ITAT Weekly Round-Up

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 January 14 to January 21, 2023

No Income Tax Addition When Expenses are Shown under WIP and not added in Trading Account: ITAT - 2023 TAXSCAN (168)

In,Vipin Madanlal Thapar 502 vs DCIT, The Mumbai Bench of  Income Tax Appellate Tribunal (ITAT), consisting of Amit Shukla, Judicial Member and Amarjit Singh, Accountant Member held that no income tax addition can be made when expenses are shown under Work in Progress (WIP) and not added in trading account.

 Return of income declaring total income was filed by the assessee, Vipin Madanlal Thapar. The case was subject to scrutiny assessment and notice under Section 143(2) of the Income Tax Act was issued. The assessee was a proprietor of Shubham Builder and Developers and a director in Swaraj Formulation Pvt Ltd.

The Bench observed that “We have considered the judicial pronouncements referred by the Counsel wherein it is held that since the expenses were shown by the assessee under the head work in progress and has not been reflected in the trading account, therefore, no addition can be made.”

ITAT invalidates Assessment Order in Name of Non-Existent Entity:ITAT-2023 TAXSCAN(169)

 In the case Motorola Solutions India Pvt. Ltd. vs ACIT,The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT), invalidated the assessment order in the name of a non-existent entity. The Counsel for the assessee submitted that as per the order passed by the High Court of Punjab & Haryana, M/s. Motorola India Pvt. Ltd., as it was then, merged with M/s. Motorola Solutions India Pvt Ltd., the present assessee.

 The Bench comprising GS Pannu, President and Saktijit Dey, Judicial Member observed that “Thus, in our view, in the facts of the present case, the ratio laid down by the Supreme Court in case of PCIT Vs. Suzuki India Ltd would squarely apply. Thus, respectfully applying the ratio laid down by the Hon’ble Supreme Court in case of PCIT Vs. Maruti Suzuki India Ltd, we hold that the assessment order, having been passed in the name of a non-existent entity, is invalid.”

PCIT cannot order conditional approval u/s 80G: ITAT-2023 TAXSCAN (170)

The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ), ruled that the Principal Commissioner of Income Tax ( PCIT ) cannot order conditional approval under Section 80G of the Income Tax Act, 1961. M/s. Lady Tata Memorial Trust and M/s. Lady Meherbai D. Tata Education Trust, the assessees being a charitable trust sought to grant the registration with effect from 23.03.2022 to A.Y. 2024-25 under section 80G of the Income Tax Act, 1961 for the assessment year 2022-23 after complying with the requisite formalities.

A Bench comprising Kuldip Singh, Judicial Member and S Rifaur Rahman, Accountant Member noted that “Consequently, approval granted by the PCIT/CIT under section 80G of the Act to the assessees is made absolute sans conditions of the impugned order. Hence, both the appeals filed by the assessee are allowed.

Income earned by Builder from letting out of Property is assessable under head of ‘Income from Business’ when objective in MOA is letting out of Property: ITAT -2023 TAXSCAN (171)

 In,ACIT vs Tupelo Builders Pvt. Ltd,The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has held that income earned by the Builder from letting out of the property is assessable under the heading of “Income from Business” when the objective in MOA is letting out of Property.

  M/s Tupelo Builders Pvt. LtdThe Assessee a Private Limited Company e-filed its original return of income for the assessment year under consideration on 19.09.2015 declaring a loss of Rs.7,07,00,678/- under the head “Income from Business”. 

 A Coram comprising of Shri G S Pannu, President and Shri Challa Nagendra Prasad, Judicial Member observed that as from the MOA, it was evident that the main objects of the assessee company are to construct, acquire hold buildings, tenements and such other movable and immovable property and to rent let on hire and managed immovable property.

Relief to Vinati Organics: ITAT confirms Treating Sale Tax Subsidy received as Capital Receipt: ITAT -2023 TAXSCAN (172)

 In,Deputy Commissioner of Income Tax vs M/s Vinati Organics Ltd 1102,

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) granted relief to M/s Vinati Organics Ltd, the assessee and confirmed treating sale tax subsidy received as capital receipt

 The return of income declaring total income of Rs.71 crores was filed and the case was subject to scrutiny assessment and notice under Section 143(2) of the Income Tax Act was issued.

