ITAT Mumbai Judgments — June 2019

The Tribunal held that the subscription fees received by the assessee for access to the online database are neither fees for technical services nor royalty under the Income Tax Act or the India-Germany Tax Treaty. The Tribunal followed its own earlier decision in the assessee's case for a prior assessment year.

The Tribunal held that freight receipts from feeder vessels are not taxable in India as per Article 8 of the India-Germany DTAA, following consistent past decisions and a jurisdictional High Court ruling. The issue of penalty proceedings was deemed premature.

The Tribunal held that the assessee did not have a Permanent Establishment (PE) in India. Consequently, the business income from operations in India was not taxable under Section 44B of the Act, upholding the CIT(A)'s deletion of the addition.

The Tribunal held that VRS expenses were added back to arrive at the profit and not claimed as a deduction, thus deleting the addition. Regarding provision for doubtful debts, it was held not to be an unascertained liability, so it should not be added back for book profit computation. The issue of disallowance under Section 40(a)(ia) and brought forward losses were remanded for fresh adjudication.

The Tribunal held that the authorities below erred in rejecting the assessee's transfer pricing study report without cogent reasons and in deeming international transactions between AEs as free of charge or not beneficial. The Tribunal directed the deletion of the adjustment, stating that the revenue authorities should not substitute their business judgment for that of the assessee.

The Tribunal held that 'stake money' paid to horse owners is not liable for TDS under Section 194B or 194BB of the Income Tax Act. Furthermore, even if there was a failure to deduct TDS, the assessee should not be treated as an 'assessee in default' if the recipients have already paid taxes on that income.

The Tribunal held that the reopening of assessment was invalid because the Assessing Officer's belief was based on a factually incorrect premise that the assessee had not filed a return. Consequently, the assumption of jurisdiction under Section 147 was set aside.

The Tribunal upheld the additions made by the Assessing Officer and sustained by the CIT(A) for unexplained cash credits and short-term capital gains. The assessee's failure to provide explanations for the nature and source of the deposits and gains led to the confirmation of the additions.

The Tribunal held that for vacant properties, the municipal rateable value should be considered for ALV, especially when supported by previous ITAT and High Court decisions in the assessee's own case. The AO's estimation under Section 23(1)(a) was deemed incorrect in this context.

The Tribunal held that the CIT(A) erred in dismissing the appeal for non-prosecution without adjudicating the grounds on merits. The CIT(A) is statutorily obligated to dispose of appeals in writing with reasons, as per Section 250(6) of the Income Tax Act.

The Tribunal held that the CBDT circular No. 5/2012, which extended MCI regulations to pharmaceutical companies, was beyond the CBDT's jurisdiction without enabling provisions in law. Therefore, sales promotion expenses incurred by the assessee were not hit by the explanation to Section 37(1) and were allowable.

The Tribunal upheld the CIT(A)'s order, finding that the assessee had provided sufficient reconciliation and evidence for the expenses, especially after considering the additional evidence. The AO's disallowances were largely deleted, except for a small portion of salary expenses.

The Tribunal found that the assessee failed to substantiate the genuineness of its trading transactions and also failed to produce parties for examination. The absence of essential business expenses further raised doubts. However, the AO also did not conclusively prove the provision of accommodation entries.

The Tribunal held that the subscription fees received by the assessee for access to the online database are neither fees for technical services nor royalty under the Income Tax Act or the India-Germany Tax Treaty. The Tribunal followed its own earlier decision in the assessee's case for a prior assessment year.

The Tribunal held that the assessment orders passed under Section 143(3) read with Section 153C were bad in law because the Assessing Officer of the searched person had not recorded the requisite satisfaction before issuing the notice under Section 153C. Consequently, the assessment orders were quashed.

The Tribunal upheld the CIT(A)'s findings, agreeing that the assessee failed to provide sufficient evidence to prove the completion of construction and satisfaction of conditions for deduction under Section 24(b). The disallowance of interest on funds used for non-business purposes was also confirmed.

