TaxTMI 
TaxTMI 
2016 (8) TMI 745
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....mitted that the assessment already completed under sec.143(3) was reopened by issue of notice u/s 148 on 30.3.2012 ie. after a period of 4 years from the end of the assessment year. Reasons for which the assessment has been reopened was furnished to the assessee. From the reasons recorded for reopening, it is evident that the reopening was done to disallow expenditure incurred in foreign currency towards interest, professional fees and others paid to non-residents. He further submitted that during the course of regular assessment u/s 143(3), the AO required the details of payments made in foreign currency which were furnished vide letters dated 08.09.2008 and 06.11.2008. The AO at the time original assessment u/s 143(3) after examining the above letters invoked the provisions of section 40a(ia) to disallow the payments made in respect of machining charges. In respect of the other payments made, the AO being satisfied with the explanation offered by the assessee had not disallowed these expenses, which is discussed in the assessment order. Subsequently in the order u/s 147, the AO had disallowed the expenditure on commission, interest and other payments by invoking section 40a(ia). ....
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....gn currency towards (i) Commission (ii) Professional/Consultancy Fees and (iv) Others, without deduction of tax at source, requires to be disallowed and added back. Explanation below sub-section (2) of Section 9 has been inserted by the Finance Act, 2010 with retrospective effect from 1st June 1976, whereby income of a non-resident shall be deemed to accrue or arise in India under clause (v), (vi) or (vii) of sub-section (1) of Sec. 9 and shall be included in the total income of non-resident, whether or not, (i) The non-resident has a residence or place of business or business connection in India or (ii) The non-resident has rendered services in India. Moreover, the CBDT vide its Circular No.7 dated 22.10.2009, has withdrawn its earlier circular on the issue of taxation of non-residents, including Circular No.786 dated 7.2.2000. Thus, income to the above extent had escaped the assessment within the meaning of provisions of sec.147 of the I.T.Act and hence the assessment was reopened by issue of notice u/s.148 vide notice date 30.3.2012." 7. As seen from the above, Explanation below sub-section (2) of Section 9 has been inserted by the Finance Act, 2010 with retrosp....
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....bly drawn and what legal inferences have ultimately to be drawn. It is not for the assessee to tell the AO what inferences, whether of facts or law should be drawn. When the assessee has submitted all details of payment of commission, professional fees and others, before the AO at the time of original assessment, there is no failure on the part of the assessee to disclose all facts truly and fully for its assessment and the reasons recorded by the AO that there is failure on the part of the assessee to disclose all facts truly and fully for reopening the assessment after 4 years from the end of relevant assessment year, are not justified. Accordingly, we are inclined to allow the appeal of the assessee. 7.2 In the result, the appeal of the assessee in ITA No.620/Mds/2014 is allowed. 8. Coming to the Revenue's appeal in ITA No.693/Mds/2014, the first ground is with regard to disallowance u/s.40(a)(i) being sales commission paid to various persons outside India. 9. This issue came up for consideration before the Tribunal in assessee's own case in ITA No.656/Mds/2012 dated 22.3.2013, wherein it was held as under : "47. In our opinion, nature of services mentioned above will come ....
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....fore us. 12. We have heard both the sides and perused the material on record. The interest was paid to the banks located in India and not outside India and the payment was not made on foreign currency for the amount borrowed from foreign banks. Being so, this payment is exempt from the provisions of TDS u/s.194A(3)(iii)(a) and disallowance u/s.40(a)(i) is not warranted. This ground is also dismissed. 13. Next ground in Revenue's appeal is with regard to disallowance made u/s.40(a)(i) being expenditure incurred on sales promotion, advertisement, legal fees outside India. 14. The ld. AR submitted before the CIT(Appeals) that the commission was paid for sales promotion outside India, that too as a reimbursement of the expenditure incurred by the representative outside India, therefore that will not attract any TDS provisions. As far as advertisement and legal fee is concerned, they were paid outside India and they are not in the nature of interest, royalty or technical fee covered u/s.9(1)(v)(vi)/vii of the Act and no such income can be considered to be deemed to accrue or arise in India. Therefore, TDS provisions do not attract. It was also submitted that those parties do not have....
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.... which allow additional depreciation for new machinery or plant acquired and installed after 31st March, 2005. The said sub-clause (iia) of Section 32(1) reads as under:- "32 (1) In respect of depreciation of - (i) ... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... (ii) .... ... .... ..... ..... ..... ..... .... .... .... .... .... .... .... .... ... .... ..... ..... .... .... .... .... .... .... .... .... .... .... .... .... .... (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture and production of any article or thing, a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii): Provided that no deduction shall be allowed in respect of - (A) any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person; or (B) any machinery or plant installed in any office prem....
