2015 (12) TMI 833 - HC - Income Tax

Tds on commission paid to the agent who is a non-resident - Held that - The commission amounts which were earned by the non-resident assessees for services rendered outside India cannot, therefore, be treated as an income which have either accrued or arisen in India. Therefore, the question of deducting TDS does not arise. - Decided in favour of assessee Reopening of assessment - whether non-speaking and composite order have been passed - Held that - Pursuant to the notice issued by the assessing officer, he is bound to consider the objections of the parties and pass a speaking order. But, in the instant case, without passing a separate order by considering the objection of the petitioner, the respondent has passed a composite and non- speaking order. Since it is a non-speaking and composite order, the same is liable to be set aside. In the instant case, this Court does not find any tangible material warranting the assessing officer to re-open the assessment. ection 147 of the Act is exercised beyond a period of four years, therefore, the same is hit by limitation. Viewed from any angle, the respondent has not made out any ground to reopen the assessment order and the orders impugned in these Writ Petitions are liable to be set aside - Decided in favour of assessee

Summary

Issues:
Challenge to assessment under Income Tax Act for multiple years.

Analysis:
The judgment involves multiple Writ Petitions filed under Article 226 of the Constitution of India challenging the assessment of the petitioner for various assessment years. The main contention was the issuance of notice under Section 148 of the Income Tax Act, 1961, and subsequent rejection of objections by the Assessing Officer leading to re-assessment orders. The petitioner argued that the commission paid to foreign agents should not be subject to TDS as it was for services rendered outside India. The petitioner also raised concerns about the non-speaking and composite nature of the orders passed by the Assessing Officer without proper consideration of objections. Additionally, it was argued that there was no tangible material to justify the reopening of assessment orders beyond the prescribed time limit of four years under Section 147 of the Act.

The petitioner relied on legal precedents to support their arguments. They cited a Division Bench judgment of the Madras High Court regarding the non-taxability of commission earned by non-residents for services provided outside India. The judgment emphasized that such income cannot be deemed to have accrued or arisen in India, hence TDS deduction was not applicable. The petitioner also referenced a Gujarat High Court judgment outlining the procedure for considering objections raised in response to Section 148 notices, emphasizing the requirement for a speaking order by the Assessing Officer.

Furthermore, the petitioner highlighted a Chennai High Court judgment stating that the Assessing Officer cannot reopen assessment orders without tangible material indicating income escapement. They also pointed out that the exercise of power under Section 147 beyond the four-year limit was impermissible, as established in a previous Madras High Court Division Bench decision.

In conclusion, the court set aside the re-assessment orders, ruling in favor of the petitioners. The judgment emphasized the lack of grounds for reopening the assessment orders and the violation of time limits under Section 147. The Writ Petitions were dismissed, with no costs awarded, and the connected miscellaneous petitions were closed.