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2021-07-15
Issue No. 239 / July 15th, 2021
Dear Professionals,
We are glad to present to you the 239th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Key Takeaways from Handpicked Rulings
1) HC: ‘Expansion’ different from ‘extension’; 2015 amendment to Sec. 36(1)(iii) prospective - HC deletes the disallowance u/s 36(1)(iii) towards interest on borrowed capital for AYs 2013-14 & 2014-15; Holds “…word 'expansion' and 'extension' connote different meaning and legislature in its wisdom has used the terms differently under various provisions…therefore, the words cannot be used synonymously”; Assessee – Coffee Day Global filed its NIL return for AY 2013-14, wherein the AO disallowed a sum of Rs. 1.46 Cr. representing interest on borrowed capital on the grounds that it was utilized towards WIP, similar disallowance was made in AY 2014-2015; ITAT upheld the disallowance made by the AO on the grounds that in terms of proviso to section 36(1)(iii) the interest cost ought to have been capitalized; HC observes that prior to amendment of Section 36(1)(iii) in the year 2015, interest on borrowed capital utilized for the purpose of business or profession had to be allowed irrespective of the fact that it i...............Click here to read and download HC Judgment
2) ITAT: Service by affixture of notice devoid of witness, after office hours, invalid - ITAT quashes reassessment proceedings u/s 148 for AY 2008-09;Revenue completed assessment u/s 147 r.w.s 143(3) in respect of Assessee - private limited company making addition u/s 68, based on the information received from the Investigation wing stating that Assesseeobtained accommodation entries of Rs.30 lakhs on account of share capital; ITAT observes that the Assessee is correct in pleading that the notice u/s 148 was served through affixture without resorting to service by post etc, and as per Sec. 282 read with service rules from 9 to 17/20 of order ‘V’ under CPC, 1908, affixture made after working hours and without identification of place/witness makes the proceedings u/s 147/148 as void ab initio; Accepts Assessee’s submission that none of the Directors of the entity, to whom shares were allotted, were present and the AO never conducted any enquiry from the said party nor rejected evidences placed before him; Holds that the approval u/s 151 for issuance of notice u/s 148 was granted in a ................Click here to read and download ITAT Order
3) HC: Provision for bad, doubtful debts u/s 36(1)(viia) computable before adjusting b/f losses - HC upholds ITAT’s order and allows Assessee’s claim for deduction u/s 36(1)(viia), for AY 2011-12 & 2012-13, being 7.5% of total income towards provision made for rural advances before setting off of brought forwards losses; Revenue recomputed the total income restricting the deduction claimed under the said section to the provision made in the books of accounts after setting off the loss brought forward; ITAT also upheld Revenue’s treatment following Assessee’s own case for AY 2009-10 and 2010-11 and held that the deduction should be computed @ 7.5% of total income after setting off of brought forwards losses; Assessee submitted that the provision of Sec. 36(1)(viia) is a beneficent provision intended to promote rural banking and therefore should be allowed full play; HC peruses through the provisions along with the explanatory note dated 30.06.1982 and remarks “The condition precedent for claiming deduction under Section 36(1)(viia) of the Act is that a provision for bad and doubtful debt should be made in the .........Click here to read and download HC Judgment
4) HC:Deletes disallowance for not withholding tax on commission payment not taxable in India - HC upholds ITAT’s order in setting aside the disallowance made u/s 40(a)(i) on commission payments made to non-residents agents; Assessee paid commission to its Associated Enterprises which had rendered outside India in the form of placing orders with the manufacturers based outside India; Revenue disallowed the expenditure contending that Assessee had failed to deduct taxes on the amount of commission paid; HC accepts ITAT’s observation that the income of non-residents by way of commission cannot be considered as accrued or arisen or deemed to accrue or arise in India as the services of such agent were rendered/utilized outside India and the commission was paid outside India; DistinguishesSC ruling in GVK Industries Ltd. from the present case as the consultancy herein is not at all utilized in India................Click here to read and download HC Judgment
5) ITAT: Holds unauthenticated information on foreign bank accounts from French authorities inadequate – ITAT rules Revenue was not justified in invoking Sec. 153A for AYs 2006-07 & 2007-08 and making additionsas unexplained investment, in the absence of any evidence; Revenue on the basis of information received under exchange of information mechanism, that the Assessee held account with HSBC having substantial credits which were not disclosed to the department made the additions; Assessee, however challenged the authenticity of information received in pen drive as the same was not received from the bank; ITAT observes that CIT(A) failed to address the argument of the assessee with regards to the information contained in pen drive, the source thereof and author thereof and its authenticity with any credible evidence or linkage with any of the document; ITAT holds “pen drive so received was just like an anonymous letter forwarded by French Competent Authority to the Indian Competent Authority”; ITAT deletes the addition made by the department on the grounds that CIT(A) has failed to appreciate that the origin of the source of information, stating merely because information is received under DTAC agreement does not make the information credible; Remarks that passing of the information from .................Click here to read and download ITAT Order
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