ITAT Weekly Round-Up

This weekly summary analyses the major Income Tax Appellate Tribunal (ITAT) stories that were covered by Taxscan.in the week before, from April 9th to April 15th, 2023. ITATis a quasi-judicial institution in India that deals with appeals against orders passed by the Income Tax Department. It is an independent body and is responsible for resolving disputes between taxpayers and the Income Tax Department. Termination of Employment due to Misconduct is not beyond the control of Assessee: ITAT refuses Exemption u/s 10(38) to Employee Vineet Sethi Vs ITO Ward-6(2)(4) Bangalore CITATION: 2023 TAXSCAN (ITAT) 712 The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that termination of employment due to misconduct is not beyond the control of assesses and refused to allow an exemption under section 10 (38) to the employee-assessee. A Coram comprising N V Vasudevan, Vice President and Shri Chandra Poojari, Accountant Member observed that the termination of the employee cannot be said that it is beyond the control of the assessee. Addition u/s 68 based on Incriminating Material found During Survey is valid: ITAT Mr. Neeraj Agrawal vs Deputy Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 713 The Allahabad bench of the Income Tax Appellate Tribunal ( ITAT ) has held that an addition under section 68 of the Income Tax Act, 1961 based on incriminating material found during the survey is valid. The AO found that the assessee has not kept proper and adequate records to substantiate the quantity of the stock at any given date and time, and it was observed by the AO that the arguments were extended by the assessee. Since the CIT(A) on appeal deleted the addition without considering the sustainability of Incriminating material, the Tribunal set aside the decision of CIT(A) and allowed the appeal. Project Expenses are “Revenue” in Nature, Deductible u/s 37: ITAT ACIT vs M/s Indian Farm Forestry Development Cooperative Ltd. CITATION: 2023 TAXSCAN (ITAT) 714 The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has recently held that project expenses are revenue in nature therefore it is deductible under Section 37 of the Income Tax Act 1961. The division bench of the tribunal after observing the issues raised by the revenue found that the tribunal has already allowed the assessee’s claim in the assessment years 2008-09 & 2009-10 by treating the same expenditure as the “revenue in nature” instead of “capital in nature” as held by the AO. Income surrendered by way of Account Receivables Not Taxable under Deeming Provisions of 69 r/w S. 115BBE: ITAT Shri Bal Krishan vs Pr.CIT CITATION: 2023 TAXSCAN (ITAT) 715 The Chandigarh bench of Income Tax Appellate Tribunal (ITAT)has recently held that income surrendered by way of account receivable was not taxable under deeming provisions of Section 69 read with Section 115BBE of Income Tax Act 1961. A survey operation was conducted at business premises of M/s Shankar Agro Foods and M/s Bindal Agro Foods Pvt. Ltd. C/o Shankar Rice and General Mills. Thereafter the assessee, Bal Krishan who is a partner/director in these concerns filed his return of income which was selected for scrutiny.Therefore the assessment completed. Roaming Charges paid by Vodafone India to Other Telecom Operators Not subject to TDS u/s 194C or 194J of Income Tax Act: ITAT Vodafone India Ltd vs Additional Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 716 The Mumbai Income Tax Appellate Tribunal (ITAT) has recently held that roaming charges paid by Vodafone India to other telecom operators are not subject to Tax Deduction at Source (TDS) under section 194C or 194J of Income Tax Act, 1961. Salil Kapoor, Counsel for the assessee submitted that during the year under consideration the assessee incurred expenses on roaming charges. Payments are made to other telecom operators to enable subscribers of the assessee to make or receive calls originating / terminating on other telephone networks. Penalty u/s 271(c) of Income Tax not leviable in Absence of Proper Show Cause Notice to the Assessee: ITAT Zile Singh Kashyap vs ITO CITATION: 2023 TAXSCAN (ITAT) 717 The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the penalty is not leviable in absence of proper show cause notice to the assessee. Zile Singh Kashyap, the assessee challenged the order dated 15.11.2019 passed by the Commissioner of Income Tax (Appeals)-16, Delhi under Section 250 of the Income Tax Act, 1961 for Assessment Year 2011-12. The Tribunal directed to delete the penalty since the conditions stipulated under section 271(1)(c) for the levy of penalty are not fulfilled. The appeal of the assessee was allowed. Interest/ Salary received by Partner from Firm Not Assessable as “Other Income”: ITAT Rashmin Ramniklal Vora vs ITO