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Showing 361 to 380 of 735 Records
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2009 (11) TMI 673
Double Taxation Avoidance Agreement between India and UK - Double taxation relief - assessee entered into an agreement with another group of company, i.e., WNS, U.K. for the purpose of availing sale support and account handling services for the assessee-company - Assessing Officer was of the view that the services so rendered by the WNS, U.K., were covered by the provisions of section 9(1)(vii) read with Explanation 2 of the Act thereto as also the article 13(4)(c) of Indo-U.K. Tax Treaty - assessee directed to deduct tax at source at the rate of 15 per cent from the remittance to WNS, U.K. in respect of marketing and management services - assessee contended that services rendered by WNS, U.K. did not ‘make available technical knowledge, experience, skill know-how’ to it and, as such, article 13(4)(c) had no application – Held that:- In terms of article 12 of Indo-UK DTAA, technical services are treated as having been ‘made available’ when recipient of such technical services is enabled to perform such services without recourse to service provider - services rendered by WNS, UK, did not meet aforesaid test, Commissioner (Appeals) was justified in holding that impugned receipts could not be taxed as fees for technical services
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2009 (11) TMI 672
Rebate - goods were cleared for export – alleged that no mention of any notification under which the goods were cleared by the respondent – Held that:- Respondent was clearing all their goods for home consumption under Notification No. 30/2004. As per Section 5A(1) the respondent was not required to pay duty after 15-5-2005 as they were working under Notification No. 30/2004 - respondent were not supposed to pay duty, hence no rebate was admissible to them - respondent has paid duty which has become a deposit with the Govt. which has to be paid back to the respondent in the manner they have paid at the time of clearance of goods - revision application succeeds
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2009 (11) TMI 671
Export under Notification No. 19/2004-C.E. - rebate claims - part rebate claims representing the amount of duty paid on freight and insurance elements were rejected – Held that:- Rebate is not admissible of the amount equal to duty paid erroneously on the post factory removal expenses of freight and insurance which do not form part of transaction value - duty which was not required to be paid can only be treated as deposit and is to be refunded back in the manner it was paid either from cenvat credit or cash
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2009 (11) TMI 670
Enhancement u/s 251(2) - TDS u/s 195 - disallowance u/s 40(a)(i) - training expenses of the surveyors paid to Lloyds Register of Shipping London - Whether the training fee can be termed as "fee for technical services"? - AO noticed that assessee had incurred training expenses, which mainly consisted of travelling, lodging and boarding abroad, made reference to reasonableness of expenditure and ultimate disallowed 50 per cent of the balance of this expenditure - CIT(A) was of the view that whole of the training expenses were in the nature of fee for technical services and since no tax has been deducted the whole of the expenditure was not allowable u/s 40(a)(i) and accordingly, he issued a notice for enhancement.
HELD THAT:- Hon’ble Supreme Court in the case of Kanpur Coal Syndicate [1964 (4) TMI 18 - SUPREME COURT] made it clear that first appellate authority has plenary powers in disposing of an appeal and the scope of his power is co-terminus with that of the Income-tax Officer. This has been interpreted by various Courts that the CIT(A) would have the same powers as the Income-tax Officer. In any case, the issue regarding training expenses was raised by the AO himself. Though the addition was made from a different angle and CIT(A) has invoked another angle by holding that why training expense should not be considered as fee for technical services. Merely because a new angle has been examined, it cannot be said that a new source of income has been created by the CIT(A). Therefore, we find no force in this issue and dismiss the same.
We find that during the assessment proceedings AO noticed that assessee had claimed expenses towards training cost. He further found that as per the claim the expenses included stay and travel cost. According to him the cost of stay was much higher and thus the expenses were on higher side. After excluding the travel expenses he disallowed 50 per cent of the balance of expenses.
Addition u/s 40(a)(ia) - As common sense would tell us that training expenses cannot be called as "fee for technical services". In the modern days even these categories can be further sub-divided, for example - in the case of taxation, it can be direct taxes and indirect taxes and with further specialization, for example - say International taxation etc. Similarly, civil matters can be divided into various fields say property matters, family matters etc. What we mean to say is that a person is highly qualified by his law degree but still requires training for rendering practical aspects. Similarly, in the case before us surveyors were highly technically qualified but such persons, may need to learn practical aspects of examining various electrical and other equipments. Such training in our view is a continuous process because technology is changing very fast and one needs to keep touch with such technology and therefore, expenses incurred towards training cannot be termed as "fee for technical services". In any case, the case before us major amount has been paid by way of reimbursement for boarding and lodging arrangements also for which no separate claims have been made. Therefore, according to us, the training fee cannot be termed as "fee for technical services".
CIT(A) has not dealt with the aspects whether such expenditure was excessive, or not as held by the Assessing Officer. Thus, while holding that these training expenses are not in the nature of fee for technical services, we remit the matter back to the file of the CIT(A) for examining whether the expenditure on training is excessive or not as held by Assessing Officer after providing adequate opportunity to the assessee of being heard.
Deduction u/s 37(1) - Payment towards contribution to PF, superannuation fund and employee’s fund - as explained that this amount was misappropriated by the brokers out of these funds while making investment. Therefore, assessee made the payment but AO did not agree with the explanation and observed that assessee had suffered huge losses and therefore, there was no justification in payment of ex gratia. CIT held that such a payment is required to be held as of revenue admissible for deduction u/s 37(1).
HELD THAT:- We find that various trusts created by the assessee company PF, superannuation fund, etc., lost the money because of the broker and not because of employees. It is clear that the assessee company made the payment to keep the moral of the staff high and therefore, it cannot be said that sums were paid for the purpose of business. In view of this, we find nothing wrong in the order of the learned CIT(A) and we confirm the same.
In the result the appeal is dismissed.
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2009 (11) TMI 669
Transfer pricing Adjustment - Computation of arm’s length price - MAM selection - TNMM v/s Unspecified Method - HELD THAT:- The assessee has itself obtained Transfer Pricing Report at TNMM method and the particulars supplied by the assessee itself in its Transfer Pricing Report has been used by the Transfer Pricing Officer while determining the net margin of profit in respect of the transactions undertaken by the assessee with his associate concerns in Korea and Thailand.
Insofar as determination of mean of profit by Transfer Pricing Officer, assessee has not been able to point out any irregularity or discrepancy in the report submitted by the Transfer Pricing Officer. Whatever objections has been raised by the assessee with regard to the some comparable to determine the mean of profit, the Transfer Pricing Officer has taken into account and has excluded those concerns which were objected to by the assessee and not relevant for determining the mean of profit.
