2018 (9) TMI 290 - AT - Income Tax

Levying interest under section 234D - calculation of the tax payable by the assessee - including an amount towards refund already paid - Held that - As the Assessee submitted that the amount of refund have been wrongly added as no refund was actually received by the assessee and it would require verification at the end of the A.O. It is also submitted that it would have impact on calculation of interest under section 234D - D.R. did not have objection for verification of the same at the level of the A.O. In view of the above, we set aside the Order of the A.O. and restore the matter in issue on Ground Nos. 3 and 4 above to the file of A.O. with a direction to verify the claim of assessee - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Assessment of total income
2. Existence of Permanent Establishment (PE)
3. Calculation of total tax payable
4. Levying of interest under sections 234D and 234B
5. Penalty proceedings under section 271B

Assessment of Total Income:
The appeal was against the Order of the Assistant Director of Income Tax, challenging the assessment of total income at ?10,823,460 instead of the NIL income declared by the Assessee. The Disputes Resolution Panel directed the assessment based on objections raised by the Assessee. The A.O. computed the profit at 10% and assessed the income accordingly.

Existence of Permanent Establishment (PE):
The Assessee argued against being considered having a fixed place of business in India, leading to the establishment of a Permanent Establishment (PE) in India. The Assessee contended that as per the India - Mauritius Double Taxation Avoidance Agreement, there was no PE in India, hence the income from contracts should not be taxed in India.

Calculation of Total Tax Payable:
Issues were raised regarding the calculation of total tax payable, with the Assessee disputing the inclusion of a refund already paid in the computation. The matter was set aside for verification by the A.O. to ensure accuracy in the tax payable calculation and its impact on interest under sections 234D and 234B.

Levying of Interest and Penalty Proceedings:
The A.O. levied interest under sections 234D and 234B, which was contested by the Assessee. Additionally, penalty proceedings under section 271B were initiated, with the Assessee arguing against the penalty imposition due to a genuine belief regarding the maintenance of accounts as per the tax treaty.

Judgment:
The Assessee withdrew certain grounds of appeal to avoid prolonged litigation. Grounds related to tax calculation were set aside for A.O. verification. The challenge against penalty proceedings was dismissed as a separate proceeding. The appeal was allowed partly for statistical purposes, with specific grounds being allowed or dismissed accordingly.