ITAT Annual Digest 2023 [Part-7]

This yearly digest analyzes all the ITAT stories published in the year 2023 at taxscan.in ACIT vs. Sh. Sanjay Choudhary Rajesh Pilot Chowk 2023 TAXSCAN (ITAT) 424 The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held that no purchase can be said to be made, if sale deed is executed in favor of the assessee to claim capital gain exemption under section 54/ 54F. “The bench is of the opinion that the nature and extent of construction or nomenclature like house, plot, cottage, farm house or villa, are only indicative of the fact that property purchased is not a commercial property and is not an agricultural property. They all convey residential house property. How it is inhabited should not interest the revenue. The Ld. AR has also impressed this by citing a judgment of Jaipur bench in ACIT V. Om Prakash Gyal, where it has been held that the only requirement for claiming exemption under Section 54F is construction of residential house and it does not matter that house constructed is on agricultural land. Bollineni Krishna Kumari vs. ITO CITATION: 2023 TAXSCAN (ITAT) 425 The Income Tax Appellate Tribunal (ITAT),

Hyderabad Bench, has recently, in an appeal filed before it, held that capital gain exemption under section 54F cannot be allowed for sale and purchase of plots. The perusal of the order clearly shows that the assessee had sold and purchased the plots only and has not acquired any residential house within the meaning of law. Further, as mentioned by the ld. CIT (A), the assessee is having more than two houses, therefore, the assessee is not entitled to any claim u/s. 54F of the Income Tax Act In the light of the above, the assessee has no case of merit, which is duly mentioned by the ld. CIT (A) in the order passed by him. Accordingly, this appeal is dismissed.” Malik Network & Computer P. Ltd vs. ITO 2023 TAXSCAN (ITAT) 426 The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, while considering the appeals filed before it, quashed Section 153C assessments, based on invalid notices. The Delhi ITAT held: “We thus find merit in the plea of the assessee that respective notices issued to the assessee under Section 153C of the Act for assessment years in question, i.e.,

Assessment Years 2006-07 and 2007-08 are without jurisdiction as these assessment years are beyond the purview of six assessment years in terms of pre-amended provisions of Section 153C of the Act. As a corollary, the assessments passed under Section 153C of the Act as a sequel to invalid notices are also liable to be quashed. In terms of these observations, the respective assessment years for Assessment Years 2006-07 and 2007-08 are set aside and quashed. M.P. State Cooperative Marketing Vs. ACIT-2(1) 2023 TAXSCAN (ITAT) 427 The Indore bench of Income Tax Appellate Tribunal (ITAT) recently directed the assessing officer to re-adjudicate assessee’s eligibility under section 80P of income tax act 1961 in respect of building /godownS used by Co-Operative Society. After considering the contentions of the both parties the division bench of ITAT comprising M. Biyani, (Accountant) and. Suchitra Kamble, (Judicial Member) allowed the appeal filed by the assessee and directed the assessing officer to proceed with the assessee’s issue in the light of legal provisions of Income-tax Act, 1961 and the judicial rulings. Vaijanti Jain, Vs. ITO, Ward-40(3) 2023 TAXSCAN (ITAT) 428 The Delhi bench of Income Tax Appellate Tribunal (ITAT) recently held that transactions could not be treated as real estate if property was held for a long time. After considering the contentions of the both parties the single bench of the ITAT Kul Bharat, (Judicial Member) allowed the appeal filed by the assessee and observed that the assessee claimed it as gain arising out of transfer of capital asset but AO treated it as business receipts arising from real estate business.

Assessee did not engage into any systematic real estate business activity. Pushp Niketan School Samiti vs. ITO, Dhampur 2023 TAXSCAN (ITAT) 429 The Delhi bench of Income Tax Appellate Tribunal (ITAT) recently allowed income tax exemptions to educational institutions for income of fine, lab free, founder day charges, photograph charges. After considering the contention of the both sides the single bench of the ITAT Kul Bharat, Judicial Member allowed the appeal filed by the assessee and observed that the amount also included the Lab fee, Founder day charges, photograph charges etc which was certainly related to the income of the educational institute. DCIT vs. Jharkhand State Beverages Corporation Ltd. 2023 TAXSCAN (ITAT) 430 The Ranchi Bench of Income Tax Appellate Tribunal (ITAT) deletes the Income Tax addition against Jharkhand State Beverages. The Coram comprising the accountant Member Rajesh Kumar and the Judicial Member Shri Sonjoy Sarma observed that

