The stories on the Income Tax Appellate Tribunal (ITAT) that were published at Tax scan December 23, 2023 to December 29, 2023 are summarized in this Round-Up
ITAT remands matter of Moraj Group Director Priya Gurnani to AO for examination on alleged entry provider used to accommodate capital gains and unsecured loans Ms. Priya Mohan Gurnani vs DCIT 2023 TAXSCAN (ITAT) 2724
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has sent back the case of Priya Gurnani, Co-Founder of Moraj Group, for a thorough reevaluation of the entry provider purportedly employed to manage capital gains and unsecured loans.
The tribunal bench, consisting of Prashant Maharishi (Accountant Member) and Kavitha Rajagopal (Judicial Member), added, “It is also the responsibility of the assessee to present, before the Assessing Officer, her chartered accountant (whose statement is unretracted), Ms. Rukhsana, alleged to have been involved in transferring cash for long-term capital gains and the conversion of loan entries, for further examination.”
Setback to Moraj Group Director: ITAT upholds Assumption of 5% of Cost of Acquisition as Income from Property Ms. Priya Mohan Gurnani vs DCIT 2023 TAXSCAN (ITAT) 2724
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) affirmed the inclusion of 5% of the cost of acquisition as income from the house property belonging to Priya M. Gurnani, the director of Moraj Group.
The tribunal bench comprising Prashant Maharishi, Accountant Member, and Kavitha Rajagopal, Judicial Member, concluded that there is no infirmity in the order of the lower authorities in assuming 5% of the cost of the investment as the annual value of the property, subject to taxation under section 23(1) of the Income Tax Act under the head “income from house property.”
TDS can’t be Deducted when EDCs have been Exempted from Category of “Contractor” by Rajasthan State Government’s Order: ITAT M/s Conservator of Forest and Field Tiger Project Sariska, Alwar vs The Income Tax Officer (TDS) 2023 TAXSCAN (ITAT) 2727
The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) has ruled that Tax Deducted at Source (TDS) should not be deducted when the Eco Development Committees (EDCs) have been granted exemption from the contractor category by the order of the Rajasthan State Government.
The two-member bench, consisting of S. Seethalakshmi (Judicial member) and Rathod Kamlesh Jayantbhai (Accountant member), has concluded that the matter needs to be reconsidered by the Assessing Officer (AO) to address the various aspects of the case and thereby reach a decision. This is in response to the assessee’s explicit statement that there was no contractual agreement with the EDCs.
Capital Gain u/s 47(xiii) can’t be attracted on Failure to prove Existence of Firm and its Succession with Company: ITAT ITO vs Shri Satish Babu Kethineedi 2023 TAXSCAN (ITAT) 2728
The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) has determined that the capital gain, as per Section 47(xiii) of the Income Tax Act, 1961, cannot be applicable in the absence of evidence establishing the existence of the firm and its succession with the company.
The two-member bench, consisting of R. K. Panda (Vice-President) and Laliet Kumar (Judicial member), concluded that the relief granted by the CIT(A) was incorrect. Therefore, the order of the CIT(A) was annulled, and the case was referred back to the AO. Consequently, the revenue’s appeal was upheld.
Reopening of Assessment u/s 147 can’t be initiated when no Transfer took place on Account of JDA entered by “Group of Assessee”: ITAT Sruthi Riedl vs Income Tax Officer 2023 TAXSCAN (ITAT) 2729
The Income Tax Appellate Tribunal (ITAT) bench in Hyderabad has ruled that the initiation of the reassessment under Section 147 of the Income Tax Act, 1961, is not justified when no transfer has occurred as a result of the Joint Development Agreement (JDA) entered into by a group of assessees.
The ITAT bench, comprised of Rama Kanta Panda (Vice-President) and Laliet Kumar (Judicial member), determined that the transfer, as defined in Section 2(47) of the Income Tax Act, occurred under the second JDA, as the first JDA was not implemented and fell apart
Setback to Moraj Director Priya Gurnani: ITAT dismisses Claim of Vacancy Allowance Ms. Priya Mohan Gurnani vs DCIT 2023 TAXSCAN (ITAT) 2724
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) rejected the plea for vacancy allowance related to residential properties owned by Ms. Priya Mohan Gurnani.
