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2016 (9) TMI 305 - HC - Income TaxTDS u/s 194H - non deduction of tds - genuineness of the transaction - Held that - Although the entire MOU was placed before the AO there was no discussion of the MOU to support the conclusion that the agreement between the Assessee and VEEPL was a sham agreement. The second difficulty is that although the AO has raised questions regarding the genuineness of the transaction it does not appear to be based on any enquiry undertaken by the AO. The AO could have easily invoked the statutory power to undertake the enquiry if he had any doubt about the genuineness of the agreement between the Assessee and the VEEPL. Thirdly, the Court finds that a desperate attempt has been made by the AO to characterize the payments made by the Assessee to VEEPL as brokerage, although admittedly, the payment made amounted to ₹ 7,93,47,974. In particular, the Court finds that the plausible explanation offered by the Assessee in its letter dated 15th December 2009 bringing out the distinction between a consolidator and a broker has not been addressed by the AO. Court is satisfied that such payments could not be characterized as brokerage only for the purposes of bringing it within the ambit of Section 194H of the Act. In that sense, the basic background facts concerning the MOU entered into by the Assessee with the VEEPL is no different from the MOU entered into by the Assessees in the similar cases with VEEPL as aforementioned. - Decided in favour of assessee
Issues:
- Whether the Commissioner of Income Tax (Appeals) erred in deleting the additions made by the Assessing Officer on account of failing to deduct tax under Section 194 H of the Income Tax Act, 1961. - Whether the payments made by the Assessee to VEEPL were liable to deduction of tax at source under Section 194 H of the Act and disallowance under Section 40(a) (ia) of the Act. - Whether the payments made by the Assessee to VEEPL could be treated as brokerage for the purpose of Section 194H of the Act. Analysis: 1. The appeal by the Revenue challenged the ITAT's order regarding the deletion of additions made by the AO due to the failure to deduct tax under Section 194 H of the Income Tax Act, 1961 for the Assessment Year 2007-08. 2. The ITAT relied on a previous order regarding similar transactions and concluded that the payments made by the Assessee to VEEPL were not liable to deduction of tax at source under Section 194 H of the Act and disallowance under Section 40(a) (ia) of the Act. 3. The Assessee's counsel highlighted similar cases where the ITAT's decisions were affirmed by the Court, emphasizing that the transactions with VEEPL were consistent across cases. 4. The Court noted that the terms of the agreements and payments made by the Assessee to VEEPL were similar to other cases, and the ITAT's decision in Finian Estate Developers Pvt. Ltd. had attained finality. 5. The Revenue's attempt to distinguish the present case was based on the genuineness of the transaction, questioning the discrepancy in sale consideration and purchase price, but the Court found no basis to challenge the ITAT's decision. 6. The Court rejected the Revenue's argument that the payments to VEEPL could be treated as brokerage under Section 194H, as the background facts of the agreements were consistent with previous cases, leading to the dismissal of the appeal. 7. It was concluded that no substantial question of law arose in the case, and the appeal was dismissed.
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