ITAT Amritsar Judgments — April 2019

The Tribunal held that the assessee failed to prove the genuineness of the cash payments and the existence of the liability at the year-end. Consequently, there was a cessation of liability, making Section 41(1) applicable.

The Tribunal upheld the disallowance, finding that the assessee failed to provide any evidence to support his claim of business suspension or the nexus of the expenditure with reviving the business. It was noted that even in a running business, expenditure must be wholly and exclusively for business purposes.

The Tribunal upheld the taxation of the entire capital gain, finding the GPOA to be an instrument of transfer and the explanation for cash payments to co-owners unsatisfactory. However, it allowed deduction for employees' contribution to welfare funds and deduction for bank interest under Section 80TTA.

The Tribunal determined the FMV of the land at Rs. 2500 per marla, considering a comparable sale instance and applying a discount for plot size. The claim for cost of improvement was disallowed due to lack of substantiation.

The Tribunal held that the assessee could not agitate the withdrawn claims in the reassessment proceedings, as the scope of such proceedings is limited to bringing escaped income to tax. The revised return, which withdrew the claims, validated the reassessment.

The tribunal rejected the assessee's plea of mutuality as contracts were with outside persons. It held that business income should be assessed at 1.5% of gross contract receipts, following a previous similar ruling.

The Tribunal held that the condonation application was not maintainable due to several deficiencies, including being filed by the counsel instead of a partner and lacking an affidavit. The reasons provided for the delay were also found to be vague and unsubstantiated.

The Tribunal held that the trust deed contained an indirect dissolution clause and that the trust's aims and objects were beneficial to the public at large. Therefore, the CIT's reasons for rejection were not sustainable.

The Tribunal noted that the assessee's registration under Section 12AA was subsequently restored by a co-ordinate bench following a High Court order. Therefore, the denial of exemption and the consequent addition were set aside.

The Tribunal held that the appeal filed by the Revenue Department was not maintainable. This was based on CBDT Instruction No. 03 of 2018, which mandates a minimum tax effect for departmental appeals.

The Tribunal held that the reopening of assessment under Section 147 was not justified as it was based on a mere change of opinion by the Assessing Officer. Furthermore, the addition under Section 68 was also deleted as the assessee had provided sufficient explanation and evidence, including additional evidence admitted by the CIT(A).

The Tribunal noted that the assessee's registration under Section 12AA was subsequently restored by a co-ordinate bench following a High Court order. Therefore, the denial of exemption and the consequent addition were set aside.

The Tribunal held that the impugned advances were made out of interest-free funds, including equity capital and realized profits, not borrowed capital. The assessee had sufficient interest-free funds to cover these advances.

The Tribunal held that the impugned advances were made out of interest-free funds, including equity capital and realized profits, not borrowed capital. The assessee had sufficient interest-free funds to cover these advances.

The Tribunal held that the Commissioner of Income Tax (Appeals) erred in not distinguishing the case from the assessee's own preceding years (AY 2013-14 and AY 2014-15) where identical facts led to the deletion of similar disallowances. The Tribunal noted that the CIT(A) relied on the Supreme Court's decision in Totgar's Co-operative Society vs. ITO, which was distinguishable. The Tribunal reasoned that the term 'attributable to' in Section 80P(2)(a)(i) is broader than 'derived from' and covers receipts related to the business of providing credit facilities. The judgment in Totgar's case involved a society that also purchased agricultural produce from members and invested surplus funds in securities and short-term deposits, which was different from the present assessee whose core activity was providing credit and accepting deposits. The Tribunal found that the CIT(A)'s assumption that the funds were surplus/idle was contrary to the assessee's claim of business exigency. Therefore, the matter was restored to the CIT(A) for re-adjudication after necessary verification, considering the predecessor's view and the Tribunal's observations, with an opportunity for the assessee to be heard.

The Tribunal held that the CIT(Exemptions) erred in declining registration under Section 12AA. The Tribunal reiterated the settled legal position that at the stage of considering a Section 12AA application, the registering authority must confine itself to the objects of the trust/society and the genuineness of its activities. It cannot examine the application of income, which is a matter for assessment proceedings. The Tribunal found that the CIT(E)'s reasons for rejection, such as accounting for advance fees, security deposits, and purchase of land, did not impinge on the genuineness of activities. Regarding the surplus, the Tribunal observed that for an educational institution, generating a surplus that is ploughed back for educational purposes does not automatically mean its predominant object is profit-making. The Tribunal cited Supreme Court judgments in Sole Trustee, Loka Shikshana Trust (1975) 101 ITR 234 (SC) and CIT Vs. Surat Art Silk Cloth Manufactures Association (1980) 121 ITR 1 (SC). The Tribunal noted that the surplus in the assessee's case (15-23% after depreciation) was reinvested for its objects, and there was no evidence that profit generation was the predominant object over rendering education. Therefore, the CIT(E)'s order was set aside, and he was directed to grant registration.

The Tribunal held that while Section 11 and 12 might not apply due to lack of registration, the entire receipts could not be taxed summarily. Expenses incurred for the trust's objects should be considered, and any disallowance would require scrutiny assessment.

The Tribunal held that the provision for bad and doubtful debts against standard assets is covered under Section 36(1)(viia) of the IT Act. Therefore, the addition made by the AO on this count was rightly deleted by the CIT(A).

The Tribunal held that the commission receipts, being in the nature of business and subject to TDS under Section 194H, were not eligible for exemption under Section 10(23C)(iiiad). The assessee's activities were considered to be in the nature of business with a profit motive, not solely for educational purposes.

The Tribunal accepted the assessee's request to withdraw the appeal. The learned DR had no objection to the withdrawal.