Section 154 of IT Act provides for the correction of exemption claims made mistakenly

Facts and issue of the case

Facts of the case are that assessee is a University incorporated by the Burdwan University Act, 1981 by the West Bengal Legislative Assembly for imparting education. Return was filed on 22.10.2018 reporting NIL income by claiming exemption u/s. 10(23C)(vi) of the Act against aggregating annual receipt of Rs.113,13,24,059/-. The said claim of exemption was rejected in the processing of the return by the Centralised Processing Centre (CPC), Bangalore vide intimation passed u/s. 143(1) of the Act dated 20.03.2020. Against the said processing, assessee moved an application of rectification u/s. 154 of the Act on 30.07.2020 by making a correction towards the claim of exemption u/s. 10(23C) (iiiab) of the Act as against eligible claim made u/s. 10(23C)(vi) of the Act.

The rectification application was rejected vide order dated 04.09.2020 against which assessee went in appeal before the Ld. CIT(A), NFAC, Delhi who had upheld the rejection of the claim made by the assessee u/s. 10(23C) (iiiab) of the Act vide its rectification application. Being aggrieved, by the decision the petition filed appeal ITAT

Observation

There is no disputing the fact that the assessee has been providing education without a profit-making motivation and receives a significant amount of funding from the West Bengal government, according to the Ld. Counsel . He further submitted that assessee had always claimed exemption u/s. 10(23C)(iiiab) of the Act on its receipt which has always been allowed. He also referred to the assessment order passed u/s. 143(3) of the Act dated 13.12.2019 for AY 2017-18 wherein assessee had claimed exemption u/s. 10(23C)(iiiab) of the Act which was considered in the said assessment proceedings. He also referred to the assessment order for AY 2016-17 passed u/s. 143(3) of the Act dated 03.12.2018 wherein also assessee’s claim of exemption u/s. 10(23C)(vi) of the Act was considered and allowed. Ld. Counsel further cited the intimation issued under Section 143(1) of the Act for AY 2019–20 and 2020–21, or the years following the impugned order under consideration, which stated that the assessee had requested an exemption under Section 10(23C)(iiiab) of the Act in the return that had been accepted and processed by the department.

He also submitted that a rectification application was filed to correct the inadvertent mistake by making claim of exemption under the correct section of 10(23C)(iiiab) of the Act which has been unjustifiably rejected. Therefore, Ld. Counsel stressed that Rule of Consistency ought to be adopted and there is no reason to depart from the position that has already been made in light of all the aforesaid processing and assessment in the assessee’s own case of the preceding as well as later assessment years. Therefore, Ld. Counsel stressed that Rule of Consistency ought to be adopted and there is no reason to depart from the position that has already been made in light of all the aforesaid processing and assessment in the assessee’s own case of the preceding as well as later assessment years.

It was an inadvertent mistake which occurred at the end of the assessee in the filing of return where the claim of exemption was made u/s. 10(23C)(vi) of the Act instead of section 10(23C)(iiiab) of the Act. It is also noted that upon receiving intimation u/s. 143(1) of the Act wherein the inadvertent claim made u/s. 10(23C)(vi) was disallowed and remedial measure was taken by the assessee by filing an application u/s. 154 for rectifying the mistake by making a claim under the correct section of sec. 10(23C)(iiiab) of the Act. Considering the ITAT Lucknow in the case of Desh Bharti public School Samiti (supra),Court observed that mistake apparent from record is rectifiable under the provisions of section 154 of the Act which in the present case ought to have been allowed as claimed by the assessee.

Conclusion

The Court decided in favour assessee set aside the finding of the Ld. CIT(A) and direct the Ld. AO mistake had occurred as a human error and thus Assessing Officer was to be directed to allow the claim of the assessee by applying the provisions of section 10(23C)(iiiab) of the Act. Accordingly, grounds taken by the assessee in this respect are allowed.

