AI Drafter 
TaxTMI 
TaxTMI 
2016 (1) TMI 221
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....ills. For the assessment year 2010-2011, the assessee has filed return of income on 24.09.2010 declaring total income of ;29,22,05,072/-. Further, the return was processed u/s.143(1) of the Act and case was selected for scrutiny and notice u/s.143(2) of the Act was issued. In response to the notice, the assessee's Director and Manager appeared from time to time and filed information called for by way of questionnaire dated 16.12.2012. At the time of hearing Books of accounts, Annual Report and financial statements and Tax Audit Report in form 3CA and 3CD alongwith enclosures were submitted to the Assessing Officer and ld.AO has made additions on account of excess deduction u/Sec 54EC of the recoverable write off, Gratuity payments, foreign travel, expenditure, overseas Commission and other expenditure to the returned income and assessed income at ;31,62,19,530/- and raised demand. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). 3. In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) after hearing the arguments and perusing the written submissions has granted part relief and confi....
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....tten off which the Assessing Officer verified on the basis of information submitted in the assessment proceedings. Further, the assessee company instead of writing off the accounts and crediting the debtors account, has written off the amount which is in accordance of law and pleaded for deletion of addition. 4.2 On the other hand, the ld. Departmental Representative relied on the order of the Commissioner of Income Tax (Appeals) and contested the issue. 4.3 We heard the rival submissions of both the parties, perused the material on record and also judicial decisions cited. The assessee has been following the system of Accounting methodology which is accepted. Bad Debts occurred in the normal course of business and write off can be made after considering the recovery of Debtors becoming doubtful and the assessee has not squared off the debtors account. Under amended provisions of section 36(i)(vii) of the act effective from 1st April, 1989, in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact has become irrecoverable, it is enough if the bad debt is written off as irrecoverable in the accounts of the....
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....proved Employees Group Gratuity Fund Trust. 5.1 The Elgi Tyre and Tread Limited as per the scheme of Arrangement approved by the Madras High Court has formed a Employees Group Gratuity Fund Trust and subsequently as name M/s. Treadsdirect Employees Group Gratuity Fund Trust. As per the scheme of arrangement by High Court order all the approvals obtained for erstwhile Company is applicable to the demerged companies also. Since the assessee company is demerged company and scheme guidelines shall be applicable. The ld. Authorised Representative submitted trust deed copies pertaining to earlier company and also demerged company and argued that that there was no change in constitution or amendment to the object of the trust. This contribution is made to protect the rights of its employees. There is no dispute about the demerged scheme of arrangement but only apprehension that subsequent to de-merger, the assessee company should obtained fresh approval from the Commissioner of Income Tax. Considering the non approval by the Commissioner of Income Tax, the Assessing Officer disallowed the claim. Against this, the assessee has filed an appeal. 5.2 Before the ld. Commissioner of Incom....
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....essee company is a demerged company and all the terms and conditions apply and necessary approvals which are applicable for Treads Direct Limited shall remain with the de-merged company. The ld. Authorised Representative also relied on the letter of the office of the Commissioner of Income Tax giving approval from 20.02.1989 and prayed for deletion of addition. 5.4 On the other hand, the ld. Departmental Representative relied on the orders of the lower authorities and vehemently argued for dismissal of the appeal. 5.5 We have heard the rival submissions of both the parties, perused the materials on record and orders of the lower authorities. The assessee company is a de-merged company from the Elgitread (India) Ltd as per the composite scheme of arrangement and amalgamation and the approval was granted with effect from 04.04.2008 and this assessment year being the second year of operations after de-merger the Revenue has considered the approval of High Court but disallowed the contribution to the gratuity fund. The ld.AR drew our attention to page No.68 of paper book were the gratuity fund was approved by letter dated 12.04.1990 which is in existence from earlier year and Rev....
