ITAT Mumbai Judgments — August 2017

The Tribunal upheld the CIT(A)'s decision to delete the disallowance of commission paid to the HUF and salary paid to the assessee's wife, finding no infirmity in the order. The Tribunal also upheld the CIT(A)'s restriction of disallowances on various expenses to 15%.

The Tribunal held that only the profit element embedded in the purchases, not the entire transaction, is taxable. Therefore, the restriction of the addition to 20% by the Commissioner (Appeals) was upheld.

The Tribunal held that a disallowance under Section 40(a)(ia) for non-deduction of TDS does not constitute concealment of income or furnishing of inaccurate particulars. Therefore, the penalty was rightly deleted.

The Tribunal held that the payments for transponder services are in the nature of royalty, considering the Explanation to Section 9(1)(vi) of the IT Act which includes transmission by satellite as a 'process'. The Tribunal followed its own previous decisions in the assessee's own case.

The Tribunal held that the issue of whether corpus fund is refundable needs examination. The matter was remitted to the Assessing Officer to ascertain its refundability and decide accordingly.

The Tribunal upheld the decision of the learned CIT(A) and dismissed the appeals filed by the Revenue. The Tribunal found no infirmity in the CIT(A)'s order, which had relied on the jurisdictional High Court's decision in the case of Quepem Urban Co-operative Credit Society Limited v. ACIT. The CIT(A) had noted that the assessee's principal business was not banking, as deposits and lending were only with members, not the public. Additionally, the CIT(A) found that the assessee's bye-laws allowed other cooperative societies to be members, thus failing the conditions to be classified as a cooperative bank under Section 80P(4). The Tribunal acknowledged that the AO had noted a pending appeal before the Supreme Court against the Quepem Urban Co-operative Credit Society Ltd. decision but found that the CIT(A) correctly followed the High Court's binding precedent. Therefore, the deletion of the disallowance made by the AO was confirmed.

The Tribunal upheld the decision of the learned CIT(A) and dismissed the appeals filed by the Revenue. The Tribunal found no infirmity in the CIT(A)'s order, which had relied on the jurisdictional High Court's decision in the case of Quepem Urban Co-operative Credit Society Limited v. ACIT. The CIT(A) had noted that the assessee's principal business was not banking, as deposits and lending were only with members, not the public. Additionally, the CIT(A) found that the assessee's bye-laws allowed other cooperative societies to be members, thus failing the conditions to be classified as a cooperative bank under Section 80P(4). The Tribunal acknowledged that the AO had noted a pending appeal before the Supreme Court against the Quepem Urban Co-operative Credit Society Ltd. decision but found that the CIT(A) correctly followed the High Court's binding precedent. Therefore, the deletion of the disallowance made by the AO was confirmed.

The Tribunal agreed that if sufficient interest-free funds are available, disallowance under Section 14A may not be justified. The plea that no expenditure was actually incurred also needs consideration. Therefore, the issue was remitted to the Assessing Officer for fresh consideration.

The Tribunal held that civil works in a leasehold property, even if incurred for business purposes, are to be treated as 'building' and are eligible for depreciation at 10%, not as 'plant' eligible for 15%. The Supreme Court's decision in Anand Theatres clarified that a building used as a hotel cannot be considered a plant.

The Tribunal upheld the DRP's decision that Basiz Fund Services Private Limited was functionally dissimilar. It also agreed that if this high-margin comparable was excluded, or if loss-making comparables were included alongside it, the arm's length margin would fall within the +/- 5% tolerance.

The Tribunal held that while the purchases were indeed bogus, a 100% disallowance might not be appropriate when sales are not doubted. They decided to allow disallowance at 12.5% of the bogus purchase amount.

The Tribunal agreed that if sufficient interest-free funds are available, disallowance under Section 14A may not be justified. The plea that no expenditure was actually incurred also needs consideration. Therefore, the issue was remitted to the Assessing Officer for fresh consideration.

The Tribunal held that the deduction under Section 54EC was allowable for investments made in two different financial years, following High Court precedents. For Section 14A, the Tribunal held that no disallowance was permissible when shares were held as stock-in-trade and dividend income was incidental.