As seen that in subsequent assessment year 2004-05, and, thereafter, the assessee has applied the same TNMM, though on merit having regard to the net margin of profit earned by the assessee as compare to the net margin of profit of comparables, no adjustment was called for.
TNMM method applied in this assessment year has been accepted by the assessee as well as by the department in subsequent assessment year insofar as the facts of the present case are concerned. Having regard to the facts and circumstances, and absence of sufficient materials and evidences to apply another method, we are in full agreement with the conclusion of the CIT(A) in holding that TNMM is the correct method applied by the TPO for determining the arm’s length price in respect of the raw materials acquired by the assessee from its sister concerns in Korea.
TPO has failed to make adjustments to the net profit margin determined by him on account of benefit accruing to the assessee for utilizing the fund - Only customer purchasing printed circuit board from the assessee is LG Electronics, and its subsidiaries in Korea and Thailand are the principal purchaser of assessee’s associate concerns situated in Korea. The assessee has been supplying manufactured items to LG Electronics, the only customer of the assessee, which has a close association and business dealing with assessee’s concerns in Korea.
The present assessee-company is established in India with a view to supply the same item of printed circuit boards in India, which are also being supplied by its associate concerns in Korea and Thailand to LG Electronics. Keeping all these facts in mind, a query was raised by the Bench in the course of hearing this appeal to show as to whether the assessee has been realizing the sale price from the LG Electronics Ltd., India much before the payment made by the assessee to its associate concerns on account of the cost of raw materials purchased by the assessee, and thereby whether the assessee was getting any benefit of utilization of the fund realized from LG Electronics of India to earn some other income instead of making the payment to its associate concern in Korea.
Assessee expressed his inability to furnish the details about when and how the assessee has been realizing the sale proceeds from the LG Electronics and as and when the payments are being made by the assessee to his associate in Korea. Therefore, in the absence of details in this respect, the assessee’s contention that some adjustment is to be made to the net margin determined by the TPO on account of benefit accruing to the assessee by way of interest on the amount payable by the assessee to its associate concerns is rejected.
Calculation of operating profit - alternative ground out of the total raw materials consumed by the assessee for manufacturing print circuit boards, only 45.51 per cent of the total raw materials were imported through assessee’s associate concerns, and, therefore, any adjustment, if any called for, can only be made to the 45.51 per cent of the total turnover, and not to the total turnover of the assessee - HELD THAT:- The present case, the Assessing Officer has calculated the operating profit on the entire sales of the assessee, which in our considered opinion, is not justified, when it is admitted position that only 45.51 per cent of raw material has been acquired by the assessee from its associate concerns for the purpose of manufacturing items.
Assessee has stated that the operating profit if applied to 45.51 per cent of the turnover would come to Rs. 35,52,573 as against operating profit of Rs. 24,35,175 booked by the assessee, and the difference thereof would only be called for to be made as addition to the profit shown by the assessee. We, therefore, direct the AO to modify the assessment and make the adjustment only to the extent of difference in the arm’s length operating profit with adjusted profit with reference to the 45.51 per cent of the turnover, and not to the total turnover of the assessee. Therefore, to this extent, the addition made by the Assessing Officer and further confirmed by the CIT(A) is reduced. We order accordingly.
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2009 (11) TMI 668
Issues Involved:
1. Applicability of Explanation to Section 73 of the Income-tax Act.
2. Determination of the principal business of the assessee-company.
Summary:
1. Applicability of Explanation to Section 73 of the Income-tax Act:
The Assessing Officer (AO) found that the assessee-company, engaged in trading in paper, shares, financing, and real estate, incurred a loss from share transactions exceeding its income from other sources. Consequently, the AO applied Explanation to Section 73, deeming the company to be carrying on speculation business and disallowed the set-off of the loss against other income heads, though allowing its carry forward u/s 73. The CIT(A) reversed this decision, holding that the assessee's case did not fall within the ambit of Explanation to Section 73, relying on a prior ITAT order for the assessment year 2004-05.
2. Determination of the Principal Business of the Assessee-Company:
The Tribunal examined whether the principal business of the assessee was granting loans and advances, which would exempt it from Explanation to Section 73. The assessee's memorandum of association, past history, and current deployment of capital were considered. The Tribunal noted that the highest capital employment was in the business of loans and financing (Rs. 6.85 crores) compared to other business activities. The Tribunal emphasized that the principal business should be determined by the nature of activities and not merely by the income/loss from share transactions in a particular year. The Tribunal concluded that the principal business of the assessee was indeed granting loans and advances, thus exempting it from the deeming provisions of Explanation to Section 73.
Conclusion:
The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal and confirming that the assessee-company was not hit by Explanation to Section 73 due to its principal business of granting loans and advances. The loss from share transactions was to be treated as a business loss and not a speculation loss. The appeal of the revenue was dismissed.
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2009 (11) TMI 667
Issues Involved:
1. Imposition of penalty under section 271A of the Income-tax Act, 1961.
2. Compliance with the statutory requirements of section 44AA of the Income-tax Act, 1961.
3. Applicability of "Accounting Standard-7" for maintaining books of account.
Issue-wise Detailed Analysis:
1. Imposition of Penalty under Section 271A of the Income-tax Act, 1961:
The core issue is whether the penalty of Rs. 25,000 imposed under section 271A for failure to maintain proper books of account as required under section 44AA is justified. The Assessing Officer (AO) imposed the penalty on the grounds that the assessee did not comply with the requisition to apply "Accounting Standard-7" and presumed non-maintenance of proper books. The Commissioner of Income-tax (Appeals) [CIT(A)] upheld this penalty relying on the ITAT Pune Bench decision in ITO v. Mahesh M. Chandan.
The assessee argued that it maintained books of account such as cash book, bank book, general ledger, purchase and sale registers, which were audited under section 44AB. The assessee contended that "Accounting Standard-7" is not mandated by statute for civil construction businesses, and non-compliance with this standard does not constitute a violation of section 44AA. The books maintained were sufficient for the AO to compute the total income, and there was no adverse finding regarding the method of accounting.
