ITAT Weekly Round-Up

This weekly round-up analytically summarises the key stories related to the Income Tax Tribunal (ITAT)  reported at Taxscan.in during the previous week from March 1st to March 12, 2022.

ACIT vs M/s. Rakhi Properties and Leasing Pvt. Ltd

The Income Tax Appellate Tribunal (ITAT), Mumbai bench has quashed an order for re-assessment passed under section 147 of the Income Tax Act, 1961 by noting that the notice under section 148 was issued with incorrect reasons. Dismissing the appeal filed by the department, the Tribunal held that “Subsequently when the remand report filed before Ld.CIT(A) in which Assessing Officer has agreed that share applicants do not belong to Shri Shirish C. Shah group. Accordingly, Ld. CIT(A) has held that Assessing Officer issued 148 notice with incorrect reasons. Therefore CIT(A) allowed the appeal of the assessee for reopening the assessment with incorrect reasons which is bad in law. In light of the above facts on record, we do not see any reasons to interfere with the above findings of the Ld.CIT(A). Accordingly, appeal filed by the Revenue is dismissed.”

ITO New Delhi vs Sh. Subhash Chandra Narang

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the capital gain exemption shall be allowed since it was found on physical inquiry that the new asset purchased is a residential property under section 54 of the Income Tax Act, 1961.

A two-Member bench of the Tribunal comprising of Mr. Saktijit Dey (Judicial Member) and Mr. B R R Kumar (Accountant Member) held that in course of proceeding before the first appellate authority, the assessee has furnished the sale-deed of the property purchased by him indicating that it is a residential house. The evidence furnished by assessee was forwarded to the Assessing Officer for verification. After receiving the additional evidence furnished by the assessee, the Assessing Office made a field inquiry through the Ward Inspector to ascertain assessee’s claim of existence of residential house.

UPS Asia Group Pte. Ltd vs Asstt. Commissioner of Income Tax

The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that when the Indian A.E. is remunerated at arm's length price no further profit attribution is required under the provisions of the Income Tax Act, 1961.Allowing the above contentions, the Tribunal bench comprising of Mr. Prashant Maharishi (Accountant Member) and Mr. Sandeep Singh Karhail (Judicial Member) held that “Insofar as the submissions made by the learned D.R. is concerned, we do not find any merit in same as the issues have already been decided by the Tribunal in favour of the assessee and against the Revenue in the preceding assessment years in assessee’s own case. Further, facts and circumstances of the present case are similar to the assessment year 2015–16, which have also not been denied by the Revenue. Thus, respectfully following the decision of the Co–ordinate Bench rendered in assessee’s own case cited supra, we hold that when the Indian A.E. is remunerated at arm's length price no further profit attribution is required and the issue of existence of P.E. becomes wholly tax neutral.”

Ms. KamlaChandrasinghKabali vs ACIT Mumbai

The Income Tax Appellate Tribunal (ITAT), Mumbai bench, while upholding a penalty order passed under section 271F of the Income Tax Act, 1961 held that the declaration of income under the Income Declaration Scheme, 2016 cannot be treated as a ‘reasonable cause’ for non-filing of Income Tax Return.Upholding the penalty order, the Tribunal held that “No other reasonable cause for not filing the return of income is brought to our attention. Therefore, we are of the considered opinion that the authorities below were justified in upholding the levy of penalty under section 271F. We uphold the decision of the NFAC.”

The Dy. Commissioner of Income Tax vs M/s Tata AIG General Insurance Co . Ltd.

In an interim relief to TATA AIG, the Income Tax Appellate Tribunal (ITAT), Mumbai bench has remanded the matter to the Assessing Officer to verify the TDS liability on co-insurance fee paid by the Company to the lead insurer under section 194H of the Income Tax Act, 1961. Remitting the matter back to the Assessing Officer, the Tribunal added that “Further, we also do not know whether the nature of payments and parties covered in earlier orders are also same. in the interest of justice, we set aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to produce the relevant agreements and arrangements before the assessing officer to show that the above payment does not fall within the purview of Section 194H of the act. The learned assessing officer may examine the same and then decide whether on such payment the provisions of Section 194H applies or not based on the various arguments raised before him by the assessee as well as the arguments raised by the assessee before the coordinate bench in earlier years as per para number 30 of that order.”

RejiEasow vs Income Tax Officer

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the date of possession shall be taken into consideration while allowing the capital gain exemption under section 54 of the Income Tax Act, 1961. The Tribunal bench comprising ITAT Vice-President Pramod Kumar, and Mr. Kuldip Singh, Judicial Member allowed this contention and held that “on the facts of the present case the date on which possession is by the Assessee (i.e. 02.04.2016) should be taken as the date of purchase. The requirement of Section 54 is that the Assessee should purchase a residential house within the specified period and source of funds is quite irrelevant.”

