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125 orders · Page 2 of 3
The Tribunal referred to the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd., stating that income from credit facilities provided to members, including nominal/associate members (if permitted by the Co-operative Societies Act), is eligible for deduction u/s 80P(2)(a)(i). Section 80P(4) excludes only co-operative banks engaged in public banking. For interest income from investments, it directed the AO to verify if it was from investments with co-operative societies, citing the Supreme Court's decision in Kerala State Co-operative Agricultural and Rural Development Bank Ltd. If income is treated as 'income from other sources', relief u/s 57 would be applicable.
The Tribunal directed the AO to verify if the interest income was earned from investments made with Cooperative Societies. If so, the assessee is entitled to deduction under section 80P(2)(d) of the IT Act, following the Supreme Court's decision. If the interest is considered 'income from other sources', relief under section 57 of the Act should be granted.
The Tribunal noted that the Supreme Court in Mavilayi Service Co-operative Bank Ltd. case held that the interpretation of 'member' should consider the respective State Cooperative Societies Act. The Tribunal also referred to the Bangalore Bench's order in M/s. Ravindra Multipurpose Cooperative Society Ltd. case, remanding the issue for de novo consideration by the AO. For interest income from cooperative banks, the AO is directed to verify if the income is from investments in cooperative societies and if so, is eligible for deduction under section 80P(2)(d). If taxed as 'income from other sources', relief under section 57 is to be considered.
The Tribunal noted that the issue revolves around the eligibility of deduction under Section 80P(2)(a)(i) or 80P(2)(d) on interest income earned from investments in co-operative banks. The Tribunal also considered the nature of the payer of interest (co-operative bank vs. co-operative society) and the applicability of Section 80P(2)(d) based on the payer's status. Additionally, the Tribunal addressed the issue of claiming the cost of funds for earning interest income.
The Tribunal condoned the delay of 28 days, finding sufficient cause for the late filing. The Tribunal noted that both the assessment and appeal orders were passed ex-parte, and the assessee was not well-versed in online tax portals. Therefore, the Tribunal decided to grant one more opportunity to the assessee.
The Tribunal held that the assessee failed to prove the source of the deposits with evidence, particularly the ownership of tractors and the genuineness of loan transactions. The assessee's plea for presumptive taxation under Section 44AE was rejected due to non-compliance and lack of evidence.
The Tribunal decided the issues as follows: Issue 1 & 4 (combined): The Tribunal held that the negative working capital adjustment should not be made. It was an admitted position that the assessee was a captive service provider, entirely funded by its AE abroad, and did not bear working capital risk. The Tribunal relied on its previous decision in the case of Adaptec (India) P. Ltd. to direct that no negative working capital adjustment shall be carried out on the average Profit Level Indicator (PLI) of the final set of comparables. This ground raised by the assessee was allowed. Issue 2: The judgment does not explicitly record a decision on whether the DRP erred in not excluding the specific companies listed as functionally incomparable. However, the DRP had granted marginal relief by excluding M/s Acropetal Technologies Ltd. The Tribunal's decision on this specific ground is not detailed in the provided excerpt. Issue 3: This issue is addressed as part of Issue 1 and 4, where the Tribunal ruled against making a negative working capital adjustment. Regarding grounds 7-10 concerning disallowance of provision for gratuity, inappropriate consideration of taxes paid, interest computed u/s. 234B and D, and not granting interest u/s. 244A, the Tribunal found that these issues required verification. The Tribunal remanded these four issues to the AO for necessary verification as per previous directions and in accordance with law. These grounds were partly allowed for statistical purposes. Operative Direction: The AO is directed not to make negative working capital adjustment. Grounds 7-10 are remanded to the AO.
The Tribunal agreed with the CIT(A) that the addition needed to be reduced further. Considering the total financial assistance received, the Tribunal granted an additional credit of Rs. 3 lakhs, thereby reducing the addition to Rs. 6,05,000/-.
The Tribunal noted that although the assessee was negligent, certain grounds presented by the assessee had merit. The CIT(A) did not consider the stamp duty and registration charges paid by the assessee, nor did it investigate the claimed improvement cost on the property.
The Tribunal held that the requirement to file Form 67 is directory, not mandatory, and that non-compliance with this procedural requirement should not lead to the disallowance of foreign tax credit. The Tribunal noted that the Double Taxation Avoidance Agreement (DTAA) overrides the Act and Rules, and that the assessee has a vested right to claim FTC under the treaty.
