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2012 (9) TMI 95 - AT - Income TaxIndia-Thailand DTAA - Disallowance of Transponder Service Fee and consultancy charges - non deduction of TDS - Held that - Disallowance on relying on explanation 5 to sec.9(1)(vi) and Explanation 6 to sec.9(1)(vi) cannot be warranted as the assessee cannot be held to be liable to deduct tax at source relying on the subsequent amendments made in the Act with retrospective effect. In the said case, Explanation to sec.9(2) was inserted by the Finance Act, 2007 with retrospective effect from 1.6.1976 and it was held by the Tribunal that it was impossible for the assessee to deduct tax in the financial year 2003-04 when as per the relevant legal position prevalent in the financial year 2003-04, the obligation to deduct tax was not on the assessee - the law cannot possibly compel a person to do something which is impossible to perform - in favour of assessee. Disallowance of higher rate of depreciation on vehicles given on lease - Held that - Considering the Tribunal s order in assessee s own case for AY 1998-99 the matter is restored back to the file of the AO to decide the same afresh after giving the assessee an opportunity to produce all the evidence to support and substantiate its claim for higher rate of depreciation on the vehicles given on lease - in favour of assessee for statistical purposes. Disallowance of bad debts written off - Held that - As decided in T.R.F. LTD. Versus COMMISSIONER OF INCOME-TAX 2010 (2) TMI 211 - SUPREME COURT in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact has become irrecoverable. It is enough of the bad debt is written off as irrecoverable in the accounts of the assessee - in favour of assessee.
Issues Involved:
1. Disallowance of Transponder Service Fee and Consultancy Charges. 2. Assessee's Claim for Depreciation on Vehicles Given on Lease. 3. Disallowance on Account of Bad Debts Written Off. Issue-wise Detailed Analysis: 1. Disallowance of Transponder Service Fee and Consultancy Charges: The primary issue in the assessee's appeal was the disallowance of Transponder Service Fee of Rs. 83,03,368/- and consultancy charges of Rs. 9,34,100/- by the AO, confirmed by the Ld. CIT (A), due to non-deduction of tax at source under sec.40(a)(i). The assessee argued that the payments made to M/s. Shin Satellite Public Co. Ltd. (SSA), a Thai company, were not taxable in India as SSA did not have a Permanent Establishment (PE) in India, relying on Article 7 of the DTAA between India and Thailand. The AO and Ld. CIT (A) rejected this, treating the payments as fees for consultancy services or alternatively as royalty, taxable under sec.9(1)(vii) and Article 12 of the DTAA. The Tribunal, referencing its earlier decision in SSA's case and the Delhi High Court's ruling in Asia Satellite, concluded that the payments were not taxable as royalty or fees for technical services under sec.9(1)(vi) or sec.9(1)(vii). Consequently, the disallowance under sec.40(a)(i) was deleted. 2. Assessee's Claim for Depreciation on Vehicles Given on Lease: The second issue involved the disallowance of the assessee's claim for depreciation on leased vehicles. The AO disallowed the entire claim of Rs. 28,48,095/- for lack of evidence of ownership. The Ld. CIT (A) allowed depreciation but at a normal rate, not the higher rate claimed. The Tribunal restored the issue to the AO for fresh consideration, directing the AO to allow the assessee to produce evidence and to consider the Bombay High Court's decision in CIT v. Kotak Mahindra Finance Ltd. 3. Disallowance on Account of Bad Debts Written Off: The third issue was the disallowance of Rs. 9,14,920/- on account of bad debts written off. The AO disallowed the claim for failing to prove the debts had become bad and that the amounts were credited in the books. The Ld. CIT (A) upheld the disallowance. The Tribunal, referencing its earlier decision in the assessee's case for AY 1998-99 and the Supreme Court's decision in TRF Ltd., held that the write-off was proper and deleted the disallowance. Conclusion: The Tribunal allowed the assessee's appeal on the disallowance of Transponder Service Fee and Consultancy Charges and the claim for bad debts written off. The issue of depreciation on leased vehicles was remanded to the AO for fresh consideration. The revenue's appeal on the depreciation issue was allowed for statistical purposes.
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