ITAT Mumbai Judgments — March 2024

The Tribunal held that interest expenditure is allowable as a deduction if borrowed funds are used for income-generating activities. Since the assessee used a mix of funds and the loan funds were not diverted for non-income earning purposes, the entire interest expenditure is deductible.

The Tribunal held that the correct jurisdiction for the appeal lies with the ITAT Kolkata as the assessment order was passed by an AO based in Kolkata. Therefore, the appeal filed before the Mumbai benches was dismissed as not maintainable.

The Tribunal condoned the delay, considering the assessee's senior citizen status and the ex-parte nature of the CIT(A)'s order. The Tribunal held that the CIT(A) should have decided the appeal on merits, even if the assessee was served, and set aside the order to provide an opportunity of being heard.

The Tribunal held that the disallowance of depreciation on goodwill was not justified. It noted that the demerger took place in AY 2015-16, goodwill was accounted for in that year, and depreciation was allowed by the AO in AY 2015-16. The present year, AY 2016-17, is the second year, and depreciation should be allowed on the WDV. The Tribunal found that the assessee had followed the same methodology for provision of liquidated damages year after year, based on past experience, and that the provision represented a present obligation arising from past events with a probable outflow of resources and a reliable estimate. Therefore, the disallowance of provision for liquidated damages was set aside. Regarding short credit of TDS, the Tribunal restored the issue to the AO for fresh examination, as the claim was supported by Form 26AS. Similarly, the issue of interest under Section 234B was restored to the AO for fresh examination. The decision for AY 2016-17 was applied to AY 2017-18.

The Tribunal held that depreciation on goodwill arising from a demerger is not allowable as it is not an asset acquired by the assessee. The excess valuation over the net asset value represents a capital receipt and not an acquired intangible asset eligible for depreciation.

The Tribunal held that the CIT(A) erred in upholding the AO's action. Following jurisdictional High Court judgments, the Tribunal directed the deletion of the additions made under Section 68 and Section 69, and allowed the LTCG exemption under Section 10(38).

The Tribunal noted that the addition amount was Rs. 9,03,193/- with a tax effect of Rs. 2,34,830/-. The Tribunal observed that the tax effect was significantly below the limit prescribed by CBDT Circular No. 17/2019 for filing appeals. No exceptional circumstances were presented to justify filing the appeal despite the low tax effect.

The CIT(A) had applied a GP rate of 25% on alleged bogus purchases and sustained an addition. The Revenue's appeal argued for the addition of 100% of purchases, citing a Gujarat High Court decision. However, the Tribunal noted that the assessee had submitted documentation for purchases and upheld the CIT(A)'s application of GP rate.

The Tribunal held that the assessee had provided sufficient evidence to establish the genuineness of the share transactions, including purchase and sale through banking channels, dematerialized shares, and sale through registered brokers on the stock exchange. Therefore, the addition made by the AO was unjustified.

The Tribunal decided on various grounds, including depreciation on unverified purchases, transfer pricing adjustments, and weighted deduction under Section 35(2AB). The decision on these grounds varied, with some being allowed, dismissed, or partly allowed.

The Tribunal noted confusion regarding the assessee's email IDs but acknowledged that the CIT(A) passed ex-parte orders without hearing the assessee. In the interest of natural justice, the assessee was granted another opportunity to present its case before the CIT(A).

The Tribunal noted confusion regarding the assessee's email IDs but acknowledged that the CIT(A) passed ex-parte orders without hearing the assessee. In the interest of natural justice, the assessee was granted another opportunity to present its case before the CIT(A).

The tribunal restored both appeals back to the file of the First Appellate Authority. The CIT(A) is directed to decide the issues on merits after providing a reasonable opportunity of hearing to the assessee.

The Tribunal held that if purchases are debited in the books of accounts with details and corresponding sales are accepted, leading to an overall trading result and gross profit, then merely estimating a GP rate on purchases does not amount to concealment of income. Therefore, no penalty can be levied based solely on an estimated GP rate.

The tribunal restored both appeals back to the file of the First Appellate Authority. The CIT(A) is directed to decide the issues on merits after providing a reasonable opportunity of hearing to the assessee.

The Tribunal upheld the CIT(A)'s decision to restrict the disallowance to 12.5% of the purchases. It was held that since sales were not disturbed and payments were made through banking channels, the entire purchase amount could not be treated as bogus, but at most a suppression of gross profit.

