ITAT Mumbai Judgments — October 2018

The Tribunal held that the holding period should be computed from the date of the allotment letter, considering relevant High Court decisions and CBDT circulars. Consequently, the gain was treated as long-term capital gain, and exemption under Section 54 was allowed.

The Tribunal held that the reassessment proceedings were partly valid. Regarding the issue of purchases from certain parties amounting to Rs. 24,44,25,543/-, the assessee argued that these were supported by invoices, payments were made via account payee cheques, and were reflected in the books. The gross profit on these purchases was low (0.26% to 0.30%). The Tribunal, considering the jurisdictional High Court's decision in *Nikunj Eximp* ((supra)), noted that purchases were identified by sales, parties were genuine, and purchases were made at identical rates accepted by the Revenue. The Tribunal found merit in the assessee's argument that the profit margin was between 0.26% to 0.30%. However, to safeguard revenue, the addition was restricted to a profit margin of 3% against the 12.5% sustained by the CIT(A). The levy of interest under Sections 234B and 234D was held to be consequential. Therefore, the impugned ground was partly allowed, and the appeals were partly allowed.

The Tribunal confirmed the deletion of penalties, holding that prior to the Bombay High Court's decision in Triumph International Finance on June 12, 2012, there was a reasonable cause for such transactions through journal entries. The genuineness of these entries was not in doubt.

The Tribunal held that no tax was outstanding in the assessee's case for AY 2003-04, and therefore, the levy of interest under Section 220(2) was incorrect. The provisions of Section 143(4)(b) were also found to be not applicable.

The Tribunal held that the reassessment proceedings were partly valid. Regarding the issue of purchases from certain parties amounting to Rs. 24,44,25,543/-, the assessee argued that these were supported by invoices, payments were made via account payee cheques, and were reflected in the books. The gross profit on these purchases was low (0.26% to 0.30%). The Tribunal, considering the jurisdictional High Court's decision in *Nikunj Eximp* ((supra)), noted that purchases were identified by sales, parties were genuine, and purchases were made at identical rates accepted by the Revenue. The Tribunal found merit in the assessee's argument that the profit margin was between 0.26% to 0.30%. However, to safeguard revenue, the addition was restricted to a profit margin of 3% against the 12.5% sustained by the CIT(A). The levy of interest under Sections 234B and 234D was held to be consequential. Therefore, the impugned ground was partly allowed, and the appeals were partly allowed.

The Tribunal confirmed the deletion of penalties, holding that prior to the Bombay High Court's decision in Triumph International Finance on June 12, 2012, there was a reasonable cause for such transactions through journal entries. The genuineness of these entries was not in doubt.

The Tribunal held that the reassessment proceedings were partly valid. Regarding the issue of purchases from certain parties amounting to Rs. 24,44,25,543/-, the assessee argued that these were supported by invoices, payments were made via account payee cheques, and were reflected in the books. The gross profit on these purchases was low (0.26% to 0.30%). The Tribunal, considering the jurisdictional High Court's decision in *Nikunj Eximp* ((supra)), noted that purchases were identified by sales, parties were genuine, and purchases were made at identical rates accepted by the Revenue. The Tribunal found merit in the assessee's argument that the profit margin was between 0.26% to 0.30%. However, to safeguard revenue, the addition was restricted to a profit margin of 3% against the 12.5% sustained by the CIT(A). The levy of interest under Sections 234B and 234D was held to be consequential. Therefore, the impugned ground was partly allowed, and the appeals were partly allowed.

The Tribunal confirmed the deletion of penalties, holding that prior to the Bombay High Court's decision in Triumph International Finance on June 12, 2012, there was a reasonable cause for such transactions through journal entries. The genuineness of these entries was not in doubt.

The Tribunal confirmed the deletion of penalties, holding that prior to the Bombay High Court's decision in Triumph International Finance on June 12, 2012, there was a reasonable cause for such transactions through journal entries. The genuineness of these entries was not in doubt.

The Tribunal held that the AO had made adequate inquiries before allowing depreciation on non-compete fees. Furthermore, since there were conflicting High Court decisions on the issue at the time the CIT passed the order, two views were possible, making the revision order unsustainable.

The Tribunal held that the assessee had provided sufficient documentary evidence, including PANs, confirmations, bank statements, share allotment records, and financial statements of investors, to establish the genuineness of the transactions. Therefore, the addition made by the AO and confirmed by the CIT(A) was deleted.

