TaxTMI 
TaxTMI 
2009 (4) TMI 210
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.... 2(1), International-tax Division, New Delhi under section 143(1) of the Income-tax Act, 1961 ('Act') under which adjustment to the returned income has been made and tax and interest under sections 234A, 234B and 234C of the Act has been charged. Therefore, the order of the learned Commissioner of Income-tax (Appeals) confirming the intimation issued by the learned Assessing Officer is bad in law and should be annulled. 2. The learned Commissioner of Income-tax (Appeals) has erred on the facts and circumstances of the case and in law in ignoring the disclosures made in the notes to the computation enclosed along with the return of income as per which the appellant has claimed that its income is not liable to be taxed in India. 3. The learned Commissioner of Income-tax (Appeals) has erred on the facts and circumstances of the case and in law confirming the levy of interest under sections 234A, 234B and 234C of the Act in the said intimation. 4. That on facts and in law, the order issued by the learned Commissioner of Income-tax (Appeals) confirming the adjustment made in the intimation issued by the learned Assessing Officer is bad in law and, inter alia, void ab initio." ....
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.... in the computation of income that the income shown in the return of income is not liable to be taxed in India. After considering the facts and circumstances of the case and submission of the assessee and after perusing the assessment records, the Commissioner of Income-tax (Appeals) had taken a view that the Assessing Officer has not made any adjustment in the income offered by the assessee as per return and has computed the tax liability at the rate of 15 per cent. on the amount of income shown in the return filed by the assessee, and after adjusting the pre-paid taxes worked out the net demand including interest charged under sections 234A, 234B and 234C of the Act. The Commissioner of Income-tax (Appeals) further stated that as per the provisions of section 143(1), the Assessing Officer was required to compute tax or interest which is found due on the basis of such return, after adjustment of arty tax deducted at source, any advance tax paid, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest. The Commissioner of Income-tax (Appeals) further stated that on the basis of return filed by the assessee, the Assessing Officer accepted the income a....
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....what the Assessing Officer has done while preparing the intimation under section 143(1) of the Act can only be done after providing an opportunity of being heard to the assessee and after selecting the case for making assessment under section 143(3) of the Act and not by way of intimation issued under section 143(1) of the Act. He further submitted that the Assessing Officer has wrongly extended the scope of section 143(1) of the Act in raising a demand of tax of the assessee on the amount shown in the return of income when it was the assessee's case made out in the return of income itself that the assessee was not liable to pay any tax on the amount shown in the return of income. He further contended that the Assessing Officer had erred in reading the return of income filed by the assessee in piecemeal without looking to the return as a whole along with the computation of income and the note thereto enclosed with the return of income. He further submitted that when the assessee's claim denying of its liability to pay tax on the amount was made in the return itself the issue of charging the tax upon the income shown in the return of income cannot be regarded a subject-matter of det....
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....greement between the U.S.A. and India. He further pointed out that the Assessing Officer has applied 15 per cent. rate of tax as per the Double Taxation Avoidance Agreement as so have been paid by the assessee under section 191 of the Act. He further submitted that when the assessee itself has paid tax at the rate of 15 per cent. under section 191 of the Act as per the Double Taxation Avoidance Agreement, the Assessing Officer has accepted the total income as declared by the assessee in the return and also calculated the tax liability at 15 per cent. In other words, the learned Departmental representative submitted that the Assessing Officer has neither made any adjustment in the return of income nor in the rate of tax at which rate tax was paid by the assessee itself under section 191 of the Act. He further submitted that the Assessing Officer was also justified in charging mandatory interest chargeable under sections 234A, 234B and 234C of the Act. We have heard both the parties and have gone through the orders of the authorities below. We have carefully perused the materials on record. We have deliberated on the position of law relating to the issue in hand before us. The pre....
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....e Commissioner of Income-tax (Appeals) had verified and perused the assessment records of the assessee. The Commissioner of Income-tax (Appeals) found that in the statement of total income, which was enclosed with the return of income, the assessee had shown total tax liability as nil, and in the return also the tax payable was shown as nil. In his order, the Commissioner of Income-tax (Appeals) also reproduced the notes given below to the statement of income filed by the assessee along with the return of income. The copy of statement of total income along with the note has also been placed before us, and on perusal thereof, we find that the assessee has shown the total tax liability at nil by making a reference to Note 1 below thereto. The statement of income and Note below thereto, filed by the assessee along with the return of income, reads as under: Statement of total income for the financial year 2001-02 ------------------------------------------------------------ Particulars ....
