ITAT Weekly Round-Up

This weekly summary analyses the major Income Tax Appellate Tribunal (ITAT) stories that were covered by Taxscan.in the week before, from April 30th to May 6 2023.

No TDS u/s 194H of Income Tax Act for Expenditure claimed to have Been Debited To Profit & Loss Account Under Head “Commission”: Itat- Shri Ketan Sahebrao Purkar Vs Ito 2023 TAXSCAN (ITAT) 917

The Pune Bench of Inturi Rama Rao, (Accountant Member) Income Tax Appellate Tribunal (ITAT), observed that no Tax Deduction at Source (TDS) deduction under Section 194H of the Income Tax Act, 1961 for expenditure claimed to have been debited to profit and loss account under the head “commission”.

The Tribunal determined that “The appellant neither paid nor credited such income to the account of the payee. The Jurisdictional High Court in the case of Super Religare Laboratories Ltd, held that there is no obligation to deduct tax at source under Section 194H of the Income Tax Act for commission expenditure.

ITAT dismisses Appeal on Lapse of more than 2 years to Substitute Name of Legal Heirs for Deceased Assessee - Shri Kabeer Khan vs Income Tax Officer 2023 TAXSCAN (ITAT) 912

The Hyderabad Bench of R.K. Panda, Accountant Member and Laliet Kumar, Judicial Member Income Tax Appellate Tribunal (ITAT), dismissed an appeal stating lapse of more than 2 years to substitute the name of legal heirs for the deceased assessee.

The Coram noted that “Since the legal heirs of the deceased assessee in the instant case have not taken any steps to file the revised Form No.36, duly filled up giving the revised name of the party duly verified in the manner as prescribed in the rules, therefore, the present appeal cannot be proceeded with in the absence of any of the above said requisite information/form.

“Reasons are life blood for any judicial/quasi-judicial order”: ITAT orders fresh adjudication on disallowance of 30% of ESOP cost - Nuvama Wealth and Investment Limited vs ACIT 2023 TAXSCAN (ITAT) 910

The Income Tax Appellate Tribunal (ITAT) Hyderabad Bench of RamaKanta Panda, Accountant Member and K Narasimha Chary, Judicial Member ordered fresh adjudication in the matter of disallowance of 30% of Employee Stock Ownership Plan (ESOP) cost and observed that reasons are the lifeblood for any judicial/quasi-judicial order without which it would be difficult for the appellate authority to sustain or overrule the findings reached by the authorities.

The Tribunal of observed that “We are of the considered opinion that the exercise, if any, done by the CIT(A) in formulating the opinion that various contentions raised by the assessee to the effect that ESOP expenditure is a revenue expenditure allowable in the hands of the employer are not acceptable is not reflected on the face of the order.”

Purchase of Furniture, AC to Make New House Habitable Eligible for Capital Gain Deduction: ITAT - Mayur Muljibhai Madhvani vs Income Tax Officer 2023 TAXSCAN (ITAT) 908

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT), Mahavir Singh, Vice President and Manjunatha G, Accountant Member observed that the purchase of Furniture, Air Conditioner to make a new house habitable is eligible for capital gain deduction.

The Tribunal observed that “The assessee has purchased a property and spent various expenditures to make the house habitable. The assessee has incurred an amount for purchase of Air conditioner. The assessee had also incurred expenditure for furnishing the house and spent amount toward purchase of light fittings. The AO and CIT(A) completely erred in classifying said items as personal effects and disallowed while computing capital gains.

ITAT allows Stamp Duty paid on Sale by Builder, holds Section 43CA of Income Tax Act not to be Triggered - The Assistant Commissioner of Income Tax vs M/s. Mahavir Infracon Pvt. Ltd. 2023 TAXSCAN (ITAT) 879

The Raipur Bench of the Income Tax Appellate Tribunal (ITAT), Ravish Sood, Judicial Member and Dipak P Ripote, Accountant Member allowed the stamp duty paid on sale by the builder and held that Section 43CA of the Income Tax Act, 1961 not to be triggered

The Tribunal observed that “For the reason that as the assessee had sold the properties/units at the market value determined by the Stamp Valuation Authority and had received the sale consideration as mentioned in the registered sale deed, therefore, the provisions of Section 43CA of the Income Tax Act by no means could have been invoked in its case.

