Bank Charges & Bank Guarantee Charges Wrongly Included As Interest: ITAT

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that bank charges and bank guarantee charges do not partake in the character of interest and had been wrongly included as interest while making disallowance under section 14A of the Income Tax Act.The bench of G.S.Pannu (Vice President) and Kul Bharat (Judicial Member) has observed that the assessee had disallowed the expenditure related to administrative expenses. However, in respect of the disallowance for the interest, it was...

Long Term Capital Gain On Sale Of Shares By Mauritius Company Is Not Liable To Be Taxed In India: ITAT

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that long-term capital gain on sale of shares by Mauritius Company is not liable to be taxed in India.The bench of Vikas Awasthy (Judicial Member) and Naveen Chandra (Accountant Member) has observed that the assessee had claimed long-term capital gains arising from the sale of shares as exempt from tax in light of Article 13(4) of India-Mauritius DTAA. LEI Singapore Holdings Pte. Ltd. deducted tax at source on the payments made to...

Profit On Sale Of Listed Shares Held For More Than 12 Months To Be Taxed As Long-Term Capital Gains: ITAT

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the profit on sale of listed shares held for more than twelve months should be taxed as long-term capital gains.The bench of G.S. Pannu (Vice President) and Anubhav Sharma (Judicial Member) has observed that provisions of Section 28(iv) of the Income Tax Act per se do not apply to the disputed transaction, as the assessee has held such shares in the capacity of promoter shareholder and not for the purpose of trading and has...

ITAT Allows Depreciation Claim On Non Compete Fee, Deletes Penalty

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has allowed the claim of depreciation on non-competing fees.The bench of Yogesh Kumar U.S. (Judicial Member) and Pradip Kumar Kedia (Accountant Member) has deleted the penalty imposed pursuant to the addition of Rs. 21,89,970 made on account of disallowance of depreciation on noncompeting fees.The assessment order came to be passed against the assessee by making disallowance on account of depreciation claimed on non-compete fee of Rs....

Payments For Certification Services Rendered By Foreign Entities Not Taxable In India In Absence Of Fixed Place Of Business In India: Ahmedabad ITAT

The Ahmedabad ITAT held that the services rendered for product certification, which include evaluating technical quality and issuing certificates, do not fall under the definition of Fees for Technical Services as per Section 9(1)(vii) of the Act. Section 9(1)(vii) of Income Tax Act states that any income that is deemed to accrue or arise in India, even if the income is earned by a non-resident, is subject to tax in India. Referring to Supreme Court decision in CIT Vs. Kotak...

AO Must Pass Draft Assessment If He Proposes Variation In Returned Income: Chennai ITAT Explains Scope Of Sec 144C

The Chennai ITAT held that the AO must pass a draft assessment order to the eligible assessee in case he proposes to make any variation in the income or loss returned which is prejudicial to the interest of such assessee. Section 144C of the Income Tax Act provides that in case of certain eligible assessees, viz., foreign companies and any person in whose case transfer pricing adjustments have been made under sub-section (3) of section 92CA, the AO is required to forward a draft...

Obsolete Inventory Prepared In Accordance With Accounting Standards And Audited By Independent Auditor, Can Be Written Off: Delhi ITAT

Referring to the decision in case of Gillette India Ltd. Vs. ACIT (66 Taxman.com 221), the New Delhi ITAT held that once assessee had given details about inventory written off along with ledger codes, then assessee would be eligible for deduction on written-off obsolete inventory. The Bench of Yogesh Kumar U.S (Judicial Member) and Pradip Kumar Kedia (Accountant Member) reiterated that “when the taxpayer has prepared obsolete inventory in accordance with the system of accounting...

No Arm's Length Addition Is Warranted On Account Of Corporate Guarantee If Guarantee Fee Is Lower Than Bank's Quoted Interest Rate: Ahmedabad ITAT

Finding that the TPO did not present compelling evidence to establish that the guarantee fee was unwarranted, the Ahmedabad ITAT held that benefits derived, as seen in lower interest rates and favorable operating margins, substantiate the transaction's arm's length nature. The ITAT added that the effective borrowing cost, including the guarantee fee, was lower than the bank's quoted interest rate, thus justifying the economic rationale for the guarantee fee. The Bench of Suchitra...

Cash Sales Can't Take Place Before Commencement Of Business: Delhi ITAT Deletes Addition U/s 69A On Receipts From Such Sale

The New Delhi ITAT held that a business man deposits consideration from sale of his products on respective dates of sales as per his needs and prudence, and therefore, the AO cannot tax the receipts and income embedded therein together. Hence, the ITAT deleted the addition made u/s 69A on account of cash sales during demonetization. As per Sec 69A of Income tax Act, where in any financial year the assessee is found to be the owner of any money, bullion, or other valuable article...

Indexation Benefit Shall Be Given To Taxpayer Based On Cost Of Acquisition Of Property Sold By Him: Delhi ITAT

The New Delhi ITAT held that the assessee is entitled to avail the benefit of carry forward of long-term capital loss on sale of residential property against long term capital gain computed on sale of commercial property. The Bench of Saktijit Dey (Vice-President) and M. Balaganesh (Accountant Member) observed that “as on the date of the conveyance deed, the value of the property is more than Rs.45 lakhs. Moreover, there is direct evidence on record, which indicates that the assessee, in...

AO Can't Make Additions Solely Based On Retracted Statement Of Third-Parties If Assessee Has Claimed Opposite: Chennai ITAT

Referring to the decision of Madars High Court in case of P.V. Kalyanasundaram (155 Taxman 454), the Chennai ITAT held that once the assessee had denied payments made by it, then he cannot be expected to prove the negative. Going further, the Bench held that the AO cannot make additions solely based on retracted statement of third-parties, if assessee had claimed otherwise. The Bench of Aby T. Varkey (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member) observed that “no...

Block Period Of Six AYs For Purpose Of Sec 153C Has To Be Reckoned From Date Of Receipt Of Documents By AO: Delhi ITAT

The New Delhi ITAT held that for purposes of assessment u/s 153C, the date of recording of satisfaction of AO will be deemed date for the possession of seized documents. Section 153C of Income tax Act empowers the Assessing Officer of the person searched to handover the money, gold, jewellery, or other relevant articles/things or books of account or documents belonging to the other person to the Assessing Officer of that other person and the Assessing Officer of that other person. ...