ITAT Weekly Round-up

This Round-Up analytically summarises the key stories related to the Income Tax Appellate Tribunal (ITAT) reported at Taxscan.in during July 29 to August 04, 2023.

Mere Suspicion Not Enough for Income Tax Dept to make Additions to Taxpayer’s Income: ITAT Jitendra Nemichand Gupta vs I.T.O CITATION:   2023 TAXSCAN (ITAT) 1762

The Surat bench of the Income Tax Appellate Tribunal (ITAT) has ruled that mere suspicion is not enough for the Income Tax Department (ITD) to make additions to a taxpayer’s income.

A Single Member Bench Shri Pawan Singh (Judicial Member) allowed the appeal of the assessee and deleted the addition made by the Assessing Officer and found that the assessee had met his burden of proof and that the addition made by the Assessing Officer was not sustainable.

Payment for architectural design could not be classified as royalty under Article 12(3) of India Singapore DTAA: ITAT DCIT vs Aedas Pte. Ltd CITATION:   2023 TAXSCAN (ITAT) 1763

The Delhi bench of the Income Tax Appellate Tribunal held that Payments made in consideration of architectural design could not be classified as royalty under Article 12(3) of India Singapore Double Tax Avoidance Agreement (DTAA).

The two-member bench consisting of G.S. Pannu (president) and Astha Chandra (Judicial member) after considering the facts of the assessee’s case in the light of the decisions in the case of Gera Developments P. Ltd. and Devi Ashmore India Ltd. held that payments made to the assessee in consideration of architectural design services could not be classified as royalty under Article 12(3) of IndiaSingapore DTAA. Hence, the tribunal did not find any reason to interfere with the findings of the CIT(A) and the appeal was dismissed.

Expenses incurred for Repairing Machines for Running Petrol Pump Business are Revenue nature: ITAT deletes Penalty Akram Hossain Mullick vs Assistant Commissioner of Income Tax CITATION:   2023 TAXSCAN (ITAT) 1765

The Income Tax Appellate Tribunal (ITAT) Kolkata Bench held that expenses incurred for repairing machines for the running of petrol pump business are revenue in nature.

The tribunal after reviewing the facts and submissions of the both parties, the two member bench of Girish Agrawal (Accountant Member) and Sanjay Garg (Judicial Member) relied upon the decision of the Supreme Court in the case of CIT vs Reliance Petroproducts Pvt Ltd observed that “There is no new asset which has been created giving benefit of enduring nature”

No Illegality in Adopting Presumptive Tax for Professional Receipts from Fashion Designer: ITAT deletes Addition u/s 68 Mehjabeen Masood Khan vs ITO CITATION:   2023 TAXSCAN (ITAT) 1764

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the addition of professional receipts as undisclosed income is not tenable.

The bench consisting of Pavan Kumar Gadale (Judicial member) held the assessee has adopted provisions of section 44AD of the Income Tax Act which is permissible and the addition of professional receipts as undisclosed income Under Section 68 of the Income Tax Act is not tenable. Accordingly, the bench set aside the order of the CIT(A) and also directed the assessing officer to delete the addition. Thus the appeal was allowed.

No Income Tax on Partner for Share in Profit of Partnership Firm: ITAT deletes Addition u/s 68 of Income Tax Act Jayesh Tokershi Shah vs The DCIT CITATION:   2023 TAXSCAN (ITAT) 1766

The Income Tax Appellate Tribunal (ITAT) Mumbai Bench held that no income tax on partners for share in profit of partnership firm. Therefore the bench deleted the addition made under Section 68 of Income Tax Act, 1961.

The tribunal after reviewing the facts and submissions of the both parties the two member bench of Om Prakash Kant, (Accountant Member)  and Kavitha Rajagopal,  (Judicial Member) deleted the addition and held that share of profit from the partnership firm was always exempt in the hands of the partners irrespective of payment taxes by the partnership firm.

TDS Benefit shall be Allowed in Year under Consideration for which such Income is Assessable: ITAT Ignitive Digitech Private Limited vs DCIT-CPC CITATION:   2023 TAXSCAN (ITAT) 1767

The Income Tax Appellate Tribunal (ITAT) Mumbai Bench Ruled that the Tax Deduction at Source should be allowed in a year under consideration for which such income is assessable.

The tribunal after reviewing the facts and submissions of the both parties, the two member bench of Gagan Goyal, (Accountant Member)  and Kuldip Singh (Judicial Member) held that as per Rule 37BA (3) (i) of Income Tax Rules, 1962 that the benefit of TDS is to be given for the assessment year for which the corresponding income is assessable.

ITAT deletes 5% Disallowance out of Repair and Maintenance Expenses claimed under Sanitation Segment M/s City Lifeline Travels Pvt Ltd vs The Addl.C.I.T CITATION:   2023 TAXSCAN (ITAT) 1769

The Income Tax Appellate Tribunal (ITAT) Delhi Bench deleted the 5% disallowance made by the assessing officer out of repair and maintenance expenses claimed under the sanitation segment .

