ITO v Mittal Investment & Co. [IT Appeal No. 1951 (Delhi) of 2012] (Del ITAT) Background: The assessee, a partnership firm, was engaged in the business as agent of post office schemes, PPF, RBI Bonds, LIC, Mutual Funds etc. on commission basis. The assessee had claimed expenses of Rs. 20,85,695/- on account of commission expenses. During the course of assessment proceedings, AO required the assessee to furnish complete details of commission paid with proof of TDS deducted and deposited on the commission so paid. Since, no TDS was deducted u/s 194H, the AO disallowed the commission u/s 40(a)(ia) for non deduction of tax.
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ITO vs. LKP Securities Ltd (ITAT Mumbai) In AY 2008-09 the assessee collected employees’ contribution to the Provident Fund and ESIC but did not pay it within the due date prescribed by the relevant legislation. The amount was, however, paid before the due date of filing the ROI. The AO assessed the said amounts as income u/s 2(24)(x) but declined to grant a deduction u/s 36(1)(va) as the amount had been paid after the due date. The CIT(A), relying on Alom Extrusions 319 ITR 306 (SC) and AIMIL 321 ITR 508 (Del) held that the amounts had to be allowed as a deduction u/s 43B as they had been paid before filing the ROI. On appeal by the department to the Tribunal, HELD reversing the CIT(A):
Employees’ PF/ ESI Contribution is not covered by s. 43B – Mum ITAT
M/s WINDERMERE PROPERTIES PVT LTD v DCIT ITA No.7192/Mum/2010 (Mum ITAT) Background: The assessee claimed deduction of Rs. 11.05 crore towards interest u/s 24(b) of the Income-tax Act, 1961 in the computation of income under the head “Income from house property”. On perusal of its details, the Assessing Officer noticed that it comprised of the interest of Rs. 9.48 crore and prepayment charges of Rs. 1.56 crore. The Assessing Officer held that the prepayment charges of Rs. 1.56 crore would not fall u/s 24(b) of the Act. Resultantly, the deduction was denied for such amount. No relief was allowed in the first appeal.
Prepayment charges on foreclosure is akin to interest – Mum ITAT
M/s IFB AGRO INDUSTRIES LTD v JCIT (ITA No.114/Kol/2013) (Kolkata ITAT) Background: The assessee is a company engaged in the business of manufacture of rectified spirit and IMFL, marine products and trading of feed and beer. The assessee had received Inter-corporate deposits from M/s. IFB. Assessee held 18.82% of the shares of M/s. IFB. The AO treated the same as a loan received by the assessee from M/s. IFB. and invoked the provisions of section 2(22)(e) of the Act. An amount of Rs.17.5 cr. was deposited by M/s. IFB through RTGS in the bank account of the assesee but Rs.12 cr. out of the same was immediately returned as it was deposited without the assessee’s permission. On appeal, the CIT(A) had accepted the contention of the assessee that the Inter corporate deposit was only to an extent of Rs.11.20 cr. However, the CIT(A) had treated the Inter corporate deposits as a loan and had consequently treated the amount of Rs.11.20 cr. as deemed dividend u/s. 2(22)(e) of the Act.
Deemed dividend not applicable in case of inter-corporate deposits – Kol ITAT
Asst DIT v M/s Clifford Chance (ITA Nos. 5034/Mum/2004, 5035/Mum/2004, 7095/Mum/2004, 3021/Mum/2005 AND 2060-61/Mum/2008) (Mumbai Special Bench) Background: The assessee is a U.K. partnership firm of Solicitors. It is engaged in providing international legal services. During the years under consideration, it rendered legal consultancy services in connection with different projects in India. Although it did not have an office in India, some part of the work relating to the projects in India was performed in India by its partners and employees during their visits to India. For assessment years 1999-2000, 2000-01, 2001-2002 and 2003-04, the returns of income were filed by the assessee declaring NIL income on the ground that the aggregate period or periods of stay of its partners and employees during the said years did not exceed 90 days and its income therefore was not taxable in India in these years.