2. Compliance with the Statutory Requirements of Section 44AA of the Income-tax Act, 1961:
Section 44AA mandates that every person carrying on specified professions or businesses must maintain books of account that enable the AO to compute total income. The assessee maintained books accepted in commercial parlance, which were produced and verified by the AO. The AO did not record any adverse findings or difficulties in computing the income from these books. The ITAT Delhi Bench decisions in Mehta Parvesh v. ITO and Sant Construction Co. v. ITO support the view that maintaining such books is sufficient compliance with section 44AA, and non-prescription of specific books by the Board for businesses further supports the assessee's position.
3. Applicability of "Accounting Standard-7" for Maintaining Books of Account:
The AO's requirement for the assessee to follow "Accounting Standard-7" was disputed by the assessee, arguing that there is no statutory requirement for civil construction businesses to adopt this standard. The AO's presumption of non-maintenance of proper books based on non-compliance with "Accounting Standard-7" was found to be unjustified. The ITAT held that the statutory requirement is to maintain books that enable the AO to compute total income, and the books maintained by the assessee met this requirement.
Conclusion:
The ITAT concluded that the penalty under section 271A was not justified as the assessee maintained proper books of account in compliance with section 44AA. The AO's presumption and requirement to follow "Accounting Standard-7" were not supported by statutory provisions. The penalty of Rs. 25,000 was thus quashed, and the appeal of the assessee was allowed.
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2009 (11) TMI 666
Issues Involved:
1. Disallowance of bad debts written off.
2. Disallowance of foreign exchange fluctuation loss.
3. Restriction of certain expenditures u/s 44C.
4. Applicability of India Mauritius Treaty on expenses.
Summary:
1. Disallowance of Bad Debts Written Off:
The assessee's claim for bad debts amounting to Rs. 47,48,426 was disallowed by the Assessing Officer (AO) and confirmed by the CIT(A). The Tribunal had earlier directed the AO to reconsider the claim, emphasizing that under the amended provisions of section 36(1)(vii), it is sufficient for the assessee to write off the debt in the books of account as irrecoverable. The AO, however, did not comply with these directions and again disallowed the claim, stating that the debt was not taken into account in computing the income of the assessee and appeared to be a trade discount. The Tribunal found that the assessee had fulfilled all conditions of section 36(1)(vii) and section 36(2), and thus, the disallowance was not justified. The Tribunal reversed the lower authorities' findings and allowed the claim for bad debts.
2. Disallowance of Foreign Exchange Fluctuation Loss:
The assessee's claim for foreign exchange fluctuation loss amounting to Rs. 2,36,625 was disallowed by the AO and confirmed by the CIT(A). The Tribunal had earlier directed the AO to examine whether the loss was a trading loss or capital loss and the method of accounting followed by the assessee. The AO again disallowed the claim, considering it a contingent liability. The Tribunal found that the loss was on account of trading transactions with group companies and should be allowed as per the decision of the Hon'ble Delhi High Court in CIT v. Woodward Governor India (P.) Ltd. The Tribunal allowed the claim for foreign exchange fluctuation loss.
3. Restriction of Certain Expenditures u/s 44C:
The CIT(A) restricted certain expenditures like commission, insurance, subscription to journals, advertisement, courier, etc., to 5% of the adjustable total income as per section 44C. The assessee contended that these expenses were not in the nature of head office expenditure and were not payable to the head office. The Tribunal did not specifically address this issue in the provided text.
4. Applicability of India Mauritius Treaty on Expenses:
The assessee argued that the expenditure incurred in India should be fully allowable under the India Mauritius Treaty, making section 44C inapplicable. The Tribunal did not specifically address this issue in the provided text.
Conclusion:
The Tribunal allowed the appeal of the assessee, reversing the disallowance of bad debts and foreign exchange fluctuation loss, while the issues regarding restriction of expenditures u/s 44C and applicability of the India Mauritius Treaty were not specifically addressed in the provided text.
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2009 (11) TMI 665
Issues Involved:
1. Deletion of addition of Rs. 11.51 lakh out of Rs. 14.02 lakh made by the Assessing Officer on account of gifts received by the assessee.
2. Genuineness and creditworthiness of the donors.
3. Legal principles and precedents regarding the genuineness of gifts.
Issue-wise Detailed Analysis:
1. Deletion of Addition of Rs. 11.51 Lakh:
The revenue challenged the deletion of Rs. 11.51 lakh by the CIT (Appeals) from the total addition of Rs. 14.02 lakh made by the Assessing Officer. The CIT (Appeals) had sustained the addition of Rs. 2.51 lakh related to a gift from Shri Raj Kumar Aggarwal but deleted the additions related to gifts from Shri Rajesh Kumar Jain and Smt. Ranjana Gupta. The CIT (Appeals) found the identity and creditworthiness of Shri Rajesh Kumar Jain and Smt. Ranjana Gupta to be established, thus accepting their gifts as genuine. However, the revenue contended that the deletion was unwarranted as the donors were not produced for examination, and their financial capacities were questionable.
2. Genuineness and Creditworthiness of the Donors:
The Assessing Officer had initially added Rs. 14.02 lakh to the assessee's income, questioning the genuineness of the gifts due to the lack of relationship and occasion for the gifts, and the insufficient creditworthiness of the donors. The CIT (Appeals) accepted the gifts from Shri Rajesh Kumar Jain and Smt. Ranjana Gupta based on their affidavits, bank statements, and other financial documents. However, the Tribunal found that the financial capacities of the donors did not evoke confidence. Shri Rajesh Kumar Jain's capital was largely locked in loans advanced, and Smt. Ranjana Gupta's capital was primarily in current assets. Both donors had relatively modest incomes and did not own immovable properties, which cast doubt on their ability to make substantial gifts.
3. Legal Principles and Precedents:
The Tribunal referred to several legal precedents to determine the genuineness of the gifts:
- CIT v. R.S. Sibal [2004] 135 Taxman 492 (Delhi): The court held that identification of the donor and movement of the amount through banking channels are not sufficient to prove the genuineness of the gift. The donee must establish the donor's identity and capacity.
- Subhash Chander Sekhri v. Dy. CIT [2007] 290 ITR 300: The court upheld the addition made on account of gifts, emphasizing the need for credible evidence of the donor's capacity and relationship with the donee.
- Jaspal Singh v. CIT [2007] 290 ITR 306: The court highlighted the importance of proving the donor's capacity and the genuineness of the gift, especially when there is no close relationship between the donor and the donee.
- CIT v. P. Mohanakala [2007] 291 ITR 278: The Supreme Court emphasized that the assessee must prove the identity, capacity, and genuineness of the gift, and mere movement of funds through banking channels is insufficient.
