ITAT Weekly Round-Up

This weekly round-up analytically summarises the key stories related to the Income Tax Appellate Tribunal (ITAT) reported at Taxscan.in during the previous week from May 13^th to 20^th, 2023.

Unsecured FCCDs issued to Holding Companies for Business Operations in India are Debts, not Equity Instruments: ITATM/s. Fairfield Developments Limited vs Dy. Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 986

The Hyderabad bench of Income Tax Appellate Tribunal (ITAT) has recently held that unsecured FCCDs issued to holding companies for business operations in India are debts which are not equity instruments.

Two-members bench of R.K. Panda, Accountant Member and Laliet Kumar, Judicial Member dismissed the appeal filed by the assessee and held that “FCCDs are debt, therefore, the benchmarking done by the learned lower authorities are correct by applying LIBOR plus 200 points, which is in consonance with the RBI guidelines issued for the purposes of FDI.”

Property Not Used for Business Purpose cannot be Treated as Business Assets: ITAT disallows ExpensesM/s. Dream BuildconPvt. Limited vs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 987

The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) has disallowed the expenses holding that property which was not used for business purposes could not be treated as business assets. 

The two-member Bench of RajpalYadav (Vice-President) and Manish Borad (Accountant Member) disallowed this ground of appeal filed by the assessee observing that, “Though the assessee has argued that these expenditures were incurred for the purpose of business but in the accounts, it has not been demonstrated as to how these properties were treated as a business asset and not as an investment. Unless the properties are being used for the purpose of the business expenditure attributable to maintaining them cannot be allowed.”

ITAT deletes Addition Due to Disallowance of Discounts/Subventions in the Income Tax Assessment U/s. 40AM/s.VST Motor Ltd. vs The Asst. Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 988

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) deletes the addition due to the disallowance of discounts or subventions in the Income Tax Assessment under Section 40 A of the Income Tax Act, 1961.

The bench of two members, the Judicial Member Manomohan Das and the Accountant Member Dr. Manish Borad observed that since the alleged payment of Rs.16,31,588/- has been paid by the assessee to M/s.Tata Motors Ltd., towards professional and technical services for developing of web-enabled software SIBIL for marketing related information, which is in the view is payment for technical services and the same is subject to deduction of tax at source.

However, since the assessee has not deducted TDS and the amount has been adjusted in the overall accounting of other transactions of purchase of goods from M/s.Tata Motors Ltd, the appeal filed by the assessee for the AY 2011-12 was partly allowed for statistical purposes.

ITAT declares Assessment Order without Quoting DIN as Non-Issued U/s.263 of Income Tax Act SiddaVenkata Surya Prakasa Rao vs Asst. Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 989

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has declared that an assessment order issued without quoting the Document Identification Number (DIN) will be considered as non-issued under Section 263 of the Income Tax Act, 1961.

The bench consisting of two members, the Judicial Member K. Narasimha Chary and the Accountant Member Rama Kanta Panda observed that all communication must contain a computer-generated DIN. Failure to do so would render the communication invalid.

The ITAT Bench further added that the order passed under section 263 of the Act did not contain any reasons or statement in the prescribed format to explain Paragraph 4 of the circular clearly states that any communication not in conformity with paragraphs 2 and 3 shall be treated as invalid and deemed to have never been issued. Therefore, any reason other than the exceptions mentioned in paragraph 3 would not save a communication issued without a DIN. Appeal filed by the assessee got allowed in result.

Assessee’sBonafide Belief on TDS Exemption for Foreign Travel LTC Protects from Default u/s. 201(1) and 201(1A) of the Income Tax Act, Rules ITAT State Bank of India Corporate Centre vs CIT(A) CITATION: 2023 TAXSCAN (ITAT) 991

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) recently provided opportunity of re-adjudication on TDS exemption for foreign travel Leave Travel Concession (LTC) default under Sections 201(1) and 201(1A) of the Income Tax Act due to Bonafide belief of Assessee.

The Bench consisting of two members, the Judicial Member KavithaRajagopal and the Accountant Member Om Prakash Kant remanded the issues back to the file of the Assessing Officer for verifying whether the employees have declared the said LTC in their return of income and have duly paid taxes on the same.

The tribunal bench further added that “We direct the Assessing Officer to give sufficient opportunity of being heard to the assessee. As we have not adjudicated the other grounds of appeal raised by the assessee, they are left open for adjudication if required. Therefore, the appeals filed by the assessee are allowed for statistical purposes.”

ITAT Orders full TDS Credit after AO withdraws TDS Benefit on Advance Rent and Fails to carry forward for 20 yearsBesto Electronics Pvt. Ltd vs DCIT CITATION: 2023 TAXSCAN (ITAT) 992

In a significant case the Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently ordered full Tax Deduction at Source (TDS) credit after the assessing office withdrew TDS benefit on advance rent and failed to carry forward for 20 years.

The two-member bench of the tribunal comprising C. M. Garg (Judicial Member) and B. R. R. Kumar (Accountant Member) allowed the appeal filed by the assessee and ordered AO to call for the record of assessment year 2002-03 and pass appropriate rectification order giving full credit for the TDS amounts to the assessee and issue refund of tax which the assessee is entitled consequent to such rectification order.

ITAT dismisses Addition U/s. 68 of Income Tax Act Due to Insufficient Evidence of Bogus Transaction Anup Trade And Transport (P) Limited vs Deputy Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 993

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) deletes Addition under Section 68 of Income Tax Act, 1961 due to Insufficient Evidence of Bogus Transaction. The issue of the case is CIT (Appeals) had erred in confirming the addition of Rs.20,00,000/-, which was added by the Assessing Officer.

The Bench consisting of Account Member Manish Borad and Vice-President RajpalYadav directed the Assessing officer to examine the issue afresh and provide an opportunity of hearing to the assessee. The tribunal also directed that if the statement of the person recorded by the Investigation Wing is being relied upon, the assessee should be given an opportunity to cross-examine him. The information received from another ITO was also not treated as a gospel truth and had to be examined. The appeal of the assessee was allowed for statistical purposes. 

ITAT quashes Reopening of Assessment Due to Lack of Live Nexus between Reasons Recorded and Belief Formed by the Assessing Officer AmritBrakewell Products Pvt Ltd vs ITO CITATION: 2023 TAXSCAN (ITAT) 994

The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed the reopening of Assessment due to lack of live nexus between reasons recorded and belief formed by the Assessing Officer.

The Single Bench consisting of Judicial Member C. M. Garg observed that the Assessing Officer has acted solely on the basis of information received from the Investigation Wing without conducting an independent exercise at his own level. The tribunal bench thus held,” The reopening of assessment under Section 147 and issuance of notice under Section 148 of the Income Tax Act are therefore invalid and should be quashed, as they are based on a borrowed satisfaction and not supported by an independent assessment by the Assessing Officer.” Appeal for the assessee partly allowed and ordered for reopening of Assessment.

Provision of Sec. 92B not applicable for AMP Expenses incurred for Business purpose in India: ITAT Grants Relief to L’oreal IndiaL’oreal India Private Limited vs Asst. CIT CITATION: 2023 TAXSCAN (ITAT) 995

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) recently held that Section 92B of the Income Tax Act, 1961, which defines International Transactions, does not apply to advertisement, marketing and promotion (AMP) expenses incurred for business purposes in India. As a result, relief was granted to L’Oreal India Private Limited, a subsidiary of the French conglomerate and leading supplier in the global cosmetic industry.

The two-member bench of Om Prakash Kant (Accountant Member) and KavithaRajagopal (Judicial Member) allowed the appeal filed by the assessee and observed that the AMP transaction incurred by the assessee for the purpose of business was not an international transaction as per Section 92B of the Income Tax Act.

No TDS U/s. 194H of IT Act applicable on amount paid to Distributors/Dealers for Sale of Pre-paid SIM card and Recharge Vouchers: ITAT deletes Penalty against Bharti AirtelM/s. Bharti Airtel Limited vs JCIT-(TDS) CITATION: 2023 TAXSCAN (ITAT) 996

The Indore bench of Income Tax Appellate Tribunal (ITAT), while deleting penalty against Bharti Airtel held that no Tax Deduction at Source (TDS) is applicabe under Section 194H of the Income Tax Act, 1961 on amount paid to distributors/dealers for sale of prepaid SIM card and recharge vouchers.

The tribunal determined that transactions of sale of SIM Card and Recharge vouchers are in the nature of sale and discount allowed by the assessee to the distributors is not in the nature of commission attracting the provision of Section 194H Income Tax Act.

It was observed that the assessee has reasonable cause not to deduct the tax at source. Therefore, the action of non-deduction of tax in the present case will not attract the penalty under Section 271C of the Income Tax Act. Thus, the two-member bench of Vijay Pal Rao, Judicial Member and B.M. Biyani, Accountant Member allowed the appeal filed by the assessee.

Dissolved Company Exempted from Income Tax Assessment Proceedings U/s. 54(2) of IBC: ITATACIT vs M/s. Indus Mobile Distribution Pvt. Ltd. CITATION: 2023 TAXSCAN (ITAT) 997

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) recently ruled that the dissolved company is exempt from Income Tax Assessment proceedings under Section 54(2) of the Insolvency and Bankruptcy Code, 2016.