The Tribunal held that the assessee's claim for working capital adjustment should be allowed. It noted that the assessee had provided details for the adjustment and relied on the decision in Huawei Technologies India (P) Ltd. The Tribunal found that the DRP's reasons for rejection, such as the need for daily balances, segmental working capital, break-up of debtors/creditors, and cost of capital, were not sustainable. The Tribunal reasoned that insisting on daily balances is impractical, and details like segmental working capital or trade/non-trade debtor breakdowns are often beyond the assessee's power to obtain from comparable companies. It also referred to OECD guidelines for adopting interest rates for the cost of working capital. The Tribunal concluded that if working capital adjustments are not allowed, the comparable uncontrolled transactions would have to be treated as not comparable under Rule 10B(3), rendering the transfer pricing exercise futile. Therefore, the working capital adjustment as claimed by the assessee was directed to be allowed. The Tribunal also directed the AO to verify and grant credit for Self-Assessment tax and Regular Assessment taxes, as a rectification application was pending.
The Tribunal restored the issue of deduction under Section 80P(2)(a)(i) to the AO for de novo consideration in light of the Supreme Court's ruling on 'members'. It also directed the AO to verify eligibility for deduction under Section 80P(2)(d) for interest income and to grant relief under Section 57 if income is treated as 'income from other sources'. The disallowance of donation expense was allowed to increase the business income eligible for Section 80P deduction.
The Tribunal held that the CBDT circular No. 1916 provides guidelines for the quantity of jewelry that can be considered explained, taking into account customary practices in Hindu families. The Tribunal allowed the appeal based on this circular and precedents.
The Tribunal allowed grounds 2 to 5 in favour of the assessee, applying the ratio laid down by the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. The Tribunal noted that the Hon'ble Karnataka High Court and this Tribunal itself had previously decided similar issues in favour of the assessee for earlier assessment years. The Tribunal found that the Revenue's argument that the Supreme Court did not examine the present assessee's specific agreements was not a valid reason to deviate from the established precedent, upholding the principle of judicial discipline. Consequently, receipts from the sale of software were held not to be royalty, and AMC receipts were not taxable as FIS. Ground 7 and its sub-grounds were also allowed, following the Tribunal's order in the assessee's own case for AY 2019-20, which held that reimbursement of computer and hardware maintenance cannot be treated as FTS/FIS. The Tribunal did not explicitly address grounds 1 and 6, but the allowance of grounds 2-5 and 7 indicates a significant part of the dispute was resolved in favour of the assessee.
The Tribunal held that the delay was sufficiently explained, as the assessee had pursued a rectification petition before filing the appeal. The Tribunal also noted that the issue of whether the income was business income or house property income had not been properly addressed.
The Tribunal held that the lower authorities erred in rejecting the assessee's evidence regarding agricultural income without proper examination. It noted that agriculturists may not maintain regular books of accounts and that the lease agreements were dated after the lease period, raising suspicion but not warranting outright rejection without due verification.
The Tribunal held that the assessee is, in principle, entitled to a deduction under section 54F for investment in a property even if it consists of multiple units, provided it is constructed as a single residential house. However, the assessee had not filed relevant evidence before the AO to substantiate the cost incurred on the new residential house. Therefore, the issue was remitted back to the AO for quantification.
The Tribunal held that the CIT(A) erred by dismissing the appeal ex-parte without considering the assessee's filed adjournment petitions. The CIT(A)'s observation that the assessee did not respond to notices was deemed incorrect.
The Tribunal found that the lower authorities had not afforded the appellant a proper opportunity of being heard, violating principles of natural justice. Therefore, the case was remanded for fresh consideration.
The Tribunal held that the definition of 'member' should be considered in light of the Karnataka Co-operative Societies Act, which permits nominal/associate members up to 15% of regular members. The Tribunal also noted that proportionate deduction should be allowed for profits from regular members, as per the Mavilayi Service Co-operative Bank Ltd. judgment.
The Tribunal held that the assessee should be granted one more opportunity to appear before the CIT (Exemptions) with all relevant documents. The CIT's order was set aside, and the matter was remitted back for a fresh decision after hearing the assessee and considering the records.
The Tribunal condoned the delay of 98 days in filing the appeal due to the reasons explained by the assessee. The Tribunal also admitted the additional grounds of appeal and additional evidences filed by the assessee, considering them bonafide and necessary for fair adjudication. Given that the additional grounds and evidences were presented for the first time, the Tribunal decided to remit the entire issues for fresh consideration.
