ITAT Mumbai Judgments — January 2017

The Tribunal held that the CIT(A) rightly deleted the penalty, as the additions were debatable and the mere making of a claim not sustainable in law does not automatically amount to furnishing inaccurate particulars or concealment of income, following the Supreme Court's decision in Reliance Petroproducts Pvt. Ltd.

The Tribunal held that the appeal filed by the Revenue was not maintainable due to the tax effect being below the prescribed monetary limit of Rs. 10 lakhs as per CBDT Circular No. 21/2015. The Tribunal also found no infirmity in the CIT(A)'s order regarding the deletion of interest under Section 220(2)/221(1).

The Tribunal noted that the tax effect was below the prescribed limit of Rs. 10 lakh as per CBDT instruction No. 21 of 2015. The Tribunal found no specific exclusion for penalty in the circular.

The Tribunal held that the mark-up determined in MAP proceedings for US-related transactions should be applied to residual transactions with non-US associated enterprises. It also ruled that interest income on deposits should be treated as business income eligible for deduction under Section 10A, with the deduction to be computed proportionally.

The Tribunal found that the facts needed proper verification. If the amount was indeed remitted to GBOT, it could not be assessed as the assessee's income. The matter was sent back to the AO for fresh adjudication.

The Tribunal held that the reopening of assessment was bad in law as the AO failed to demonstrate failure on the part of the assessee to disclose material facts, especially since the original assessment was completed under Section 143(3) and the reopening was after four years. Consequently, the penalty order also did not survive.

The Tribunal held that if the quantum additions, which formed the basis for the penalty, are deleted, the penalty cannot survive. The penalty cannot stand without the underlying addition.

The Tribunal upheld the CIT(A)'s deletion of the addition related to cash payments, finding that the explanations of temporary fund rotation were supported by ledger accounts and business expediency. The Tribunal also found that the revision order by the CIT for AY 2004-05 was not valid as the AO had taken a possible view.

The Tribunal held that while admitting additional evidence during appellate proceedings is permissible, the AO must be given an opportunity to examine and rebut such evidence. Since this opportunity was not provided, the CIT(A)'s order was set aside.

The Tribunal held that a portion of the investment write-off could be allowed as a business loss, following earlier precedents. For interest expenses, the Tribunal set aside the issue to the AO for fresh adjudication based on a detailed working sheet provided by the assessee.

The Tribunal held that the AO failed to provide clinching evidence of payment and the burden was on the AO to demonstrate the payment. Following previous similar judgments, the ground raised on merits was allowed.

The Tribunal dismissed the grounds related to disallowance under section 43(b) and addition under section 68. It found that the assessee's contentions were factually incorrect as the grounds were dismissed as not pressed or for lack of evidence, and no contravening evidence was provided.

The Tribunal upheld the CIT(A)'s deletion of additions for unexplained expenditure and deemed dividend, following previous decisions and High Court rulings on similar facts.

The Tribunal reduced the penalty from 200% to 100% of the income sought to be evaded, considering the assessee's old age and the submissions made. The addition made by the AO was not directly addressed in this part of the order.

The Tribunal held that the assessee had sufficient owned funds to cover its investments, following the ratio in 'CIT Vs. Reliance Utilities & Power Ltd.'. Therefore, the interest disallowance was deleted, but a disallowance for administrative expenses was sustained.

The Tribunal upheld the order of the CIT(A) and dismissed the revenue's appeal. It found that the GP ratio of 24.22% on purchases from the related party, considering the credit period offered, was at arm's length. The Tribunal also noted the AO's failure to confront the assessee with comparable cases or seek necessary details.

The Tribunal held that the disallowance of corporate service charges was erroneous as the AO/DRP failed to appreciate the benchmarking method and evidence. The disallowance under Section 14A was deleted as no exempt income was earned during the year.

The Tribunal held that the CIT(A) erred in allowing relief based on additional evidence (bank statement) without giving the Assessing Officer an opportunity to examine and rebut it, violating Rule 46A of the IT Rules. The matter was restored to the CIT(A) for de novo consideration.

The Tribunal upheld the CIT(A)'s order, which directed the AO to recompute the penalty based on the understated income calculated using an average GP rate, as per the ITAT's directions in the quantum appeal. The assessee's appeal was dismissed.

The Tribunal held that the facts are identical to a previous case, Smt. Manjula L. Shah, where similar additions were deleted. The Tribunal found that the assessee had discharged the primary onus with evidence, and the department had not rebutted it.