Smt. Heena Parag Chheda vs ACIT Mumbai

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the interest received on loan given to a related party for business purposes cannot be subjected to provisions of section 40A(2)(b) of the Income Tax Act, 1961. Quashing the impugned order, the Tribunal held that“Therefore it is a precondition for making the disallowance u/s 40A (2) that the AO has to arrive at the conclusion that the amount paid by the assessee is excessive or unreasonable in comparison to the fair market value/price. In the case in hand, the AO has not carried out such exercise to first determine the fair value of interest rate in question by bringing any comparable instance/case So, naturally and undisputedly it would be for the business purpose only. Therefore, in our considered opinion that lower interest received on loan given to the related party for business purpose cannot be subjected to provisions of section 40A(2)(b) of the Act.”

Dy. Commissioner of Income Tax, Circle vs Clarion Technologies Pvt. Ltd

The Pune bench of the Income Tax Appellate Tribunal ( ITAT ) has held that denial of benefit u/s 10A only because Form No.56F was not filed is quite erroneous. The Coram of Sri R.S. Syal, Vice President, and Sri S.S. Viswanethra Ravi, Judicial Member while dismissing the appeal held that “the stand of Revenue is quite erroneous in allowing the benefits of section 10A of the Act merely because the prescribed Audit Report in Form No. 56F was not filed in the return of income which clearly establishes that the Tribunal considered the issue in its peculiar facts and circumstances by taking into consideration the provisions of section 80 A (5) of the Act. Therefore, in our opinion, the only step is available for the AO is to examine whether the assessee fulfilled the other conditions to the satisfaction provision u/s. 10A of the Act. As discussed above, the AO did not dispute the same. The CIT (A) in the impugned order allowed alternate claim u/s. 10A of the Act by placing reliance on the order of ITAT. Therefore, we find no reason to interfere with the order CIT (A) and it is justified. Thus, the grounds raised by the appellant-revenue are dismissed”.

M/s.Plivo Communications Private Limited vs The Assistant Commissioner of Income Tax

The Income Tax Appellate Tribunal (ITAT), Bangalore bench has held that the amendment in the Finance Act, 2021 restricting employees’ contribution to ESI and PF after the due date is prospective in nature. The ITAT bench comprises of Shri George George K, JM &Ms.Padmavathy S, AM has found that the jurisdictional High Court in the case of EssaeTeraokaPvt. Ltd Vs. DCIT¸ had held that the assessee would be entitled to the deduction of employees’ contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) of the I.T.Act. It was further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory.

M/s Khevana Securities and Finstock Ltd vs Income Tax Officer

The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the amount of compensation received by the assessee for sterilization of the profit earning source is a capital receipt that is not chargeable to tax in the hands of the assessee. The Coram of Before Sri Mahavir Prasad, Judicial Member and Sri Waseem Ahmed, Accountant Member while restoring this issue to the file of the AO for fresh adjudication as per the provisions of law held that “it appears that the assessee has received the compensation which is not chargeable to tax in the light of the principles laid down by the honorable Supreme Court in the  CIT vs. Saurastra Cement Ltd reported in 325 ITR 422 case– it was held by the Supreme Court that

M/s.ABB Limited vs The Additional Commissioner of Income Tax

In a recent ruling, the Income Tax Appellate Tribunal (ITAT), Bangalore bench has directed the Assessing Officer to re-verify the calculation of interest under section 234C of the Income Tax Act, 1961 on the basis of the allegation of the assessee that the excess payment of advance tax was ignored. A two-member bench consisting of Mr. George George K, (JM) and Ms. Padmavathy S (AM) held that “We have heard rival submissions and perused the material on record. The learned AR has given a table, wherein it is claimed that excess payment of advance tax for the 1st and the last quarter has been ignored while calculating interest u/s 234C of the Income Tax Act. The A.O. is directed to examine the correctness of the claim of the assessee as regards the calculation of interest u/s 234C of the Act and grant relief in accordance with the law. Accordingly, ground 2 in the additional ground is restored to the A.O.

The Assistant Commissioner of Income vs M/s. Gujarat Ambuja Exports Ltd.

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the deduction under section 80IC of the Income Tax Act, 1961 is allowable to the income from Interest on Electricity Deposit, Recovery from Transporters and Sundry Balances of Vendors written off.

Sports Authority of Gujarat vs DCIT

The Income Tax Appellate Tribunal Ahmedabad ( ITAT ) Presided by Vice President P.M. Jagtap, and Judicial Member Siddhartha Nautiyal has held that, the assessee not earning any business income and has earned only interest income which is assessable as “income from other sources”, accordingly, depreciation cannot be allowed.