University of Burdwan C/o S. N. Ghosh & Associates Vs ACIT (ITAT Kolkata)

Date of Hearing : 09.11.2022

Date of Pronouncement : 24.11.2022

Flat Booking vs. Possession: Section 54/54F Exemption

Facts and issue of the case

In accordance with sections 54 and 54F of the Income Tax Act, the assessee has claimed an exemption. By noting that the assessee booked the flat with the builder in an earlier year but finally took possession in later years, the assessee was disallowed this exemption. Therefore, he failed to fulfil the conditions of section 54 and 54F.

Observation of case

Findings of CIT (A)- In the instant case the appellant has earned the Long Term Capital Gain of Rs. 10,16,649/- on sale of flat at Dhanbad and Long Term Capital Gain of Rs.37,28,015/- on sale of shares of Shree Ram Electrocast Pvt. Ltd. respectively. These were claimed exemption under section 54 and 54F of the Act respectively. There is no dispute regarding quantum of Capital Gain. However, the Assessing Officer disallowed the exemption claimed by the appellant under section 54 and 54F of the Act. The sequence of events involved in the instant case are given hereunder :

• The appellant booked a flat to be constructed by the builder at Sahara Grace Gurgaon in F.Y.2003-04.
•   The appellant took home loan from ICICI Home Finance Ltd. in May, 2004 and installments were paid till March, 2010.
• Possession of the aforesaid flat was obtained by the appellant on 09.03.2009
• Against the LTCG earned by the assessee as mentioned above, the appellant claimed exemption u/s.54 and 54F.

 However, the Assessing Officer disallowed exemption claimed by the appellant under section 54 and 54F of the Act on the ground that the flat was booked with the builders for construction much before the date of transfer of capital assets (which resulted capital gains)

The moot question that arises is when the appellant is eligible for exemption u/s.54 and 54F of the Act. It should be construed from the date of booking of the flat or date of possession. The appellant has relied on several case laws to submit that it should be construed from the “date of possession”. It has been argued that as per section 53A of the T.P. Act the date of possession is the date when the assessee is to be treated as “deemed owner” and accordingly it should be treated as “date of purchase.” The Ld. A/R has accordingly argued that since Long Term Capital Gain arose within one year before the date of possession, hence the appellant is entitled to exemption u/s.54 and 54F

On going through the records, I find that substantial payments against the said flat was already made before possession. It is relevant to refer to on CBDT’s Circular No.471 dated 15.10.1986, further clarified by CBDT Circular No.672 dated 16.12.1993 that relevant extracts of which is reproduced hereunder: “Board have been advised that under the above circumstances, the inference that can be drawn is that the D.D.A. takes up the construction work on behalf at the allottee and that the transaction involved is not a sale. Under the scheme the tentative cost of construction is already determined and the D.D.A. facilities the payment of cost of construction. Therefore, for the purpose of capital gains tax the cost of the new asset is the tentative cost of construction and th fact that the amount w’as allowed to be paid in installments does not affect the legal position stated above. In view of these facts it has been decided that case of allotment of flats under the Self- Financing Scheme of the D.D.A. shall be treated as cases of construction for the purpose of Capital Gams.” Further, reliance is placed on the various case laws, w’herein it has been held that the flats constructed by the private developers are also covered by Circular 471 and 672 and therefore, entitled for deduction u/s.54 with reference to date of booking. (i) Kishor H. Galaiya Vs. Income Tax Officer, Ward 8(2)(3) [2012) 24 (ii) Assistant Commissioner of Income Tax, Circle 25(3) vs. Smt. Sunder Kaur Sujan Gadh (2005) 3 SOT 206 (Mumbai).

The moot question is whether the agreement with builder to purchase a flat that is going to be constructed, is the case of purchase or construction. In this regard, Hon’ble Court of Mumbai, in the case of Hilla T.B. Vadia 216 ITR 376 held that it is a case of construction. Further, on identical question, i.e., whether the booking of flat with the builder is to be considered a case of ACIT vs. Sardar Kaur Sujan Singh and it was held to be a case of construction. In recerh/Jidtlgements in the case of CIT vs. Bindra Kumar (2001). Hon’ble High Court of Delhi [jurisdiction High Court] has held that the purchase of property in multi storied building amounts to construction of building within the meaning of section 54(1) for the purpose of claiming of exemption.

