TaxTMI 
TaxTMI 
2015 (3) TMI 754
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....the case of De Beers U.K. Ltd., DCIT(ITAT), Mum 134 ITD 697 (DTAA with U.K.). 4. The Ld CIT(A) has erred in deleting part of the additions on account of disallowance of Hire Charges paid in cash which the assessee could not prove with evidence the recipients of these hire charges as held in the case of CIT Vs. Calcutta Agency Ltd.,(SC) 74 ITR 634. 5. The Ld CIT(A) has erred in deleting Rs. 10 lakhs on account of disallowance of screening and crushing charges paid to sister concern when the iron ore fines purchased from sister concern which do not requires the crushing charges. 6. The Ld. CIT(A) has erred in deleting part of the additions on account of disallowance of labour charges when assessee has not provided any evidence for such payment being made towards the labour charges as held in the case of CIT Vs. Chandravilas Hotel (Guj) 164 ITR 102. 7. The Ld CIT(A) has erred in deleting part of the additions on account of unexplained cash purchases ore when assessee neither proved the identity of the parties from whom cash purchases were made nor the genuineness of the transactions as held in the case of CIT Vs. Calcutta Agency Ltd., (SC) 19 ITR 191 & Lakshimaratan Cotton....
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....l & Logistics Pvt. Ltd. did not have any permanent establishment in India. The AO was not satisfied and he disallowed both the commission paid to Mrs. Sita Ram Parodkar amounting to Rs. 45 lacs as well as the commission paid to M/s. De Long Mineral & Logistics Pvt. Ltd. amounting to Rs. 22,19,528/-. When the matter went before the CIT(A), CIT(A) deleted both the disallowances by holding as under : "4.4 Thus, it can be seen that the A.O. has made disallowance of commission in case of two parties, i.e. Mrs.Sita Parodkar and M/s De Long Minerals and Logistics Pte. Ltd. One is an Indian Resident, whereas the other is a Foreign party, not assessed in India. As far as commission payment to Smt. Sita Ram Parodkar is concerned, the A.O., for the reasons mentioned in the assessment order, has cast aspersions on the genuineness of the transaction. The main reasons being that she is old, illiterate and has done only one transaction during entire year. The rate of commission paid is Rs. 1500 PMT which is too high according to the A.O. The A.O. also found that the date for agreement and date of billing for commission are also the same, i.e. 01.08.2009, which also created the doubt in the min....
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.... in mining business. iii) Mrs. Sita R. Parodkar is not related to the appellant. iv) Mrs. Sita Parodkar has filed Return of Income and has declared the receipt and declared total income amounting to Rs. 33,20,060/- and paid taxes amounting to Rs. 9,28,795/- The A.O. drew a conclusion that this transaction of paying commission is an arrangement or a colourable device. The case laws relied upon by the A.O., especially CIT v/s McDowell, also direct that colourable devices be not allowed. But, in my opinion, such arrangements are done with a purpose, i.e. purpose of tax evasion. On the contrary, in the instant case, almost 80% of the gross commission receipt has been declared at total income and entire taxes of over Rs. 9 lakhs has been paid. In view, of this fact alone, it can be concluded that there was no motive of tax evasion through this transaction and there has been no loss of revenue to the Income Tax Department. In view of the above discussion, the A.O. is directed to delete the addition amounting to Rs. 45,00,000/- with respect to the commission payment made to Mrs. Sita R. Parodkar. 4.5. Now, regarding payment made to M/s De Long Minerals and Logistics, Singap....
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.... met each other. Business of the broker is just to bring both the purchaser and seller together. Merely because a person is illiterate and puts her thumb impression does not mean that she does not have any contact to bring two business people together. The AO is not justified in stating that the commission is paid by the seller and not by the buyer. In real estate deals also whenever a buyer wants to buy a property he has to get property through broker and has to pay commission to the broker. Mrs. Sita Ram Parodkar is an income tax assessee. She entered into an agreement with the Assessee on a stamp paper which was brought by her own son and the agreement was read out by her daughter in law who accompanied her at the time of execution of the agreement. Due to the commercial expediency the Assessee has to find the seller as the Assessee has to buy the iron ore. After getting introduced the Assessee entered into transaction with M/s. Mayur Minerals and has not paid any commission subsequently to Mrs. Sita Ram Parodkar. The commission agent has not to be registered. The Assessee had duly paid and deducted TDS. Even Mrs. Sita Ram Parodkar has duly filed her return. Reliance was placed ....