The Bench, consisting of an Advocate Member, G. Manjunatha, and a Judicial Member, Mahavir Singh, noted the NCLT order and observed that the company stood dissolved under Section 54(2) of the Insolvency and Bankruptcy Code, 2016, and once the company was dissolved, the entity had come to an end. No proceedings of any sort could be kept pending once the company was dissolved because the artificial entity had come to an end. The appeal filed by the revenue was dismissed in result.

ESOP Expenses Eligible for Deduction U/s. 37 of Income Tax Act: ITATM/s. Northern Operating Services Private Limited vs The Joint Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 998

The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) recently ruled that the expenditure towards the Employees Stock Option Plan (ESOP) is eligible for deduction under Section 37 of Income Tax Act 1961.

The Bench consisting of Advocate Member Laxmi Prasad Sahu and Judicial Member George George K observed that “The expenditure in question was wholly and exclusively for the purpose of the business of the assessee and had to be allowed as deduction as a revenue expenditure. The facts of the instant case are identical to assessment year 2015-2016, following the co-ordinate Bench order in assessee’s own case for AY 2015-2016 (supra), we hold that the expenditure towards ESOP is an allowable deduction U/s. 37 of the Income Tax Act.” Thus, the appeal filed by the assessee was partly allowed.

Penalty U/s. 271AAC is not Applicable, if Tax U/s. 115BBE of Income Tax Act is NIL: ITAT directs Re-adjudicationShri Vijay Kumar Reddy Challavs Asst. C. I. T. CITATION: 2023 TAXSCAN (ITAT) 999

The Hyderabad bench of Income Tax Appellate Tribunal (ITAT), while directing re-adjudication observed that penalty under Section 271AAC Income Tax Act, 1961 would not be applicable if tax under Section 115BBE of Income Tax Act was mentioned at zero.

It was observed by the tribunal that AO levied a penalty U/s. 271AAC on the ground that the assessee could not explain the source of Rs.45.00 lakhs from real estate activities by producing cogent documentary evidence, for which the addition was made U/s. 69A R/w. Sec. 115BBE of the Income Tax Act. While considering the statement of the assessee the tax U/s. 115BBE is mentioned at zero and therefore, no penalty U/s. 271AAC should be levied and also assessee is in a position to substantiate before the lower authorities as to how the penalty U/s. 271AAC is not leviable. The tribunal of Shri R.K. Panda, Accountant Member and Shri Laliet Kumar, Judicial Member allowed the appeal filed by the assessee and restored the matter for re-adjudication.

ITAT Quashes Invalid Penalty Order on Deceased Assessee U/s. 159(2) of Income Tax ActSri. Varadarajan Narayan Aiyarvs The Income Tax Office CITATION: 2023 TAXSCAN (ITAT) 1000

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) hasquashed the invalid penalty order on deceased assessee under Section 159(2) of Income Tax Act, 1961.

The two-member Bench consisting of Judicial Member George George K and Account Member Laxmi Prasad Sahu observed that “According to Section 159(2) of the Income Tax Act, any proceedings against the deceased person are considered as being against their legal representative and can be continued from the stage they were at when the person passed away. In this case, the penalty order was issued in the name of the deceased assessee, making it invalid. Considering the aforementioned reasoning and judicial precedents, we quash the penalty order as it was imposed on a deceased person.” In result, the appeal filed by the assessee was partly allowed.

Admissibility of Employees’ Contribution Payment of ESIc/PF Beyond the Due Date: ITAT remands the matter to AO to clarify the usage of ‘every month’The Master Polishers vs Assistant Director of Income Tax CITATION: 2023 TAXSCAN (ITAT) 1001

This appeal by the assessee is directed against order dated 15.11.2022 passed by the Commissioner of Income-tax – National Faceless Appeal Centre (NFAC) for assessment year 2020-21 in relation to the rectification order passed by the Assessing Officer under Section 154 of the Income-tax Act, 1961.

The Bench opined that, it will be appropriate if the term ‘every month’ specified in Provident Fund scheme, whether it is the month for which salary/ wages are due or month of the payment is referred to Relevant Authorities for finding out with reference to any judicial precedent in respect of provisions of the relevant Act. Accordingly, the issue was restored back to the file of the Assessing Officer with the direction to find out from the relevant PF authorities about the term ‘every month’ as mentioned in Clause 38 of the Employees Provident Fund Scheme (EPF Scheme). He was also directed to find out the same from the ESI Authorities. In the result, the appeal of the assessee was allowed for statistical purposes by the two-member bench of Judicial Member Aby T Varkey and Accountant Member Om Prakash Kant.

No Addition on Regular items which were Disclosed by Assessee in Regular Books of Account: ITATDCIT vs Shri Basant R. Agarwal CITATION: 2023 TAXSCAN (ITAT) 1002

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that there cannot be any addition of the regular items which were disclosed by the assessee in regular books of account.

“The completed assessment cannot be disturbed in the absence of any incriminating material or documents, whereas the assessment or reassessment can be made for abated assessment years,” the bench observed.

The two-member bench of Madhumita Roy (Judicial) and Waseem Ahmed (Accountant) observed that in the absence of any material evidence that could support the case put forth by the Appellant, the additions cannot be sustained. The assessee cannot be held to be guilty, the Court observed and upheld the order of the CIT-A.

Denial of TDS Credit on Mistake or Misconception of Assessee is Impermissible: ITATKunvarjiFincorpPvt. Ltd vs D.C.I.T CITATION: 2023 TAXSCAN (ITAT) 1003

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that denial of Tax Deducted at Source (TDS) credit on mistake or misconception of assessee is impermissible.

The two-member Bench of Waseem Ahmed, (Accountant Member) and Madhumita Roy, (Judicial Member) allowed the appeal filed by the assessee directing to grant benefit of the TDS credit which was inadvertently not claimed in the return of income. The Bench following the decision of Gujarat High Court in S.R. Koshti Vs. CIT it was observed that, “Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected.”

No Disallowance u/s 36(1)(iii) as Amount was Advanced during Normal Course of Business: ITATThe Assistant Commissioner of Income Tax vs M/s. Hotel Ishika CITATION: 2023 TAXSCAN (ITAT) 1004

The Raipur Bench of Income Tax Appellate Tribunal (ITAT) has held that no disallowance could be made under Section 36(1)(iii) of the Income Tax Act, 1961, as the amount was advanced during the normal course of business.

The Single-member Bench of Ravish Sood, (Judicial Member) dismissed the appeal filed by the revenue observing that, “as the assessee had advanced the aforesaid respective amounts in question to the aforementioned parties in the normal course of its business, therefore, no part of interest expenditure corresponding to the said respective amounts was liable to be disallowed u/s.36(1)(iii) of the Income Tax Act.”

Belated Remittances Towards Employees’ Contribution to EPF & ESI: ITAT sustains DisallowanceMTR Maiya’svs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 1005

The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) has sustained disallowance as the contribution towards an EPF and ESI was remitted belatedly.

The two-member Bench of George Georgek (Judicial Member) And Laxmi Prasad Sahu (Accountant Member) allowed the appeal and sustained the disallowance towards s belated remittances towards employees’ contribution to EPF & ESI under the respective Acts. The Bench referred the Supreme Court judgement in Checkmate Services Ltd. Vs CIT wherein it was held that, “Section 43B(b) does not cover employees’ contributions to PF, ESI etc., deducted by employer from salaries of employees and that employees contribution has to be deposited within the due date u/s 36(1)(va) i.e. due dates under the relevant employee welfare legislation like PF Act, ESI Act etc. failing which the same would be treated as income in the hands of the employer u/s.2(24)(x).”

Compensation Paid by BCCI to CSA not Taxable under Termination Agreement under India-South Africa DTAA: ITATThe Board of Control for Cricket in India vs Dy. Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 1006

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the compensation paid by the Board of Control for Cricket in India (BCCI) to Cricket South Africa is not taxable under termination agreement as per the India-South India Double Taxation Avoidance Agreement (DTAA).

The two-member Bench of G.S. Pannu (President) and Sandeep Singh Karhail (Judicial Member) set aside the impugned order observing that, holding that, the payment of compensation to CSA under the Termination Agreement was also not taxable under the provisions of the India-South Africa DTAA. Since the payment was not chargeable to tax in India in the hands of CSA, therefore, the Bench held that there was no obligation on the assessee to deduct tax at source. The payment to CSA was not arising from any operations carried out in India in the year under consideration and thus the same is not taxable under section 9(1) of the Income Tax Act, the Bench further observed.

ITAT deletes Addition Based on Compliance with Donation Records U/s. 115BBC of the Income Tax ActIncome Tax Officer vsAishwarya Foundation CITATION: 2023 TAXSCAN (ITAT) 1007

The Patna bench of the Income Tax Appellate Tribunal (ITAT) removed the addition based on compliance with donation records under Section 115BBC of the Income Tax Act.

The bench consisting of two members, the Judicial Member SonjoySarma and the Accountant Member Manish Borad observed that “the assessee in the present case has duly complied with the requisites by maintaining the records of the donors in the form of their names and addresses thereby not making them anonymous donations and resultantly not attracting the rigours of the Section 115BBC of the Income Tax Act. The Assessing Officer had conducted due verifications and enquiry at his end but has failed to point out anything constructive leading to the conclusion that the donations in question were anonymous”. As a result, the appeal for the revenue was dismissed.