From the judgments discussed above it is clear that the agreements with the builder to purchase a flat that is going to be constructed, is the case of construction. Thus, it is clear that the assessee has not ‘purchased’ the property at Sahara Grace, Gurgaon, but acquired it on 09.03.2009 by way of ‘construction’. Hence, the action of the Assessing Officer in disallowing claim u/s.54 and 54F of the Act is correct as deduction claimed by the appellant is not satisfying the requirements of section 54 and 54F of the Act to claim the deductin with respect to ‘construction’ of property. For claiming deductin under the condition of ‘construction’ of property’, the property must be constructed after the transfer of capital assets, resulting in Long Term Capital Gain, where from exemption u/s.54 and 54F is claimed and not before the date of transfer of capital assets. Hence, the criteria at section 54 and 54F of the Act is not satisfied and thus the assessee is not eligible for claiming deduction of the same.

Hence, appeal filed by the appellant is dismissed.

Incidentally the assessee has taken an opposite view in the case of Mr. Nithin Sonthalia (Associated Person) for A.Y.2014-15 and in the case of Kusumlata Sonthalia (A.Y.2015-16).Therefore, it cannot be the case of the assessee that it can pick and choose the benefit of section 54 and 54F both on the basis of allotment of property in some cases and possession of property in some other cases.

Conclusion

It is pertinent to observe that the case of the assessee is covered by Circular No. 471 and 672 of the CBDT, because the assessee has booked the flat, which has not been disputed by the Revenue. The dispute is that deduction ought to be claimed in the year when flat was booked and not in the year when possession was taken. The dispute is that deduction ought to be claimed in the year when flat was booked and not in the year when possession was taken. On the other hand, the case of the assessee is that capital gain has been arose in the year in which he took the possession of the flat and, therefore, this capital gain be set off against price of the flat, which ultimately came to his possession. The assessee has utilized the capital gain arose within one year from taking possession of the new flat and, therefore, on the basis of the Circulars and the judgments referred by the ld. CIT(Appeals), is entitled for the deduction. Accordingly, we allow the claim of the assessee and direct the ld. Assessing Officer to grant deduction under section 54 and 54F of the Income Tax Act. Accordingly, the appeal of the assessee is allowed exparte.

UPS and printers are part of a computer system and eligible for higher depreciation of 60%

Facts and issue of the case

The facts of the case are that the assessee company M/s.Eversendai Construction Private Limited (in short “M/s.ECPL”) was incorporated in 2009. The company is a subsidiary of Eversendai Constructions (s) Pte Ltd, Singapore. The Global Ultimate parent company is Eversendai Corporation, Berhad, Malaysia. The company is engaged in the business of engineering, design, detailing, steel fabrication, development of residential buildings and commercial complexes. The international transactions entered into by M/s.ECPL were segregated into two segments, i.e. Engineering, Procurement & Construction (in short “EPC”) Services segment and Engineering & Design Services (in short “EDS”) segment for transfer pricing purposes. Transactional Net Margin Method (in short “TNMM”) was considered as the most appropriate method and the transactions were aggregated segment-wise and concluded to be at arm’s length. Operating margin on Operating cost was selected as the Profit Level Indicator (“PLI”) for both the segments.

 AP disagreed with the assessee’s claim of depreciation of 60% on UPSs, printers, and other accessories. In accordance with the normal block of plant and machinery, AO restricted the depreciation on UPSs, printers, and other accessories to 15%.

