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 from August 13 to August 19, 2022
The Income Tax Appellate Tribunal (ITAT) Bangalore bench has held that the cess forms part of tax and cannot be allowable as a deduction under section 40(a)(ii) of the Income Tax Act.1961.The Tribunal observed that the assessee’s contention was not acceptable and even though cess was calculated as % of Income-tax, effectively, it was a levy on the profits and gains of the assessee. Further observed that the words `any tax’ in section 40(a)(ii) include cess.
The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the defense of ignorance of law cannot be reasonable cause to condone delay after the assessee hired a Chartered Accountant.Rejecting the plea of the assessee, the Tribunal held that “Coming back to the legal position evolved by the decision of various High Courts, including the Hon’ble Supreme Court in number of cases, where it has been, time and again, held that when merits and technicalities pitted against each other, then merit alone deserves to be prevailed, because, if you throw out a meritorious case out of judicial scrutiny on the grounds of technicalities, then you may deprive the right of the petitioner in pursuing their case. At the same time, various Courts have held that rules of limitation are not meant to destroy the rights of parties, they are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly, within the time bound prescribed under the Act. Further, in a case, where, for the reasons beyond the control of the petitioner, the appeal could not be filed, then the Courts are well equipped with power to condone the delay, if the petitioner explains the delay in filing of the appeal with a reasonable cause. However, there is no law or mandate in the Act, to condone the delay in each and every case.”
The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that income tax deduction cannot be available for the interest paid on the delayed payment of TDS under section 201(1A) of the Income Tax Act, 1961.The division bench observed that the levy of 201(1A) is a levy for delay in the remittance of tax that is deducted and not paid into the government account and is levied towards the use of funds belonging to the exchequer.
The Income Tax Appellate Tribunal (ITAT), Delhi Bench has held that amount received for services rendered by non-residents in connection with prospecting for mineral oil charged to tax u/s 44BB.The Tribunal observed that the amount received by the assessee does not fall in the category of FTS under section 9(1)(vii) of the Act, as it comes within the exception provided under explanation 2 to section 9(1)(vii) of the Act. Thus, the amount received cannot be regarded as FTS, under Article 13 of the India – France DTAA as the ‘make available’ condition is not satisfied.
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the delay in filing an appeal can’t be condoned when the assessee failed to explain the cause.It was observed that the appeals have been filed with an inordinate delay of more than 10 years and the right to appeal under the Income Tax Act was a statutory right, where Section 253(1) permits the assessee to file an appeal before the Tribunal against orders specified therein. Sub-section (3) to section 253 prescribes the period of limitation of 60 days for filing the appeal before the Tribunal.
Income Tax Appellate Tribunal (ITAT), Chennai bench allowed deduction under section 54F of the Income Tax Act,1961 when apartments sanctioned for residential purposes were let out as service apartments.In light of precedents, the Tribunal observed that where two apartments owned by the assessee, even though had been sanctioned for residential purpose, yet same were, being used for commercial purposes as service apartments, then both needs to be excluded for deduction u/s.54F of the Income Tax Act, 1961.
The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) charges towards management support services are allowable as business expenditure.It was observed that the alleged management services are merely 2% of the total revenue of the company which was even less than 2% of the revenue of the company and the said sum paid by the assessee has also been offered to tax by AE-CPA.
On hearing the appeal against the order of CIT(A), the Varanasi bench of the Income Tax Appellate Tribunal (ITAT) held that denial of the claim of past savings will not sustainable when relevant details being furnished.Shri. Vijay Pal Rao, judicial member observed that the additions sustained by the CIT(A) on the ground that no evidence could be furnished, are not justified and deleted the addition made by the Assessing Officer and confirmed by the CIT(A).
The Income Tax Appellate Tribunal (ITAT), Jaipur Bench has condoned the delay of 9 years in filing an appeal since the assessee was imprisoned for 9 years.The Tribunal observed that because of involvement in criminal offences mentioned above and judicial custody, the assessee was not aware of Incomes taxes hovering upon him. The Supreme Court in the case of N Balakrishnan vs. M. Krishnamurthy has observed that “It must be remembered that in every case of delay, there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy, the court must show utmost consideration to the suitor”.
While hearing the appeal filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals)1, the Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the annual value of property let out or vacant whole or part of the previous year should be computed as per section 23(1(c) of the Income Tax Act,1961.The Tribunal observed that the assessee has made his best efforts to let out the property which was evident from e-mail correspondence between the assessee and agents and viewed that the assessee has rightly computed the annual letting value of the property as per provisions of section 23(1)(c) of the Income Tax Act, 1961.