ITAT Refuses to Condone a Delay of 1005 Days in Filing Income Tax Appeal without Reasonable CauseMass Awash Private Limited vsAddl.CIT CITATION: 2023 TAXSCAN (ITAT) 1008

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in appeals filed before it, refused to condone a delay of 1005 days in filling the income tax appeal without reasonable cause.

The Delhi ITAT observed: “Having regard to the principle of law laid down in various decisions and in the facts and circumstances of the assessee’s case, we decline to condone the inordinate delay of 1005 days in filing appeal before the Tribunal.” “We have enumerated the dates fixed for hearing of the appeals. Despite numerous opportunities provided to the assessee, the assessee chose not to avail them to rebut the findings of the Ld. AO/CIT(A). Resultantly, the findings of the Ld. AO/CIT(A) remain uncontroverted by the assessee before us. For the reason aforesaid, the appeals of the assessee are dismissed as time-barred and devoid of any merit”, the coram of G.S Pannu, the President and Astha Chandra, the Judicial Member thus concluded.

ESOP Expenditure is Revenue in Nature: ITAT Allows DeductionDCIT vs M/s. Process Nine Technologies (P) Ltd CITATION: 2023 TAXSCAN (ITAT) 1009

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, allowed deduction, by holding that ESOP expenditure is Revenue in nature.

TheITAT panel comprising of ChallaNagendra Prasad, the Judicial Member and ShamimYahya, the Accountant Member thus held: “We have heard both the parties and perused the records. We find that this issue is squarely covered by the decision of the jurisdictional Delhi High Court in the case of Lemon Tree Hotels and New Delhi Television Ltd. wherein it has been held that expenditure under ESOP is an allowable expense. Hence, we find that the Ld. CIT(A) has passed a correct order and we do not need to interference on our part. Accordingly, this appeal by the Revenue is dismissed.”

Failure of Assessee to Comply with Provisions of Section 269T: ITAT upholds Penalty U/s. 271E Sandeep Kaur Gill vs JCIT CITATION: 2023 TAXSCAN (ITAT) 1010

The Income Tax Appellate Tribunal (ITAT), Raipur Bench, has recently, in an appeal filed before it, on finding about the failure of the assessee to comply with the provisions of section 269T, upheld the penalty under section 271E of the Income Tax Act, 1961.

The ITAT coram of ArunKhodpia, the Accountant Member, and Ravish Sood, the Judicial Member, held: “The assessee had not only failed to comply with the provisions of section 269T of the Act, therein rendering her liable for imposition of penalty under Section. 271E of the Act, but had also failed to come forth with any reasonable cause which had prevented her to make repayment of the monthly instalments of her outstanding loans in a manner other than that prescribed under law, therefore, finding no infirmity in the penalty of Rs. 6,71,939/- imposed by the JCIT under Section. 271E of the Income Tax Act, uphold the same.”  Resultantly, the appeal filed by the assessee was dismissed.

Alimony Received on Divorce is not Unexplained Cash Credit u/s 68, not Taxable u/s. 115BBE: ITAT SaritaKondavs The Pr. Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 1011

The Income Tax Appellate Tribunal (ITAT), Raipur Bench, has recently held that alimony received on divorce is not unexplained cash credit under Section 68, and that the same is not taxable under Section 115BBE of Income Tax Act, 1961.

“In case the A.O finds the claim of the assessee as regards the nature and source of the aforesaid receipts in order, then no modification of the order passed by him under Section 143(3) dated 30.11.2019 shall be carried out. At the same time, in case the explanation of the assessee as regards the nature and source of the aforesaid receipts is found to be incorrect, then the aforementioned receipts shall be held as unexplained cash credits under Section 68 of the Income Tax Act and brought to tax by triggering the provisions of Section 115BBE. Thus, the Ground of appeal raised by the assessee is allowed for statistical purposes in terms of our aforesaid observations”, the Raipur ITAT concluded.

Determination of Fair Market Value of Unquoted Shares does not Prohibit Inclusion of Share Premium as part of Reserves and Surplus: ITAT deletes Addition CNR Leading Softek Pvt Ltd vs ITO CITATION: 2023 TAXSCAN (ITAT) 1012

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition holding that the determination of fair market value of unquoted shares would not prohibit inclusion of share premium as part of reserves and surplus.

The Bench observed that the share premium would be included in the ‘reserves and surplus’ even as per Rule 11UA of Income Tax Rules. While this was so, it was completely wrong on the part of the AO to ignore the same while valuing the shares of the assessee company both under ‘liability approach’ and considering the same as a liability under ‘asset approach’.

The two-member Bench of C.M Garg, (Judicial Member) and M. Balaganesh, (Accountant Member) deleted the addition made under Section 56(2) (viib) of the Income Tax Act 1961, holding that the value determined by the AO was totally flawed and no mistake was found by us in the valuation adopted by the assessee, and held that addition made by the AO would have no legs to stand.

Relief to Idea, No TDS on Discount to Distributors on sale of SIM Card and Prepaid Recharge Vouchers: ITAT Idea Cellular Ltd. vs JCIT CITATION: 2023 TAXSCAN (ITAT) 1013

The Indore Bench of Income Tax Appellate Tribunal (ITAT) has granted relief to Idea holding that no Tax Deducted at Source (TDS) would be applicable on discount given to distributors on the sale of SIM card and prepaid recharge vouchers.

The Two Member Bench of VIJAY PAL RAO, (JUDICIAL MEMBER) AND B.M. BIYANI, (ACCOUNTANT MEMBER) observed that, a good number of other decisions had held that transaction in question would not fall in the ambit of section 194H of the Income Tax Act and thereby the assessee was not liable to deduct TDS at source on these transactions. In view of the decision and facts and circumstances of the in assessee’s own case, Vodafone Idea Ltd. New Delhi vs. DCIT and Bharti Airtel Ltd. Vs. DCIT Bangalore, the Bench deleted the penalty levied under Section 271C of the Income Tax Act 1961.

Revenue can bring Expenditure Incurred in Earlier Years to be Taxed in Subsequent Years on Bogus Expenditure: ITAT Sh. Pradeep Sawhneyvs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 1014

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that revenue could bring expenditure incurred in earlier years to be taxed in subsequent years on bogus expenditure.

The two-member Bench of C. M. Garg, (Judicial Member) Dr. B. R. R. Kumar, (Accountant Member) referring to the decision of Karnataka High Court in Southern India Plywood Company Vs. ACIT, dismissed the appeal filed by the assessee holding that the revenue could bring the expenditure incurred in the earlier years to be taxed in the subsequent years if it was proved that the expenditure incurred was bogus and the revenue could deem the liabilities ceased as time went by taking into consideration, the period of non-payment of dues and the intention to pay the dues.

Default in Furnishing TDS Statement, Section 200A only applicable after 1st June 2015: ITATM.E.S. High School vs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 1015

The Pune bench of the Income Tax Appellate Tribunal (ITAT) recently held that the levy of a fee under Section 234E of the Income Tax Act for default in TDS statements was applicable since 1st June 2015, as per the amendment to Section 200A of the Income Tax Act.

The bench consisting of two members, the Judicial Member S.S. Viswanethra Ravi and the Vice President R.S. Syal observed that the fee for default in furnishing the TDS statements has been imposed on the assessee under Section 234E of the Income Tax Act for the 3rd quarter of the financial years 2012-13 (A.Y. 2013-14) and 2013-14 (A.Y. 2014-15). Section 200A deals with processing of TDS statements of tax deducted at source and Clause (c) of sub-Section (1) of Section 200A was inserted by the Finance Act 2015 with effect from 01-06-2015 providing for the levy of fee under Section 234E of the Income Tax Act. In such circumstances, levy of such fee under Section 234E can be levied only after 01-06-2015 for the default committed by the assessee.  The Bench further added that “We find that the period covered in the present subject appeals before us is Quarter 3rd of financial years 2012-13 (A.Y. 2013-14) and 2013-14 (A.Y. 2014-15). Therefore, we hold that the amendment by insertion of Clause (c) to sub-3 ITA Nos.96 & 97/PUN/2023 Section (1) of Section 200A of the Income Tax Act is not applicable.”   In result, the appeal of the assessee was allowed.

ITAT deletes Penalty for Same Defaults Under Section 271(1)(b) in Second RoundAmar Bharti vsAsstt. Commissioner of Income-tax CITATION: 2023 TAXSCAN (ITAT) 1016

The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) recently deleted the penalty for the same default under Section 271(1)(b) of the Income Tax Act in the second round.

The bench consisting of two members, the Judicial Member Sandeep Gosain and the Accountant Member RathodKamleshJayantbhai observed that the Assessing Officer has already passed the penalty proceeding under Section 271(1)(b) of the Income Tax Act vide order dated 07.12.2017 there cannot be a second round of the penalty for the same defaults. The tribunal quashed the levy of the penalty vide order dated 12.06.2018. In the result, the appeal of the assessee was allowed.

Toyota Gets Partial Relief as ITAT Orders Investigation into Capitalized Expenses for Transfer Pricing Adjustment ComputationToyota Industries Engine India Pvt. Ltd vs NFAC CITATION: 2023 TAXSCAN (ITAT) 1017

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) recently ordered an investigation into capitalized expenses for transfer pricing adjustment computation.