Observation of court

TPO order u/s.92CA(3) of the Act, dated 28.10.2016, the AO has passed draft assessment order u/s.143(3) r.w.s.144C(1) of the Act, on 30.06.2017 and proposed TP adjustment as suggested by the TPO. The AO had also made additions towards disallowance of employee’s contribution to PF & ESI for belated remittances under respective Acts and also disallowed excess depreciation claimed on printer, UPS and port switch, etc. Aggrieved by the draft assessment order, the assessee filed objection before the DRP and the DRP vide their order passed u/s.144C(5) of the Act, dated 05.05.2017 rejected the objection filed by the assessee and upheld TP adjustment proposed by the TPO as well as other Corporate Tax additions made by the AO. In pursuant to the DRP directions, the AO has passed final assessment order u/s.143(3) r.w.s.144C(13) of the Act, on 30.06.2017 and determined total income of Rs.1,80,55,800/- by making additions towards TP adjustment, excess depreciation on printer, UPS & port switch, and disallowance of reimbursement of expenses. Aggrieved by the final assessment order, the assessee is in appeal before us.

Conclusion

The ITAT’s ruling in the case of Sundaram Asset Management Co. Ltd. v. DCIT, LTU, reported in [2013] (Chennai-Trib. ), which clearly held that UPS and printers are part of a computer system and eligible for higher depreciation of 60%, resolves this issue in the assessee’s favour. A similar view has been taken by the Mumbai Tribunal in the case of Macawber Engineering System (India) Pvt. Ltd. v. ACIT reported in [2013] The ITAT held that the assessee is entitled for 60% depreciation on UPS and Printers and thus, we direct the AO to allow 60% of depreciation on UPS and Printers as claimed by the assessee.

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Order and SCN differ on the legal grounds; Delhi HC dismisses the case

Facts and issue of the case

The writ petition has been filed challenging the notice issued under Section 148 of the Income Tax Act, 1961 (‘the Act’) dated 25th June, 2021 as well as the notice issued under Section 148A A(b) of the Act dated 21st May, 2022, order passed under Section 148A(d) of the Act dated 29th July, 2022 and the notice issued under Section 148 of the Act dated 30th July, 2022 for the Assessment Year 2017-18.

M/s. Usha Rani Girdhar (“the Petitioner”) had sold the immovable property in the Assessment Year 2017-18 and the long-term capital gain arose by such transaction was not disclosed in the Income Tax  Return (“ITR”) of same  period.

In accordance with information obtained from an Income Tax Officer (“ITO”), the AO informed the Petitioner of a Notice under Section 148A(b) of the Income Tax Act, 1961 (“the IT Act”), dated May 21, 2022 (“Notice”), alleging that the Petitioner had failed to disclose a long-term capital gain.

Observation

The AO then passed an Order dated July 29, 2022 in accordance with Section 148A(d) of the IT Act (hereinafter referred to as “the Order”), and issued a SCN dated July 30, 2022 in accordance with Section 148 of the IT Act, for initiating proceeding for the Assessment Year 2017-18.

The Notice and the Order, according to the petitioner, were for two different immovable properties. The Order was given for the property in Rohini Section-34 in Delhi, whereas the Notice was for the property in Kingsway Camp in Delhi.

The Revenue (“the Respondent”) accepted the mistake of issuance of the Notice and the Order related to distinct immovable properties and prayed before the High Court to rectify mistake by issuing a Supplementary Notice under Section 148A(b) of the IT Act

Whether the tax authorities can issue Supplementary Notice for incorporating primary allegation which was not present in the Notice?

It was held that the intent of issuing Notice under Section 148A(b) of the IT Act is to inform the Petitioner of the allegations against him with sufficient particulars so that he can put forward his defence.

Relied on the ruling in Catchy Prop-Build Private Ltd. v. Assistant Commissioner of Income Tax & Anr., [2022] 448 ITR 671 (Del) and determined that if the foundation allegation was missing from the notice issued under Section 148A(b) of the IT Act, the same cannot be incorporated by issuing a supplementary notice.