The Tribunal upheld the CIT(A)'s decision to restrict the disallowance to 12.5% of the purchases. It was held that since sales were not disturbed and payments were made through banking channels, the entire purchase amount could not be treated as bogus, but at most a suppression of gross profit.

The Tribunal held that the assessee failed to rebut the statement of Shri Rajesh Doshi regarding bogus purchases, and in the absence of contradictory evidence, upheld the CIT(A)'s addition of 12.5% on the gross profit margin for bogus purchases, dismissing appeals related to this ground. For the on-money receipt issue, the Tribunal found lacunae in the record, including the non-production of the Settlement Commission's order and the remand report, and therefore remanded the issue back to the CIT(A) for proper adjudication.

The Tribunal held that the assessee failed to rebut the statement of Shri Rajesh Doshi regarding bogus purchases, and in the absence of contradictory evidence, upheld the CIT(A)'s addition of 12.5% on the gross profit margin for bogus purchases, dismissing appeals related to this ground. For the on-money receipt issue, the Tribunal found lacunae in the record, including the non-production of the Settlement Commission's order and the remand report, and therefore remanded the issue back to the CIT(A) for proper adjudication.

The Tribunal held that the assessee failed to rebut the statement of Shri Rajesh Doshi regarding bogus purchases, and in the absence of contradictory evidence, upheld the CIT(A)'s addition of 12.5% on the gross profit margin for bogus purchases, dismissing appeals related to this ground. For the on-money receipt issue, the Tribunal found lacunae in the record, including the non-production of the Settlement Commission's order and the remand report, and therefore remanded the issue back to the CIT(A) for proper adjudication.

The Tribunal held that the assessee failed to rebut the statement of Shri Rajesh Doshi regarding bogus purchases, and in the absence of contradictory evidence, upheld the CIT(A)'s addition of 12.5% on the gross profit margin for bogus purchases, dismissing appeals related to this ground. For the on-money receipt issue, the Tribunal found lacunae in the record, including the non-production of the Settlement Commission's order and the remand report, and therefore remanded the issue back to the CIT(A) for proper adjudication.

The Tribunal held that the assessee failed to rebut the statement of Shri Rajesh Doshi regarding bogus purchases, and in the absence of contradictory evidence, upheld the CIT(A)'s addition of 12.5% on the gross profit margin for bogus purchases, dismissing appeals related to this ground. For the on-money receipt issue, the Tribunal found lacunae in the record, including the non-production of the Settlement Commission's order and the remand report, and therefore remanded the issue back to the CIT(A) for proper adjudication.

The Tribunal held that the assessee, being a credit society catering to small vendors and drivers, naturally accepts small deposits from its members. The assessee had maintained regular books of accounts and cash books detailing the members, their PAN, and Aadhaar numbers for these deposits. Therefore, the deposits were explained.

The Tribunal held that while the assessee's explanation for non-appearance was not supported by material evidence, the ex-parte order was passed without affording the assessee a hearing. In the interest of natural justice, the assessee is given one more opportunity to present its case.

The Tribunal held that the CIT(A) erred in dismissing the appeal on the ground of limitation without properly considering the date of service of the order and the submissions of the assessee. Furthermore, on merits, the addition made by the AO was not sustained as the partner remuneration was found to be in accordance with the partnership deed and relevant provisions of the Act and Circular No. 739.

The Tribunal held that while the deduction itself might not be allowable, the assessee's claim was based on the auditor's opinion, which was considered bonafide at the time of filing the return. Therefore, the penalty levied for furnishing inaccurate particulars was deleted.

The Tribunal decided on various grounds, including depreciation on unverified purchases, transfer pricing adjustments, and weighted deduction under Section 35(2AB). The decision on these grounds varied, with some being allowed, dismissed, or partly allowed.

The Tribunal held that the deduction for employee's contribution to PF/ESIC is allowable only if deposited within the due date as prescribed by the respective Acts. The Supreme Court decision in Checkmate Services Pvt. Ltd. is applicable even for adjustments made under section 143(1) of the Act.

The Tribunal held that the deduction for employee's contribution to PF/ESIC is allowable only if deposited within the due date as prescribed by the respective Acts. The Supreme Court decision in Checkmate Services Pvt. Ltd. is applicable even for adjustments made under section 143(1) of the Act.

The Tribunal held that the assessee had provided sufficient evidence to establish the genuineness of the share transactions, including purchase and sale through banking channels, dematerialized shares, and sales via a registered stockbroker on the stock exchange.