The Tribunal found that the CIT(A) passed an erroneous ex-parte order by not considering the assessee's adjournment petition. Therefore, the order of the CIT(A) was liable to be set aside.
The Tribunal noted that the appeal was dismissed for non-prosecution by NFAC/CIT(A) despite the assessee seeking adjournments. The Tribunal opined that due to the pandemic and the lapse of time, the assessee was unable to present their case properly and adhering to the principles of natural justice, the assessee deserves an opportunity to be heard.
The Tribunal held that filing Form No. 67 is a directory requirement and not mandatory. It also reiterated that Double Taxation Avoidance Agreements (DTAA) override the provisions of the Income Tax Act and Rules, and non-compliance with procedural rules like late filing of Form 67 should not be fatal to the FTC claim.
The Tribunal noted that while the CIT(A) issued various notices, the assessee contended they were not sent to the correct email ID. The CIT(A) had partly allowed the appeal. The assessee raised a legal issue for the first time before the ITAT regarding the validity of the AO's assessment order. Respectfully following the judgment in National Thermal Power Company Ltd. v. CIT (229 ITR 383), the Tribunal admitted the additional grounds raised by the assessee. Considering that the CIT(A) had passed an ex-parte order, and in the interest of justice, the Tribunal decided to remit both the legal issue and the merits of the case back to the file of the CIT(Appeals). The CIT(Appeals) was directed to decide the matter afresh after providing a reasonable opportunity of being heard to the assessee. The assessee was directed to produce necessary documents to substantiate their case, avoid unnecessary adjournments, and update their contact details for early disposal.
The Tribunal held that the addition made by the Assessing Officer (AO) under Section 69 of the Income Tax Act was not sustainable solely because the "cash in hand" column in the ITR was not filled, especially when the opening balance was reflected in the balance sheet. The department failed to provide evidence that the opening cash balance was utilized elsewhere.
The Tribunal noted that the mistake in filing Form 10BB was rectified by filing Form 10B later. They also observed that a contrary ITAT order relied upon by the lower authority was reversed by the Gujarat High Court. The issue of deduction was restored to the AO for verification.
The Tribunal held that the amendment to Section 54F, which restricts the deduction to one residential unit, was prospective and applied from April 1, 2015. For the assessment year 2008-09, prior to the amendment, the phrase "a residential house" could include multiple units.
The Tribunal held that the addition of Rs. 11,79,000/- was made in respect of monies recorded in the assessee's bank statements and thus could not be treated as unexplained money under section 69A. The explanation that the cash was withdrawn prior to demonetization for specific purposes was not dismantled by the AO.
The Tribunal noted that the jurisdictional High Court (Karnataka High Court) in the case of Fatehraj Singhvi Vs. UOI held that levy of late fee for belated filing of e-TDS return for assessment years prior to 01.06.2015 is not warranted. Following this precedent, the Tribunal held that the late fee could not be imposed.
The Tribunal noted that the assessee had furnished audited financial statements but failed to respond to notices from the AO and CIT(A). However, considering the interest of justice and the assessee's plea regarding non-receipt of notices, the Tribunal decided to remit the issue back to the AO for fresh consideration.
The Tribunal noted that the CIT(A) had dismissed the appeal without going into the merits, solely based on a delay of 45 days, which was attributed to several factual errors by the CIT(A) regarding the dates of appeal and the order. The Tribunal also found that the assessee was eligible for the cost of earning such interest income as per the jurisdictional High Court judgment.
The Tribunal accepted the sale of agricultural land as exempt. For the remaining agricultural income from produce, the issue was remitted to the Assessing Officer to determine the average agricultural income from the preceding and succeeding three assessment years.
The Tribunal held that the provisions of Section 12AB(4)(ii) of the Income Tax Act, introduced by the Finance Act, 2022, were not applicable for the Assessment Year 2018-19. The PCIT should have invoked the provisions relevant to that assessment year.
The Tribunal held that the PCIT erred in invoking Section 12AB(4)(ii) of the Act, as this provision was introduced w.e.f. 01.04.2022 and was not applicable for the Assessment Year 2018-19. The law applicable for the relevant assessment year should be applied.
The assessee sought to withdraw the appeal, stating that the CIT(A) had already allowed their claim for deduction u/s 80P(2)(a)(i) of the Act, making the present appeal infructuous. The assessee was granted permission to withdraw the appeal with liberty to revive it in case the CIT(A)'s order is reversed.