No addition can be made on Unexplained Credit Amount in the Bank Account of Assessee - Ajay Kumar Aggarwal vs The ACIT 2023 TAXSCAN (ITAT) 869

The Delhi bench of Income Tax Appellate Tribunal (ITAT) Chandra Mohan Garg (Judicial Member) and B.R.R. Kumar (Accountant Member)  held that no addition can be made on unexplained credit amount appearing in the bank account of assessee.

The  bench of determined that entire amount of credit entries cannot be added to the taxable income of the assessee ignoring the debit side entries and as when the assessee is receiving cash and issuing cheques then said cheque of almost same amount then the assessee could not be held beneficiary of entire amount or entire amount of credit entries treating the same as unexplained.

Activity of Providing Courses for Women is “Charitable” in Nature: ITAT allows IT Refund to Women Training Institute - Young Women’s Christian Association vs ITO 2023 TAXSCAN (ITAT) 916

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the activity of providing courses for women is charitable in nature therefore the tribunal allowed income tax refund to women training institutes.

The tribunal of two-member bench of tribunal G.S. Pannu, (President) and Astha Chandra, (Judicial Member)   observed that, The Assessment Year  2009-10 in the assessee’s own case, the tribunal directed AO to grant exemption under section 11 along with consequential benefits.

No Disallowance of Commission paid to U.S  Sales Agent for Selling Products in U.S u/s 40(a)(i) of the Income Tax Act: ITAT - Sunbeam Auto Ltd vs Addl. CIT 2023 TAXSCAN (ITAT) 919

The Delhi bench of Income Tax Appellate Tribunal (ITAT) has held that commission paid to US sales agents for selling products in the US should not be disallowed under Section 40(a)(i) of the Income Tax Act, 1961.

The tribunal of two-member bench of G.S. Pannu, (President) and Astha Chandra, (Judicial Member)  relied upon the decision of the case Panolfa Autoelektrik observed that “commission paid by the assessee to its foreign agent for arranging of export sales and recovery of payment could not regarded as fees for technical services under section 9(1)(vii) of the Act”. This decision entirely applies to the facts of the assessee’s case.

No Disallowance of Expenditure on Account of Accumulated Service Tax of Rent - Ultimate Fashion Maker Ltd vs ACIT 2023 TAXSCAN (ITAT) 918

The Delhi bench of B.R.R. Kumar, (Accountant Member)   and Yogesh Kumar U.S (Judicial Member) Income Tax Appellate Tribunal (ITAT) has held that no disallowance can be made on expenditure on account of accumulated service tax of rent

The tribunal while considering the submission of the parties observed that the AO disallowed the amount of service tax paid on the rent on the ground that the ‘reply of the assessee found to be not satisfactory’.

The observed that rent paid for the purpose of business of assessee is covered under Section 30 of the Income Tax Act and allowed the appeal filed by the assessee.

Amounts Advanced for Business Transactions Between Parties Will not fall within the Definition of “Deemed Dividend”u/s  2(22)(e) of  Income Tax Act: ITAT - Vishnu Aggarwal vs ITO 2023 TAXSCAN (ITAT) 915

The Delhi bench of G.S. Pannu, (President)  and Astha Chandra, (Judicial Member) ,Income Tax Appellate Tribunal (ITAT) has held that the amount advanced for business transactions between parties would not fall within the definition of deemed dividend under Section 2(22)(e) of the Income Tax  Act, 1961.

The tribunal viewed that the amounts advanced for business transactions between the parties would not fall within the definition of deemed dividend under section 2(22)(e) of the Income Tax Act. Therefore, the two-member bench allowed the appeal filed by the assessee.