The bench consisting of two members, the Judicial Member Beena Pillai and the Accountant Member Chandra Poojari observed that “we are inclined to remit this issue to the file of Assessing Officer/TPO to examine whether these two expenditures namely payment of professional and consultation charges & purchase of fixed assets are capitalized in the books of accounts of assessee. If it is so, these expenditures cannot be considered for computation of proportionate TP adjustment and the Assessing Officer/TPO has to decide the issue after giving the opportunity of hearing to the assessee.” In result,the appeal of the assessee was partly allowed.

Claim of Deduction on Freight Outward Expenses Allowable only on Submission of Actual Payment Details: ITATNipro India Corporation Pvt. Ltd. vs PCIT CITATION:   2023 TAXSCAN (ITAT) 1018

The Pune Bench of Income Tax Appellate Tribunal (ITAT) has held that claim of deduction on freight outward expenses would be allowable only on submission of actual payment details.

The two-member Bench of S.S. Viswanethra Ravi, (Judicial Member) and Dipak P. Ripote, (Accountant Member) upheld the order of Commissioner of Principal Commissioner of Income Tax Appeals (PCIT) as no details of payment were furnished by the assessee before the authority. “We find the action of AO is neither a mistake on facts nor deviated from law. The said conclusion arrived by the AO on his satisfaction of details furnished by the assessee cannot be found to be erroneous simply because Pr. CIT does not feel satisfied with the said conclusion,” the Bench further observed.

ITAT allows Deduction in Respect of written off Irrevocable Advances on Inextricable Link between Advances to Business and CompanyAssistant Commissioner of Income Tax vs Shri. V. Krishnamurthy CITATION: 2023 TAXSCAN (ITAT) 1019

The Chennai Bench of Income Tax Appellate Tribunal (ITAT) has allowed deduction in respect of written-off irrevocable advances based on the inextricable link between advances to business and company.

The two-member Bench of V. Durga Rao (Judicial Member) and Manjunatha. G (Accountant Member) dismissed the appeal filed by the revenue observing that “Since, there was an inextricable link between advances given to the company and business of the assessee, and further, the assessee has derived business advantage by lending money to said company, in our considered view, written off of irrecoverable advances given to said company partakes the nature of business loss which can be allowed as deduction.”

Undisclosed Investments in Unaccounted Stock should be Taxed Separately: ITATSaitawadekar Jewellers vsPr.CIT CITATION: 2023 TAXSCAN (ITAT) 1020

The Pune Bench of Income Tax Appellate Tribunal (ITAT) has held that, the undisclosed investments in the unaccounted stocks of the assessee should be taxed separately.

The two-member Bench of S. S. Godara, (Judicial Member) and Dipak P. Ripote, (Accountant Member) upheld the revision order, observing that, “In this case the AO has failed to apply proper and correct section of Income Tax Act to the “Investment in the Undisclosed Stock”. The undisclosed investment in the unaccounted stock needs to be taxed separately as Income of the assessee as per the deeming provision of the Act.” The Bench further held that Sections 69B, 69A and 69 of the Income Tax Act, 1961 had introduced a deeming provision and the AO had failed to verify this aspect of the impugned excess stock declared during the survey. Therefore, the assessment order was erroneous and prejudicial to the interest of the revenue.

Adjustment Against Bad and Doubtful Debts Amounts to Actual Writing Off of Bad Debts: ITATIntegra Engineering India Ltd vsAsstt. Commissioner of Income-tax CITATION: 2023 TAXSCAN (ITAT) 1021

The Income Tax Appellate Tribunal (ITAT) of Ahmedabad bench has held that adjustment against bad and doubtful debts amounts to actual writing off of bad debts.

The two-member bench of T.R. Senthil Kumar (Judicial Member) and Waseem Ahmed (Accountant Member) has observed that any adjustment made by the assessee on account of the bad debts against the provisions created in the earlier year amounts to actual writing off of the bad Debts in the books of accounts. Further viewed that the assessee cannot be denied the benefit for the bad debts merely on the reasoning that such bad debts were not claimed in the profit and loss account but adjusted against the provision of bad debts. While allowing the appeal, the Court set aside the order of CIT(A) and directed the AO to delete the addition made by him.

Penalty u/s 271D cannot be Imposed after the Expiry of larger Period of Limitation: ITATJagdish Chandra Suwalkavs The JCIT CITATION: 2023 TAXSCAN (ITAT) 1022

The Jaipur Bench of Income Tax Appellate Tribunal (ITAT) has held that the penalty under Section 271D of the Income Tax Act, 1961 could not be imposed after the expiry of a larger period of limitation.

A Single Bench of Sandeep Gosain, (Judicial Member) allowed the appeal and quashed the penalty imposed holding that the penalty under Section 271D of the Income Tax Act could not be imposed after the expiry of the larger period of limitation. “At the very beginning it is observed that the provisions contained u/s 275(1)(a) are not applicable to the facts of present case for the reason that undisputedly no appeal has been filed against the assessment order passed on 28.12.2017. Therefore, it cannot be said that the relevant assessment or other order was subjected to some appellate proceeding. Consequently, the extended period of limitation of 6 months from the availability of the appellate order, will not be available to the revenue,” the Bench further observed.

ITAT upholds Penalty under Section 271AAA on Failure of Assessee to Substantiate Source and Manner of Undisclosed IncomeChetanHasmukhbhai Vasa vs The ACIT (Central) Circle CITATION: 2023 TAXSCAN (ITAT) 1023

The Income Tax Appellate Tribunal (ITAT), Pune Bench, has recently, in an appeal filed before it, on failure of the assessee to substantiate the source and manner of undisclosed income, upheld the penalty under Section 271AAA of the Income Tax Act, 1971.

The ITAT observed, “We are constrained to conclude that he has very well fallen short of substantiating the manner of having derived his undisclosed income in question i.e., the second limb in Section 271AAA of the Income Tax Act, penalty proceedings and therefore, there is hardly any reason for us to disturb both the lower authorities’ findings. The case law quoted at the assessee’s behest supports the Revenue’s case rather wherein their lordships hold in identical terms that an assessee has to substantiate the manner after the Authorised Officer puts specific queries to him regarding source and manner of the undisclosed income in issue.” The Pune ITAT coram comprising of G.D Padmahshali, the Accountant Member, and Satbeer Singh Godara, the Judicial Member thus held: “We thus affirm CIT(A)’s findings extracted in the penalty proceedings upholding the Assessing Officer’s action imposing the impugned penalties in these twin assessment years.”

Delay of One Day in Filing Audit Report Due to Technical Glitches of Income Tax Portal: ITAT sets aside Penalty u/s 271BSushila Devi vs ACIT CITATION:   2023 TAXSCAN (ITAT) 1024

The Income Tax Appellate Tribunal (ITAT), Jaipur Bench, has recently, on finding that the delay of one day in filing audit report was due to technical glitches on the Income Tax Portal, set aside the penalty imposed under Section 271B of the Income Tax Act, 1961.

ITAT coram of Sandeep Gosain, Judicial Member and RathodKamleshJayantbhai, Accountant Member, held: “The delay if any is on account the reasons on the technical letches on the portal and the same is venial in nature based on the provision of the Act as reiterated herein below. Based on these deliberation of the facts as well as provision of the law and judicial precedence cited, we hold that the penalty levied under Section 271B is not justified and thus vacated.”

Addition Based on Non-Appearance of Company Directors on the basis of unproven Identity of Subscriber not Sustainable: ITAT Atlantic Dealers Pvt. Ltd. vs ITO CITATION:   2023 TAXSCAN (ITAT) 1025

The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) has held that the addition based on non-production of company directors on the ground that identity of the subscribers were not proved would not be sustainable.

The two-member Bench of Sanjay Garg, (Judicial Member) and Manish Borad, (Accountant Member) allowed the appeal holding that, even if the directors of the subscriber companies had not come personally in response to the summons issued by the AO, adverse inference could not be taken against the assessee solely on this ground as it was not under control of the assessee to compel the personal presence of the directors of the shareholders before the AO. The Bench placed reliance upon the decision of Bombay High Court in Panji vs. Paradise Inland Shipping Pvt. Ltd., wherein it was held that once the assessee had produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish their case.

ITAT deletes Addition u/s 37(1) of written off Amount Treated as Business Expenditure Addl. CIT vs Amway India Enterprises Pvt. Ltd CITATION:   2023 TAXSCAN (ITAT) 1026

The New Delhi bench of the Income Tax Appellate Tribunal (ITAT) recently deleted the addition under Section 37(1) of Income Tax Act 1961 on account of written off amount treated as business expenditure.

The two-member tribunal observed that, In light of these facts and the commercial expediency, the CIT(A) correctly concluded that the payment made by the appellant was directly related to the business activity and incurred wholly and exclusively for the purpose of the company’s business. It was allowable as a business expenditure, the tribunal further observed. The tribunal thus upheld the decision of CIT (A). In result, the appeal filed by revenue was dismissed.