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....nal, the ld. Authorised Representative has filed paper book, submitted statements of Foreign Travel Expenses incurred alongwith name and designation of executives of the company and disallowance made by Assessing Officer purely referred to employees of Finance Department visits to subsidiary companies for Accounts finalization and for consolidation of accounts required under Indian Law. Further, the ld. Authorised Representative argued that percentage of Travel expenses on a turnover if considered on percentage basis is very negligible considering the global business operations and prayed for deletion of addition. 6.3 On the other hand, the ld. Departmental Representative relied on the orders of the lower authorities and vehemently argued for dismissal of the appeal. 6.4 We heard the rival submissions of both the parties, perused the materials on record and orders of the lower authorities. The assessee company is having global business operations and definitely such subsidiary companies are to be managed in accordance with standard accounting principle and Indian laws. The expenditure percentage compared to turnover is very small amount. The expenditure incurred for the busin....
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....ing to establish that there is a business connection with subsidiary Company and disallowed foreign sales commission of ;42,87,219/-. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal. 7.1 In the appellate proceedings, the ld. Authorised Representative has filed written submissions and referenced to double taxation agreement at page No.12 of CIT order as under:- ''The relationship between the assessee and the agents are principal to principal. The agents do not have any PE in India. Any tax that would accrue or arise in only outside the country and not in India. Very importantly this payment does not also fall within the ambit of Section 9(1)(vii) as the services under consideration is not for any technical service rendered nor could not be taken as a job which was managerial in nature. The non-residents are only procuring orders for the assessee and following up payments. No other service are rendered other than procuring the orders and collecting the amounts. The non-residents are not providing any technical services to the assessee. The commission payment made to non -residents also does not fall under the category of royalty of fees o....
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....ny permanent establish in India and produced the Ledgers Accounts of export sale commission and copy of the invoices raised by the foreign commission agents, to establish the transaction with the company and relied on the order of the Commissioner of Income Tax (Appeals). 7.5 We have heard the rival submissions of both the parties, perused the material on record and orders of the lower authorities and judicial citations referred by the parties. The ld.AR filed invoice copies at page Nos.69 to 78 of paper book raised by foreign agents of different countries on assessee company for commission on sale of tread rubber and bonding gum. The Co-ordinate Bench of Tribunal in the case of CIT vs. M.M. Forgings Ltd in ITA No.2679/Mds/2014, dated 19.06.2015 has dealt the issue referred at page No.10 of paper book at para 12 and 13. 12. The Commissioner of Income Tax (Appeals) further observed that the Hon'ble Supreme Court in the case cited supra has held that the assessee is not liable to deduct TDS when the non-resident agents provided services outside India and as such commission payments made to them cannot be treated as income deemed to accrue or arise in India and therefo....
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....ibunal, it was held that. 47. In our opinion, nature of services mentioned above will come not within the definition of "fees for technical services" given under explanation 2 to Section 9(1)(vii) of the Act. By virtue of such services, the concerned recipients had not made available to the assessee any new technic or skill which assessee could use in its business. The services rendered by the said parties related to clearing, warehousing and freight charges, outside India. The logistics service rendered was essentially warehousing facility. In our opinion, this cannot be equated with managerial, technical or consultancy services. Even if it is considered as technical service, the fee was payable only for services utilized by the assessee in the business or profession carried on by the said nonresidents outside India. Such business or profession of the non-residents, earned them income outside India. Thus, it would fall within the exception given under sub-clause (b) of Section 9(1) of the Act. In any case, under Section 195 of the Act, assessee is liable to deduct tax only where the payment made to non-residents is chargeable to tax under the provisions of the Act. In the....
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....d also relied on the findings of the Assessing Officer. The Assessing Officer tried to interpret the provisions by restricting to ;50,00,000/- to one financial year only and observed at page No.5, of paper book para 6 of CIT order as under:- Section 54EC(1) clearly states that if the assessee has at any point of time within a period of 6 months after the date of transfer of a long term capital asset, invested the whole or part of the capital gain in the long term capital asset, the capital gain shall be dealt with in accordance with the provisions of this Section. The provision clearly states that "investment made on or after 1st April of 2007 in the long term specified asset by an assessee 'during any financial year' does not exceed 50 lakh rupees". It is also to be considered that in the Finance Act 2014, an amendment was made in Section 54EC. As per the amendment, after the proviso to sub section (1), the following proviso shall be inserted w.ef. 1st April 2015 namely, "provided further that the investment made by an assessee in the long term Specified Asset from capital gains arising out of transfer from one or more capital asset during the Financial Year in wh....