ITAT Mumbai Judgments — May 2019

The Tribunal held that commission paid to non-resident agents for services rendered outside India for procuring export orders is not taxable in India. It affirmed the CIT(A)'s deletion of the addition, relying on the jurisdictional High Court's decision.

The Tribunal held that substantial justice should prevail over technicalities, especially during a transition period. Following its own order in a similar case for a different assessment year, the Tribunal directed the CIT(A) to condone the manual filing and decide the appeal on merits.

The Tribunal allowed the indexed cost of improvement, noting that the expenses were capitalized in audited balance sheets and the delay in producing bills was due to the age of the expenditure. The Tribunal found no dispute raised by revenue authorities regarding the audited figures in past years.

The Tribunal held that the advisory fees were rightly offered to tax in AY 2010-11 when the dispute was settled and the amount was received. Therefore, taxing it in the impugned assessment years would amount to double taxation.

The Tribunal dismissed the Revenue's appeal concerning security and water charges as it was a multiple appeal. The assessee's appeal regarding Section 14A was partly allowed for statistical purposes, and the issue of building repairs and maintenance was restored to the Assessing Officer for fresh adjudication.

The Tribunal held that the AO's penalty notice under section 274 read with section 271(1)(c) was defective as it did not strike off one of the two limbs (concealment or inaccurate particulars), depriving the assessee of a specific charge. Therefore, the penalty order suffered from a jurisdictional defect.

The Tribunal held that additions under Section 153A cannot be made without incriminating material found during search, especially when the original assessment under Section 143(3) had attained finality. The Tribunal also found that the assessee had provided sufficient evidence regarding the share capital.

The Tribunal held that the CIT(A) had taken a reasonable view regarding the interest disallowance, and that market-to-market losses on interest rate futures are not notional or contingent. It also affirmed that Section 14A disallowance is not applicable if no exempt income is earned.

The Tribunal held that the AO wrongly invoked Section 14A read with Rule 8D without recording satisfaction. It directed the deletion of disallowances under Section 14A and also ruled that adjustments for Section 14A disallowances should not be made while computing book profits under Section 115JB.

The Tribunal held that the addition was made solely based on the statement of a third party without corroborative evidence. Following precedent, the Tribunal found no evidence to support the claim of 'on money' payment by the assessee.

The Tribunal held that the assessee did not pay the outstanding liability to the party to whom it was payable, thus constituting remission/cessation of liability. The adjustment against a director's receivable and subsequent payment to the director was not accepted as a valid settlement of the original liability.

The Tribunal held that the assessee's method of benchmarking charter hire using an independent valuer's report based on industry norms (CIRIA) was acceptable, especially given past acceptance by the revenue. The Tribunal also deleted additions made on account of management services and salary reimbursements, following its own prior decisions. Interest under Section 234B was also deleted based on a Supreme Court ruling.

The Tribunal, following a decision of the Hon'ble Bombay High Court which condoned a similar delay, decided to condone the delay in filing the appeal before the CIT(A). The case was restored to the CIT(A) for adjudication on merits.

The Tribunal upheld the CIT(A)'s decision, finding that the assessee's claim for deduction under Section 80IA was valid. The Tribunal also found that the disallowance of managerial support service charges was unjustified, as the services were necessary for business expediency.

The Tribunal held that strategic investments should be considered for Section 14A disallowances. However, disallowances under Section 14A cannot be made while computing book profits under Section 115JB, and this issue was restored to the AO.

The Tribunal held that the purchases were genuine, considering the assessee's consistent profit rates and the partial acceptance of payments by the AO. The ad-hoc disallowance of labour charges was also set aside due to the availability of signed vouchers and consistent profit margins. The exemption under Section 54 was allowed, following a High Court ruling that borrowed funds do not disentitle the assessee to the deduction.

The Tribunal held that the gift of shares of a listed company is not taxable as income. The amendment to Section 56(2)(viia) of the Act, which makes gifts of unlisted shares taxable, was not applicable to the assessment year in question and also excluded companies in which the public are substantially interested.

The Tribunal held that the penalty notice was issued without proper application of mind, as it did not clearly specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The penalty was quashed on this ground.

The Tribunal held that a mere disallowance under Section 40(a)(ia) or a discrepancy in Form 26AS, when explained by the assessee with supporting evidence, does not automatically amount to concealment of income or furnishing of inaccurate particulars, thus not justifying penalty.

The Tribunal held that strategic investments should be considered for Section 14A disallowances. However, disallowances under Section 14A cannot be made while computing book profits under Section 115JB, and this issue was restored to the AO.

The Tribunal held that the notice under section 143(2) was not validly served on the assessee as it was served on an unauthorized person. Consequently, the assessment order passed by the Assessing Officer was quashed as bad in law.

The Tribunal held that the ratio of the Gujarat High Court in Sanjay Oil Cake and Vijay Proteins was not applicable as the assessee was a trader, not a manufacturer. It further held that only the taxable income component, not the entire transaction, is taxable even if a transaction is not verifiable.

The Tribunal upheld the CIT(A)'s decision regarding the DRR, following a coordinate bench's ruling that such reserves are permissible adjustments for book profit calculation. For the unexplained loans, the Tribunal agreed with the CIT(A) that the genuineness of the loans was established during remand proceedings.

The Tribunal dismissed the Revenue's appeal concerning security and water charges as it was a multiple appeal. The assessee's appeal regarding Section 14A was partly allowed for statistical purposes, and the issue of building repairs and maintenance was restored to the Assessing Officer for fresh adjudication.

