ITAT Bangalore Judgments — February 2022

The Tribunal held that there is a distinction between setting up of business and commencement of business, and expenses incurred after setting up are deductible. The Tribunal found that the assessee had taken premises, employed staff, and purchased assets, indicating the business was set up, even if not fully commenced.

The Tribunal held that the AO and CIT(A) did not dispute the source of accretions to the capital account as disclosed in the belatedly filed returns. Therefore, the case was remanded to the AO for fresh consideration.

The Tribunal held that the assessment under section 153A was made accepting the returned income without any additions based on seized materials. Therefore, the AO could not have disturbed the capital gains computation or carry forward of capital loss. Consequently, the section 263 revision was not sustainable.

The Tribunal held that a deduction claimed in the original return, even if for an incorrect amount, can be revised during assessment proceedings. It also ruled that provisions for gratuity, leave encashment (based on actuarial valuation), and bonus (statutory liability) are ascertained liabilities and should not be added back for book profit computation.

The Tribunal held that the Assessing Officer was not justified in valuing the closing stock of dump material at the same rate as good stock, especially when the assessee consistently treated its realizable value as nil. The addition made on this account was therefore deleted.

The Tribunal held that it is crucial for the assessee to demonstrate the nexus between borrowed funds and the acquisition/construction of the property. An opportunity was granted to the assessee to prove this connection.

The Tribunal restored the transfer pricing issue to the AO/TPO for de novo consideration, citing lapses on both sides and previous ITAT decisions. Similarly, the warranty provision and software expense issues were restored for fresh examination.

The Tribunal held that employees' contribution to PF and ESI paid before the due date of filing the return of income under Section 139(1) is an allowable deduction. The amendment by the Finance Act, 2021, was held to be prospective and not applicable to the assessment year in question.

The Tribunal condoned the delay in filing the appeal. Considering that the CIT(A) passed an order without proper hearing due to the assessee's repeated adjournments, the Tribunal restored all issues to the CIT(A) for fresh examination in the interest of natural justice.

The Tribunal condoned the delay in the assessee's appeal. It confirmed the deletion of Rs. 33 lakhs, dismissed the addition of Rs. 1 crore, and remitted several issues back to the AO for further examination.

The Tribunal condoned the delay in the assessee's appeal. It confirmed the deletion of Rs. 33 lakhs, dismissed the addition of Rs. 1 crore, and remitted several issues back to the AO for further examination.

The Tribunal held that the amendment to Section 200A, which allowed for processing of TDS statements for late fees, was prospective from June 1, 2015. Therefore, demands for late fees for periods prior to this date were not valid. The CIT(A)'s dismissal of the appeal was set aside.

The Tribunal condoned the delay in the assessee's appeal. It confirmed the deletion of Rs. 33 lakhs, dismissed the addition of Rs. 1 crore, and remitted several issues back to the AO for further examination.

The Tribunal held that the expenditure was not otherwise allowable as revenue expenditure in the hands of the assessee, as the import was of a capital asset and not by the assessee. The penalty was also disallowed. Therefore, Section 43B could not be applied.

The Tribunal held that 91% of the finance charges related to the NBG project should be allowed as deduction, corresponding to the 91% of revenue offered for taxation. For general finance charges, the assessee needs to demonstrate their nature and purpose to the AO.

The Tribunal upheld the CIT(A)'s deletion of interest disallowance, stating that no disallowance is required when sufficient interest-free funds are available. It also confirmed the deletion of depreciation on home theatre equipment, citing its business utility and prior tribunal decisions. The Section 14A disallowance was also deleted, following the jurisdictional High Court's ruling that it does not apply when no exempt income is earned.

The Tribunal restored the transfer pricing issue to the AO/TPO for de novo consideration, citing lapses on both sides and previous ITAT decisions. Similarly, the warranty provision and software expense issues were restored for fresh examination.

The Tribunal restored the issue of the donation claim to the Assessing Officer for fresh examination. The Assessing Officer was directed to consider the claim without being influenced by the CIT(A)'s previous decision and to provide the assessee with an adequate opportunity to be heard.

The Tribunal restored the issue of the donation claim to the Assessing Officer for fresh examination. The Assessing Officer was directed to consider the claim without being influenced by the CIT(A)'s previous decision and to provide the assessee with an adequate opportunity to be heard.

The Tribunal held that the amendment to Section 200A, which allowed for processing of TDS statements for late fees, was prospective from June 1, 2015. Therefore, demands for late fees for periods prior to this date were not valid. The CIT(A)'s dismissal of the appeal was set aside.

The Tribunal held that the interest earned on surplus funds deposited in banks is taxable as income from other sources, as it does not fall within the principle of mutuality. However, the AO was directed to recompute the taxable interest based on the mercantile system of accounting.

The Tribunal dismissed the Revenue's appeal as not maintainable, citing CBDT Circular No. 17/2019 which sets a monetary limit for appeals. The assessee's cross-objection was dismissed as infructuous.

The Tribunal held that since the supplier's selling price included freight and the supplier arranged transportation, the liability to deduct TDS did not fall on the assessee. The disallowance made by the AO was therefore incorrect.

The Tribunal directed the AO to compute the income from the sale of land as business income and also to grant the benefit of Section 45(2) to the assessee. The grounds raised by the assessee were dismissed.

The Tribunal directed the TPO to conduct a fresh analysis of the international transactions using TNMM, prioritizing the assessee's submitted internal comparables. If the internal data is insufficient or unverifiable, the TPO can proceed with external comparables.