ITAT quashes Assessment Order framed u/s 143(3) of Income Tax Act in Name of Non-Existent Entity M/s. Allscripts (India) LLP vs National Faceless Assessment Centre CITATION:   2023 TAXSCAN (ITAT) 1027

The Income Tax Appellate Tribunal (ITAT) of Ahmedabad bench quashed the assessment order framed under Section 143(3) of Income Tax Act 1961 in the name of non- non-existent entity.

The tribunal observed that conversion of AIPL into LLP was intimated to both the AO and the TPO much before passing of their respective orders, yet both the TPO and the AO passed the Transfer Pricing Order and the draft assessment order in the name of a nonexistent entity. Therefore the members of tribunal comprising Waseem Ahmed, (Accountant Member) and Siddhartha Nautiyal, (Judicial Member) determined that, “Once the draft assessment order and Transfer pricing order itself are bad in law, having been passed in the name of a non-existent entity, then the final assessment order based on the above orders is void ab initio as well.” Hence the bench allowed the appeal filed by the assessee.

Salary Reimbursement for Seconded Employee Not Taxable as FTS under India-US DTAA: ITAT M/s. Juniper Networks Incvs ITO CITATION:   2023 TAXSCAN (ITAT) 1028

The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) has held that salary reimbursement for seconded employees would not be taxable as Fees for Technical Service (FTS) under the India-US tax Double Taxation Avoidance Agreement, also known as Indo-US DTAA.

Similar isuue had arisen in the case Netflix Entertainment Services India, that even if seconded employees were only loaned for a short period, they form a permanent establishment. The Goods and Services Tax obligation was a result of Netflix Inc’s employment of seconded employees to support its services in India. The matter is still to attain finality. But the Tribunal bench has taken an alternate view in this matter. The two member Bench of Chandra Poojari, (Accountant Member) and BeenaPillai, (Judicial Member)  referring to the Goldman Sachs Services Pvt. Ltd allowed the appeal filed by the assessee and held that salary reimbursements for seconded employees would not be taxable as Fee for Technical Services (FTS).

Expenses incurred for Import of Rubber Process Oil eligible for Deduction u/s 37(1) Income Tax Act: ITATIndian Synthetic Rubber Pvt. Ltd. vs ACIT CITATION:   2023 TAXSCAN (ITAT) 1029

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has recently held that expenses incurred for import of rubber process oil is eligible for deduction under Section 37(1) of the Income Tax Act, 1961.

It was observed by the tribunal that an internal circular issued by Addl. Director, Customs & Excise in alert circular No. 12/2013 was issued only on 3.09.2013 in respect of the hazardous nature of goods declared as rubber process oil and petroleum-based greece. Rubber process oil imported by the assessee was freely importable as on the date of placing the order and also as on the date of the cargo reaching the seaport in India. Since the customs authorities were not releasing the rubber process oil imported by the assessee and further required for verifying for testing the samples by Central Research Chemical Laboratory. But the assessee avoided contesting the matter and chose to re-export the rubber process oil without incurring further demurrage charges and to avoid any further litigation the consignment was re-exported and also incurred huge loss on such re-export. These cause huge expenses to the business of assessee. These expenses were incurred in the course of carrying on business of the assessee and they are allowable as a deduction under Section 37(1) of the Income Tax Act. Therefore the two-member bench of G. S. Pannu, (President) and ChallaNagendra Prasad, (Judicial Member) allowed the appeal filed by the assessee.

Assessee’s Delinquency and Lethargy in Pursuing Matter Before the Tax Authorities Attracts Cost: ITAT AnilkumarChampalal Jain vs ITO CITATION:   2023 TAXSCAN (ITAT) 1030

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has recently, in an appeal filed before it, held that the assessee’s delinquency and lethargy in pursuing the matter before the tax authorities would attract cost.

The Tribunal observed, “Since the assessee has not appeared before any of the tax authorities below, in the interest of justice, we are of the view that the assessee may be provided with an opportunity to present his case properly before the CIT(A)”. Finally, the coram of Narender Kumar Choudhry, the Judicial Member and B.R Baskaran, the Accountant Member thus held: “Since the assessee was delinquent and lethargic in pursuing his matter before the tax authorities, we impose a cost of Rs. 2000/- upon the assessee, which shall be paid to the credit of the Income Tax Department as ‘Other fees’ within two months from the date of receipt of this order.”

Approval of Reassessment Order by JCIT without Recording Reasons: ITAT invalidates Income Tax Notice and Reassessment Proceedings ACIT vs Kamal Kapoor CITATION:   2023 TAXSCAN (ITAT) 1031

The New Delhi bench of the Income Tax Appellate Tribunal (ITAT) recently invalidated the Income Tax Notice under Section 148 and the reassessment proceedings due to non-compliance with Section 151 of the Income Tax Act, 1961. Additionally, it was found that the approval of the reassessment order by the Joint Commissioner of Income Tax (JCIT) was not recorded.”

The bench consisting of two members, the Judicial Member C. M. GARG and the Accountant Member B. R. R. Kumar observed that the CIT (A) noted that the additional CIT (A) had mentioned a word “approved” on the proposal of the Assessing Officer for issuance notice under Section 151 of the Income Tax Act. He has not recorded his satisfaction towards reasons recorded by the Assessing Officer. The power vested to the Commissioner/ Additional CIT as in the case of the present assessee to grant or not to grant approval is coupled with a duty. Such duty cannot be exercised casually and in a routine manner and he is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. The CIT (A) had issued an order stating that the notice issued under Section 148 of the Income Tax Act, as well as the reassessment proceedings and resulting reassessment order, are invalid and should be cancelled. The reason for this is that they were deemed legally invalid and were not carried out in accordance with the mandatory provision of section 151 of the Income Tax Act. As a result, the appeal filed by the revenue was dismissed.

Section 115BBE not applicable to Undisclosed Assets Deposited in Bank Post-Demonetization when Assets found in premises prior to Demonetization: ITAT Samir Shantilal Mehta vs The ACIT CITATION:   2023 TAXSCAN (ITAT) 1032

The Surat Bench of Income Tax Appellate Tribunal (ITAT) has held that Section 115BBE of the Income Tax Act 1961 would not be applicable as the undisclosed assets deposited in the bank accounts in the post demonetisation and assets were found in the premises prior to the demonetisation period.

The two-member Bench of Pawan Singh, (Judicial Member) and A L Saini, (Accountant Member) held that the amendment in section 115BBE of the Income Tax Act came into force only on 15.12.2016 whereas the search was conducted on 16.08.2016 and the assessee had paid tax at 30%. Since the search in the case of the assessee was carried out before the amendment the addition ought to have been made in terms of the prevailing provision, the addition made by the assessing officer invoking Section 115BBE of the Income Tax Act, provision of which came into force only on 01.04.2017, would not be sustainable, the Tribunal ruled.

No Addition during Reassessment once Genuineness of Transaction is Proven: ITAT Ganesh GanpatAlimvs The ITO CITATION:   2023 TAXSCAN (ITAT) 1033

The Surat Bench of Income Tax Appellate Tribunal (ITAT) has held that addition would not sustain once the genuineness of transaction is proven.

The two-member Bench of Pawan Singh (Judicial Member) and A L Saini (Accountant Member) allowed the appeal holding that the addition made by the Assessing Officer in reassessment proceedings was not sustainable in law. The Bench further held that there was no finding that any details, documents and evidence supplied by the assessee to the AO in respect of payment/repayment in the same year were found to be incorrect or erroneous or false. The bench added that, such addition cannot be made where the assessee has paid the due amount in the assessment year itself.

Legal Illiteracy of Common Man not an Excuse: ITAT refuses to Condone Delay in Filing Appeal NileshkumarChhaganbhaiVasoyavs I.T.O CITATION:   2023 TAXSCAN (ITAT) 1034

The Surat Bench of Income Tax Appellate tribunal (ITAT) has refused to condone the delay in filing the appeal holding that the legal illiteracy of common man could not be treated as an excuse.

A Single Bench of Pawan Singh, (Judicial Member) considering the submission of the revenue and persuading the record carefully held that in the application for condonation of delay, the assessee had casually contended that he was a common man and was not aware,could not be sufficient and reasonable ground for condoning the delay in filing appeal before the Tribunal. Accordingly the appeal was dismissed by the tribunal.

No Penalty u/s 271(1)(c) of Income Tax Act on Payment Received on Sale of Penny Stock Shares: ITAT Rajesh Kumar Agarwal vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1035

The Income Tax Appellate Tribunal (ITAT) of Jaipur bench has recently held that, no penalty shall be levied under Section 271(1)(c) of Income Tax Act 1961 on payment received on sale of penny stock shares.

It was observed by the tribunal that the assessee has already shown the income in response to the notice issued under Section 148 of the Income Tax Act. Further, as regards the addition of Rs 21,300/- amount of income received from sale of penny stock has been made on account of the meageramount and on account of difference of opinion only. Therefore, the two-member bench of Sandeep Gosain, (Judicial Member) andRathodKamleshJayantbhai, (Acountant Member) allowed the appeal filed by the assessee.

ITAT quashes Ex Parte order passed due to Mistake of Service of Notice to Email of Assesses’s Counsel Natthi Singh vs ITO CITATION:   2023 TAXSCAN (ITAT) 1036

The Income Tax Appellate Tribunal (ITAT) has recently quashed an ex parte order passed due to mistake of services of notice to email of assessee’s counsel.

