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 October 22 to October 28, 2022
The Ahmedabad Bench of the Income Tax Appellate Tribunal(ITAT), in a recent ruling in favour of the Revenue has held that, the educational expenses incurred for the daughter of the assessee’s firm shall not be considered as incurred for purposes of business. Deciding the appeal against the assessee and dismissing it on the merits, observing that “It was merely because these expenses were in relation to the daughter of the assessee that they were incurred by the assessee, and not dominantly because they were for the purpose of business of the assessee firm”, the tribunal held as, “we have no iota of doubt in holding the impugned expenditure as personal and not allowable therefore as business expenditure.”
The Income Tax Appellate Tribunal (ITAT), Chennai held that on Receipt of property by way of inheritance, it will not be treated as income from other sources. The Bench consisting of V Durga Rao, Judicial Member and Manoj Kumar Aggarwal, Accountant Member held that “Finally, on entirety of facts and circumstances, we would hold that the property was received by the assessee under a will / by way of inheritance and therefore, the provisions of s.56(2)(vii) would not apply to the case of the assessee.”The Income Tax Appellate Tribunal (ITAT), Chennai held that on Receipt of property by way of inheritance, it will not be treated as income from other sources.
The Income Tax Appellate Tribunal (ITAT), Allahabad Bench deleted Income Tax Addition on the ground that the explanation was past savings of HUF and its members and no other deposits were made during demonetization. A Single Bench of the Tribunal consisting of Vijay Pal Rao, Judicial Member observed that “Accordingly, in the facts and circumstances of the case when the assessee has explained the source of Rs. 1,00,000/- as past savings of the assessee HUF and its members and there are no other deposits during the demonetization the addition made by the Assessing Officer is deleted.”
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT), in a recent ruling has held in favour of the assessee that, no penalty can be imposed under Minimum Average Tax (MAT) provisions for adjustments in book of profit with regard to disallowance of depreciation. It was also held that “Similarly adjustment in the book of profit on account on disallowance of depreciation could not culminate in imposition of penalty under the MAT provisions” relying on the judgment rendered in CIT Vs. Nalwa Sons Investments Limited (2010) by the Supreme Court of India, and allowed the appeal of the assessee.
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT)has held that addition to a cash deposit is not allowable when additional evidence explaining the source is submitted by the assessee. It was observed that when the assessee remained unrepresented in the assessment proceeding and the assessment order was passed ex-parte, the assessee could not have produced the evidence before the Assessing Officer. The Tribunal directed the Commissioner (Appeals) to accept the evidence and examined them on its own merits before deciding the issue, as the evidence furnished by the assessee can have a crucial bearing on disputed addition.
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, as recently, in an appeal filed before it, held that income tax exception shall be available to the Defence Forces Personnel who have been invalidated from service on account of bodily disability while in service.
The Income Tax Appellate Tribunal ‘A’ bench, Chennai, has recently, in an appeal filed before it, held that interest on loans obtained for own business purposes constitutes business expenditure and hence that deduction is allowable.
The Income Tax Appellate Tribunal (ITAT), Pune Bench deleted Income Tax Addition on lease line charges thereby granting relief to BMC Software India Pvt Ltd. Allowing the appeal, a Division Bench of the Tribunal consisting of R S Syal, Vice President and ParthaSarathi Chaudhary, Judicial Member held that “In view of the judicial pronouncement where the addition on lease line charges have been deleted, respectfully following the same, on the same parity of reasoning this ground of appeal of the assessee is allowed and the Assessing Officer/Transfer Pricing Officer is directed to delete addition on lease line charges from the hands of the assessee.”
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held that excise duty refund are purely capital receipts and hence that they are not chargeable to tax.
The Income Tax Appellate Tribunal (ITAT), Ahmedabad deleted addition of Six Lakhs as there was satisfactory evidence as to source of cash deposit. A Bench consisting of Annapurna Gupta, Accountant Member and Suchitra Kamble, Judicial Member observed that “The entire evidences, as noted above by us reasonably and satisfactorily demonstrating the flow of money to the assessee in cash from the proceeds received of land sold, we see no reason to disbelieve the assesses explanation of the source of cash deposit in bank of Rs. 6lacs being attributable to his share in land sold by family received in cash from his brother. Addition of Rs.6,00,000/- on account of unexplained cash deposits is accordingly directed to be deleted.”