The Tribunal upheld the CIT(A)'s order, stating that the issue was covered by the ITAT's decision in the assessee's own case. The Tribunal also noted that Supreme Court judgments supported the assessee's position.

The Tribunal held that only the profit element embedded in the disputed purchases can be taxed, not the entire purchase price. Relying on the Gujarat High Court's decision in CIT v. Simit P. Sheth, the Tribunal confirmed the AO's addition of 12.5% profit.

The Tribunal upheld the CIT(A)'s decision to delete additions for unaccounted sales, finding the facts identical to previous assessment years. For unexplained expenditure, the Tribunal partly allowed the revenue's appeal by restricting the addition to 12.5% of the expenditure. The addition for Section 14A disallowance was also upheld as per the CIT(A)'s order.

The Tribunal upheld the CIT(A)'s decision to delete the Section 10A disallowance, following a co-ordinate bench's ruling. It also affirmed the CIT(A)'s deletion of the Rule 8D disallowance, finding that the assessee's own funds exceeded investments and that the suo-motto disallowance was sufficient.

The Tribunal noted that the assessee failed to provide complete details before the lower authorities. However, considering the assessee was not given sufficient time, the issue was set aside to the AO for fresh consideration with a reasonable opportunity to be heard.

The Tribunal held that since the double claim of speculation loss did not result in any reduction of income for the year and was due to a bona fide human error, it did not constitute furnishing inaccurate particulars of income. Therefore, the penalty levied was not sustainable.

The Tribunal held that while purchases from the parties were not fully substantiated, disallowing the entire amount was incorrect. It directed the AO to estimate a reasonable profit on these purchases instead of disallowing the full amount.

The Tribunal held that merely making a claim which is not accepted by the revenue does not automatically attract penalty under Section 271(1)(c), especially when primary facts are disclosed. A bona fide mistake in computation does not amount to furnishing inaccurate particulars.

The Tribunal held that the bank charges were not allowable as the assessee failed to establish a nexus with income earning. Regarding the investment, the Tribunal found that while the AO could presume ownership of seized documents, the assessee's denial and lack of specific evidence from the AO warranted further verification.

The Tribunal held that since the quantum addition, on which the penalty was based, was deleted by a coordinate bench of the ITAT, the penalty order does not survive. Therefore, the CIT(A)'s deletion of the penalty was upheld.

The Tribunal restored the issue of risk adjustment to the Assessing Officer/TPO for factual verification, agreeing that risk adjustment can be allowed in appropriate cases. The Tribunal also upheld the exclusion of 'Motilal Oswal Investment Advisors Pvt. Ltd.' as a comparable.

The Tribunal upheld the CIT(A)'s decision, finding that the Rs. 77 lakhs paid to SBBS was on account of arrears of rent as per a court order and thus allowable as a business expense. The Tribunal also upheld the rectification order which corrected the disallowance amount.

The Tribunal held that the addition of Rs. 60,00,000/- was not justified as the capital gains were already taxed in A.Y. 2011-12. The cash received in A.Y. 2013-14 represented consideration for a transaction on which tax had already been paid, thus avoiding double taxation.

The Tribunal upheld the CIT(A)'s decision to restrict the addition to the extent of the profit element and estimated brokerage expenses, rather than the entire purchase value. The assessee had already disclosed a profit, and the CIT(A) correctly identified potential unrecorded expenses.

The Tribunal held that the assessment orders passed under Section 143(3) read with Section 153C were bad in law because the Assessing Officer of the searched person had not recorded the requisite satisfaction before issuing the notice under Section 153C. Consequently, the assessment orders were quashed.

The Tribunal held that the assessment orders passed under Section 143(3) read with Section 153C were bad in law because the Assessing Officer of the searched person had not recorded the requisite satisfaction before issuing the notice under Section 153C. Consequently, the assessment orders were quashed.