The Tribunal held that forward contracts in foreign exchange, when incidental to carrying on business and done to cover losses due to exchange rate variations, constitute a business activity and not a speculative one. Therefore, the loss is allowable.

The Tribunal found merit in the Revenue's contention that the CIT(A) had reasonably reduced the disallowance based on a High Court judgment. No infirmity was found in the CIT(A)'s order.

The Tribunal directed the Assessing Officer to make the addition by disallowing 10% of the purchases instead of the 12.5% sustained by the CIT(A). This was based on the peculiar facts of the case.

The Tribunal upheld the CIT(A)'s deletion of the addition related to cash payments, finding that the explanations of temporary fund rotation were supported by ledger accounts and business expediency. The Tribunal also found that the revision order by the CIT for AY 2004-05 was not valid as the AO had taken a possible view.

The Tribunal held that 'Site Transfer Income' is part of business income eligible for deduction under Section 10B, following a previous decision in the assessee's own case. It also ruled that losses from eligible units can be adjusted against income from non-eligible units, as Section 10B is a deduction provision, citing the Supreme Court's decision in CIT Vs. Yokogawa India Ltd.

The Tribunal held that the loss arose from operational errors and business exigencies, not speculative activity. Consequently, the disallowance of expenses related to normal broking activities was also deleted.

The Tribunal held that the issue of closing stock valuation needs to be examined by the AO to verify consistent accounting practices and acceptance in subsequent years. The disallowance under Section 14A also requires re-examination by the AO after the assessee provides necessary details.

The Tribunal upheld the CIT(A)'s decision to delete the addition, agreeing that notional gains on forward contracts are not taxable until settlement. The Tribunal followed the principle that only actual or real income, not notional profit, is subject to tax.

The Tribunal held that income from leasing amenities and infrastructure, including specific items like CCTV cameras and furniture, should be treated as business income. The AO was directed to allow consequential depreciation claims.

The Tribunal upheld the order of the CIT(A), agreeing that the disallowance under Rule 8D(2)(ii) was not justified. The Tribunal also noted that income from foreign investments is taxable and thus should not be considered for disallowance under Section 14A.

The Tribunal found that ex-parte orders were passed at both assessment and appellate stages. Considering the assessee's claim of a declared amount not being considered and the lack of proper opportunity, the appeal was remanded to the Assessing Officer for fresh adjudication.

The Tribunal held that Rule 8D was not applicable for the assessment year in question, but allowed a reasonable estimate of Rs. 5,00,000/- for disallowance under Section 14A. It also held that the research expenses were fully allowable as revenue expenditure.

The Tribunal held that a portion of the investment write-off could be allowed as a business loss, following earlier precedents. For interest expenses, the Tribunal set aside the issue to the AO for fresh adjudication based on a detailed working sheet provided by the assessee.

The Tribunal held that the assessee consistently followed the FIFO method, which was accepted by the Revenue in prior and subsequent years. The Tribunal also noted that the tax impact was revenue-neutral as closing stock becomes opening stock in the next year.

The Tribunal held that the assessee had discharged the initial onus under Section 68 by proving the identity of the creditors, the genuineness of the transactions (received through banking channels), and the creditworthiness of the lenders. For AY 2009-10, the Tribunal found that the AO rejected the creditworthiness solely because the lenders did not carry on business activities and doubted fund sources based on high premium share issuance, despite funds being raised in 2006. The Tribunal noted that the explanation of soft loans given with the intent of purchasing shares in M/s Aman Infratex Ltd was not established as wrong by the tax authorities, and the MOU was rejected without examining directors. Therefore, the addition of Rs. 4.55 crores for AY 2009-10 was set aside. Extending the same reasoning to AY 2010-11, the Tribunal found that the lenders' identities were proved, transactions were genuine, and their financial statements showed sufficient reserves and creditor balances. Their financial transactions were accepted by their respective AOs. The motive for giving advances was explained. The Tribunal concluded that the tax authorities doubted genuineness on surmises and that the explanation of soft loans for share allotment in a public issue is common in commercial circles. Accordingly, the addition of Rs. 6.77 crores for AY 2010-11 was also deleted. The Tribunal expressly left no issue undecided.

The Tribunal held that the CIT(A) did not pass a speaking and reasoned order in the second round of litigation. The CIT(A) rejected the assessee's contentions without proper discussion of the accounting system and legal disputes.

The Tribunal held that the AO's jurisdiction under Section 153C was limited to seized material. Since the loan in question was not related to the seized material, the AO had no jurisdiction to examine it. Therefore, the assessment order could not be considered erroneous or prejudicial to the revenue.

