ITAT Mumbai Judgments — October 2024

The Tribunal accepted the assessee's request for withdrawal of the appeal. The assessee had filed an application stating that the Assessing Officer had rectified the mistake in the intimation under section 143(1) by passing an order under section 154 read with section 143(3) of the Act on 29.07.2024. This rectification addressed the issue of the incorrect computation of Short Term Capital Gains (STCG) and the consequent demand. Since the grievance raised in the appeal before the ITAT was effectively resolved by the subsequent rectification order passed by the Assessing Officer, the appeal had become infructuous. The Tribunal found considerable cogency in the assessee's contentions and, in view of the facts and circumstances, dismissed the appeal as withdrawn. No specific finding was recorded on the merits of the original grounds of appeal, as the appeal was withdrawn.

The Tribunal held that the assessee consistently followed the project completion method, which is a valid method for computing taxable income. The AO's argument that the percentage completion method is better does not invalidate the assessee's chosen method. The books of accounts were not rejected. Following previous decisions for the same assessee and project, the CIT(A)'s direction to compute income on the project completion method was upheld.

The Tribunal held that the reserve created on account of amalgamation was capital in nature and not revenue. It further found that no benefit or perquisite arose to the assessee from the scheme of amalgamation, thus Section 28(iv) was not applicable.

The Tribunal noted that the issue pertains to the correct determination of the taxable income and that the assessee's rectification application under section 154 of the Act is still pending. Therefore, the Tribunal deemed it appropriate to remand the issue to the Assessing Officer.

The Tribunal held that the CIT (Exemptions) had dismissed the application without following the principles of natural justice. The assessee claimed they never received the notices, and the impugned order did not address the service of notice. Therefore, the assessee was not given a fair opportunity to be heard.

The Tribunal held that the assessee, being a cooperative credit society, is eligible for deduction under Section 80P(2)(a)(i) on its business income from providing credit facilities to its members. Further, income earned by way of interest from other cooperative societies is eligible for deduction under Section 80P(2)(d). Income from interest received from non-cooperative banks is also eligible for deduction.

The Tribunal held that the notice under Section 153A was barred by limitation as the 'on money' receipts and expenditures did not represent an 'asset' as defined in the proviso to Section 153A. Therefore, the AO lacked jurisdiction to issue the notice for that assessment year.

The Tribunal held that borrowed service fees are not 'fees for technical services' and, in the absence of a PE, are considered 'business profit' not taxable in India. The Tribunal noted that a Mutual Agreement Procedure (MAP) resolution for a previous year had also classified similar receipts as not taxable. Consequently, the issue of PE was remanded to the Assessing Officer for examination.

The Tribunal held that for the purpose of claiming deduction under section 10AA, brought forward business losses should not be reduced from the eligible profit, relying on Supreme Court decisions. The disallowance of interest on delayed TDS payment was upheld as it was considered penal in nature. The issue of set-off of business loss was restored to the AO for determination.

The Tribunal found that the District Valuation Officer's (DVO) report, which valued the property lower than the stamp duty value but still considered for the actual sale consideration, was not properly discussed by the lower authorities. The Tribunal noted that 110% of the actual sale consideration was higher than the DVO's valuation, making additions under Section 50C unsustainable.

The Tribunal noted that the tax effect in the department's appeal was below the revised monetary limit of Rs. 60 lacs. Consequently, the department's appeal was dismissed as infructuous. Following this, the assessee's cross objection was also dismissed as withdrawn.

The Tribunal held that the proviso to Section 43CA, introduced by the Finance Act 2018 with effect from 1/4/2019, provides a tolerance band of 10% for the difference between stamp duty valuation and sale consideration. While the proviso is effective from 1/4/2019, the Tribunal considered it applicable retrospectively for AY 2015-16 to obviate the difficulty. The addition concerning properties at Serial Nos. 1, 3, and 4 was therefore not sustained.

