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2018 (4) TMI 989 - AT - Income Tax


Issues involved:
1. Disallowance of management charges under Sec. 40(a)(i) of the Income Tax Act.

Analysis:
The appellant contested the disallowance of management charges by the assessing officer under Sec. 40(a)(i) of the Act, arguing that the charges were not fully covered by the provision. The Commissioner of Income Tax (Appeals) had restricted the disallowance to 50% of the charges, considering them as technical services. The appellant contended that the charges should have been allowed in full without the application of Sec. 40(a)(i). The Tribunal noted that a similar issue had been decided in favor of the assessee in a previous case. The Departmental Representative also acknowledged that the issue was in favor of the assessee.

For the assessment years 2006-07 and 2011-12, the Commissioner of Income Tax (Appeals) had held that 50% of the management charges paid to Lloyds Register UK should be taxable in India, as the appellant failed to deduct tax at source as required by law. The disallowance under Sec. 40(a)(i) was restricted to 50% of the charges, resulting in relief for the appellant. The Tribunal referenced a judgment of the Honorable Delhi High Court in a related case, supporting the assessee's position.

The Tribunal found that the facts and issues were identical to a previous case where the Tribunal had ruled in favor of the assessee. Citing the precedent set by the earlier decision and the judgment of the Honorable Delhi High Court, the Tribunal decided the issue in favor of the assessee. The Departmental Representative concurred with this decision, and no contradictory judgment was presented.

Additionally, the appellant raised a separate issue challenging the validity of the reopening of the assessment under Sec. 147 by the Assessing Officer. However, since the main issue regarding the disallowance of management charges had been decided in favor of the assessee, the Tribunal did not delve into the reopening issue, deeming it of academic interest only.

Conclusively, the Tribunal partly allowed ITA No. 742/Mum/2016 for the assessment year 2006-07 and fully allowed ITA No. 743/Mum/2016 for the assessment year 2011-12 based on the decisions and precedents discussed during the proceedings.

 

 

 

 

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