It was observed by the tribunal that during the course of assessment proceedings itself the assessee has explained that repairs and maintenance expenses were incurred by it on its own vehicles and not on hired vehicles.  Further the  explanation of the assessee was supported by bills/vouchers.

The tribunal after reviewing the facts and submissions of the both parties, the two member bench of  N.K. Billaiya, (Accountant Member) and Anubhav Sharma, (Judicial Member) deleted the 5% disallowance  out of repair and maintenance expenses claimed under sanitation segment.

Expenses incurred for Repair and Maintenance of Damaged Assets on Fire are Capital Expenditure: ITAT upholds Disallowance ACIT vs M/s. Nitrex Chemicals India Ltd. CITATION:   2023 TAXSCAN (ITAT) 1768

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the expenses incurred for repair and maintenance of damaged assets on fire are capital expenditure. Hence, the bench upholds the disallowance made by the assessing officer.

The tribunal after reviewing the facts and submissions of the both parties the two member bench of G.S.Pannu (President)  and Anubhav Sharma,  (Judicial Member) upheld the disallowance of expenses incurred for  repair and maintenance of damaged assets on fire and held as it was capital in nature.

Income Tax is not Leviable on Award received on Compulsory Acquisition of Agricultural Land of Partnership Firm: ITAT Parasnath Vinimay Pvt. Ltd vs CPC CITATION:   2023 TAXSCAN (ITAT) 1770

The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) held that Income Tax is not leviable on award received on the compulsory acquisition of the agricultural land of partnership firm.

The tribunal after reviewing the facts and submissions of the both parties a  Single bench of Dr. Manish Borad (Accountant Member) held that Income Tax is not leviable on award received on the compulsory acquisition of the agricultural land of partnership firm

Repairs and Maintenance expenses of Transport Segment were incurred by its own vehicles and not on Hired Vehicles: ITAT deletes 20% Ad-hoc Disallowance M/s City Lifeline Travels Pvt L vs The Addl.C.I.T CITATION:   2023 TAXSCAN (ITAT) 1769

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that repairs and maintenance expenses of the transport segment was incurred by its own vehicles not on hired vehicles. Hence, the bench deleted the 20% ad hoc disallowance made by the assessing officer.

It was observed by the tribunal that during the course of assessment proceedings itself the assessee has explained that repairs and maintenance expenses were incurred by it on its own vehicles and not on hired vehicles.  Further, the explanation of the assessee was supported by bills/vouchers.

The tribunal after reviewing the facts and submissions of the both parties, the two member bench of  N.K. Billaiya, (Accountant Member)  and Anubhav Sharma,  (Judicial Member) deleted 20% adhoc disallowance made on expenses incurred for repairs and maintenance under Transport segment using owned vehicles.

ITAT deletes Penalty Imposed u/s  271AAB of Income Tax Act  on  account of Cash received by Minor Grandson on Birthday during Search Proceedings Pawan Satyanarain Jalan vs The Assessing Officer CITATION:   2023 TAXSCAN (ITAT) 1771

The Income Tax Appellate Tribunal (ITAT) Ahmedabad Bench deleted the penalty imposed under Section 271AAB of Income Tax Act, 1961 on account of cash received by a minor grandson on birthday during search proceedings.

The tribunal after reviewing the facts and submissions of the both parties, the two member bench of Annapurna Gupta, (Accountant Member)  and Madhumita Roy,  (Judicial Member) deleted the penalty imposed under Section 271AAB of Income Tax Act on account of cash received by a minor grandson on birthday during search proceedings.

No addition can be made on basis of Notional Interest due to failure to Receive Interest for loan Advances  by assessee Finance Company: ITAT Panchiram Nahata vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1772

The Income Tax Appellate Tribunal (ITAT) Kolkata  Bench held that no addition could be made on basis of notional interest  due to failure to receive Interest for the loan advanced by the assessee finance company.

The tribunal after reviewing the facts and submissions of the both partiesz the two member bench of Rajpal Yadav, (Vice-President)  and Rajesh Kumar,,  (Accountant Member)  observed that It is just a normal business incident and in the absence of any interest income,  the notional interest income could not  be estimated for making the disallowance out of interest expenditure.

Interest Earned on Surplus Grants should not be Taxed as Income: ITAT ACIT vs Gujarat State Road Development Corporation Ltd CITATION:   2023 TAXSCAN (ITAT) 1774

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that interest earned on surplus grants should not be taxed as income.

The Two Member Bench Comprising T.R. Senthil Kumar (Judicial Member) and Annapurna Gupta (Accountant Member) held that “In view of the above, the aforestated decisions of the Hon’ble jurisdictional High Court, will clearly apply to the present case and the interest received on the surplus funds by the assessee, therefore, cannot be treated as income of the assessee. The addition therefore made to the income of the assessee by treating the interest on surplus funds as income of the assessee amounting to Rs.2,54,85,315/- is directed to be deleted.”

