ITAT Bangalore Judgments — May 2024

The Tribunal noted that Section 80P(2)(d) allows deduction for interest received from a co-operative society. However, it is crucial to determine if the payer bank is indeed a co-operative bank or a bank governed by the Banking Regulation Act, 1949, as per Supreme Court judgments. The issue of cost of funds for earning interest income was remitted back to the AO.

The Tribunal condoned the delay in filing the appeal before the CIT(A), considering the explanation of the assessee as a reasonable cause and applying a liberal interpretation of 'sufficient cause'. On merits, the Tribunal noted that the issue regarding deductions u/s 80P(2)(a)(i) and (d) requires detailed verification.

The Tribunal restored the matter to the AO to determine if SCDCC Bank is a co-operative society. If it is, the interest income is eligible for deduction under Section 80P(2)(d). If not, the AO is to consider the deduction of cost of funds under Section 57.

The Tribunal held that the assessee was involved in a charitable activity and not solely for profit, and that the conditions of Section 249(4)(b) regarding admitted tax payment were not applicable. The Tribunal noted that the assessment was completed ex-parte and decided to examine the matter afresh.

The Tribunal condoned the delay of 10 days in filing the appeal, citing sufficient cause and no malafide intention. However, on merits, the Tribunal noted that a subsequent assessment order dated 28.02.2024 (after the impugned order) computed income as per the assessee's declaration and that the assessee had opted for taxation under section 115BAA for the preceding year. Since the grievance was resolved by the subsequent order, the appeal was dismissed as academic.

The Tribunal observed that both the AO and CIT(A) did not deal with the case appropriately and failed to consider the assessee's request. The Tribunal found that proper opportunities for being heard were not provided to the assessee.

The Tribunal held that the cash deposits made by members were genuine and the assessee had provided sufficient evidence regarding the identity and genuineness of the transactions. The AO erred in treating these deposits as unexplained investment under section 69A or as income under section 68 without proper verification. The assessee was eligible for deduction under section 80P(2)(a)(i).

The Tribunal noted the assessee's submission that non-response was not deliberate but due to bonafide reasons and hardship. Considering the interest of justice and equity, the Tribunal decided to provide one more opportunity to the assessee.

The Tribunal held that depreciation is a statutory deduction under Section 32 and is an allowance, not an expenditure. Section 40(a)(i)/(ia) disallows expenses where TDS has not been deducted, but it does not apply to capital expenditures or depreciation claims. The Tribunal noted that similar issues have been decided in favor of the assessee by higher courts.

The Tribunal held that the NFAC overlooked the adjournment letter and written submissions filed by the assessee, rendering the ex-parte order against the principles of natural justice. The Tribunal also noted that the due date for filing the return and audit report for AY 2018-19 was extended by the CBDT.

The Tribunal condoned the delay in filing the appeal, acknowledging it as a genuine mistake. The Tribunal noted that the Ld. Commissioner also failed to decide the issue properly due to lack of relevant documents/replies from the assessee.

The Tribunal held that depreciation is a statutory deduction on an asset and not an expenditure in the nature of revenue. Therefore, Section 40(a)(i) and (ia) of the Act, which deals with disallowance of revenue expenditure where TDS is not deducted, are not applicable. The disallowance made by the AO was not sustainable.

The tribunal held that the assessee should be given one more opportunity to represent their case. The issues were restored to the files of the CIT(A).

The Tribunal noted that depreciation is a statutory deduction and Section 40(a)(i)/(ia) applies to revenue expenditure, not capital expenditure or depreciation. The Tribunal relied on the decision in PCIT vs. Tally Solutions Pvt. Ltd. and the Supreme Court's ruling in Engineering Analysis Centre of Excellence (P) Ltd. vs. CIT, stating that depreciation is an allowance, not an expenditure, and thus Section 40(a)(i)/(ia) is not applicable. The appeals related to the transfer pricing issues were withdrawn due to the MAP proceedings.

The Tribunal found that the disallowance based solely on the presence of nominal members was not in accordance with the Supreme Court's judgment in Mavilayi Service Co-operative Bank Ltd. The court held that loans to nominal members can qualify for deduction under Section 80P(2)(a)(i).