Linklaters ruling overruled by Mumbai Sp Bench in Clifford Chance
Marubeni India Pvt. Ltd. v DIT (ITA 1042/2011 dtd 25.04.2013) Delhi High Court Background: The assessee is a private limited company incorporated in India under the Companies Act, 1956. It is a 100% subsidiary of Marubeni Corporation, Japan(MCJ). It carries on mainly two types of business – agency and market research business. The assessee filed a return of income on 31.10.2002 declaring “nil” income for AY 2002-03. In the course of the assessment proceedings, the assessee’s case was referred to the transfer pricing officer (TPO). The TPO proposed an addition of Rs 2,60,49,881/- on the ground that the commission and service fees received by the assessee from MCJ did not represent arm’s length price. The TPO treated the interest income of Rs 1.72 crores received by the assessee as non-operating income. Because of this treatment accorded to the interest, the profits of the companies which were taken for comparison purposes were found to be more than the profits earned by the assessee. The TPO was further of the view that in respect of the services rendered by the assessee, it should be remunerated on a cost-plus basis and the total costs should be made the basis of computing its earnings and not merely the commission and fixed feespaid to it.
Interest being non-operating income & other non-operating expenses to be excluded from computing ALP – ...
Mrs Amisha B Koradia v ITO (ITA No.03/Mum/2011 dtd 19.04.2013) Mumbai ITAT Background: The assessee is a beneficial shareholder in M/s Koradia Construction Pvt Ltd, and has 50% of share-holding. During the course of assessment proceedings, the AO noted that the assessee has taken loan of Rs. 78,10,000/- various dates from this company which has accumulated profit of Rs. 8,00,97,861/-. In the absence of explanation, the AO treated the loan as deemed dividend u/s 2(22)(e) of the Act and added Rs. 78,00,000/- to the income of the assessee. The assessee filed an appeal before the CIT(A) and argued that the AO ignored the fact that the said sum includes remuneration of Rs 2 lacs, opening debit balance of Rs 5,32,396, other debit balances of Rs 4,75,000 amounting to Rs 12,10,396. Further, it includes a sum of Rs. 58 lacs represents advance received from the company towards purchase of flat which ultimately could not go through and the amount was later on refunded. The CIT(A) granted relief to the extent of Rs 12,10,396 and confirmed the balance addition.
Deemed dividend not attracted for loan in the course of business transactions – Mum ITAT
Smt Sriram Indubal v ITO (ITA No: 1950 MDS of 2012 dtd 31.01.2013) – Chennai ITAT Background: The assessee had sold a property comprising of land and building for a consideration of Rs. 3,46,50,000. Sale proceeds were invested by the assessee in 54EC bonds in two instalments i.e. first Rs. 50 lakhs in REC Bond on 27.2.2008 and second Rs. 50 lakhs in NHAI Bond on 27.06.2008. The AO held that investments under section 54EC had to be made within six months from the date of transfer of capital asset. Since the statute pegged the investment for which exemption was allowable in an assessment year to Rs. 50 lakhs, the second sum of Rs. 50 lakhs invested on 30.6.2008 was not eligible for deduction under Section 54EC of the Act.
54EC allowed to the extent of Rs 1 crore if split equally between 2 financial ...
CIT v M.D. Jakir Hossain Mondal (ITA No 31 of 2013 dtd 04.04.2013) (Calcutta High Court) Background: The assessee incurred expenditure of Rs. 31 lakhs on freight but did not deduct TDS thereon u/s 194C. The AO held that as there was a failure to deduct TDS, the expenditure could not be allowed as a deduction u/s 40(a)(ia). However, the CIT(A) allowed the claim on the ground that the freight charge was a part of the price of the goods and there was no contract between the assessee and the transporter.