9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (4) TMI 1580 - AT - Income TaxDisallowance of management fees/royalty paid - lack of genuineness and commercial expediency - HELD THAT - The assessee had paid management fees to M/s.India Offshore Inc. for rendering various services in connection with location of suitable rigs that are available in the market opportunities worldwide technical specifications of available rigs negotiation with equipment suppliers and other services etc. since 1986. The payment made to M/s.India Offshore Inc. was approved by the Ministry of Commerce Industry Department of Industrial Policy Promotion. The assessee has paid the amount after deducting applicable TDS as per the provisions of Sec.195 of the Act. The assessee had also filed necessary evidences including agreement between the parties for rendering services. Further the ITAT had considered the very same issue for the earlier assessment years and after considering the necessary evidences filed by the assessee held that expenditure was incurred in terms of agreement entered into by the assessee and M/s.India Offshore Inc. vide agreemen and further the said agreement was renewed from time to time. In this view of the matter and consistent with view taken by the coordinate Bench in the assessee s own case for the AYs 2010-11 2011-12 2017 (11) TMI 1946 - ITAT CHENNAI we are of the considered view that there is no error in the reasons given by the Ld.CIT(A) to delete the additions made towards disallowance of management fees/royalty paid to M/s.India Offshore Inc. Validity of re-assessment order passed - Assessee argued that AO had issued notice u/s.148 on the last day of time limit prescribed under the Act - HELD THAT - We find that the Act prescribed for issuance of notice within six years from the end of relevant assessment year and thus even if notice issued on the last day of the prescribed time limit the said notice should be a valid notice and thus the assessment order passed u/s.147 on the basis of the said notice cannot be held to be invalid. The case laws relied upon by the assessee on this issue has been considered and opined that those case laws are not applicable to the facts of the present case. As regards the second objection of the assessee in light of provisions of Sec.147 we find that the AO has recorded reasons as per which income chargeable to tax has been escaped assessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and thus we are of the considered view that there is no merit in the arguments of the assessee that re-opening of assessment after a period of four years is invalid when there is no failure on the part of the assessee. The case laws relied upon by the assessee in this regard are considered and opined that facts for those cases are different from the facts of the present case and thus not considered. Hence ground taken by the assessee challenging validity of re-opening of assessment are rejected. Disallowance of loss on Foreign Currency Exchange Rate - AO had disallowed Forex loss on the ground that Forex loss on loans/liabilities relating to fixed assets shall be capitalized and cannot be allowed as Revenue expenditure and assessee had also failed to furnish necessary evidences to prove that Forex loss is on account of Revenue expenditure and thus disallowed total Forex loss debited into the P L A/c u/s.37(1) - HELD THAT - r exchange gain or loss would be capital in nature if the foreign currency was held as an asset. We further noted that in the present case foreign fluctuation loss incurred by the tax payers has no nexus or relation with the asset purchased. Once a particular expenditure has been wholly and exclusively incurred for the purpose of business the same needs to be allowed as deduction. In the present case although assessee claims to have furnished various evidences to prove Forex loss incurred on account of fluctuation in foreign exchange is not related to acquisition of any asset from a country outside India and hence it cannot be added to cost of asset in terms of Sec.43A of the Act but the fact brought on record by the AO shows that the assessee has not filed any evidences. Therefore we are of the considered view that although in principle we agree with the stand taken by the assessee to treat Forex loss on loans/liabilities is a Revenue in nature but whether the facts with regard to the nature of loans/liabilities and the purpose of such loan whether the loans have been taken for acquisition of an asset from a country outside India or for regular business purpose of the assessee are not forthcoming. Therefore we deem it appropriate to set aside the issue to the file of the AO for further verification. Hence we set aside the issue to the file of the AO and direct the AO to re-examine the claim of the assessee in light of various evidences filed by the assessee and also by following the decision of the Hon ble Supreme Court in the case CIT v. Woodward Governor India Pvt. Ltd 2009 (4) TMI 4 - SUPREME COURT . and also the decision of the Hon ble Supreme Court in the case of CIT v. Tata Iron Steel Co. Ltd 1997 (12) TMI 5 - SUPREME COURT . TDS u/s 195 - non deduction of tds on professional and consultancy fee paid - disallowance u/s.40(a)(i) - HELD THAT - An identical issue has been considered by the Tribunal in the assessee s own case for the AY 2015-16 for the AY 2015-16 wherein by following its earlier decision for the AY 2012-13 held that twin conditions of rendering services in India and utilization of such services in India are not satisfied to bring the impugned payment within the definition of fee for technical services as per Sec.9(1)(vii) of the Act read with explanation and thus the question of deduction of TDS on said payments does not arise. We set aside the issue to the file of the AO and direct the AO to re-consider the issue in light of the directions given by the Tribunal for the earlier years and decide the issue in accordance with law. Disallowance of depreciation on difference in foreign exchange outflow - addition on the ground that although the assessee claims to have made