CITATION: 2023 TAXSCAN (ITAT) 718 The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that interest/ salary received by a partner from a firm is not assessable as “other income”. It was found that the assessee periodically withdrew the investments made in the firm. The Assessing Officer made a disallowance of Rs. 17,65,962/- which was claimed as interest expenses under Section 57(iii) of the Act. The Tribunal viewed that the claim of the assessee for deduction under Section 57(iii) is not justifiable and has rightly been disallowed by the Assessing Officer and the CIT(A). Non-Compete Fee Related to Profession Made Taxable, only w.e.f. AY 2017-18: ITAT Mrs. Nalini Mahajan vs ACIT CITATION: 2023 TAXSCAN (ITAT) 719 The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held that a non-compete fee related to a profession is made taxable only with effect from AY 2017–18 and that the non-compete fee in relation to a profession for periods prior to AY 2017–18, would be treated as a capital receipt. The AO noted that the assessee had increased her capital on account of a payment receipt from the said company, the payment of which is said to be exclusive for the engagement of goodwill. Further, the AO was of the opinion that the assessee had provided professional services to the company. Notice Served on Ex-Employee is “Reasonable Cause” for Non-Compliance: ITAT directs Re-Adjudication Kaveri Infrastructure Pvt. Ltd.vs ACIT CITATION: 2023 TAXSCAN (ITAT) 720 The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has directed re-adjudication as the notice served on ex-employee was a reasonable cause for non-compliance of such notice. R. S. Singhvi, who appeared on behalf of the assessee submitted that assessee company had closed its business operations and almost defunct and, therefore, notices were issued by the Commissioner of Income Tax (CIT(A)) through e-filing portal could not be seen and compiled as there was no regular employee looking after the affairs of the assessee company. Assessment Order Signed on a Holiday cannot be treated as Invalid: ITAT Priyal Kauhshal Shah vs I.T.O CITATION: 2023 TAXSCAN (ITAT) 721 The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that the assessment order signed on holiday could not be treated as invalid.Sunil Maloo, who appeared on behalf of the assessee submitted that the income tax office was working as on 30 September 2018 despite the fact that it was the holiday being Sunday and the notice was digitally signed by the AO on 30 September 2018 and it should have been issued through the email on the same date. Payment made to Doctors for Referring Patient to Assesee is Professional fee, not Referral Fee: ITAT Income Tax Officer vs Shri Dipen M. Desai CITATION: 2023 TAXSCAN (ITAT) 722 The Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) has recently held that payment made to doctors for referring patients to assess are professional fees which were not referral fees. The Assessing Officer observed that the said expenditure was nothing but commission paid to Doctors for referring patients which is not allowable under explanation to Section 37(1) of the Income Tax Act, 1961. Warehouse Charges Paid Without Deducting TDS shall be disallowed u/s 40(a)(ia) of Income Tax Act: ITAT Vandana Dinehkumar Inani vs The Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 723 Assesee Vandana Dinehkumar Inani, is a CommissionAgent and General Merchant. While passing the assessment order, the assessing officer held that the assessee has made payments to certain warehouses without deducting TDS and hence disallowed Rs.69,27,693/- under Section 40(a)(ia) of the Income Tax Act. The Pune bench of Income Tax Appellate Tribunal (ITAT) has recently held that warehouse charges paid without deducting Tax Deduction at Source shall be disallowed under Section 40(a)(ia) of Income Tax Act, 1961. Agricultural Land does not fall under Capital Asset u/s 2(14) of the Income Tax Act, S 50C not Applicable: ITAT Anilkumar Kantilal Trivedi vs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 724 The Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) has recently held that agricultural land did not fall under the head of capital asset under Section 2(14) of the Income Tax Act, 1961.Therefore Section 50C of the Income Tax Act would not be applicable. While processing the returnThe Assessing Officer observed that the assessee sold immovable property for Rs. 7,73,020/- against the stamp duty value of Rs. 63,93,600/- under Section 50C of the Income Tax Act. Notice issued u/s 148 of the Income Tax Act lacks Jurisdiction: ITAT set aside Assessment Order Shri Ganesh Umanath Nayak vs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 725 The Mumbai bench of Income Tax Appellate Tribunal (ITAT) while set-aside