9911796707
TMI Blog2023 (3) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence on record to the effect that the payments made are covered under circular No.723 of 1995 and that the non-residents ship owners/charters had filed returns under Section 172 of the Act?" [B] "Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs.82,121/- on account of interest and Rs.23,370/- on account of insurance expense claimed on vehicle?" [C] "Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs.1,88,986/- on account of depreciation, petrol and repair expenses claimed on vehicle?" [D] "Whether the Appellate Tribunal has erred in law and on facts in deleting the disallowance of expenses of Rs.6,72,442/- being web designing and development expenses which is intangible and capital in nature?" [E] "Whether the Appellate Tribunal has erred in law and on facts in deleting the disallowance of expenses of Rs.8,71,278/- for market survey and production of commercial film for broadcasting on TV channels?" [F] "Whether the Appellate Tribunal has erred in law and on facts in deleting the disallowance of expenses of Rs 30,20,703 being payment made for making advertisement film which is in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein Revenue, the present appeal has been preferred by the Revenue. 2. As per the office report the respondent is served. From the office report, it appears that the respondent assessee sent a letter to the Registry of this Court on 22.10.2021 to grant an adjournment of three months. The time was accordingly granted. Despite the same no one has filed vakalatnama and none has appeared on behalf of the respondent. Hence, service of notice on the respondent is complete. 3.By the impugned order the High Court has dismissed the said appeal simply by observing that none of the questions as proposed by the revenue could be termed as the substantial questions of law and all the questions proposed are on factual aspects of the matter. However, it is required to be noted that except re-producing the proposed questions of law, there is no further discussion on the factual matrix of the case. While issuing the notice, this Court passed the following order: - "Mr. Balbir Singh, learned ASG, has vehemently submitted that in the impugned order except narrating the proposed questions of law, there is no independent reasoning given by the High Court while dismissing the appeal except reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the TDS thereon to the parties referred to by the Assessing Officer on the ground that the provision of Section 40(a)(ia) of the IT Act uses the words "such tax" which denotes that the tax has to be deducted as per rate prescribed under the appropriate section in Chapter XVII-B of the IT Act is applicable to the sums under consideration. The assessee, therefore, was asked on 04.03.2013 to furnish the complete details of the parties along with explanation as to why the payments made to those parties would not be disallowed by invoking the provision of Section 40(a)(ia) of the IT Act. 4.3 It had been replied by enclosing the photocopies of the invoices raised by all parties and the tax at source had been deducted in accordance with the provisions of Section 194C of the IT Act and w.e.f. 01.10.2009 in view of the insertion of section 194C(6) no tax at source has been deducted by the company. The copies of the accounts of all parties were enclosed for the perusal of the A.O. and the entries were supported by the supporting evidences. 4.4 On considering the contention of the assessee, the Assessing Officer did not find the same tenable as it failed to substantiate its claim that the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further held that the ITAT, Ahmedabad in case of Dy. CIT Bharuch vs. Hasmukh J. Patel, reported in (2011) 10 taxmann.com 229 (Ahd) in the similar facts held that all such parties acted as agent of non-resident shipping companies and such payment in foreign currency to such non-resident shipping company duly permitted by RBI Guide line has to be dealt with special provision as provided u/s.172 of the Act hence, deduction of TDS is not required u/s. 194C of the Act. 5.3 The appellant's A.R. during the course of appeal proceedings further submitted that out of the composite bill of each such party including freight charges, terminal handling charges, documentation charges, container repo charges, etc., the appellant deducted TDS except that from freight charges, therefore, it considered for a composite bill then the deficiency is of incorrect deduction of tax rather than no deduction of tax and appellant cannot be held as in default u/s.201(1) of the IT Act. 5.4 The CIT, Appeal is inclined with appellant that out of the total composite bill if TDS is deducted from terminal handling charges, documentation charges, container repo charges, etc. as per prescribed rate u/s. 194C of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal on this ground is dismissed." 5.7 Much emphasis is laid on the reply given by the assessee before the Assessing Officer in the scrutiny assessment, where it had accepted of having deducted the tax at source in accordance with the provision of Section 194C of the IT Act. It is only after 01.10.2009 in view of insertion of Section 194C of the IT Act, no tax at source was deducted by the company. 5.8 That generalized acceptance on the part of the assessee cannot be held against it when there is a clear provision and also the clarity on the record in wake of the different material, which has come in possession of the Assessing Officer and other authority. The CBDT Circular 723 dated 19.09.1995 would also come to the rescue of the assessee as has rightly been held by both the CIT, Appeals and ITAT. This Circular if is considered, it had been issued as there were representations received regarding the scope of Sections 172, 194C and 195 of the IT Act in connection with the TDS from the payment made to the foreign shipping companies or their agents. Apt would be to reproduce the Circular NO.723 dated 19.09.1995: Section 172. Shipping Business of Non-Residents 913. Tax deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is quite clear that when the agents act on behalf of the non-resident ship-owners or charterers, they would step into the shoes of the principal and hence, the provision of Section 172 of the IT Act would apply and not the provision of Sections 194C and 195 of the IT Act. Therefore, the action on the part of the CIT (Appeals) which had been confirmed by the ITAT of not having endorsed to the views of Assessing Officer of adding the dis-allowance claimed under Section 41(a) would not deserve any interference as is quite clear the authority concerned has already taken the note of the fact that the assessee had deducted the tax at source on terminal handling charges, documentation charges, etc. however, when they acted as the principal for and on behalf of the assessee and paid the amount, it was essentially the reimbursement for which there cannot be any TDS required to be deducted. 