- CIT v. Anil Kumar [2007] 292 ITR 552: The Delhi High Court reiterated that the assessee must prove the donor's financial capacity and the genuineness of the transaction.
The Tribunal also noted that in cases like Mrs. Ranjana Katyal v. Asstt. CIT [2008] 113 TTJ (Delhi) 479 and CIT v. Padam Singh Chouhan [2008] 215 CTR (Raj.) 303, the courts emphasized the need for credible evidence to establish the genuineness of gifts, including the donor's financial capacity and relationship with the donee.
Conclusion:
The Tribunal concluded that the financial capacities and genuineness of the gifts from Shri Rajesh Kumar Jain and Smt. Ranjana Gupta were not satisfactorily established. The donors' financial situations did not support the substantial gifts made, and their failure to appear for examination further weakened the assessee's case. Thus, the Tribunal held that the CIT (Appeals) erred in deleting the addition of Rs. 11.51 lakh, and the appeal of the revenue was allowed.
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2009 (11) TMI 664
Issues Involved:
1. Escapement of income.
2. Cost of acquisition of assets for capital gains computation.
Issue-Wise Detailed Analysis:
1. Escapement of Income:
The department appealed against the CIT(A)'s order, which held that there was escapement of income. The assessee had returned a total income of Rs. 4,24,198 for the assessment year 1991-92. Upon discovering that capital gains had escaped assessment, a notice under section 148 was issued, leading to reassessment proceedings. The assessee had purchased 120 shares of Jupiter Press (P.) Ltd. (JPPL) and received immovable property upon the company's liquidation. The property was later sold, and the assessee computed capital gains based on the value of the shares. The Assessing Officer recomputed the capital gains, considering the cost to the previous owner, resulting in a higher capital gain of Rs. 32,69,795 compared to the assessee's computation of Rs. 7,56,240.
2. Cost of Acquisition of Assets:
The CIT(A) upheld the assessee's computation, following a previous order that sections 49(1)(iii)(c) and 55(2)(b)(iii) should be read together. The department argued that similar cases had been decided against the assessee, where the cost to the previous owner was considered for capital gains computation. The assessee's counsel contended that the reliance on certain judgments was misplaced and that the provisions of section 55(2)(b)(iii) were not considered in earlier orders. The counsel argued that there were two taxable events: the transfer of shares and the transfer of property received on liquidation. Since both transactions occurred in the same financial year, the computation of capital gains should consider the fair market value of the property on the date of distribution as per section 55(2)(b)(iii).
Judgment Analysis:
The Tribunal considered the rival contentions and the material on record. It clarified that the judgments in Shantha Rangarajan and Theatre Sri Rangaraja were not applicable to the present case, which involved the distribution of assets by a company on its liquidation. The Tribunal examined the relevant provisions: sections 46(1), 46(2), 49(1)(iii)(c), and 55(2)(b)(iii).
Section 46(1):
This provision was not relevant as it pertained to the company's distribution of assets, not the shareholder's case.
Section 46(2):
This section charged the shareholder to capital gains tax upon receiving money or assets on liquidation. The fair market value of the asset on the date of distribution was considered the sales consideration for computing capital gains.
Section 49(1)(iii)(c):
This section deemed the cost of acquisition of the asset to be the cost to the previous owner when a capital asset became the property of the assessee on liquidation.
Section 55(2)(b)(iii):
This section provided that if the assessee had been assessed to capital gains tax under section 46, the cost of acquisition would be the fair market value of the asset on the date of distribution.
The Tribunal analyzed hypothetical computations to illustrate the application of these provisions. It concluded that if the assessee offered capital gains for taxation as they arose, the total capital gains would be Rs. 70. However, if the assessee postponed the taxability of capital gains, the total would be Rs. 90. The Tribunal noted that both transactions occurred in the same year, complicating the application of section 55(2)(b)(iii).
The Tribunal held that the earlier orders of the Tribunal were not per incuriam, as the provisions of section 55(2)(b)(iii) were considered. It emphasized judicial discipline and followed the earlier orders, applying section 49(1)(iii)(c) to compute capital gains based on the cost to the previous owner.
Conclusion:
The appeal of the department was allowed, and the cost to the previous owner was considered for computing capital gains in terms of section 49(1)(iii)(c).
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2009 (11) TMI 663
Issues Involved:
1. Legal validity of assessments under section 153A of the Income-tax Act, 1961.
2. Merits of additions made by the Assessing Officer regarding understatement of sale consideration, processed Hing, and out-of-books expenses.
Issue-wise Detailed Analysis:
1. Legal Validity of Assessments under Section 153A:
The assessee challenged the legal validity of assessments under section 153A on the grounds that there was no search under section 132 on the firm, only a survey under section 133A. The assessee argued that the search was conducted on the residential premises of the Karta's of the partners and not on the firm's premises, thus invalidating the assessments under section 153A. The CIT(A) rejected this contention, stating that the warrant of authorization existed in the appellant's case and that the search on residential premises of the partners was sufficient to justify the assessments under section 153A.
The Tribunal upheld the CIT(A)'s decision, noting that the search was initiated under section 132 and conducted on the premises of the partners, where materials relating to the firm were found. The Tribunal concluded that the Assessing Officer was justified in assuming jurisdiction for framing assessment under section 153A, as the requisite conditions were satisfied.
2. Merits of Additions Made by the Assessing Officer:
Understatement of Sale Consideration:
The Assessing Officer made additions based on the assumption that the assessee under-invoiced the sale of Hing. The CIT(A) found that the Assessing Officer's estimation of sale value at Rs. 2,000 per kg was arbitrary and not supported by any cogent material. The CIT(A) noted that the evidence relied upon by the Assessing Officer did not support the adoption of a higher sale value and that the gross profit rate should be reasonably estimated at 20% instead of the declared 18%, resulting in a minor addition of Rs. 57,339.
The Tribunal agreed with the CIT(A) that there was no basis for adopting a higher turnover or excess price realization, as no corroborative material was found to suggest that the actual price realized was higher than billed. The Tribunal upheld the deletion of the addition of Rs. 40,12,470 made by the Assessing Officer.
Processed Hing:
The Assessing Officer estimated the sale value of processed Hing at Rs. 500 per kg, resulting in an addition of Rs. 1,05,69,539. The CIT(A) found this estimation to be without basis and directed the deletion of the addition, instead estimating the gross profit at 20%, resulting in an addition of Rs. 2,02,179.