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....carefully considered the same alongwith the order of the tax authorities below. We noted that no disallowance has been made by the AO in respect of commission paid to M/s. De Long Mineral & Logistics Pvt. Ltd. on the basis of genuineness of the expenditure incurred by the Assessee. The disallowance has been made by the AO in view of the fact that the Assessee has not deducted TDS as per the provisions of Sec. 195. We noted that the CIT(A) held that sales commission paid by the Assessee is not chargeable to tax in India as services were rendered outside India by a non-resident and therefore provisions of Sec. 195 have no application so as to disallow the commission payment u/s 40(a)(i) of the Income Tax Act. Before us, the ld. AR vehemently contended that since commission paid by the Assessee to a non-resident was not taxable in India, therefore, no TDS has been deducted. The commission agent does not have any permanent establishment in India and for this the ld. AR drew our attention towards the tax treaty between India and Singapore. It is a well settled law in view of the decision of the Hon'ble Supreme Court in the case of GE India Technology Pvt. Ltd. vs. CIT, 327 ITR 456 t....
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....t they have paid to the truck owners on trip basis. The AO noted from the ledger of the Assessee that the narration contains "being paid towards transportation of ore from Jalna to Redi". Jalna is in Maharashtra while Redi is in Goa. The AO noted that the Assessee purchased ore from only two parties from Maharashtra - M/s. Welspun Maxsteel Ltd., Dist. Raigad (740.53 MT) and M/s. Ispat Industries Ltd., Dist. Raigad (12869.8 MT) but the Assessee has shown payment towards transportation charges amounting to Rs. 42,19,933/- as cash payment for transportation of ore from Jalna to Redi. It was also noted by the AO that most of the trucks are having Goa registration. Only few trucks have Maharashtra registration. The distance between Jalna and Redi is around 652 Kms. Therefore, the AO was of the opinion that uniform payment should have been made to each truck while the payment made by the Assessee varies from Rs. 10,000/- to Rs. 19,500/-. The AO took the view that the expenses were not genuine and therefore he disallowed 50% of the cash payment of Rs. 42,19,933/- i.e. Rs. 21,09,966/-. The Assessee went in appeal before the CIT(A). CIT(A) deleted the disallowance. 9. We heard the rival ....
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....ted an amount of Rs. 10,54,000/- as labour charges for screening and blending. The journal entries were passed on 31.2.2010 in the books of the Assessee. M/s. Karishma Impex has not rendered crushing and screening services to any other third party. The Assessee in reply submitted that they used the plant and machinery of M/s. Karishma Impex to carry out crushing and screening of ROM of M/s. Mayur Minerals and the bill was raised by M/s. Karishma Impex on 31.3.2010 and therefore the entry was passed on that date. The Assessee has purchased ROM from M/s. Mayur Minerals totaling 45000 MT. The AO further noted that the Assessee has purchased ROM from other parties also but Assessee has blended and screened only 20000 MT of iron ore purchased from M/s. Mayur Minerals. The Assessee is an exporter. A single shipment contains 50000 MT of iron ore. Therefore, all the iron ore exported should be of uniform quality. Why the Assessee would have crushed and screened only 20000 MT ? The AO also noted that as per the agreement executed on 1.8.2009 between the Assessee and M/s. Mayur Minerals, the Assessee purchased from M/s. Mayur Minerals fines and crushing is not required for fines. At the most....