additions to fixed asset being Drill Ship but assessee could able to file evidences - explanation of the assessee before the AO that there is no actual difference in the foreign currency outflow on account of acquisition of any asset and he has capitalized purchase of new asset as per invoices whereas the disclosure in annual accounts is only on the basis of actual outflow of foreign currency transactions therefore on that basis additions cannot be made - HELD THAT - Assessee claimed that it has filed all evidences to prove acquisition of asset and further amount reported in notes to accounts is only on the basis of actual remittances of foreign currency during the relevant Financial Year which is nothing to do with additions made to fixed assets. The assessee further claims that additions made to fixed assets is supported by necessary Invoices. The facts are contradictory. The AO records that the assessee did not file any evidences whereas the assessee claims that it has filed all evidences. The facts need to be verified. Hence we set aside the issue to the file of the AO and direct the AO to re-examine the claim of the assessee in light of various evidences filed to prove additions made to fixed assets. In case the AO finds that the assessee has filed necessary evidences then the AO is directed to delete the addition made towards disallowance of depreciation. CIT(A) power deleting addition - Challenging violation of Rule 46A - HELD THAT - As we find that the Ld.CIT(A) had deleted the additions made by the AO towards payment made to M/s.Haledon International Corporation u/s.40(a)(i) of the Act by following the decision of ITAT in the assessee s own case for the AY 2012-13 in earlier round of litigation where the Tribunal has categorically held that payment made to M/s.Haledon International Corporation does not come under the definition of fees for technical services as defined u/s.9(1)(vii) of the Act and thus the assessee is not required to deduct TDS u/s.195 of the Act and consequently payments made to said non-residents cannot be disallowed u/s.40(a)(i) of the Act. Since the Ld.CIT(A) has given his findings on the basis of findings of the Tribunal for the earlier assessment years we are of the considered view that the question of admission of additional evidences by the Ld.CIT(A) and violation of Rule 46A of Income Tax Rules 1962 does not arise and hence we reject the ground taken by the Revenue.
Issues Involved:
1. Disallowance of management fees paid to M/s. India Offshore Inc. 2. Validity of reassessment proceedings under Section 147 of the Income Tax Act. 3. Disallowance of foreign exchange loss. 4. Disallowance of professional and consultancy fees paid to M/s. Haledon International Corporation. 5. Disallowance of depreciation on the difference in foreign exchange outflow. Detailed Analysis: 1. Disallowance of Management Fees Paid to M/s. India Offshore Inc. The Revenue challenged the deletion of disallowance of management fees paid to M/s. India Offshore Inc., arguing that the payment lacked genuineness and commercial expediency. The assessee contended that the payments were genuine, backed by an agreement, and supported by evidence. The Tribunal upheld the CIT(A)'s decision, noting that similar payments had been allowed in earlier years and were approved by the Ministry of Commerce & Industry. The Tribunal found no error in the CIT(A)'s decision to delete the disallowance, as the payments were made under a valid agreement and were consistent with past practices. 2. Validity of Reassessment Proceedings Under Section 147 of the Income Tax Act The assessee argued that the reassessment proceedings were invalid, as they were based on a change of opinion and lacked tangible material. The Tribunal rejected this argument, stating that the AO had recorded reasons suggesting income had escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The Tribunal found no merit in the assessee's arguments and upheld the reassessment proceedings as valid. 3. Disallowance of Foreign Exchange Loss The AO disallowed the foreign exchange loss, arguing it should be capitalized under Section 43A of the Act. The assessee contended that the loss was revenue in nature and not related to the acquisition of assets from outside India. The Tribunal noted that the AO disallowed the loss due to a lack of evidence from the assessee. The Tribunal set aside the issue to the AO for re-examination, directing the AO to verify the nature of the loans/liabilities and whether they pertained to the acquisition of assets from outside India. 4. Disallowance of Professional and Consultancy Fees Paid to M/s. Haledon International Corporation The AO disallowed the fees paid to M/s. Haledon International Corporation under Section 40(a)(i), arguing they were fees for technical services under Section 9(1)(vii). The assessee argued that the services were rendered and payments made outside India, thus not attracting TDS under Section 195. The Tribunal remitted the issue back to the AO for re-examination, directing the AO to follow the Tribunal's earlier decision, which held that the payments did not constitute fees for technical services under Section 9(1)(vii). 5. Disallowance of Depreciation on Difference in Foreign Exchange Outflow The AO disallowed depreciation on additions to fixed assets, arguing the assessee failed to provide evidence for the full amount. The assessee claimed the difference was due to the method of reporting foreign currency transactions. The Tribunal found the facts contradictory and remitted the issue back to the AO for verification. The AO was directed to re-examine the claim and delete the disallowance if the assessee provided necessary evidence. Conclusion: The Tribunal upheld the CIT(A)'s decisions on several issues but remitted others back to the AO for further verification. The key issues revolved around the genuineness of payments, the validity of reassessment proceedings, and the treatment of foreign exchange losses and professional fees. The Tribunal emphasized the need for proper evidence and consistent application of legal principles.
|
