TaxTMI 
TaxTMI 
2011 (11) TMI 509
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....ge rate fluctuation is in relation to the fourth instalment of research and know how fee remitted by the assessee to its foreign collaborator. During the year under consideration, the assessee had claimed deduction of Rs. 42,89,872/- as fourth instalment of research and know how fee in its return of income. Notably, the assessee had entered into a research and know how agreement with A B Sandvik Coromant, Sweden during the assessment year 1991-92 in terms of which the assessee was liable to pay Swiss Kroner 38,58,000/-. In the assessment order for the assessment year 1991-92, the Assessing Officer held that since the duration of the Agreement was for five years, the appellant was entitled to deduction of Swiss Kroner 7,71,600/- being 1/5th of the amount payable under the Agreement in five assessment years commencing from the assessment year 1991-92. However, at that point of time, the assessee had deducted the prescribed tax deductible at source (TDS) also and remitted the same to the exchequer, on the entire amount of fee payable to the foreign collaborator, including the future instalments as the assessee had credited the entire amount to the account of the collaborator in the ac....
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....sallowance of Rs. 8,82,234/- when computing the appellant's income chargeable to tax. 2. The ld CIT(A) erred in upholding the AO's view that disallowance of Rs. 8,82,234/- could be sustained in view of S. 40(a)(i) of the Act. 3. The ld CIT(A) erred in upholding the disallowance of Rs. 8,82,234/- without anywhere considering or dealing with the said provision, the other provisions of the Income-tax Act and Rules, the arguments urged and contentious and materials in support thereof. 4. The ld CIT(A) failed to appreciate that: (i) the provisions of S.40(a)(i) of the Act have no application to the sum of Rs. 8,82,234/-, (ii) assuming for the sake of argument that the said provision required consideration, even then the same did not permit disallowance of the sum of Rs. 8,82,234/-. 5. The CIT(A) gravely erred in holding that the previous appellate order of the CIT(A) dated 28.11.1997 directed tat the provisions of S. 40(a)(i) of the Act were to be applied when considering deductibility of Rs. 8,82,234/-. At the very highest the said order can be read as directing the AO to consider whether section 40(a)(i) of....
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....er section 40(a)(i) of the Act. In this context, reliance has been placed on the following two decisions of the Tribunal, wherein it has been opined that provisions of section 40(a)(ia) of the Act do not apply in the event of lesser deduction of tax at source, but are applicable only in the event of non deduction of tax at source: (i) Dy. CIT v. Chandabhoy & Jassobhoy, IT Appeal No 20/Mum/2010 order dated 8.7.2011; and, (ii) Dy. CIT v. S.K. Tekriwal [2011] 15 taxmann.com 289 (Kol.) It is contended that the parity of reasoning laid down in the aforesaid decisions is equally relevant and applicable in the context of section 40(a)(i) of the Act also, which is the subject matter of consideration in the instant case. Apart from the aforesaid submissions, the learned Counsel also pointed out that the Assessing Officer while giving effect to the order of the Commissioner of Income-tax (Appeals) dated 28.11.1997, has travelled beyond his jurisdiction by invoking the provisions of section 40(a)(i) in the context of the impugned sum of Rs. 8,82,234/. In this regard, reference has been made to the directions of the Commissioner of Income-tax (Appeals) contained in his order dat....
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....tances and thereafter allow deduction on account of foreign exchange loss in this year too and accordingly the issue was remanded to the file of the Assessing Officer. However, the following words, "if the remittances are actually made subject to appropriate deduction of tax at source as per section 40(a)(i) of the Act." in his direction has led to a new arena of dispute between the assessee and the Revenue. In the order passed to give effect to the directions of the Commissioner of Income-tax (Appeals), the case made out by the Assessing Officer, and which is presently in appeal before us, is to the effect that the assessee was required to deduct tax at source even with regard to the exchange rate fluctuation loss in terms of section 195(1) of the Act and the assessee not having done so, the same is to suffer disallowance in terms of section 40(a)(i) of the Act. Quite clearly, the case made out by the Revenue is founded on the assumption that the exchange rate fluctuation loss also partakes the character of technical fee. Without going into this controversy, it transpires from the material on record that loss on account of foreign exchange in relation to the earlier instalments re....