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held that no addition is to be made u/s 68 to Deewali expenses on account of the assessee’s inability to substantiate the same for business purposes.
The Income Tax Appellate Tribunal,(ITAT) ‘SMC’ Bench Chandigarh, has recently, in an appeal filed before it, held that business income is not to be confirmed merely on the basis of closing bank of the assesse.
Google got relief with the Income Tax Appellate Authority (ITAT) Bangalore bench’s ruling that the payments made by the company to its unit in Ireland are not royalty. While allowing the appeal, the Tribunal held that the impugned payment cannot be characterized as royalty under the India Ireland DTAA.
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that the re-assessment proceeding under section 147 is invalid in absence of valid service of notice. A Coram of Shri Saktijit Dey, Judicial Member observed that valid service of notice under section 148 of the Income Tax Act is a sine qua non for proceeding under section 147 of the Income Tax Act . In absence of valid service of notice under section 148 of the Act, the assessment proceeding under section 147 of the Income Tax Act is invalid and quashed the assessment order.
The Income Tax Appellate Tribunal (ITAT), Bangalore Bench, has recently in an appeal filed before it, while deleting the Income Tax Addition, held that satisfaction of Assessing Officer (A.O), under section 69C of the income tax act should be subjective. “Therefore, we are of the view that the additional income offered cannot be taxed u/s. 115BBE and the impugned addition is hereby deleted. Accordingly, the assessee is allowed to set off the current year loss against the additional income offered to tax as business income.”
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held that right to appeal against addition or disallowance to returned income not vitiated by non -compliance to notices.
The Income Tax Appellate Tribunal (ITAT), Visakhapatnam Bench ruled that liquidated damages not core activity of shipping and not part for computation in tonnage tax, thereby granting relief to M/s Dredging Corporation of India Ltd. A Bench consisting of Duvvuru R L Reddy, Judicial Member and S Balakrishnan, Accountant Member held that “As regards the liquidated damages the source of such income is payment for failure to execute the contract works within the stipulated time and not the shipping activity either core or incidental. Though the liquidated damages may be incidental business income but the same is not the profit from core activities or incidental activities which have been defined in the Act. They are not directly received from the shipping activity but are compensatory in nature collected from the contractors for failure to execute contract. Therefore, liquidated damages cannot be held to be from the core activity of the shipping and does not form part for computation in tonnage tax.”
The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has recently dismissed the appeals of two assessees, as the ‘professional commitments’ of the auditor was no reasonable cause for condonation of delay of 649 days. It was observed how the assessee could not file any evidence as to how the Assessee’s Counsel was preoccupied in his professional commitments for 649 days.
Demise of tax auditor is reasonable cause in failure to upload tax audit report on the portal of Income Tax, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held as above. A Coram of Shri Kuldip Singh (judicial member) and Shri Om Prakash Kant (accountant member)observed that the fact of the demise of the tax auditor has not been controverted by Mr Manoj Sinha appeared for the Revenue.
Capital Gain Exemption u/s 54 B is not permissible on the investment made in name of the grandson, the Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) has held as above. The bench held that “the authorities below were justified in making the assessee not eligible to exemption u/s 54B of the Act where the investment is made in the name of the grandson of the assessee. “
The Income Tax Appellate Tribunal (ITAT), Jaipur deleted penalty as there was no proof of delivery and service of notice. A Single Bench consisting of Sandeep Gosain, Judicial Member observed that We are of the view that since there is no proof of delivery and service of notice under section 142(1), therefore, in our view no penalty is attracted under section 271(1)(b) of the Act. The penalty is deleted.”
The Income Tax Appellate Tribunal (ITAT) Chennai Bench, has recently, in an appeal filed before it, held that rental income shall not to be assessed as ‘business income’, and that adjustment made u/s 143(3) in this regard is unsustainable.
The Income Tax Appellate Tribunal (ITAT), Jaipur directed the assessee to pay Rs 2,000 to PM Relief Fund due to the casual and cavalier attitude of the assessee. A Single Bench consisting of Sandeep Gosain, Judicial Member observed that “After hearing both the parties and perusing the materials available on record it is noted that both the lower authorities have passed ex-parte order and the assessee could not defend his case before them. In view of the request of the lAR of the assessee, the appeal of the assessee is restored to the file of the AO for afresh assessment. The assessee is also directed to cooperate the AO during the course of afresh assessment and submit the documents before the AO to defend his case.”