The Tribunal held that borrowed service fees are not 'fees for technical services' and, in the absence of a PE, are considered 'business profit' not taxable in India. The Tribunal noted that a Mutual Agreement Procedure (MAP) resolution for a previous year had also classified similar receipts as not taxable. Consequently, the issue of PE was remanded to the Assessing Officer for examination.

The Tribunal held that borrowed service fees are not 'fees for technical services' and, in the absence of a PE, are considered 'business profit' not taxable in India. The Tribunal noted that a Mutual Agreement Procedure (MAP) resolution for a previous year had also classified similar receipts as not taxable. Consequently, the issue of PE was remanded to the Assessing Officer for examination.

The Tribunal held that borrowed service fees are not 'fees for technical services' and, in the absence of a PE, are considered 'business profit' not taxable in India. The Tribunal noted that a Mutual Agreement Procedure (MAP) resolution for a previous year had also classified similar receipts as not taxable. Consequently, the issue of PE was remanded to the Assessing Officer for examination.

The Tribunal found that the Assessing Officer had duly examined the issue during original assessment proceedings, and the assessee had furnished all relevant details. It emphasized that income from capital work in progress is not an item for adjustment under Explanation 1 to Section 115JB. Reaffirming that for Section 263 to apply, an order must be both erroneous and prejudicial to the revenue, the Tribunal concluded that these twin conditions were not met and therefore quashed the PCIT's Section 263 order.

The Tribunal held that the notice under section 148 was validly served as it was issued to the address provided by the assessee in his PAN application. However, the Tribunal found that the assessee was not given a proper opportunity to present his case on merits regarding his non-resident status and income taxability.

The appeals are dismissed in light of Circular No. 09/2024, dated 17th September, 2024, which guides dismissal of appeals with tax effect below a certain threshold.

The Tribunal held that borrowed service fees are not 'fees for technical services' and, in the absence of a PE, are considered 'business profit' not taxable in India. The Tribunal noted that a Mutual Agreement Procedure (MAP) resolution for a previous year had also classified similar receipts as not taxable. Consequently, the issue of PE was remanded to the Assessing Officer for examination.

The appeals are dismissed in light of Circular No. 09/2024, dated 17th September, 2024, which guides dismissal of appeals with tax effect below a certain threshold.

The Tribunal held that the provision regarding the furnishing of the audit report is procedural and directory, not mandatory. The delay in filing Form 10B was a procedural omission and should not be an impediment to claiming exemptions under Section 11.

The Tribunal held that the notice under section 153A was not barred by limitation as the definition of 'asset' is comprehensive. It also deleted the addition of interest paid on a loan that was accepted in earlier years and found that the Assessing Officer's inquiry into loans was insufficient.

The CIT(A)/NFAC allowed the assessee's claims, finding that the assessee had discharged its onus and that the evidence supported the business expenditure. However, the Tribunal noted that the CIT(A)/NFAC may not have conducted proper verification of the documents.

The Tribunal held that substantial justice should prevail over technical considerations, especially since the delay did not benefit the assessee. The COVID-19 pandemic and technical difficulties were considered valid reasons for the delay. The Tribunal found that the addition made in the intimation order under Section 143(1) was factually incorrect and not sustainable.

The Tribunal noted that the AO levied penalty for both concealment of income and furnishing inaccurate particulars, failing to strike out the irrelevant limb in the notice. Relying on the decision in Mohammed Farhan A. Shaikh vs. CIT, the Tribunal held that striking off the irrelevant limb is a mandatory condition, and failure to do so vitiates the penalty proceedings.

The Tribunal held that the cash deposits of Rs. 22,99,000/- pertained to the previous assessment year and no addition could be made. Regarding credit entries of Rs. 45,01,980/-, the assessee's claim of short-term capital loss from the sale of assets in the previous year was supported.

The Tribunal observed that the assessee has substantiated the source of investment for the property purchase, including incidental charges, with documentary evidence. The assessee had discharged the onus of proof to explain the source of investment as per the Income Tax Act.

