ITAT Mumbai Judgments — January 2025

The Tribunal held that the Assessing Officer erred in disallowing the creditworthiness without proper verification and also noted that the additions were made arbitrarily. The Tribunal decided to remit the issue back to the Assessing Officer for necessary verification of the financial statements of the unsecured creditors.

The Tribunal noted that the evidence for the refund claim was not fully verified by the lower authorities. Therefore, the issue was remitted back to the Assessing Officer (AO) for thorough verification of all furnished evidence, with a direction to analyze the claim in accordance with the law and grant the assessee an opportunity of being heard.

The Tribunal held that the software charges were not taxable as royalty as the assessee was not the owner of the copyright and the transaction was based on the 'right to use'. The Tribunal further held that the GSC and IT-SIS charges did not constitute FTS because the services did not 'make available' technical knowledge or expertise to the affiliates, a condition under the DTAA.

The Tribunal allowed the appeals to be withdrawn as the disputed tax was settled under the VSV Scheme. Liberty was granted to the assessee to seek recall of the order if circumstances warrant.

The Tribunal held that the BUP IDs in question were not bank accounts but business partner identification numbers. It found that the AO's additions were based on surmises and conjectures without sufficient evidence. Furthermore, the Tribunal noted that the peak balance of one of the accounts had already been taxed in a prior assessment year.

The CIT(A) deleted the penalty, finding that the issue of residential status was debatable and that the assessee had provided explanations and documents which were bonafide. The Tribunal upheld the CIT(A)'s order, agreeing that there was no furnishing of inaccurate particulars and that the penalty was not leviable.

The Tribunal upheld the CIT(A)'s decision, holding that the charges for the use of standard software do not constitute royalty as per the Supreme Court's ruling in Engineering Analysis Centre Excellence Pvt. Ltd. vs CIT. It further held that the inter-company support charges (IT-SIS, GSC, MESA) were pure reimbursements without an income element and did not involve making technical knowledge, skill, or know-how available to the Indian entity, thus not qualifying as FTS under Article 13(4) of the India-UK DTAA. The Tribunal dismissed all appeals filed by the revenue.

The Tribunal held that penalty under Section 271(1)(c) is not imposable if the addition is made purely on an estimation basis. Relying on previous decisions of ITAT and High Courts, the Tribunal found that the penalty levied based on estimated bogus purchases was unsustainable.

The Tribunal held that the issue of disallowance was debatable and the Assessee's explanation for claiming deduction was reasonable. The Tribunal found that the disallowance did not amount to 'undisclosed income' as defined in Section 271AAB, and therefore, the Assessing Officer erred in invoking the penalty provisions.

The Tribunal held that the issue regarding the disallowance was debatable, especially given the conflicting judicial precedents at the time. The Supreme Court's decision in Checkmate Services Private Ltd. settled the issue later. Therefore, levying penalty under Section 271(1)(c) was considered erroneous.

The Tribunal found that the assessee failed to provide adequate proof for the direct expenses, hence disallowance was justified. However, for salary expenses, the Tribunal directed a fresh verification by the AO due to discrepancies in claimed amounts and the need to ascertain actual payments.

The Tribunal held that the reopening of assessment for AY 2001-02 to 2006-07 was not valid. It agreed with the CIT(A)'s finding that BUP IDs were business partner identification numbers and not bank accounts. The Tribunal noted that the peak balance of the disclosed account was already taxed in AY 2006-07, making the additions by the AO repetitive and baseless.

The Tribunal held that the software charges were not taxable as royalty, as the assessee did not own the copyright and only provided the right to use the software. The FTS charges for support services were also not taxable as they did not 'make available' technical knowledge or skill to the affiliate, as required by the India-UK DTAA.

The Tribunal held that the disallowance under Section 14A was not warranted as the assessee had sufficient interest-free own funds to cover investments. Regarding the addition under Section 68, the Tribunal found that the assessee had discharged its onus to prove the identity, genuineness, and creditworthiness of the loan creditor.

The Tribunal held that the additions made by the Assessing Officer were not based on cogent evidence. The Tribunal noted that statements recorded during the search were retracted, and the assessee consistently denied any cash loan transactions. No incriminating material was recovered from the assessee's premises.