The Tribunal held that Section 40(a)(i) and (ia) of the Income-tax Act are applicable to revenue expenditure and not to capital expenditure. Since the software was capitalized as an asset, depreciation claimed thereon is a statutory deduction and not an expenditure. Therefore, the disallowance made by invoking Section 40(a)(i)/(ia) for non-deduction of TDS is not sustainable. The Tribunal also noted that the nature of software purchase (copyrighted article vs. royalty) was a key consideration.

The Tribunal noted that Rule 128 of the I.T. Rules, which mandates timely filing of Form 67, was inserted effective 01.04.2017. For the assessment year 2015-16, there was no such requirement. Therefore, the CIT(Appeals) erred in disallowing the credit based on this rule.

The Tribunal held that depreciation is a statutory deduction allowed on assets and is not an expenditure of a revenue nature. Therefore, Section 40(a)(i)/(ia) of the Act, which deals with disallowance of expenditure where TDS has not been deducted, is not applicable to a claim for depreciation. The Tribunal noted that prior decisions by the Karnataka High Court and the Tribunal supported this view.

The Tribunal held that the delay in filing the appeals was caused by a reasonable cause, including the belief that the appeals were filed by the representative and the oversight due to external circumstances. Citing various Supreme Court judgments emphasizing substantial justice over technicalities, the Tribunal condoned the delay.

The Tribunal held that the assessee failed to establish a 'sufficient cause' for the inordinate delay in filing the appeal. The explanation provided was considered bald, general, and lacking in bonafides and diligence.

The Tribunal acknowledged the explanation of the delay, including a communication gap and oversight by the previous representative, and the appellant's bonafide belief. Citing Supreme Court judgments on condonation of delay, the Tribunal held that substantial justice should be preferred over technicalities. The Tribunal also noted that the Revenue did not file any counter-affidavit opposing the condonation.

The Tribunal held that while Form 67 is required to be submitted before filing returns, this requirement is directory and not mandatory. The Tribunal further noted that Rule 128(9) does not provide for disallowance of FTC in case of delayed filing of Form 67. Moreover, DTAA provisions override the Act and Rules.

The Tribunal held that there was a reasonable cause for the delay, as it was not willful or wanton but due to circumstances beyond the assessee's control. Relying on various judicial precedents, the Tribunal condoned the delay in filing the appeals before the Ld.CIT(A). The appeals were admitted for adjudication.

The Tribunal acknowledged the appellant's belief that appeals were filed by their representative and considered the affidavit explaining the communication gap and oversight as a reasonable cause. Relying on Supreme Court and High Court decisions, the Tribunal held that substantial justice should be preferred over technicalities and that the delay, though substantial, was not willful or due to gross negligence.

The Tribunal condoned the delay in filing the appeal after considering the reasons provided by the assessee. It was noted that the CIT(Appeals) had passed an ex-parte order without considering the assessee's adjournment petition and without going into the merits of the case. Therefore, the appeal was remitted back to the CIT(Appeals).

The Tribunal, considering the facts and the explanation provided by the assessee and their erstwhile representative, found that there was a reasonable cause for the delay, which was neither willful nor wanton but due to circumstances beyond the assessee's control. Relying on various judicial precedents, the Tribunal condoned the delay.

The Tribunal held that the disallowance leading to the penalty arose from an order giving effect to a MAP Resolution, which was received after the time limit for filing a revised return had expired. The assessee voluntarily paid the additional taxes before the assessment proceedings were initiated. The explanation offered by the assessee was found to be bona fide. Therefore, the penalty under Section 271(1)(c) could not be sustained.

The Tribunal held that the delay in filing the appeals was due to a reasonable cause and not willful or wanton, but rather due to circumstances beyond the assessee's control, including a communication gap and oversight by the representative. The Tribunal relied on several Supreme Court judgments emphasizing the importance of substantial justice over technicalities in condoning delays.

The Tribunal held that there was a reasonable cause for the delay in filing the appeals, attributing it to communication gaps, oversight, and a bonafide belief that the appeals were filed by the previous representative. The Tribunal relied on various Supreme Court judgments to condone the delay.

