This weekly round-up analytically summarizes the key stories related to the Income Tax Appellate Tribunal ( ITAT ) reported at Taxscan.in during the previous week 13th July 2024 to 19th July 2024.
The Chennai Bench of the Income Tax Appellate Tribunal ( ITAT ) upheld the addition of excess income as ‘business income’ for a family engaged in the money lending business for 20 years.
The two-member bench of Manu Kumar Giri (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member) found that the assessee family had been engaged in money lending for over 20 years, with promissory notes as current assets. The bench noted that sundry debtors would change continuously due to advances given and received back. The differential was offered as undisclosed income by the assessee, arising from the money lending business. The ITAT concluded that the excess debtors were from the business and taxable as ‘business income.’
The ITAT’s decision was supported by similar cases, including the Chennai Tribunal in M/s Mookambika Impex vs. DCIT and M/s Overseas Leathers vs. DCIT. The Tribunal upheld the assessee’s treatment of additional income as ‘Business Income,’ directing the AO to re-compute the income and demand payable and directed the CIT(A) to adjudicate the issue on merits. Both appeals were allowed.
Concerning the latest case, the Chennai bench of the Income Tax Appellate Tribunal ( ITAT ) dismissed the appeal made by the assessee as the tribunal agreed to the findings made by the Commissioner of Income Tax (Appeals). The Tribunal held that bonuses of equity shareholders are not covered under section 2(22)(b) of the Income Tax Act,1961 and are not taxable as “other income” under Section 56(2) of the Act.
The two-member bench of Mahavir Singh(Vice President) and Manoj Kumar Aggarwal ( Accountant Member ) found that there is no reason to reverse the CIT(A)’s decision in this case based on the legal precedents and rulings.
In the recent case, the Chennai Bench of the Income Tax Appellate Tribunal ( ITAT ) directed the Income-tax Assessing Officer ( AO ) to allow the claim of the assessee under Section 54F of the Income Tax Act,1961 as the assessee has fulfilled the necessary conditions required under the aforementioned section. The Tribunal upheld full deduction made for purchase of property in wife’s name out of bank loan.
The two-member bench of Manu Kumar Giri (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member) found that the assessee has taken into consideration the necessary conditions that are required to claim the deduction under Section 54F other than the fact that the new investment was made under the name of the assessee’s wife.
The Tribunal allowed the claim made by the assessee under section 54F of the Act and ordered the AO to allow the Income tax deduction claimed by the assessee under section 54F of the Act. N. Arjun Raj appeared for the appellant and AR V Sreenivasan appeared for the respondent.
The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) has held that the provision of Section 254(2) of the Income Tax Act, 1961 cannot be used for a recall and review order by the tribunal. It was viewed that the above-said provision intended to only rectify the mistake apparent from the records.
The two-member bench of Raghunath Kamble ( Judicial Member ) and Narendra Prasad Sinha ( Accountant Member ) has observed that the order passed by the ITAT recalling its earlier order, which was passed in the exercise of powers under Section 254(2) of the Act, is beyond the scope and ambit of the powers of the Appellate Tribunal conferred under Section 254(2) of the Income Tax Act. While dismissing the application, the Tribunal noted that the finding as given by the tribunal was not only based on the portion of the order to which the assessee objected. The finding as recorded by the Tribunal is not disputed as incorrect, and no mistake in the findings has been pointed out. The tribunal held that the ITAT is not required to revisit its order and dwell on its merits, as the power under Section 254(2A) is limited to correcting or rectifying mistakes apparent on record.
While deleting the addition under section 68 of the Income Tax Act, 1961, the Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) held that scrip cannot be called penny stock when shares are retained for more than 10 years
The two-member 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 AO has failed to substantiate how the assessee is involved with 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. While allowing the appeal, the ITAT directed the A.O. to delete the addition made under Section 68 of the Income Tax Act.
The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) determined that the consultancy charges paid to a resident director by M/s Egberts India Private Limited were not “excessive or unreasonable.” Consequently, the tribunal allowed the company’s deduction claim for the payment made.
The two-member bench of Manoj Kumar Aggarwal ( Accountant Member ) and Manu Kumar Giri ( Judicial Member ) found that the AO had not provided any material evidence to demonstrate that the payment was excessive or unreasonable. The bench emphasised that the reasonableness of expenditure should be judged from the perspective of a businessman, not the Revenue. The tribunal referred to the ruling of Madras High Court in the case of Computer Graphics Pvt. Ltd, which held that disallowance under Section 40A(2) requires proof of excessive or unreasonable payment. It was also noted that the revenue of the company from operations significantly increased in the year under consideration, justifying the higher remuneration to the resident director. The payment was also found to be in conformity with the provisions of the Companies Act, and the director had duly offered the income to tax in his return. The tribunal deleted the disallowance of Rs.73.78 Lacs and directed the AO to re-compute the income of the assessee. Accordingly, the appeal was allowed.
In a ruling that grants relief to Renault Nisan Automotive, the Chennai bench of the Income Tax Appellate Tribunal ( ITAT ) has held that bonuses paid as CTC of employees cannot be disallowed under section 43B of the Income Tax Act,1961. The Tribunal contested four different issues and ordered partial allowance of appeal based on the contention made by disallowed expenses and depreciation.
The Tribunal agreed that the business setup date was 01-10-2009, depreciation needed to be allowed based on the assets put to use and the additional depreciation issue back to the AO for reconsideration. The Tax Auditor had reported that a bonus of Rs.277.83 Lakhs was unpaid as of 31-03-2010. The assessee had claimed that this was variable pay and part of the CTC of employees. The AO disallowed it under Section 43B of the Act. While partly allowing the appeal the two-member bench of Mahavir Singh ( Vice- President ) and Manoj Kumar Aggarwal ( Accountant Member ) agreed to the contention made by the assessee and stated that the bonus is payable to employees who have rendered services to the assessee and the same form part of CTC of employees, therefore the disallowance is not valid and is deleted.