Deputy Commissioner of Income Tax vs Brahmos Aerospace

The Cochin bench of the Income Tax Appellate Tribunal (ITAT) has held that the carry forward of business loss cannot be denied to the assessee merely on the ground that the statutory audit/tax audit was not completed within the prescribed period. The Tribunal bench comprising Mr. George Mathan (JM) and Mr. RamitKochar (AM) held that such benefit cannot be denied to the assessee in the absence of a specific provision in the statute.

Maharashtra Seamless Ltd vs DCIT

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the activity of inspection and examination of goods before shipment cannot be treated as technical and managerial services under Section 9 (1) of the Income Tax Act, 1961.The bench consisting of members Amit Shukla (Judicial Member) and Dr. B. R. R. Kumar (Accountant Member), ruled that Section 9 (1) (vii) of the Act provides that income by way of fees for technical services payable by a resident shall be deemed to accrue or arise in India.

Rakesh Janghu vs ITO

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the claim of deduction of contribution to Employee’s State Insurance Scheme (ESI) and Provident Fund u/s.36(1)(va) could not be denied to the assessee for the period prior to the amendment in the provision under Finance Act, 2021.

M/s. Standard Builders vs ACIT, Cuddalore

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the re-opening of an assessment cannot be done in a mechanical manner and on the basis of change of opinion by the Assessing Officer under Section 148 of the Income Tax Act, 1961.

M/s. Sri Kalaivani Spinners Pvt. Ltd vs The ITO

The ITAT, Delhi bench has held that the revisional jurisdiction under section 263 of the Income Tax Act, 1961 cannot be invoked in case of highly debatable issues. While quashing the revisional order, the Tribunal held that “We noted that the PCIT himself admits that there are different views possible on this issue and issue is highly debatable. Once the issue is highly debatable no revision is possible invoking the provisions of section 263 of the Act. Hence, we quash the revision order passed by PCIT u/s.263 of the Act and allow the appeal of the assessee.”

ACIT vs M/s Benetton India Pvt Ltd

The Delhi bench of the Income Tax Appellate Tribunal, in a major relief to Benetton India, held that the loss incurred on forfeiture of security deposits given for lease of rental premises can be claimed as business loss. A Tribunal comprising Dr.B. R. R. Kumar, Accountant Member Ms. Astha Chandra, Judicial Member has held that “Having gone through the entire judgments quoted by both the parties, provisions of the Act pertaining to the interplay between Section 28 and Section 37, and facts of the case, we have no hesitation to hold that the assessee is allowed to claim the loss incurred in forfeiture of security deposits given for lease of rental premises as the expenses are incurred wholly and exclusively for the purpose of business.”

Sheela Devi vs Principal Commissioner of Income Tax

The Delhi bench of the ITAT comprising Judicial Member Mr. Amit Shukla and Accountant Member Mr. Pradip Kumar Kedia has recently quashed an order citing the violation of natural justice principles as the hearing was fixed on the very next date of the issuance of show-cause notice.

Dy. Commissioner of Income Tax vs M/s Dakshin Haryana Bijli Vitran Nigam Ltd

In a major relief to Dakshin Haryana Bijli Vitran Nigam, the ITAT Delhi has confirmed the deletion of income tax addition amounting to approx. Rs. 328 Crores on account of “Surcharge levied but not realized".Dismissing the appeal, the Tribunal held that “We have heard both the sides. We have perused the materials on record. There is no dispute over the fact that the issue in dispute in the present appeal before us is squarely covered in favour of the assessee and against Revenue, by the aforesaid orders dated 30.11.2011, 01.10.2014 & 17.07.2019 of Co-ordinate Bench of ITAT, Delhi; the Hon’ble High Court of Punjab & Haryana; and Hon’ble Supreme Court respectively. Neither side has brought any facts and circumstances for our consideration to distinguish the assessee’s case in Assessment Year 2014-15 (to which this present appeal pertains) from Assessment Year 2006-07 to which the aforesaid orders dated 30.11.2011, 01.10.2014 & 17.07.2019 pertained. In view of the foregoing, and with utmost regards for Hon’ble Supreme Court; Hon’ble High Court of Punjab & Haryana; and Co-ordinate Bench of ITAT, Delhi; we decide the issue in dispute in the present appeal before us in favour of the assessee and against Revenue.”

M/s. Bajaj Foods Ltd vs The ITO

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT), while granting interim relief to the assessee, Bajaj Foods Ltd, directed the income tax department to reconsider the TDS default issue relating to the payments made to foreign shipping companies on the basis of the documents.

The Asst . Commissioner o f Income Tax (Intl. Taxation) vs M/s Viacom 18 Media Pvt. ltd

The Mumbai bench of the ITAT, while considering a departmental appeal against the assessee, M/s Viacom 18 Media Pvt. Ltd, held that the payment to a foreign company for utilization of transponder centered on a satellite is not in the nature of Royalty in terms of various DTAAs.