Receipts for Advisory Services Not Taxable Unless they Result in Transfer of Technical Knowledge u/a 13(4) of India-UK DTAA: ITAT N.M. Rothchild & Sons Ltd vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1773

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that receipts for advisory services are not taxable as Fees for Technical Services (FTS) unless they result in the transfer of technical knowledge and clarifies the scope of FTS under the India-UK Double Taxation Avoidance Agreement (DTAA), and it is likely to have implications for other taxpayers who are engaged in the provision of advisory services to their associated enterprises.

The tribunal  held that the services provided by the assessee to the Indian AE are merely for enabling and assisting the Indian AE in making the correct decisions on certain aspects as specifically provided under the group service agreement. Such rendition of services does not result in the transfer of technical knowledge, know-how, skill, etc. to the Indian AE. Therefore, the ‘make available’ condition provided under Article 13(4)(c) remains non-compliant. That being the position, the receipts would not fall within the definition of FTS as provided under Article 13(4) of India – UK DTAA.

Enhancement of Disallowance u/s 43B of Income Tax Act made Voluntarily: Delhi HC confirms Penalty Order of ITAT PR. COMMISSIONER OF INCOME TAX -CENTRAL -1 vs VALLEY IRON & STEEL CO. LTD. CITATION:   2023 TAXSCAN (HC) 1177

The Delhi High Court confirmed penalty of the Income Tax Appellate Tribunal (ITAT), on the ground of enhancement of disallowance under Section 43B of Income Tax Act, 1961 made voluntarily.

A Division Bench comprising Justices Rajiv Shakdher and Girish Kathpalia noted that “Thus, given the aforesaid, it cannot be said that the enhancement of disallowance under Section 43B of the Income Tax Act carried out by the respondent/assessee was not voluntarily. Thus, for the forgoing reasons, we are not inclined to interdict the decision of the Tribunal. According to us, no substantial question of law arises for our consideration.”

Contract/Professional Receipts Reflected in Form 26AS Rightly Offered under Presumptive Tax: ITAT deletes Addition R. P. Wood Products Private Limited vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1775

The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) held that the Contact/ Professional Receipts reflected in the Form 26AS shall be Taxed at 8% under Section 44AD of Income Tax Act, 1961.

A Single bench of Pawan Singh (Judicial member) found merits in the submissions of the AssesseeRepresentative for the assessee that only income component is to be brought to tax and not the entire receipt. Also, the tribunal directed the Assessing Officer to tax all the receipts contract, professional receipt shown in Form-26 AS at the rate of 8% and allow the benefit of proviso to Section 44AD(2) of Income Tax as existed during AY-2011-12.

Issuance of notice u/s 148 of Income Tax Act for Reassessment shall not be made without Reasonable Belief: ITAT Purulia Central Cooperative Bank Limited vs Assistant Commissioner of Income Tax CITATION:   2023 TAXSCAN (ITAT) 1779

The Income Tax Appellate Tribunal (ITAT) Kolkata Bench held that the issue of notice under Section 148 of Income Tax Act, 1961 for reopening of assessment should not be made without reasonable belief.

The tribunal after reviewing the facts and submissions of the both parties, the two member bench of Rajpal Yadav, (Vice-President) and Rajesh Kumar, (Accountant Member) held that  there is no reasonable belief to issue notice under Section 148 of Income Tax Act for reopening Assessment.

ITAT upholds Disallowance on Account of  Failure to prove Long Term Capital Loss arises from Sale of Share Of Company Pat – Fab Engineering Pvt. Ltd vs ITO CITATION:   2023 TAXSCAN (ITAT) 1778

The Income Tax Appellate Tribunal (ITAT) Ahmedabad Bench upheld the disallowance made by the assessing officer on account of failure to prove long term capital loss arises  from the sale of shares of the company.

It was observed by the tribunal that the assessee did not produce any  evidence for claim of LTCL was produced during the assessment proceedings as well as before CIT(A). Thus also considering  the submission of the assessee that when the business operation of the assessee is closed the assessee is not in a position to submit the evidence.

The tribunal after reviewing the facts and submissions of the both parties, a single member bench of Suchitra Kamble, (Judicial Member) determined that claim of LTCL would  not be proved by the assessee before any of the authorities.

Nirma Ltd. entitles to Additional Compensation for Delay in Issuing Refund u/s 244A of Income Tax Act: ITAT Nirma Limited vs ACIT CITATION:   2023 TAXSCAN (ITAT) 1776

The Ahemdabad bench of the Income Tax Appellate Tribunal (ITAT) held that the amount of refund granted to the assessee, first, has to be adjusted against the interest payable to the assessee and thus entitled to additional compensation for delay in issuing refund.

