ITAT Weekly Round-Up

This weekly round-up analytically summarizes the key stories related to the Income Tax Appellate Tribunal (ITAT) reported at Taxscan.in during the previous week from September 17 to September 23, 2022 CRYSTAL CROP PROTECTION PVT. LTD vs PR. CIT -1 -2022 TAXSCAN (HC) 583 The Delhi High Court confirms the permission granted by ITAT treating the subsidy allowed as a capital receipt as per the New Industrial Policy and Other Concession Scheme from the state of Jammu & Kashmir. It was observed that the subsidy received by the assessee under the “New Industrial Policy and Other Concessions Scheme” from the State of Jammu & Kashmir was to be treated as a ‘capital receipt’ and was wrongly reported as a revenue receipt instead of a capital receipt in the return of income. Rajendra Sukhdev Mirgane vs DCIT - 2022 TAXSCAN (ITAT) 1291 The Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that the interest on income tax cannot be allowable as deduction under section 40(a)(ii) of the Income Tax Act, 1961. The assessee, Rajendra Sukhdev Mirgane, is a Builder and Contractor, who filed the return of income declaring total income at Rs.2.18 crore. During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee had debited Rs.61,96,457/- and Rs.84,05,606/- towards payment made to sub-contractor, Shri S.N. Ubale in respect of the Koradi LBC work/Koradi RBC work. Since the assessee could not furnish necessary details in respect of the said payments, the AO made disallowance for such a sum. During the course of proceedings before the CIT(A), the assessee furnished additional evidence to prove the genuineness of the claim of expenditure. While passing the order, the Assessing Officer also disallowed the interest expenditure of Rs.3,13,414/- paid on delayed payment of TDS. Dhan Housing and Habitat Development of Poor for Empowerment Confederation vs CIT - 2022 TAXSCAN (ITAT) 1292 The Income Tax Appellate Tribunal (ITAT), Chennai, has recently ruled that a trust facilitating financial assistance to the poor, to access housing credit, is not eligible for getting a registration u/s. 12AA of the Income Tax Act. “The case law before us concerns question of registration wherein the only activity carried out by the assesse is obtaining loans and extending the same to certain strata of people, and the only source of funding for the assesse is borrowings and the donations which are almost negligible. Hence, Considering the facts and circumstances of the case, we see no reason to interfere in the impugned order and the appeal stand dismissed”- the court commented. Schoeller Technologies India Pvt. Limited. vs The Income Tax Officer - 2022 TAXSCAN (ITAT) 1103 The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that no evidence of remission or cessation of liability and deleted the addition of liability as profits chargeable to tax under section 41(1). The Tribunal observed that non-payment of outstanding liability where the liability still exists, cannot be added under Section 41(1) of the Act. The Tribunal further observed that the assessee is showing liability in his books of account and therefore, the same exists. Dr. (Late) S.F.V. Selvara vs The Deputy Commissioner of Income Tax - 2022 TAXSCAN (ITAT) 1077 The Income Tax Appellate Tribunal (ITAT), Chennai confirmed the penalty levied under Section 271 AAA on the ground of admission of undisclosed income by the assessee. The bench consisting of V. Durga Rao, Judicial Member, and G. Manjunatha, Accountant Member held that “During the course of the search, in a statement recorded under section 132(4) of the Act, the assessee has admitted the undisclosed income, but failed to offer in the return filed and pay tax thereon consequent upon the search. Since the addition made by the Assessing Officer on account of cash seized clearly falls within the ambit of undisclosed income and thereby warranting levy of penalty under section 271AAA of the Act.” Income Tax Officer vs M/s. More Marketing Pvt. Ltd - 2022 TAXSCAN (ITAT) 1067 The Income Tax Appellate Tribunal (ITAT), Mumbai has held that unsecured loans are taken through banking channels from Directors / Shareholders and upholds deletion of addition under section 68 of the IT Act. The Tribunal observed that all the loans are taken through banking channels from the Directors / Shareholders and all these people have filed their return of income. All these parties are related parties and they are not required to file any financial statements. However, they have filed ITR and bank statements to prove their genuineness and creditworthiness. Kalyan Aqua & Marine Exports India Pvt Ltd. vs DCIT - 2022 TAXSCAN (ITAT) 1051 The Visakhapatnam bench of Income Tax Appellate Tribunal (ITAT), confirms the deduction u/s 80IB of