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TMI Blog2012 (10) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... “any other sum chargeable under the provisions of the Act” would mean “sum” on which income tax is leviable. Since the amount paid by the appellant is not chargeable to tax in India, the question of deducting tax at source on the said payment does not arise. Issue decides in favour of assessee Validity of notice u/s 148 - Reopening of assessment u/s 147 – AO argued that the assessee has not disclosed all the material facts fully and truly – Assessee contended that issuance of notice u/s. 148 Act after four years is not valid – Held that:- If the assessee failed to disclose fully and truly all the material facts necessary for his assessment, the AO has jurisdiction u/s. 147 proviso to reopen the assessment even after 4 years also. Issue in favour of revenue Computing the deduction u/s 80HHC - AO has excluded the sub-contract charges for the purpose of computation – Held that:- The sub-contract charges received by the assessee were income akin to rent. Remit the matter back to his file with the direction to examine whether the sub contract charges received by the were akin to rent or not and to decide the issue de novo in accordance with law after giving opportunity to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges made to non-residents without deduction of tax at source. 5. The brief facts are that the AO made a disallowance under section 40(a)(i) in respect of export sales commission of ₹ 117.50 lakhs and marketing service charges of ₹ 6.66 lakhs, on the ground that the persons to whom these payments were made were non-residents rendering managerial services and therefore the assessee ought to have deducted tax at source in respect of the payments made to them. 6. On being aggrieved, the assessee carried the matter before the CIT(A). The learned CIT(A) dealt with the issue in detail and has held as under: I have carefully considered the facts of the case and the submissions of the ld. AR. I have also perused copies of the agreements and the case laws relied on by the AO and the AR. I find from the facts of the case that the appellant had paid sale commissions and marketing services to nonresident agents outside India for their services rendered outside India by way of canvassing sales orders. None of the entities to whom payment has been made by the appellant have a permanent establishment (PE) in India. As per the relevant Articles of the DTA agreement (DTAA) en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed u/s 143(1) of the Act and subsequently the assessment was completed u/s 143(3) of the Act on 31-01- 2006 determining the total income of ₹ 12,81,65,989/-. Subsequently, the AO had issued a notice u/s 148 on the ground that there is an escapement of income from assessment for the following reasons : 1. It is observed that while computing the deduction u/s 80HHC, a sum of ₹ 75,40,031 was inter alia added to the Total turnover towards sub-contractor receipts. However, 90% of the same was not reduced from the profits of the business while computing the said deduction. Reliance is placed on the decision of Hon ble Supreme Court in the case of K.N. Ravindranathan Nair vs. CIT (295 ITR 228). Hence excess deduction has been allowed u/s 80HHC of the Income tax Act and thus the income has escaped the assessment. Also the assessee has not proved whether it has been complied with the amended provisions of section 80HHC of the Income tax Act for claiming the deduction on the export benefits received as per the taxation law amendment 2005 against the provisions of section 80HHC of the Act. 2. Further as per Circular No. 7/2009 of the CBDT, the earlier circulars that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering the submissions of the assessee has observed that the assessee has failed to bring all the facts to the notice of the AO though the same have been mentioned in the annual report and the note given in the annual report cannot be taken as full and true disclosure and he held that the issue of notice u/s 148 was valid. 12. Aggrieved the assessee carried the matter before the CIT(A). It was submitted before the learned CIT(A) that the assessee has disclosed fully and truly all the material facts necessary for assessment as required in the second proviso to section 147 and the AO has not pointed out what material and primary facts that the assessee failed to disclose and the action of the AO in reopening the assessment after 4 years should be held to be bad in law. After considering the submissions of the assessee, the learned CIT(A) has observed that the assessment was re-opened on two grounds, that in the assessment to exclude sub contract receipt from profits of the business under clause (baa) in Explanation to Sec. 80HHC and to disallow amounts of export commission payments u/s 40(a)(i). It is seen from the material available on record that these