The Income Tax Appellate Tribunal (ITAT), Delhi Bench has held that notice under section 274 fails to specify the reason for the imposition of penalty and deletes the penalty imposed under section 271(c)(1).The Tribunal has held that “the Act without specifying the limb under which the penalty proceedings have been initiated and proceeded with, apparently goes to prove that notice, in this case, has been issued in a stereotyped manner without applying mind which is bad in law, hence cannot be considered a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act and therefore we are of the considered view that under these circumstances, the penalty is not leviable as held by the various Court including Apex Court”.
The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the addition of unexplained cash will sustain when the genuineness of the transaction was not proven.The Tribunal observed that the assessee though has been able to establish the identity of the creditor/lender, but failed to establish either the genuineness of the transaction or his creditworthiness.
The Income Tax Appellate Tribunal (ITAT), Surat Bench presided by Dr. Arjun Lal Saini, Accountant Member has held that deduction under section 80IA (iv) computed with respect to each unit independently, without clubbing loss of another unit.The Tribunal observed that separate accounts are maintained for each windmill undertaking. Thus, the deduction is to be computed with respect to each unit independently taking into consideration the profit of each unit without clubbing loss of others.
Non- compliance due to delay in getting notice from the authority, the Allahabad Bench of the Income Tax Appellate Tribunal (ITAT)has held that penalty under section 271(1)(b) is not sustainable.The Tribunal observed that the copies of the seized document were issued just before passing the penalty order and the assessee was having a reasonable cause for non-compliance with the notice under section 142(1) of the Act.
The Bengaluru bench of the Income Tax Appellate Tribunal (ITAT) held that the recurring charges paid to telephone lines are revenue in nature and deletes the addition to regard to telecommunication.Shri George George K, Judicial Member and Ms Padmavathy s, Accountant Member viewed that the expenditure incurred by the assessee under the head ‘telecommunication lines’ was of a revenue nature.
The Income Tax Appellate Tribunal (ITAT), Chennai held that Income Tax on Rental Income on a Notional Basis is not Applicable If Assessee could not find a Tenant for a Relevant Assessment Year.The bench consisting of Mahavir Singh, Vice President and G Manjunatha, Accountant Member held that “In this case, property was let out earlier, however, it was vacant during the impugned assessment year owing to nonavailability of tenants Further, the assessee has made his best efforts to let out the property which is evident from e-mail correspondence between the assessee and agents however, could not get tenants for relevant period. Therefore, we are of the considered view that the assessee has rightly computed annual letting value of the property as per provisions of section 23(1)(c) of the Income Tax Act, 1961.”
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has disallowed a claim of business expenditure towards the payment of license fee by observing that the assessee illegally obtained the license in the name of his benami, i.e., the employee, violating the rules of excise department and therefore, deduction under section 37 of the Income Tax Act, 1961 is not allowable.Dismissing the appeal, the Tribunal observed that “Since the said model of business itself is in violation of licenses issued by the Excise Department, the license fee paid by the assessee who is not the license holder cannot be treated as eligible expenses. In view of the above discussion, we are of the opinion that, the grounds of appeal of the Revenue deserves to be allowed.”
The Income Tax Appellate Tribunal (ITAT), Bangalore Bench consisting of Beena Pillai, Judicial Member, and Laxmi Prasad Sahu, Accountant Member held that Capital Gain does not attract in case of permissive possession in immovable property and hence not taxable.The Tribunal observed that “The assessee only permitted the developer to develop the project in their land. Therefore, it cannot be construed that the possession of the immovable property of the assessee is vested with the joint developer as per the provisions of the Act.
In the case of Britannia Industries Ltd, the Income Tax Appellate Tribunal (ITAT), Kolkata bench has quashed the revision order passed under section 263 since the revision was conducted without proper inquiry.The Tribunal observed that the PCIT did not delve into the submissions made by the assessee to point out how and what was erroneous in respect of the claim made by the assessee towards scientific research expenses u/s 35 of the Act except for noting of a mere arithmetic difference of amounts claimed by the assessee and as approved by DSIR including recording certain grossly incorrect fact relating to capital expenditure.