 Dismissing the appeal filed by the Revenue a Bench comprising Amit Shukla, Judicial Member and Amarjit Singh, Accountant Member observed that during the course of appellate proceedings the Counsel also submitted that in subsequent year assessment year 2013- 14 the CIT(A) allowed the appeal of the assessee treating sale tax subsidy as capital receipt and department has not raised any ground before the ITAT.

Compensation on compulsory acquisition of land is exempted u/s 10(37): ITAT deletes income tax    addition: ITAT -2023 TAXSCAN (173)

In,Kishor Ganpatrao Karande vs The Income Tax Officer,The Pune bench of the Income Tax Appellate Tribunal (ITAT) deleted the income tax addition as the compensation on compulsory acquisition of land is exempted under section 10(37) of the Income Tax Act,1961.

A Coram comprising of Shri S S Viswanethra Ravi, Judicial Member observed that the assessee was into agricultural activity by sowing Bajara in his land for F.Y. 2008-09 and the same has been shown as paid in the revenue records in 7/12 extract due to lack of rain and drought.  The assessee establishes the reasons for classification as barren land due to the non-availability of irrigation facilities.  Therefore, the assessee is entitled to claim an exemption under section 10(37) of the Income Tax Act.

EHL Ltd and The Lalit Golf and Spa Resort fails to respond notice u/s 133(6): ITAT to deletes Addition on Marketing Expenses :ITAT- 2023 TAXSCAN (174)

in,Sonicwall Technology System India Pvt. Ltd vs Asstt. Commissioner of Income,The Mumbai Income Tax Appellate Tribunal (ITAT) instructed the Assessing Officer (AO) to delete the addition of Rs. 22,43,401 made on marketing expenses, because of 2 out of 17 parties failed to respond to the notice sent under section 133(6) of the Income Tax Act.

The well-known hotel chains India M/s EHL Ltd and The Lalit Golf & Spa Resort are the 2 parties who failed to respond to the notice.

The bench of Prashant Maharishi (Accountant Member) and Sandeep Singh Karhail (Judicial Member) observed that  it is no doubt true that payment through the bank channel is not conclusive proof of the transaction.

The bench of Prashant Maharishi (Accountant Member) and Sandeep Singh Karhail (Judicial Member) observed that  it is no doubt true that payment through the bank channel is not conclusive proof of the transaction.

Company cannot have “Salary Income”: ITAT deletes Addition by NFAC: ITAT-2023 TAXSCAN (175)

In Ducere Technologies Private Limited vs Deputy Commissioner of Income Tax,The Income Tax Appellate Tribunal ( ITAT ), Hyderabad bench has deleted an addition by the National Faceless Assessment Centre ( NFAC ) by holding that the “Company” cannot have salary income under the provisions of the Income Tax Act, 1961.

  Shri K. Narasimha Chary, Judicial Member observed that “It is therefore clear that the assessee is not disputing the additions made but only prays for verification of the brought forward losses for the purpose of setting-off the additions now made against such losses. Since the assessee is a company as is established by the 143(1) intimation, the question of assessing its income under the head ‘salary’ does not arise. Impugned order is, therefore, liable to be set aside. The aspect of availability of brought forward losses needs verification at the end of the 2019-20 resulting in raising demand to Rs. 2,55,650/-.”

Rule 128(9) Disallowing FTC in case of Delay in filing Form 67 Contrary to Indo-USA DTAA, : ITAT-2023 TAXSCAN (176)

In Purushothama Reddy Vankireddy vs ADIT, The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) has held that Rule 128(9) of the Income Tax Rules regarding the disallowance of foreign tax credit (FTC) in cases where filing Form 67 is delayed is in contradiction with the double taxation avoidance agreement (DTAA) between India and USA and shall be read down.

A bench of Shri Rama Kanta Panda, Accountant Member & Shri K.Narasimha Chary, Judicial Member observed that the Apex Court including the case in Union of India Vs. Azadi Bachao Andolan, reached a conclusion that since Rule 128(9) of the Rules does not provide for disallowance of FTC in the case of delay in filing Form 67 and such filing within the time allowed for filing the return of income under section 139(1) of the Act is only directory, since DTAA overrides the Act, and the Rules cannot be contrary to the Act.

Relying on the above decision, the ITAT held that “We find from Article 25(2)(a) of the DTAA that where a resident of India derives income which, in accordance with the provisions of the convention, may be taxed in the United States, India shall allow as a deduction from the tax on the income of the resident an amount equal to the income tax paid, paid in the United States, whether directly or by deduction.

