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TMI Blog2016 (6) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... sment under section 147 of the Act. Therefore, re–opening on mere reappraisal / review of material already considered at the time of original assessment tantamount to change of opinion and review of the order passed earlier. For this reason alone, impugned assessment order deserves to be quashed. As far as merits of the issue are concerned could be seen it is clearly evident that the payment of ₹ 8,79,32,213 by the assessee to RPPL is towards reimbursement of expenditure incurred on behalf of the assessee and not towards fee for managerial services. What RPPL received from the assessee towards services rendered is service charges of ₹ 8,79,322 being 1% of the actual expenditure. It is seen from the material placed on record that RPPL has raised two separate debit notes i.e., one for ₹ 8,79,32,213 towards advertisement expenses incurred on behalf of the assessee and another of ₹ 8,79,322 towards service charges. It is also evident, on the service charges of ₹ 8,79,322 paid to RPPL assessee has not only deducted tax at source but RPPL has declared such amount as its income. Therefore, in the aforesaid facts and circumstances of the case, when it is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its associate company RPPL to play a role of intermediary between the ultimate advertisement company and the assessee. It was submitted, associate company RPPL made payment to the advertisement company towards advertisement expenses and the assessee, in turn, from time to time reimbursed the expenditure incurred by RPPL on behalf of the assessee. It was submitted, the payment made by the assessee to RPPL comprised of reimbursement of cost of advertisement of ₹ 8,79,32,213 and service charges paid ₹ 8,79,322 towards administrative expenses. Thus, it was submitted by the assessee, the payment made to RPPL being towards reimbursement of cost, there is no requirement to deduct tax at source, hence, no disallowance under section 40(a)(ia) could be made. The Assessing Officer, however, did not find merit in the submissions of the assessee and ultimately held that RPPL having provided managerial services to the assessee and received the payment, the assessee was liable to deduct tax at source on such payment. Since the assessee has not deducted tax at source on such payment, the Assessing Officer disallowed the amount of ₹ 8,88,11,535 by invoking the provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted the assessment under section 143(3). Drawing the attention of the bench to the reasons recorded for re opening the assessment under section 147, the learned Authorised Representative submitted, there was no fresh material available before the Assessing Officer for forming belief that income had escaped assessment. He submitted, the Assessing Officer solely relying upon the audit report has again re opened the assessment. He submitted, there being no fresh material before the Assessing Officer to form his belief the re opening of assessment on the basis of material already available before the Assessing Officer at the time of original assessment amounts to change of opinion. As far as merits of the disallowance is concerned, the learned Authorised Representative submitted, documentary evidence produced before the Assessing Officer as well as the learned Commissioner (Appeals) clearly demonstrate that the payment made was towards reimbursement of expenditure incurred by RPPL on behalf of the assessee. Therefore, the payment made being purely in the nature of reimbursement of cost incurred by the payee is not fee for managerial service, hence, not subject to deduction of tax at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment record itself. It is noticed that the Assessing Officer specifically referring to Annexure 4 to the tax audit report has formed the belief that as the assessee has failed to deduct tax at source on payment of ₹ 8,88,11,535 towards advertisement expenditure, the same has to be disallowed under section 40(a)(ia). Thus, it is clear from the reasons recorded that the Assessing Officer has no fresh tangible material available before him to re open the assessment. Only on the basis of material available on record at the time of original assessment, the Assessing Officer has initiated proceedings under section 147. It has been argued by the Department that at the time of completing original assessment, the Assessing Officer has not examined the issue, hence, there is no formation of opinion by the Assessing Officer to constitute change of opinion. However, we are unable to agree with the said proposition. It is well accepted principle of law that tax audit report submitted by the assessee in terms of section 44AB of the Act has statutory force. Tax audit report not only contains all necessary information but gives an insight into the business and financial affairs of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards advertisement expenses incurred on behalf of the assessee and another of ₹ 8,79,322 towards service charges. It is also evident, on the service charges of ₹ 8,79,322 paid to RPPL assessee has not only deducted tax at source but RPPL has declared such amount as its income. Therefore, in the aforesaid facts and circumstances of the case, when it is evident that the payment made by the assessee to RPPL is towards reimbursement of cost of expenditure incurred on behalf of the assessee such payment cannot be subject to deduction of tax. Consequently, no disallowance under section 40(a)(ia) can be made. In any case of the matter, department has not controverted the fact that RPPL at the time of making payment to advertisement companies has debited tax at source and remitted to government account. That being the case, the learned Commissioner (Appeals) was justified in deleting the addition made by the Assessing Officer. Thus, the assessee succeeds both on legal issue as well as on merit. 10. In the result, Department s appeal is dismissed and assessee s cross objection is allowed. Order pronounced in the open Court on 20.05.2016. - - TaxTMI - TMITax - Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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