Conclusion

Present writ petition is allowed and the show cause notice issued under Section 148A(b) of the Act as well as the order passed under Section 148A(d) of the Act and the notice issued under Section 148 of the Act for the Assessment Year 2017-18 are set aside.

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Delayed deposit of employee’s contribution to PF/ESI upheld by ITAT

Facts and Issue of the case

The facts of the case  Ld.DR. reiterated the grievance raised in M.P. and submitted that there is mistake regarding disallowance due to belated remittance of PF/ESI pursuant to the decision of Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. Vs CIT-1 reported in [2022] The ld. AR objected for recalling the order passed by the bench and submitted that the there is no mistake apparent from the record.

Considering the rival submissions, it was observed that there is apparent mistake on the order passed by the bench in regard to the belated remittance of PF/ESI as per the respective Act in pursuant to the decision of Hon’ble Supreme Court recently passed in case of Checkmate Services (P.) Ltd. Vs CIT- 1 (supra). I therefore, rectify this mistake which is apparent from the record and the order passed by the bench is recalled.In the result the miscellaneous petition filed by the revenue is allowed. The case was heard on merits.

Observation of court

The ld. DR submitted that the latest decision of the Hon’ble Supreme Court in the case of Checkmate Services (P.) Ltd. Vs CIT-1, [2022] where the Apex Court has held that Section 43B(b) does not cover employees’ contributions to PF/ESI etc. deducted by employer from the salaries of employees and that employees’ contribution has to be deposited within the due date u/s 36(1)(va) of the Act i.e. due dates under the relevant employees welfare legislation like PF/ESI Act etc., failing which the same would be treated as ‘income in the hands of the employer’ u/s.2(24)(x) of the Act. Therefore, the order of lower authorities should be restored.

The ld. AR reiterated the order dated 02/06/2022 passed by the bench and submitted that in the intimation issued under section143(1)(a) of the Act on 18.09.2019, the aforesaid disallowance was made and, therefore, one has to examine as to whether it was within the powers of the Revenue authorities to make the disallowance while electronically processing the return of income under section 143(1)(a) of the Act. She further submitted that the only prime facie arithmetical mistakes has be rectified and referred to the Explanation of the section.

On the rejoinder submitted by the ld.DR, the adjustments u/s 143(1)(a) of the Act can be made and in the section, it is very clear that which type of adjustments can be made. He also relied on judgment of the Hon’ble Madras High Court in the case of AA520 Veerappampalayam Primary Agricultural Cooperative Credit Society Ltd. Vs. Deputy Commissioner of Income-tax reported in (2022) 138 taxmann.com 571, wherein he also relied on the decision of the coordinate bench of the Tribunal in the case of M/s. IV Sanctum vs Asstt. Director of Income Tax CPC Bengaluru, in ITA No. 986/Bang/2022 vide order dated 24.11.2022 for the AY 2019-20

After considering the rival submissions Court notice that the Hon’ble Supreme Court in the case of Checkmate Services (supra) has considered the issue of whether the employees’ contribution paid before due date for filing the return of income u/s.139(1) of the Act otherwise allowable u/s.43B of the Act and putting to rest the contradicting decisions of various High Courts.

Conclusion

After hearing to the both parties it was held that the addition can be made in respect of the employees’ contribution in regard to PF/ESI, which has not been deposited within the stipulated date as per the respective Act, since in the case on hand, the assessee has not deposited the employees, contribution within the due date as per the respective Act. Therefore, the disallowance can be made as per section 36(1)(va) r.w.s. 2(24)(x) of the Act.

Genuine hardship faced by the tax consultant that caused the delay in filing a return is allowed

Facts and issue of the case

The petitioner, being a firm engaged in the business of real estate, builders and developers since 3rd March, 2007, had entered into a joint venture agreement dated 12th May, 2008 with M/s Sanghvi Premise Pvt. Ltd. to jointly develop a housing project named “Sanghvi Nakshatra” situated at Nasik and the project having met the conditions under Section 80 IB (10) of the Act was entitled to a deduction under that Section for the AYs 2010-11 to 2013-14 However, in case of petitioner for A.Y. 2011-2012 the return of income remained to be filed in time by the Chartered Accountant.