the Act,1961 when the assessee failed in the submission of Form-10CCB. Shri Duvvuru R L Reddy, judicial member & Shri S Balakrishnan, accountant member observed that the AR could not produce the Form-10CCB claimed to have been prepared by the assessee on the date of filing of return of income U/s. 139(1) of the Act. The CIT(A) simply relied on the plea of the assessee that the assessee has obtained Form 10CCB along with the other statutory reports but has not called for its verification. Shri Atul Kumar Bansal vs DCIT - 2022 TAXSCAN (ITAT) 1026 - 2022 TAXSCAN (ITAT) 1026 The Income Tax Appellate Tribunal (ITAT), Delhi bench presided by Mr. Challa Nagendra Prasad, Judicial Member has quashed levy of penalty under section 271(1)(c) without mentioning specific charge in the notice issued under section 274. The Authority observed that the Bombay High Court in the case of Mr. Mohd. Farhan A. Shaikh v. ACIT held that “assessee must be informed of the grounds of the penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of vagueness”. Thus Authority further observed that the department failed to intimate the assessee of the relevant limb and charge for which the notices were issued. Mr. Mohammad Rafiq Ahemadsaheb Kokani vs The Income Tax Officer - 2022 TAXSCAN (ITAT) 1027 The Income Tax Appellate Tribunal (ITAT), Pune bench,comprising of Shri Inturi Rama Rao, AM and Shri S S Viswanethra Ravi, JM has allowed exemption u/s 54B of the Income Tax Act,1961 on the sale of agricultural land even if the land was cultivated for some days during two preceding years. The Tribunal observed that the reference to the term “two years” has been interpreted to mean that not during the whole period of two years, even if the land is used for some days in the earlier yearwould be sufficient for compliance with the provisions of section 54B of the Act. Maharashtra Film Stage and Cultural Development Corporation Ltd vs Asst. - 2022 TAXSCAN (ITAT) 1064 The Income Tax Appellate Tribunal (ITAT), Mumbai bench presided by Mr. Vikas Awasthy, Judicial Member, and Mr. Amarjit Singh, Accountant Member has held that accounts were closed prior to the write-off of advances and upholds disallowance of the write-off. The Tribunal upholds the decision of the lower authority since the appellant fails to place any relevant material to prove contrary to the findings of the CIT(A). Shri Ambica Sarvajnik Trust Anklav vs DCIT - 2022 TAXSCAN (ITAT) 1057 The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has up held the denial of exemption claimed under sections 11 and 12 since failure to file Form No.10B electronically. The Coram of Mr. Waseem Ahmed, Accountant Member, and Mr. T.R. Senthil Kumar, Judicial Member has observed that the assessee is free to file the Form 10B online and/or approach the CIT(Exemption), after filing Form 10B electronically and to condone the delay in accordance with the delegated powers vested u/s. 119(2)(b) of the Act. Such a power u/s. 119(2)(b) is not vested with CIT(A). The assessee has not produced any details of filing Form 10B electronically with delay condonation petition. Thus the Tribunal has held that “we do not find any infirmity in the order passed by the CIT(A) and therefore we have no hesitation in confirming the order passed by the CIT(A)”. Mr. Mahesh D. Saini vs ITO - 2022 TAXSCAN (ITAT) 1294 The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that capital gain can’t be taxed when actual possession of the property is not transferred as per the agreement. In the light of the facts, while allowing the appeal, Shri Pramod Kumar, VP, and Shri Aby T Varkey, JM held that “there was no transfer of immovable property, so no capital gain could have been taxed in the hands of the assessee in this assessment year, therefore, the assessee succeeds.” Lalit Sakalchand Gandhi vs Assistant Commissioner of Income Tax - 2022 TAXSCAN (ITAT) 1295 The Income Tax Appellate Tribunal (ITAT), Pune Bench held that Capital gain arising from sale of land not receipts from business, thereby deleting penalty imposed under Section 271B of the Income Tax Act, 1961. The Bench consisting of Inturi Rama Rao, Accountant mEmber and SS Viswanethra Ravi, Judicial Member held that “In the present case, the AO held the unexplained cash deposits, unexplained investments, interest on F.D. and unexplained profit on sale of land is held to be business income of the assessee. The only contention of the AR is that the assessee is an individual and all the said transactions as held by the AO which was confirmed by the CIT(A) is not business income. We find force in the arguments of the AR, thus, the penalty imposed by the AO u/s. 271B of the Act as confirmed by the CIT(A) is not justified.” Air Control India Pvt. Ltd. vs ITO - 2022 TAXSCAN (ITAT) 