The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench held that ITAT considered Revised Tax Audit Report as additional evidence as it is vital piece of evidence. The Bench consisting of Sudhanshu Srivastava, Judicial Member observed that “The revised Tax Audit Report is a vital piece of evidence which goes to the very root of the matter and should be admitted for the furtherance of cause of justice. Accordingly, I admit the additional evidence and since the lower authorities have not had any occasion to examine the same, I further deem it expedient to restore the issue to the file of the Assessing Officer with a direction to adjudicate the issue afresh after duly considering the revised Tax Audit Report which I have admitted as additional evidence.”
The Income Tax Appellate Tribunal (ITAT), Bangalore treated assessment order as null as due intimation was given on amalgamation of company by the assessee, M/s. Biocon Biologics Limited. A Bench consisting of Chandra Poojari, Accountant Member and George George K, Judicial Member observed that “The A.O. in the instant case had passed the assessment order in the name of Biocon Research Limited, even though sufficient intimation have been made to the A.O about the merger of Biocon Research Limited with Biocon Biologics Limited during the course of assessment proceedings. The A.O was diligently informed about the amalgamation during the course of assessment proceedings and prior to the passing of the draft assessment order / final assessment order, hence, the ratio of the judgment in the case of Maruti Suzuki India Limited and Spice Infotainment continues to apply and the assessment order in the name of amalgamated company is treated as null and void.”
The Income Tax Appellate Tribunal (ITAT), Pune Bench held that there is no claim of capital loss when revised return filed under Section 139(5) of the Income Tax Act, 1961 became non-est. The Bench consisting of S S Viswanethra Ravi, Judicial Member and G D Padmahshali, Accountant member held that “The provisions relating to furnishing of a revised return is provided u/s 139(5), which entitles an assessee to furnish a revised return if he discovers any omission or any wrong statement in the original return filed, however for the impugned assessment year, this right or entitlement of revision was given to an assessee who has filed original return either u/s 139(1) oru/s 142(1), this by necessary implication means that, such a right was denied and not at all available to the assessee who has filed the return u/s 139(4), this view has been historically held by the Hon’ble Supreme Court in much celebrated case of “Kumar Jagdish Chandra Sinha Vs CIT”.”
The Income Tax Appellate Tribunal (ITAT), New Delhi Bench held that generation of electricity is manufacture, eligible for deduction under Section 32AC of the Income Tax Act, 1961. A Division Bench consisting of Anubhav Sharma, Judicial Member and Shamim Yahya, Accountant Member held that “We note that it is now well settled proposition that generation of electricity amounts to manufacture or production of any article or they qualifying for deduction u/s 32AC.”
The Income Tax Appellate Tribunal (ITAT), Pune Bench dismissed appeal filed as there was ex facie delay in depositing TDS within due date. The Bench consisting of S S Viswanethra Ravi, Judicial Member and G D Padmahshali, Accountant Member held that “in the present impugned case, it remained an undisputed fact that, the appellant after deducting the tax from the payment due to large number of contractors or payees etc., was failed to pay such deducted tax to the credit of Central Government within the due date prescribed in the respective provisions of chapter XVII of the Act, consequently the CPC-TDS initiated the proceedings identifying the delays in payment of deducted tax on the basis of information supplied by the appellant while filing the respective TDS returns, more particularly ‘Form No 26Q’ quarterly returns and considering the online representation, e-processed the TDS- returs.’’
The Chandigarh bench of the Income Tax Appellate Tribunal (ITAT), has held that the filing of TDS Statement in form would constitute a mere inadvertent error and the department cannot impose late fee under section 234E of the Income Tax Act, 1961 in such cases. Ruling in favor of the assessee, the Tribunal held that “It is only l that it was due to inadvertent error that the TDS statement was filed in the wrong Form. Had it not been so, there would not have been any question of levy of interest u/s 234E of the Act, which was deleted by the Ld. CIT(A) himself.”