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.... and does not require further crushing. CIT(A), we noted, has appreciated the facts of the case and found that disallowance has been made merely on assumption and presumption and therefore deleted the disallowance of Rs. 10 lacs. We do not find any illegality or infirmity in the order of CIT(A) in deleting the disallowance. We, therefore, dismiss the ground no. 5 of Revenue's appeal. 12. Ground no. 6 in Revenue's appeal and ground no. 2 in the C.O relate to the deletion of the addition on account of disallowance of the labour charges. The brief facts relating to this ground are that the AO noted that the Assessee has debited to M/s. Karishma Minerals, a sister concern, sum of Rs. 10,54,000/- as labour charges for screening and blending. It was noted that this expenditure was incurred through cash. The Assessee was asked to submit the ledger account of crushing and screening. The labour expenses were paid either Rs. 18,500/- or Rs. 19,500/- which were started by the Assessee on 3.12.2009 and were paid till 25.3.2010. The AO was of the opinion that crushing and screening are activities which are done using machinery and no labour is required. Therefore, he disallowed 50% of the la....
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....itative statement showing the opening stock, purchases, consumption as well as the closing stock, therefore, in our opinion, without making the purchases the Assessee cannot consume the iron ore. We, therefore, delete the disallowance. In the result, ground no. 7 of Revenue's appeal stands dismissed while ground no. 3 in the Assessee's C.O stands allowed. 16. Ground no. 8 in Revenue's appeal relates to deletion of the addition on account of payment of demurrage without deducting TDS. The brief facts relating to this ground are that the AO noted that the Assessee has paid demurrage amounting to Rs. 79,68,853/- to various parties relating to Hongkong, Dubai, British origin island countries with whom India does not have DTAA without deducting tax at source. The AO, therefore, disallowed the said expenditure by applying provisions of Sec. 40(a)(i) as, in his opinion, the Assessee was bound to deduct TDS. When the matter went before the CIT(A), CIT(A) deleted the disallowance. 17. We heard the rival submissions and carefully considered the same alongwith the order of the tax authorities below. In our opinion, the issue is duly covered by the decision of the jurisdiction High Court....
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....ssessee cannot be said to be non-resident. We have also taken notice of section 6, i.e., "Residence in India". In short, respondent-assessee cannot be said to be non-resident. The present appeal pertains to the respondent-assessee. In our view, in the facts of the present case, the respondent-assessee cannot lay fingers on section 172, since we are not dealing with profits of non-residents. The other aspect is that such profits of non-residents should be from occasional shipping business. It is not the case that the respondent-assessee has earned some profit from occasional shipping and is a non-resident. In our view, section 172 does not have application in relation to the respondent-assessee and in the facts and circumstances of the present case. The company from Japan viz., Mitsui & Co. Ltd., Japan, recipient of demurrage amount is not before us. In other words, we are not examining the tax liability of the foreign company, i.e., Mitsui & Co. Ltd., Japan. On our query to the learned Senior Advocate Shri Usgaonkar as to material on record for occasional shipping, part of para 3 from the Judgment of the learned Commissioner of Income-tax has been pointed out to us. His observation....
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....es in the area of computation of profits from shipping business of non-residents and there is no overlapping in the areas of operation of these sections. Learned Senior Advocate Shri Usgaonkar, appearing on behalf of the respondent-assessee, also drew our attention to the Judgment of the Hon'ble Supreme Court in the matter of Commissioner of Sales Tax v. Indra Industries [2001] 248 ITR 338. It is a three Bench Judgment of the Hon'ble Supreme Court. It has been held by the Hon'ble Supreme Court that the circulars issued by Commissioner of Sales Tax not binding on assessee or Court, however, binding on the Department. In the case on hand, in our view, learned Commissioner of Income-tax (Appeals) and the learned appellate Tribunal have wrongly interpreted the Circular dated 19-9-1995 issued by the CBDT. This circular, in our opinion, cannot be considered in the facts and circumstances of the present case, in aid to the respondent-assessee. The learned Assessing Officer, in fact, has passed a legal, proper and reasoned order, holding that the provisions laid down under section 40(a)( i) of the 1961 Act apply to the case on hand. 11. We may notice here the Judgment of the....