The Tribunal held that the CIT(A) erred in upholding the AO's addition. The Tribunal found that the assessee had provided sufficient evidence of share purchase and sale through banking channels, dematerialized shares, and a registered broker on the stock exchange, thus fulfilling the requirements for exemption.

The Tribunal held that the AO's order giving effect to the ITAT's order was passed beyond the prescribed time limit under Section 153(5) of the Income Tax Act, 1961. Therefore, the AO's order was considered void ab initio and bad in law.

The Tribunal held that the AO's order giving effect to the ITAT's order was passed beyond the prescribed time limit under Section 153(5) of the Income Tax Act, 1961. Therefore, the AO's order was considered void ab initio and bad in law.

The Tribunal held that the valuation of shares by an independent valuer, even if a hybrid method, could be considered under the 'Other Method' if it's not based on patently wrong assumptions. The Tribunal also directed the Assessing Officer to comply with the CIT(A)'s directions regarding TDS credit and DIT credit.

The Tribunal dismissed the Revenue's appeal. The sole issue was the deletion of the disallowance of Rs. 107.13 crores related to the valuation of work-in-progress (WIP) for construction contracts. Both parties agreed that this was a recurring issue. The Tribunal noted that it had consistently decided this issue in favor of the assessee in preceding assessment years. Specifically, the Tribunal referred to its own order in the assessee's case for Assessment Year 1994-95 (ITA No.4265/Mum/1998), where it had held that the valuation of WIP for incomplete contracts was made in a consistent manner following accepted accounting principles and decided the issue in favor of the assessee. The Tribunal found no contrary decisions or new material presented by the Revenue. Therefore, respectfully following the decision of the co-ordinate bench in the assessee's own case for preceding assessment years, the Tribunal found no merit in the Revenue's ground of appeal and dismissed it. The operative direction was the dismissal of the Revenue's appeal.

The Tribunal observed that the assessee had provided documentary evidence, including bank statements, to support the investment in REC Bonds. The CPC's rejection of the exemption claim due to a system error was not justified. The Tribunal allowed the appeal concerning the denial of deduction under section 54EC.

The Tribunal held that the tax authorities failed to provide material to substantiate their findings that the impugned transactions were non-genuine. The assessee was not directly linked to any manipulation or rigging of share prices.

The Tribunal decided that interest on fixed deposits, after netting off interest on borrowings, should be considered as business income eligible for deduction under Section 80IAB, aligning with the assessee's contention for AY 2008-09. The reasoning was that the funds were invested for short periods and not out of surplus funds, and the AO had erred in restricting the amount. Regarding grant-in-aid and development charges for AYs 2012-13 and 2015-16, the Tribunal held that these were indeed revenue receipts. The assessee's argument that they were for specific purposes and collected as a Special Planning Authority was not accepted as a basis for non-taxability as revenue. Similarly, lease rent for AY 2012-13 was held to be income from other sources, not business income, as it lacked a nexus with the assessee's core business. The grant-in-aid for land acquisition in AY 2012-13 was held to be capital in nature, not revenue, as it pertained to inventory/work-in-progress. The Tribunal directed deletion of additions where the receipts were held to be capital in nature or business income eligible for deduction, and upheld additions where they were considered revenue income from other sources.

The Tribunal dismissed the Revenue's appeal. The sole issue was the deletion of the disallowance of Rs. 107.13 crores related to the valuation of work-in-progress (WIP) for construction contracts. Both parties agreed that this was a recurring issue that had been decided by the Tribunal consistently in favour of the assessee for several past assessment years. The Tribunal noted that a Co-ordinate Bench, in the Department's appeal for Assessment Year 2002-03, had dismissed the Revenue's ground by following the Tribunal's order in the assessee's own case for Assessment Year 1994-95. In that earlier case, the Tribunal had found that the valuation of WIP for incomplete contracts was made by the assessee in a consistent manner following accepted accounting principles and decided the issue in favour of the assessee. Since the Revenue did not present any contrary decision or material, the Tribunal respectfully followed the decision of the Co-ordinate Bench in the assessee's own case for preceding assessment years and found no merit in the Revenue's ground of appeal. The Revenue's appeal was accordingly dismissed.

The Tribunal allowed the assessee's appeal regarding the limitation period for passing the order giving effect to the ITAT's order. It also held that certain receipts, like grant-in-aid and development charges, were for specific purposes and not taxable as revenue. The Tribunal found no illegality in the CIT(A)'s findings regarding losses due to water distribution and transmission/distribution losses.