The DCIT vs M/s. PVP Ventures Ltd

The Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the receipt of royalty by the real estate developer was rightly declared as business income under the provisions of the Income Tax Act, 1961. While dismissing the appeal filed by the Revenue, the Tribunal concluded that “In the present case before us, from the facts noted above we are of the view that the non-compete fee has rightly been declared by assessee as business income u/s.28(iv) of the Act and declared as income chargeable in profits & gains of business or profession. Similarly, royalty is also held by CIT(A) as the business receipt is as per the facts of the case and stated position of law because the assessee is engaged in the business. Hence, we find no infirmity in the order of CIT(A) and the same is confirmed. The appeal of the Revenue is dismissed.”

The Income Tax Officer vs KiritRaojibhai Patel

The Income Tax Appellate Tribunal (ITAT), Mumbai has held that the sale of transferable development rights does not attract capital gains tax since the cost of acquisition for the same does not exist.

Abhay Kumar Mittal vs DCIT, New Delhi

The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has held that IT Act does not prohibit claiming HRA exemption on the rent paid to one's spouse. The Coram of Shri. A. D. Jain, Vice-President, and Dr. B. R. R. Kumar, Accountant Member while allowing the appeal held that “There is no bar on the part of the assessee to extend the loan from his known sources of income to his wife. Similarly, there is no bar on the assessee's wife to repay the loan from her own mutual funds and fixed deposits. The assessee has paid house rent and the recipient, the assessee's wife has declared the same under the head “income from house property” in her returns which has been accepted by the revenue. CIT(A)’s observation that the assessee has got meager income hence she cannot afford to purchase a house cannot be accepted as the source for purchase of the house in the hands of Smt. Shivani Bansal are proved rather never doubted”.

Sri.Yeruva Prasad vs The Asst / Deputy Commissioner of Income Tax

The Income Tax Appellate Tribunal (ITAT), Bangalore bench has held that the amendment under the Finance Act, 2021 relating to deduction of employees’ contribution to ESI and PF would not be applicable to assessment years 2018-19 and 2019-2020.

M/s Dow Jones & Company Inc. vs The ACIT

The Income Tax Appellate Tribunal, New Delhi has held that the transaction under consideration is for provision of accessing the database of the assessee, hence the same cannot be considered as ‘Royalty’ under Article 12 of the India-US DTAA.

ICMC Projects Pvt. Ltd vs ITD

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that when there are two conflicting decisions on a similar issue, the authorities shall follow the one in favour of the Assessee.

Dr.E.S.Krishnamoorthy vs The Income Tax Officer

The Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the capital gains shall be determined according to the respective share of the parties in residential property and not according to any internal family arrangement under the provisions of the Income Tax Act, 1961.

AvijitDewanjee vs The Deputy Commissioner of Income Tax

The Income Tax Appellate Tribunal ( ITAT ), Bangalore has held that the embezzlement loss stated by the assessee is not ascertained liability and hence cannot allow a loss in business income.

M/s. Venture Lighting India Limited vs The ACIT

The Income Tax Appellant Tribunal, Chennai has held that the loss suffered by the assessee on account of foreign exchange difference as on the date of the balance sheet is an item of expenditure allowable u/s.37(1) of the Act.

Triumph International Finance India Limited vs Dy. Commissioner of Income Tax

The Income Tax Appellate Tribunal (ITAT), Mumbai bench, while quashing a penalty order under section 272A(1)(d) of the Income Tax Act, 1961 held that the year, 2019 being the initial year of the shift towards digital and electronic mode, the mistake appears to be bonafide.

Incom Cables Pvt. Ltd vs Addl CIT

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the course fee paid to Harward Business School for the director is allowable as business expenses of the Company and therefore, eligible for deduction under the Income Tax Act, 1961.

Income Tax Officer vs ARCIL SBPS 024 I Trust

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the income of a revocable trust is taxable in the hands of the contributors. Deciding the issue in favour of the assessee, the Tribunal held that “Respectfully following the above said Tribunal decision, we are in agreement with the finding of the Ld.CIT(A) and we do not find any infirmity to interfere with the finding of the Ld.CIT(A). Accordingly, grounds filed by the revenue are dismissed.”

Bharat Mahesh Malhotra vs ITO

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT), while deleting a penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 has held that the statement of the survey without any corroborative material cannot be the sole reason for addition to income.

Shanti ChemsteelPvt. Ltd vs DCIT

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the income tax penalty under section 271(1)(c) of the Income Tax Act, 1961 cannot be levied on the ground that the assessee claimed deduction without any malafide intention.

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