The Tribunal held that the delay in filing the appeals was due to a reasonable cause, including a communication gap and oversight by the representative, which was not willful or deliberate. The Tribunal condoned the delay and admitted the appeals for adjudication.

The Tribunal held that the issue of interest received from credit facilities to members vs. non-members needs fresh consideration to determine the attributable profit for 80P deduction, based on the principle of mutuality. Regarding interest on investments in co-operative banks, the issue was remitted to the AO for verification of whether the payer banks are governed by the Banking Regulation Act, affecting eligibility for 80P(2)(d) deduction. The Tribunal upheld the addition of provisions for NPA and gratuity as unascertained liabilities but directed that the resultant increase in business profits would be eligible for proportionate 80P(2)(a)(i) deduction.

The Tribunal held that the rejection by the CIT(E) was not justified in light of CBDT Circular No. 07/2024, which extended the due date for filing applications. The Tribunal noted that the assessee had initially filed the application within the correct time frame but it was rejected for selecting the wrong section code, and a revised application was filed later.

The Tribunal held that the addition made under section 68 was not proper as the assessee had provided details of depositors and transactions were found to be with members. The Tribunal also held that the assessee is not eligible for deduction under section 80P(2) because it failed to file a return of income, which is a prerequisite for claiming such deductions.

The Tribunal held that the authorities below failed to specify which limb of Section 270A(9) was attracted and how it was satisfied. The denial of immunity was considered arbitrary. The Tribunal quashed the penalty order and directed the AO to consider the application for immunity.

The Tribunal held that the penalty proceedings were initiated for underreporting of income in consequence of misreporting, but the specific limb of Section 270A(9) that was satisfied was not specified. The Tribunal noted that the assessee's application for immunity was dismissed without proper consideration. The Tribunal referred to judicial precedents where similar actions were deemed arbitrary.

The Tribunal held that if the investments were made compulsorily as per the Karnataka Co-operative Societies Act and Rules, the interest income would be considered business income eligible for deduction under Section 80P(2)(a)(i). If considered 'income from other sources', deductions under Section 57 would be allowable.

The tribunal observed that the assessee, not well-versed in online proceedings, failed to notice the notices and respond. Consequently, the issue of granting deduction under Section 54F was remitted back to the NFAC for reconsideration.

The Tribunal acknowledged the delay and the assessee's personal circumstances. It noted that the Ld.CIT(A) had issued limited opportunities for hearing. Applying principles of natural justice, the Tribunal decided to condone the delay and remand the appeals.

The Tribunal held that the issue is whether the assessee is eligible for deduction under section 80P(2)(a)(i) or 80P(2)(d) on interest income earned from investments in cooperative banks. One part of the issue concerning interest from a cooperative bank is remitted back to the AO for clarification on whether the payer is a bank registered with RBI. The other part concerning interest from other cooperative banks is also remitted to the AO to determine the cost of funds for earning such interest.

The Tribunal noted that grounds 3 & 4 concerning disallowances of Rs. 25,00,000/- and Rs. 27,72,490/- were not decided by the CIT(A). The Tribunal also considered the assessee's submission that loans were given for constructing a nursing college. In the interest of justice, the Tribunal remitted the issue of loans and exemption under Section 11 to the CIT(A) for fresh consideration.

The Tribunal noted that the deduction under Section 80P(2)(a)(i) is only for income attributable to business operations. For Section 80P(2)(d), it depends on whether the payer is a cooperative society or a cooperative bank. The matter regarding cooperative banks being a species of cooperative societies and the eligibility for deduction under 80P(2)(d) was remitted to the AO.

The Tribunal held that the disallowance made by the CPC towards belated remittance included both employees' and employer's contribution. While employer's contribution is covered under Section 43B(b) and if paid within the due date for filing the return, is allowable, employees' contribution is governed by Section 36(1)(va). The Tribunal upheld the disallowance for employees' contribution as it was deposited belatedly. However, the employer's contribution paid within the extended due date for filing the return was deemed allowable.

The Tribunal held that while the Ld.CIT(A) correctly observed the non-compliance by the assessee, the principles of natural justice warrant considering the circumstances empathetically, especially when a family member is facing a medical emergency. The Tribunal condoned the delay and remanded the matters back to the Ld.CIT(A).