issues were not examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore the disclosure made by the assessee is not true disclosure and accordingly the notice issued by the AO u/s 148 of the Act is valid. He further submitted that the case laws relied on by the assessee have no application to the facts of the present case and therefore those case laws have no support to the assessee s case. 15. We have heard both the sides, perused the records and gone through the orders of the authorities below. The assessee filed its return of income for the assessment year 2003-04 on 28-11-2003 declaring a total income of ₹ 12,36,34.880/-. The return was processed u/s 143(1) of the Act initially and the assessment was completed under section 143(3) of the Act. Subsequently, the assessment was reopend on two counts by issue of a notice dated 09-03-2010 u/s. 148 on the ground that while computing the deduction u/s. 80HHC of the Act, a sum of ₹ 75,40,031/- was added to the total turnover towards sub-contractor receipts. However, 90% of the same was not reduced from the profits of the business while computing the said deduction. The second reason for re-opening of the assessee is that the expenditure incurred by the assessee in foreign curre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to excise duty, sales tax, subcontractor receipts, weighment charges, etc. So far as the sales commission is concerned, no figure was given before the AO. On 23-01-2006 the assessee filed a letter stating at para 10 thereof that Commission paid in foreign currency represent sales commission paid to non-resident agents for procuring orders abroad and hence no tax is deductible on their payments, since income does not accrue and arise in India. Please refer to circular no. 23 dated 23-7-1969 enclosed. The assessment was completed on 31-01-2006. The above note was submitted just before completing the assessment order u/s 143(3). When we specifically pointed out to the counsel why the assessee has not submitted the details in respect of the sales commission before the AO during the course of assessment proceedings the learned counsel for the assessee simply submitted that details were filed before the AO. It is also not clear from the paper book submitted by the learned counsel for the assessee that when the scrutiny assessment was initiated by the AO, why this was not brought to the notice of the AO. No reply was given by the assessee. The assessment order is silent in this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to reopen the assessment after the lapse of four years from the end of the relevant assessment year, in the absence of failure on the part of the assessee to disclose truly and fully all material facts necessary for the assessment. In the present case the assessee has not disclosed fully and truly all the necessary facts. Therefore this decision has no application to the facts of the present case. 20. Insofar as the decision of the Tribunal in the assessee s own case in ITA No. 13/Mds/2010 dated 24-06-2010 for the assessment year 2001-02 is concerned, the Tribunal has observed that, Originally, the assessment for assessment year 2001-02 was completed u/s 143(3) on 31.3.2004. The notice for reopening the assessment was issued u/s 148 on 28.3.2008 which is beyond the period of four years from the end of the assessment year. Reopening of the assessment beyond the period of four years from the end of the assessment year is found to be without jurisdiction and bad in law in view of the following decisions : CIT vs. Premier Mills 296 ITR 157 (Mad) CIT vs. Elgi Finance 286 ITR 674 (Mad) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not subject matter before the Apex Court in the case of K. Ravindranathan Nair (supra). It was contended that the same cannot be held as an authority to disallow the claim of deduction under section 80HHC of the Act. The learned CIT(A) confirmed the order of the AO on the ground that the AO by following the decision of the Hon ble Supreme Court has excluded the sub-contract charges from the computation of sec. 80HHC. 22. On being aggrieved, the assessee carried the matter before the Tribunal. The learned counsel for the assessee submitted that the decision in the case of K. Ravindranathan Nair (supra) followed by both the authorities below has no application to the facts of the present case. On the other hand, the learned DR submitted that the learned CIT(A) has not discussed the facts. Therefore, he suggested that the issue may be remitted back to the file of the CIT(A). 23. We have heard both the sides, perused the records and gone through the orders of the authorities below. The issue raised by the assessee in this ground of appeal is that the subITA. contract received by the assessee should be excluded from the computation of the deduction u/s 80HHC or not. The learn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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