ITAT Mumbai Judgments — August 2019

The Tribunal deleted the addition of capital gain made on a protective basis, as the capital gain was assessable in AY 2010-11. Since the Section 54F deduction was allowed for AY 2010-11, the disallowance in the current year became redundant.

The Tribunal held that the assessee had duly replied to the notice under section 133(6) by denying ownership of the bank account. Since the AO did not provide any material to rebut this denial, the penalty for non-compliance was not justified.

The Tribunal held that income earned up to March 31, 2002, was not liable to income tax due to the continued applicability of Section 55 of the NABARD Act, 1981, for that period. The amendment's effective date meant the exemption was valid for the income earned during the relevant accounting year.

The Tribunal noted that the tax effect in these appeals was below the revised monetary limit of Rs. 50,00,000/- set by the CBDT for filing appeals before the ITAT. Consequently, the appeals were dismissed as withdrawn.

The Tribunal held that a Debenture Redemption Reserve (DRR) is for a known liability, not a reserve. Following the decision in CIT v. Raymonds Ltd., the Tribunal allowed the assessee's appeal on this issue.

The Tribunal held that profits eligible for Section 10A deduction should not be included in the computation of book profit under Section 115JB. It also directed that disallowance under Section 14A should be restricted to the exempt income earned.

The Tribunal held that provisions for unpaid expenditure and legal/professional fees falling within a reasonable range (around 10%) of actual expenditure should be allowed. However, provisions for commission, promotion, and advertisement exceeding this range were disallowed.

The Tribunal held that the assessee had provided sufficient material to satisfy the AO regarding the nature, source, and genuineness of the investment transaction. The identity of Biometrix as the investor and the nature of the transaction as CCPS were established.

The Tribunal dismissed the Revenue's appeal as withdrawn due to low tax effect, as per CBDT Circular No. 17/2019. The Revenue was granted liberty to move for recalling the order if it was later found not to fall under the exceptions of the circular.

The Tribunal held that the confirmation of additions does not automatically warrant a penalty. The assessee's actions regarding bad debts and BMC taxes were considered bona fide mistakes, not concealment or furnishing of inaccurate particulars.

The Tribunal held that when sales are not doubted, 100% disallowance for bogus purchases is not permissible. The matter was set aside to the AO to restrict the addition to the gross profit rate of genuine purchases.

The Tribunal held that when sales are not doubted, 100% disallowance for bogus purchases is not permissible. The addition should be restricted to the profit element embedded in such purchases.

The Tribunal held that the disallowance was arbitrary and bad in law as the revenue had consistently allowed the interest expenditure in prior and subsequent assessment years without any change in facts. The Tribunal relied on the principle of consistency as laid down by the High Courts.

The Tribunal held that the expenditure on brand reminders and medical books/journals was not disallowable as it was distinguishable from previous cases and considered a form of advertising. Regarding un-reconciled AIR transactions, the Tribunal found that the assessee had made sufficient efforts to reconcile and the AO failed to provide concrete evidence, thus setting aside the addition.

The Tribunal upheld the validity of the reassessment under Section 147. It agreed that the entire purchase amount should not be added back, but found the CIT(A)'s estimation of 12.5% profit to be high. The Tribunal directed the addition to be restricted to 6% of the non-genuine purchases.

The Tribunal held that since the sales were not doubted, a 100% disallowance for bogus purchases was not justified. They modified the order to restrict the disallowance to 12.5% of bogus purchases, reduced by the gross profit rate already declared by the assessee.

The Tribunal agreed with the Revenue's request to dismiss the appeal as withdrawn, while granting liberty to seek recall if exceptions to the monetary limit are found. The appeal was dismissed due to the tax effect being below the prescribed monetary limit.

The Tribunal restored the issue of corporate and management service charges to the Dispute Resolution Panel (DRP) for fresh adjudication, following its prior decisions. It allowed depreciation on intangible assets, citing consistent rulings in favor of the assessee. For Section 14A, it restricted the disallowance to the amount of exempt income earned.

The Tribunal held that the loans were not received in cash but through banking channels, as established by the Assessing Officer's own remand report in a related case. Therefore, the penalty was not justified.

The Tribunal held that Section 14A of the Income Tax Act is not applicable when no exempt income is earned by the assessee. Therefore, the disallowance made by the AO and confirmed by the CIT(A) was set aside.

The Tribunal held that the date of sale of the original asset should be considered as per the MOU dated 08.05.2006, as substantial consideration was received and possession was handed over on that date. This date falls within one year prior to the purchase of the new asset, making the assessee eligible for the deduction.

The Tribunal held that two of the disputed comparables, Vishal Information Technologies Ltd. and Asit C. Mehta, were not suitable due to their distinct business models (outsourcing and KPO services, respectively). The Tribunal directed the Assessing Officer to re-determine the arm's length price considering these exclusions.

The Tribunal dismissed the Revenue's appeal as withdrawn because the tax effect was below the monetary limit prescribed by CBDT Circular No. 17/2019 for filing appeals. The assessee's cross-objections were not pressed and were also dismissed.

The Tribunal noted that the assessee claimed non-receipt of the show-cause notice and that while e-filing was mandated by rules, the Income Tax Act sections did not explicitly require it. Therefore, the appeal was restored to the CIT(A) for a decision on merits, with a direction to the assessee to file electronically.