The two-member bench consisting of Siddhartha Nautiyal (Judicial member) and Waseem Ahmed (Accountant member) held that the amount of refund granted to the assessee, first, has to be adjusted against the interest payable to the assessee in the given facts and circumstances. Considering the fact that the amount of refund issued to the assessee for Rs. Rs. 75,00,281/- was first to be adjusted against the interest of Rs. 22,12,583/- then refund of principal amount.

Thus, the tribunal set aside the findings of the CIT(A) and held that the assessee is entitled to additional compensation of interest under section 244A of the Act on account of delay in the issue of refund. Thus, the ground of appeal raised by the assessee was allowed.

Interest on Compulsorily Convertible Debentures Allowable as Revenue Deduction u/s 36(1)(iii) of the Income Tax Act: ITAT Religare Finvest Ltd vs Deputy Commissioner of Income-Tax CITATION:   2023 TAXSCAN (ITAT) 1777

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that Compulsorily Convertible Debentures (CCDs) are in the nature of borrowed fund and continue to be in debt till conversion thereof into shares.

The two- member bench consisting of Dr. B. R. R. Kumar (Accountant member) and Yogesh Kumar U.S. (Judicial member) held that CCDs are in the nature of borrowed fund and continued to be debt till conversion thereof into shares and consequently interest on CCDs is allowable as revenue deduction under Section 36(1)(iii) of the Income Tax Act. Thus the appeal of the assessee was allowed.

Investment for affording financial security to wife in old age out of explained funds, not unexplained investment: ITAT Rukshana Begum vs ITO CITATION:   2023 TAXSCAN (ITAT) 1780

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the investment for affording financial security to wife in old age out of explained funds could not be considered as unexplained investment.

The Bench allowed the appeal filed by the assessee holding that “The factum of gift by husband on the special occasions, festivals etc and other occasions at the time of buying immovable property or other valuable articles is normal practice in the civilized society. The fact of saving the laid for further emergency time is also a well-accepted and well-adopted practice of ladies in civilized society.”

Investment for affording financial security to wife in old age out of explained funds, not unexplained investment: ITAT Rukshana Begum vs ITO CITATION:   2023 TAXSCAN (ITAT) 1780

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the investment for affording financial security to wife in old age out of explained funds could not be considered as unexplained investment.

A Single Bench of C.M. Garg, (Judicial Member) observed that the copies of the agreement to sale revealed that the husband of the assessee Khalid Qureshi 26.02.2007 had entered into agreements to sell his two residential plots situated in village Mirzapur with Gaurav Kumar and Usha and received Rs. 4 Lakh each from said two purchasers in cash against the agreement of sale.

The Bench allowed the appeal filed by the assessee holding that “The factum of gift by husband on the special occasions, festivals etc and other occasions at the time of buying immovable property or other valuable articles is normal practice in the civilized society. The fact of saving the laid for further emergency time is also a well-accepted and well-adopted practice of ladies in civilized society.”

Advance received for Sale of Property is taxable under ‘Income from other sources’ if Agreement for Sale is not registered u/s 56(2)(ix) of Income Tax Act: ITAT Mr. Anthony P Lewis vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1783

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that an advance received for the sale of property is taxable under the head Income from other sources if the agreement for sale is not registered under Section 56(2)(ix) of the Income Tax Act, 1961.

The Two-member bench comprising of Amarjit Singh (Accountant Member) and Rahul Chaudhary (Judicial Member) ruled that the Rs. 5 crores advance cannot be taxed as income due to the non-registered agreement for sale, the purchaser’s failure to take possession, and the assessee’s failure to refund the advance.

Difference in Perception of Viewing Transaction not Amount to Furnishing of Inaccurate Particulars: ITAT deletes Penalty Riyasat Palaces Limited vs ACIT CITATION:   2023 TAXSCAN (ITAT) 1781

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has deleted the penalty holding that the difference in perception of viewing transactions could not amount to inaccurate particulars.

The two-member Bench of Saktijit Dey, (Vice President) and Girish Agrawal (Accountant Member) allowed the appeal filed by the assessee deleting the penalty holding that the that difference in perception of viewing a transaction could not amount to furnishing of inaccurate particulars.

Section 43CA of Income Tax Act not Applicable to Sale Agreement Entered Before 1.4.2014: ITAT deletes Addition M/s Reegal Construction vs ITO CITATION:   2023 TAXSCAN (ITAT) 1782

The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition holding that Section 43CA of the Income Tax Act 1961 would not apply to the sale agreement entered before 1.4.2014.

The two-member Bench of Sanjay Garg (Judicial Member) and Manish Borad (Accountant Member) relied upon the decision of the Bombay High Court in PCIT vs. Swananda Properties (P) Ltd.