“We note that the assessee is a Government body engaged in the wholesale marketing of IMFL/FMFL/country liquor in terms of Govt. direction and charging margin 5% as has been prescribed by the State Government. Therefore, we are not in a position to accept the conclusion as recorded by CIT (A) accordingly we set aside the order of CIT (A) and direct the assessing officer to accept the income of the assessee as returned. Accordingly, we allow the appeal of the assessee”. M/s. Supreme Auto (India) Pvt. Ltd. vs. ITO-1(4) Indore 2023 TAXSCAN (ITAT) 431 The Indore bench of Income Tax Appellate Tribunal (ITAT) recently held that bank charge paid for obtaining loan was revenue expenditure. After considering the contentions of the both parties the division bench of ITAT comprising B.M. Biyani, (Accountant) and. Madhumita Roy, (Judicial Member) allowed the appeal filed by the assessee and the bench observed that renewal of cash-credit limit is a regular feature, normally every year, being done by banks and the banks charge fee for every renewal and expenditure incurred for obtaining loan is a revenue expenditure and not capital in nature thus assessee has rightly claimed deduction. Smt. Anupama Asawa vs. PCIT-I 2023 TAXSCAN (ITAT) 432 The Indore Bench of Income Tax Appellate Tribunal (ITAT) held that the revision order cannot be based on a mere change of opinion. The Coram comprising the judicial member Ms Madhumita Roy and the accountant member Shri Bhagirath Mal Biyani observed that the original assessment order has been passed under Section 143(3) of the Income Tax Act,1961

by the assessing officer after due verification of the same issue as raised in the order impugned passed under Section 263 of the Income Tax Act,1961 and that too upon causing exhaustive enquiry and finalizing the same after taking a possible view, the invocation of provision of Section 263 of the Income Tax Act on the basis of change of opinion is not found to be sustainable. BNP Paribas vs. Asstt. Commissioner of Income Tax International Taxation Circle–1(3)(1) 2023 TAXSCAN (ITAT) 433 The Mumbai Bench of Income Tax Appellate Tribunal has held that the interest received by the officer or overseas branches would not be taxable under India-France DTAA. The Division Bench of G.S. Pannu, (President) and Sandeep Singh Karhail, (Judicial Member) referred to the earlier decision in assessee’s own case in BNP Paribas SA vs. ADIT, in which the

coordinate bench held that the principles for determining the profits of the PE and GE/head office are not the same, and the fiction of hypothetical independence does not extend to the computation of the profit of the GE/head office. The Bench allowed this ground of appeal. Mohamed Mohideen Ayesha Nasreen No.14 vs. ACIT Central Circle-1(1) 2023 TAXSCAN (ITAT) 434 The Chennai Bench of Income Tax Appellate Tribunal (ITAT) has allowed the benefit of 600 grams of jewelry to the NRI women observing that the status and traditional practices should be considered during the addition of unexplained jewelry. The Division Bench of V. Durga Rao (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member) partly allowed the appeal, observing that, “Considering the status of the assessee as well as the traditional practices, we grant further benefit of 600 grams of jewelry to the assessee and sustain the addition to the extent of 370 grams of jewelry. No further benefit could be granted to the assessee in the absence of acceptable satisfactory documentary evidence.”

Malook Singh vs. Pr. CIT 2023 TAXSCAN (ITAT) 435 The New Delhi Bench of Income Tax Appellate Tribunal recently held that cultivation of high quality foundation seeds of peas, wheat, paddy and potato constitutes “agricultural activity”. The CIT (A) held that the cultivation of high quality foundation seeds of peas, wheat, paddy and potato is different from normal agricultural activity. Against this, the assessee has submitted all the bills & vouchers for expenses like lease rent, power bills, fertilizer, seeds, labor, wages and details of sale and mandi receipts. M/s. Bhavani Engineering vs Income Tax Officer 2023 TAXSCAN (ITAT) 436 The Hyderabad bench of the Income Tax Appellate Tribunal ( ITAT ) recently held that the firm was only liable for a levy surcharge when the total income of that firm exceeds one crore. After considering the contentions of both sides the division bench of the ITAT comprising Waseem Ahmed, (Accountant) and Madhumita Roy (Judicial Member) allowed the appeal filed by the assessee and observed that “provisions under section 2(3) of the Finance Act, 2018 abundantly makes it clear that sub-clause (a) thereof is applicable to categories (i), (ii), (v) and (vii) of section 2(31) of the Act whereas sub-clause (b) is applicable to clause (iv), (vi) or co-operative societies whereas sub-clauses (c) and (d) are made applicable to clause (iii) of section 2(31) of the Act”.

