite above information being available with the lower authorities, an addition is made to the total income of the assessee”.
Claim Of Advertisement Expenditure By Hospital Violative Of Indian Medical Council Act 1956: ITAT
The Visakhapatnam Bench of Income Tax Appellate Tribunal (ITAT) has held that the claim of advertisement expenditure by hospitals is violative of the Indian Medical Council Act 1956 professional conduct, Etiquette and Ethics Regulations, 2002.
The bench of Duvvuru Rl Reddy (Judicial Member) and S Balakrishnan (Accountant Member) has observed that Chapter 6 of the Indian Medical Council Act, 1956, professional conduct, etiquette, and ethics Regulations, 2002, prohibits even institutions and organizations from soliciting patients either directly or indirectly. The assessee has violated the provisions of the Indian Medical Council Act 1956, professional conduct, and the and the Etiquette and Ethics Regulations, 2002.
The Ahmedabad ITAT held that provision for leave encashment which was inherited by the assessee on account of restructuring exercise of the GEB, by virtue of which, huge number of employees had been onboarded by the assessee-company, cannot be added to assessee's income.
The Division Bench of Annapurna Gupta (Accountant Member) and T.R. Senthil Kumar (Judicial Member) observed that no disallowance of leave encashment liability was warranted if the assessee had not debited any amount on account of provision for leave encashment to the profit & loss account.
While observing that the assessee is a resident of India in terms of Article 4(2)(a) of the Indo-US DTAA, the Mumbai ITAT held that all his income derived in the USA, is chargeable to tax in India by virtue of the provisions of section 5 of the Income tax Act. Since the income tax return filed by the assessee in the USA, does not show that he is paid any tax in the USA, therefore, the ITAT clarified that in the absence of any payment of tax in the country of source, no credit is available against tax payable by the assessee in India.
According to Article 4(2)(a) of the Double Taxation Avoidance Agreement, an individual is a resident of the state in which he has a centre of vital interest being where his personal and economic relations are closer.
The Bench of Prashant Maharishi (Accountant Member) and Shrianikesh Banerjee (Judicial Member) observed that “assessee is staying in India for the current year for more than 183 days and therefore according to the domestic law, he is considered to be the resident of India”.
Additions Made Under Income Tax Act Have No Bearing Under Black Money Act: Mumbai ITAT
The Mumbai ITAT held that any addition made as undisclosed foreign income and asset under the Black Money Act (BMA), shall not be repeated under the Income Tax Act.
However, since there is no corresponding provision under the Income tax Act, the ITAT clarified that additions made under the Income tax Act have no bearing under the BMA.
Single Third Member Bench comprising Narendra Kumar Billaiya (Accountant Member) observed that the entire BMA revolves around taxing only 'undisclosed asset located outside India' and 'undisclosed foreign income and asset', whereas under the Income Tax Act, all income are taxable unless specifically exempt from tax or not included in taxable income.
The Mumbai ITAT held that capital gain arising out of transfer of shares of an Indian entity cannot be taxed at hands of foreign entity in India, if foreign entity has less than 10% shareholding in such Indian entity.
The ITAT held so while referring to UN Model Convention commentary, which states that the provisions of Article 14(4) come into effect to prevent the case of indirect transfer of ownership of immovable property by transfer of shares owning these properties.
The Bench of Padmavathy S (Accountant Member) and Sunil Kumar Singh (Judicial Member) clarified that capital gain in hands of Spanish company (assessee/ appellant) from sale of shares of IMI Investments (Indian company) cannot be taxed in India, since assessee has no controlling interest in said Indian company.
While observing that the deeming fiction of section 50 cannot be imported u/s 112, the Mumbai ITAT in a split verdict ruled that capital gains u/s 50 of Income tax Act, arising out of sale of long-term capital assets, shall be taxable at rate of 20% u/s 112 of the Act.
