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2014 (8) TMI 875 - AT - Income TaxDeduction u/s 80IB - Export incentives - Interest paid in Jajmau unit Held that - As decided in assessee s own case for the earlier assessment year, it has been held that the assessment by a higher authority may be possible even if the proceedings were initiated by a subordinate authority who is also having concurrent jurisdiction - assessment proceedings were initiated by the DCIT and the assessment was completed by the JCIT - maximum assessments are framed u/s 143(1) where the AO has issued the intimation after making a prima facie adjustment - Along with the intimation the AO either raises the demand or issues the refund but whenever case falls within the guidelines issued by CBDT, it is to be taken for scrutiny and the assessment is required to be completed u/s 143(3) of the Act and for completing the assessment u/s 143(3), the AO is required to issue a notice u/s 143(2) within a period prescribed u/s 143(2) of the Act - once the authority higher in rank has seized with the matter, the authority lower in rank forfeits its jurisdiction to proceed with the matter in any manner and to complete the remaining assessment. The object/basis for giving that finding, are that once the authority higher in rank seized with the matter pending before the subordinate authority for adjudication, the subordinate authority is ceased with the jurisdiction to proceed further in that matter - The reason for doing so is quite obvious as once the higher authority has started applying his mind to the issue in dispute, the subordinate authority cannot proceed with the matter - If it is not done, there would be chaos in the administration of justice - the DCIT has completed the one mode of assessment by issuing intimation u/s 143(1) of the Act and the CIT has initiated and completed the second mode of assessment - assessment by the higher authority may be possible even if the proceedings were initiated by the subordinate authority who is also having concurrent jurisdiction thus, the order of the CIT(A) is upheld Decided against assessee. Deduction u/s 80IB - duty drawback and DEPB benefits Held that - Following the decision in Liberty India vs. CIT 2009 (8) TMI 63 - SUPREME COURT - receipts by way of duty drawback and DEPB benefits do not form part of the net profits derived from the industrial undertaking the ground relating to interest debited to Banther unit is concerned, it was pointed out by the assessee that once the assessee is not entitled for deduction u/s 80IB of the Act, it would not make any difference even interest was allowed to be debited in the Banther unit. Non-deduction of TDS on payment of commission to Foreign Agent Held that - Following the decision in CIT vs. M/s Model Exims 2013 (9) TMI 742 - ALLAHABAD HIGH COURT - AO did not bring anything on record, which could demonstrate that non-resident agents were appointed as selling agents, designers or technical advisers - The payment of commission to foreign agents did not entitle such foreign agents to pay tax in India and thus the TDS was not liable to be deducted under Section 195 of the Act - CIT (A) has considered the admission in the reply of the assessee and has also perused the agreement from which he found that there was nothing, which could demonstrate that these agents were appointed as selling agents, designers or technical advisers for invoking the provisions of Section 9 (1) (vii) of the Act the order of the CIT(A) is upheld Decided against revenue.
Issues Involved:
1. Disallowance of deduction under Section 80IB of the Income Tax Act, 1961, on export incentives. 2. Validity of assessment proceedings initiated by a junior officer and completed by a senior officer. 3. Disallowance of expenses on account of repair and maintenance of machinery and buildings. 4. Disallowance of vehicle maintenance, depreciation on car, and telephone expenses. 5. Non-deduction of TDS on payment of commission to foreign agents. Detailed Analysis: 1. Disallowance of Deduction under Section 80IB on Export Incentives: The assessee challenged the disallowance of deduction under Section 80IB on export incentives amounting to Rs. 4,24,66,821/-. The CIT(A) confirmed the disallowance, and the Tribunal upheld this decision, citing the Supreme Court's ruling in Liberty India vs. CIT [2009] 317 ITR 218 (SC), which held that duty drawback receipts and DEPB benefits do not form part of the net profits derived from industrial undertakings. 2. Validity of Assessment Proceedings: The assessee contended that the assessment proceedings initiated by the DCIT and completed by the JCIT were invalid. However, the Tribunal found no defect in the jurisdiction, referencing its previous decision in the assessee's case for the assessment year 2005-06, which allowed assessments by higher authorities if initiated by subordinate authorities with concurrent jurisdiction. The Tribunal cited the explanation provided in Section 120 of the Income Tax Act and judgments from various High Courts, concluding that the JCIT, being a supervisory authority, could validly complete the assessment initiated by the DCIT. 3. Disallowance of Expenses on Repair and Maintenance: The Revenue appealed against the CIT(A)'s decision to restrict the disallowance of Rs. 15,69,973/- on account of repair and maintenance to Rs. 1,00,000/-. The Tribunal upheld the CIT(A)'s decision, noting that the disallowance by the AO was ad hoc and without specific defects in the vouchers. The CIT(A) had reasonably reduced the disallowance to cover minor discrepancies. 4. Disallowance of Vehicle Maintenance, Depreciation on Car, and Telephone Expenses: The Tribunal upheld the CIT(A)'s decision to restrict the disallowance of vehicle maintenance, depreciation on car, and telephone expenses from 1/5th to 1/10th of the total claim. The CIT(A) considered the element of personal use and found the revised disallowance reasonable. 5. Non-Deduction of TDS on Payment of Commission to Foreign Agents: The Revenue challenged the deletion of an addition of Rs. 1,19,55,775/- due to non-deduction of TDS on commission payments to foreign agents. The CIT(A) had relied on Tribunal orders and the Allahabad High Court's judgment in CIT vs. M/s Model Exims, which held that payments to foreign agents for procuring orders did not attract TDS under Section 195. The Tribunal, following the High Court's decision, confirmed the CIT(A)'s order, noting that the services rendered by foreign agents did not constitute technical or managerial services under Section 9(1)(vii) of the Act. Conclusion: The Tribunal dismissed the appeals of the assessee regarding the disallowance of deduction under Section 80IB and the ad hoc disallowance of expenses. It upheld the CIT(A)'s decisions on restricting disallowances and confirmed the legality of the assessment proceedings. The Tribunal allowed the appeal concerning the invalidity of the assessment completed by a junior officer when initiated by a senior officer, quashing the assessment order. The Tribunal also dismissed the Revenue's appeals on the issues of TDS on foreign commission payments and ad hoc disallowances.
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