The Tribunal upheld the CIT(A)'s decision, noting that the estimation of higher GP was not justified as there was no evidence of suppressed sales, inflated purchases, or incorrect stock valuation. The Tribunal deleted the addition sustained by the CIT(A).
Out-of-Books Expenses:
The Assessing Officer estimated an addition of Rs. 5,00,000 for out-of-books expenses related to the processing of Hing. The CIT(A) found that the assessee had recorded the expenditure for processing Hing in the audit report and that there was no basis for the estimated addition.
The Tribunal upheld the CIT(A)'s decision, noting that the estimation of expenses was without any material evidence. The Tribunal directed the deletion of the addition of Rs. 5,00,000.
Conclusion:
The Tribunal dismissed the revenue's appeals and partly allowed the assessee's appeals, concluding that the Assessing Officer's additions were not justified and that the CIT(A) had rightly deleted most of the additions. The Tribunal emphasized the importance of corroborative evidence and the need for a basis in making additions.
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2009 (11) TMI 662
Issues Involved:
1. Claim of deduction u/s 36(1)(viii) for income from investment in co-operatives.
2. Claim of deduction u/s 36(1)(viii) for interest on short-term deposits.
3. Claim of deduction u/s 36(1)(viii) for service charges on SDF loans.
4. Application of the rule of consistency.
5. Alternative claim for netting of interest income.
Summary:
1. Claim of deduction u/s 36(1)(viii) for income from investment in co-operatives:
The assessee claimed deduction u/s 36(1)(viii) for dividend income from investments in co-operatives. The Assessing Officer (AO) and CIT(A) disallowed the deduction, stating that such income is not derived from long-term finance. The Tribunal upheld this view, referencing the Supreme Court's judgment in Liberty India, which differentiates between income derived from and attributable to a business. The Tribunal concluded that dividend income is attributable to but not derived from the business of providing long-term finance.
2. Claim of deduction u/s 36(1)(viii) for interest on short-term deposits:
The assessee argued that interest from short-term deposits should be eligible for deduction u/s 36(1)(viii) as these deposits were made from funds received from long-term loans. The AO and CIT(A) disallowed the deduction, and the Tribunal agreed, citing that such interest income is not derived from the business of providing long-term finance. The Tribunal emphasized that the source of funds does not change the nature of the income.
3. Claim of deduction u/s 36(1)(viii) for service charges on SDF loans:
The assessee claimed deduction for service charges on SDF loans, asserting that these loans are long-term and related to the business of providing long-term finance. The AO and CIT(A) disallowed the deduction. The Tribunal upheld this decision, stating that service charges are attributable to but not derived from the business of providing long-term finance, as the financing is done by the Government and not the assessee.
4. Application of the rule of consistency:
The assessee argued that similar deductions were allowed in earlier years, invoking the rule of consistency. The Tribunal noted that the provisions of section 36(1)(viii) were amended from the assessment year 1996-97, and the department had taken corrective actions in subsequent years. The Tribunal rejected the assessee's claim, stating that the department's inability to reopen earlier assessments due to the expiration of the limitation period does not preclude it from correcting mistakes in subsequent years.
5. Alternative claim for netting of interest income:
The assessee contended that if interest income from short-term deposits is excluded, only the net interest income after deducting related interest expenditure should be excluded. The Tribunal agreed with this contention, directing the AO to allow netting of interest income to the extent the assessee can establish a direct nexus between interest expenditure and interest income from bank deposits. The Tribunal referred to the Delhi High Court's judgment in Shri Ram Honda Power Equipment for guidelines on netting interest.
Conclusion:
The appeals were partly allowed for statistical purposes, with the Tribunal directing the AO to reconsider the netting of interest income based on the established nexus.
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2009 (11) TMI 661
Issues Involved:
1. Disallowance of proportionate interest and other expenses under Section 14A of the Income-tax Act, 1961.
2. Treatment of interest income as "Income from other sources" vs. "Business income."
3. Addition of purchase values of vessels sold within a specific period under Section 33AC.
4. Disallowance of deduction claimed under Section 33AC of the Income-tax Act, 1961.
Issue-wise Detailed Analysis:
1. Disallowance of Proportionate Interest and Other Expenses under Section 14A:
- Ground No. 1: The assessee's counsel did not press this ground during the hearing. Consequently, it was rejected as not pressed.
2. Treatment of Interest Income as "Income from Other Sources" vs. "Business Income":
- Ground No. 2(a): The Commissioner of Income-tax (Appeals) confirmed the Assessing Officer's action of treating interest income as "Income from other sources" instead of "Business income."
- Ground No. 2(b): The authorities did not net off the interest paid against the interest income.
- ITAT's Decision: The ITAT referred to its previous decision in the assessee's case for the assessment year 2000-01. The matter was set aside to the file of the Assessing Officer for re-verification and fresh adjudication, following the same directions as in the earlier year.
3. Addition of Purchase Values of Vessels Sold within a Specific Period under Section 33AC:
- Ground No. 3(a): The Commissioner of Income-tax (Appeals) confirmed the addition of Rs. 89,30,258, being the purchase values of vessels sold within eight years from the acquisition date, despite the amended retention period of three years.
- Ground No. 3(b): The authorities failed to appreciate the amended clause (c) of sub-section (3) of section 33AC, which reduced the retention period from eight years to three years.
- Ground No. 3(c): Disallowance of Rs. 25,00,000 in respect of the sale of a vessel to DB Girdhari was confirmed, even though no deduction under section 33AC was claimed in earlier years.
- ITAT's Decision: The ITAT held that the amended provision of section 33AC(3)(c), effective from 1-4-2004, would be applicable. Since the ships were sold after three years but within eight years, there was no violation of section 33AC(3)(c). The addition of Rs. 89,30,258 was deleted.
4. Disallowance of Deduction Claimed under Section 33AC:
- Ground No. 4(a): The Commissioner of Income-tax (Appeals) confirmed the disallowance of the deduction of Rs. 13,80,00,000 claimed under section 33AC.
- Ground No. 4(b): The authorities made various observations contrary to the facts and provisions of the Income-tax Act.
- Arguments by Assessee's Counsel:
- Preference Share Capital: It should be considered part of paid-up share capital.
- General Reserve: The balance should not be reduced by amounts transferred from the capital redemption account and section 33AC reserve utilized account.
- Section 33AC Reserve: Once utilized for acquiring new ships, it can be transferred to general reserve.