Assessment Order passed without enquiry into CFS Charges paid to Continental Warehousing Corporation: ITAT upholds Revision Order SDS Cargo Solutions Pvt. Ltd vs Income Tax Officer 2023 TAXSCAN (ITAT) 921

The Chennai bench ofMahavir Singh (Vice President) and Manjunatha. G, (Accountant Member),  Income Tax Appellate Tribunal (ITAT) has held that revision of the assessment order passed without enquiry into CFS charges paid to continental warehousing corporation is valid and good in law under Section 263 of the Income Tax Act.

The tribunal observed that AO has not carried out any enquiries on the issue of CFS charges paid to Continental Warehousing Corporation in light of relevant provisions of the Income Tax Act.

Therefore, they found that the assessee neither appeared nor filed any details to justify its case . Hence, relying upon the above observation, the two-member tribunal confirmed the revision order passed by the PCIT.

Interest Income of Farmers Services Co-operative Society from Fixed Deposits in Union Bank of India deductible u/s 80P (2)(a)(i): ITAT Ghatkesar Farmers Service Cooperative Society Limited vs Income Tax Officer 2023 TAXSCAN (ITAT) 911

The Hyderabad bench of K. Narasimha Chary, (Judicial Member),   Income Tax Appellate Tribunal (ITAT) held that interest income of Farmers service co-operative society from fixed deposits in Union Bank of India is deductible under Section 80P(2)(a)(i) of Income Tax Ac , 1961.

It was observed by the tribunal that funds deposited by the assessee with the Union Bank of India are undoubtedly the own funds of the assessee and none of such funds represents any liability of the assessee to its members or anyone else.

Therfore tribunal held that assessee is a primary agricultural co-operative society, thus surplus fund invested in the union bank of India was their own fund therefore, the assessee is entitled to claim the deduction under Section 80P(2)(a)(i) of the Income Tax Act

Interest Income of Co-operative Credit Societies from Credit Balances deductible u/s 80P(2)(a)(i): ITAT Tirumala Tirupati Devasthanams Employees Co Op. Credit Society vs Income Tax Officer 2023 TAXSCAN (ITAT) 907

The Hyderabad Bench Of   K.Narasimha Chary, (Judicial Member)  Income Tax Appellate Tribunal (ITAT)has recently held that interest income of co-operative credit societies from credit balances deductible under section 80P(2)(a)(i) of the Income Tax Act, 1961.

The tribunal observed that interest arose on the credit balances with reference to the regular course of business of the assessee. The bench held that disallowed interest Income of Co-operative Credit Societies is eligible for deduction under section 80P(2)(a)(i) of the Act.

No addition can be made u/s 69A  of Income Tax Act on cash received on sale of Ancestral Agricultural Land: ITAT - Mujtaba Hussain Ahmed vs ACIT 2023 TAXSCAN (ITAT) 909

The Hyderabad bench of  Laliet Kumar, (Judicial Member), Income Tax Appellate Tribunal (ITAT) has recently held that no addition could be made under Section 69 of Income Tax Act 1961, on cash received on sale of ancestral agricultural land.

The tribunal observed that once the assessee has disclosed the source of the cash on account of sale of agricultural land, then it is the bounden duty of the lower authorities to examine the purchaser and ask the purchaser to disclose the source of the cash. So, the AO violated the provisions of section 269SS/269ST against the seller and purchaser. By considering the above facts tribunal of deleted the  addition made by the Assessing Officer along with the confirmation made by the CIT(A).

Employees of State Government Undertaking cannot be treated as State Government Employee: ITAT upholds Restricting Exemption made u/s 10(10) & s.10(10AA) of Income Tax Act - Shivaram Gopal Awate vs ITO 2023 TAXSCAN (ITAT) 902

The Hyderabad Bench of Inturi Rama Rao, Accountant Member, the Income Tax Appellate Tribunal (ITAT) has held that employees of state government undertakings could not be treated as state government employees. Therefore the bench upheld the restricting exemption made under Section 10(10) and 10(10AA) of Income Tax Act, 1961.

The tribunal relied upon the decision of the Supreme Court in case of Indian Institute of Science vs. DCIT observed that “State Government Undertaking may be considered as a State instrumentality within the definition of article 12 of the Constitution of India, the same cannot be treated as Central or State Government, consequently the employees of such undertakings cannot be treated as a Central or State Government employee”.

