This weekly round-up analytically summarizes the key stories related to Income Tax Appellate Tribunal (ITAT) reported at Taxscan.in during the previous week from October 18 to October 23, 2021.
The Delhi Bench of ITAT ruled that 10% Presumptive Tax on business of hiring security guards for customers.
“If a person adopts the provisions of section 44AD and declares income at the rate of 8% of the turnover, then the assessee is not required to maintain the books of account as provided for under section 44AA in respect of business covered under the presumptive taxation scheme of section 44AD. Payment of advance tax in respect of income from business is also covered under section 44AD. It mandates that any person opting for the presumptive taxation scheme under section 44AD is liable to pay the whole amount of advance tax on or before 15thMarch of the previous year. If he fails to pay the advance tax by 15th March of previous year, he shall be liable to pay interest as per section 234C,” the coram of Judicial Member, Suchitra Kamble and Accountant Member, Dr. B. R. R. Kumar ruled.
Lord Shiva Educational Welfare Society Vs. CIT (Exemption)
The Amritsar Bench of ITAT allowed Section 12A Registration to an Educational Welfare Society as leasehold land and fee concession was verified.
The coram of Judicial Member Lalit Kumar and Accountant Member Dr. M. L. Meena held that nothing has been doubted and for the purpose of 12A, only two conditions are to be required to be satisfied that one with regard to the activities of the trust and the second with regard to the aims & objects of the society as per the decided case laws on this issue which have been addressed in favor of the assessee by the earlier order of the Coordinate Bench.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) quashed the re-assessment Proceedings as information on the basis of which AO formed belief of escapement of income was wrong.
The coram of Accountant Member R.K. Panda and Judicial Member, Sanjay Garg ruled that when it has been brought to the knowledge of the Assessing Officer that the information on the basis of which he (Assessing Officer) had formed belief of escapement of income was in fact wrong information, then the very belief of the Assessing Officer of escapement of income of the assessee on the basis of such information also ceased to exist. The Assessing Officer, under the circumstances, should have applied his mind afresh to the fresh information brought to his knowledge.
M/s Maharashtra Housing and Area Development Authority Vs. DCIT (Exemption)
The Mumbai Bench of ITAT granted the Income Tax Exemption to Maharashtra Housing and Area Development Authority (MHADA) as its activity of providing Affordable Housing is charitable in nature.
The ITAT bench, comprising judicial member Saktijit Dey and accountant member Rajesh Kumar and Judicial Member Saktijit Dey respectfully following the decision of the coordinate Bench of the Tribunal set aside the order of CIT(A) and direct the AO to allow the exemption under section 11 of the Act to the assessee, MHADA.
DCIT Vs. M/s Tally Solutions Pvt. Ltd.
In a major relief to the M/s.Tally Solutions Pvt. Ltd, the Bangalore Bench of ITAT allowed the depreciation on Home Theatre as it was used for business purposes.
The coram of Accountant Member, B.R.Baskaran and Judicial Member, George George K observed that the theatre is admittedly used for the business purpose of exhibiting various technologies development in the field of software to the employees and also to the customers. There was a major fire accident in the premises of the assessee and various books of account, documents and invoices were destroyed. The ITAT while upholding the order of the CIT(A) held that there is no violation of Rule 46A(3) of the Income Tax Rules, since there are no fresh facts produced before the CIT(A). The stand taken by the assessee before the A.O. was that there was a fire accident, wherein the invoices were destroyed and hence, cannot be produced. The same is the stand taken before the CIT(A) and the same set of evidence are produced. Therefore, there is no violation of provisions of Rule 46A(3) of the Income Tax Rules.
M/s Hitachi Metglas (India) Pvt. Ltd. Vs. DCIT
In a major relief to Hitachi Metglas, the Delhi Bench of ITAT ruled that the IT support services cannot be termed as technical services so TDS is not deductible.
The coram of Judicial Member, Kul Bharat and Accountant Member, Dr. B. R. R. Kumar observed that the foreign AE (service provider) has neither employed any technical or skilled person to provide managerial or technical service nor there was direct interaction between the assessee and the foreign AE. Thus, where the entire process resulting in provisioning of service is a fully automated process with no human intervention, charges paid for provision of such services cannot be classified as FTS for the purpose of the Income Tax Act. The ITAT held that the IT support services availed by the Assessee from Hitachi Ltd., Japan, and Hitachi Asia Ltd., Singapore are standard connectivity and networking services cannot be termed as technical services within the meaning of Section 9(1)(vii) of the Act. Hence, we hold that the assessee was not liable to deduct TDS on such expenditures. Accordingly, the disallowance made by the AO and confirmed by the Ld. CIT (A) in the present case is liable to be deleted.
DCIT Vs. M/s. Heilgers Development & Construction Company Pvt. Ltd.
The Kolkata Bench of ITAT deleted the addition as interest on Loan duly paid by the assessee after deducting TDS. The coram of Vice President, P.M.Jagpat and Judicial Member A.T.Varkey held that held that the phrase “by way of advance or loan” appearing to sub-clause (e) of section 2(22) must be construed to mean those advances or loans which a shareholder enjoys for simply on account of being a beneficial owner of shares, but if such loan or advance is given to such shareholder as a consequence of any further consideration, which is beneficial to the company, received from such shareholder, in such case, such advance or loan cannot be said to be deemed dividend within the meaning of section 2(22)(e). It was held that gratuitous loan or advance given by a company to those classes of shareholder this would come within the purview of section 2(22)(e) and not the cases where loans or advances given in return to an advantage conferred upon the company by such shareholder.