Set Back to Toyota Kirloskar: ITAT rejects Depreciation on provisional basis:ITAT-2023 TAXSCAN (177)

In M/s. Toyota Kirloskar Motor (P) Ltd. vs ACIT LTU Circle-1 The Income Tax Appellate Tribunal (ITAT), Bangalore Bench comprising Beena Pillai, Judicial Member and Laxmi Prasad Sahu, Accountant Member, in a major setback to M/s. Toyota Kirloskar Motor (P) Ltd, rejected the depreciation claim on a provisional basis.

The Bench observed that “Accordingly, we uphold the order of the lower authorities. The assessee admitted that there was excess claim of depreciation on the provisions created, which has been reversed subsequently. Considering the totality of the facts and circumstances of the case, we uphold the order of the revenue authorities.

Difference b/w Sale Consideration and Stamp Duty Valuation is Less than 10%: ITAT deletes Addition u/s 50C: ITAT -2023 TAXSCAN (178)

In Deputy Commissioner of Income Tax vs M/s. S.G.P. Exim Pvt Ltd,The Chennai bench of the Income Tax Appellate Tribunal (ITAT) deleted the addition under section 50C of the Income Tax Act,1961 as the difference between the Sale Consideration and Stamp Duty Valuation is Less thaThe revenue challenged the order passed by the Commissioner of Income Tax (Appeals) which deletes the disallowance of interest expenses of Rs. 6,29,504/- which was decided in favour of the assessee.

It was observed that as per the 3rd proviso to section 50C(1) of the Act, inserted by the Financial Act, 2018 w.e.f. 01.04.2019, if difference the between stated consideration and guideline value does not exceed 10% of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall be deemed to be the full value of consideration.

Business support services is not ‘Technical service’ as ‘make available’ clause not satisfied under DTAA: ITAT deletes addition: ITAT -2023 TAXSCAN (179)

In Michael Page International Pte Limited vs Deputy Commissioner of Income-tax,The Mumbai bench of Income Tax Appellate Tribunal ( ITAT ) deleted the addition made by the Assessing Officer (AO) stating addition made on account of fee for technical services is unsustainable.

The assessee Michael Page International Pvt Limited filed  the appeal against the assessment order passed under section 143(3) read with section 144C(13) of the Income Tax Act, 1961 for the A.Y. 2018-19.

The bench observed that the AO held that the fees paid by Indian entities to the assessee is covered under “fees for included services” as the “make available” clause is duly satisfied.

Relief to Karnataka Vikas Grameena Bank: ITAT allows Deduction on Income from Co-operative Society :ITAT -2023 TAXSCAN (180)

In Karnataka Vikas Grameena Bank vs Asst. Commissioner of Income Tax,The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT), granted relief to Karnataka Vikas Grameena Bank and allowed deduction on income from cooperative society.

The assessee is Karnataka Vikas Grameena Bank and the Counsel for the assessee also argued on the legal issue in regard to eligibility of claiming deduction under Section 80P of the Income Tax Act by holding that the assessee is not cooperative bank and it is a cooperative society, therefore, the Section 80P(iv) will not affect the eligibility for claiming deduction under Section 80P(2a)(i) of the Income Tax Act on the profits earned

 A Coram comprising George George K, Judicial Member and Laxmi Prasad Sahu, Accountant Member observed that “The assessee is a regional rural bank and formed with the merging of four regional banks into a single regional rural bank. As per the Regional Rural Bank Act 1976 notification dated 12/09/2005, the shareholders were the Central Government, State Government and sponsored Bank.”

TDS Not Applicable to Payments made to Non-Residents:ITAT -2023 TAXSCAN (181)

In Turbo Energy Private Limited vs Deputy Commissioner of Income Tax Counsel for Appellant:   Shri. R. Vijayaraghavan,The Income Tax Appellate Tribunal (ITAT) Chennai bench held that Tax Deduction at Source not applicable to payment made to Non-Residents.