The tribunal observed that action of the AO in restricting the exemption under Section  10(10) and Section 10(10AA) of the Income Tax  Act to the extent applicable to a non-State Government employee has been correct in law.

ITAT allows Increase in Proportionate Capital Gains Deduction u/s 54F for Disallowance of Indexed Cost of Improvement: ITAT - Yashpalsingh Surindersingh Matharu vs ITO 2023 TAXSCAN (ITAT) 894

The Pune bench of R.S. Syal, (Vice President) and Partha Sarathi Chaudhury, (Judicial Member), Income Tax Appellate Tribunal (ITAT) has allowed increase in proportionate capital gain deduction under Section 54F of the Income Tax Act, 1961 for disallowance of index cost of improvement.

Thus the bench determined that “even if it is presumed that the development work was actually carried out as claimed through the estimate/Bill of the developer, it is hard to accept that the development of the property was done by the assessee before the date of its purchase itself”.

Income Generated from Production and Sale of White Button Mushrooms is Agricultural Activity, shall Exempt from Tax: ITAT - Deputy Commissioner of Income Tax vs British Agro Products (India) Pvt. Ltd. 2023 TAXSCAN (ITAT) 878

The Chennai bench of  Aby T. Varkery, (Judicial Member) and Manjunatha. G, (Accountant Member),  Income Tax Appellate Tribunal (ITAT) has recently held that income generated from production and sale of white button mushrooms is agriculture activity hence shall be exempt from tax.

The tribunal observed that operations which are undertaken for the production of mushrooms are nothing but agricultural operations.

The Tribunal held that “cultivation and sale of white button mushroom is an agricultural activity and income derived from said activity comes under the head agricultural income, which is exempt from tax”.

Capital Gain Exemption Benefit u/s 54  can be availed in respect of Basement Property: ITAT - Smt. Anu Gera vs Income Tax Officer 2023 TAXSCAN (ITAT) 882

The Delhi bench of B.R.R. Kumar, (Accountant Member)  and  Yogesh Kumar Us,(Judicial Member) Income Tax Appellate Tribunal (ITAT) has held that capital gain exemption under Section 54 of Income Tax Act, 1961 benefit could be availed in respect of basement property.

The tribunal found that exemption under section 54 of the Income Tax Act has been denied in respect of the basement floor on the ground that the benefit of exemption under section 54 Income Tax Act could be passed on the assessee only in respect of one residential property instead of claim of 3 properties. 

The appellate tribunal held that acquisition of more than one residential house by assessee out of capital gains would not disentitle assessee from availing benefit conferred under Section  54 of the Income Tax Act.

Addition made on Loan Amount u/s 68 of Act are based on Utter Suspicion and Conjectures: ITAT deletes Addition - Amit Tyagi vs DCIT 2023 TAXSCAN (ITAT) 883

The Delhi bench of C.M. Garg, (Judicial Member) and B.R.R. Kumar, (Accountant Member), Income Tax Appellate Tribunal (ITAT) held that additions made on loan amount under Section 68 of the Income Tax Act 1961 are based on uttar suspicion and conjectures.Therefore the bench deleted the addition made by the assessing officer.

The tribunal observed that Assessee has successfully demonstrated by way of sufficient documentary evidence that he has also repaid the loan amount to the respective creditors during subsequent financial periods and this fact has also not been disputed or controverted by the authorities below.

Re-assessment Order passed without Considering Submissions of Assessee : ITAT remands matter to AO for Fresh Adjudication - Smt. Rupa Mahesh Gandhi vs The Income Tax Officer 2023 TAXSCAN (ITAT) 885

The Ahmedabad bench of Annapurna Gupta, (Accountant Member), Income Tax Appellate Tribunal (ITAT) has while allowing the appeal filed by the assessee remanded assessee’s matter to the assessing officer for fresh adjudication and observed that reassessment order passed by the authority was without considering the submission of assessee.