- ITAT's Decision:
- Preference Share Capital: It is part of paid-up share capital.
- General Reserve: The Assessing Officer's reduction of Rs. 7,13,50,000 was factually incorrect. The correct amount transferred from the capital redemption account was Rs. 4,82,50,000.
- Section 33AC Reserve: The assessee was entitled to transfer the section 33AC reserve to the general reserve after its utilization for acquiring new ships.
- Remand to Assessing Officer: The matter was restored to the file of the Assessing Officer for re-computation of deduction under section 33AC, considering the preference share capital, creation of capital redemption reserve, and the transfer from section 33AC reserve utilized account.
Conclusion:
The appeal of the assessee was allowed in part, with specific directions for re-adjudication by the Assessing Officer on certain points.
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2009 (11) TMI 660
Issues Involved:
1. Entitlement to benefits of Indo-U.A.E. tax treaty.
2. Verification of residential status of the recipient in the U.A.E.
3. Rectification petitions u/s 154 of the Act.
Summary:
1. Entitlement to benefits of Indo-U.A.E. tax treaty:
The assessee, a Public Sector Undertaking, challenged the order of CIT(A) denying benefits of the Indo-U.A.E. tax treaty. The assessee had entered into an Aviation Service Agreement with Caltex Al Khalij (LLC), U.A.E., and sought permission u/s 195(2) of the Income-tax Act, 1961, to remit payment without tax deduction at source. The Assessing Officer denied the treaty benefits on the grounds that Caltex Al Khalij was not paying taxes in the U.A.E. The CIT(A) upheld this view, stating that the assessee failed to provide a tax resident certificate. However, the Tribunal referenced the decision in Green Emirate Shipping & Travels, which held that actual payment of tax in one Contracting State is not a condition precedent to avail treaty benefits in the other Contracting State. The Tribunal concluded that the recipient's tax residency status in the U.A.E. was sufficient for treaty benefits, irrespective of actual tax payment.
2. Verification of residential status of the recipient in the U.A.E.:
The Tribunal noted that the CIT(A) did not have the benefit of examining the evidence regarding the recipient's residential status in the U.A.E. The matter was remitted to the Assessing Officer for de novo adjudication to verify the residential status of the recipient in the U.A.E., with the assessee agreeing to file requisite evidence.
3. Rectification petitions u/s 154 of the Act:
The assessee's appeals in ITA Nos. 5761/Mum./2004 and 5762/Mum./2004, concerning rectification petitions u/s 154 of the Act, became infructuous as the main issues were remitted to the Assessing Officer. Consequently, these appeals were dismissed as not pressed.
Conclusion:
The appeals in ITA Nos. 5273 and 5274/Mum./2004 were allowed for statistical purposes, and the matters were remitted to the Assessing Officer for verification of the recipient's residential status in the U.A.E. The appeals in ITA Nos. 5761 and 5762/Mum./2004 were dismissed as infructuous.
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2009 (11) TMI 659
Issues Involved:
1. Taxability of income on account of capital gain from the transfer of agricultural land.
2. Determination of the date of transfer of agricultural land.
3. Applicability of notifications regarding the definition of "capital assets."
4. Reopening of block assessment under section 148.
5. Taxability of the value of plots received in lieu of agricultural land under the Wealth-tax Act.
6. Determination of the value of plots for Wealth-tax purposes.
Issue-wise Detailed Analysis:
1. Taxability of Income on Account of Capital Gain from the Transfer of Agricultural Land:
The primary issue was whether the capital gain arising from the transfer of agricultural land was taxable. The assessee argued that the land was agricultural and situated beyond the specified distance from the municipal limits, thus exempt from capital gains tax under section 2(14) of the Income-tax Act. The CIT (Appeals) upheld the assessee's contention, stating that the land was not a "capital asset" as per section 2(14) and the notification dated 6-2-1973 was applicable. The ITAT also considered whether the land fell within the definition of "capital assets" and concluded that the land was transferred on 9-2-1993, making the 1973 notification applicable and exempting the land from capital gains tax.
2. Determination of the Date of Transfer of Agricultural Land:
The date of transfer was crucial for determining the applicability of the notifications. The assessee claimed the transfer occurred on 9-2-1993, supported by a civil court decree and mutation records. The CIT (Appeals) initially disagreed, stating that the actual transfer occurred on 27-6-1996 when the assessee received additional payment. However, the ITAT found that the transfer occurred on 9-2-1993, supported by the court decree and mutation records, thus applying the 1973 notification and exempting the land from capital gains tax.
3. Applicability of Notifications Regarding the Definition of "Capital Assets":
The applicability of the 1973 and 1994 notifications was debated. The 1973 notification exempted land situated beyond 2 kms from the national highway from being considered a "capital asset." The 1994 notification extended this limit to 6 kms. The ITAT concluded that the 1973 notification was applicable as the transfer occurred on 9-2-1993, and the land was beyond 2 kms from the national highway, thus not a "capital asset."
4. Reopening of Block Assessment Under Section 148:
The CIT (Appeals) quashed the reopening of the block assessment under section 148, following the Gujarat High Court decision in Cargo Clearing Agency v. Jt. CIT and the ITAT decision in Western India Bakers (P.) Ltd. v. Dy. CIT. The ITAT upheld this decision, stating that the block assessment could not be reopened under section 148 as Chapter XIV-B's special provisions override the general provisions of the Act.
5. Taxability of the Value of Plots Received in Lieu of Agricultural Land Under the Wealth-tax Act:
The issue was whether the value of plots received by the assessee in lieu of agricultural land was taxable under the Wealth-tax Act for the assessment year 1998-99. The CIT (Appeals) held that the plots were taxable, but the ITAT found that the plots were allotted on 16-1-1999, after the assessment year 1998-99, and thus could not be taxed for that year.
6. Determination of the Value of Plots for Wealth-tax Purposes:
The assessee challenged the valuation of the plots based on a bank's valuation report. The ITAT agreed that the valuation should follow the procedure in section 7 and Schedule III of the Wealth-tax Act, not solely based on the bank's report. The issue was remanded to the Assessing Officer for re-adjudication following the proper valuation procedure.