The Tribunal allowed the assessee to raise additional legal grounds. It also held that the Assessing Officer's order giving effect to the ITAT's order was barred by limitation. The Tribunal found no illegality in the CIT(A)'s findings regarding certain disallowances.

The Tribunal held that goodwill arising on amalgamation is a capital asset eligible for depreciation, following Supreme Court precedent. The disallowance of depreciation on goodwill was incorrect, and the Assessing Officer was directed to delete it. The issue of depreciation on brought forward goodwill was remitted back to the Assessing Officer for fresh adjudication.

The Tribunal held that valuation of shares by an independent valuer falls under the 'Other Method' for determining Arm's Length Price (ALP) under the Income Tax Act. Such valuations are generally accepted unless fundamentally flawed.

The Tribunal, in its consolidated order, addressed the grounds raised by the Revenue. For Ground No. 1 concerning expatriate salaries, the Tribunal noted that the issue was identical to those decided in earlier assessment years in the assessee's own case. It respectfully followed a coordinate bench's decision for AY 2001-02, which allowed HO expenditure under Section 37(1) of the Act, stating that Section 44C is a disabling provision and the non-discrimination clause (Article 26 of the India-UK Treaty) ensures that the scope of deduction under Section 37(1) is not curtailed by Section 44C. Therefore, the ground raised by the assessee (in relation to the Revenue's appeal) was allowed. For AY 2003-04, the Tribunal stated that the decision in AY 2002-03 would apply mutatis mutandis. Specifically, for Ground No. 7 relating to premium paid to acquire a retail loan portfolio, it was directed to be allowed at 1/5th of the premium paid, treating it as deferred revenue expenditure, thus partly allowing the ground. All other grounds for AY 2003-04 were disposed of mutatis mutandis to AY 2002-03. The Tribunal concluded that the appeals filed by the Revenue were dismissed, and the appeals filed by the Assessee were partly allowed.

The Tribunal held that while the purchases might be from alleged bogus suppliers, the sales were not disputed and correlated with the purchases. The Tribunal referred to the Bombay High Court's decision in PCIT vs. Mohd. Haji Adam & Company, which suggests restricting additions to the extent of gross profit at the same rate as other genuine purchases. The Tribunal noted that the gross profit on these transactions was 5.096%, only slightly lower than the assessee's regular gross profit ratio of 5.407%, making the difference minuscule.

The Tribunal upheld the disallowance of the full weighted deduction under Section 35(2AB) as per the DSIR certificate but restored the matter to the AO to examine the claim under Section 37. The addition of duty drawback income was deleted.

The Tribunal held that the AO's order giving effect to the ITAT's order was passed beyond the prescribed time limit under Section 153(5) of the Income Tax Act, 1961. Therefore, the AO's order was considered void ab initio and bad in law.

The Tribunal held that the AO's order giving effect to the ITAT's order was passed beyond the prescribed time limit under Section 153(5) of the Income Tax Act, 1961. Therefore, the AO's order was considered void ab initio and bad in law.

The Tribunal, in its consolidated order, addressed the grounds raised by the Revenue. For Ground No. 1 concerning expatriate salaries, the Tribunal noted that the issue was identical to those decided in earlier assessment years in the assessee's own case. It respectfully followed a coordinate bench's decision for AY 2001-02, which allowed HO expenditure under Section 37(1) of the Act, stating that Section 44C is a disabling provision and the non-discrimination clause (Article 26 of the India-UK Treaty) ensures that the scope of deduction under Section 37(1) is not curtailed by Section 44C. Therefore, the ground raised by the assessee (in relation to the Revenue's appeal) was allowed. For AY 2003-04, the Tribunal stated that the decision in AY 2002-03 would apply mutatis mutandis. Specifically, for Ground No. 7 relating to premium paid to acquire a retail loan portfolio, it was directed to be allowed at 1/5th of the premium paid, treating it as deferred revenue expenditure, thus partly allowing the ground. All other grounds for AY 2003-04 were disposed of mutatis mutandis to AY 2002-03. The Tribunal concluded that the appeals filed by the Revenue were dismissed, and the appeals filed by the Assessee were partly allowed.

The Tribunal held that the AO is entitled to invoke Rule 8D only if they record dissatisfaction with the assessee's claim after examining the accounts, as per Section 14A(2) of the Act. The absence of such a recording makes the disallowance under Rule 8D invalid. The Tribunal relied on the decision of the Bombay High Court in DCIT Vs. Godrej & Boyce Mfg. Co. Ltd.