The tribunal observed that orders passed by the authorities below had ignored the submissions of the assessee. Therefore the tribunal  restored the matter  back to the file of the Assessing Officer to be decided afresh after giving due opportunity of hearing to the assessee and considering all the contentions and explanation

Income offered towards Excess Stock not Unexplained Investment u/s 69B, No Income Tax levy u/s 115BBE : ITAT - M/s. Overseas Leathers vs Deputy Commissioner of Income-tax 2023 TAXSCAN (ITAT) 884

The Chennai bench of Aby T. Varey, (Judicial Member) and Manjunatha. G, (Accountant Member) Income Tax Appellate Tribunal (ITAT) has held that income offered towards excess stock could not be treated as unexplained investment under Section 69B of the Income Tax Act, 1961. Thus it ruled that no tax is to be levied under Section 115BBE of the Income Tax Act, 1961.

The tribunal observed that, “when the assessee has explained source for excess stock found during the course of survey, is out of income generated from current year business and explanation offered by the assessee is plausible explanation, then income offered towards excess stock could not be treated as unexplained investment under Section 69B of the Income Tax Act, and also provisions of section 115BBE of the Income Tax Act.”

No Addition can be made on Unexplained Cash Credit from Sale and Purchase of Shares: ITAT - Naveen Kishor Mohnot vs Income Tax Officer –25(3)(5) 2023 TAXSCAN (ITAT) 881

The Mumbai bench of S. Rifaur Rahman, (Accountant Member)  the Income Tax Appellate Tribunal (ITAT) has recently held that no addition can be made on unexplained cash credit from sale and purchase of shares.

The tribunal relied upon the decision of  Rajiv Rameshchander v. Income Tax Officer and held that “once assessee is found to be a trader, the loss incurred during business need to be allowed as business loss” therefore the bench allowed the appeal filed by the assessee.

ITAT upholds Addition made u/s 69  on Unaccounted, Undisclosed Income on the basis of the Seized Loose Papers - Shri Vinod K. Faria vs DCIT(OSD)-II 2023 TAXSCAN (ITAT) 886

The Mumbai bench of Prashant Maharishi, (Accountant member) and Kavitha Rajagopal, (Judicial Member)  Income Tax Appellate Tribunal (ITAT) recently upheld the addition made under Section 69 of the Income Tax Act 1961 on unaccounted, undisclosed income on the basis of the seized loose papers.

The tribunal observed that assessee has failed to furnish the details of Shri Salim Babaji to prove the identity, genuineness and creditworthiness mandated as per the provisions of the law.

Re-assessment Order framed without Issuance of Notice u/s 143(2) of Income Tax Act is Invalid: ITAT - Rameshkumar Tagraji Jain vs ITO 2023 TAXSCAN (ITAT) 888

The Mumbai bench of Aby T. Varkey, (Judicial Member), Income Tax Appellate Tribunal (ITAT) has held that re-assessment order framed without issuance of notice under Section 143(2) of Income Tax Act, 1961 is invalid.

The tribunal set-aside the impugned order of CIT(A) and restored the appeal back to his file with a direction to examine the re-assessment records and record a finding of fact as to whether the AO during the reassessment proceedings had issued/served the notice /issued/served the notice under Section 143(2) of the  Income Tax Act on assessee before he framed the reassessment order under Section 143(3)/147 of the Income Tax Act.

Interest Income Derived from the Business of Manufacturing and Export of Rice is Eligible for Deduction u/s 10B of Income Tax Act: ITAT - Picric Limited vs Income Tax Officer 2023 TAXSCAN (ITAT) 890

The Delhi bench of G.S Pannu, (President) and  Astha Chandra, (Judicial Member)  the Income Tax Appellate Tribunal (ITAT)has held that interest income derived from the business of manufacturing and export of rice is eligible for deduction under Section 10B of the Income Tax Act 1961.

It was observed by the tribunal that all income that arises essentially during the course of running of the eligible business would qualify for deduction under Section 10B of the Income Tax Act. Therefore, the bench determined that  “Once an income forms part of the business of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction under Section 10B of the Income Tax Act.”