  Assessee Turbo Energy Private Limited company is a manufacturer of turbochargers and components for engine application in passenger cars, commercial vehicles, off highway vehicles and industrial engines. After filing the income tax return Assessing officer disallowed additions under section 40(a) (i) of the Income Tax Act 1961 towards logistic service a payment for non-deduction of TDS under section 195 of the Act. Against the order assesse filed appeal before CIT (A).CIT (A) deleted the addition made towards disallowance u/s. 40(a)(i) of the Income Tax Act 1961 for non-deduction of TDS on payment made to non-resident.Aggrieved revenue appeal before ITAT

The ITAT bench comprising G. Manjunatha, Vice President and V. Durga Rao, Judicial Member deleted additions made towards disallowance of payment made to non-resident service providers.

Mere Entry in Books Not a Ground to Delete Addition If Source Not Explained: ITAT -2023 TAXSCAN (182)

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the mere entry in the books of account could not be a ground to delete the addition when the sources were not explained.

The Delhi Bench of B R R Kumar (Accountant Member) and Yogesh Kumar US (Judicial Member) held that the mere reflection of the unexplained cash in the books of accounts in the absence of any supportive documents, could not be a ground for deletion of the addition. The bench set aside the deletion of addition by the Commissioner of Income Tax (Appeals)(CIT(A)) and allowed the appeal.

Warner Bros have No PE in India: ITAT deletes Addition: ITAT-2023 TAXSCAN (183)

In Warner Bros. Distributing Inc C/Of the Act Warner Bros. Pictures India Pvt. Ltd.vs Assistant Commissioner of Income Tax,The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition as Warner Bros had no permanent establishment in India.

The Mumbai Bench of Vikas Avasthy (Judicial Member) and  Gagan Goyal (Accountant Member) observed that  the Indian company who had  obtained the rights were acting independently  and also held that  the assessee could not be said to have any  permanent establishment in India . The bench allowed the appeal and deleted the addition.

Company Audit and AGM on 31st March: ITAT upholds Rejection of Valuation Report Violating Rule 11UA: ITAT -2023 TAXSCAN (184)

In M/s Sagitarius Securities Pvt Ltd vs The I.T.O Ward -22(3), Delhi Bench of Income Tax Appellate Tribunal (ITAT) upheld the rejection of valuation report submitted by the assessee on the grounds that it violated the rule 11UA of Income Tax Rules.

The appeal was preferred against the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] on upholding the addition made by the Assessing Officer (AO) amounting to Rs. 1,49,60,000 under section 56(2)(viib) of the Income Tax Act, 1961.

The bench of Kul Bharat (Judicial Member) and N.k. Billaiya (Accountant Member) found that there is no fault with the AO that the assessee violated the Rule 11UA and shall be entitled to the addition made.

Sale of Unsold Flats by Builder Taxable as “Business Income”:ITAT :ITAT-2023 TAXSCAN (185)

In Dy. Commissioner of Income Tax vs Ashrita Construction Pvt. Ltd, The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT )has held that the income from sale of unsold flats by the builders should be taxable under the head of income from business.

Section 22 of Income Tax Act, 1961 says that the annual value of property consisting of building or land apparent other than property conducting business or profession to which assessee is the owner shall be calculated under the head of income from house property and section 23 deals with the determination of the annual value of the property.

The Income Tax Appellate Bench of Suchitra Kamble (Judicial Member) and Waseem Ahmed (Accountant Member) dismissed the appeal upholding the deletion of addition by the CIT(A) observing that the assessee was a developer and held the unit in questions income from such unit could be taxed only under business income and not under income from house property.

Revision Order without DIN is Invalid:ITAT :ITAT-2023 TAXSCAN (186)

In Shri H K Suresh vs The Principal Commissioner of Income Tax (Central), According to the Income Tax Appellate Tribunal (ITAT) Bangalore bench of George George K. (a judicial member) and Padmavathy S. (an accountant member),a revision order is invalid ,Without a Director Identification Number (DIN).

The appeal was against the order under section 263 of the Income Tax Act, 1961 passed by the Principal Commissioner of Income Tax (PCIT).

The assessee, an individual is a contractor earning business income from contract receipts apart from rental income and interest income and filed return of income Rs. 2,58,15,614 for the A.Y. 2011-12.

The authority noted that it is obvious that neither the section 263 of the Income Tax Act order nor the specific format specified in Paragraph 3 states that the communication is issued manually without a DIN after receiving the required approvals. As a result, they conclude that the challenged order does not conform with paragraphs 2 and 3 of the Central Board of Direct Taxes (CBDT) circular.