The Tribunal held that Section 50C of the Income Tax Act is not applicable to charitable trusts, as per Section 11(1A). Furthermore, the property in question was transferred in AY 2016-17 and accepted by the revenue, rendering the action under Section 263 for AY 2018-19 unwarranted. The Tribunal quashed the order passed by the CIT under Section 263.

The Tribunal found that the Assessing Officer's conclusion of manipulated trading in a penny stock was not supported by any material on record. The basis for the conclusion was solely the rise in script price and variation in delivery volumes from public domain data.

The Tribunal affirmed the CIT(A)'s decision, holding that the pharmacy activity is integral and incidental to the hospital's charitable objects, and its surplus is therefore not taxable under Section 11(4A). It also confirmed the assessee's entitlement to the statutory 15% deduction under Section 11(1)(a) on gross receipts, irrespective of whether there was a surplus or deficit. The Revenue's appeals on these core issues were dismissed, and the assessee's cross-objections were dismissed as withdrawn.

The Tribunal held that the activity of the medical store is incidental to the main object of running a hospital and providing medical relief, and that the pharmacy primarily serves admitted patients. The Tribunal noted that the issue is covered by the assessee's own case decided by a co-ordinate bench of the ITAT, Mumbai, and the Hon'ble jurisdictional High Court. Therefore, the surplus from the pharmacy store was not to be treated as business income under Section 11(4A). Regarding the deduction under Section 11(1)(a), the Tribunal found that the claim of set apart on gross receipts is covered by the Apex Court decision in Programme for Community Organisation (supra) and that Section 11(1)(a) does not impose a condition for claiming set apart on surplus or deficit. The view taken by the CIT(A) was upheld. For grounds related to provisions for compensated absences, post-retirement medical benefits, and the Indigent & Weaker Section Patient Fund, the Tribunal noted that the Ld. AR indicated that if these issues were held against the assessee, there would be no fiscal benefit for the revenue, and the Ld. DR did not contest this. Consequently, these issues were considered to be in academic interest and left open for adjudication in an appropriate forum. The cross-objections filed by the assessee were dismissed as withdrawn since the revenue's appeals were dismissed.

The Tribunal held that the delay in share allotment was due to the failure to obtain necessary approvals from the SAIF Zone, not due to any lapse on the part of the assessee. Therefore, the transfer pricing addition was not sustainable.

The Tribunal held that running a pharmacy within a hospital, primarily for patients, is incidental to the main charitable object of providing medical relief. Therefore, the surplus from the pharmacy should not be treated as separate business income under Section 11(4A) if separate books of accounts are not maintained.

The Tribunal noted that the facts were similar to a previous case involving the assessee's father. Evidence showed the assessee received salary in cash in preceding years and had sufficient cash in hand from previous year's closing balance. The employer also confirmed salary payments, with TDS deducted. The Tribunal held that the lower authorities failed to provide justification for rejecting the assessee's explanation and for adding the cash deposit as unexplained income.

The Tribunal held that for the purpose of calculating 'tax due on the returned income' under section 234C, any income on which tax is deductible at source, even if not deducted, must be excluded. Therefore, interest under section 234C cannot be charged.

The Tribunal noted that the CIT(A) failed to adjudicate the assessee's ground regarding the uncertainty in realization of revenue from the sale of land and did not consider additional evidences submitted. Therefore, the matter was remitted back to the CIT(A) for de novo consideration.

The Tribunal held that the purchase of new residential units in the name of the spouse does not disentitle the assessee from claiming exemption under section 54F, especially when the assessee is the beneficial owner and the investment was made by him. It was also held that the amendment restricting the exemption to 'one house' was applicable from AY 2015-16 onwards, not AY 2014-15, and the two flats purchased were adjacent and treated as a single unit.

The Tribunal held that running a pharmacy within a hospital, serving primarily admitted patients, is incidental to the charitable object of providing medical relief. Therefore, the surplus from the pharmacy should not be treated as separate business income and deductions under Section 11 are allowable.

