ITAT Mumbai Judgments — June 2024

The Tribunal noted that the assessee did not represent their case before the AO or CIT-A, despite opportunities. However, considering the assessee was out of India during proceedings, it was deemed appropriate to grant one more opportunity. The CIT-A had dismissed the appeals for non-prosecution without deciding on merits.

The Tribunal noted the assessee's efforts to upload Form 10B and the department's portal issues. However, since the Tribunal lacks the power to condone delays, the appeal was dismissed. The assessee was directed to approach the PCIT for condonation.

The Tribunal acknowledged that the cash deposits were part of the assessee's business receipts from sales, and since no other income source was established and sales were admittedly in cash, the net profit rate of 8% as offered under the presumptive taxation scheme should be applied to the cash deposits. The AO was directed to apply this 8% net profit rate.

The Tribunal condoned the delay in filing the appeal, citing the assessee's bonafide belief that the AO would act on the rectification application. On merits, the Tribunal found that the adjustment made under section 143(1) was not permissible for the assessment years in question.

The Tribunal noted that the assessee had provided invoices, made payments through banking channels, and mapped these purchases to sales. Following the Bombay High Court's decision, the Tribunal held that only the profit element on such bogus purchases could be added to the total income.

The Tribunal held that the sale deed, though not entertained by the lower authorities due to procedural reasons, was essential for the case. The assessee acquired the property as a legal heir and sold it with three other co-owners for Rs. 40 lakhs, receiving Rs. 10 lakhs as their share. Therefore, the capital gain should be computed based on the Rs. 10 lakhs received by the assessee.

The Tribunal held that a cooperative bank is a species of a cooperative society and therefore, interest income earned from it is eligible for deduction under Section 80P(2)(d). The judgments relied upon by the revenue were distinguished as dealing with different sections or facts.

The Tribunal noted that the assessee failed to provide confirmation letters or a reconciliation statement regarding the bad debts written off. While the assessee did not deserve leniency, the Tribunal decided to grant one more opportunity for the assessee to substantiate the liability and the payment of the amount. The assessee was also directed to file a reconciliation statement with documentary evidence.

The Tribunal held that the assessee is eligible for deduction of interest income earned from cooperative banks under Section 80P(2)(d). It distinguished the reliance on Supreme Court judgments regarding Section 80P(4) and Section 80P(2)(a)(i), finding them inapplicable to the present case concerning Section 80P(2)(d).

The Tribunal held that the assessee's explanation that the cash deposited was from contributions by his children for daily expenses and medical emergencies was plausible, considering his advanced age, immobility, and lack of banking knowledge. Non-compliance with notices was considered bonafide.

The Tribunal condoned the delay in filing the appeals for both assessment years, considering the affidavit submitted by the assessee explaining the reasons for the delay. The matters were restored to the file of the CIT(A) for deciding them on merits.

The Tribunal observed that the CIT(A) had passed the order without considering the assessee's reply. Therefore, the Tribunal set aside the CIT(A)'s order and restored the issues to the CIT(A)'s file for fresh adjudication, with an opportunity for the assessee to present further replies.

The Tribunal held that interest income derived by a co-operative society from investments with another co-operative bank is eligible for deduction under Section 80P(2)(d) of the Act. The Tribunal relied on various High Court decisions and observed that even though co-operative banks may not be entitled to deduction under Section 80P(4) after the insertion of the sub-section, they continue to be co-operative societies, and thus, income derived from their investments by another co-operative society is eligible for deduction.

The Tribunal held that the administrative support services provided by the assessee to its Indian subsidiary do not constitute FTS or FIS under the India-USA DTAA, as they do not 'make available' technical knowledge, skill, or expertise. Relying on its own previous decisions for the assessee and various case laws, the Tribunal affirmed that these services are merely supportive for day-to-day management. Consequently, the additions made by the AO were deleted, and both the revenue's appeals and the assessee's cross-objections were dismissed.

The Tribunal held that the AO and CIT(A) rejected the assessee's explanation and supporting documents without proper opportunity for examination or cross-examination of the family members. The addition of Rs. 15,00,000/- made under OCM was deemed not justified as the deposit was made before demonetization and the assessee provided evidence of its source.

The Tribunal observed that the assessee failed to demonstrate why they did not regularly check their ITBA portal and on what date they actually saw the impugned order. In the absence of sufficient cause and any supportive material for the delay, the application for condonation of delay was rejected.