Ms. Gurnani, the Director and Co-Founder of Moraj Group, filed a series of seven appeals for the assessment years 2010-11 to 2016-17. These appeals shared common issues stemming from the same search. Both parties acknowledged that the appeals involved identical facts and circumstances across all years. Consequently, the authorized representative presented arguments addressing similar contentions for all matters, while the departmental representative defended the lower authorities’ orders with consistent arguments. As a result, the appeals were collectively addressed through this single order.
Despite the Special Leave Petition (SLP) filed by the assessee being dismissed, the ITAT bench, comprising Shri Prashant Maharishi (Accountant Member) and Kavitha Rajagopal (Judicial Member), observed that, “In view of that precedent, we do not find any merit in the claim of the assessee for the allowability of vacancy allowance.”
Relief to Priya Gurnani, Moraj Group Director: ITAT allows Standard Deduction u/s 24(a) of Income Tax Act on Annual Value of Property Ms. Priya Mohan Gurnani vs DCIT 2023 TAXSCAN (ITAT) 2724
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that a 30% standard deduction is permissible on the annual let-out value of the residential property owned by Ms. Priya Mohan Gurnani, the Co-Founder of Moraj Group.
The tribunal bench, consisting of Shri Prashant Maharishi (Accountant Member) and Kavitha Rajagopal (Judicial Member), concluded, “With respect to granting a deduction of 30%, we find that such deduction is available under section 24(a) of the Act. This deduction is unqualified, and the assessee is eligible for the same. No reasons are shown to us why the assessee is not eligible for the same.” The Tribunal Bench directed the Assessing Officer to grant the deduction of 30% of the annual value to the assessee in accordance with the provisions of section 24(a) of the Act.
MTM losses incurred in regular course of business of ICICI Bank allowable as deduction: ITAT directs AO to bring MTM gain reverse back to tax ICICI Bank Ltd vs The Deputy Commissioner of Income-tax 2023 TAXSCAN (ITAT) 2730
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that ICICI Bank is eligible to claim mark-to-market losses as a deduction for computing tax liability, provided these losses are incurred in the regular course of its business.
After a thorough examination of the facts and records, the two-member bench, consisting of Padmavathy S (Accountant Member) and Amit Shukla (Judicial Member), referred to the precedent set by DCIT vs Bank of Bahrain & Kuwait. It was determined that mark-to-market losses incurred in the regular course of business by ICICI Bank are eligible for deduction.
No Opportunity of Hearing to Assessee required when Transfer of Income Tax Case is within same City, Locality or Place: ITAT Ms. Priya Mohan Gurnani vs DCIT 2023 TAXSCAN (ITAT) 2724
The Income Tax Appellate Tribunal (ITAT) held that no opportunity of hearing was required to be afforded to assessee when there is a transfer of Income Tax Case at the tribunal within the same city, locality or place. Priya Mohan Gurnani, the Assessee and Co-Founder of Moraj Group, filed a series of seven appeals covering the assessment years 2010-11 to 2016-17, addressing common issues arising from a single search and seizure action.
The tribunal bench, led by Prashant Maharishi, Accountant Member, and Kavitha Rajagopal, Judicial Member, remarked that none of the cited cases demonstrated a transfer within the same city, locality, or place, which had been nullified. Section 127(3) of the act explicitly states that when a case is transferred within the same city, locality, or place, there is no requirement for providing the assessee with an opportunity of hearing. Considering these facts, the bench found no flaws in the order of the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)]. Consequently, ground number 3 of the appeal was dismissed.
No disallowance towards interest cost u/s 14A of Income Tax Act when investment made out of own funds: ITAT grants Relief to ICICI Bank ICICI Bank Ltd vs The Deputy Commissioner of Income-tax 2023 TAXSCAN (ITAT) 2730
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT), in providing relief to ICICI Bank, ruled that disallowance should not be imposed on the interest cost under Section 14A of the Income Tax Act, 1961, when the investment is funded from internal sources.
After a thorough examination of the facts and records, the two-member bench comprising Padmavathy S (Accountant Member) and Amit Shukla (Judicial Member) concluded that no disallowance should be imposed on the interest cost under Section 14A of the Income Tax Act, 1961, when the investment is made from internal funds.
Relief to ICICI Bank: ITAT directs to allow Depreciation claimed on Leased Assets continuing from Past Lease Transactions ICICI Bank Ltd vs The Deputy Commissioner of Income-tax 2023 TAXSCAN (ITAT) 2730
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has issued a directive to permit depreciation claims on leased assets, extending from prior lease transactions, thereby providing relief to ICICI Bank.
