2014 (1) TMI 1325

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.....Y.2005-2006 i.e. ITA No.3352/Ahd/2010. The grounds raised by the assessee are as under:    "1. The learned CIT (A) has erred in the instant case in not directing the learned assessing officer to grant the credit of taxes paid in foreign country (Kingdom of Saudi Arabia) from the professional fees remitted to the appellant and offered for taxation in India while processing the return of income u/s. 143(1) of the Act.    2. The learned CIT (A) has failed to appreciate that, at the relevant time, the double taxation avoidance agreement with the Kingdom of Saudi Arabia was a limited treaty and not a comprehensive treaty and, therefore, the appellant's case was covered within the purview of section 91 of the Act and no....

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....osition. The learned DR supported the order of the CIT(A). 4. We have considered rival submissions. We find that the ground no.3 raised by the assessee is this that the AO could not have made this adjustment by way of denial of the credit of tax paid in foreign country while passing intimation under section 143(1) of the I.T.Act. On this aspect, no specific ground was raised before ld. CIT(A), and hence, there is no decision by the learned CIT(A) on this aspect. Still, we feel that this issue is a legal issue, hence, this can be raised for the first time before us also, and therefore, we decide to admit this ground. However, since there is no decision of the learned CIT(A) on this aspect, we set aside the order of the learned CIT(A) and ....

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.... CIT(A) has failed to appreciate that the true nature of account of M/s. C. C. Chokshi & Co. (CCC) with the appellant is of a current account and. therefore, the payments made on various dates were erroneously perceived as advance payments towards professional fees requiring deduction of tax at source (TDS) at the point of time when such payments were made.    3. The learned CIT(A) has, based on an erroneous understanding of the "cash system" of accounting, sustained the disallowance of Rs.17,53,564, being the excess of various advance / on account payments made by the appellant to CCC over the amount of professional fees credited of Rs.99,32,196 till February, 2006 by invoking section 40(a)(ia) r.w.s. 194J of the Act despite t....