Section 115JB: AO asked to reverify brought-forward losses and unabsorbed depreciation; Section 195: no withholding for several foreign payments

ITAT DELHI - AT restored the issue of deduction for brought-forward losses/unabsorbed depreciation under section 115JB to the AO for fresh factual verification and computation. On TDS under section 195, the Tribunal held payments to non-residents from USA, UK, Australia, Canada and Singapore were not taxable in India (no make-available/PE; treaty relief applies) and no withholding was required; payments to UAE residents likewise not taxable under the India-UAE treaty. For Netherlands, Spain and France, facts showed repairs were performed abroad and no PE existed, so no withholding obligation. Addition for advances written off was deleted and the ground dismissed.

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Issues Involved:
1. Computation of book profit under section 115JB of the Income-tax Act, 1961.
2. Disallowance under section 40(a)(i) of the Income-tax Act, 1961.
3. Deletion of disallowance of advances written off.

Issue-wise Detailed Analysis:

1. Computation of Book Profit under Section 115JB:
The dispute in the assessee's appeal pertains to the computation of book profit under section 115JB of the Income-tax Act, 1961. The assessee, engaged in aviation services, filed its return declaring NIL income under normal provisions and book profit under section 115JB. The Assessing Officer (AO) found discrepancies in the deduction claimed by the assessee for brought forward loss or unabsorbed depreciation and recomputed the deduction, allowing a lesser amount. The Commissioner (Appeals) upheld the AO's decision. The assessee argued that the AO miscalculated the deduction and that the computation should relate to the entries made in the books for the relevant year. The Tribunal agreed that the assessee's claim requires fresh verification and restored the issue to the AO for fresh adjudication, ensuring a reasonable opportunity of being heard is provided.

2. Disallowance under Section 40(a)(i):
The Revenue's appeals concern the disallowance made under section 40(a)(i) for payments made to non-residents without deducting tax at source. The assessee argued that the payments were for repair and maintenance services carried out outside India, and as per various Double Taxation Avoidance Agreements (DTAAs), the payments do not qualify as Fees for Technical Services (FTS) due to the absence of a Permanent Establishment (PE) in India or the non-fulfillment of the 'make available' condition. The AO treated the payments as FTS and disallowed them. The Commissioner (Appeals) deleted the additions, stating the services were not technical in nature and were carried out outside India. The Tribunal upheld this decision, agreeing that the payments were not taxable in India under the respective DTAAs, thus no tax was required to be deducted at source.

3. Deletion of Disallowance of Advances Written Off:
In the appeal for the assessment year 2011-12, the Revenue challenged the deletion of disallowance of advances written off. The AO disallowed the claim due to insufficient evidence. However, the Commissioner (Appeals) found that the advances were given in the normal course of business and had become irrecoverable due to non-fulfillment of conditions, thus representing a business loss allowable under section 37 of the Act. The Tribunal upheld this decision, noting that the Revenue failed to provide contrary evidence.

Conclusion:
The assessee's appeal regarding the computation of book profit under section 115JB is allowed for statistical purposes, requiring fresh verification by the AO. The Revenue's appeals concerning disallowance under section 40(a)(i) and deletion of disallowance of advances written off are dismissed.

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