The Bench held that the provisions to Section 43CA of Income Tax Act have been introduced w.e.f. 01.04.2014 and the ‘agreement to sell was entered before the 1st April 2014 and therefore, the condition of payment or part payment of consideration on or before the date of agreement could not be imposed back-dated as the assessee could not have foreseen the introduction of Section 43CA of the Income Tax Act 1961.

Deduction u/s 54 of Income Tax Act not allowable as Capital Gain as is not Taxable in Current Assessment Year: ITAT directs to examine Previous A.Y Shri Manesh Bansilal Shah vs ITO CITATION:   2023 TAXSCAN (ITAT) 1786

The Income Tax Appellate Tribunal (ITAT) Ahmedabad Bench while directing to examine previous year assessment regarding capital gain exemption held that deduction under Section 54 of Income Tax Act, 1961 is not allowable as capital gain is not taxable in the current assessment year. The sale of the residential property was occurred in the previous year.

The tribunal after reviewing the facts and submissions of the both parties, the two-member bench of Annapurna Gupta (Accountant Member) and Rajpal Yadav (Vice-President) held that since the capital gain has been held to be not taxable in the impugned year, the eligibility to claim exemption of the same is to be examined in the year to which the capital gain pertains. Thus, the tribunal directed the AO to examine the previous year.  

Failure to file ITR bonafidely and witness no Loss to Revenue as Proper Tax was already Paid: ITAT deletes Penalty Shri Mukesh Pathak vs ITO CITATION:   2023 TAXSCAN (ITAT) 1788

The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) set aside penalty of Rs.5000 under Section 271F of the Income Tax Act, 1961 on grounds of non-filing of returns by the assessee bonafidely and did not witness any loss to the revenue as the proper tax was already paid.

A Single bench member consisting of Sandeep Gosain (Judicial member) held that there was no loss to revenue on account of bona fide mistake on the part of the Revenue by not filing the return. Therefore, taking the liberal view of the matter in the peculiar circumstances, the penalty of Rs.5,000/- under section 271F of the Income Tax was set aside and consequently, the appeal of the assessee was allowed .

Section 80HHC of Income Tax Act not requires Exports Profits as Sole Source of Income: ITAT allows Deduction M/s. MMTC Ltd vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1790

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that businesses can avail of benefits under Section 80HHC of Income Tax Act, 1961 even if export profits are not their exclusive source of income and it promotes trade and encourages entrepreneurial endeavors without restricting eligibility for tax incentives solely to export-oriented entities.

The ITAT observed that the assessee’s other sources of income, such as interest income and dividend income, were not derived from the same business as the export profits. This means that the other sources of income were not “profits of the business” for Section 80HHC. The AO’s interpretation of Section 80HHC would defeat the purpose of the provision, which is to provide a deduction for profits derived from export.

The Two-member Bench comprising G.S. Pannu (President) and Anubhav Sharma (Judicial Member) upheld the decision of the CIT(A) and allowed the deduction claimed by the assessee. The ITAT found that the assessee’s interpretation of Section 80HHC of Income Tax Act was correct and that the AO’s interpretation would defeat the purpose of the provision.

ITAT deletes  5% disallowance out of repair and maintenance expenses claimed under Sanitation Segment M/s City Lifeline Travels Pvt Ltd vs The Addl.C.I.T CITATION:   2023 TAXSCAN (ITAT) 1784

The Income Tax Appellate Tribunal (ITAT) Delhi Bench deleted the 5% disallowance made by the assessing officer out of repair and maintenance expenses claimed under the sanitation segment .

It was observed by the tribunal that during the course of assessment proceedings itself the assessee has explained that repairs and maintenance expenses were incurred by it on its own vehicles and not on hired vehicles.  Further the  explanation of the assessee was supported by bills/vouchers.

The tribunal after reviewing the facts and submissions of the both parties, the two member bench of  N.K. Billaiya, (Accountant Member) and Anubhav Sharma, (Judicial Member) deleted the 5% disallowance  out of repair and maintenance expenses claimed under sanitation segment. To Read the full text of the Order CLICK HERE

Retaining Disallowance without Following Directions of DRP: ITAT directs Re adjudication Parle Biscuits Private Limited vs Assessment Unit, Income Tax Department CITATION:   2023 TAXSCAN (ITAT) 1785

The Income Tax Appellate Tribunal (ITAT) Mumbai Bench directed readjudication for retaining disallowance without following directions of the Dispute Resolution Panel.

he tribunal after reviewing the facts and submissions of the both parties, the two-member bench of Kuldip Singh, (Judicial Member) and Padmavathy S. (Accountant Member) observed that asessee has submitted additional evidence before the DRP and the DRP after perusing the details submitted, has given a clear direction to the AO to verify and allow the expenditure in accordance with law. AO in the final assessment order did not consider the said directions of the DRP.

Therefore, the bench remitted the issue back to the AO with a direction to consider the evidence submitted and allow the claim of the assessee in accordance with law after giving a reasonable opportunity of being heard to the assessee.