1033 The Income Tax Appellate Tribunal (ITAT), Pune Bench allowed the additional depreciation claimed for windmills u/s 32(1)(iia) of the Income Tax Act,1961. Shri S S Godara, judicial member and Shri Dr Dipak P Ripote, accountant member observed that an amendment that has prospective application cannot be said to retrospectively take away the rights of an assessee qua its explanatory notes. While allowing the appeal the Tribunal held that where there was no ambiguity in the section, no need for external aids of interpretation namely the notes on clauses and the memorandum explaining its provisions. Sunny Rock Estates & Developers Pvt. Ltd. vs Deputy Commissioner of Income-tax - 2022 TAXSCAN (ITAT) 1298 The Income Tax Appellate Tribunal (ITAT), Kolkata bench held that earning interest income from Inter-corporate Deposit is business income. The AO held this interest income as income from other sources u/s. 56(2) of the Act and thus completed the assessment at the assessed income of Rs.89,73,695/-. Aggrieved, the assessee went to appeal before the CIT(A), who despite detailed submissions made by the assessee, confirmed the addition/disallowance made by the AO. Aggrieved, the assessee is in appeal before the Tribunal. Babasaheb Kondiram Dongre vs ITO - 2022 TAXSCAN (ITAT) 1134 The Income Tax Appellate Tribunal (ITAT), Pune held that penalty can be levied only on charges for which penalty proceedings were initiated. The Bench consisting of Inturi Rama Rao, Accountant Member, and SS Viswanethra Ravi held that “On perusal of the assessment order, it would reveal that the Assessing Officer had initiated penalty proceedings for both the limbs i.e., concealment of particulars of income as well as furnishing of inaccurate particulars of income, however, the penalty was levied only holding that the assessee is guilty of concealment of particulars of income. It is a settled position of law that the Assessing Officer cannot levy a penalty on the charges different from the charges for which the penalty proceedings were initiated. Accordingly, we direct the Assessing Officer to delete the penalty of Rs.64,662/- u/s 271(1)(c) of the Act.” Smt. Heera Mani Devi vs Income-tax Officer -2022 TAXSCAN (ITAT) 1102 The Income Tax Appellate Tribunal (ITAT), Patna Bench has held that no evidence of tax evasion by showing fictitious or false transactions and deleted the addition of expenditure under section 40A(3). The Coram of Mr. Sanjay Garg, Judicial Member, and Mr. Girish Agrawal, Accountant Member observed that the intention behind the introduction of provisions of section 40A(3) of the Act, is curbing expenditure in cash and to counter tax evasion.Both the parties i.e., the purchaser (assessee) and the seller (M/s. Trishul Agency) duly recorded in their respective books of accounts the purchases and sales. M/s Public Employees Retirement System vs Jt. Commissioner of Income - 2022 TAXSCAN (ITAT) 1299 The Income Tax Appellate Tribunal ( ITAT ) Mumbai, has in an appeal recently filed before it by the Jt. Commissioner of Income Tax (OSD), International Taxation, held that business loss occurring out of share transactions with a company declared as a penny stock, shall be allowed as a short-term capital loss, lacking evidence of any malpractices on the part of the assessee. “The transactions in the above shares were made through the stock exchange and further, the learned Assessing Officer has made the addition only because of the reason that assessed traded in the shares of Kailash Auto Finance Limited which has been classified as a penny stock. No information is available that the assessee has engaged in any manipulative activities with respect to the purchase and sale of the above shares, and further the complete details filed before the learned Assessing Officer, were not at all doubted. Therefore, we do not find any reason to state that the short-term capital loss by the assessee is not genuine. And accordingly, we confirm the order of the learned CIT(A) and dismiss the appeal of the ld AO.” – The court commented dismissing the assessing officer’s appeal against the assessed. ANI Technologies Private Limited vs DCIT- 2022 TAXSCAN (ITAT) 1300 The Chandigarh bench of the Income Tax Appellate Tribunal ( ITAT ) has ruled that, transport aggregator Ola ( ANI Technologies Private Limited ) is not liable to deduct withholding TDS on payments to drivers. While allowing the appeal, the tribunal observed that, the assessing officer and the commissioner erred in concluding that Ola was providing transportation services which was sub-contracted to the driver and consequently holding that Ola was liable to deduct tax at source for the assessment year 2018-19. Shri Rajesh Dharamvir vs Pr. Commissioner of Income Tax - 2022 TAXSCAN (ITAT) 1301 The Income Tax Appellate Tribunal ( ITAT ), Mumbai, has recently while quashing a revisional order in a writ petition filed before it , held that notional rent will not be applicable to unsold flats of real estate business. With the only issues to be decided in the appeal being the questions regarding the justifiability of invoking revisionary jurisdiction u/s.263 by the Principal Commissioner Of Income Tax, (PCIT), as well as the PCIT directing the AO to make a fresh assessment, taxing the notional rent arising from property held as ‘stock in trade’, under the head ‘income from house property’, the court ,while allowing the appeal of the assesse, observed. Otis Elevator Company (India) Limited vs Dy. Commissioner of Income Tax - 2022 TAXSCAN (ITAT) 1302 The Income Tax Appellate Tribunal (ITAT), Bench Mumbai, has recently in a writ petition filed before it, held that the withdrawal of interest on refund u/s 244 A (2), is beyond the scope of rectification as per the provisions of section 154 of the of the Income Tax Act, 1961.“We are in respectful agreement with the views so expressed by the co-ordinate bench ,and respectfully following the same, we uphold the plea of the assesse to the extent that given the limited scope of section 154 for rectification of mistakes apparent on record ,and given the fact that the period to be excluded for grant of interest has not yet been taken a call on by the PCCIT/CCIT/PCIT or the CIT, the impugned withdrawal of interest under section 244A(2) is beyond the scope of rectification of mistake under section 154. The order under section 154 is thus set aside , and the assesse gets the relief accordingly.” M/s.Univercell Telecommunications India Pvt. Ltd vs Dy. Commissioner of Income Tax - 2022 TAXSCAN (ITAT) 1303 The Income Tax Appellate Tribunal ( ITAT ) Chennai bench, in a recent appeal filed before it by the revenue, held that there cannot be said to be any capital gain on the transfer of goodwill on account of the conversion of proprietary concern into a Pvt. Ltd. Co. The tribunal observed that from the above, it is very clear that even if you invoke the provisions of Sec.47A(3) of the Act to withdraw exemption granted u/s.47(xiv)(b) of the Act, in principle, there cannot be any capital gains on transfer of goodwill because, the said goodwill is not self-generated or created on account of the conversion of proprietary concern into a Pvt. Ltd. Co., but acquired by incurring the cost. If you consider the cost incurred by the assessee for acquiring goodwill, then, capital gains on the transfer of said goodwill would come to a ‘nil’ amount. The Ld. CIT(A) after considering the relevant facts has rightly deleted the additions made by the AO. Hence, we are inclined to uphold the findings of the Ld.CIT(A) and dismisses the appeal filed by the Revenue.” The Dy. C.I.T vs M/s Expeditors International Pvt. Ltd - 2022 TAXSCAN (ITAT) 1304 The Income Tax Appellate Tribunal, (ITAT), Delhi, ‘D’ Bench, has, on Friday held that no TDS can be imposed upon the payments made to the agents of a foreign shipping company, dismissing an appeal filed by the revenue in this regard. The contentions of the assesse that the provisions of section 194C of the Act do not apply to it, for the reason of it being covered by the provisions of section 172 read with Clause 5 of Circular No. 723, though not accepted by the Assessing Officer, (A.O), was well received by the CIT (A), and on the aggrieved appeal being filed by the revenue due to the same, the Tribunal observed as below, dismissing the revenue’s appeal. Church’s Auxiliary vs ACIT - 2022 TAXSCAN (ITAT) 1188 Amount spent outside India on account of boarding and lodging local transport is not application income u/s 11(1)(a), so was held by Income Tax Appellate Tribunal (ITAT), New Delhi. The Bench consisting of Shamim Yahya, Accountant Member and Yogesh Kumar US observed “It is well settled law that the expenditure incurred by the trust outside India cannot be considered as application of income as per Section 11(1)(a) of the Act. Therefore, in the present case, the disallowance of Rs. 10,15,818/- which was spent outside India on account of boarding and lodging local transport etc. cannot be considered as application income as per Section 11(1)(a) of the Act.” M.Mallika Mahal vs The Commissioner of Central GST and Central Excise - 2022 TAXSCAN (HC) 697 In a significant ruling, the Madras High Court has permitted the businesses to file returns for the period prior to the cancellation of GST Registration and make payment of tax dues along with interest. The Single Judge, while reiterating the order passed on 31st January this year, also advised the State to instruct GSTN to make necessary changes in the portal to facilitate these