ACIT Central Circle-16 vs ABW Infrastructure Ltd. Reactengle-1 2023 TAXSCAN (ITAT) 437 The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the provisions of IBC would override all the acts including the Income Tax Act 1961. The Bench held that no proceedings could be initiated against the corporate debtor that is the assessee company including the present proceedings before this Tribunal, or the income tax proceedings and recovery of demand or giving effect of any order. Indofil Industries Limited vs CIT-26 2023 TAXSCAN (ITAT) 438 The Mumbai bench of Income Tax Appellate Tribunal (ITAT) recently held that the commission given to the whole time director of the company was part of salary therefore which was subject to Tax deduction at source under section 192 of the Income Tax Act 1961. The division bench of ITAT comprising B.R. Baskaran, (Accountant) and. Kuldip Singh, (Judicial Member) allowed the appeal filed by the assessee and the disallowance made under section 40(a) (ia) of the Income Tax Act 1961 in all the three years in respect of commission expenses was deleted. Mukesh Padamchand Sogani vs ACIT 2023 TAXSCAN (ITAT) 439 The Pune bench of Income Tax Appellate Tribunal (ITAT) recently held that benefit of Tax deduction at source should not be allowed in intimation under section 143(1) of Income Tax Act 1961 if it was not deposited.

After considering the contentions of the both parties the division bench of ITAT comprising R.S. Syal, (Vice President) and Partha Sarathi Chaudhury, (Judicial Member) allowed the appeal filed by the assessee and observed that “Requirement for allowing credit was only the amount of tax deducted at source and not the amount eventually getting deposited with the Government after deduction. Since a sum of Rs.8,21,149/- was duly deducted at source by the employer from the salaries credited/paid to the assessee for the year under consideration and the benefit of such tax deducted at source has to be allowed in Intimation under section 143(1) of the Income Tax Act 1961 notwithstanding the fact that it was not deposited”. Manjeet Singh, Vs. ITO, Ward-2, Karnal 2023 TAXSCAN (ITAT) 440 The Bench of Income Tax Appellate Tribunal (ITAT) enhanced the compensation with interest for acquisition of agricultural land exempted under section 10(37) of Income Tax Act, 1961.

The Coram comprising the accountant Member Dr. B. R. R. Kumar and the judicial member Sh. Yogesh Kumar US observed that in the case of Ghanshyam (HUF), the Supreme Court equated the interest received under section 28 of LA with compensation. V. K. Ispat & Alloys Vs. ITO-17(3)(5), Mumbai 2023 TAXSCAN (ITAT)441 The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) recently ruled that no penalty where addition is made on an estimated basis. The Coram comprising judicial members’ Shri Prashant maharishi, am and Ms. Kavitha Rajagopal observed that “We are of the view that the penalty under section 271(1) (c) of the Income Tax Act, 1961 cannot be levied where the addition is made on an estimated basis. We hereby delete the penalty levied by the A.O. and find. Lata Keshao Thaokar B-103 vs. ITO– Ward – 28(2)(1) 2023 TAXSCAN (ITAT) 442 The Mumbai Income tax appellate tribunal (ITAT) has recently held that income tax penalty could not be levied even if the audit was carried out after receipt of re-assessment notice. Aby T. Varkey, (Judicial Member) and Rifaur Rahman, (Accountant Member) allowed the appeal filed by the assessee and observed that, “There is no difference between the return of income and assessed income. It clearly establishes that there is no ulterior motive in not filing the belated audit report in this case. It is only ignorance and misguidance,”

M/s Headmaster Saloon Pvt. Ltd. vs. The DCIT 2023 TAXSCAN (ITAT) 443 The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, has recently, in an appeal filed before it, held that a wrong claim of depreciation does not attract a penalty. The Chandigarh ITAT noted: “Apropos the issue of depreciation on the purchase of machinery, as per the assessee, the duplicate bills could not be produced, as the vendor having a closed shop, the assessee could not obtain the same, when the original bills stood misplaced. However, as rightly observed by the ld. CIT(A), in the event of the assessee not being able to obtain copies of the bills from its vendor, ought to have provided the details of such vendor to the Department so as to enable it to ascertain the factual position.