The joint venture partner, Sanghvi Premise Pvt. Ltd., has already successfully claimed the aforementioned deduction for the AYs 2010-11 to 2013-14, according to learned counsel for the petitioner. He would submit that even the petitioner has been granted the deductions under Section 80 IB(10) for the AYs 2010-11, 2012-13 and 2013-14. He would submit that, however, with respect to the AY 2011-12 the return of income remained to be filed in time by the Chartered Accountant entrusted with the filing of returns. Learned counsel would submit that the petitioner had engaged M/s B.S. Mart and Associates as the chartered accountant firm who had recommended one Mr. Damodar Narayan Panchal as tax consultant for the task of looking after petitioner’s filing of returns. However, in view of the said tax consultant’s son’s handicap coupled with innumerable medical emergencies in the year 2011, the said tax consultant overlooked the filing of ITR not only in petitioner’s case but also of many other clients of the said chartered accountant’s firm. Mr. Bora would submit that the said tax consultant’s affidavit clearly setting out the circumstances which led to the omission to file the petitioner’s as well as the returns of around 28 other assessees for AY 2011-12 to the petition.

Mr. Bora submits that the present petition only pertains to the AY 2011-12, wherein the tax consultant was supposed to file the return on or before 30th September, 2011. However, due to the inadvertent delay on his account, the ITR was filed on 30th September, 2012 after making a delay of 365 days. Learned counsel submits that the books of accounts of the petitioner were audited on 21st September, 2011 i.e., well within the due date. Learned counsel submits that therefore the petitioner firm filed an application dated 11th October, 2019 under Section 119 (2) (b) of the Act seeking condonation of delay in filing of the ITR for AY 2011-12 caused due to the said tax consultant, depriving the petitioner of a deduction of Rs. 2,42,88,917/- causing grave hardship to the said firm.

Aggrieved by the rejection of its application under Section 119(2)(b), by the CBDT, the petitioner has filed petition to HC

Observation of court

Mr. N. N. Singh, learned Senior Standing Counsel for the respondents refers to the affidavit in reply dated 8 th November, 2021 filed on behalf of the respondents. He would submit that the return of income was due to be filed on 30th September, 2011 but was filed only on 30th September, 2012 i.e., after a delay of 365 days, although, the books of accounts of the petitioner were admittedly audited on 21st September, 2011 and the assessment was completed on 14th March, 2014 disallowing the deduction claimed by the petitioner under Section 80 IB (10) of the Act. It is submitted that after due consideration of all the facts, circumstances and material on record, the application dated 11th October, 2019 of the petitioner has been rejected by the impugned order dated 7th May, 2021.

The application was correctly rejected because the income tax consultant had attended several limitation matters before March 30, 2012, which made the filing of the petitioner’s return for the (AY) 2011–12 an act of negligence. As a result, the learned standing counsel would argue that the filing of the return of income late cannot be justified. He would argue that the application under Section 119(2)(b) of the Act was only submitted on October 11, 2019, more than 5 years late, in order to claim the deduction under Section 80 IB (10) and that the said is inane and bad in law .

Learned counsel would submit that no man can take advantage of his own wrong and the ground of income tax consultant’s omission due to his son’s physical and mental condition and ill health cannot be used by petitioner to claim hardship. Learned counsel also submits that the petitioner has already availed of the benefits under the DTVSV Act as the petitioner has already been issued Form 3 whereby petitioner is liable to pay 100% of the tax liability without any interest and penalty, the petition deserves to be dismissed.