The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) allowed the appeal, emphasising that the reasonableness of business expenditure should be judged from the point of view of the businessman and not the Revenue.
The tribunal allowed the claim of the assessee, stating that legitimate deductions under Section 80C should not be disallowed without proper justification. It was observed by the bench that the reasonableness of business expenditure should be judged from the point of view of the businessman and not the Revenue. The two-member bench, comprising Siddhartha Nautiyal (Judicial Member) and Makarand V. Mahadeokar (Accountant Member), upheld the addition of Rs. 2,13,800 due to cash payments in light of the provisions of Section 40A(3) and deleted the remaining addition confirmed by the CIT(A).
The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) held that an assessee cannot be penalized for the fault of their Chartered Accountant ( CA ) and accordingly condoned an exorbitant delay of 1430 days in filing an appeal against an order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre ( NFAC ), Delhi.
The two-member bench, comprising Judicial Member Suchitra Kamble and Accountant Member Narendra Prasad Sinha, emphasised that the assessee acted promptly upon discovering the orders and that the delay should not impede the assessee’s right to contest the appeal on its merits.
The bench condoned the delay and remanded the matter back to the CIT(A) for adjudication on merits, ensuring due process and adherence to principles of natural justice. The CIT(A) will decide the matter on merit as per due process of law and will provide the assessee with an opportunity of hearing, following the principles of natural justice.
The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) set aside the appellate order and directed the Assessing Officer(AO) to offset the loss against the long-term capital gain. It was held that the loss on sale of shares on the stock exchange could be set off against the long-term capital gain (LTCG) from sale of unlisted shares if STT duly paid.
The Tribunal noted that the assessee’s case is directly supported by the decision in Royal Calcutta Turf Club vs. CIT, where Section 10(27) of the Act excluded only the income from livestock breeding, poultry, or dairy farming, not the entire business Under Section 256(1) of the Act, the loss suffered by the assessee was allowed as a deduction in computing the total income. The two-member bench of Sonjoy Sarma (Judicial Member) and Rajesh Kumar (Accountant Member) based on the facts and previous decisions allowed the set-off of the loss from selling shares on a stock exchange against the LTCG from selling unlisted section.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) found no wrongdoing in jewelry being kept in the maternal family by a married daughter, leading to the deletion of the related addition.
The two-member bench of Pradip Kumar Kedia (Accountant Member) and Sudhir Kumar (Judicial Member) found merit in the appellant’s argument that jewelry belonging to a married daughter could be kept with the maternal family for safety and must be considered while evaluating the unexplained jewelry.
“We find traction in the aforesaid plea raised on behalf of the assessee. We are convinced with the assertions raised on behalf of the assessee that jewelry are, at times, kept by the married daughters with the maternal family. There is no warrant to deny credit of 500 gms on account of married daughter in terms of CBDT Instruction No. 1916 dated 11th May, 1994. The assessee thus gets the relief to the extent of 500 gms as against aggregate 603.97 gms for which the additions were sustained before the CIT(A).” The bench stated.
Accordingly, relief for 500 grams of jewelry was granted, and the remaining 103.97 grams were conceded by the appellant to be treated as unexplained to avoid prolonged litigation. The ITAT emphasised principles of natural justice and directed the Assessing Officer (AO) to reconsider the assessee’s case. This decision came after the assessee faced challenges in presenting evidence regarding a cash source. The tribunal noted that the assessee should be granted a reasonable opportunity to justify their case. The AO is required to consider any new evidence presented and issue a detailed order outlining their reasoning.
In a ruling the Income Tax Appellate Tribunal Bangalore condoned the delay of 1999 days in filing appeal by the assessee on reasonable grounds.
The single bench of the Income Tax Appellate Tribunal comprising Beena Pillai observed the assessee’s plea condoned the delay in filing appeal and re-emitted the appeals back to CIT(A) to consider the issues raised by assessee based on evidence submitted by him. And both the appeals raised by assessee were partly allowed for statistical purposes.
The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) held that the benefit of Section 80G of the Income Tax Act, 1961 cannot be denied due to technical errors that occurred in making the application because of the confusion and misunderstanding properly interpreting the relevant provision.
The two-member Bench of Sanjay Garg ( Judicial Member ) and Rakesh Mishra ( Accountant Member ) held that if the assessee is granted final approval by the CIT(E) then, the benefit of approval under section 80G of the Act, available to the assessee before the Amendment brought vide Amending Act of 2020, will be deemed to be continued without any break. While partly allowing the appeal, the ITAT directed the CIT(Exemption) to grant final approval to the assessee under Clause (iii) to First Proviso to section 80G(5), if the assessee is otherwise found eligible.
The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) allowed the claim for tax deduction under Section 54 of the Income Tax Act, 1961, for an investment in a new residential property.
The Income tax appellate bench observed that the assessee had provided details, including a registered sale deed and payment of Municipal Tax, which indicated a legal transfer of the property.
The Tribunal distinguished the present case from the decision in Suraj Lamp & Industries Pvt. Ltd. and relied on the Supreme Court’s ruling in Sanjeev Lal vs. CIT, which held that a valid transfer could take place through an agreement to sell if the subsequent sale deed execution was delayed due to circumstances beyond the assessee’s control. The ITAT allowed the assessee’s appeal, granting the deduction under Section 54 of the Income Tax Act.