During the proceedings, the assessee argued that no new lease transactions were initiated in the current year. The matter of depreciation on leased assets has been a recurring issue in the assessee’s case, and the Tribunal consistently ruled in favor of allowing the depreciation.
The revenue supported the assessing officers’ orders. The tribunal noted that a Co-ordinate Bench had previously considered a similar issue in the assessee’s case for AY 2004-05 and 2005-06, concluding that, “in the impugned assessment year, there is no new lease transaction.
The assessee has claimed depreciation on its own fixed assets, and depreciation claimed on leased assets were continuing from past lease transactions.” After a thorough review of facts and records, the two-member bench, consisting of Padmavathy S (Accountant Member) and Amit Shukla (Judicial Member), observed that no new lease transactions were undertaken by the assessee during the year. Given the consistent rulings in favor of the assessee by the Co-ordinate Bench, the tribunal directed the allowance of depreciation claims on leased assets, continuing from past lease transactions.
Expenses incurred towards club membership fee of employees is business expenditure: ITAT grants relief to ICICI Bank ICICI Bank Ltd vs The Deputy Commissioner of Income-tax 2023 TAXSCAN (ITAT) 2730
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), while providing relief to ICICI Bank, determined that expenses related to the club membership fee of employees qualify as business expenditure. ICICI Bank Ltd, operating in the banking and related activities sector, caught the attention of the Assessing Officer (AO) when the Tax Audit Report revealed expenses amounting to Rs. 1,13,85,062 incurred towards club entrance fees and subscriptions.
During the proceedings, Counsel for the assessee argued that the matter had already been addressed by the Coordinate Bench in the assessee’s case for AY 2004-05 and 2005-06. The bench concurred, affirming that club membership fees for employees should be treated as the business expenditure of a company under Section 37 of the Income Tax Act.
The revenue maintained support for the assessing officers’ order. After a comprehensive review of the facts and records, the two-member bench, comprising Padmavathy S (Accountant Member) and Amit Shukla (Judicial Member), concluded that expenses incurred towards the club membership fee of employees constitute business expenditure.
ITAT directs readjudication in respect of condonation of delay in filing appeal due to treatment of ill-health of wife Everest Grande Commercial Premises Co– Operative Society Ltd. vs Income Tax Officer 2023 TAXSCAN (ITAT) 2731
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), while providing relief to ICICI Bank, determined that expenses related to the club membership fee of employees qualify as business expenditure. ICICI Bank Ltd, operating in the banking and related activities sector, caught the attention of the Assessing Officer (AO) when the Tax Audit Report revealed expenses amounting to Rs. 1,13,85,062 incurred towards club entrance fees and subscriptions.
Following a thorough examination of the details and documents, the two-member bench, consisting of Padmavathy S (Accountant Member) and Amit Shukla (Judicial Member), instructed a re-evaluation concerning the justification for the delay in filing the appeal, considering the medical treatment of the individual’s wife.
No Revision Order can be passed u/s 263 of Income Tax Act against issues which are not arising out of Limited Scrutiny: ITAT upholds Assessment Order M/s. Epimoney Private Limited vs The Income Tax Officer/ACIT 2023 TAXSCAN (ITAT) 2732
The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that under Section 263 of the Income Tax Act, 1961, no revision order can be issued for matters that do not arise from a limited scrutiny. Consequently, the tribunal upheld the assessment order.
The tribunal held that the issue identified by the PCIT was not within the purview of “Limited Scrutiny.” Consequently, as the AO could not exceed its scope, the PCIT could not assert the order as being erroneous and prejudicial. The tribunal granted relief to the assessee by allowing the appeal.
ITAT directs to recompute ALP of international transactions carried out by ICICI Bank pertaining to adjustment towards back office support services ICICI Bank Ltd vs The Deputy Commissioner of Income-tax 2023 TAXSCAN (ITAT) 2730
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has directed the reassessment of the Arm’s Length Price (ALP) for international transactions involving ICICI Bank, specifically concerning adjustments for back-office support services.
During the proceedings the assessee contended that several comparables chosen by the TPO had functional differences from the assessee, and some did not meet the TPO’s criteria. In contrast, Revenue supported the TPO’s order.