It is undeniable that the petitioner participated in the Sanghvi Nakshatra housing project in Nasik as a joint venture partner of Sanghvi Premise Pvt. Ltd. Sanghvi Premises Pvt. Ltd. was granted deductions under Section 80 IB (10) of the Act for the AYs 2010-11 to 2013-14, and this is also not disputed by the respondents. Admittedly, the petitioner has also been allowed deduction under Section 80 IB (10) for the said project for the AYs 2010-11, 2012-13 and 2013-14.

Only for the AY 2011–12 was the return of income finally submitted on September 30, 2012, following a 365-day delay. For the said assessment year, the petitioner has claimed deduction of Rs.31,06,990/- under Section 80 IB (10) of the Act which was  disallowed by the Assessing Officer under intimation issued under Section 143 (1) of the Act by application of Section 80 AC of the Act for the reason that the return of income had been filed  beyond the time permitted under Section 139 (1) of the Act. The petitioner had filed rectification application before the Assessing Officer against the said disallowance which came to be rejected by order under Section 154 of the Act. The said order was confirmed by the CIT(A). Before the ITAT the claim for deduction under Section 80 IB (10) was allowed on the ground that this being a debatable issue, cannot be rejected under Section 143 (1) of the Act.

Court view ,the affidavit of the income tax consultant which has neither been disputed nor controverted by the respondents is sufficient cause for condonation of delay in filing the application under Section 119 (2)(b) of the Act. Besides it is not in dispute that the return for AY 2011-12 was in fact filed by the petitioner albeit 365 days later on 30th September, 2012. That in respect of the other years from 2010-11 to 2013-14 except 2011-12, the income tax authorities have allowed the deduction under Section 80 IB (10) through the petitioner. In our view, substantial injustice would be caused to the petitioner if the order dated 7th May, 2021 is not set aside. This is clearly a case falling within the phrase “genuine hardship”. As mentioned above. Technical consideration above cannot come in the way of substantial justice. It is neither an allegation of malafide nor an allegation that the delay has been deliberate. We do not find that the omission to file petitioner’s return by the income tax consultant to be an act of negligence. Any person in his situation would have been mentally disturbed. The very fact that not only the petitioner’s ITR was not filed in time, there were also 28 others whose return filing was delayed beyond the due date. The authorities should refrain from over analysis which leads to paralysis of justice

Conclusion

After hearing to the both parties the petition allowed by petitioner. The affidavit of the income tax consultant which has neither been disputed nor controverted by the respondents is sufficient cause for condonation of delay in filing the application under Section 119 (2)(b) of the Act. Court does not find that the  omission to file petitioner’s return by the income tax consultant to be an act of negligence. Any person in his situation would have been mentally disturbed. The very fact that not only the petitioner’s ITR was not filed in time, there were also 28 others whose return filing was delayed beyond the due date.

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Repair & maintenance of showroom is revenue in nature

Fact and Issue of the case

The appellant is a private limited company holding authorized dealership of Hyundai Motors, has for the AY 2013-14 filed its return of income [for short “ITR”] on 30/09/2013 declaring income of ₹1,09,70,250/-, wherein the case was subjected to CASS by service of notice u/s 143(2) and considering the submissions of the assessee, the assessment was culminated u/s 143(3) with additions viz; disallowance of depreciation on demo car, disallowance of interest u/s 36(1)(iii) for diversion of interest bearing funds, disallowance u/s 40a(ia) and disallowance of repairs & maintenance holding as Capex. The assessee company challenged the action of Ld. AO contesting all the addition before the first appellate authority [for short “FAA”], wherein the Ld. CIT(A) finding force in assessee’s contention granted part relief as regards to depreciation on demo car following precedents laid in assessee’s own case for earlier years and conceded with the balance action of Ld. AO in confirming other additions. Consequently, against sustained additions / disallowances the appellant company is in appeal before this Tribunal.

