ITAT Bangalore Judgments — August 2019

The Tribunal restored the issue of Section 14A disallowance to the AO for fresh adjudication based on judicial precedents. It upheld the CIT(A)'s order on the reversal of interest income and remitted the issue of capitalization of revenue expenses back to the AO for verification.

The Tribunal held that the reopening of assessment was bad in law. It found that the AO had not relied solely on the CBI information but had independently examined the assessees' returns, noting the huge share premium received which was not commensurate with their financial strength or income. However, the Tribunal noted that the AO did not demonstrate that the share premium represented the assessees' own money, which is a prerequisite for addition under Section 68. The Tribunal observed that the assessees had furnished a valuation report to justify the premium, even if rejected by the AO. It emphasized that the AO's doubt about the quantum of share premium alone was not a sufficient ground for addition under Section 68, citing CIT vs. Green Infra Ltd. The Tribunal also noted that the AO had not made independent inquiries with the share applicants and that the deficiencies pointed out were procedural. Therefore, the additions made by the AO were deemed to have no merit. The Tribunal quashed the orders, allowing the appeals.

The Tribunal held that the expenditure on logo designing, considering its break-up and business context, did not create a new asset or provide enduring benefit. Therefore, it was considered revenue expenditure.

The ITAT found that the CIT(Appeals) order lacked clear findings on the suo moto disallowance made by the assessee and on another disputed issue. Therefore, the matter was restored to the CIT(Appeals) for fresh adjudication.

The Tribunal held that the penalty proceedings were initiated on March 24, 2016, when the AO completed the assessment. According to Section 275(1)(c), the penalty order should have been passed by September 30, 2016. Since the order was passed on January 27, 2017, it was barred by limitation.

The Tribunal upheld the CIT(A)'s decision, following the Special Bench ruling in Biocon Ltd. and High Court decisions, which allowed ESOP expenses when shares were allotted to employees during the year.

The Tribunal held that the payment of NPV to CAMPA is revenue expenditure, not capital expenditure. Following its own previous decisions, the Tribunal directed that the expenditure be allowed as a deduction in the year it was incurred.

The Tribunal held that the disallowance under Section 14A should be restricted to the exempt income earned. It also held that the commission paid to the foreign agent for services rendered outside India was not taxable in India, thus no TDS was required.

The Tribunal held that the show cause notice issued for penalty proceedings was defective as it did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. Following the jurisdictional High Court's decision, the Tribunal quashed the penalty.