The two judge bench consisting of Padmavathy S (Accountant Member) and Amit Shukla (Judicial Member) instructed the reconsideration of the Arm’s Length Price (ALP) for international transactions concerning ICICI Bank’s back-office support services. As a result, the bench granted approval to the appeal filed by the assessee.
Advance received against booking of flats are not Unexplained Amount: ITAT deletes Addition Anil Kumar Paik vs DCIT 2023 TAXSCAN (ITAT) 2733
The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that advances received against the booking of flats are not to be treated as an unexplained amount. Consequently, the tribunal has overturned the addition made by the assessing officer. The assessee, Anil Kumar Paik, an individual engaged in various businesses including property development, a liquor shop, a medicine shop, and rental income, underwent scrutiny after filing the return.
The two-member bench, comprising Dr. Manish Borad (Accountant Member) and Sanjay Garg (Judicial Member), concluded that advances received against the booking of flats should not be treated as an unexplained amount. Therefore, the bench has removed the addition made by the assessing officer.
Interest on Delayed Payment of TDS cannot be allowed as deduction: ITAT M/s. Expat Engineering India Ltd vs ACIT 2023 TAXSCAN (ITAT) 2734
The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that interest on delayed payment of Tax Deduction at Source (TDS) cannot be permitted as a deduction. Expat Engineering India Ltd, the assessee, had its case selected for scrutiny after filing the income tax return. During the scrutiny, the Assessing Officer (AO) determined that interest on delayed payment of TDS could not be claimed as a deduction.
Displeased with the decision, the assessee filed an appeal before the CIT(A), who upheld the disallowance made by the assessing officer. Subsequently, the assessee brought a second appeal before the tribunal. In the course of the proceedings, the assessee argued that the interest paid was merely compensatory and contended that Section 40(a)(ii) should be interpreted from the perspective of the assessee, the payer, rather than the payee’s perspective.
The two-member bench consisting of Chandra Poojari (Accountant Member) and Beena Pillai (Judicial Member) ruled that interest on delayed payment of TDS is not an allowable deduction. As a result, the bench dismissed the appeal of the assessee.
AO cannot make any estimated Income addition without pointing out specific defects in the Audited Book: ITAT Priyamda Media & Infotainment Private Limited vs DCIT 2023 TAXSCAN (ITAT) 2735
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the assessing officer (AO) is not permitted to make any estimated addition without identifying specific defects in the audited books.
The AO discovered that the assessee had made payments to contractors, and tax had been deducted at source, but the amount had not been deposited before the due date. Utilizing the provisions of section 40a(ia) of the Act, the AO added Rs. 8,852,509. Since the assessee was unable to present the books of account and vouchers, the AO, invoking the provisions of section 145 (3) of the Act, disallowed 20% of the expenditure, totaling Rs. 25,401,898, and added Rs. 5,080,380. The Tribunal observed that in the entire financial statements, there was no indication of any liability under the name of Axom Communication.
The basis on which the AO arrived at this figure was unknown, as it was not part of the financial statement. The Tribunal emphasized that there was no logical or reasoned basis for the contested addition. Without identifying any specific defect in the audited books of accounts, the AO is not justified in making any estimated addition. The two bench members, Kul Bharat (Judicial Member) and N. K. Billaiya (Accountant Member), instructed the AO to eliminate the contested addition of Rs. 5,080,380.
Interest Income received from Co-Operative Bank is eligible deduction u/s 80(2)(d) of Income Tax Act: ITAT Chetak Co-Operative Housing Society Ltd vs ITO 2023 TAXSCAN (ITAT) 2738
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that interest income received from cooperative banks is eligible for deduction under section 80(2)(d) of the Income Tax Act, 1961. The appellant, Chetak Co-Operative Housing Society Ltd, registered under the Maharashtra Society Act, 1960, filed its income return for the assessment year 2013-14 on October 29, 2013, declaring a total income of Rs. Nil after claiming a deduction of Rs. 12,35,591/- under section 80P(2)(d) of the Income Tax Act.
The sole member of the bench, Pavan Kumar Gadale (Judicial Member), concluded that interest on deposits made by a cooperative society with the cooperative bank qualifies for a deduction under section 80(2)(d) of the Income Tax Act.