The Tribunal held that the reopening of assessment under Section 147 was valid as there was a prima facie belief of escaped income based on the development agreement. The claim for brokerage expenses was disallowed due to lack of substantiating evidence.

The Tribunal held that since there was only one incomplete project (Manori Project) in the impugned assessment year and the genuineness of the loan and interest expenditure was not doubted, the entire interest expenditure should be capitalized to the work-in-progress as per Accounting Standard (AS)-16.

The Tribunal held that the Assessing Officer's method of determining ALV on an ad-hoc basis without reference to fair rent is unsustainable. The Tribunal restored the issue to the Assessing Officer for de novo adjudication, directing him to consider the vacancy allowance claim.

The Tribunal admitted the additional grounds of appeal filed by the assessee, which challenged the validity of the assessment order. The Tribunal set aside the CIT(A)'s order and restored the matter to the CIT(A) for a de novo decision.

The Tribunal held that the service fee income is taxable as fees for technical services. For AY 2012-13, management fee is not taxable as there was no Service PE due to insufficient employee days. For AY 2013-14, profits attributable to the management service PE can be considered. Interest under Section 234B was not to be charged.

The Tribunal held that the service fee income is taxable as fees for technical services. For AY 2012-13, management fee is not taxable as there was no Service PE due to insufficient employee days. For AY 2013-14, profits attributable to the management service PE can be considered. Interest under Section 234B was not to be charged.

The Tribunal held that if an assessment is completed under Section 115JB, no penalty can be imposed under Section 271(1)(c) for additions made under normal provisions. This is based on High Court decisions and a CBDT circular.

The Tribunal noted that the assessee was proceeded ex-parte before the CIT(A) and could not present its case or documents. To meet the ends of justice, the Tribunal set aside the CIT(A)'s order and remitted the matter back for a fresh adjudication.

The Tribunal held that the assessee had discharged its primary onus by providing details of the share applicants, their PANs, share application forms, and bank statements showing receipt through banking channels. The Tribunal followed the Bombay High Court's decision in CIT vs. Orchid Industries Pvt. Ltd.

The Tribunal held that the assessee had provided sufficient evidence of relinquishing a part of the PG Block, and the Government had accepted it. Therefore, the disallowance of unsuccessful exploration expenses was incorrect. The Tribunal also allowed expenditure on drilling and other activities post-commencement of commercial production under Section 42(1)(b) of the Act.

The Tribunal held that the income from letting out flats should be treated as business income, not income from house property. The Tribunal also upheld the CIT(A)'s decision regarding the genuineness of purchases, finding sufficient evidence to support the assessee's claim.

The Tribunal held that the discount on Set-Top Boxes and Recharge Coupon Vouchers was not subject to TDS under Section 194H, rendering the demand under Section 201(1)/(1A) invalid. It also upheld the deletion of demands related to installation services and document management charges, finding them to be covered under Section 194C.

The Tribunal held that the assessee had furnished the required documents to establish the identity, genuineness, and creditworthiness of the parties. Following various High Court judgments, the Tribunal found that the AO failed to discharge his onus, and the additions were not justified.

The Tribunal held that the additions were due to bonafide mistakes and not with an intent to evade tax. The Tribunal found that the dividend stripping addition was based on misconceived facts and that the accounting errors for derivative margins were revenue-neutral in the long run.

The Tribunal admitted the additional ground of appeal, noting it was a new plea that went to the root of the issue. Following a coordinate bench's decision in the assessee's own case for a prior AY, the issue was restored to the AO.

The Tribunal held that the assessee is eligible for the full deduction claimed under Section 54EC. The restriction of Rs. 50 lakhs by the lower authorities was deemed incorrect as the investment was made within the stipulated period and the amendment restricting the split investment was not applicable to the assessment year in question.

The Tribunal held that the deeming fiction in Section 50 of the Act is to treat the capital gain as short-term for taxability, not to convert a long-term capital asset into a short-term one. Therefore, exemption under Section 54F is available for capital gains arising from depreciable assets.

The Tribunal held that share trading transactions in cash and futures segments, when part of a composite arbitrage activity, cannot be segregated for tax treatment. The profit and loss from both segments should be adjusted against each other.

The Tribunal confirmed the rejection of books of account but found the 8% profit estimation to be excessive. It directed the AO to estimate net profit at 2% of gross receipts, considering the assessee's past profit margins and the nature of road repair works, and to allow deductions for partner remuneration and interest.