The Income Tax Appellate Tribunal (ITAT), Bangalore bench has held that the foreign travel expenses relating to secure the capital investment in the business cannot be allowed as expenditure for the purpose of sections 30 to 38 of the Income Tax Act, 1961.A bench of Shri Chandra Poojari, Accountant Member and Smt. Beena Pillai, Judicial Member observed that there is a documentary evidence that assessee entered into an agreement between the partners in Dar AI Tomouh Projects LLC on 27.2.2017 for securing various investments only as a share capital in the assessee’s company.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the activity of pharmacy is incidental to the purpose of running the hospital for the purpose of cliaming income tax exemption under the provisions of the Income Tax Act, 1961.The Tribunal viewed that the decision in the case of Baun Foundation Trust applies to the assessee wherein it was “held that the activity of Chemist / Pharmacy was held to be incidental or ancillary to the dominant object or purpose for running a hospital.”
The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has held that bonafide and silly mistakes in the tax audit report would not result into imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961.“In the case of Price Waterhouse Coopers Pvt Ltd (supra) relied upon by the learned Counsel for the assessee, the Hon’ble Supreme Court held that even if the assessee was a reputed firm and had great expertise available with it, it was possible that it could make a “silly” mistake. In this regard, the Hon’ble Supreme Court took note of the fact that the Tax Audit Report filed by the assessee along with return of income unequivocally stated that the provision for payment was not allowable under Section 40A(7) of the Act and held that the contents of the Tax Audit Report suggested that there was no question of the assessee concealing its income or furnishing any inaccurate particulars of its income. Hon’ble Apex Court held that it was through a bona fide and inadvertent mistake, the assessee while submitting its return, failed to add the provision for gratuity to its total income. It was held that the imposition of penalty on the assessee, therefore, was not justifiable. In our opinion, the decision of the Hon’ble Supreme Court in the case of Price Waterhouse Coopers Pvt Ltd (supra) is squarely applicable in the facts of the present case as discussed above and respectfully following the same, we cancel the penalty imposed by the Assessing Officer under Section 271(1)(c) of the Act and confirmed by the learned CIT(A),” the Tribunal observed.
The Income Tax Appellate Tribunal(ITAT), Bangalore Bench has held that the demand for late fees under section 234E of the Income Tax Act,1961 is not sustainable for TDS filed before 1st June 2015.In the decision of the High Court of Karnataka in the case of Fatehraj Singhvi v. UOI, it was held that “amendment made u/s. 200A providing that fee u/s. 234E of the Act could be computed at the time of processing of return and issue of intimation has come into effect only from 1.6.2015 and had only prospective effect and therefore, no computation of fee u/s.234E of the Act for delayed filing of return of TDS while processing a return of TDS u/s.234E of the Act could have been made for tax deducted at source for the assessment years before 1.6.2015.”
The Income Tax Appellate Tribunal (ITAT), Mumbai allowed depreciation under Section 32 of the Income Tax Act on already paid non-compete fees thereby granting relief to Abbott Healthcare Private Limited.The Bench consisting of Vikas Aswathy, Judicial Member, and Amarjit Singh, Accountant Member held that “In the present case payment of the non-compete fee in accordance with terms of the agreement between the assessee and Piramal Healthcare Ltd. is not disputed by the Revenue. Ergo, in light of the facts of case and the decision by Hon’ble Bombay High Court referred above, we hold that the assessee is eligible for depreciation u/s. 32 of the Act on Non-compete Fees paid being an intangible asset.”
Late filing of required documents would not disentitle Trust from availing benefit under Section 11 of the Income Tax Act, so was held by the Income Tax Appellate Tribunal (ITAT), Mumbai.The Tribunal further observed that “Thus, in the facts of the case and in the light of decision of Hon’ble Bombay High Court, I deem it appropriate to restore the file back to Assessing Officer for denovo assessment after considering the audit report field by the assessee, in accordance with law.”
Passing an assessment order by not following order of ITAT is patently illegal and against judicial propriety, as ruled by the Income Tax Appellate Tribunal (ITAT), Indore Bench.It was observed that the AO passed the impugned assessment order, in haste and on a back date merely for escaping to give the effect of the order of the ITAT in the assessee’s case as patently illegal, unwarranted, unjustified and against the spirit of judicial propriety.
The Income Tax Appellate Tribunal (ITAT), Delhi allowed outstanding bonus claims under Section 43B when there was an Allegation of non-payment of outstanding liability before the due date of filing income returns.The bench consisting of Challa Nagendra Prasad, Judicial Member, and Pradeep Kumar Kedia, Accountant Member held that “we find that the assessee has successfully demonstrated that the return of income filed by it has been subjected to provisions of Section 92E of the Act and consequently the due date available to the assessee is 30th November 2017 relevant to Assessment Year 2017-18 in question in terms of Section 139(1) read with clause (aa) to Explanation-2 thereto.