the assessment order passed by the assessing officer (AO) held that, notice issued under section 148 of the Income Tax Act 1961 lacks jurisdiction. Ashwin Chhag, the counsel appearing on behalf of the assessee submits that the assessment for Assessment Year 2008-09 in the case of assessee was reopened beyond the period of four years. Addition u/s 68 is Beyond Jurisdiction of Assessing Officer as Turnover already reflected in books of the Assessee: ITAT quashes addition Raj Kumar vs ITO CITATION: 2023 TAXSCAN (ITAT) 726 The assessee Raj Kumar is a proprietor of M/s Radhika Sales Corporation, and is engaged in the business of the wholesale/retail of sugar, refined oil, ghee and other allied karyana items. The assessee is registered under Punjab VAT Act in 2005. During the assessment year the assessee’s turnover Rs.10, 38,81,637. The addition was made by the AO alleging that the appellant had inflated the sales to cover unaccounted money and assessed the total income at Rs. 2,82,17,200. No Tax Shall Be Charged on entire receipts If Income below the Threshold Limit: ITAT M/s. H M V Educational Cultural & Social Trust vs ITO CITATION: 2023 TAXSCAN (ITAT) 727 Assessee H M V Educational is a Trust registered under section 12A of the Income Tax Act, 1961. The assessee Trust has been running educational institutions since 2008. The assessee filed a return of income claiming exemption under section 12AA of the Income Tax Act. The CIT(A), did not grant exemption since the assessee did not file his return of income within the time limit prescribed under Section 139(4A) of the Income Tax Act. Thereafter, the assese filed a second appeal before the tribunal. Income can be Said to have Accrued Only when there is Certainty of Receipt: ITAT Essar Steel Metal Trading Limited vs . DCIT CITATION: 2023 TAXSCAN (ITAT) 728 The assessee, Essar Steel Metal Trading Limited was engaged in the business of trading in Steels and holding investments. The assessee had given inter corporate deposits to Essar Steel India Ltd. The AO took the view that the interest income receivable by the assessee was assessable in the hands of the assessee. The Division Bench of B.R. Baskaran (Accountant Member) and Kavitha Rajagopal (Judicial Member) allowed this ground of appeal and held that, if there was uncertainty over the receipt of the same, it could not be said that the interest income had accrued. ITAT upholds Disallowance only with respect to Godown Leased to Banas Dairy for “Non-Agricultural” Purposes The DCIT vs Rushay Commodities Pvt. Ltd. CITATION: 2023 TAXSCAN (ITAT) 729 The assessee company, Rushay Commodities Pvt Ltd was engaged in the business of warehousing agricultural products. The Assessing Officer found that one of the parties i.e. Banas Dairy, had items stored in the godown, was skimmed milk powder. Since only one godown was not used for specified business and accordingly, the disallowance should be restricted to that particular godown only the Commissioner of Income Tax Appeals (CIT(A) granted relief accordingly. The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has upheld the disallowance only with respect to the godown which was leased to Banas Diary for non-agricultural purposes. Payment of Interest made Towards “compromise agreement” pursuant to Court order Allowable u/s 37: ITAT The DCIT vs M/s. Sayaji Hotels Ltd. Nr. Kala Ghoda Sayajigunj CITATION: 2023 TAXSCAN (ITAT) 730 The assessee, Sayaji Hotels Ltd is a company engaged in the business of hotels and restaurant during the year under consideration, the assessee had debited Nakoda developers on the amount remaining to be paid for the repurchase of party plot named Vatika belonging the assessee which was sold to Nakoda developers about 9 years earlier. The assessee company had acquired land from Indore Development Authority (IDA) on leasehold basis. D.K. Parikh, appearing for the assessee submitted that the “compromise agreement” was done purely to protect the business interests of the assessee and Satish Solanki, appeared for the revenue. The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that the payment of interest made towards compromise agreement pursuant to court order would be allowable under Section 37 of the Income Tax Act, 1961. Purchase made out of Advance of Agricultural Property Sale Deductible u/s 54B: ITAT Dharmendra J. Patel vs DCIT CITATION: 2023 TAXSCAN (ITAT) 731 During the course of assessment, the AO observed that the assessee, Dharmendra J Patel had sold two agricultural lands, one on 20-03- 2017 for a sum and another on 10-08-2016. The assessee claimed long-term capital gains on the aforesaid two agricultural lands after taking benefit of indexation, the assessee claimed deduction under section 54B of the Act on purchase of agricultural land