changes. Observing that the State confirmed the directions as set out in order dated 31.01.2022 have been implemented in the case of all those petitioners, the Court held that “i. The petitioners are permitted to file their returns for the period prior to the cancellation of registration, if such returns have not been already filed, together with tax defaulted which has not been paid prior to cancellation along with interest for such belated payment of tax and fine and fee fixed for belated filing of returns for the defaulted period under the provisions of the Act, within a period of forty five (45) days from the date of receipt of a copy of this order, if it has not been already paid. ii. It is made clear that such payment of Tax, Interest, fine/fee and etc. shall not be allowed to be made or adjusted from and out of any Input Tax Credit which may be lying unutilized or unclaimed in the hands of these petitioners. iii. On payment of tax, penalty and uploading of returns, the registration shall stand revived forthwith. iv. The respondents shall take suitable steps by instructing GST Network, New Delhi to make suitable charges in the architecture of the GST Web Portal to allow these petitioners to file their returns and to pay the tax/penalty/fine. v. The above exercise shall be carried out by the respondents within a period of forty five (45) days from the date of receipt of a copy of this order. M/s Adobe Systems Software Ireland Ltd vs Dy. Commissioner of Income Tax - 2022 TAXSCAN (ITAT) 1176 No income attributed to DAPE of Adobe-Ireland in India, when transaction between Indian AE and foreign party found at arm’s length price, so was held by the Income Tax Appellate Tribunal (ITAT), New Delhi. The Bench consisting of held that “Once a transfer pricing analysis has been undertaken in respect of the Indian AE, nothing further would be left to be attributed to it as the alleged PE of Adobe Ireland and that, accordingly, would automatically extinguish the need for attribution of any additional profits to the alleged PE. M/s. Tata Advanced Systems Limited vs Asst. Commissioner of Income Tax - 2022 TAXSCAN (ITAT) 1053 The Income Tax Appellate Tribunal (ITAT) Mumbai bench has held that no tax liability on compensation received towards interest cost, insurance cost, cost of modification and validation of the assets, warranty, restating, etc. The Tribunal has held that “we have no hesitation in holding that the compensation received by the assessee in Asst Year 2013-14 of Rs 7,34,25,476/- towards interest cost; of Rs 11,46,651/- towards insurance cost and Rs 10,15,04,000/- towards validation support services, warranty, asset modifications, etc would go to reduce the cost of the aerospace project of the assessee company”. Texraj Realty Pvt. Ltd. vs Principal Commissioner of Income-tax - 2022 TAXSCAN (ITAT) 1068 Claim for deduction on account of land vacation compensation charges allowed without specific enquiry by the AO, the Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) upheld the revisional order the Principal Commissioner of Income-tax, Ahmedabad-4, Ahmedabad dated 24.03.2020 passed under Section 263 of the Income-tax Act, 1961. It was observed that the land vacation compensation charges of Rs.10 crores were paid by the assessee-company to M/s. Bosch Rexroth India Ltd. for vacating the land was claimed by the assessee company as a deduction in the return of income filed for the year under consideration. The PCIT observed that the Assessing Officer did not inquire into certain specific issues while passing the assessment order. Further, viewed from the submission made by the assessee that the claim for land vacation compensation charges was allowed by the Assessing Officer partly by applying his mind. Amasebail Vyvasaya Seva Sahakari Sangha Ltd vs Deputy Commissioner of Income tax - 2022 TAXSCAN (ITAT) 1305 The Income Tax Appellate Tribunal (ITAT) Banglore bench ruled that the exemption under section 80 P of the Income Tax Act,1961 is allowable if it is condoned by the competent authority.The Tribunal remitted the issue to the file of AO to examine whether the application filed by the assessee on 30.11.2018 before PCIT, Central Revenue Building, Attavara, Bengaluru for condoning the delay in filing the return of income for the assessment year 2018-19. ACIT Vs Shobhakaver Surana - 2022 TAXSCAN (ITAT) 1307 The Income Tax Appellate Tribunal (ITAT) Chennai Bench has upheld the order of CIT(A) which deletes the addition, as there was no cognitive evidence which proves the change in the stock valuation method. The Tribunal held that the addition was rightly been deleted in the impugned order and the appeal, as well as cross-objection stand, dismissed. 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