6. We do not see any reason as to why we should also not be followed the ratio laid down by this Court in Tax Appeal No.315 of 2013 [Coram: Justice M.R. Shah (as His Lordship then was) and Ms.Justice Sonia Gokani] where the assessee had claimed the deduction under Section 40(a)(ia) towards the reimbur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O. has disallowed entire depreciation and incidental expenses but the provisions of section 38(2) of the Act specifically provided to handle such situation i.e. appellant can claim depreciation for the assets even if the same partly used to the extent of proportion of its use. In the absence of any details provided by appellant, I treat that the vehicle so purchased and registered in the name of director is partly used by appellant company for business purpose to the extent of 75% while balance 25% is used for either personal purpose of director or not wholly and exclusively for the purpose of appellant's company business. It is therefore the depreciation claim and other incidental expenses related to use of this vehicle is allowable to the extent of 75%. In respect of disallowances of interest and insurance, since it has been held that motor car was purchased from loan fund and partly used (75%) for appellant business, but such interest and insurance are for the purpose of business and essential to run the car irrespective of fact that whether it is used partly or wholly, therefore such claim are allowable in its entirety. It has been gathered that appellant claimed deprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The decision of this Court in Commissioner of Income-tax vs. Navsari Cotton & Silk Mills has been applied while not endorsing to the views of the Assessing Officer. This Court also while considering the capital versus revenue expenditure has held thus: "The present is a case where, we are constrained to say, the aforesaid principle is attracted and attracted squarely so that we feel justified in rejecting the application made by the Commissioner for requiring the Tribunal to state the case to us in exercise of the powers under sub-s. (2) of s. 256 of the Act. The reasons which impel us to reach this conclusion we shall presently state after setting out the question of law which the Commissioner requested the Tribunal to refer to us, namely : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the amount of Rs. 1,80,000 being the assessee's share of contribution at 20% of the total expenditure of Navasari Borough Municipality by way of betterment charges for the underground drainage lines was an allowable revenue deduction ?" What is a mixed question of fact and law ? Where the authority concerned has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely, (1) positive tests, (2) negative tests. One (at least one) of the positive tests must nod its head and none (not even one) must do so in order to affirmatively hold that the expenditure is a business expenditure - inter alia, incurred on account of commercial expediency. Positive tests: If the expenditure incurred :- 1. with a view to bring profits or monetary advantage either today or tomorrow. 2. to render the assessee immune from impending or reasonably apprehended litigation. 3. in order to save losses in foreseeable future. 4. for effecting economy in working which may pay dividends to-day or to-morrow. 5. for increasing efficiency in working. 6. for removing inefficiency in the working. 7. where the expenditure incurred in such as a, (i) wise, (ii) prudent, (iii) pragmatic, (iv) ethical, man of the world of business would conscientiously incur with an eye on promoting his business prospects subject to the expenditure being genuine and within reasonable limits. 8. where it is incurred solely by way of a civil duty owed by the assessee to the society having regard to the nature of his business which brings him profits but results in some detr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the decision of this Court in case of Principal Commissioner of Income-tax-4, Ahmedabad vs. Zydus Wellness Ltd., reported in [2017] 81 taxmann.com 159(Gujarat). We are in complete agreement with the findings of both the CIT(Appeals) and the ITAT that all these expenditures will not have any enduring benefits to the assessee to be termed as Capital Expenses as they are being used in connection with the running of business of the assessee and they will need to be essentially held to be revenue in nature. 12. This brings this Court to the question in relation to under invoicing of the sales made to the sister concern and deletion of addition of Rs.13,44,47,290/- at the ends of the ITAT. The Assessing Officer made additions of this amount on account of alleged under invoicing of the sales made to the sister concern. There had been an export of Rs.2,42,67,490/- to the sister concern Bajaj Herbal FZE LLP. The Assessing Officer also found that assessee had exported the very product to various other parties as well. The estimated value was 84.71% as per the paper-book. The same product was sold to other parties, which had been sold to the sister concern. The rates at which the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to the TPO nor had he adopted any such methodology. The methodology employed by the Assessing Officer was held to be contrary to law. 14. When challenged by the Revenue before the ITAT, it also confirmed the view of the CIT(Appeals) by holding that the Assessing Officer failed to appreciate that difference in sales price could be on account of various factors such as "strength of the product, terms of payment, the concerned country being the final destination, stability of political conditions in those countries, quantity supplied, quality supplied, creditworthiness of parties, market conditions, risk factor, etc." Moreover, under invoicing of the export since was by a huge sum almost 5.54 times of exports to the sister concern, it was held that the same is not possible as the under invoicing the Gross Profit rate and Net Profit rate by this method would work out to be 64.79% and 46.38%. 15. Considering strongly acceptable reasonings of both the CIT(Appeals) and the ITAT, it could be noticed that when the assessee's books of account had been duly audited and at no stage, the Tax Auditor had questioned its books of accounts or the method used by the assessee with the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