The Tribunal held that since the assessee failed to file a return in response to the Section 148 notice within the stipulated time, and the belated return was treated as non-est by the AO, the issue of issuing a notice under Section 143(2) did not arise. However, the grounds related to the merits of the addition were remitted to the AO for verification.
The Tribunal noted that Section 11(6) of the Income Tax Act, inserted w.e.f. April 1, 2015, disallows depreciation if the cost of the asset was claimed as an application of income in a previous year. The NFAC allowed the ground without verifying this fact. Therefore, the issue was remitted to the AO for reconsideration.
The Tribunal held that the amount received by the assessee from its customers in India, based on service agreements, cannot be taxed in India as 'Royalty' under Section 9(1)(vi) of the Act or Article 12 of the India-US DTAA. The reasoning was based on a review of various judicial precedents, including decisions from the ITAT itself and High Courts, which have consistently held that payments for access to software platforms, cloud hosting services, or similar digital services, where the customer does not have access to the underlying processes, technology, or equipment, do not constitute royalty. The Tribunal emphasized that the customers only use the services provided and do not operate the equipment or have physical access to or control over the assessee's infrastructure. The Tribunal also noted that the Revenue had not established the existence of a Permanent Establishment (PE) of the assessee in India, and therefore, no income could be taxed in India under the Indo-US DTAA. Consequently, the grounds raised by the assessee in both appeals were allowed.
The Tribunal held that the assessee's claim for exemption under Section 11(1) of the Act was not allowable because the sale agreement for the land purchase was not culminated into a sale deed, and there was no absolute transfer of property. The Tribunal observed that the assessee had not brought on record crucial aspects like the source of funds, nature of possession, motive for continuing with the sale agreement, and comparison with Sub-Registrar's valuation.
The CIT(A) decided the appeal ex-parte due to non-compliance with notices by the assessee. The assessee's representative claimed non-receipt of notices due to them going into spam folder and requested the case be remanded. The Tribunal, considering the interest of justice, decided to remit the issue back to the AO for fresh consideration.
The Tribunal condoned the delay of 71 days in filing the appeal before the FAA, opining that there was a sufficient cause for the delay due to the tax consultant's oversight. The Tribunal also noted that the entire receipts were taxed without considering the benefit of expenditure, and respectfully following a precedent, remitted the issue back to the Assessing Officer for de novo consideration.
The Tribunal found that the reconciliation of Form 26AS with sales and commission received was required. Therefore, the issue was remitted back to the AO for fresh consideration.
The Tribunal noted that the assessee's grounds of appeal regarding the initiation of proceedings under Section 147 were not pressed. However, the core issue of whether interconnect usage charges constitute 'royalty' was to be decided on merits, referencing previous judgments.
The Tribunal held that the interconnect usage charges are not 'royalty' under the India-Japan DTAA, as the technology involved is not secret. It also noted that Explanations 5 and 6 to Section 9(1)(vi) of the Act are not part of the DTAA's definition of royalty.
The Tribunal held that the amount received by the assessee from its customers in India, based on service agreements, cannot be taxed in India as 'Royalty' under Section 9(1)(vi) of the Act or Article 12 of the India-US DTAA. The reasoning was based on a review of various judicial precedents, including decisions from the ITAT itself and High Courts, which have consistently held that payments for access to software platforms, cloud hosting services, or similar digital services, where the customer does not have access to the underlying processes, technology, or equipment, do not constitute royalty. The Tribunal emphasized that the customers only use the services provided and do not operate the equipment or have physical access to or control over the assessee's infrastructure. The Tribunal also noted that the Revenue had not established the existence of a Permanent Establishment (PE) of the assessee in India, and therefore, no income could be taxed in India under the Indo-US DTAA. Consequently, the grounds raised by the assessee in both appeals were allowed.
The Tribunal noted that the assessee's VAT return showed a turnover of Rs. 1,88,15,594 and gross sales of Rs. 1,34,95,325 from April to November 2016, with Rs. 1,12,16,200 collected in cash. Considering these aspects and the assessee's request for verification, the issue was remitted back to the AO.
The Tribunal held that interconnect usage charges are not royalty under the Act or the DTAA. It referred to jurisdictional High Court decisions and commentary on DTAAs to support its view.
The Tribunal directed the AO to examine if the interest income from Central Co-operative Bank was due to compulsions under the Karnataka Co-operative Societies Act. If so, it should be treated as business income eligible for deduction under Section 80P(2)(a)(i). If not eligible for 80P(2)(a)(i), the AO should examine eligibility under Section 80P(2)(d), and if neither applies, consider deduction for cost of funds under Section 57.