The Tribunal held that the activity of the medical store is incidental to the main object of running a hospital and providing medical relief, and that the pharmacy primarily serves admitted patients. The Tribunal noted that the issue is covered by the assessee's own case decided by a co-ordinate bench of the ITAT, Mumbai, and the Hon'ble jurisdictional High Court. Therefore, the surplus from the pharmacy store was not to be treated as business income under Section 11(4A). Regarding the deduction under Section 11(1)(a), the Tribunal found that the claim of set apart on gross receipts is covered by the Apex Court decision in Programme for Community Organisation (supra) and that Section 11(1)(a) does not impose a condition for claiming set apart on surplus or deficit. The view taken by the CIT(A) was upheld. For grounds related to provisions for compensated absences, post-retirement medical benefits, and the Indigent & Weaker Section Patient Fund, the Tribunal noted that the Ld. AR indicated that if these issues were held against the assessee, there would be no fiscal benefit for the revenue, and the Ld. DR did not contest this. Consequently, these issues were considered to be in academic interest and left open for adjudication in an appropriate forum. The cross-objections filed by the assessee were dismissed as withdrawn since the revenue's appeals were dismissed.

A corrigendum was issued to rectify a mistake in the cause title of an order dated 30/09/2024. The assessee's name and PAN were wrongly mentioned in ITA No.608/Mum/2024 and C.O. No.69/Mum/2024. The correct name is "Euro Pratik Ispat (1) Pvt Ltd".

The Tribunal held that running a pharmacy within a hospital, serving primarily admitted patients, is incidental to the charitable object of providing medical relief. Therefore, the surplus from the pharmacy should not be treated as separate business income and deductions under Section 11 are allowable.

The Tribunal noted that the issue of depreciation on goodwill had been consistently decided in favor of the assessee by coordinate benches in previous assessment years, and there was no change in facts. Similarly, the issue of launch expenses being revenue expenditure had also been decided in favor of the assessee, with the High Court not admitting the revenue's appeal.

The Tribunal held that the CIT(A) exceeded his powers by setting aside the matter to the AO, as per Section 251 of the Act. The Tribunal restored the matter to the CIT(A) for a remand report from the AO.

The Tribunal noted that the issue was covered by previous decisions of co-ordinate benches, which had supported the assessee's position. The Tribunal found no infirmity in the CIT(A)'s order and concluded that the originator was not an 'investor' as defined in Section 194LBC read with Section 115TCA, making TDS deduction inapplicable.

The Tribunal held that the maximum marginal rate is to be computed by taking the highest slab of income tax and the highest slab of surcharge applicable to an individual. The CPC has the power to compute the correct amount of tax and sum payable by the assessee under section 143(1).

The Tribunal held that in certain paragraphs of the aforementioned order, the term 'draft order' was inadvertently used instead of 'order'. These specific paragraphs have been modified to reflect the correction.

The Tribunal noted that improvements were made over 20 years and that past assessments had accepted similar claims. While some invoices were missing, the Tribunal found it pertinent that income from warehousing business was declared and accepted, and standard deductions were claimed. The Tribunal decided to remand the issue to the AO for verification of expenses with available documents.

The assessee moved an application under section 154 to rectify the intimation and compute tax on slab rate basis. The CPC processed the application and granted the relief sought. Since the relief was granted by the CPC, the appeal before the Tribunal became infructuous.

The Tribunal held that penalty under Section 271(1)(c) of the Act is not leviable on additions made on an estimated basis. Reliance was placed on various High Court decisions and a coordinate bench ruling that stated penalty cannot be levied without concrete evidence of concealment.

The Tribunal held that the penalty cannot be levied automatically for every addition. It was noted that the AO did not doubt the genuineness of the expenditure but disallowed it for lack of documentation. The CIT(A) also sustained the disallowance on estimation basis. Reliance was placed on judicial decisions where penalties were not sustained in similar circumstances.