Issue Not subject to Limited Scrutiny cannot be raised in Revisionary Proceedings: ITAT-2023 TAXSCAN (187)

In Longia Engineers vs Pr. CIT,the Chandigarh Bench of Income Tax Appellate tribunal ( ITAT )has held that the issue not subjected to limited scrutiny could not be raised in revisionary proceedings

The Chandigarh Bench of Income Tax Appellate Tribunal (ITAT)of Vikram Sing Yadav AM observed that the matters related to wages/labor expenses which were not subjected to the of limited scrutiny could not be raised in revisionary proceedings u/s 263 of the Income Tax Act 1961 for the first time. The bench also observed that the order passed by the AO could not be treated as erroneous and prejudicial to the interest of the Revenue. The bench thereby upheld the decision of the AO and set aside the revision order.

Mere Wrong Mention of TAN in TDS Deposit Challan would not Attract Demand u/s 200A of Income Tax Act: ITAT-2023 TAXSCAN (188)

In ACIT vs TCIL Bina Toll Road Ltd , The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) found that incorrectly entering a Tax Deduction Account Number (TAN) in a Tax Deduction Source (TDS) deposit Challan will not result in a demand under section 200A of the Income Tax Act, 1961.

The appeal was filed by the revenue against the order passed by the CIT(A) arised from the order of Assessing Officer (AO)  under Section 200A(1) of the Income Tax Act, 1961 for the A.Y. 2014-15.

 The assessee, TCIL Bina Toll Road Ltd, a subsidiary of Telecommunication Consultants India Ltd. (TCIL), a Government of India Undertaking under the administrative control of the Ministry of Communication.

The bench of Saktijit Dey (Judicial Member)  and Pradeep Kumar Kedia (Accountant Member) observed that the order of the CIT(A) in granting relief to the assessee is founded on fair play and natural justice.

Delay in filing Form 67 not a reason to deny claim of Foreign Tax Credit under DTAA: ITAT -2023 TAXSCAN (189)

In  Rohan Hattangadi vs CIT,Mumbai Bench of Income Tax Appellate Tribunal (ITAT) ruled that delay in filing the Form 67 was not a reason to deny the claim of the Foreign Tax Credit (FTC) under Double Taxation Avoidance Agreements (DTAA). The appeal was filed by the assessee, Rohan Hattamgdi, challenging the order of the Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (‘NFAC’) passed under section 250 of the Income Tax Act, 1961.

The Tribunal of M. Balaganesh (Accountant Member) and Kavitha Rajagopal (Judicial Member) has held that delay in filing Form No. 67 should not deny the claim of FTC enumerated in the DTAA and the intention of the legislation in the said case has to be construed in a manner which benefits the assessee.

Income Tax Addition against Company based on Statement of Director during Search cannot be Confirmed without Supporting Evidence: ITAT-2023 TAXSCAN (190)

In Dy. Commissioner of Income Tax Central Circle 1(3) vs M/s NIBR Bullion Pvt. Ltd,

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has recently in an appeal filed before it, held that the addition against a company based on the statement of the director during the search, cannot be confirmed without supporting evidence.

The aforesaid observation was made by the Mumbai ITAT when an appeal was preferred before it by the Revenue, as against the order of Commissioner of Income Tax Appeals, Mumbai [CIT(A)], dated 30/05/2011, for the assessment year 2009-10.

Thus dismissing the Revenue’s appeal, the ITAT held: “In the light of the facts of the case, various decisions and CBDT instructions, we see no infirmity in the impugned order granting partial relief to the assessee. Hence, the impugned order is upheld and appeal of the Revenue is dismissed.”

Beneficial Provision of S. 54B of Income Tax Act shall be Interpreted Liberally: ITAT-2023 TAXSCAN (191)

In Ramdas Pandharinath Kale vs Income Tax Officer,The Income Tax Appellate Tribunal, Pune Bench, has recently, in an appeal filed before it, held that the beneficial provision of section 54 B of the Income Tax Act shall be interpreted liberally.

The aforesaid observation was made by the Pune ITAT when an appeal was preferred before it by the assessee, an HUF named Ramdas Pandharinath Kale, as against the order dated 17-12-2018, passed by the Commissioner of Income Tax (Appeals), Pune [CIT(A)], for the assessment year 2013-14.