The Tribunal held that the Principal CIT was justified in initiating revision proceedings as the AO had not examined the donation claim. However, the Tribunal directed the AO to examine the claim afresh, without being influenced by the revision order's observations.

The Tribunal directed the TPO to conduct a fresh analysis of the international transactions using TNMM, prioritizing the assessee's submitted internal comparables. If the internal data is insufficient or unverifiable, the TPO can proceed with external comparables.

The Tribunal restored the issues regarding Section 80P deductions to the AO for fresh examination in light of Supreme Court rulings. The addition under Section 68 was deleted, holding that the demonetized notes collected were explained and not unexplained money.

The Tribunal held that the employees' contribution to PF and ESI is deductible if paid before the due date for filing the return of income under Section 139(1). The amendment by the Finance Act, 2021, was held to be prospective and not applicable to the assessment year in question.

The Tribunal condoned the delay of 511 days, finding reasonable cause due to the assessee pursuing rectification and the impact of the COVID-19 pandemic. The Tribunal set aside the CIT(A)'s order and restored the appeal to the CIT(A)'s file for adjudication on merits.

The Tribunal held that depreciation adjustment is to be granted when depreciation rates differ between the taxpayer and comparable companies. Following previous ITAT decisions, the Tribunal found no infirmity in the CIT(Appeals)'s order.

The Tribunal held that the disallowance under Section 14A cannot exceed the amount of exempt income earned by the assessee. The AO was directed to restrict the disallowance to the extent of the exempted income.

The Tribunal held that the amendment by the Finance Act, 2021, to Sections 43B and 36(1)(va) is not retrospective. Following the jurisdictional High Court's decision, the assessee is entitled to deduction if the payments were made before the due date of filing the return of income.

The Tribunal held that the amendment by the Finance Act, 2021, to Sections 43B and 36(1)(va) is not retrospective. Following the jurisdictional High Court's decision, the assessee is entitled to deduction if the payments were made before the due date of filing the return of income.

The Tribunal condoned the delay of 511 days, finding reasonable cause due to the assessee pursuing rectification and the impact of the pandemic. Consequently, the appeal was restored to the CIT(A) for adjudication on merits.

The Tribunal held that the assessee's activities, such as road and building construction, were commercial in nature and not incidental to its stated objects of promoting innovative housing techniques. Therefore, the proviso to section 2(15) was applicable, disentitling the assessee from exemption under section 11.

The Tribunal held that the sum received by the assessee was not without consideration, as it was in lieu of giving up his rights in the suit properties. Therefore, it was a capital receipt not chargeable to tax.

The Tribunal noted that an identical issue in previous assessment years was remanded to the AO for fresh consideration in light of a Supreme Court decision. Following this precedent, the Tribunal also remanded the current issue to the AO for a fresh examination.

The Tribunal found inconsistency in the characterization of the assessee's business by the TPO across different assessment years. To ensure consistency and for proper appreciation of the functions performed, the transfer pricing issues were remanded to the AO/TPO for de novo verification.

The Tribunal held that the DRP's directions were erroneous regarding the number of comparable companies. It directed the TPO/AO to consider five specific comparable companies instead of three. The Tribunal also directed the AO/TPO to grant working capital adjustment on an actual basis.

The Tribunal held that the disallowance of employees' contribution to PF and ESI is not justified if paid before the due date of filing the return of income under Section 139(1). The amendments by the Finance Act, 2021, were held to be prospective and not applicable to the assessment years in question.

The Tribunal held that the DRP's directions were erroneous regarding the number of comparable companies. It directed the TPO/AO to consider five specific comparable companies instead of three. The Tribunal also directed the AO/TPO to grant working capital adjustment on an actual basis.

The Tribunal held that negative net worth cannot be ignored when computing capital gains on a slump sale. Following the decision in M/s. Summit Securities Ltd., the AO was directed to compute capital gains in accordance with the principles laid down, implying that negative net worth should be factored in.

The Tribunal decided to remit the issue of sponsorship fees to the Assessing Officer (AO) for verification of expenditure and TDS compliance. For commission expenditure, the issue was also remitted to the AO to examine the genuineness of the expenditure first, and then consider TDS implications.

The Tribunal found inconsistency in the characterization of the assessee's business by the TPO across different assessment years. To ensure consistency and for proper appreciation of the functions performed, the transfer pricing issues were remanded to the AO/TPO for de novo verification.

The Tribunal held that the disallowance of employees' contribution to PF and ESI is not justified if paid before the due date of filing the return of income under Section 139(1). The amendments by the Finance Act, 2021, were held to be prospective and not applicable to the assessment years in question.

The Tribunal held that the interest paid on the loan could not be allowed as a deduction against interest income from other sources. This was because the borrowed funds were not used for the purpose of earning interest income, but rather for making a deposit in the CGDA Scheme.

The Tribunal held that the receipts from software licensing and embedded software were not royalty, following the Supreme Court's decision in Engineering Analysis Centre of Excellence (P) Ltd. The Tribunal also held that support services did not constitute FTS as the technical know-how was not 'made available' to the customers.

The Tribunal found that the reliance on a previous draft assessment order was incorrect. Regarding Section 10AA, the Tribunal noted issues with the denial of relief and the assessee's evidence. For AMP expenses, the Tribunal remanded the issue to the AO/TPO for verification of the existence of an international transaction and the nature of AMP expenditure.

The Tribunal found that the reliance on a previous draft assessment order was incorrect. Regarding Section 10AA, the Tribunal noted issues with the denial of relief and the assessee's evidence. For AMP expenses, the Tribunal remanded the issue to the AO/TPO for verification of the existence of an international transaction and the nature of AMP expenditure.