The assessee not having done so, an adverse inference was correctly drawn against the assessee and the penalty was rightly levied. However, the penalty ought to have been levied at the minimum rate, i.e., 100% and not 111.5 %, as has been done. The AO is directed to scale down the levy of penalty on this count accordingly.” M/s. Panexcell Clinical Lab Pvt. Ltd. R–374 vs Asstt. Commissioner of Income Tax Circle–15(2) (2) 2023 TAXSCAN (ITAT) 444 The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has recently in an appeal filed before it, held that payment to volunteers for drug analysis supported by signed vouchers, is allowable as expenditure. “In absence of any other allegation, we find no basis for confirming the disallowance upheld by the learned CIT (A). Accordingly, we direct the AO to delete the disallowance in respect of drug analysis expenses.

As a result, the ground raised in the assessee’s appeal is allowed.” Vodafone Business Services Ltd vs DCIT 2023 TAXSCAN (ITAT) 445 The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has recently, in an appeal filed before it, held that computer software is eligible for depreciation at 60%. The Hon’ble high court has held that as long as it fell within the definition provided in the appendix it qualified as computer software for enhanced rate of depreciation of 60%. The ITAT, Ahmedabad Bench, in the case of Voltamp Transformers Ltd., has also categorically held that Income Tax Rules providing for rate of depreciation makes no distinction between the system software and application software while prescribing 60% depreciation thereon. Therefore, the distinction pointed out by the ld.DR that software of the assessee was utility software and such softwares qualify as intangible assets for the purposes of rate of depreciation, we hold is of no relevance.”, the ITAT Panel consisting of Madhumitha Roy, the Judicial Member, along with Annapurna Gupta, the Accountant Member.

Banpal Oilchem Pvt. Ltd. vs. The ACIT 2023 TAXSCAN (ITAT) 446 The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that the advance to the subsidiary company which was written off due to the non-repayment should be deductible under Section 37(1) of the Income Tax Act 1961. The Division Bench observed that “From the facts it is evident that the purpose of the assessee to advance the loan to its subsidiary were two-fold, firstly, to extend into a similar line of business and secondly to insulate the business of the assessee from the vagaries of its existing business owing to dependency primarily on one client based out of Germany. Therefore, in the instant facts, we are of the considered view that the loss on account of non-payment of the advance of the subsidiary was a business loss in the assessee’s line of business and the same is allowable as a business reduction to the assessee.” M/s Welgrow Hotels (P) Ltd vs. Income-tax Officer 2023 TAXSCAN (ITAT) 447 The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held that common area maintenance charges are subject to TDS u/s 194 C. The ITAT Bench consisting of Dr. B.R.R Kumar, the Accountant Member, along with N.K Choudhry, the Judicial Member, observed: “We have given thoughtful consideration to the peculiar facts and circumstances of the case.

Considering the peculiar facts and circumstances of the case, as the Hon’ble Coordinate Bench has already dealt with the identical issue and categorically held that for CAM charges, the provisions of Section 194-C of the Act are applicable.” Shri Pankaj Chimanlal Lodhiya vs. The Assistant Commissioner of Income-tax 2023 TAXSCAN (ITAT) 448 The Income Tax Appellate Tribunal (ITAT), Rajkot Bench, has recently, in an appeal filed before it, held that there is no penalty as checking, cross-checking and reconciliation of data was a very lengthy Process and a valid “reasonable cause” for non-filing of ITR. The Rajkot ITAT commented: “We have given our thoughtful consideration and perused the materials available on record. The first argument of the assessee, namely that the penalty provisions of Section 271F are not applicable in the case of a search and calling for the assessee to file the Return under section 153A of the Act, which goes to the root of the case. However, the other submissions of the assessee namely”reasonable cause” for the delay in filing the Returns of income in response to the 153A notice on 08.08.2014.”