Thus, allowing the assessee’s appeal the Pune ITAT held: “Following the order of Surat Bench of Tribunal in the case of Babubhai Arjanbhai Kanani (HUF), I hold that the assessee is entitled to claim deduction u/s. 54B of the Income Tax Act and that the enhancement made by the CIT(A) is not justified. Thus, the order of AO is restored in allowing deduction u/s. 54B of the Income Tax Act to an extent of Rs.80,85,572/”.

Advertisement Expenses Not Allowable without Valid Agreement for Transfer of Dealership: ITAT-2023 TAXSCAN (192)

In M/s. Miracle Cars India Pvt Ltd. vs Deputy Commissioner of Income Tax,The Income Tax Appellate Tribunal (ITAT), Chennai, has recently, in an appeal filed before it, held that advertisement expenses are not allowable without a valid agreement for the transfer of the dealership.

The aforesaid observation was made by the Chennai ITAT when an appeal was preferred before it by the assessee, M/s. Miracle Cars India Pvt Ltd., as against the order passed by the learned Commissioner of Income Tax (Appeals), Chennai, dated 03.01.2022, pertaining to the assessment year 2012-13.

THe ITAT Bench consists of V. Durga  Rao, the Judicial Member, and G. Manjulatha, the Accountant Member observed : “We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The Ld. Counsel for the assessee rested his arguments on the basis of agreement between the appellant and M/s. DRS Industries Ltd., and argued that the assessee has incurred advertisement expenses, because it was supposed to takeover dealership business from M/s. DRS Industries Ltd.”

Revisional Authority shall Avoid the attitude of “I have the Power and I shall exercise”:ITAT-2023 TAXSCAN (193)

In Smt. Nagina Kochar vs The PCIT-1,The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, has recently in an appeal filed before it, held that the revisional authority shall avoid the attitude of “I have the power and I shall exercise”.

The aforesaid observation was made by the Chandigarh ITAT, when an appeal was preferred before it by an assessee, wherein the correctness of the order dated 26.03.2021, of the Pr .CIT, Chandigarh, pertaining to the assessment year 2016-17 had been assailed, on the grounds that the Principal Commissioner of Income Tax has wrongly assumed jurisdiction under section 263 of the Income Tax Act, to set aside the assessment order dated 26.11.2018 passed by the Assessing Officer, in as much as the order is neither erroneous nor prejudicial to the interest of Revenue,  that as such the assumption of jurisdiction under section 263 of the Income Tax Act is beyond his competence, and further that the  Principal Commissioner of Income Tax, has erred in failing to consider the various replies and submissions placed on record in proceedings before her in the correct perspective, which is arbitrary and unjustified.

Rental Income is Inseparably connected with Business of Cargo Handling Services: ITAT Allows Income Tax Deduction u/s. 80IA ITAT-2023 TAXSCAN (194)

In  Menzies Aviation Bobba (Bangalore) Pvt. Ltd. vs Assistant Commissioner of Income Tax,In a significant ruling, the Income Tax Appellate Tribunal ( ITAT ), Bangalore bench has held that the rental income which is inseparably connected with the business of cargo handling services shall be eligible for income tax deduction under section 80IA of the Income Tax Act, 1961

ITAT held  that the rental income derived by the assessee from Cargo Agents, Airlines, Banks etc., is derived from the cargo business and eligible for deduction u/s. 80IA,”

Relief to AstraZeneca: ITAT restores matter on Disallowance of Contribution towards Gratuity Funds:ITAT-2023 TAXSCAN (195)

In M/s. AstraZeneca Pharma India Ltd vs DCIT,The Bengaluru Bench of the Income Tax Appellate Tribunal (ITAT), restored matters on disallowance of contribution towards gratuity funds, thereby granting relief to M/s. AstraZeneca Pharma India Ltd, the assessee.

The assessee incurred Rs.4 crores towards contribution to the gratuity fund and paid to the said fund before the due date for filing return of income. The same was also disclosed in the tax audit report. It was therefore submitted that the entire amount is eligible for deduction u/s. 36(1)(va) of the Income Tax Act.

The Bench comprising Beena Pillai, Judicial Member and Padmavathy S, Accountant Member noted that “The AO has made disallowance considering the provisions of Section 144C(8) of the Act and sustained the disallowance. Since the AO has not verified the details of gratuity based on the details furnished by the assessee, we remit the issue back to the AO with a direction to examine the details of payment of gratuity and decide the allowability accordingly.”