The Tribunal held that the CIT(A) erred by dismissing the appeal based solely on the appealability of the intimation order, as even appealable orders can contain mistakes apparent on record. The Tribunal set aside the CIT(A)'s order and remitted the issue of allowability of deduction under Section 80P(2)(d) back to the Assessing Officer for a fresh, denovo adjudication with a reasonable opportunity of being heard.

The Tribunal held that the AO had not conducted sufficient investigation into the specific facts of the assessee's case. It was noted that the assessee had incurred a loss on the short-term dealing of shares and the AO had not provided any finding of price rigging. Furthermore, the transactions were carried out through a registered broker via an online platform with payments and receipts through banking channels, indicating genuineness.

The Tribunal held that the additions made by the AO were not based on cogent evidence. The evidence relied upon, primarily statements recorded during the search, were contradicted and lacked corroboration. The cross-examination of Shri Nilesh Shamji Bharani also denied any cash loan transaction with the assessee.

The Tribunal held that the additions made on account of alleged cash loan transactions and notional interest were not based on cogent evidence. The initial incriminating material and statements were found to be unreliable due to subsequent retractions and contradictions.

The Tribunal held that the TPO's approach of determining the ALP of management support services at Nil was not acceptable, especially considering Section 92(3) of the Income Tax Act. The Tribunal found that such an adjustment would lead to an erosion of the tax base, rather than augmenting it, and thus prohibited the application of arm's length principle in this situation.

The Tribunal held that the additions made by the AO were not based on cogent evidence. The statements obtained were retracted, and the cross-examination contradicted the initial statements. No incriminating material was found from the assessee's premises.

The Tribunal acknowledged that the Assessee offered the income on a cash basis in the relevant year and the TDS was reflected in 26AS. It restored the matter to the Assessing Officer with directions to verify if the claimed TDS corresponds to the income offered in AY 2018-2019 and if it has not been claimed in any preceding assessment years, and then to grant the credit.

The Tribunal held that the assessee cannot be denied the carry forward of losses, as the investments were made through proper banking channels and the source was established. The Tribunal also noted that capital gains are exempt in India for Mauritius residents under the DTAA, and therefore, losses from such exempt sources cannot be set off or carried forward.

The Tribunal held that the assessee's claim for carry forward of short-term capital losses should be allowed. It reasoned that the purchases were made through proper banking channels with established sources, and the classification of shares as penny stocks by the revenue was not sufficient to disallow the losses or make additions under Section 69.

The Tribunal noted that the tax challan was placed in the paper book and the Ld.CIT(A) had not decided the issue on merits. Therefore, in the interest of justice, the issue is remanded back to the Ld.CIT(A) for necessary verification and decision on merits.

The Tribunal held that the reopening of assessment for AY 2001-02 to 2006-07 was not valid. It found that BUP ID 5090260976 was a business partner identification number, not a bank account. Furthermore, the peak balance in account 5091327690 had already been taxed in AY 2006-07. Therefore, the additions made by the AO were deleted.

The Tribunal held that the software charges did not constitute royalty as the assessee was neither the owner nor transferred copyright, and the 'right to use' was not in scope. For GSC and IT-SIS charges, the Tribunal found that the services rendered were not technical or consultancy in nature, and crucially, did not 'make available' any technical knowledge or skill to the affiliate, thus not qualifying as FTS under the DTAA.

The Tribunal held that penalty under Section 271(1)(c) is not imposable when the addition is made purely on an estimation basis. This decision was based on precedents from the ITAT and High Courts. Therefore, the deletion of penalty by the CIT(A) was upheld.

The Tribunal held that software charges were not taxable as royalty under the DTAA, as the assessee merely acquired the right to use software and did not gain ownership or copyright. For GSC and IT-SIS charges, the Tribunal found that the services did not 'make available' technical knowledge or expertise to the affiliate in a way that would constitute FTS under the DTAA.

The Tribunal followed its own orders and decisions of Coordinate Benches, which held that ESOP expenses are allowable as revenue expenditure under Section 37(1) of the Act. The Tribunal noted that similar issues had been settled in favour of the assessee in earlier years.