situated on 21-10-2016. The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that purchase made out of advance made out of sale of agricultural property would be deductible under Section 54B of the Income Tax Act 1961. Provisions of S.44AB of the Act are not applicable if Turnover of Assessee less than Prescribed Limit: ITAT delete Penalty u/S 271B Ms. Meena Jain vs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 732 The AO initiated penalty proceedings under section 271B of the Income Tax Act for not getting the accounts audited. Against the order assesee filed an appeal before the first appellate authority. The CIT(A), rejected the contention of the assessee and confirmed imposition of penalty under Section 271B of the Income Tax Act. Thereafter the assessee filed a second appeal before the tribunal. The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has recently held that provisions of Section 44 of the Income Tax Act, 1961 are not applicable if turnover of assessee less than prescribed limit therefore the tribunal deleted the penalty levied under Section 271B of the Income Tax Act 1961. No Exemption Claimed in the Preceding Year on the Purchase of Fixed Assets: ITAT deletes addition made u/s 143(1) M/s Varthur Foundation Trust vs The Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 733 The assessee Varthur Foundation Trust filed return of income on declaring excess expenditure over income. The assessee filed a rectification application under Section 154 of the Act which was disposed of by the CPC, denying the claim of depreciation and not accepting the 154 applications of the assessee for rectification of mistake apparent on the face of the record. The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition made under section 143(1) of the Income Tax Act 1961 as no exemption was claimed in the preceding year on the purchase of fixed assets. Issue Regarding Claim of Depreciation Cannot Decided Until Dispute Regarding Capitalization of Expenses in Assessment Order is decided: ITAT M/s Plastic Omnium Auto Inergy Manufacturing India Private Limited vs DCIT Case Number: 2023 TAXSCAN (ITAT) 734 Assessee Plastic Omnium Auto Inergy Manufacturing IndiaPrivate Limited, took international transactions with its Associated Enterprise (AE) namely Inergy Japan, relating to payment of development expenses amounting to Rs.1,98,00,000. The assessee capitalized these expenses. The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has recently held that Issue regarding claim of depreciation could not be decided until dispute regarding capitalization of expenses in assessment order is decided. Mere filing of Affidavit is not sufficient to prove the Capacity and Source of Persons who gave Money to Assessee: ITAT grants Rs.10 lakh Relief Sumeet Agarwal vs Joint Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 735 Assesee Sumeet Agarwal, is an individual engaged in the proprietary business of Jewellery manufacturing and selling in the name and style-of Ganesh Narayan Gems and Jewels. Waseem U R Rehman Counsel for the revenue submitted that assessee failed to disclose the necessary details of persons, who gave money to him like names, PAN, address etc. at the time of marriage. The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) while granting Rupees 10 lakh relief to assessee held that merely filing of the affidavit is not sufficient to prove the capacity and source of the persons who gave money to assessee. Assessing Authority exceeds Jurisdiction for making Assessment in respect of Acquisition of the Property: ITAT Deletes Addition Shri Madhusoodan Paliwal vs ITO CITATION: 2023 TAXSCAN (ITAT) 736 The Assessee Madhusoodan Paliwal’s return of income was selected for limited scrutiny for having large cash deposits in saving bank accounts and the assessee had also transferred one or more properties during the year. Thereafter, the assessing officer made addition in respect of unexplained cash deposit and unexplained investment of immovable property under Section 69 of the Income Tax Act. The Jodhpur bench of the Income Tax Appellate Tribunal (ITAT) has recently held that the Assessing officer exceeded jurisdiction for making assessment in respect of acquisition of the property and deleted the addition made by the assessing officer. Interest Expenditure cannot be considered for making Disallowance u/s 14A of the Act: ITAT confirms Relief of Adani Wilmar Ltd The DCIT vs Adani Wilmar Ltd CITATION: 2023 TAXSCAN (ITAT) 737 The assessee Adani Wilmar Ltd had earned exempt income of Rs. 15 crores from investment made in KOG KTV Food Products for Rs. 16.12 crores. The Assessing Officer made proportionate disallowance under Rule 8D(2)(iii) of Rs. 8.25 crores. The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has