Date of acquisition of property to be considered for computing capital gain: ITAT deletes addition M/s. D.K. Brothers vs Income Tax Officer 2023 TAXSCAN (ITAT) 2739
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the calculation of capital gain should consider the date of property acquisition. Consequently, the bench nullified the addition made by the assessing officer. The taxpayer, D.K. Brothers, had their case subjected to scrutiny after filing the income return. During the scrutiny process, it was discovered from AIR information that the taxpayer had sold an immovable property on 08.02.2011 for a sale consideration of Rs. 84,33,000/-.
After a thorough examination of the facts and records, the two-member bench comprising Amarjit Singh (Accountant Member) and Kuldip Singh (Judicial Member) instructed the Assessing Officer to calculate the capital gain by considering the date of property acquisition by the taxpayer as 28.01.1992.
No assessment order can be passed in name of amalgamating company not in existence at time of issuance of notice: ITAT Avaada Ventures Private Limited vs Deputy Commissioner of Income Tax 2023 TAXSCAN (ITAT) 2736
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that an assessment order cannot be issued in the name of the amalgamating company if it did not exist at the time of the notice issuance. Avaada Ventures Private Limited, a result of the merger between Juicy International Pvt. Ltd. and Avaada Power Pvt. Ltd., faced scrutiny proceedings following the filing of the original income return for the Assessment Year 2012-13. Reassessment proceedings were initiated under Section 147 of the Income Tax Act, but these were abated due to a search and seizure action under Section 132 of the Income Tax Act in the case of Welpsun Group of the Company.
During the notice issuance, Juicy International Pvt. Ltd. had already merged with Avaada Power Pvt. Ltd., yet the Assessing Officer proceeded to frame the assessment in the former’s name. The CIT(A) later deemed this Assessment Order invalid. The revenue appealed this decision before the tribunal.
The tribunal, noting that the notice under Section 153A was issued almost four years after the effective merger date, acknowledged the communication from the assessee stating that Juicy International Pvt. Ltd. ceased to exist. The two-member bench consisting of B.R. Baskaran (Accountant Member) and Rahul Chaudhary (Judicial Member) concluded that an assessment order cannot be issued in the name of a non-existent entity and, therefore, allowed the appeal of the assessee.
Sponsorship amount paid by IOCL to Global Cricket Corporation is not Royalty: ITAT M/s. Indian Oil Corporation Ltd vs Deputy Director of Income Tax (IT) 3(1) 2023 TAXSCAN (ITAT) 2740
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has noted that the sponsorship amount paid by Indian Oil Corporation Ltd (IOCL) to Global Cricket Corporation is not categorized as royalty.
The assessee was appointed as the official sponsor of International Cricket Council (ICC) Events and entered into an Official Sponsor (Worldwide) Agreement on 16/12/2004 with Global Cricket Corporation PTE Ltd. (GCC) and World Sports Nimbus PTE Ltd-Singapore (WSN). This agreement covered sponsorship for ICC Cricket Events from the ICC Champions Trophy 2004 in England to the ICC Cricket World Cup 2007 in the West Indies. GCC invoiced the assessee for sponsorship, including display of signage and associated benefits during ICC Champions Trophy 2004 in England and the ICC Trophy 2005 in Ireland. The application clarified that GCC-Singapore has no Permanent Establishment (PE) in India, and the display of signage occurs outside India. According to Article 7(1) of the India-Singapore Tax Treaty, the payment is not subject to tax in India in the absence of a PE in India.
The Assessing Officer disagreed with the assessee’s application, considering the amounts as “Royalty.” The officer directed the assessee to deduct tax at 24% (grossed-up rate per section 195A of the Act) and education cess at 2%. The Assessing Officer also issued an order on 27/10/2006 under section 195(2) of the Act, maintaining a similar stance. The counsel for the assessee argued that the payments were primarily for the non-exclusive right to use, reproduce, and publish “Event Marks” and the non-exclusive right to use “Footage and still images” related to the Events and/or ICC Matches owned or controlled by ICC Development (International) Ltd (IDI) and/or GCC, strictly for advertising and promotional purposes during the term.
In this context, a Two-Member Bench, comprising Gagan Goyal, Accountant Member, and Vikas Aswathy, Judicial Member, observed that the facts in the present assessee’s case are identical to those in the case of Hero MotorCrop.”In light of decision of the Co-ordinate Bench as referred above, we have no hesitation in holding that the payments made by the assessee to GCC are not in the nature of Royalty as defined under the provisions of the Act or Article-12(3) of India- Singapore DTAA. Consequently, the assessee succeeds on ground No.1 to 6 of the appeal.”
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