Summary of Results:
1. IT(SS) A. No. 25/Delhi/09: The appeal of the assessee is partly allowed.
2. IT(SS) A. No. 26/Delhi/09: The appeal of the revenue is dismissed.
3. ITA No. 576/Delhi/09: The appeal of the assessee is allowed.
4. ITA No. 591/Delhi/09: The appeal of the revenue is dismissed.
5. WTA Nos. 01, 02, and 04/Delhi/09 for assessment year 1998-99: All these appeals of the assessee are allowed.
6. WTA Nos. 03 and 05/Delhi/09: Both these appeals filed by the assessee are allowed for statistical purposes.
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2009 (11) TMI 658
Payment to Directors of the company as commission - amount paid for extra-commercial purpose - Disallowance of expenditure within the meaning of section 36(1)(ii) as well as section 37(1) - HELD THAT:- All the facts show that commission payment has been accepted by revenue itself for the purpose of the business of the assessee-company and, thus, there was no question of disallowance of the commission in the year under appeal. It is cardinal principle of law that while judging the commercial expediency of an expense, the matter needs to be looked into from the point of view of the assessee and not from the point of view of revenue only.
We do not agree with this. Section 36(1)(ii) provides that commission will not be allowed as deduction if, had it not been paid so, it would be paid as profits or dividend. There is no basis or material or evidence brought on record by AO to support this contention that the commission would have been paid as dividend to the shareholders.
Companies Act, 1956 contains the limitations and restriction in the matter of payment of dividend and such discretion of the company either to pay or not to pay dividend cannot be assumed. AO cannot presume that had this commission not been paid, this would have necessarily been paid as dividend to the shareholders. There is no basis for this assumption.
It cannot be ignored that the assessee-company had substantial profits out of which dividend could be declared if assessee-company so wanted. Thus, there is no basis for applicability of section 36(1)(ii).
CBDT Circular No. 551 relied upon by ld. AR clearly states that after amendment of 1989, fact of commission payment alone is essential and its excessiveness can be seen under section 40A(2) only. We find that applicability of section 40A(2) is not the case of Assessing Officer. Even otherwise, commission paid to the directors was part of remuneration of the directors as Supreme Court has held in the case of Gestetner Duplicators (P.) Ltd. [1978 (12) TMI 1 - SUPREME COURT] that commission paid as fixed percentage of turnover is nothing but assessable as salary.
Thus, section 36(1)(ii) has got no application. Contention of the assessee is also duly supported in the case of Shahjada Nand & Sons [1977 (4) TMI 4 - SUPREME COURT] in which held that commission paid to the employees is allowable and there is no need for any contractual obligation or extra services performed by the assessee.
Commission payment to the whole-time working directors of the assessee-company disallowed by AO was rightly deleted by CIT(A) and, accordingly, we do not find any infirmity in the order of CIT(A). We, therefore, confirm the order of the CIT(A).
Appeal filed by the revenue is dismissed.
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2009 (11) TMI 657
Issues Involved:
1. Whether the additions under section 68 for assessment years 2004-05 and 2005-06 are liable to be deleted or confirmed.
2. Whether the addition on account of reimbursement of expenses to M/s. Cox & King (India) (P.) Ltd. and M/s. Tulip Star Hotels (P.) Ltd. for assessment years 2004-05 and 2005-06 are liable to be deleted or confirmed.
Issue-wise Detailed Analysis:
1. Additions under Section 68:
The first point of difference revolves around the additions of Rs. 4,78,12,403 and Rs. 1,02,91,176 made under section 68 for assessment years 2004-05 and 2005-06, respectively. The assessee argued that the amounts were advances from Shri Somendra Khosla of UAE for acquiring space on a 99-year lease basis. The assessee provided extensive documentation, including correspondence, confirmation of advance, remittance details, and a certificate from Citibank, Mumbai, certifying the inward foreign remittance.
The learned counsel for the assessee contended that the identity, creditworthiness, and genuineness of the transaction were established through various pieces of evidence such as the passport, Chartered Accountant's certificate, utility bills, and newspaper articles. The learned Departmental Representative (DR) countered that the identity of the creditor was not proved before the Assessing Officer, the transaction was not genuine, and the evidence provided was of a subsequent period.
The Third Member noted that the onus is on the assessee to prove the cash credit by establishing the identity, creditworthiness, and genuineness of the transaction. The evidence included a Chartered Accountant's certificate, passport, trade license, and utility bills, which were sufficient to establish the identity and creditworthiness of Shri Somendra Khosla. The genuineness of the transaction was supported by the remittance certificates and the business activities of Shri Khosla.
Despite the DR's objections regarding the timing of the evidence and the lack of opportunity for the Assessing Officer to cross-examine the additional evidence, the Third Member concluded that the assessee had duly established the identity, creditworthiness, and genuineness of the transaction. Therefore, the additions under section 68 were liable to be deleted.
2. Reimbursement of Expenses:
The second point of difference involved the addition on account of reimbursement of expenses to M/s. Cox & King (India) (P.) Ltd. and M/s. Tulip Star Hotels (P.) Ltd. The assessee had agreements with these entities for operating and marketing the hotel property. The expenses incurred by these entities were reimbursed by the assessee, who then raised debit notes to recover these amounts from Tulip Hospitality Services Ltd. (THSL).
The learned counsel for the assessee argued that the assessee was merely an intermediary and did not actually incur the expenses. The expenses were incurred by Cox & King and Tulip Star Hotels and were reimbursed by THSL. Therefore, the question of disallowance in the assessee's hands did not arise.
The learned DR contended that the assessee had not proved the services rendered by Cox & King or Tulip Star Hotels and that the expenses should be disallowed. However, the Third Member found that the assessee had not claimed any deduction for these expenses in its profit and loss account. The total expenditure debited was only Rs. 86,97,337, which did not include the amounts reimbursed to Cox & King or Tulip Star Hotels.
Since the assessee did not claim the deduction, the question of disallowance did not arise. The Third Member concluded that the addition on account of reimbursement of expenses was not justified and should be deleted.
Conclusion:
The Third Member resolved both points of difference in favor of the assessee. The additions under section 68 for the assessment years 2004-05 and 2005-06 were deleted, and the addition on account of reimbursement of expenses to M/s. Cox & King (India) (P.) Ltd. and M/s. Tulip Star Hotels (P.) Ltd. was also deleted. The matter was directed to be placed before the regular Bench for an appropriate order in accordance with the law.
