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2013 (12) TMI 477 - AT - Income TaxDeduction u/s 10A - Held that - The assessing officer could not entertain the claim made by the assessee otherwise than through a revised return, nothing prevented the learned Commissioner of Income-tax(Appeals) from considering the claim of the assessee, which the assessee had specifically, raised in its ground of appeal - This decision of Hon'ble Apex Court is limited to the power of assessing authorities for considering a claim made by the assessee which was originally not there in the return - The first appellate authority has power to entertain a claim of deduction not made before the Assessing Officer - The appellant is eligible for deduction u/s 10A - Decided against Revenue.
Issues Involved:
1. Deduction under Section 10A vs. Section 10B of the Income Tax Act. 2. Disallowance under Section 40(a)(i) for non-deduction of tax at source on sales commission paid to a non-resident director. Issue-Wise Detailed Analysis: 1. Deduction under Section 10A vs. Section 10B of the Income Tax Act: The revenue contested the decision of the Ld CIT(A) allowing the deduction under Section 10A instead of Section 10B, which was initially claimed by the assessee but found ineligible. The Ld CIT(A) accepted the alternative claim under Section 10A, even though the assessee did not file a revised return. The AO declined to consider the claim on technical grounds, citing the Supreme Court decision in Goetze (India) Ltd. Vs. CIT, which restricts the AO from entertaining new claims not made in the original return. However, the Ld CIT(A) followed judicial precedents, including the Cochin bench of ITAT in C.W.P. Taylor Vs. DCIT, which allows appellate authorities to consider new claims if the facts are on record. The Ld CIT(A) thus directed the AO to allow the deduction under Section 10A. Upon appeal, it was noted that the AO did not examine the documents related to the Section 10A claim. The Tribunal, agreeing with the Ld CIT(A) on the admissibility of the claim, remanded the matter back to the AO to verify the eligibility for deduction under Section 10A and make a decision based on the law. 2. Disallowance under Section 40(a)(i) for Non-Deduction of Tax at Source: The assessee challenged the disallowance of Rs. 55,51,605/- under Section 40(a)(i) for non-deduction of tax at source on sales commission paid to Shri Balaji Bal, a non-resident director. The AO and Ld CIT(A) held that the payment constituted fees for technical services under Section 9(1)(vii) and was taxable in India, thus requiring tax deduction at source under Section 195. The assessee argued that the payment was purely for sales commission, not technical services, and cited Circulars No. 23 and 786, and the Supreme Court decision in GE India Technology Cen (P) Ltd Vs. CIT, which exempts such payments from tax deduction if not taxable in India. The Tribunal examined the agreement and concluded that the services provided by Shri Balaji Bal involved technical expertise beyond normal commission agency functions. Given his technical background and role as a director, it was inferred that the services were technical in nature. The Tribunal upheld the Ld CIT(A)'s view that the payment was taxable under Article 14 of the DTAA with Switzerland, as Shri Balaji Bal had a fixed base in India through the assessee company's office. Consequently, the assessee was liable to deduct tax at source, justifying the disallowance under Section 40(a)(i). Conclusion: The Tribunal dismissed the cross-objection by the assessee regarding the Section 40(a)(i) disallowance and partly allowed the revenue's appeal, remanding the Section 10A deduction issue back to the AO for verification and appropriate action.
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