Jeypore Evangelical Lutheran Church Vs. ITO
The Income Tax Appellate Tribunal (ITAT), Cuttack bench has held that the amount of donation received by a Trust with a specific direction to use the same for a different project undertaken by them is entitled for deduction under section 11 of the Income Tax Act, 1961.
Judicial Member Chandra Mohan Garg observed that the amount of donation has been given for the specific purpose. “The Assessing Officer has bifurcated three donations as specific purpose and left out other donations not being specific purpose without giving any reason. The donations are for a specific purpose and capital receipts are not coming within the ambit of definition of income as defined under section 2(24)(ii) of the Act. Being a capital receipts, there is no necessity of routing through income and expenditure accounts, as claimed by the Assessing Officer.”
In a major relief to ESPN Star Sports, the ITAT, Delhi bench has held that the entity is not taxable in the absence of a Business Connection or PE in India in view of the provisions of the Double Taxation Avoidance Agreement (DTAA) between India and Mauritius.
The two-member bench of the Tribunal comprising Judicial member Amit Shukla and Accountant Member N K Billaiya relied on the decision of the Supreme Court in the case of E-funds IT Solutions Inc. wherein the Apex Court laid down a test for whether there is fixed place PE. “Considering the past history of the assessee in light of the decision of this Tribunal read with the decision of the Hon’ble Supreme Court in the case of E-funds IT Solutions Inc. [supra], we hold that the assessee has no business connection in India in terms of section 9(1) of the Act and has no PE under Article 5(2), 5(4) and 5(5) of India Mauritius DTAA,” the Tribunal said.
Smt. Meera Devi Kumawat Vs. Joint CIT
In a welcoming ruling favouring women in the country, the Income Tax Appellate Tribunal (ITAT), Jaipur has held that the penalty under section 271D of the Income Tax Act, 1961 cannot be levied on a wife for receiving money from her husband for purchase of family property. The Tribunal bench comprising Judicial Member Sandeep Gosain and Accountant Member Vikram Singh Yadav was considering an appeal filed by an individual against the penalty order passed by the income tax authorities which was later confirmed by the first appellate authority.
“We find that such a practice of registering the property in name of the wife is guided by various family and societal factors besides encouragement of the Government for such transactions entered into by female members in the family by way of reduced stamp duty. In the present case, where the family of the assessee is guided by its internal family requirement and also by such policy incentive by the Government and at the same time, pooling in the family funds especially where the assessee doesn’t have any known sources of income, the explanation of the assessee deserve to be appreciated and the approach of the authorities needs to be flexible for appreciating the reasonability of the explanation so submitted by the assessee,” the Tribunal said.
ICRW Group Gratuity Trust Vs. CIT (Exemption)
The Delhi bench of the ITAT has held that the registration under section 12 of the Income Tax Act, 1961 cannot be denied to the International Centre for Research on Women Ltd. (‘ICRW’) merely because it is for the benefit of a restricted group of employees.
Relying on a catena of decisions, Judicial Member Kuldip Singh and Accountant Member O P Kant held that the registration of the assessee trust cannot be rejected merely on the ground that it is for the benefit of a restricted group of employees of the company ‘ICRW’. With a direction to the Assessing Officer to re-consider the claim on the basis of documents and other evidence, the Tribunal held that “However, we find some merit in the argument of the Ld. DR that trust has been engaged in discharging the statutory obligation of the company “ICRW” of making gratuity payments to their employees. But in this regard the competent authority has not examined the activities actually carried out by the trust, sources of funds, and how the same are distributed to the employees, whether by way of creating the trust, the company is getting some benefit of saving of money, whether any activity of welfare of the employees other than making gratuity payment has been carried out by the trust, etc. The assessee has also not filed any information with regard to its activities before us.”
Rieter Machine Works Ltd. Vs. ACIT
The ITAT, Pune bench has held that royalty/fee for technical services (FTS) taxable at the rate of 10% as per the Double Taxation Avoidance Agreement (DTAA) between India and Singapore.
The two-member bench observed that the receipt of Rs.3.84 crore is neither reimbursement nor royalty for software as the assessee rendered I.T. services to its group companies including RIPL and offered a sum of Rs.20.04 crore to tax as royalty/fees for technical services. The assessee contended that the same is not taxable.
Girirajkripa Developers Pvt. Ltd. Vs. ITO
The Jaipur bench of the ITAT while quashing the reassessment proceedings, has held that the ‘proper service’ of notice is a mandatory requirement for reopening of assessment under section 148 of the Income Tax Act, 1961.
The two-member bench comprising Judicial Member Mr. Sandeep Gosain and Accountant Member Mr. Ramesh S Sharma was hearing an appeal filed by a company against whom the income tax department initiated re-assessment proceedings by making an addition of Rs. 2,76,51,300/- on account of short-term capital gains.
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