Issuing Notices u/s 153C of Income Tax Act shall be from Six AYs immediately Preceding A.Y: ITAT dismiss Appeal ACIT vs M/s. Opal Buildwell P. Ltd. CITATION:   2023 TAXSCAN (ITAT) 1787

The Income Tax Appellate Tribunal (ITAT) Delhi Bench while dismissing the appeal filed by the revenue held that issuing notices under Section 153C of Income Tax Act, 1961 should be from six Assessment Year immediately preceding the assessment year.

It was observed by the tribunal that a satisfaction note for initiating the proceedings under Section 153C by the Assessing officer having jurisdiction over the case of “other person” has been recorded on 14.10.2016 and accordingly notice was issued on 18.10.2016.

The tribunal after reviewing the facts and submissions of the both parties the single member bench of G.S.Pannu, (President) and  Anubhav Sharma, (Judicial Member) observed that the assessment order passed under section 153C of the Income Tax Act, is wholly without jurisdiction. Thus, the bench confirmed that issuing notices under Section 153C of Income Tax Act, 1961 should be from six Assessment Year immediately preceding the assessment year.

Repair and Maintenance Expenses are Revenue in Nature: ITAT Allows Deduction u/s 37(1) Harmuny Entertainment Pvt. Ltd vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1791

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has allowed the deduction of repair and maintenance expenses as revenue expenditure under Section 37(1) of the Income Tax Act, 1961. The ITAT held that the expenses were incurred for the purpose of earning income and therefore, they are eligible for deduction.

The Two Member Bench comprising, Dr. Manish Borad, (accountant member), and Sonjoy Sarma (Accountant Member) has decided the case in favor of the assessee and has allowed the appeal. The Tribunal has held that the repair and maintenance expenses are revenue expenditures and should be allowed as a deduction.

Not Enquiring Huge Cash Deposit in Demonetized Currency is Violation of Provisions Dealing in Demonetized Currency: ITAT upholds Revision Order SAP Medicals (P) Ltd vs Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1794

The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) has upheld the revision order holding that not enquiring huge cash deposits in demonetized currency was a violation of provisions dealing with demonetized currency.

The two-member Bench of R.K. Panda, Vice-President AND Shri Laliet Kumar, Judicial Member It is an admitted fact that the assessee has made cash deposit of Rs.39,74,500/- during the demonetization period which was accepted by him from various hospitals in demonetized currency in violation of the extant provisions regarding dealing in demonetized currency. However, the AO in the instant case has failed to investigate this aspect and passed the order under Section 143(3) of Income Tax Act accepting the income returned.

The Bench upheld the revision order holding that “Not enquiring the huge cash deposit of Rs.39,74,500/- in demonetized currency in violation of the extant provisions regarding dealing in demonetized currency has rendered the order erroneous and prejudicial to the interest of the Revenue.” To Read the full text of the Order CLICK HERE

Receipts for AWS services /Cloud computing services rendered by Amazon to Indian Customers Not Taxable as FTS under Indo-US Treaty: ITAT Amazon Web Services vs ACIT CITATION:   2023 TAXSCAN (ITAT) 1796

The Income Tax Appellate Tribunal (ITAT) Delhi Bench held that the receipts for Amazon Web Services cloud computing services rendered by amazon to Indian customers are not taxable as Fee for Technical Service (FTS) under India -US treaty.

It was observed by the tribunal that AWS Services provided by the assessee are merely standard and automated services which are all publically available online to anyone. These services are all standardised and there is no customisation done for any particular customer. Thus, the payments received by the assessee from Indian Customer(s) from rendering AWS Services do not qualify as royalty under Article 12(3) of the India-USA DTAA and hence are not taxable in India.

Further, AWS Services provided by the assessee are standardised automated services that did not provide technical services to its customers nor does it satisfy the ‘make available’ clause as the customer would not be able to make use of the technical knowledge, skill, process etc. used by the assessee in providing cloud computing services, by itself in its business or for its own benefit, without recourse to the assessee in future. Hence, rendering cloud computing service cannot be held to be liable to tax in India as FTS/FIS.

After reviewing the facts and submissions of the both parties, the two member bench of G.S.Pannu, (President)  and Astha Chandra,  (Judicial Member) held that receipts for Amazon Web Services cloud computing services rendered by amazon to Indian customers are not taxable as Fee for Technical Service(FTS) under India -US treaty

AO Must Verify Source of Cash Deposits Made During Demonetization Period: ITAT Jumbo Electronics Corporation Pvt. Ltd. vs Pr. Commissioner of Income Tax CITATION:   2023 TAXSCAN (ITAT) 1797

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the assessing officer (AO) must verify the source of cash deposits made during the demonetization period. The ITAT’s decision in the case of Jumbo Electronics Corporation Pvt Ltd. v. Pr. CIT-2 is a reminder to businesses of the importance of accurate record-keeping and transparency with the tax authorities.