The Income Tax Appellate Tribunal (ITAT), Bangalore deleted addition on reduction of bad debts from Sundry Receivables and debited to Profit and Loss account thereby granting Relief to Bosch Limited. A Division Bench consisting of N V Vasudevan, Vice President and Padmavathy S, Accountant Member held that “From the perusal of the facts it is noticed that the assessee has reduced the provision for bad debts from Sundry Receivables and the same is debited to the Profit & Loss account. Therefore, respectfully following the decision of the coordinate Bench, we direct the AO to delete the impugned disallowance.”
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that depreciation is allowable u/s 11(6) when cost of fixed assets is not claimed application of income. A Coram of Shri B.R. Baskaran (AM) & Shri Rahul Chaudhary (JM) noticed that the AO has disallowed the claim of depreciation as per the mandate of provisions of sec.11(6) of the Act. It was observed that the responsibility to show that the provisions of sec.11(6) do not apply to the assessee, shall lie upon the shoulders of the assessee.
The Income Tax Appellate Tribunal (ITAT), Jaipur Bench deleted penalty as the Capital gain from sale of immovable property below taxable limit. A Single Bench of the Tribunal consisting of Sandeep Gosain, Judicial Member held that “ It is also noted from the record that the assessee is not having any taxable income and the AO has not given the benefit of indexed cost of acquisition and indexed cost of improvement on the immovable property in question and thus in that eventuality the capital gain arose on the sale of immovable property would have been below taxable limit. While giving benefit of the same, the Bench deletes the penalty levied by the AO of Rs.5,000/-u/s 271F of the Act.”
The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has recently, in an appeal filed before it, held that copyright license fee/ royalty distributed amongst the members of a company are not taxable at the hands of the company.
While allowing a departmental appeal, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the term “purchase on credit” shall be included within the meaning of “unexplained cash credit” under section 68 of the Income Tax Act, 1961. Upholding the addition, the Tribunal held that “A lot of emphasis is then placed on the fact that section 68 is titled ‘cash credit’ and, therefore, purchases on credits cannot be covered by this section. This plea is also ex-facie incorrect as wordings of Section 68, as we have noted above, are categorical, and these words cover any unexplained credit in the books of accounts.”
The Income Tax Appellate Tribunal (ITAT), New Delhi Bench deleted disallowance of Rupees 1 Lakh on account of democratization of premium of government securities. A Division Bench consisting of Dr BRR Kumar, Accountant Member and Yogesh Kumar US, Judicial Member held that “Therefore, by considering the facts and circumstances of the case, in our opinion, the disallowance of Rs. 1,92,041/- on account of democratization of premium of government securities is deserves to be deleted.”
The Income Tax Appellate Tribunal (ITAT), Pune Bench refused to condone delay of 239 days as there was due knowledge of outcome for withdrawal application tendered before First Appellate Authority (FAA). A Bench consisting of S S Viswanethra Ravi, Judicial Member and G D Padmahshali, Accountant Member held that “It is significant to note that applicants are not rustic, ignorant villagers; they constitute a corporal body and managed by board with educated representatives besides equipping themselves with expert professionals who know well where the appellant’s interest lies. Since the appellant with the due knowledge of outcome of withdrawal application tendered before FAA, did not bother for its own interest and rights and slept over for long period without any cogent and convincing justification, therefore, in the absence of cogent reasons to condone enormous delay of 239 days in filing appeal, the petition for delay condonation stands rejected, we therefore do not express any opinion on merits of the case.”
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that notice u/s 143(2) served on wrong address invalidates the assessment Order. A Coram of Shri G S Pannu, president and Shri Vikas Awasthy, judicial member observed that the service of notice issued under Section 143(2) of the Act directly by affixture and on an address on which the assessee had never resided or carried its business is not valid. No service of notice is issued under section 143(2) of the Act on the assessee. Assessment under section 143(3) made without notice under section 143(2) of the Act suffers from jurisdictional defect.
In a recent ruling, the Income Tax Appellate Tribunal (ITAT), Kolkata bench, while considering an issue of disallowance under Section 40(b)(v) of the Income Tax Act, 1961, has observed that the remuneration including bonus to the partners were duly supported by the partnership deed and therefore, the disallowance shall be re-verified. Concluding the order, the Tribunal held that “we, in the interest of justice and being fair to both the parties, are of the considered view that the issue needs to be restored to ld. CIT(A). The assessee has filed various documents before us in support of its claim of bonus of Rs. 16,38,664/-. We direct the assessee to place all these documents before ld. CIT(A) who shall adjudicate the issue in light of the same and pass a speaking order in accordance with law. Needless to mention that proper opportunity of being heard should be provided to the assessee.”