The Tribunal held that the amended Section 140A(3) of the Income Tax Act, effective from April 1, 1989, does not envisage the levy of penalty for the delay in payment of self-assessment tax. The default in payment of self-assessment tax renders the assessee an 'assessee in default' for recovery purposes, not for penalty. Therefore, the Assessing Officer erred in levying the penalty.

The Tribunal held that payments for transponder services to Intelsat Corporation are not taxable as royalty in India, following various High Court judgments. Consequently, the assessee was not liable to deduct tax at source on these payments.

The Tribunal held that the rental income should be treated as business income, following its own previous decisions in the assessee's own case. The provision of amenities and facilities constituted a composite business activity.

The Tribunal held that IMD bonds fall under the category of securities and not 'sum of money' as per Section 56(2) of the Act. Since the IMD bonds were received before 01.10.2009, the provisions of Section 56(2)(v) were not applicable.

The Tribunal held that the AO must record satisfaction before rejecting the assessee's suo motu disallowance under Section 14A, as per the Supreme Court ruling in Maxopp Investment Ltd. The Tribunal also held that no disallowance under Section 14A can be made while computing book profit under Section 115JB, following a Special Bench decision.

The Tribunal held that losses on forward contracts for hedging foreign exchange fluctuations are business losses, regardless of whether they arise on maturity or pre-mature cancellation, provided they are linked to the business operations. The Tribunal also allowed mark-to-market losses on outstanding contracts as per Accounting Standard 11.

The Tribunal held that the assessee's activities were in furtherance of charitable objects of general public utility and not merely for its members. It also found that the contribution to the Skill Development Centre was not a prohibited investment but an application of funds towards the assessee's own objects.

The Tribunal held that the assessee's activities were in furtherance of charitable objects of general public utility and not merely for its members. It also found that the contribution to the Skill Development Centre was not a prohibited investment but an application of funds towards the assessee's own objects.

The Tribunal held that the assessee's activities were in furtherance of charitable objects of general public utility and not merely for its members. It also found that the contribution to the Skill Development Centre was not a prohibited investment but an application of funds towards the assessee's own objects.

The Tribunal held that the proviso to Section 115W of the Act, which exempts certain persons from FBT, specifically mentions persons registered under Section 12AA, not Section 12A. Therefore, the assessee's claim for exemption based on its Section 12A registration was not accepted.

The Tribunal held that the AO must record satisfaction before rejecting the assessee's suo motu disallowance under Section 14A, as per the Supreme Court ruling in Maxopp Investment Ltd. The Tribunal also held that no disallowance under Section 14A can be made while computing book profit under Section 115JB, following a Special Bench decision.

The Tribunal held that making a claim of deduction, even if not sustainable in law, does not attract penalty under Section 271(1)(c). The CIT(A) had judiciously deleted the penalty.

The Tribunal held that all losses incurred on forward contracts, irrespective of maturity or pre-mature cancellation, are business losses. It also ruled that mark-to-market losses on outstanding forward contracts, as per Accounting Standard 11, are allowable business losses.

The Tribunal held that the adjustment to book profits under Section 115JB by including transfer pricing adjustments and capitalized business promotion expenses was misconceived and set aside the Assessing Officer's action. The issue of capitalizing business promotion expenses was remanded to the Assessing Officer for fresh consideration.

The Tribunal held that the AO must record satisfaction before rejecting the assessee's suo motu disallowance under Section 14A, as per the Supreme Court ruling in Maxopp Investment Ltd. The Tribunal also held that no disallowance under Section 14A can be made while computing book profit under Section 115JB, following a Special Bench decision.

The Tribunal held that while the AO had a good starting point to investigate bogus purchases, the investigation was not carried to its logical end. The Tribunal found that there was evidence of goods movement and the FAA's finding that part of the goods formed closing stock was noted. The Tribunal distinguished the present case from a similar case where cash was immediately withdrawn by the supplier.

The Tribunal held that Section 14A applies only when there is an actual receipt of income which does not form part of the total income. Since the assessee earned no exempt income, the disallowance under Section 14A was not warranted.

The Tribunal held that the assessee is entitled to exemption under Section 11 and accumulation under Section 11(2). It found that the AO's rejection of exemption based on commercial activity was not justified, and that the trust's activities were charitable in nature.

The Tribunal noted that the tax effect was below the monetary limit as per CBDT Circular No. 3 of 2018. Therefore, the appeals filed by the Revenue were not maintainable.

The Tribunal held that the two flats, combined into a single unit with one entrance and kitchen, should be considered as one property for self-occupation, making the annual value nil. It also deleted the disallowance of business expenses, noting the assessee had already suo moto disallowed a larger portion.