The Two Bench Members comprising Justice S Rifaur Rahman (Accountant Member) and Justice Kavitha Rajagopal (Judicial Member) decision was to partly allow the appeal filed by the assessee. It upheld the order of the PCIT on the issue of cash deposits made during the demonetization period, but it set aside the order of the PCIT on the issue of discrepancy in the gross receipts reported in the service tax return, the 26AS, and the P&L account.

Power to Transfer Appeals is vested with Respective Benches of ITAT, and not with President: ITAT Dismisses Appeal DCIT vs K.K. Patel Finance Ltd. CITATION:   2023 TAXSCAN (ITAT) 1799

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has dismissed an appeal filed by the revenue, i.e. the Income Tax Department, challenging the order of the Bangalore bench of the ITAT.  It was held that the President of the ITAT does not have the power to transfer appeals from one Bench of the ITAT to another. The power to transfer appeals is vested with the respective Benches of the Tribunal.

The tribunal observed that the power to transfer appeals is vested with the respective Benches of the ITAT, and not with the President of the ITAT and the transfer of appeals from the Kolkata Bench to the Indore Bench was not in the interests of justice, as it would have caused inconvenience to the assessee.

The Two Member Bench comprising Dr. Manish Borad (Accountant Member), and Rajpal Yadav (Vice President) ruled that appeals cannot be maintainable before the ITAT Kolkata Bench and dismissed the appeals for statistical purposes and also advised both parties to pursue them before 2 months at the ITAT Indore Bench and held that the period of limitation at Kolkata benches will be excluded from the limitation period.

Jewellery Gifted on Occasion of Marriage before Search Action: ITAT deletes Addition Anuj Sood vs ACIT CITATION:   2023 TAXSCAN (HC) 1201

The Income Tax Appellate Tribunal (ITAT) Delhi Bench deleted the addition made by the assessing officer on jewelry gifted on occasion of marriage before the search action.

The tribunal after reviewing the facts and submissions of the both parties the two -member bench of B. R. R. Kumar, (Accountant Member) and Saktijit Dey, Vice President) observed that the assessee has filed before the revenue authorities, the will of Sarla Sood and also the confirmation of Rajesh Sood the Paternal uncle of gifting the jewellery on the occasion of marriage. Hence, he proved the source of jewellery gifted on marriage. Also noted that the Search action was conducted after the marriage of asessee. Therefore, no addition could be made on the jewellery gifted on marriage.

Reopening cannot be Merely based on Retracted Statement in the Absence of Tangible Materials: ITAT deletes Addition u/s 153A of Income Tax Act DCIT vs M/s Saarthak Vanijya India Ltd CITATION:   2023 TAXSCAN (ITAT) 1793

The Delhi Bench of Income Tax Appellate Tribunal has deleted the addition made under Section 153A of the Income Tax Act, 1961 holding that the reopening could not be done merely based on Retracted statement in the absence of any tangible material.

The two-member Bench of Shamim Yahya, (Accountant Member) and Anubhav Sharma, (Judicial Member) considered the opinion that AO had fallen in error in relying the retracted statement of Brijesh Bhagat. If at all the statement of Brijesh Bhagat was relevant the same should have been corroborated by some material evidences from the enquiry of the AO had conducted with regard to creditworthiness of the parties.

Thus, the Bench had no hesitation but to accept that the assessments completed under Section 153A of the Income Tax Act that the retracted statement of Bhagat was not reliable piece of evidence and like making addition under Section 153A of the Income Tax Act the same could not have been the sole basis of reopening also.

Doubtful Debt in Nature of Diminution in value of Asset, unless there is finding u/s 35(1)(vii) of Income Tax Act: ITAT upholds Addition of Book Profit u/s 115JB DCIT vs M/s Everest Industries Limited CITATION:   2023 TAXSCAN (ITAT) 1792

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that in the year under consideration when the provision for doubtful debt has been written back, the assessee is entitled for making claim of the same.

The two-member bench consisting of Aby T Varkey (Judicial member) and Om Prakash Kant (Accountant member) held that unless there is such a finding under regular provisions of section 36(1)(vii) of the Income Tax Act, the provision for doubtful debt being also in the nature of diminution in value of asset, it also attracts explanation (i) of the section 115JB of the Income Tax Act. Therefore, under the facts and circumstances, the tribunal upheld the finding of CIT(A).

No Failure to Disclose Material Facts fully: ITAT invalidates Assessment Reopened after Four Years Samridhi Stocks Pvt. Ltd vs ITO CITATION:   2023 TAXSCAN (ITAT) 1795

The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) has invalidated assessment reopened after four years as there was no failure to disclose the material facts fully.

The two-member Bench of Sanjay Garg, (Judicial Member) and Manish Borad, (Accountant Member) observed that the Assessing Officer has reopened the assessment merely based on the information received from the investigation wing without verifying the veracity and truthfulness of such information. The information was wrong and the Assessing Officer reopened the assessment on the basis of borrowed satisfaction without correlating the same with the facts of the case.

