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TMI Blog2015 (10) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... following substantial questions of law:- "i) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was right in law in deleting the addition of Rs. 45,03,927/- made by the AO on account of advance against order when the nexus between sending of money as against sale was not established and no service was rendered by the foreign buyer/receiver of the money and that too without deduction of tax at source as required under section 40(a) of Income Tax Act, 1961? ii) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was right in law in deleting the addition of Rs. 5,00,000/- made by the AO on account of payment of rent made in contravention to provisions of section 40(a)(ia) of Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 18.5.2012, Annexure A.III dismissed the appeal filed by the revenue and partly allowed the appeal filed by the assessee. Hence the instant appeal by the revenue. 4. We have heard learned counsel for the appellant. 5. The following two additions made by the Assessing Officer which were deleted by CIT(A) or the Tribunal arise for consideration in this appeal:- (a) Addition on account of advance against order: Rs. 45,03,927/- (b) Disallowance under Section 40(a)(ia) : Rs. 5,00,000/- 6. The CIT(A) while deleting the addition of Rs. 45,03,927/- had noticed in its order dated 17.2.2011, Annexure A.II that the assessee was in the business of manufacturing and production of home furnishing items for the domestic market an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and again there was no income to the beneficiary so as to require deduction of tax at source. As regards, the attorney fee, it has been stated that the same is covered under double taxation agreement with Spain notification NO.GSR 356(E) dated 21.4.1995. The article 7 of the agreement reads as under:- "The profits of an enterprise of a contracting State shall be taxable only in that State unless the enterprise carried on business in other contracting State through a permanent establishment situated therein." 4.11 As per the appellant, no TOS was required as the beneficiary does not have permanent establishment in India. Therefore, in view of the above submission of the appellant, the contention of the Assessing Officer that tax shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, it is held that the loss has been caused to the appellant due to the fraud which he fell victim to in the course of his business. The Hon'ble P&H High Court in the case of CIT vs. Pukhrajwati Bubber 296 ITR 290 on which the appellant has also relied, while allowing the loss caused due to embezzlement observed as under:- 'The liability to tax is on profits or gains of business computed in accordance with sections 30 to 43 of the Income tax Act, 1961 (for short, "the Act"). Though there is no provision for allowing deduction of a trading loss on account of embezzlement, section 37 of the Act provides for any expenditure for the purpose of business and there has to be nexus between the business operation and the loss. If the loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to be deducted at source where a non refundable deposit has been made by the tenant? Ans: In cases where the tenant makes a non refundable deposit, tax would have to be deducted at source as deposit represents the consideration for the use of the land or the building etc. and therefore partakes the nature of rent as defined in section 194-I. If, however, the deposit is refundable, no tax would be deductible at source. It is further clarified that if the deposit carries interest, the tax to be deducted on the amount of interest will govern it. 11. There is no dispute that the amount paid by the assessee was a refundable security. The only dispute raised by the Assessing Officer is that the assessee failed to deduct the TDS. Learned fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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