Disallowance u/s. 40(a)(i) cannot be Invoked in view of Retrospective Amendment to S. 195 Imposing TDS on Payment to Non-Residents :ITAT-2023 TAXSCAN (196)

In  Allsec Technologies Ltd. Vs DCIT,The Income Tax Appellate Tribunal (ITAT) of Chennai Bench ruled that the disallowance imposed under Section 40(a)(i) of the Income Tax Act, 1961, prohibiting Tax Deduction Source (TDS) on payments to Non-Residents, cannot be applied retroactively.

The tribunal referred to the case of M/s. TVS Electronics Ltd. v. ACIT, wherein, the Tribunal under identical facts held that the assessee cannot be fastened liability on the basis of subsequent amendment to the law with retrospective effect, because the assessee cannot be expected to do impossibility of performance and thus, for non-deduction of TDS under section 195 of IT Act, payment made to non-residents, cannot be disallowed under section 40(a)(i) of IT Act. The bench of Mahavir Singh (Vice President) and Manoj Kumar Aggarwal (Accountant member) dismissed the appeal filed by the respondent and stated that the disallowance made under section 40(a)(i) of Income Tax Act would be unwarranted.

No TDS Default in Payment of Rent & Maintenance Charges to Different Entities under Single Agreement: ITAT-2023 TAXSCAN (197)

In HV Global Pvt. Ltd vs ITO,The Delhi Bench of Income Tax Appellate Tribunal (ITAT)has held that the payment of rent and maintenance charges to different entities under a single agreement could not be treated as Tax Deduction at Source (TDS) default.

Section 201 (1) of the Income Tax Act 1961 deals with the consequence of non-payment of TDS, that is if any person failed to deduct TDS or failed to pay to the government then such person shall be deemed to be assessee default and he shall be liable to pay penalty unless AO is not satisfied with the reasonableness or sufficient ground for such failure. Section 201(1A) says that such person under (1) shall be liable to pay a simple interest on the amount failed to pay or deduct.

The Delhi Bench of CM Garage (Judicial Member) and Pradip Kumar Kedia (Accountant Member) observed that the assessee couldn't be made liable under the provisions of subsections (1) and (1A) of section 201 of the Income Tax Act 1961 as the payments of rent and common area maintenance charges had been made to distinct entities/companies.

Repayment of Loan in Cash in excess of Rs.20,000: ITAT upholds Penalty u/s 271E of Income Tax Act :ITAT-2023 TAXSCAN (198)

In Kacharu Madhukar Shinde vs The Joint Commissioner of Income Tax,The Pune Bench of Income Tax Appellate Tribunal (ITAT) has upheld the penalty imposed under Section 271E as the repayment of loan in cash had exceeded Rs. 20,000.

The Pune Bench of Dipak P Rippotte (Accountant Member) and S S Godara(Judicial Member) held that the assessee was liable for penalty u/s 271E and uphold the penalty u/s 271E as the assessee had repaid loan in cash in excess of Rs.20,000/- and also had not submitted any sufficient cause for such payment. The bench dismissed the appeal of the assessee.

Scholarship to Student Not Associated with Company for Any Commercial or Business Purpose Not Allowable as Deduction:ITAT-2023 TAXSCAN (199)

In VIC Enterprises Pvt. Ltd vs ACIT ,The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the scholarship to students not associated with the company for any commercial or business purpose would not be allowed as deduction.

The Delhi Bench of B R R Kumar (Accountant Member) and Yogesh Kumar US (Judicial Member) observed that the incumbent student was neither an employee nor associated with the company for any commercial or business purpose. The bench also observed that the expediency of sponsoring the student had not been brought on record nor the student had contributed in any manner for augmenting, contributing to the business of the assessee.

SOR Arrangement not comes in ambit of ‘Work Contract’ u/s 194C, No TDS:ITAT: ITAT-2023 TAXSCAN (200)

In ACIT vs M/s Shoppers Stop Limited,Income Tax Appellate Tribunal (ITAT) Mumbai Bench ruled that Sales or Return (SOS) agreements did not fall within the ambit of Section 194C of the Income Tax Act, 1961 and therefore the assessee did not have any liability to deduct tax at source on such payments under section 194C of Income Tax Act.

The AO noted that the term outlets model was ’Sales or Return‘ being used by the assessee for their business misleading and was an attempt to evade the rigours of Section 194C of the Income Tax Act. According to the AO, these facts indicated that the contract between the assessee and vendors were ‘contracts of work & labour’ not ‘contracts of supply’. The bench of Amarjit Singh (Accountant Member) and Aby T. Varkey (Judicial Member) uphold the decision of CIT(A).