The Income Tax Appellate Tribunal (ITAT), Kolkata bench has held that no addition of interest on the restructuring of working capital cash credit loan.Mr. Rajpal Yadav, Vice President, and Mr. Girish Agrawal, Accountant Member has held that “we are inclined to accept the submissions of the Counsel and direct the AO to delete the addition made in this respect of Rs.4,05,22,204/-.”
In a significant ruling in the case of ONGC, the Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has ruled that TDS liability does not arise in the absence of use of patent or copyright against royalty paid.It was observed that if he was able to carry on his business in future without the technical service of the service provider in respect of services rendered then, it would be said that technical knowledge was made available.
Income tax re-assessment order passed without communicating the reason for re-assessment is invalid has been held by the Jaipur Bench of the Income Tax Appellate Tribunal (ITAT).The Tribunal viewed that the AO was bound to furnish reasons recorded by him within a reasonable time as has been held in the case of GKN Driveshafts (India) Ltd. vs ITO (supra).Further observed that the reassessment order cannot be upheldsince the reasons recorded for reopening of the assessment were not furnished to the assessee till the completion of the assessment.
The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that amount paid by the purchaser of property to the tenant can’t be taxed in the capital asset of the owner.Shri V. Durga Rao, Judicial Member & Shri G. Manjunatha, Accountant Member observed that no allegation shall be sustained without evidence and set aside the order of the CIT(A) in confirming the addition and direct the Assessing Officer to adopt the guideline value adopted for the stamp duty purposes by the SRO of ₹.1,52,65,558/- as FMV of the property under section 50C of the Act.
The Income Tax Appellate Tribunal (ITAT), Delhi Bench has held that the credit or subsidy from suppliers of aircraft engines and other components are capital receipts and deleted the addition.The Coram of Mr. Anil Chaturvedi, Accountant Member,and Mr. Anubhav Sharma, Judicial Memberby relying on the decision of the appellant’s o case has held that “We, therefore, reverse the finding recorded by CIT in the impugned order and hold that the credits received by the appellant from IAE are capital in nature.”
The Income Tax Appellate Tribunal (ITAT), Bangalore held that Interest paid on convertible debentures is not interest on equity and allowable as expenditure under Section 36(1)(iii).The Tribunal also observed that “Further the determination of ALP of the transaction has also been remanded by the Coordinate Bench of this Tribunal. Respectfully following the same, we also direct the AO/TPO to compute the ALP of the interest for the year under consideration in accordance with the transfer pricing provisions.”
The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the income tax department cannot treat the same income received as sale consideration from the same property by co-owners differently for the purpose of imposing tax under the Income Tax Act, 1961.A bench of Shri Waseem Ahmed, Accountant Member and Shri T.R. Senthil Kumar, Judicial Member held that “it is seen from the sale deed executed on 30.05.2011, the entire consideration were being made through cheque payments. However, as it can been seen from the other co-owners assessment orders, the Income Tax Department has accepted the returned income filed by the respective assessee and has not adopted section 50C valuation for the other co-owners namely Smt. Hiraben Shantilal and Smt. Indiraben Shantilal as can been seen from the reassessment orders passed u/s. 143(3) r.w.s. 147 dated 30.12.2019. There cannot be two different yardsticks for the same set of sale transaction made by five co-owners.”
The Kolkata bench of Income Tax Appellate Tribunal (ITAT), has been directed to allow depreciation in respect of closed units and non-functional undertakings since depreciation is claimed on the block of assets.The Tribunal by relying on the provisions of Section 32 of the Act, which was amended by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986 w.e.f. 01.04.1988 observed that, once an asset is part of the block of assets and depreciation is granted on that block, it cannot be denied in subsequent years on the ground that one of the assets is not used by the assessee in some of theyears. The concept of the user of assets has to apply to the block of assets as a whole instead of an individual asset. Thus, deduction of depreciation is to be allowed mandatorily in computing the profits and gains of business or profession for any previous year.
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) ruled that the addition of unexplained cash credit does not sustain when the creditworthiness and genuineness of the transaction are proven.Shri Shamim Yahya, accountant member and Shri C M Garg, judicial member declined to accept the reasoning recorded by the CIT(A )and allowed the appeal of the assessee by deleting the entire addition confirmed by the CIT(A).
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