The Tribunal held that the primary adjustment made by the AO was invalid as the assessee had filed its return and audit report by the due date, fulfilling the conditions for claiming the deduction. The delay in filing the appeal before the CIT(A) was considered reasonable due to the Chartered Accountant's medical condition.

The Tribunal held that cooperative banks are also considered cooperative societies, and interest income earned from them is eligible for deduction under Section 80P(2)(d). The disallowance made under Section 143(1) was not sustainable.

The Tribunal held that a cooperative bank is a species of the genus 'cooperative society' and therefore falls within the purview of Section 80P. The provisions of Section 80P(4) do not make Section 80P inapplicable to cooperative banks. The interest income earned from cooperative banks is eligible for deduction under Section 80P(2)(d).

The Tribunal held that the issue was a difference in the rate of depreciation due to interpretation of the asset's classification, not a false or bogus claim. Since the assessee disclosed all relevant facts and the dispute was on the taxability/interpretation of the law, penalty could not be imposed.

The Tribunal held that cooperative banks fall under the definition of 'co-operative society' as per section 2(19) of the Income Tax Act and the Maharashtra Co-operative Societies Act, 1960. Therefore, the interest income derived by the assessee from investments with other cooperative banks is eligible for deduction under section 80P(2)(d). The Tribunal also ruled that the disallowance of such deduction cannot be made through an intimation under section 143(1) as it does not constitute an 'incorrect claim' or 'arithmetical error'.

The Tribunal, relying on the Supreme Court's decision in CIT vs. M/S Jayalakshmi Rice Mills and a Co-ordinate Bench decision in DCIT vs. Karan Empire Pvt. Ltd., held that when the underlying assessment proceedings (reassessment u/s 147) are quashed as void ab initio, the penalty proceedings initiated therefrom, specifically under sections 271D and 271E, cannot survive. The Tribunal reasoned that the satisfaction recorded for initiating penalty proceedings becomes invalid once the assessment order itself is set aside. Consequently, the levy of penalty amounting to ₹11,40,000/- under section 271E was deleted, and all three appeals were allowed.

The Tribunal held that since the assessee had already credited the amount of Rs.60,19,934/- to its P&L account and computed its total income by including this sum, the further addition made by CPC under section 41(1) resulted in impermissible double taxation. Consequently, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to delete the addition.

The Tribunal noted that the unsecured loan was received in A.Y. 2012-13, and the department had not questioned its genuineness or made any addition regarding this loan in that year, with the returned income being accepted. Consequently, the Tribunal ruled that the disallowance of interest on the loan in the current year (A.Y. 2013-14) is not justified since the loan was not treated as bogus/non-genuine in the preceding year. The addition of Rs. 2,15,014/- was therefore deleted.

The Tribunal, citing the Bombay High Court's decision in *Principal Commissioner of Income Tax-17 v. Mohommad Haji Adam & Co (2019)*, ruled that only the profit element embedded in such bogus purchases should be added, as the assessee demonstrated corresponding sales and banking channel payments. Consequently, the AO was directed to restrict the addition to 11.58% of the alleged bogus purchases for both assessment years.

The Tribunal held that the appeal filed by the Revenue was in contravention of Section 14 of the Insolvency and Bankruptcy Code, 2016, as it was filed after the moratorium period began. The Learned DR did not refute this claim.

The assessee sought withdrawal of the appeal on the grounds that registration under section 80G of the Act was granted on 13.05.2024. The revenue did not raise any objection to the withdrawal.

The Tribunal, relying on its previous decision in the assessee's own case (AY 2012-13) and other precedents, held that the administrative support services provided did not make technical knowledge or expertise 'available' to JIPL and therefore did not qualify as Fees for Technical Services (FTS) or Fees for Included Services (FIS) under Article 12(4)(b) of the India-USA DTAA. Consequently, the additions made by the AO for both administrative service fees and expense reimbursements were deleted. The Revenue's appeals were dismissed, and the assessee's cross-objections were dismissed as infructuous.

The Tribunal ruled that the disallowance under section 143(1) was impermissible as the claim for deduction under section 80P(2)(d) was not an 'incorrect claim' as defined. It clarified that cooperative banks are indeed cooperative societies, making interest from them eligible for section 80P(2)(d) deduction. However, interest from a non-cooperative bank (Bank of India) was not allowed.

The Tribunal noted that while the assessee was out of India, the lower authorities dismissed the appeals for non-prosecution without deciding on merits. Therefore, the Tribunal decided to grant one more opportunity to the assessee.