The Tribunal directed the exclusion of 'R. Systems International Ltd.' as a comparable for ITES services due to functional dissimilarity and extraordinary events. The issue of brought forward unabsorbed depreciation was allowed for statistical purposes, pending decisions in prior assessment years.

The Tribunal held that the assessment orders passed under Section 143(3) read with Section 153C were bad in law because the Assessing Officer of the searched person had not recorded the requisite satisfaction before issuing the notice under Section 153C. Consequently, the assessment orders were quashed.

The Tribunal held that for vacant properties, the municipal rateable value should be considered for ALV, especially when supported by previous ITAT and High Court decisions in the assessee's own case. The AO's estimation under Section 23(1)(a) was deemed incorrect in this context.

The Tribunal held that leasehold premium amortized by the assessee was in the nature of rent and therefore allowable as a revenue expenditure. This decision was based on analogy with a High Court judgment allowing stamp duty charges on lease deeds as revenue expenditure and a Supreme Court judgment on similar lease premium payments.

The Tribunal held that the assessee was non-cooperative and failed to provide any grounds of appeal or submissions to justify the additions. Therefore, the AO and CIT(A) were justified in treating the unsecured loan as unexplained cash credit.

The Tribunal held that additions made under Section 153C, which were merely repetitions of additions from original assessments and not based on incriminating material found during the search, were invalid. The Tribunal also noted that the validity of Section 153C proceedings was upheld due to the assessee's failure to controvert the Revenue's submissions.

The Tribunal upheld the CIT(A)'s order, agreeing that the assessee had duly established the identity of the lenders, the genuineness of the transactions, and the creditworthiness of the parties by providing documentary evidence. The AO had failed to adduce material to refute the authenticity of these transactions.

The Tribunal held that only the profit element embedded in the bogus purchases should be taxed, not the entire amount. It directed the AO to apply a rate of 5% on these purchases, considering the assessee's business and VAT rates.

The Tribunal held that the CIT(A) erred in dismissing the appeal on a technicality, especially during a transitional period where assessees might not have been aware of the new electronic filing requirement. The appeal was restored to the CIT(A) for a decision on merits.

The ITAT set aside the ex-parte order passed by the CIT(A) and restored the matter for fresh adjudication on merits. The assessee was directed to pay a cost of Rs. 5,000/- to the Prime Minister's Relief Fund.

The Tribunal held that the CIT(A) had disregarded the Tribunal's interim orders and violated principles of natural justice by passing the penalty order without proper opportunity to the assessee. The penalty order was quashed.

The Tribunal held that when sales are not doubted, 100% disallowance of bogus purchases is not permissible. The addition should be limited to bringing the gross profit rate on such purchases to the same level as genuine purchases.

The Tribunal held that the levy of fee under Section 234E is mandatory for delayed filing of TDS statements, even if the transaction involves multiple flats. The assessee's contention that it should be treated as a single transaction was rejected.

The Tribunal held that the CIT(A)'s deletion of additions on account of scrap sales was justified based on previous years' decisions. For unexplained expenditure, the Tribunal directed a partial addition of 12.5% of the expenditure. The disallowance under Section 14A was upheld as per the CIT(A)'s order.

The Tribunal held that excess application of income for charitable purposes can be carried forward and set off against future income, relying on Bombay High Court precedents. However, the 15% accumulation benefit was not allowed for calculating the deficit.

The Tribunal held that the fee under Section 234E is mandatory for late filing of TDS statements and cannot be waived. It also ruled that each flat purchase constituted a separate transaction for the purpose of TDS and the levy of fees, as separate TDS statements were filed.

The Tribunal held that the assessment orders passed under Section 143(3) read with Section 153C were bad in law because the Assessing Officer of the searched person had not recorded the requisite satisfaction before issuing the notice under Section 153C. Consequently, the assessment orders were quashed.

The Tribunal held that since the facts were similar to a previous assessment year where machinery usage charges were treated as business income, the same treatment should apply. The CIT(A)'s distinction of facts was not accepted.