S.50C (1) cannot be invoked in case of Transfer of Leasehold Right: ITAT: ITAT-2023 TAXSCAN (201)

   In Shri Narendra Shantikumar Firodia vs Dy. Commissioner of Income Tax,The Income Tax appellate tribunal (ITAT) in a case recently held that Section 50C (1) of the Income Tax Act 1961 cannot be invoked in case of transfer of leasehold rights.

As per section 50C (1) of the Income Tax Act 1961 refer that an assessee received any consideration by way of transfer of asset it may be land, or building, or both in such a case the value of the asset is less than that assessed by the authority of state government for the purpose of payment of stamp duty, the assessed value is consider as the full value of the consideration in case of result of the above transfer.

The Division bench of ITAT Pune comprising G. D. Padmahshali, Accountant Member, and SS Viswanethra Ravi, Judicial Member, allowed the appeal and held that the transaction of transfer of leasehold right in question did not warrant invoking of section 50C(1) of the Income Tax Act 1961.

ITAT Allows NRI to Rectify Income Tax Return after 7 Years as Tax Benefit was Not Claimed by Mistake:ITAT-2023 TAXSCAN (202)

InPrasanta Kumar Mishra vs ACIT,Income Tax Appellate Tribunal (ITAT) recently allowed non -resident Indian (NRI) vto rectify Income Tax Return after seven years as tax benefit was not claimed by mistake.

the ITAT bench allowed the appeal filed by the assessee and held that the “Assessing Officer is at liberty to examine whether the assessee was NRI during the relevant point of time and whether he is entitled to the benefit of exemption under section 5 (1) (c) read with section 6 of the Income Tax Act 1961”.

AO shall consider Valid Revised Return while Completing Assessment:ITAT :ITAT-2023 TAXSCAN (203)

In Rohit Infra Projects Pvt.

Ltd vs DCIT, Central Circle-2 B, The Mumbai Bench of Income Tax Appellate Tribunal (ITAT)has held that the Assessing Officer should consider a valid revised return while completing the assessment.

The Bench of Gagan Goyal (Accountant Member) and Aby T Varkey (Judicial Member) held that the Assessing Officer had erred in not considering the revised return filed by the assessing officer. The bench allowed the petition and seaside the impugned order directing the Assessing officer to make fresh assessment considering the revised return. 

Payment by Oxford University Press towards “School Support Services” for Referring Students constitutes “Brokerage”, TDS Applicable:ITAT :ITAT-2023 TAXSCAN (204)

In Oxford University Press vs DCIT, Income Tax Appellate Tribunal (ITAT), Mumbai Bench recently held that payment by Oxford University press towards school support services for referring students constitutes brokerage.

the ITAT bench comprising M. Balaganesh (Accountant Member) and Kavitha Rajagopal (Judicial Member) and conclude that the assessee is bound to deduct tax at source, failure of which would be invited with disallowance under section 40(a) (ia) of the Income Tax 1961.

Section 194H of the Income Tax Act 1961 deals that Tax Deduction at Source should be levied on the earnings received as commission or brokerage. Section 40(a) (ia) of the Income Tax 1961 expenditure mentioned under the heads of TDS, such amount paid and deducted profit and loss account of resident would not be allowed as deduction while computing the income under the heads of  Profit and Loss account.

Capital Gain Exemption u/s 54 Not Allowable in cases where Builder has not Started Construction:ITAT :ITAT-2023 TAXSCAN (205)

IN Sh. Vijay Sharma vs ACIT, Circle-II,The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has recently held that capital gain exemption under Section 54 is not allowable in cases where the builder has not started construction of house.

It was also contended that the Commissioner of Income Tax (Appeals) [CIT(A)] has wrongly concluded that it is a case where the developer was not having necessary approval from the government to construct residential units and that it is not a case that the assessee was not offered possession.

The approval of the zonal plan and delivery of possession happened by 18.08.2022 whereas the land was purchased on 17.12.2014. Section 54 of the Income Tax Act allows for an exemption on long-term capital gains tax for individuals and HUF (Hindu Undivided Family) if the proceeds from the sale of a long-term capital asset, such as a residential property, are invested in the purchase or construction of another residential property within a specified time frame.

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