The assessee in his prayer for condonation of delay prayed that the impugned order of the CIT(A) was received directly into the SPAM folder of the counsel of the assessee and was not noticed.

After considering the materials and facts furnished by the both parties, the tribunal confirmed that the delay was caused due to the mistake of service of notice to email of assesse’s counsel. Therefore, the two-member bench of Sandeep Gosain, (Judicial Member) &RathodKamleshJayantbhai, (Accountant Member) restored the matter back to the file of the CIT(A).

Supporting Other Trusts and Societies for Charitable Activities falls under Section 80G of Income Tax Act: ITAT Seth PaannalaljiDhoolchandjiKatariaParmarthik Trust vs CIT CITATION:   2023 TAXSCAN (ITAT) 1037

The assessee Seth Paannalalji is a Trust created on 15.08.2001. It is registered under the M.P. Public Trust Act. It was also registered by the Income tax Department under Section 12A as well as section 80G of Income Tax Act, 1961, with the effect from 10.01.2003. However, in terms of the amendments made in Income Tax Act, 1961, the Assessee is required to obtain re-registration under Section 12A as well as 80G. Therefore, to comply with such requirements, the assessee filed two separate applications for registration under Section 12A as well as 80G of the Income Tax Act.

The two member bench consisting  Judicial Member Vijay Pal Rao and and Accountant Member  B M Biyani observed that the assessee has clearly mentioned “To Expenditure on the object of the Trust” in Income & Expenditure A/cs and the auditors have audited those statements after due verification. The Tribunal further held that the assessee has given donations out of current year income consisting of dividend, interest and mutual funds and not out of income which was accumulated or set apart brought the bench to conclude that the twin-reasons assigned by CIT(E) for rejection of assessee’s application were not valid. In result, Appeal filed by the assessee was allowed.

Treatment of Booking Advances as Unexplained Cash Credits: ITAT quashes Disproportionate Addition towards Co-Owners of LandSanjaykumarRamanbhai Patel vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1038

The Surat Bench of Income Tax Appellate Tribunal (ITAT) has quashed the disproportionate addition towards co-owners of land as the booking advances were treated as unexplained cash credits.

The two-member Bench of Pawan Singh, (Judicial Member) and A. L. Saini, (Accountant Member) allowed the appeal holding that the addition in the hands of the co-owners, therefore the assessee under consideration should not be treated differently. The Bench further observed that the Assessing Officer had failed to conduct the enquiry and issue the notice under Section 131 of the Income Tax Act to the persons from whom the assessee had received booking advances and assessee’s mother was one of the co-owners of the land and whose assessment was framed under section 143(3) of the Income Tax Act, wherein the Assessing Officer had not made any addition in her hand.

Cost of New Property has to be Assessed as per Collaboration Agreement for Exemption u/s 54: ITAT Sh. Ramesh Chandnavs ACIT CITATION:   2023 TAXSCAN (ITAT) 1039

The Income Tax Appellate Tribunal (ITAT) of Delhi bench has held that the cost of new property has to be assessed as per collaboration agreement for exemption under section 54 of the Income Tax Act, 1961.

A two-member bench comprising ShamimYahya, Accountant and S Anubhav Sharma, Judicial observed that the cost of the new property is not the cost of a share in the plot alone but all the other constructed and covered area received by the assessee. It was held that for Section 54 of the Act, the mere value of 32.5% ownership rights on the proportionate basis of share consideration of Rs. 5,50,00,000/- is not correct and the cost of new property has to be assumed to be Rs. Rs. 3,57,50,000/- being the value of interests and share of the assessee in the new construction, as per the collaboration agreement and the sale deed terms.

Loss of Chit Fund Utilized for Business Purpose allowable as Business Loss: ITAT Nijhawan Travel Service Pvt. Ltd vs ACIT CITATION:   2023 TAXSCAN (ITAT) 1040

The Income Tax Appellate Tribunal (ITAT) of Delhi bench has held that loss incurred on chit fund is allowable as a business loss if money is utilized for business purposes.

The two bench members, Shri. N.K. Billaiya,( accountant) and Shri. Anubhav Sharma, (judicial) observed that subject to the satisfaction that the Chit Fund money is utilized for business, it can be allowed as an expenditure. The ITAT restored the matter to the files of  AO to inquire into the question of the use of the Chit Fund money for business and to allow the same as business expenditure. 

Interest Income from Co-operative Bank Credited to Reserves in Balance Sheet Eligible for Deduction u/s 80P(2)(d) of Income Tax Act: ITAT Oberoi Spring Co–operative Housing Society Limited vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1041

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has recently, in an appeal filed before it, held that interest income from co-operative bank credited to reserves in the balance sheet is eligible for deduction under section 80P(2)(d) of the Income Tax Act.

The ITAT coram of S. Rifaur Rahman, the Accountant Member, and Sandeep Singh Karhail, the Judicial Member, thus held: “Therefore, in view of the above, we are of the considered opinion that the assessee is entitled to deduction under section 80P(2)(d) of the Act on the entire amount of interest income of Rs.1,99,90,770 received from the Co-operative Bank. As a result, grounds raised by the assessee are allowed.”

No Addition can made on Account of Income received from sale of Scrap/Waste: ITAT New Delhi Export House vs JCIT CITATION:   2023 TAXSCAN (ITAT) 1042

The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently held that no addition could be made on account of income received from sale of scrap/Waste.

The two-member bench of  Anil Chaturvedi, Accountant Member and Anubhav Sharma, Judicial Member while considering the contentions of the both parties, observed that,  AO made addition on the basis on the basis of research undertaken on the internet. Thus he had not brought on record any concrete material to demonstrate that the sale of Scrap recorded by the assessee is understated. Therefore, the bench allowed the appeal filed by the assessee and deleted the addition made by the AO.

Fee u/s 234E of Income Tax Act is Leviable Only for Default Committed after June 1st 2015: ITAT Eagle Flask Industries Pvt. Ltd. vsDy.CIT CITATION:   2023 TAXSCAN (ITAT) 1043

The Income Tax Appellate Tribunal (ITAT), Pune Bench, has recently, in appeals filed before it, held that fee under Section 234E of the Income Tax Act is leviable, only for defaults committed after June 1st, 2015.

Finally, the ITAT coram of R.S Syal, the Vice- President, and S.S Viswanethra Ravi, the Judicial Member, thus concluded and held: “Similar view has been taken in Jiji Varghese VS. ITO (TDS) &Ors., holding that no interest under Section 234E can be imposed for the periods of the respective A.Ys. prior to June 1, 2015. Thus, the order of NFAC, Delhi is not justified in confirming the levy of fee under Section 234E of the Act and it is set aside.”

Interest Income from the Investments Made out of Reserve Fund Exempt u/s 80P(2)(a)(i): ITATONGC Employees Co-op Credit & Thrift Society Limited vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1044

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that interest income arising from the investment made out of reserve fund is exempted under Section 80P(2)(a)(i) of the Income Tax Act, 1961.

A Single member Bench of SuchitraKamble, (Judicial Member) allowed the appeal holding that the assessee being cooperative society, any income recorded in sub-section 2 of the Section 80P of the Income Tax Act, there should be in accordance with and subsection to the provisions of Section 80P, of the Income Tax Act, the same was specified in sub-section 2 in computing the total income of the assessee. The Bench held that therefore, interest income arising from the investments made out of reserve funds is exempt under Section 80P(2)(a)(i) of the Income Tax Act.

Deduction Allowable on written off Bad Debts since Unpaid Portion of Sale Amount and Bad Debts written off Claimed are Same: ITATHusk Power Systems Pvt. Ltd vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1045

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has allowed deduction to bad debts written off since the unpaid portion of sale amount and bad debts written off claims were the same.

The two member Bench of C.M. Garg, (Judicial Member) and M. Balaganesh, (Accountant Member) allowed the appeal holding that the assessee had claimed bad debts written off in respect of sales made during the year, that the assessee had indeed offered the sales amount initially to tax which would be in compliance to the provisions of Section 36(2) of the Income Tax Act. Since part of the said sales amount was not received, the Bench held that the assessee had claimed the same as bad debts written off and would be allowable.

Disallowance u/s 14A of the Income Tax Act cannot Exceed Exempt Income: ITAT DCIT vs PTC India Financial Services Ltd. CITATION:   2023 TAXSCAN (ITAT) 1046

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that disallowance under Section 14A of the Income Tax Act, 1961 could not exceed the exempted limit.

The two-member Bench of ShamimYahya, (Accountant Member) And Anubhav Sharma, (Judicial Member) allowed the appeal filed by the assessee observing that the AO had mechanically applied the formula given in Rule 8D, hence he found that AO had computed the disallowance which was far in excess of the exempt income disclosed by the assessee which was not logically or prudently possible. Referring to the decision in Joint Investment (P) Ltd. vs. CIT, aa the Bench held that disallowance under Section 14A of the Income Tax Act could not exceed the exempt income.

Assessment Order passed u/s 147 of Income Tax Act against Non-Existing Entity is Void Ab Initio: ITAT Rathi Ceramics Pvt. Ltd vs ITO CITATION:   2023 TAXSCAN (ITAT) 1047

The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently held that assessment order passed under Section 147 of the Income Tax Act, 1961 against non-existing entities is void ab initio.