The Tribunal allowed the assessee's appeal on the Section 14A disallowance, directing the AO to restrict it to the exempt income earned. The Tribunal dismissed the revenue's appeals, holding that hotel business receipts are to be treated as business income based on previous consistent rulings.

The Tribunal held that 100% disallowance of bogus purchases is not permissible when sales are not doubted. The matter was remanded to the AO to restrict the addition to the gross profit rate on such purchases, similar to genuine purchases.

The Tribunal held that while purchases were not genuine, a 100% disallowance was not justified when sales were not doubted. The disallowance was restricted to 12.5% of bogus purchases, reduced by the gross profit rate already declared by the assessee.

The Tribunal held that since sales were not doubted, a 100% disallowance was not justified. It further held that taxing the gross profit already declared would lead to double jeopardy.

The Tribunal held that the assessee had provided sufficient evidence for the loans from his son and Mr. Kumarusaman, including confirmations and bank transactions. Therefore, the addition made by the revenue authorities was not justified.

The Tribunal held that 100% disallowance for bogus purchases is not justified when sales are not doubted. The addition was restricted to 12.5% of the bogus purchase amount.

The Tribunal held that the sale of the textile undertaking was not a slump sale as individual asset and liability values were discernable, upholding the AO's rejection of long-term capital loss. However, it allowed the loss on certain deposits as business loss.

The Tribunal restored the issue to the Assessing Officer for factual verification. The Assessing Officer was directed to decide the issue considering that the assessee himself had disallowed Rs. 5,15,632 under Section 14A for exempt income, and the nature of the Lokhandwala construction investment was unclear.

The Tribunal held that the disallowance was arbitrary and bad in law as the revenue had consistently allowed the interest expenditure in prior and subsequent assessment years without any change in facts. The Tribunal relied on the principle of consistency as laid down by the High Courts.

The Tribunal noted that the tax effect was below the prescribed monetary limit of Rs. 50,00,000/- as per CBDT Circular No. 17/2019. Therefore, the appeal was dismissed as not maintainable.

The Tribunal held that TCS e-Serve Ltd. could not be treated as a comparable due to its high brand value and significantly higher turnover compared to the assessee. The issue of bad debt written-off was restored to the Assessing Officer for factual verification. The disallowance under Section 37(1) was also restored to the Assessing Officer pending the decision in the assessment year 2010-11.

The Tribunal held that the CIT(A) erred in not admitting the additional evidence filed by the assessee, which fell under an exception to Rule 46A(1). The matter was restored to the AO for a de novo assessment after examining the evidence.

The Tribunal held that the payment of Rs. 59.15 Crores was for removing encumbrances and acquiring clear title, thus revenue in nature and allowable as expenditure. It also held that notional rental income from unsold flats, being stock-in-trade, cannot be taxed under 'Income from house property'.

The Tribunal restored the issue to the Assessing Officer for fresh adjudication, noting that the assessee claimed to have applied for approval and that the Assessing Officer should provide an opportunity of being heard.

The Tribunal held that the assessee had a bonafide belief regarding the treatment of corporate guarantee as an international transaction due to lack of clarity prior to a statutory amendment. It also noted that the assessee voluntarily offered interest income on loans to subsidiaries, which was eventually accepted. Therefore, the penalty under Section 271(1)(c) was not sustainable.

The Tribunal restored the issue to the Assessing Officer/Transfer Pricing Officer for fresh adjudication. The assessee was directed to provide evidence to justify its claims regarding the transfer pricing method and comparables.

The Tribunal held that once the addition in the quantum assessment was deleted by a previous order, the penalty order has no basis. Furthermore, penalty cannot be levied on estimated additions.

The Tribunal held that 100% disallowance for bogus purchases is not justified when sales are not doubted. However, considering the purchases were made from the grey market, a partial disallowance is appropriate.

The Tribunal upheld the CIT(A)'s order, quashing the reassessment proceedings. It found that the reassessment was initiated beyond four years without demonstrating any failure on the part of the assessee to disclose truly and fully material facts. The Tribunal also noted that the reassessment was based on a change of opinion, which is not permissible.

The Tribunal held that IPLC charges, software sales, and support/maintenance services did not qualify as royalty or FTS under the India-US DTAA as they did not 'make available' technical knowledge. Interest under Section 234B was also directed to be recomputed.

The Tribunal held that while the revenue was justified in making estimated additions due to bogus purchases, the estimated profit rate of 12.5% was excessive. The Tribunal reduced the addition to 2% of the alleged bogus purchases, considering the assessee was a trader in low-margin items and had already declared a gross profit rate.

The Tribunal noted that the assessee had subsequently added back the claimed interest in its computation of income. Upholding the disallowance would lead to a double addition, which is not permissible. Therefore, the addition was deleted.

The Tribunal held that no notional interest could be taxed as income. It was established that the assessee had not received any interest, nor did it have a right to receive interest, as the debts were acquired at a discount and the original debtors were in default.

The Tribunal allowed the assessee's appeal regarding the disallowance of lease rentals and depreciation on UPS/inverters, consistent with its previous rulings. Other grounds were also considered based on prior decisions.

The Tribunal held that the tax effect in these appeals was below the prescribed limit of ₹ 50 lacs as per CBDT Circular No. 17 of 2019. Consequently, the appeals were dismissed as withdrawn.

The Tribunal dismissed the Revenue's appeal as not maintainable, acknowledging that the tax effect was below the CBDT's revised monetary limit for ITAT appeals. The Revenue was granted liberty to file a miscellaneous application if exceptions applied.