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2009 (11) TMI 656
Issues Involved:
1. Sustenance of penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income.
2. Validity of reopening of assessment under section 148.
3. Burden of proof regarding the genuineness of the gift received.
4. Applicability of Explanation 1 to section 271(1)(c).
Issue-wise Detailed Analysis:
1. Sustenance of Penalty under Section 271(1)(c):
The core issue in this appeal is the sustenance of the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) for a sum of Rs. 1,05,000, which was confirmed by the CIT(A). The AO added Rs. 3,50,000 to the assessee's income, considering it as income from undisclosed sources, and initiated penalty proceedings for concealment of income or furnishing inaccurate particulars. The assessee argued that the amount represented a gift and was not required to be added to the income. However, the AO rejected this explanation, stating that the assessee failed to prove the nature of the gift, thus amounting to concealment and furnishing inaccurate particulars.
2. Validity of Reopening of Assessment under Section 148:
The assessment was reopened based on the intimation received from the Joint DIT (Investigation) regarding accommodation entries received by the assessee. The assessee contended that there was no justification for reopening as the sums represented gifts and long-term capital gains, which were duly reflected in the return of income. However, the reopening was upheld as the AO had credible information suggesting the need for reassessment.
3. Burden of Proof Regarding the Genuineness of the Gift Received:
The assessee provided evidence in the form of a gift deed, affidavit, and bank account details to substantiate the claim of receiving a gift. However, the AO issued a summon under section 131 to the donor, which could not be served. The assessee later surrendered the amount, citing an inability to locate the donor. The Tribunal noted that the AO did not discharge the onus of proving the gift as bogus, and the assessee's explanation was not disproven.
4. Applicability of Explanation 1 to Section 271(1)(c):
Explanation 1 to section 271(1)(c) provides that the amount added or disallowed in computing the total income shall be deemed to represent the income in respect of which particulars have been concealed unless the assessee offers a bona fide explanation. The Tribunal observed that the AO did not specify whether the penalty was for concealment or furnishing inaccurate particulars. The Tribunal cited the Gujarat High Court's decision in New Sorathia Engg. Co. Ltd., which mandates a clear finding on the specific charge for penalty.
The Tribunal concluded that the assessee had discharged the onus by providing a plausible explanation and evidence for the gift. The AO failed to prove the explanation as false. The Tribunal also relied on the Supreme Court's decisions in Sir Shadi Lal Sugar & General Mills Ltd. and Suresh Chandra Mittal, which support the view that mere surrender of income does not automatically lead to penalty.
Conclusion:
The Tribunal held that the penalty order under section 271(1)(c) could not be sustained due to the lack of a specific charge and the assessee's bona fide explanation. The penalty was deleted, and the appeal was allowed.
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2009 (11) TMI 655
Issues Involved:
1. Exemption under section 10(29) of the Income-tax Act, 1961 for storage/warehousing income.
2. Principle of consistency in tax assessments.
Summary:
Issue 1: Exemption under section 10(29) of the Income-tax Act, 1961 for storage/warehousing income
The assessee, a Government of Haryana undertaking, claimed exemption u/s 10(29) of the Income-tax Act, 1961, for storage/warehousing income amounting to Rs. 10,90,82,220 received from the Food Corporation of India (FCI). The Assessing Officer (AO) denied this exemption, treating the amount as a composite trading receipt rather than rental income. The CIT(A) upheld the AO's decision. The Tribunal referred to its earlier decision for the assessment year 1994-95, where a similar claim was allowed, and directed the AO to verify and allow the exemption if the income was indeed from warehousing.
Issue 2: Principle of consistency in tax assessments
The Tribunal emphasized the principle of consistency, noting that similar claims had been allowed for the assessment years 1994-95 to 1998-99. The AO's denial of the exemption in the current year was found unjustified, as no change in facts or law was demonstrated. The Tribunal cited Supreme Court judgments supporting the principle of consistency in recurring or identical claims across different assessment years.
Conclusion:
The Tribunal set aside the CIT(A)'s order and directed the AO to allow the exemption u/s 10(29) for the storage/warehousing income of Rs. 10,90,82,220 received from FCI, thereby allowing the appeal of the assessee.
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2009 (11) TMI 654
Issues Involved:
1. Whether the tax is deductible at source by the assessee on payments made to M/s. Star Cruises Management Ltd. (SCML) from the sale proceeds of cruise booking tickets.
2. Applicability of Board's Circular No. 23 dated 23-7-1969.
3. Taxability of income under section 5(2)(a) and section 44B of the Income-tax Act.
4. Validity of the orders u/s 201(1) and 201(1A) for failure to deduct tax.
Summary:
Issue 1: Tax Deductibility at Source
The Revenue challenged the CIT(A)'s decision that tax is not deductible at source on payments to SCML from the sale proceeds of cruise tickets booked by the assessee. The Assessing Officer (AO) had directed the assessee to deduct TDS, treating 7.5% as deemed profit u/s 44B of the Act. The CIT(A) concluded that the AO's direction to deduct tax and the consequential levy of tax and interest u/s 201(1) and 201(1A) was not justified. The Tribunal upheld the CIT(A)'s decision, noting that SCML, a foreign company, operates cruises in international waters without any connection to Indian ports, and the income from ticket sales in India is not taxable under section 5(2)(a) or section 44B.
Issue 2: Applicability of Circular No. 23
The CIT(A) applied Board's Circular No. 23 dated 23-7-1969, which limits the assessment of income arising from transactions secured through an agent in India to the profit attributable to the agent's services. The Tribunal agreed with the CIT(A) that the arm's length commission paid by SCML to the assessee extinguishes SCML's tax liability in India, as the relevant amount has already suffered tax in the hands of the assessee.
Issue 3: Taxability under Section 5(2)(a) and Section 44B
The Tribunal noted that SCML's income from cruise ticket sales in India does not accrue or arise in India under section 5(2)(a) and is not taxable under section 44B, as the cruises do not operate from Indian ports. The Tribunal emphasized that the income of a non-resident shipping company cannot be taxed in India unless the passengers travel from or to an Indian port.
Issue 4: Orders u/s 201(1) and 201(1A)
The Tribunal confirmed that the AO's orders u/s 201(1) and 201(1A) for failure to deduct tax were not justified, as the income from the sale of cruise tickets was not taxable in India. Consequently, the Tribunal dismissed the Revenue's appeals and the assessee's cross objections, which were only supporting the CIT(A)'s order and were deemed infructuous.
Conclusion:
The Tribunal upheld the CIT(A)'s decision that the tax is not deductible at source on payments to SCML from the sale proceeds of cruise tickets, confirming that the income is not taxable in India under the relevant sections of the Income-tax Act and Board's Circular No. 23. All appeals by the Revenue and cross objections by the assessee were dismissed.
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