Section 50 of Income tax Act is a special provision for computation of capital gains in case of depreciable assets, whereas Section 112 deals with income arising from transfer of long-term capital asset.
Relying upon the Bombay High Court ruling in CIT vs. Ace Builders Pvt Ltd, the Special Bench in its majority ruling by Amit Shukla (Judicial Member) and Vikas Awasthy (Judicial Member) observed that Section 50 was enacted with the object of denying multiple benefits to the owners of a depreciable asset, however, that restriction is limited to the computation of capital gains and not to the exemption provision.
The Mumbai ITAT held that capital reserve arising on account of amalgamation is a capital receipt and hence cannot be taxed as a benefit or perquisite arising from business u/s 28(iv).
Section 28(iv) of Income tax Act provides that any value of benefit or perquisite, whether convertible in money or not, arising from business or exercise of a profession would be considered as income and shall be chargeable to income tax as business income
Pointing that the assessee was the ultimate holding company of the merged entity and in the whole process, does not gain or lose anything, the Bench of Prashant Maharishi (Accountant Member) and Sandeep Singh Karhail (Judicial Member) observed that there is absolutely no benefit or perquisite arising out of the scheme of amalgamation.
The Delhi ITAT held that the bandwidth charges remitted by the Appellant/ assessee (Bharti Airtel) to the non-resident service providers cannot be treated as royalty either under the applicable treaty provisions or u/s 9(1)(vi).
Since bandwidth charges are not royalty, the ITAT held that assessee was not required to deduct tax at source on such receipts. Where the payment for use or right to use computer software, falls within the definition of royalty u/s 9(1)(vi) of Income tax Act, the Payor is required to withhold tax u/s Section 195, unless such payments do not meet the definition of 'royalty', under the relevant DTAAs.
Referring to decision of CIT Vs. Telstra Singapore, the Division Bench comprising Saktijit Dey (Vice-President) and Naveen Chandra (Accountant Member) reiterated that telecom service providers had not accorded right over the technology while providing bandwidth services.
The Delhi ITAT ruled that TDS u/s 194-I has no application on the franchise fee, if the franchisee/collaborator does not render any service, and claim of expenditure is nothing but sharing of revenue in accordance to the agreement undertaken by the parties. Section 194I of Income tax Act imposes an obligation for TDS deduction on persons (other than individual/HUF who are not subject to audit) making rental payments to resident Indians above a specified limit i.e., 2.40 lacs in a year.
The ITAT emphasized that sharing of revenue and its impact of taxability vis-à-vis application of TDS provision depends upon the method of accounting adopted by respective assessees. Since in the present case, the franchise agreement
Referring to the CBDT Circular No. 872 dated Dec 16, 1993, the Kolkata ITAT clarified that allotment of flats/houses by Cooperative Societies and other Institutions whose scheme of allotment and construction are similar to Delhi Development Authority (DDA) should be treated as 'construction' for purpose of Section 54 and 54F. While treating the allotment letter by the developer as 'construction activity', the ITAT granted the benefit of set off of capital gain to the purchaser (appellant here).
Section 54 of Income Tax Act provides exemption on long term capital gains from the sale of residential property if the proceeds from such sale are reinvested in purchasing or constructing another residential property within a specified time frame.
The Bench of Rajpal Yadav (Vice-President) and Rakesh Mishra (Accountant Member) observed that allotment letter given by the developer to the assessee way back in 2010 would be construed as an agreement of purchase between the developer and the assessee.
The Delhi ITAT held that income derived by foreign entity for rendering technical assessment services will not constitute as Fees for Technical Services (FTS) under Article 12(4)(b) of India-Singapore DTAA.
The ITAT held so after finding that income was derived by Respondent/ Assessee (a Singapore based company) on account of services rendered towards technical integrity assessment/ scanning of off-shore pipelines under sea, through Magnetic Tomography Method (MTM) technology to Indian Companies.