No Addition can be made on Account of Unexplained Closing Cash filed u/s 44AD of Income Tax Act: ITAT - Shailesh Popatbhai Katrodiya vs I.T.O 2023 TAXSCAN (ITAT) 889

The Ahmedabad bench of Waseem Ahmed, Accountant Member  Income Tax Appellate Tribunal (ITAT) has recently held that no addition could be made on account of an unexplained closing case filed under Section 44AD of Income Tax Act 1961.

The tribunal held that the “revenue failed to discharge the onus imposed upon it to disprove the contention of the assessee. Thus, it is transpired that whatever cash was available with the assessee was out of the agricultural activity of the earlier years carried out by him.”

Capital Gain Exemption u/s 54F of Act Allowable for Purchase of Property along with Husband and Son: ITAT - Dy. Commissioner of Income Tax vs Smt. Anjali Mittal 2023 TAXSCAN (ITAT) 892

The Delhi bench of Shamim Yahya, (Accountant Member) and Astha Chandra, (Judicial Member), the Income Tax Appellate Tribunal (ITAT) has held that capital gain exemption under Section 54F of the Income Tax Act, 1961 is available for purchase of property along with husband and son.

The tribunal relied upon the decision of In Sunil Sachdeva’s case, the Delhi Bench of the Tribunal also held that section 54F Income Tax Act, 1961 did not require one to one correlation between capital gain arising out of transfer of long term capital asset and utilization thereof for purchase /construction of residential house.

No addition can made u/s 23(4) of Act on Deemed Rent on Unsold Flats declared as Stock In Trade: ITAT - Dugad Properties vs DCIT 2023 TAXSCAN (ITAT) 893

In a significant case the Pune bench of S.S. Viswanethra Ravi, (Judicial Member)  and G.D. Padmahshali, (Accountant Member), Income Tax Appellate Tribunal (ITAT) held that no addition could be made under Section 23(4) of Income Tax Act, 1961 on deemed rent on unsold flats declared as stock in trade .

The tribunal relied  upon the decision in the case of M/s Cosmopolis Constructions observed that,  no addition is maintainable on account of deemed rent on unsold flats which are treated at stock-in-trade. Therefore, the bench held that   no addition is justified under deemed rent under Section 23(4) of the Income Tax Act.

Relief to Cricket Club of India: ITAT upholds Restriction of 2% Disallowance by AO on Exempt Income u/s 14A of Income Tax Act - M/s Cricket Club of India Pvt. Ltd. vs Pr. Commissioner of Income Tax-1 2023 TAXSCAN (ITAT) 913

While entertaining the appeal filed by the Cricket Club of India (CCI), the Mumbai Bench of Income Tax of Appellate Tribunal (ITAT) upheld the view of the Assessing Officer (AO) which restricted the 2% disallowance of exempt income under Section 14A of the Income Tax Act, 1961 for the Assessment Year 2013-14 with due application of mind.

The bench held that “the view taken by the Assessing Officer to restrict the disallowance under Section 14A of the Act to 2% of the exempt income for the Assessment Year 2012-13 was a plausible view taken by the Assessing Officer after due application of mind which cannot be interfered with by the PCIT in the exercise of powers under Section 263.”

Relief to Petrofils Co-op. Ltd: ITAT allows the Claim of Unabsorbed Brought-forward Depreciation to be Set off against Income from Other Sources - Petrofils Cooperative Ltd. vs The DCIT 2023 TAXSCAN (ITAT) 866

By allowing the claim of unabsorbed brought-forward depreciation to be adjusted against the income from other sources, the Ahmedabad Bench of member Annapurna Gupta of Income Tax Appellate Tribunal (ITAT) granted relief to Petrofils Co-operative Limited.

The bench noted that the Commissioner of Income Tax (Appeals) has misappreciated the facts of the case.

One of the reasons for the Commissioner of Income Tax (Appeals) denying the benefit of set-off of unabsorbed depreciation was the assessee’s acceptance or rejection of set-off of brought forward- depreciation in Asst.Year 2004-05.

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