Observation of the Court

In the present case before us, it is an admitted fact that, the appellant has occupied the premises on short term lease in a disfigured condition and carried out the extensive repairs to convert the same into workshop and showroom so has to suit its business operation to be carried therefrom under a dealership specification, but without bringing into existence any capital field / asset or rights therein, except enduring usage over a short period of lease, which naturally subjected to pre-termination, consequently no control over the term of enduring usage as well. And the question as to whether or not such extensive repairs is of enduring nature is extensively dealt by the Hon’ble Supreme Court in the case of “Alembic Chemical Works Co. Ltd. Vs CIT” reported in 177 ITR 377, wherein the Lordships have vide para 9 observed that;

The Tribunal is headful to quote that, expenditure incurred for enduring benefit may termed as deferred revenue expenditure is essentially revenue in nature and the decision to treat the same as deferred revenue only represents a management decision taken in view of the magnitude of the expenditure involved and benefit to be derived subject to limitation on enduring usage. For the purpose of allow ability of any expenditure under the Act, what is material is the classification between the capital and revenue and the same-does not recognise of any concept of deferred revenue expenditure cataloguing with enduring benefit, hence for the reason we disapprove the contention of Ld. DR’s for treating the revenue expenditure as deferred expenditure, and are we are of the considered view that, the expenses incurred by the appellant squarely intra-legem to the provision of section 30(a)(i) of the Act, and the same finds fortified by the decision of the Hon’ble Calcutta High Court in “Cultural Enterprises Corp. Vs CIT” reported in 196 ITR 488, ergo we remove the infirmity in the order of both the tax authorities below by deleting the disallowance carried out u/s 30(a)(i) of the Act.

Conclusion

The Tribunal ruled in favour of the assessee and disposed of the appeal

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Karnataka HC quashed IT order attaching Xiaomi’s RS 3700 crore FDs

The income tax department had provisionally attached fixed deposits of Xiaomi Technology India worth Rs 2,600 crore in HSBC Bank and Rs 1,100 crore with Citibank. Xiaomi had challenged the order as being arbitrary, mechanical, and without application of mind.

The Karnataka High Court has quashed a provisional order from the Income Tax Department attaching Rs 3,700 crore held in fixed deposits by Xiaomi Technology India, preventing the telecom giant from making any payments from the FD in any form, including royalty payments to any businesses or entities outside of India.

Partly allowing Xiaomi’s petition, Justice SR Krishna Kumar has said the petitioner-company is, however, allowed to take overdrafts from the FD accounts and make payments from overdrafts to companies or entities located outside India.

The I-T department has been instructed to finish the petitioner’s final draft proceedings from 2019–20 to 2021–2022 before March 31, 2023.

According to Justice Krishna Kumar, the I-T department has not made a determination that the petitioner is a “fly-by-night operator” from whom it would be impossible to recoup the expected demand. The judge noted in his judgement that “the impugned order also does not say that the petitioner was either a habitual defaulter or he was operating no business at all or the petitioner did not have adequate funds to pay the demand.” the judge pointed out in his order as per news and media report

The judge has said that except for stating that it was necessary to attach FDs to protect the revenue interest, no other reasons were assigned by the department

It is trite law that grant of approval should not be a mechanical act and should reflect independent application of mind and this important safeguard of taking prior approval of the commissioner under Section 281B of Income Tax Act is not a mere empty formality and cannot be taken lightly. The judge stated that the impugned decision based on the abovementioned approval ought to be overturned since the approval given by the principal commissioner of income tax reflects full non-application of mind and is a non-speaking and unreasoned approval which is contrary to law ,as per media report

Following approval by the I-T principal commissioner on August 11, 2022 the I-T deputy commissioner, Bengaluru, passed a provisional attachment order the same day under Section 281B of the Income Tax Act, 1961 over the petitioner- company’s fixed deposits. Xiaomi challenged the order. saying it was arbitrary and reflects premeditated conclusion since any opinion for attaching the property had not been recorded

It is just an administrative action, which does not require to be informed to the petitionerthe I-T department asserted in defence of it. The department contended that the petitioner – who is guilty of defrauding the respondents and ot paying taxes by moving funds outside India is not entitled to any relief as per media report.