Prosperous Buildcon Pvt Ltd vs. I.T.O 2023 TAXSCAN (ITAT) 449 The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it regarding TDS on interest income on FDRs, rejected the plea by Emaar’s subsidiary on interest paid to the parent company. The ITAT Bench consisting of C.M Garg, the Judicial Member, along with, N.K Billaiya, the Accountant Member, observed: “We have carefully perused the orders of the authorities below. There is no dispute that the assessee has purchased FDRs from the interest free borrowed funds from its parent company M/s EMAAR MGFLand Limited. It is equally true that on such FDRs, interest was received by the assessee on which bank deducted TDS. It is equally true that the assessee has claimed credit of TDS in its return of income. Therefore, the contentions/submissions of the counsel of the assessee, are baseless and deserve to be rejected.” M/s Jindal Saw Ltd vs. DCIT 2023 TAXSCAN (ITAT) 450 The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently held that payment towards bus hire charges and wharf age charges are subject to Tax Deduction at Source under section 194 C of Income Tax Act 1961.

The bench observed that “payments made towards bus hire charges and wharfage required deduction of tax at source under section 194C o f the Act and accordingly, deleted the demand raised under sections 201(1) and 201(1A) of the Act. Admittedly, the assessee has deducted tax on both the payments applying the provisions of Section 194C of the Act” M/s. Ride A Cycle Foundation vs. ITO 2023 TAXSCAN (ITAT) 451 The Income Tax Appellate Tribunal (ITAT), Bangalore Bench, has recently, in an appeal filed before it, while granting relief to Ride a Cycle Foundation, held that the applicability of S. 2(15) of the Income Tax Act, shall not be based on the default of parties. The Bangalore ITAT concluded: “In this regard, the contentions that the assessee may put forth should also be considered by the CIT(A) rather than deciding the appeal on the basis of default of parties. For the above reasons, I set aside the order of the CIT(A) and remand the issue of applicability of proviso to section 2(15) of the Act, to the CIT(A) for fresh consideration, after affording the assessee opportunity of being heard.”

Keeday Makauday Foundation vs. CIT 2023 TAXSCAN (ITAT) 452 The Income Tax Appellate Tribunal (ITAT), Jaipur Bench, has recently, in an appeal filed before it, held that income tax registration u/s 12AB cannot be denied to trust, after supplying all desired information as per query letter. “From the entire consensus of the issue in question, we feel that the ld. CIT (E) is not justified in denying the registration 12AB of the Act when the assessee foundation/ trust has supplied all the desired information as per his query letter and he did not controvert them which indicates that the order passed by the ld. CIT (E) suffers from infirmity which cannot be sustained. Thus, appeal of the assessee foundation is allowed.” M/s. Global Consultants & Designers Pvt. Ltd. vs Income Tax Officer 2023 TAXSCAN (ITAT) 453 The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held shortage towards principal in a lending business is allowable as bad debt. The Delhi ITAT concluded: “There is also a force in the contention of Ld. Counsel for the assessee that in any case, if a shortfall in interest is adjusted from the principal amount on the principle of first appropriation towards the interest before applying it to the principal. Then being in the lending business, the shortage towards principal would be allowable as bad debt. Which assessee prevented. Being in the lending business the bad debt ratio is crucial to the assessee and thus business expediency cannot be more justified than here. Consequently, grounds are allowed in favor of the assessee and the appeal is allowed.”

Northern Operating Services Pvt. Ltd vs. Joint Commissioner of Income Tax 2023 TAXSCAN (ITAT) 454 The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) has held that the expenditure towards “Erroneous disallowance of Payment of Employee Stock Option Plan (ESOP) would be eligible for deduction under Section 37 of the Income Tax Act1961. The Division Bench of George George K (Judicial Member) and Padmavathy S, (Accountant Member) allowed the appeal referring to the decision in Novo Nordisk India P. Ltd. v. DCIT, and held that the expenditure towards ESOP would be eligible for deduction under Section 37 of the Income Tax Act 1961. Sanjiv Dutta vs Income-tax Officer 2023 TAXSCAN (ITAT) 455 The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has deleted the penalty under Section 271B of the Income Tax Act 1961 as the completion of the audit and furnishing of the tax audit report was before the conclusion of assessment proceedings. The Division Bench of Anil Chaturvedi, (Accountant Member) and Narender Kumar Choudhry, (Judicial Member) allowed the appeal and deleted the penalty imposed observing that, “Even it is not the case of the Revenue Department that the Assessee has failed to get his accounts audited for the year under consideration and/or failed to furnish a report of such audit as required u/s 44AB of the Act before the finalization of the assessment order, as mandated u/s 271B of the Act.”

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