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2022 (10) TMI 487 - AT - Income TaxReopening of assessment u/s 147 - non deduction of TDS - certain payment on which TDS was required to be deducted but was not deducted by the assessee, having not being disallowed while computing the income of the assessee, and thus the income relating to the same escaping assessment - HELD THAT - No hesitation in concurring with the finding of the ld.CIT(A) that reopening in the present case was not change of opinion at all. The challenge raised by assessee against the validity of the assessment framed under section 147 of the Act in the present case, therefore, has been rightly held to be not sustainable in law by the ld.CIT(A). The order of the ld.CIT(A), upholding the validity of the assessment framed under section 147 of the Act is upheld. Ground no.1 is dismissed. TDS u/s 195 - non-deduction of tax at source as per section 40(a)(ia) on expenses related to certification fees paid to Islamic Food and Nutrition Council of America ( IFANCA ), Chicago - making available technical knowledge to the assessee so as to be treated as included services as per Article 14(2) of the DTAA with USA for the purpose of holding taxes on the same - assessee contended thereafter that IFANCA was division of Islamic Food and Nutrition Council of America, and a non-profit Islamic Organization incorporated in 1982 in the State of Illinois, USA and remittance was on account of payment of Halal supervision and certificate fees in respect of export of Gelatine to USA and European countries - HELD THAT - To make the assessee halal compliant the assessee is educated about the meaning and implication of the term, its products and process adopted for manufacturing are reviewed to see that they are halal compliant, sanitation and cleaning procedures are reviewed and so on. The end purpose, we may state at the cost of repetition, being to ensure that the product manufactured by the assessee and the process adopted for manufacturing is such that it can be certified as halal . What technicality is involved in halal compliant, has not been pointed out by the Revenue. As per the common meaning of the term halal , as noted above by us, we do not find any technicality involved in halal compliant. Therefore, we hold, that the findings of the Ld.CIT(A) that halal certification involved technical knowhow being made available to the assessee, is incorrect on facts. The payment made by the assessee to IFANCA therefore for halal certification and supervision charges, did not qualify as Included Services in terms of Article 12(4) of the DTAA with USA and the said payment, we hold, did not qualify for withholding tax in terms of the DTAA. The disallowance of the said expenses for non deduction of tax at source is therefore unwarranted. The disallowance therefore of the amount of certification and supervision paid to the IFANCA directed to be deleted. - Decided in favour of assessee.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Validity of assessment framed under section 147 of the Income Tax Act, 1961. 3. Disallowance of expenses due to non-deduction of TDS. 4. Charging of interest under sections 234B and 234D of the Income Tax Act, 1961. 5. Disallowance of fees paid to ROC for increase in authorized share capital. Issue-wise Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The assessee's appeal was time-barred by 31 days. The delay was attributed to logistical issues, as the tax matters were handled in Mumbai, while the order was served in Vadodara. The Tribunal found the delay unintentional and condoned it, stating that the assessee demonstrated reasonable cause for the delay due to logistical handicaps. 2. Validity of Assessment Framed under Section 147 of the Income Tax Act, 1961: The assessee challenged the reopening of the assessment under section 147, arguing it was a mere change of opinion. The Tribunal upheld the CIT(A)'s decision, stating that the reopening was based on tangible material indicating income had escaped assessment due to non-deduction of TDS on certain payments. The Tribunal cited various judicial precedents, emphasizing that reopening within four years is permissible if the issue was not considered in the original assessment. 3. Disallowance of Expenses Due to Non-Deduction of TDS: The assessee contested the disallowance of Rs.3,13,859/- for non-deduction of TDS on payments made to IFANCA for halal certification. The CIT(A) had held these payments as "Included Services" under Article 12(4) of the DTAA with the USA, involving technical knowledge transfer. The Tribunal disagreed, stating that halal certification does not involve technical know-how but ensures compliance with Islamic law. Thus, the payment did not qualify for withholding tax, and the disallowance was unwarranted. 4. Charging of Interest under Sections 234B and 234D of the Income Tax Act, 1961: These grounds were consequential and not specifically addressed by the Tribunal. They were disposed of accordingly. 5. Disallowance of Fees Paid to ROC for Increase in Authorized Share Capital: The assessee admitted that the issue of disallowance of ROC fees for increasing authorized share capital was covered against it and did not press the ground. Consequently, the Tribunal dismissed this ground. Conclusion: The appeals were partly allowed, with the Tribunal condoning the delay in filing and deleting the disallowance related to halal certification fees. The validity of the assessment under section 147 and disallowance of ROC fees were upheld, while the interest-related grounds were disposed of as consequential. The order was pronounced on 12th October 2022 at Ahmedabad.
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