The Mumbai ITAT held that when no income had accrued from the transaction of remittance of share application money by assessee to its overseas AE, then such transaction cannot be subjected to the transfer pricing provisions
The ITAT deleted a transfer pricing addition made by the TPO on account of notional interest on share application money paid by assessee to its AEs. Transaction between assessee/ Appellant and its AE was in the nature of remittance towards share application money and not in the nature of a loan transaction, accepted the Division Bench comprising Narendra Kumar Billaiya (Accountant Member) and Rahul Chaudhary (Judicial Member).
The Bangalore ITAT deleted the disallowance made by the AO u/s 40(a)(ia) on ground of non-deduction of tax at source on sales commission paid by the assessee company/ respondent to its US based subsidiary as well as other AE on account of selling & marketing services.
The Division Bench comprising George George K (Vice-President) and Padmavathy S (Accountant Member) observed that the sales and marketing services rendered to assessee by its US based subsidiary does not fall within the ambit of FTS as defined u/s 9(1)(vi) of Income tax act or Article 12 of India-US DTAA.
The Delhi ITAT deleted the addition made by AO in the absence of any supporting evidence, which was merely based on assumption and not on any material recovered during search and seizure.
The ITAT further clarified that assessee/ employee doing overtime beyond working hours may be classified as violation of banking rules, but could not form basis for addition, assuming that assessee has received commission from his manager for same.
The Delhi ITAT held that transaction between assessee and its subsidiary cannot be treated as deemed loan u/s 2(22)(e), as they are current transactions that pertain to travelling & other expenses incurred by assessee on behalf of its subsidiary.
Any loan/ advance given by a closely held company to a shareholder holding 10% or more voting power is considered a dividend under Section 2(22)(e) of Income tax Act. Such income is taxable in the hands of the recipient shareholder as income from other sources.
Finding that assessee had followed a consistent and reasonable policy in recognizing income, and the amount in question was rightfully excluded from taxable income, the Ahmedabad ITAT deleted the addition made by AO on account of understatement of income.
The ITAT held so after emphasizing that said income was never accrued to assessee nor did it represent real income as the funds were never utilized by the assessee but were simply transferred to other government agencies as per State Government's directions.
Finding that the interest payment is incurred wholly & exclusively for business purposes, and is neither personal nor capital in nature, the Bangalore ITAT held that interest on delayed customs duty cannot be treated at par with penalty. The ITAT therefore clarified that such interest payment is an accretion to the main payment and not penalty, and hence, allowable as revenue expenditure u/s 37.
The Mumbai ITAT ruled that tax credit cannot be denied in cases where the interpretation of the residence country about the applicability of a treaty provision is not the same as that of source jurisdiction about the provision and yet the source country had levied taxes directly or by way of tax withholding.
The Bench of Beena Pillai (Judicial Member) and Ratnesh Nandan Sahay (Accountant Member) clarified that that the DTAA provisions eliminate double taxation in all cases where the state of source has imposed its tax by applying to an item of income.
The Mumbai ITAT held that a taxpayer is not prevented from arranging her affairs within the legal framework and through legitimate means to reduce his tax liability.
While pointing that the Income Tax Statute does not require the assessee to pay more tax, the Division Bench of Saktijit Dey (Vice President) and Amarjit Singh (Accountant Member) observed that “short-term capital loss derived by assessee from sale of shares cannot be prevented from being set off against the long-term capital gain by alleging adoption of colourable device”.
The Bombay High Court held that bonafide delay in filing Form 9A on part of trust, has to be construed as procedural lapse and shall be condoned by exercising powers u/s 119(2) of Income tax Act.
The Division Bench of Justice G S Kulkarni and Justice Advait M Sethna observed that that the jurisdictional AO completely lost sight of the fact that at the time when assessee claimed deductions towards depreciation and capital expenditure u/s 11(1) by filing the revised computation, the time limit for submission of Form 9A had lapsed, due to change of procedure.