AO had fallen in error in not taking cognizance of the fact of merger of the assessee company and that it had lost legal existence for the purpose of the Act, still the assessment order was passed against non-existing entity.Two member bench of ShamimYahya, (Accountant Member) and Anubhav Sharma, (Judicial Member) allowed the appeal filed by the assessee.

Chronic Disease Resulted in Ex parte Assessment and Ex parte Appellate Order: ITAT Directs Denovo AdjudicationSumita Devi vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1048

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has directed for denovo adjudication on finding that chronic disease of the assessee had resulted in ex parte assessment and ex parte appellate order.

A Single Bench of C.M. Garg,(Judicial Member), allowed the appeal and restored it back and directed for denovo adjudication observing that, “I am of the view that while deciding the condonation petition of assessee it has already observed that the assessee was suffering with chronic diseases and therefore, he could not file appeal within prescribed time limit and this cause was continuous and thus was continuously persisting in the life of the assessee which resulted into ex parte assessment as well as ex parte first appellate order.”

Technical Approval Granted u/s 153D of Act is not valid: ITAT quashes Assessment OrderM.G. Metalloy Private Limited vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1049

The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently while quashing the assessment order passed by the AO held that the technical approval granted under Section 153D of Income Tax Act, 1961 is not valid.

It was observed by the tribunal that, in the instant matter of record by the own admission of JCIT that the approval granted is merely technical and without appraisal of evidence or enquiries. Finally, after considering the facts and circumstances of the case the two member bench Chandra Mohan Garg, (Judicial Member) and Pradip Kumar Kedia, (Accountant Member) observed that the observations made by the JCIT, approval granted under Section 153D Income Tax Act apparently did not meet the requirement of law and hence assessment orders passed in consequence of such non-est approval is a nullity in law.

Income Tax Addition cannot be Made Merely on Retracted Statement: ITAT ACIT vs Surya Global Steel Tubes Ltd CITATION:   2023 TAXSCAN (ITAT) 1050

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that Income Tax additions cannot be made merely based on retracted statements.

The two member Bench of B. R. R. Kumar, (Accountant Member) and Yogesh Kumar US, (Judicial Member) allowed the appeal filed by the assessee holding that, “it is clear that the source of investment made against the share capital/ premium/ warrants, stands explained, as appellant and investor companies, have substantiated the same by furnishing evidences and proved the Identity, genuineness of transactions and creditworthiness of investor companies.”

No Penalty under Section 271AAA(2) when Assessee Disclosed Undisclosed Income in Section 132(4) Statement: ITAT ACIT vs R.J. Corp. Limited CITATION:   2023 TAXSCAN (ITAT) 1051

The New Delhi bench of the Income Tax Appellate Tribunal (ITAT) recently ruled that the penalty cannot be imposed under Section 271AAA(2) when the assessee disclosed undisclosed income in a statement under Section 132(4) of the Income Tax Act.

The two Bench consisting of an Account Member Dr. B. R. R. Kumar and a Judicial Member SaktijitDey observed that there was no undisclosed income relating to the previous year which could have enabled the Assessing Officer to invoke the provisions of section 271AAA of the Income Tax Act. Therefore, there was no valid reason to interfere with the decision of the Commissioner (Appeals). Grounds raised by the Revenue was dismissed.  On the basis of the facts, it is clearly established that whatever undisclosed income earned by Assessee was offered to tax in the manner specified in sub-Section (2) to Section 271AAA of the Income Tax Act. That being the case, assessee’s case falls within the exception provided under section 271AAA (2). Hence, no penalty can be imposed under Section 271AAA of the Income Tax Act. In result, both appeals filed by revenue were dismissed.

Payments made to the Non-Resident Service Providers on Account of Ad Film Production Line Services are not FTS, not Taxable: ITATACIT vs Red Ice Production Pvt. Ltd. CITATION:   2023 TAXSCAN (ITAT) 1052

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) recently held that payments made to the non-resident services providers on account of ad film production line services are not Fee for Technical Service (FTS) hence not taxable.

After considering the submissions of both parties the two-member bench of the tribunal G S Pannu, (President) and Astha Chandra, (Judicial Member) dismissed the appeal filed by the revenue and held that “payments made to the non-resident service providers by the assessee are not chargeable to tax in India and thus no disallowance under Section 40(a)(ia) of the Income Tax Act is called for on account of non-deduction of tax at source.”

Compliance with Statutory Notice u/s 142(1): ITAT allows Penalty Exemption u/s 272(1) Agrasar Education Ltd. vs ITO CITATION:   2023 TAXSCAN (ITAT) 1053

The New Delhi bench of the Income Tax Appellate Tribunal (ITAT) recently allowed the exemption under Section 272(1) due to compliance with the statutory notice under Section 142 (1) of Income Tax Act 1961.

The two-member Bench of Accountant Member M. Balangesh and a Judicial Member C.M. Garg observed that “We find that the counsel for the assessee had placed on record the evidence of having sought an adjournment in income tax portal from the Assessing Officer by stating the reason that its authorized representative Shri K C Garg is busy with filing of tax audit returns and information called for require some time for compilation. The evidence in this regard is placed on record by the counsel .Moreover, the assessee had also furnished the complete details called for before the Assessing Officer. Hence we hold that the assessee had indeed complied with the statutory notice under Section 142(1) of the Income Tax Act by seeking adjournment and later furnishing the requisite details. Hence there cannot be any levy of penalty under Section 272A(1)(d) of the Income tax  Act for non-compliance with statutory notice. Accordingly, the ground raised by the assessee is allowed.”

ITAT quashes Penalty Order u/s 271(1) (c) for “Lack of Clarity in Particulars”Gawar Constructions Co. Pvt. Ltd. vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1054

The New Delhi bench of the Income Tax Appellate Tribunal (ITAT) recently quashed the penalty order under Section 271(1)(c) of the Income Tax Act for lack of clarity in particular.

The bench consisting of  two members, the Judicial Member Chandra Mohan Garg and the Accountant Member Pradip Kumar Kedia observed that based on this satisfaction, the notice under Section 274 read with Section 271(1)(c) of the Income Tax Act was issued. However, the penalty has been imposed on the grounds of furnishing inaccurate particulars of income. Thus, the basis for drawing satisfaction under Section 271(1B) of the Income Tax Act and the actual basis for imposition of penalty are quite different. The impugned action of the Assessing Officer for imposition of penalty on a different ground than the ground on which the satisfaction was drawn, is wholly untenable in law, the Bench observed. Consequently, the impugned penalty orders passed by the Assessing Officer were set aside as per the decision in the case HatisPrabhu Das Chaudhary vs. ITO and the penalty imposed under Section 271(1)(c) of the Income Tax Act was canceled. In the result, the appeal of the assessee was allowed.

Cane Development Council is Local Authority u/s 10(20) of Income Tax Act: ITAT deletes Tax Demand M/s Cane Development Council Titawivs ITO CITATION:   2023 TAXSCAN (ITAT) 1055

The Income Tax Appellate Tribunal (ITAT) of Delhi bench has held that Cane Development Council is a local authority under section 10(20) of the Income Tax Act, 1961.

The two bench members, Shri C.M Garg(judicial), and Shri M.Balaganesh (accountant) concluded that the provisions of Section 2(24) of the Act would not cover such grant in aid to be included as an income for reasons that it cannot be naturally imputed that the activity of the construction of roads was any part of the business of Cane Cooperative Society and it did not relate to the normal business activities of the assessee cane committee. The ITAT held that “the assessee to be a ‘local authority’ and its receipts are not chargeable to tax in the facts and circumstances of the instant case.” The appeal of the assessee is allowed.

Fair Market Value determined by Registered valuers for Computation of Taxable value should not be ignored: ITAT HarivadanbhaiMaganlal Patel vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1057

The Surat Bench of Income Tax Appellate Tribunal (ITAT) has held that the fair market value determined by the registered valuers for the purpose of computation of taxable value should not be ignored.

The two member Bench of Pawan Singh, (Judicial Member) and A. L. SAINI, (Accountant Member) held that the registered valuer of the assessee had taken into account all these facts and circumstances of the land to determine the fair value, therefore fair market value determined by the registered valuers should not be ignored. The Bench partly allowed the appeal by determining the fair value of both the properties at the rate of Rs.80/- per square metre for the purposes of computation of indexed cost of acquisition to determine the taxable long term capital gain holding that would meet the end of justice.

No Addition on Unaccounted Income on Inclusion of Sale of Jewellery as LTCG in ROI: ITAT quashes Assessment Order and Penalty Smt. NirmalUppalvs DCIT CITATION:   2023 TAXSCAN (ITAT) 1058

The Delhi bench of Income tax appellate tribunal (ITAT) quashed the assessment order and penalty which was passed by Deputy Commissioner of Income Tax (DCIT) and held that No addition could be made on unaccounted income since the assesse already included sale of jewellery as Long term capital gain in return of Investment.

The two-member bench comprising (N.K.Billaiya) accountant member (Anubhav Sharma) judicial member stated that the assessee is a former Central Government Employee who retired from the office of Accountant General, it can be assumed that she must have been holding some jewellery. The respondent, without trying to make any further inquiries from the assessee to ascertain the truthfulness of her holding of the jewellery, proceeded to out rightly discard the explanation. The assessee was required to give explanation of the reasons for receiving the credit entry in her bank which she has given on the basis of the invoice issued by the JBL. To discredit the same and to connect the assessee with the pseudonymous entries of cash, some evidence or circumstance based on preponderance of probability was required to be shown by the respondent-revenue. While allowing the appeal, the Court quashed the impugned assessment order and penalty order.