The Tribunal upheld the Ld. CIT(A)'s decision, ruling that software charges were for the use of standard software, not copyright, and thus not royalty under Article 13(3)(a) of the DTAA. For IT-SIS, GSC, MESA, and other support charges, the Tribunal found them to be reimbursements on a cost-to-cost basis that did not "make available" technical knowledge, skill, or know-how to the recipient, failing the condition for FTS under Article 13(4) of the DTAA. Consequently, these amounts were held not taxable in India.

The Tribunal held that the additions made by the AO were not based on cogent evidence. The statements relied upon were retracted, and the cross-examination contradicted initial admissions. No corroborative evidence was found despite a search of the assessee's premises.

The Tribunal condoned the delay in filing the appeal. It acknowledged the inadvertent mistake in ticking the 'religious' activity box and noted that the assessee had not carried out any such activities. The matter was remitted back to the CIT(E) for a fresh order.

The Tribunal held that the issues of commission on bogus accommodation entries and donation were settled under the Vivad Se Vishwas Scheme and thus correctly dropped by the PCIT. The issue of 'other investment' was not examined by the AO during re-assessment, making the PCIT's order under section 263 valid in that regard. The contention regarding jurisdiction was also found to be without merit.

The Tribunal held that the CIT(A)'s approach was incorrect. An appeal against a rectification order cannot be dismissed solely on the grounds that the original order was appealable. Even an appealable order can suffer from a mistake apparent on record. The CIT(A)'s order was set aside, and the issue was remitted back to the Assessing Officer for de novo adjudication.

The Tribunal held that the penalty under Section 271(1)(c) is not imposable when the addition is made purely on an estimation basis, especially concerning bogus purchases. Citing decisions from its own benches and the Rajasthan High Court, the Tribunal found the penalty unsustainable.

The Tribunal allowed the ground related to the disallowance of deduction under section 80G, remitting the issue back to the AO for fresh consideration. The Tribunal also allowed the ground related to the beneficial rate under Article 11 of the India-Canada DTAA, allowing the appeal.

The Tribunal held that the BUP ID 5090260976 was merely a business partner identification number and not a separate bank account. The Tribunal found no documentary evidence to support the AO's assumption of initial deposit and maintenance charges, considering it based on conjecture. Furthermore, it was noted that a similar issue regarding account 5091327690 had already been taxed in AY 2006-07, making the additions repetitive.

The Tribunal held that the CIT(A) was correct in deleting the additions. The additions were based on statements and documents from third parties, which were not corroborated by independent evidence. The statements were also retracted, and the AO failed to establish a link between the seized material and the assessees.

The Tribunal allowed the withdrawal of the appeals as the disputed tax was settled under the VSV Scheme. Liberty was granted to the assessee to seek recall of the order if circumstances warranted.

The Tribunal held that the additions made by the AO were not based on cogent evidence. The seized material and statements were not sufficiently corroborated, especially after the deponents retracted their statements and provided alternative explanations. The assessee consistently denied the transactions, and no incriminating material was found during the assessee's search.

The Tribunal upheld the CIT(A)'s decision, ruling that additions cannot be sustained solely on the basis of retracted third-party statements and seized material without independent corroborative evidence linking such material to the assessees. It emphasized that denying the assessees the opportunity to cross-examine witnesses whose statements form the basis of the additions violated principles of natural justice and that strong suspicion does not equate to proof.

The Tribunal set aside the CIT(A)'s order, directing the Assessing Officer to re-adjudicate the claim. This involved verifying if the assessee was covered by Clause (aa) of Explanation 2 to Section 139(1) of the Act, which defines a later due date for assessees requiring a report under Section 92E.

The Tribunal restored the appeals to the file of the CIT(A) to decide the issues afresh after giving the assessee a due opportunity of hearing, considering the facts and in the interest of justice.

The Departmental Representative submitted that the tax effect in the appeal was below the threshold limit prescribed by CBDT Circular No. 09/2024, and therefore, the appeal was deemed withdrawn. The Authorized Representative did not object.

The Tribunal restored the appeals back to the file of the CIT(A) to decide the issues afresh after giving the assessee an opportunity of being heard.