 The Bench allowed the appeal holding the assessment was bad in law and observed that, “Even there is no allegation that the income of the assessee has escaped assessment due to non-disclosure of the facts necessary for the assessment and since the assessment has been reopened after four years of the end of relevant assessment year, hence, the exception provided under 1st Proviso to section 147 is attracted.”

Assessee cannot Question Power of Transferring Cases of Authorities from one Jurisdiction to Another: ITAT upholds Assessment Order Deputy Commissioner of Income Tax vs M/s. Natural Food Products CITATION:   2023 TAXSCAN (ITAT) 1798

The Income Tax Appellate Tribunal (ITAT) Chennai Bench held that the assessee cannot question the power of transferring cases of authorities from one jurisdiction to another. Therefore, the bench upheld the assessment order passed by the lower authorities.

It was observed by the tribunal that under provisions of section 127 of the Income Act, it was very clear that the power to transfer cases from one Assessing Officer to another Assessing Officer rests with the Principal Director General or Principal Chief Commissioner. Thus, the assessee could not call in question the powers vested with the authorities to transfer the cases in a manner convenient to the Department.

 After reviewing the facts and submissions of the both parties, the two-member bench of V. Durga Rao, (Judicial Member) and Manjunatha. G, (Accountant Member) dismissed the appeal and upheld the assessment order passed by the lower authorities.

Relief to Reliance Commercial Dealers: 10% TDS Applicable on Payment to FSII for for Availing Training of Pilots, rules ITAT M/s. Reliance Commercial Dealers Limited vs Commissioner of Income Tax CITATION:   2023 TAXSCAN (ITAT) 1804

The Mumbai bench of the Income Tax Appellate Tribunal held that taxation rate is not to exceed 10% under Article 12 of the DTAA between India and France.

The two bench member consisting of S.Rifaur Rahman (Accountant member) and Amit Shukla (Judicial member) came to the conclusion that The claim of the assessee is that as per Article 12 of the DTAA between India and France, the rate of tax shall not exceed 10% and accordingly it filed appeal before the CIT (A) claiming that rate of tax to be deducted shall be 10%. However, the aforesaid finding will also apply mutatis mutandis for this appeal also. Thus the appeal was allowed

Failure to Furnish Material Evidence of Rs. 1 crore Gift Received on Marriage: ITAT sustains addition of Partial Amount as Unexplained Money Shri Karthick Natarajan vs DCIT CITATION:   2023 TAXSCAN (ITAT) 1802

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) sustainedthe addition of partial amount of Rs. 1 crore as unexplained money under Section 69A of the Income Tax Act, 1961. The tribunal noted that the assessee failed to furnish material evidence regarding the gift received on marriage.

The two-member bench consisting of Manoj Kumar Aggarwal (Accountant member) and Mahavir Singh (Vice President) held that the provisions of Section 115BBE of the income Tax Act as amended by second amendment Act by the Taxation Laws Act, 2016 will apply w.e.f 01.04.2017 on enhanced rate of tax @60% instead of @30%. The enhanced rates apply from the commencement of the assessment year relevant to previous financial year. Hence the case of the assessee was rejected Thus, the appeal was partly allowed.       

Documentary Evidences validates Compensation Paid to Brokerages and Settlement of Disputes out of Sale Proceeds: ITAT upholds Deletion of Rs. 3.86 crores as Expenditure The Dy. Commissioner of Income tax vs Shri B.N Ramachandra (HUF) CITATION:   2023 TAXSCAN (ITAT) 1805

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) held that the documentary evidences validated the compensation paid to the brokerages and the settlement of disputes out of sales proceeds.

The two bench member consisting of Chandra Poojari (Accountant member) and Beena Pillai (Judicial member) did not find any infirmity in the action of the CIT(A) in the deleting the addition of Rs.3,86,040,000/- in the hands of the assessee. Accordingly, the question of law remanded to the Tribunal by the Hon’ble High Court was allowed in favour of the assessee. Thus the appeal of the revenue was dismissed.

Interest Paid towards Excess Claim of Refund of Duty Drawback is not Penalty or Fine: ITAT Mahalasa Exports vs The Income Tax Officer CITATION:   2023 TAXSCAN (ITAT) 1801

The Income Tax Appellate Tribunal (ITAT) Bangalore Bench held that interest paid towards excess claim of the refund of duty drawback is not penalty or fine.

After reviewing the facts and submissions of the both parties, the two-member bench of George George K (Vice President) and Laxmi Prasad Sahu, (Accountant Member) determined that interest paid by the assessee towards excess claim of refund of duty drawback is not penal in nature. Therefore, Explanation 1 to section 37 would not apply and assessee is eligible for claiming it as expenditure.

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