The Income Tax Appellate Tribunal (ITAT), Chennai Bench, has recently, in an appeal filed before it, held that no legal or factual issue on merits can be argued or re- argued while considering rectification application.
Payments made as expense onsite project to the third party vendors not liable to deduct tax at source, disallowance made u/s 40(a)(i) not permissible, the Bangalore the Income Tax Appellate Tribunal (ITAT)has held as above. It was held by the Tribunal that the impugned payments are not fees for technical services and not business income taxable in India. There is no disallowance warranted u/s. 40(a)(i) for non-deduction of tax at source by the assessee. The appeal filed by the revenue got dismissed.
The Income Tax Appellate Authority at Chennai has held that, the disallowance made by the Assessing Officer (AO) and as confirmed by Commissioner of Income Tax (Appeals) [CIT(A)] is not sustainable in law and the same is liable to be deleted as the deductions are made for Research and Development Expenses of a new branch of business amounting to revenue expenditures. In regard to the deduction under Section 37(1) for scientific research, the order relied on by the revenue, DCIT V/s Bharat Biotech International Ltd (2014) was observed to be amended for the application in Section 37(1) in favour of the assessee. It was thus held that “the disallowance as made by Ld. AO and as confirmed by Ld. CIT(A) is not sustainable in law and the same is liable to be deleted.” Subsequently, the Assessing Officer (AO) was directed to recompute the income of the assessee, M/s Aban Infrastructure Ltd.
The Income Tax Appellate Tribunal (ITAT), New Delhi Bench deleted penalty and held that setting aside of assessment by citing jurisdictional defect is technical error. The assessee in the present appeal is Gungun Gold Infra Pvt. Ltd. The Division Bench of the Tribunal consisting of N K Billaiya, Accountant Member and Anubhav Sharma, Judicial Member is of considered opinion that the CIT(A) had fallen an error in setting aside the assessment order merely by citing jurisdictional defect in recording of reasons and issuance of notice u/s 147or 148 of the Act.
The Income Tax Appellate Tribunal (ITAT), has recently, in an appeal filed before it, upheld disallowance on account of non- submission of proof of TDS deducted while claiming freight and carriage charges.
Assessing Officer allowed the Income Tax deduction in the form of amortization of premium with due verification, and The Tribunal held that the decision of the ld. Pr. CIT for treating the assessment order as erroneous as well as prejudicial to the interest of the revenue is not justified and set aside the order passed u/s 263 of the income tax Act. The appeal of the assessee was allowed.
The Banglore Bench of the Income Tax Appellate Tribunal (ITAT), recently deleted the penalty imposed under Section 271D of the Income Tax Act, 1961 as the revenue could not show sufficient reasons to prove tax evasion attempt. It was observed by the Tribunal comprising Judicial Member George George K and Accountant Member Laxmi Prasad Sahu that, “the intention of the assessee was not to defraud the revenue by violating the provisions of the Act or by evading taxes. The same is evident from the fact that the cash receipts have been duly disclosed in the sale deed as well as the income tax returns. The copies of the sale deeds are enclosed in the paper book filed by the assessee”, and in favour of the appellant-assessee, it was held that the penalty was unjustified in law and deleted the penalty.
The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has allowed income tax deduction in respect of the expenditure towards the issue of ESOP to the employees at discount rates. Allowing the claim of the assessee, the Tribunal held that “By no stretch of imagination, we can describe such a discount as either a short capital receipt or a capital expenditure. It is nothing but the employees cost incurred by the company. The substance of this transaction is disbursing compensation to the employees for their services, for which the form of issuing shares at a discounted premium is adopted. The said decision has been upheld by the Hon’ble Karnataka High Court in the case of BIOCON Ltd. (supra). Therefore the issue in so far as this Bench of ITAT is concerned is concluded by the decision of the Hon’ble Jurisdictional High Court. Pendency of identical issue before the Hon’ble Supreme Court cannot be thebasis not to follow decision of jurisdictional High Court. In the present case, there is no dispute that the liability has accrued to the assessee during the previous year. There is no reason why this expenditure should not be considered as expenditure wholly and exclusively incurred for the purpose of business of the assessee.’’
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