Addition not Sustainable u/s 153C without Incriminating Material found during Search and Seizure: ITAT ITO vsPrajyotiImpexPvt. Ltd. CITATION:   2023 TAXSCAN (ITAT) 1059

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the addition cannot be made under Section 153C of the Income Tax Act 1961 without finding any incriminating material during the search and seizure operations.

The two-member Bench of SaktijitDey, (Judicial Member) and B.R.R Kumar, (Accountant Member) dismissed the appeal filed by the revenue referring to a recent judgement delivered in the case of PCIT vs. AbhisarBuildwell P. Ltd held that no addition could be made in an assessment under Section 153C of the Income Tax Act in absence of any incriminating material found as a result of search and seizure operation.

Delay in Filing Form 67 not a Reason for Denial of Relief u/s 90 of Income Tax Act: ITAT SobhanLalGangopadhyayvsAsstt. Director of Income Tax CITATION:   2023 TAXSCAN (ITAT) 1060

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) recently held that the relief under Section 90 of the Income Tax Act, 1961 should not be denied solely on the ground of a delay in filing Form 67.

The bench, consisting of two members, Vice President RajpalYadav and Accountant Member Manish Borad, observed that the decision in the case of Sonakshi Sinha (supra) was squarely applicable to the facts of the present case. Therefore, the Income Tax Appellate Tribunal held that the Assessing Officer should not have denied the relief under Section 90 of the Income Tax Act merely based on the delay in filing Form 67. In result, appeal of the assessee was allowed.

Relief to Finesse International: Business Promotion Expenses for Improving Visibility of Brand Should Not Be Treated Personal, rules ITAT M/s Finesse International Design Pvt. Limited vs DCIT Central Circle-4 CITATION:   2023 TAXSCAN (ITAT) 1061

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has granted relief to Finesse global company holding that the business promotion expenses for improving visibility of the brand should not be treated as personal.

The two member Bench of SaktijitDey, (Judicial Member) and M. Balaganesh, (Accountant Member) allowed the appeal filed by the assessee and deleted the disallowance made on account of business promotion holding that the employees and directors of the assessee company would incur the expenditure in their credit cards and later on the same had been reimbursed by the assessee company to the Directors and employees. The Bench further observed that, “Numerous entries entered by the assessee on account of business promotion and these are to be incurred by the assessee for improving the visibility of its brand and sale of its products, to the various customers / clients and business associates for the business purposes and also for entertaining the customers /clients in various restaurants and clubs and these are routine expenses incurred by the assessee in the normal course of business.

Depreciation Allowable to Plant and Machinery Installed for Pilot Project Added to Existing Block: ITAT M/s. Indorama Industries Limited vs ITO CITATION:   2023 TAXSCAN (ITAT) 1062

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has allowed the depreciation to plant and machinery installed for pilot projects which were added to existing blocks.

The two member Bench of SaktijitDey, (Judicial Member) and M. Balaganesh, (Accountant Member) allowed the appeals holding that in subsequent assessment years, the Assessing Officer had allowed assessee’s claim of depreciation on the capitalised plant and machinery of the pilot project.  On a reading of section 43(6)(c) of the Act, the Bench found that as per the definition of block of assets therein, there was no condition that the plant and machinery must have been put to use. The only condition was that the assets must have been acquired during the relevant year.

Sham Transaction between Associated Enterprises: ITAT Disallows Proprietary Business Loss Samtel Glass Ltd. vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1063

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has disallowed the proprietary business loss since sham transactions were found between associated enterprises.

The two-member Bench of Chandra Mohan Garg, (Judicial Member) and Pradip Kumar Kedia, (Accountant Member) dismissed the appeal filed by the assesseehilding that both the assessee and the SAL were family controlled with common shareholding and therefore were privy to the exact affairs and It was not a case where a third party had been caught unaware resulting in unintended losses. “The basis of calculation of security deposit, the proof of production of specialised glass, cost involved thereon is not available on record. The agreement with the AE is also not available in original. Except for the transfer of funds to SAL, no other substantive evidence is available to enable us to appreciate the facts in its perspective,” the Bench further observed.

Consideration from Sale of Agricultural Land not Taxable as ‘capital Gains’: ITAT deletes Addition Shri. George Gee Varghese vs The Income-tax Officer CITATION:   2023 TAXSCAN (ITAT) 1064

The Chennai bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition made by the assessing officer and held that consideration received towards sale of agricultural land should not be taxable under the head of capital gain.

It was observed by the tribunal that certificate issued by the Additional Tahsildar and Village Officer at Manarcad Village and copy of receipt issued by the Kerala Government evidencing payment of basic land tax contribution towards Agricultural Workers Welfare Fund Board also clearly showed that said land was agricultural land. As per evidence filed by the assesseeincluding revenue records, it is very clear that the land was an agricultural land when it was purchased in the year 2006 and remained agricultural land when it was sold in the year 2015. Therefore, the land sold by the assessee was held to be agricultural land and outside the scope of definition of capital asset as defined under Section 2(14) of the Income Tax Act. The two member benches of the tribunal Mahavir Singh, (Vice President) and Manjunatha. G, (Accountant Member)   after considering the facts and materials produced by the both parties allowed the appeal filed by the assessee.

ITAT quashes Assessment Order Due to Lack of Opportunity given to be Heard to Assessee u/s 144AIncome Tax Officer vs M/s. Shri Mahalakshmi Metal & Scrap Processing Private Limited CITATION:   2023 TAXSCAN (ITAT) 1066

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) recently quashed the assessment order passed under Section 144A of the Income Tax Act due to lack Opportunity to be heard for assessee.

Although the assessment order did not explicitly mention the directions issued by the joint Commissioner of Income Tax (JCIT), a comparison between the directions and the assessment order reveals that the assessment was carried out based on the directions. Consequently, the assessment made without providing the assessee an opportunity to be heard, as required by Section 144A, is illegal and void. As a result, the assessment order passed by the Assessment Officer under Section 143(3) of Income Tax was quashed. In result, the appeal filed by revenue was quashed.

Section 56(2)(vii) not Applicable to Individual Receiving Sum from HUF as its Member: ITATRanjitbhaiDhayabhai Panchal vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1067

The Income Tax Appellate Tribunal (ITAT), Surat Bench, has recently, in an appeal filed before it, held that section 56(2) (vii) is not applicable to individual receiving sum from HUF as its member.

The Surat ITAT observed, “The Karta of the ‘HUF’, even can gift the ‘HUF’ property for pious purpose and even he can contract a debt for the legal necessity and for family purposes and can bind the other members to the extent of their interest in the family property.” Finally, the ITAT coram of Pawan Singh, the Judicial Member, thus held: “Thus, in view of the above factual and legal discussion and respectfully following the decision in PankilGargVs ITO, I direct the assessing officer to delete the addition of Rs. 18.00 lacs under section 56(2)(vii). In the result, the ground of appeal raised by the assessee is allowed.”

ITAT disallows Exemption under Section 54B for Property Purchased in Name of Wife Shri Surta Ram vs ITO CITATION:   2023 TAXSCAN (ITAT) 1068

The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) recently disallowed the exemption under Section 54B property purchased in the name of the wife of assessee.

The tribunal bench, consisting of two members, Vice President A.D.Jain and Accountant Member Vikram Singh Yadav, observed that exemption under Section 54B of the Income Tax Act was not allowable to the assessee on the ground that the land was not purchased by the assessee in his own name; that the CIT(A) as well as the Tribunal, both dismissed the appeals filed by the assessee and that since the issue stood already concluded against the assessee by the Punjab & Haryana High Court in Jai Narain’s case (supra) and the Tribunal had also followed the said judgment. In result, appeal filed by the assessee was dismissed

Failure of Assessee to Substantiate Enhanced Cost of Acquisition with Cogent Evidence: ITAT upholds Disallowance of Excess Cost BhausahebSopanraoBhoirvs Dy. Commissioner of Income Tax CITATION:   2023 TAXSCAN (ITAT) 1070

The Income Tax Appellate Tribunal (ITAT), Pune Bench, has recently, in an appeal filed before it, on the assessee’s failure to substantiate enhanced cost of acquisition with cogent evidence, upheld the disallowance of excess cost.

The Pune ITAT observed, “the excess payment (if any) made by the appellant to the parties from whom the pieces of and were acquired does not ispo-facto sufficient it to attribute towards the cost of acquisition of transferred assets. This is so because, there is a complete absence of lawful contractual obligation or a document creating any additional liability upon the appellant purchaser or acquirer for any payment in addition to or over & above the agreed consideration of ₹26,30,000/- in relation to execution of registered POA.” Finally, the coram of S.S Godara, the Judicial Member, and G.D Padmahshali, the Accountant Member, thus concluded and held: “Therefore, we do not find any infirmity with the orders of both the tax authorities below in disallowing the excess cost while computing the profits in the hands of appellant. For the reason we find the grounds of appeal meritless.”

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