recently held that interest expenditure could not be considered for making disallowance under Section 14A of the Income Tax Act, 1961 and the bench confirmed the relief granted to Adani Wilmar Ltd. External Development Charges paid to Haryana Urban Development Authority does not Attract the Provisions of Section 43B of the Act: ITAT set-aside Assessment Order Tulip Infratech Pvt. Ltd vs ACIT CITATION: 2023 TAXSCAN (ITAT) 738 Tulip Infratech Pvt. Ltd filed the appeal against the order of CIT(A) upholding the decision of assessing officer on the issue of addition made by him under section 43B of Income Tax Act on account of External Development Charges (EDC). Pankaj Khanna counsel for the revenue submitted that assessee had not made payment of EDC to the Government of Haryana, then, it has to be disallowed under Section 43B of the Income Tax Act. The Delhi bench of the Income Tax Appellate Tribunal (ITAT) while set-aside the assessment order held that external development charges paid to urban development authority did not attract the provisions of Section 43B of Income Tax Act Income Tax Act. Assesse cannot Claim Cost of Improvement and Indexation Cost unless provides Evidence to Prove Construction: ITAT Mr. Vasamsetty Veera Venkata Satyanarayana vs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 739 Assesse Vasamsetty Veera Venkata Satyanarayana, is an individual and derives income from business, long term capital gain and from other sources. A search and seizure operation under Section 132 of the Income Tax Act was conducted on the assessee as part of the searches conducted on M/s. Skill Promoters Pvt. Ltd Group and others. Ramakrishnan, counsel for the assessee submitted that the registered sale deed recovered from the residential premises of searched person, could not be said to be an incriminating document registered sale deed was available in public domain and therefore, cannot be said to be an incriminating document The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) has recently held that assessees could not claim cost of improvement and indexation cost unless they provide evidence to prove construction. Assessing Officer has no Power u/s 200A to Levy Late Fee u/s. 234E Prior to Amendment of Law: ITAT set-aside Order Ochre Media Private Limited vs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 740 Assessee Ochre Media Private Limited is a company engaged in the Media business. Assessee filed its TDS quarterly statements for all four quarters of Financial Year 2013-14 belatedly that is after the due date. The Hyderabad bench of the Income Tax Appellate Tribunal ( ITAT ) has recently held that the assessing officer has no power under section 200A Income Tax Act 1961 to levy late fees under section 234E of the Income Tax Act prior to the amendment of the law. Ice Box Expenditure Accounted under Marketing Expenses’ are Capital Expenditure: ITAT upholds Disallowance Hindustan Coca-Cola Beverages Pvt. Ltd vs Dy. Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 741 Assessee Hindustan coca-cola is a manufacturer and trader of non alcoholic beverages and filed returns for respective years.The returns were processed under section 143(2) of the Income Tax Act. The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently held that expenditure incurred on ice-boxes, accounted under the head of marketing expenses, are capital expenditure.Therfore the bench confirmed the disallowance made by the assessing officer. CSR Expenses Carried out by Hindustan Coca-Cola Beverages are Eligible for Deduction u/S 37(1) of the Income Tax Act: ITAT M/s. Hindustan Coca-Cola Beverages Pvt. Ltd. vs Dy. Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 741 Assessee Hindustan coca-cola is a manufacturer and trader of non alcoholic beverages and filed returns for respective years. The returns were processed under section 143(2) of the income tax act. The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently held that Corporate Social Responsibility (CSR) expenses carried out by the Hindustan coca-cola beverages are eligible for deduction under Section 37(1) of the Income Tax Act 1961. 60% Depreciation Allowable on Licenses to use Software: ITAT The DCIT, Cir.1(1)(1) Vadodara vs. Gujarat Green Revolution Co. Ltd. CITATION: 2023 TAXSCAN (ITAT) 742 Assessing officer had restricted depreciation claimed by the assessee Gujarat Green Revolution Co. on Licenses to use software at 25% as opposed to rate of depreciation of 60% claimed by the assessee resulting in disallowance of depreciation of Rs.2,25,170/-. The Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) has recently held that Assesee is entitled to 60% Depreciation Claim on Licenses to use Software. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates