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 28th July 2024 to 2nd August 2024.
In the recent ruling, the Delhi bench Of Income Tax Appellate Tribunal (ITAT) quashed the penalty for disallowing Rs. 21,89,970 in non-compete fee depreciation due to conflicting High Court rulings and the Supreme Court’s pending review.
The Tribunal on considering the facts and materials on record found that the penalty was imposed due to the disallowance of Rs. 21,89,970 for depreciation on non-compete fee. The Tribunal stated that The CIT(A) had relied on the High Court decision in the case Sharp Business System Vs. CIT which is currently under appeal in the Supreme Court.
The two-member bench of Yogesh Kumar U.S (Judicial Member) and Pradip Kumar Kedia(Accountant Member) contended that Section 271(1)(c) cannot be applied in this case and quashed the penalty order dated 31/03/2019 for the Assessment Year 2014-15.
The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) set aside an assessment order that was passed without the application of mind. The order was quashed as it was contrary to Section 153 of the Income Tax Act observing that the mechanical approval of superior authority for income tax search defeats the purpose of Section 153D of the Act.
The two-member ITAT bench, comprising Pradeep Kumar Kedia and Yogesh Kumar US, held that the approvals granted under Section 153 of the Income Tax law do not pass the test of legitimacy. The impugned assessment is non-est and a nullity and has been quashed by the bench. Thus, the appeal filed by the assessee was allowed.
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, 1961.
The two-member 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. Concerning the disallowance of the interest, it was stated that the assessee was having sufficient interest-free funds and also it was stated that the AO had wrongly computed the disallowance by including the bank charges and bank guarantee charges.
The tribunal held that CIT(A) as well as the assessing authority has not brought any material suggesting that the interest-free funds were diverted for earning tax-free income. The ITAT deleted the disallowance under section 14 A of the Income Tax Act made in respect of interest expenditure.
The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ), set aside an assessment order as by the exception provided under Section 9(1)(vii)(b) of the Income Tax Act, 1961 where the income earned by non-residents cannot be considered to accrue or arise in India, and the fees for technical services cannot be taxed.
The bench, comprising B.R.R. Kumar and Sudhir Kumar, held that in this present case, there is a clear application of Section 9(1)(vii)(b) of the Income Tax statute, and the income earned by non-residents cannot be deemed to accrue or arise in India, and the fees for technical services cannot be taxed. As the work order was issued outside the country to generate income outside the country, the amount paid comes within the purview of the exception provided under Section 9(1)(vii)(b) of the Income Tax Act. Thus, it is not required for the assessee to deduct tax at source.
The appeal was allowed, and the addition made by the AO and which was confirmed by CIT(A) has been deleted by the bench.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that Long-Term Capital Gain (LTCG) on sale of shares by Mauritius Company is not liable to be taxed in India.
The two member 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.
The ITAT held that since the investments were made by the assessee, a Mauritius company holding a valid TRC, the resultant capital gain is not liable to be taxed in India.
In a recent case, the Income Tax Appellate Tribunal ( ITAT ) of Chennai directed the Commissioner of Income Tax (Exemption) [ CIT (E) ] to consider the fresh application submitted by a Trust as per Section 80G(5)(iii) of the Income Tax Act, 1961 for registration.
The two member bench consisting of Mr. Mahavir Singh and Mr. R S Raghunatha condoned the delay as they found the contentions of the appellant to be reasonable. However, the income tax tribunal noted the appeal to be infructuous, as it was observed that the appellant has already applied afresh for registration under the extended time limit provided by CBDT circular no. 7/2024.
Thus, the issue at hand became academic and the primary reason behind the appeal does not survive. The tribunal directed the CIT(E) to consider the new application on its own merit, independent of the current appeal.
In light of the aforementioned observations, the appeal was dismissed by the bench
The Banglore Bench of Income Tax Appellate Tribunal (ITAT) directed the AO( Assessing Officer ) to delete the additions made by him as the disputed transaction comes outside the ambit of the Section 2(22)(e) of Income Tax Act, 1961.
The ITAT Bench of Shri Waseem Ahmed,Accountant Member and Shri Soundarajan K, Judicial Member held that in view of the above contentions it is held that the transaction in dispute was a commercial transaction and therefore it comes out of the ambit of the provisions of Section of 2(22)(e) of the Income Tax Act,1961. Accordingly, the findings of the CIT-A was set aside and the directed the AO to delete the addition made by him.
The appeal filed by the assessee was allowed.
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) quashed an Assessment Order passed by an Assessing Officer under Sections 144 and 147 of the Income Tax Act, 1961. The aforementioned Assessment Order was reopened by the Commissioner of Income Tax (Appeals) (CIT(A)) by issuing a second notice dated 30.03.2016 to the Assessee under Section 148 of the Income Tax Act. The Tribunal in its judgment observed that an earlier assessment order under Section 148 of the Income Tax Act had already been passed under Section 143(3) read with Section 147 of the Income Tax Act on 19.03.2015.
The Mumbai Bench of the ITAT panel comprising of Amit Shukla, Judicial Member and Ranesh Nandan Sahay, Accountant Member, further reinforced the Assessee’s position in law by stating that the dismissal of the appeal by the JCIT(A) is a result of a callous approach towards their duty as the CIT(A) dismissed the appeal ex-parte citing grounds of non-prosecution owing to the Assessee not honoring the multiple notices sent by the CIT(A) to the Assessee. In closing, the Bench further averred that the Assessing Officer and Authority should have paid closer attention to the facts on record and prevented the Assessee from having to pursue unwanted litigation while simultaneously quashing the impugned Assessment Order.
The Hyderabad bench of the Income Tax Appellate Tribunal ( ITAT ) allowed the weighted deduction in respect of the expenses incurred on clinical trials and held that the assessee is entitled to deduction under Section 35(2AB) of the Income Tax Act, 1961.
The two-member bench, comprised of K. Narasimha Chary (Judicial Member) and Madhusudan Sawdia (Accountant Member), based on the facts and previous decisions, held the issue in favour of the assessee and allowed weighted deductions in respect of the expenses incurred on clinical trials. The bench dismissed the appeal filed by the revenue, and the appeal of the assessee was allowed in part.
The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) contended that Section 54F of the Income Tax Act, 1961 allows for a deduction on long-term capital gains when these gains are reinvested in residential property.
The two-member bench comprising Suchitra Raghunath Kamble (Judicial Member) and Narendra Prasad Sinha (Accountant Member) directed the CIT(A) to adjudicate the matter afresh, decide the appeal on its merits, and provide the assessee with another opportunity to present their case. The assessee is expected to cooperate fully and should not seek adjournments without valid reasons.
The Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that employers should deposit Employee State Insurance ( ESI ) and Provident Fund ( PF ) on or before the due date as a condition for claiming income tax deduction 36(1)(va) of the Income Tax Act,1961 which deals with the deductions claimed by the businesses for employees contributions to welfare funds.
Considering the ruling of the apex court in the above-mentioned case, the division bench of ITAT Saktijit Dey (VP), Dr. B. R. R. Kumar (Accountant Member) observed that none appeared for the assessee’s side and the appeal was dismissed on the ground that the assessee deposited the ESI/EPF beyond the due date so he was disallowed from the deductions.
The Chennai Bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that the Tamil Nadu Advocates Welfare Fund is exempted from Income Tax under section 23 of the AWS Act, against the provisions of section 11 and section 2(15) of the Income Tax Act,1961 which deals with tax exemption of income derived from the property held under trust for charitable or religious purposes and definition of charitable purposes respectively.
The Chennai Bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that the Tamil Nadu Advocates Welfare Fund is exempted from Income Tax under section 23 of the AWS Act, against the provisions of section 11 and section 2(15) of the Income Tax Act,1961 which deals with tax exemption of income derived from the property held under trust for charitable or religious purposes and definition of charitable purposes respectively.
The case of assessee was taken for scrutiny assessment by issuing a notice under section 143(2) of the Act, the appeal was filed by the assessee against the rejection of exemption claimed with respect to section 10(38) of the Income Tax Act.
The division bench of Pavan Kumar Gadale and Girish Agrawal observed that the purchase took place in an offline mode and the sale of shares were undertaken via SEBI (stock exchange platform) and the consideration was routed through normal exchange.