The Tribunal noted the ex-parte dismissals by lower authorities due to the assessee's non-representation. Considering the exceptional circumstances, including the MD's death, the company's unrepresented status, and the non-receipt of notices, the Tribunal decided to restore the entire matter to the file of the Assessing Officer for fresh adjudication on all issues, including the validity of the reopening proceedings under Section 148. The assessee was directed to cooperate and substantiate its case before the authorities.

The Tribunal upheld the decision of the lower authorities, confirming the taxation of the assessee at the higher rate of 40%. It held that Explanation 1 to Section 90, retrospectively inserted, clarifies that a higher tax rate for foreign companies (not declaring/paying dividends in India) is not considered less favorable. The Tribunal dismissed the reliance on a Calcutta High Court judgment, stating it was not a binding precedent as it did not consider Explanation 1 to Section 90.

The Tribunal held that the Assessing Officer (AO) failed to record his dissatisfaction with the assessee's suo motu disallowance, which is a prerequisite for invoking Rule 8D. Therefore, the disallowance made by the AO under Section 14A and the enhancement by the CIT(A) were deleted.

The Tribunal largely upheld the decisions of the CIT(A) by following earlier Coordinate Bench rulings. Transfer pricing adjustments for correspondent banking activities, marketing and support services for ECB, marketing of derivatives, and interest from overseas HSBC offices were deleted in favour of the assessee. Employee separation expenditure, interchange income from offshore branches, employee share scheme costs, and Nostro account maintenance charges were also decided in favour of the assessee. The disallowance related to tax-free income was partly allowed, restricting it to 1% of the total exempt income. The Tribunal dismissed the revenue's appeals on most grounds, while the assessee's ground regarding mark-up on Transition Support Services was dismissed.

The Tribunal held that the CIT(A) should have condoned the delay, considering the assessee's bonafide belief that the rectification would be processed. Furthermore, the adjustment made under section 143(1) for AY 2014-15 was not permissible as there was no provision for disallowing deduction u/s 80P at that time.

The Tribunal, following previous judgments of co-ordinate benches, held that interest income earned by a cooperative society from its investment in a cooperative bank is allowable for deduction under section 80P(2)(d) of the Act, even after the insertion of sub-section (4) of Section 80P.

The Tribunal affirmed the CIT(A)'s decision, ruling that the TPO order dated 01.11.2019 was indeed barred by limitation. Citing the Madras High Court judgment in Pfizer Healthcare, the Tribunal reiterated that the TPO order should have been passed on or before 31.10.2019 (60 days prior to 31.12.2019, the last day for assessment). Consequently, since the TPO order was non-est due to being time-barred, the subsequent final assessment order was also deemed barred by limitation.

The Tribunal noted that the CIT(A) had passed an ex-parte order without providing the assessee an opportunity to substantiate their case. The Tribunal also noted that the Ld. DR had no objection.

The Tribunal, relying on the Supreme Court's decision in CIT vs. M/S Jayalakshmi Rice Mills, held that when the original assessment order (which is the basis for initiating penalty proceedings) is set aside or quashed as void ab initio, the penalty proceedings cannot survive. Since the reassessment orders u/s 147 for both assessment years were quashed by the Co-ordinate Bench of ITAT, the penalties imposed u/s 271D and 271E were deleted.

The Tribunal observed that the assessee's mother's case with an identical issue was decided in favor of the assessee, allowing the method of accounting adopted while following ICDS for AY 2016-17. The Tribunal found the tax authorities' action improper, stating that the assessee has the right to change the valuation method for closing stock at any point if it's a prudent method.

The Tribunal affirmed the CIT(A)'s finding that the administrative support services do not 'make available' technical knowledge, experience, skill, know-how, or processes to JIPL, thereby not meeting the criteria for FTS/FIS under Article 12(4)(b) of the India-USA DTAA. Relying on prior judgments and its own decisions, the Tribunal concluded that these services, including reimbursements, are not taxable in India and consequently deleted the additions made by the AO.

The Tribunal noted that the CIT(A) had passed an ex-parte order. However, in the interest of natural justice, the Tribunal set aside the CIT(A)'s order and restored the appeal to the CIT(A)'s file for fresh examination after affording adequate opportunity to the assessee.

The Tribunal noted that the Commissioner rejected the application without affording the assessee an opportunity to be heard and on a hyper-technical ground, sidelining the provisional certificate. For substantial justice, the case was remanded.

The Tribunal admitted the additional ground regarding depreciation on building. It noted that the Assessing Officer in paragraph 3.7 of the Assessment Order had stated that depreciation under Section 57(ii) would be allowed, but failed to do so in computation. The Tribunal directed the AO to allow depreciation on the building.