2017 (11) TMI 254 - AT - Income Tax

Reopening of assessment - addition u/s.40(a)(i) - Held that - The ground relating to disallowance of the expenditure by holding it as not incurred wholly and exclusively for the purpose of the business was already before the ld CIT-A, but the same was not adjudicated by him. Hence, following the Tribunal in assessee s own case, we remit the adjudication of this aspect to the file of CIT-A. CIT-A is directed to complete the appellate order by considering the issue whether the disallowance on account of expenditure being not fully and exclusively for the purpose of business as raised in ground number two before him is justified or not. Needless to add, the assessee should be granted adequate opportunity of being heard. We make it clear that we have not considered the issue of reopening and the disallowance u/s.40(i)(a) i.e., in any manner whatsoever. Both the parties are free to take up necessary issues as deemed necessary after the order of the Ld. CIT-A is completed in terms of our remitting as above. Both the counsel fairly agreed to the above proposition.

Summary

Issues Involved:
1. Validity of reopening of assessment proceedings under section 147 of the Income Tax Act.
2. Disallowance of SG Business Development Expenses as 'Fees for technical services' under section 9(1)(vii) of the Act.
3. Requirement of withholding tax at source for transactions in AY 2007-08.
4. Disallowance of SG Business Development Expenses without considering the 'make available' provision.
5. Disallowance of SG Business Development Expenses under Circular 23 of 1969.
6. Levy of interest under section 234B of the Act.
7. Failure of CIT(A) to adjudicate on the disallowance of expenses not wholly and exclusively incurred for business purposes.

Validity of Reopening of Assessment Proceedings:
The appeal challenged the initiation of assessment proceedings under section 147 of the Income Tax Act, arguing that all relevant details were available during the original assessment. The tribunal admitted an additional ground challenging the disallowance of expenses not wholly and exclusively for business purposes. The tribunal remitted the issue back to the CIT(A) for adjudication, citing the need to decide on both jurisdictional and merit aspects for finality in proceedings.

Disallowance of SG Business Development Expenses:
The CIT(A) upheld the disallowance of SG Business Development Expenses as 'Fees for technical services' under section 9(1)(vii) of the Act, despite arguments on exclusions and tax treaties. The tribunal allowed the appeal for statistical purposes, remitting the issue of disallowance back to the CIT(A) for further adjudication based on the merits of the case.

Requirement of Withholding Tax at Source:
The appeal contested the requirement of withholding tax at source for transactions in AY 2007-08, citing the position of the law at the relevant time. The tribunal did not provide a specific ruling on this issue in the judgment.

Disallowance of SG Business Development Expenses without 'Make Available' Provision:
The appeal argued against the disallowance of SG Business Development Expenses without considering the 'make available' provision under the India-Singapore tax treaty. The tribunal remitted the issue back to the CIT(A) for further adjudication to determine if the disallowance was justified.

Disallowance of SG Business Development Expenses under Circular 23 of 1969:
The appeal contested the disallowance of SG Business Development Expenses under Circular 23 of 1969, claiming that the payments were akin to commission. The tribunal did not provide a specific ruling on this issue in the judgment.

Levy of Interest under Section 234B:
The appeal challenged the levy of interest under section 234B of the Act, arguing that no additional interest should be payable if relief was granted on other grounds. The tribunal did not provide a specific ruling on this issue in the judgment.

Failure to Adjudicate on Expenses not Wholly and Exclusively Incurred for Business:
The CIT(A) did not adjudicate on the issue of disallowance of expenses not wholly and exclusively incurred for business purposes. The tribunal remitted this aspect back to the CIT(A) for further adjudication to ensure a complete order considering the merits of the case.

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