While making the additions the AO didn’t point out any disparity in the details furnished by the assessee. Assessing officer relied upon the search and survey operations of the department’s investigation wing. According to him, the sharp jump in the share prices of the scrip is not justified . The conclusions drawn by the AO are unsupported by any cogent material hence is purely presumptuous.
Considering the totality of facts and circumstances of the case the division bench deleted the addition made u/s 68 towards proceeds of sale of listed shares of PS IT which gave rise to Long Term Capital Gain on the said sale, claimed exempt by the assessee u/s 10(38). As a result, appeal of the assessee was allowed.
ITAT Mumbai Bench dismisses the appeal filed by the Revenue due to the lack of Territorial Jurisdiction. An appeal was filed by the Revenue, challenging the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre passed under Section 250 of the Income Tax Act,1961 regarding the Assessment Year 2010-11, 2016-17 and 2017-18.
The ITAT Mumbai Bench consisting of Shri Narendra Kumar Billaiya, AM and Ms. Kavitha Rajagopal, JM observed that “As it is now a settled proposition of law that the jurisdiction of the ITAT in adjudicating an appeal would lie within the jurisdiction of the Assessing Officer who had passed the assessment order which is the subject matter of appeal before the Tribunal, we, therefore, are inclined to dismiss these appeals filed by the Revenue with the liberty to the Revenue to file these appeals before the ITAT having jurisdiction over the assessing officer who had passed the assessment order in these cases, i.e., the Bangalore Bench. The delay in filing the appeal shall be condoned as if the assessee has filed the appeal in the first instance within the period of limitation”.
All the appeals filed by the Revenue were dismissed for statistical purposes. As the facts are identical in all the three appeals, the bench passed a consolidated order in all these appeals.
The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) has ruled against the deduction of interest paid on Foreign Currency Convertible Debentures (FCCD) under the Tonnage Tax Scheme, deeming the claim for deduction invalid.
The bench dismissed the assessee’s argument that they were entitled to deductions on the interest paid as part of the pro-rata term on Foreign Currency Convertible Debentures (FCCD). They argued that the investments were made from free funds. However, this argument was found to lack merit as it was not demonstrated before the CIT (A) that the investments were indeed made from free funds available due to the liquidation of FCCD Bonds.
The bench concluded that, given the specific prohibition in Section 115VG against claiming any other deductions, the argument of mixed funds does not apply. Consequently, the tribunal dismissed the ground raised by the assessee, affirming that the claim for deduction was invalid under the Tonnage Tax Scheme.
In a recent judgment, the Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) deleted the adjustment on the Section 80P deduction as the taxpayer filed their Income Tax Return ( ITR ) within the due date under Section 139(1).
The bench noted that the assessee, a Cooperative Housing Society registered under the Maharashtra Society Act 1960, had filed its returns of income within the due dates under Section 139(1) for the assessment years 2012-13 and 2014-15. Under the amended provisions, no prima facie adjustment on account of deduction under Section 80P could have been made.
Consequently, the two-member bench of the tribunal, comprising Ratheesh Nandan Sahay (Accountant Member) and Amit Shukla (Judicial Member), held that the disallowance made by the CPC under Section 143(1)(a) on the claim of deduction under Section 80P was beyond the scope of adjustment under Section 143(1). Accordingly, the adjustment was deleted.
Concerning the case of Hero Motocorp, the Income Tax of Appellate Tribunal ( ITAT ) observed the discounted shares were incorrectly taxed under Section 28(iv) of Income Tax Act, 1961 instead of being treated as Long-Term Capital Gains ( LTCG ).
The CIT(A) had previously ruled that income from the sale of shares was capital gains, not business income. However, the AO later tried to change this by issuing a notice and arguing it was business income, applying section 28(iv). This was incorrect, as the CIT(A) had already determined the shares were investments and the income was capital gains.
The two-member bench of G.S. Pannu (Vice President) and Anubhav Sharma (Judicial Member) ruled that Section 28(iv) cannot be invoked if there is no business income from the sale of shares held as investment.
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