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....as at the time of payment thereof. In other words, it would be safe to deduce that where the assessee has deducted tax at source at the earlier point of time, namely, at the time of crediting of income into the account of the payee, the assessee thereafter is under no obligation to again deduct tax at source at the time of payment of such income. Section 195(1) of the Act also enumerates the timing at which the tax is required to be deducted by the payer in relation to a transaction which entails payment of a sum chargeable under this Act to a non-resident. In the present case, it is evident that the assessee was required to deduct tax at source on its transaction to pay research and technical know-how fee to the foreign concern and it deducted requisite tax at source as per section 195(1) of the Act at the time when such income was credited to the account of the foreign concern as per the then prevailing foreign exchange rate. Consequently, it would follow that when such income is actually paid by the assessee to the foreign concern, the same would not again invite the deduction of tax at source as per section 195(1) of the Act. Ostensibly, as per the agreement, the assessee is to....
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.... be invoked only in the event of non-deduction of tax, but not in cases involving short deduction of tax at source. In our view, the ratio of the decisions is squarely applicable in the present case also, inasmuch as the provisions of section 40(a)(ia) of the Act are akin to those of section 40(a)(i) which is the subject-matter of consideration before us. On this count also, we find that invoking of section 40(a)(i) of the Act to disallow the sum of Rs. 8,82,234/- is untenable. 10. Therefore, on both the counts as discussed above, the impugned sum is not disallowable in terms of section 40(a)(i) of the Act and accordingly, we set aside the order of the Commissioner of Income-tax (Appeals) and direct the Assessing Officer to delete the addition of Rs. 8,82,234/-. Thus, on the first issue, assessee succeeds. 11. The second grievance of the assessee articulated in terms of Ground Nos. (7) & (8) relate to a disallowance of Rs. 6,11,000/-, and read as under:- "(7) The CIT(A) erred in setting aside the issue of deduction of Rs. 6,11,000/-, (8) The CIT(A) ought to have allowed deduction of Rs. 6,11,000/- being liquidated damages in view of inter alia the facts and circumstances of the....
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.... the Assessing Officer did not carry out directions of the Commissioner of Income-tax (Appeals) properly has since been negated by the Commissioner of Income-tax (Appeals) in the impugned order dated 26.7.1999. The Commissioner of Income-tax (Appeals) by way of the impugned order has again directed the Assessing Officer to examine whether Government's refusal to pay in respect of the two entries in dispute have become final during the year or not and has accordingly remanded the matter back to the file of the Assessing Officer. Not being satisfied with the order of the Commissioner of Income-tax (Appeals), assessee is in further appeal before us. 15. Before us, the sum and substance of the arguments put-forth on behalf of the appellant is that the Assessing Officer while passing order dated 10.3.1998 went beyond the scope of directions given by the Commissioner of Income-tax (Appeals) in his order dated 28.11.1997 and, therefore, the claim has been wrongly disallowed. The learned Counsel quite fairly submitted that the direction of the Commissioner of Income-tax (Appeals) dated 28.11.1997 contained in para 6.3 which reads as under: "The AO is directed to allow the deduction subje....
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.... 58/PN/2005 by the assessee also emanates from the same order of the Commissioner of Income-tax (Appeals). 20. In the appeal of the Revenue, following two Grounds have been raised: "(1) On the facts and in the circumstances of the case, the ld CIT(A) erred in deleting the addition of Rs. 1,99,43,610/- made by the AO on account of excise duty payment on finished goods which is not included in the value of closing stock. (2) On the facts and in the circumstances of the case, the ld CIT(A) erred in taxing the net of interest and thus giving relief for interest paid by the assessee to the I.T department." 21. The first Ground relates to an addition of Rs. 1,99,43,610/- made by the Assessing Officer on account of valuation of closing stock of finished goods due to Excise Duty payable. The Commissioner of Income-tax (Appeals) has deleted the addition by observing that similar issue was considered in assessee's own case for the assessment years 1992-93 and 1993-94 in favour of the assessee. 22. Before us, it was a common ground between the parties that for the assessment year 1992-93, similar issue has been adjudicated by the Tribunal vide its order in ITA No 119/PN/96 da....