The Tribunal upheld the deletion of the addition by the CIT(A), finding that the assessee had provided sufficient evidence regarding the identity, creditworthiness, and genuineness of the share transactions. The Revenue's grounds of appeal were dismissed.

The Tribunal held that the provisions of the Double Taxation Avoidance Agreement (DTAA), being more beneficial to the assessee, would override Section 206AA by virtue of Section 90(2) of the Income Tax Act. Therefore, the rate of TDS adopted by the assessee was justified.

The Tribunal dismissed the Revenue's appeal concerning security and water charges as it was a multiple appeal. The assessee's appeal regarding Section 14A was partly allowed for statistical purposes, and the issue of building repairs and maintenance was restored to the Assessing Officer for fresh adjudication.

The Tribunal held that since the payment to the non-resident entity was for business profits and the entity had no Permanent Establishment in India, no TDS was deductible. Therefore, the disallowance under Section 40(a)(ia) was incorrect. The ground regarding travelling expenses was dismissed as not pressed.

The CIT(A) granted partial relief on the bus ticket booking addition, reducing it to Rs. 5,00,000/-, and deleted the addition on bank deposits. The Tribunal upheld the CIT(A)'s order, finding no material to controvert the CIT(A)'s findings.

The Tribunal held that the addition made by the AO based solely on statements, without corroborating incriminating material found during the search belonging to the assessee, was unsustainable. The Tribunal upheld the deletion of the addition by the CIT(A).

The Tribunal held that the interest disallowance was not justified as the loans were advanced in connection with the assessee's business and interest was charged. Regarding Section 14A, the disallowance cannot exceed the exempt income earned.

The Tribunal held that the DRP erred in rejecting the assessee's benchmarking report without proper inquiry and remitted the issue of arm's length price determination to the Transfer Pricing Officer (TPO). The Tribunal also found that the authorities below erred in disallowing depreciation and remitted this issue to the AO for fresh consideration.

The Tribunal dismissed the ground related to the business loss, finding that the assessee failed to substantiate the business activities with documentary evidence. The Tribunal also dismissed the ground regarding the capitalization of interest, as the assessee failed to disclose the acquisition dates of different shares of the property.

The Tribunal held that the payment of Rs. 50.84 Crores was made as part of a settlement agreement to acquire development rights and resolve disputes, not solely for the purchase of equity shares. The CIT(A) had erred in upholding the disallowance.

The Tribunal held that the CIT(A) erred in accepting additional evidence without allowing the AO an opportunity to examine it, violating principles of natural justice and Rule 46A(3). The issue regarding Section 68 was remanded to the AO for fresh adjudication.

The Tribunal held that adjustment on account of working capital investment must be allowed as it is a crucial factor impacting pricing and profitability. The Assessing Officer/TPO was directed to verify the assessee's computation of working capital adjustment and determine the arm's length price.

The Tribunal held that the profit embedded in the alleged bogus purchases should be brought to tax. An estimation of 10% of the bogus purchases was considered appropriate to meet the ends of justice.

The Tribunal held that the profit embedded in the alleged bogus purchases should be brought to tax. An estimation of 10% of the bogus purchases was considered appropriate to meet the ends of justice.

The Tribunal held that the assessee had explained the circumstances for the addition and that the explanation was bona fide, thus it was not a case of concealment of income. Mere rejection of a claim does not automatically make an assessee liable for penalty.

The Tribunal held that the assessee must fulfill the criteria of a small-scale industrial undertaking every year to be eligible for deduction under Section 80IB. The issue was restored to the CIT(A) for fresh adjudication based on notifications issued under the IDR Act, 1951.

The Tribunal held that the assessee was justified in adjusting the total consideration for capital gains calculation based on the Master Agreement. It also allowed the claim for repairs and maintenance expenses as revenue expenditure and directed the Assessing Officer to allow depreciation on the motor vehicle and related expenses.

The Tribunal held that disallowance under Section 14A read with Rule 8D cannot exceed the exempt income earned. It also held that no disallowance under Section 14A can be made while computing book profit under Section 115JB, though expenditure for earning exempt income can be disallowed as per Explanation 1(f) to Section 115JB.

The Tribunal held that the assessee had provided sufficient evidence, including a registered sale deed and other corroborating documents, to establish joint ownership of the flat with his mother. The addition made by the Assessing Officer was therefore incorrect.

The Tribunal held that since the additions/disallowances that formed the basis for the penalty were no longer extant due to the Tribunal's earlier order, the penalty could not survive. Therefore, the penalty was deleted.

The Tribunal held that the assessee deserves an opportunity to explain its case before the Commissioner (Appeals). Therefore, the impugned order was set aside for de novo adjudication.

The Tribunal examined the inclusion of specific comparables. It found that TSR Darashaw Ltd. was functionally different from the assessee's business and therefore should not be considered a comparable.

The Tribunal held that the split of fees between the Indian branch and the German head office, as per the India-Germany DTAA, makes the head office's share non-taxable in India. The Tribunal also found that the transfer pricing adjustment was not sustainable once the attribution and taxability of the head office and branch office income were accepted.

The Tribunal held that income from cloud hosting services is not royalty as per Section 9(1)(vi) and the tax treaty. It also ruled that interest under Section 234B cannot be levied on the payee assessee when the payer failed to deduct tax at source.

The Tribunal held that income from cloud hosting services is not royalty under Section 9(1)(vi) of the Act or Article 12(3)(b) of the India-US tax treaty. It also ruled that interest under Section 234B cannot be imposed on the payee assessee when the payer failed to deduct tax at source.