The Tribunal held that the assessee is eligible for deduction under Section 10AA as the SEZ Act's provisions override the Income Tax Act for export trading. It also held that interest on FDs made for business purposes constitutes business income and is eligible for deduction.

The Tribunal deleted the addition of Rs. 8,55,000/- made by the Assessing Officer. The Tribunal found that the AO had adopted an arbitrary and presumptive method without bringing any concrete evidence on record to justify the addition. The Tribunal relied on the assessee's submissions, including affidavits and supporting documents, which explained the discrepancy. The Tribunal distinguished the case of CST vs. H.M. Esufali H.M. Abdulali, noting that it had been distinguished by various High Courts. The Tribunal also referred to the decisions in Mehta Parikh & Company vs. CIT and CIT vs. Aero Club, emphasizing that additions should not be made arbitrarily or on a presumptive basis without sufficient evidence. The Tribunal concluded that the AO's method was arbitrary and not supported by evidence, thus allowing the assessee's appeal. The issue regarding the addition for other flats was implicitly resolved by deleting the primary addition, as the proportion was to be applied to it.

The Tribunal held that recruitment expenses, SOX compliance testing, and ISAP awards were routine revenue expenditures and not capital in nature. The ratio of the Brooke Bond India Ltd. case was found not applicable.

The Tribunal directed the inclusion of 'Allsec Technologies Ltd.' as a comparable for software development services, finding its exclusion by the TPO to be based on a minuscule difference. For the ad-hoc disallowance of expenditure, the matter was restored to the Assessing Officer for fresh consideration.

The Tribunal held that the assessee is eligible for deduction under Section 10AA as the SEZ Act's provisions override the Income Tax Act for export trading. It also held that interest on FDs made for business purposes constitutes business income and is eligible for deduction.

The Tribunal held that a mere change in the head of income, without any concealment or inaccurate particulars, does not warrant penalty under Section 271(1)(c). The decision followed the Bombay High Court's ruling in CIT vs. Bennett Coleman & Co. Ltd.

The Tribunal decided the issues as follows: On the issue of services rendered and their utilization in India (Grounds 1-7), the Tribunal noted that while the legal principle was decided in favour of the assessee in earlier years (AY 1998-99), no proper factual examination was done by the AO. Therefore, the issue was remanded back to the AO for fresh examination of facts, with directions to provide an opportunity to the assessee and follow the Tribunal's order for AY 1998-99. This ground was allowed for statistical purposes. Regarding the denial of 5% deduction of expenses under section 44C (Ground 13), the Tribunal found that the AO denied the deduction in the final order without reason, despite it being allowed in the draft order. This issue was also remanded back to the AO for verification and decision as per law, allowing adequate opportunity to the assessee. This ground was allowed for statistical purposes. On the levy of interest under section 234B (Ground 15), the Tribunal held that following the judgment of the Hon'ble Bombay High Court in NGC Network and the Tribunal's own consistent decisions in the assessee's case for earlier years, interest u/s 234B is not leviable. This ground was allowed. Since primary issues were decided in favour of the assessee, other issues were treated as infructuous.

The Tribunal set aside the CIT(A)'s order and restored the issue to the Assessing Officer. The assessee is to be given an opportunity to explain a reconciliation statement prepared by him, and the AO is to examine it afresh.

The Tribunal found that the CIT(A) had not examined the additional details filed by the assessee, which were crucial for the additions made. Therefore, the Tribunal set aside the CIT(A)'s order and restored the matter to the AO for a fresh assessment.

The Tribunal held that the assessee had offered more income than what was noted in the seized documents and that the figures matched the audited books of accounts. The addition of Rs. 11 lakh on account of payment vouchers was also deleted as the same addition could not be made at two places.

The Tribunal held that the reopening of assessment was valid as it was based on tangible material. However, the addition on account of bogus purchases was deleted as the department failed to provide cogent evidence. A 2% disallowance was directed to meet anomalies in local purchases.

The Tribunal followed its own previous order for an earlier assessment year, directing the AO to restrict the disallowance to 10% of the exempt income. This was based on the principle that no disallowance under Section 14A can be made for income earned from shares held as stock-in-trade.

The Tribunal held that registration under Section 12A is a condition precedent for claiming exemption under Sections 11 and 12 of the Act. Therefore, the assessment order allowing corpus donation despite lack of 12A registration was erroneous and prejudicial to revenue.