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....t that MRSC is held to be liable to tax in India it shall not be liable to interest under sections 234B and 234C of the Act based on the following judicial precedents: Sedco Forex International Drilling Inc. v. Deputy CIT [2000] 72 ITD 415 (Delhi). CIT v. Madras Fertilisers Limited [1984] 149 ITR 703 (Mad); and M.M. Ratnam v. ITO [1997] 62 ITD 21 (Mum). Section 191 of the Act provides that where income-tax has not been deducted in accordance with the provisions of Chapter XVII-B of the Act, income-tax shall be payable by the assessee direct. In the instant case, payments have been made by non-exclusive Indian distributors to MRSC for purchase of computer software. Since MRSC is a non-resident, the relevant provision for deduction of tax under Chapter XVII-B of the Act is section 195 of the Act. Section 195 of the Act provides that any person responsible for paying any sum to a non-resident which is chargeable to tax in India, shall at the time of credit of such income to the account of the payee or at the time of payment whichever is earlier deduct income-tax at the rates in force. Since the payments made to MRSC are not chargeable to tax in India based on reasons outli....
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....e and taken by the Assessing Officer in the intimation made under section 143(1) of the Act, but the dispute is with regard to the matter as to whether there would be any tax payable by the assessee on the aforesaid amount of total income of Rs. 5,11,68,95,840. The assessee's case as so made out in the note below to computation of income is that no tax is payable by the assessee on the aforesaid income of Rs. 5,11,68,95,840. On the other hand, the Assessing Officer worked out the tax liability at the rate of 15 per cent. on the aforesaid income of Rs. 5,11,68,95,840 while preparing the intimation under section 143(1) of the Act. The learned Commissioner of Income-tax (Appeals) has stated that the Assessing Officer applied tax at the rate of 15 per cent. as per the Double Taxation Avoidance Agreement, as so paid by the assessee under section 191 of the Act. To resolve the controversy in hand, we find it necessary to refer to the provisions contained in section 143(1) of the Act as effective from June 1, 1999. Sub-section (1) of section 143 reads as under: "(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142,- (i) ....
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....he assessee has shown the tax payable at "nil". Similarly, in the computation of income annexed to the return of income the tax payable has been shown at "nil". The Assessing Officer has proceeded on the basis of amount of total income shown by the assessee under column No. "20" "total income", and has worked out the tax payable thereupon at the rate of 15 per cent. by treating the total income shown by the assessee as "royalty" chargeable to tax as per article 12(7) of the Double Taxation Avoidance Agreement between India and the U.S.A. In this respect, we find that the scope of section 143(1), as was prevailing at the relevant point of time, permitted the Assessing Officer without requiring the presence of the assessee or production by him of any evidence in support of the return, to determine tax payable or refund due on the basis of return of income filed by the assessee. The return of income filed by the assessee, for the purpose of section 143(1), would include every part of the return of income, and the whole return of income along with relevant note, if any, filed explaining the assessee's liability of tax payable on the amount of income shown in the return of income, shoul....
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....e will not fall under the category of determination of tax payable on the returned income on the basis of return of income under section 143(1) when the assessee has categorically stated in the note enclosed with the return of income that the returned income is not in the nature of royalty within the meaning of article 12(7) of the Double Taxation Avoidance Agreement between India and the U.S.A. but a business profit not liable to be taxed in India in the absence of any permanent establishment in India. There may be a case where the nature of income and rate of tax chargeable thereupon is not disputed but while calculating the tax payable on the returned income there is an error or mistake, which could be corrected under this clause, i.e., 143(1). In other words, while calculating the tax as per the rate on the returned income admitted by the assessee in the return of income, there is a mistake in calculation of the amount of tax committed by the assessee, which could be corrected and will fall within the scope of section 143(1) of the Act while determining tax payable on the returned income, but whether the income returned is chargeable to tax or not, and if chargeable, then what ....
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.... profit under article 7 of the Double Taxation Avoidance Agreement between India and the U.S.A., and such business profit is not chargeable to tax in India in the light of the fact that the assessee had no permanent establishment situated in India, we are of the considered view that the Assessing Officer is unjustified in creating the demand by determining the tax at the rate of 15 per cent. treating the amount shown by the assessee to be in the nature of royalty within the meaning of article 12 of the Double Taxation Avoidance Agreement between India and the U.S.A. while making an intimation under section 143(1) of the Act. We further hold that the Assessing Officer's action in creating the demand in the manner as aforesaid is beyond the scope of section 143(1) of the Act. We, therefore, cancel the intimation made by the Assessing Officer under section 143(1) of the Act and set aside the orders of both the authorities below. Before parting with this issue, we may observe that, in the meantime, the Assessing Officer has also made regular assessment under section 143(3) of the Act on February 28, 2005 and March 18, 2005, for the assessment years 2002-03 and 2003-04 respectively, and....