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....ich the capacity expansion has taken place which has resulted in the substantial increase in the installed capacity. In the assessee's case this took place in the assessment year 2005-06 and the assessee has also claimed the additional depreciation during that year and the same has also been allowed. Each assessment year is separate and independent assessment year. The provisions of section 32 of the Act do not provide for carry forward of the residual additional depreciation, if any. In the circumstances, the finding of the learned CIT(A) on this issue is on a right footing and does not call for any interference. Consequently, ground No.1 of the assessee's appeal stands dismissed." We are therefore of the opinion that CIT(Appeals) was justified in following the view taken by co-ordinate Bench of this Tribunal. 56. Ground No.1 of the assessee stands dismissed." Respectfully following the aforesaid decision of this Tribunal, we decide this issue against the assesse. 19. The next ground in assessee's appeal is with regard to upholding the disallowance u/s.14A based on Rule 8D despite the fact that the assesse had not incurred any expenditure to earn the exempted income viz. di....
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....se deductions. The CIT(A)- LTU further failed to appreciate that the investments from which tax free income was earned were made even before 10B unit came into existence and hence the question of apportioning the income to 10B unit does not arise. 25. The facts of the issue are that the AO observed that the assessee claimed deduction u/s 10B on two 100% EOU (i) Apache Unit located at Sholingar of Rs. 1 ,69,42,751 and (ii) Roll Tee unit of Rs. 6,86,28,810/- and that it had claimed weighted deduction u/s 35(2AB), 35AC and 35(1 )(ii) of the Act. It has been stated by the AO that since the assessee has not apportioned the total R&D expenditure incurred by it on the said EOU units, it was asked to explain why the above expenditure should not be apportioned proportionately on the basis of the turnover figure. 25.1 The assessee replied that the products manufactured and exported from the 10B unit at Apache is a time tested product for years together and the product manufactured at Rolltec Unit is based on the design and drawings provided by the buyer and hence there is no R & D effort involved and it relied on the order of the Tribunal, Chennai Bench in their own case for A.Y. 89-90 whe....
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....produced as under : "31 As per AO the new products developed could be used extensively for export purposes. However, we find nothing is available on record to show what tangible benefit, if any, assessee had derived on account of the research work. Whether any such earlier research had helped the assessee with regard to its activities in the units on which it had claimed deduction under section 10B of the Act, is also not on record. CIT(Appeals) had given relief to the assessee accepting its claim that it had not incurred any such expenditure with reference to the units 00 'which 10B deduction was claimed. We are of the opinion that the matter requires a fresh look by the Assessing Officer. Assessing Officer has to verify whether the research done by the assessee had any tangible benefit vis-a- vis the activities carried on by it from the units on which deduction under section 10B was claimed. Assessing Officer has to compute such data with regard to research expenditure incurred in earlier years and come to a conclusion in this regard. Assessee has to co-operate with the Assessing Officer and give necessary information. We, therefore, set aside the orders of authorities belo....
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....is that the assessee's own case for the earlier assessment years have not become final and therefore, the Department preferred the appeal before the Tribunal. In our opinion, this issue came up for consideration before the Tribunal in assessee's own case in ITA No.656/Mds/2012 dated 22.3.2013, wherein the Tribunal remitted the issue back to the file of the AO for fresh consideration. Accordingly, on similar line, we remit this issue back to the file of the AO for fresh consideration. This ground is allowed for statistical purposes. 30. The next ground in Revenue's appeal is with regard to depreciation at 80% instead of 15% on UPS. 31. We find that similar issue was considered by this Tribunal in the case of Indian Overseas Bank in ITA No.1815/Mds/2011 dated 2.4.2013 for the assessment year 2008-09, wherein the Tribunal held that the assessee is entitled to depreciation at 60% on UPS, treating it as part of computers. Therefore, we do not find any infirmity in the order of the CIT(Appeals) and the same is confirmed on this issue. 32. The next ground is with regard to deleting the disallowance made u/s.40(a)(i) being the interest paid to the branches of banks located outside India....
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....disallowance is to be made, the same cannot exceed 2% of the tax free income as has been consistently held in the case of the assessee. 41.1 We have heard both the parties and perused the material on record. This issue of disallowance made by the Assessing Officer for this assessment year by invoking the provisions of sec.14A r.w.Rule 8D, was in normal computation also. In our opinion, disallowance made u/s.14A r.w. Rule 8D cannot be added while computing book profit u/s.115JB of the Act that the disallowance is only disallowance for the purpose of computing taxable income of the assessee in the normal course. There is no provision in the Act to add these kind of disallowance while computing book profit u/s.115JB and it cannot change the book profit on this count. Therefore, even if there is an addition in view of provision u/s.14A r.w. Rule 8D, that cannot be added back to compute the book profit u/s.115JB. This ground is allowed. 42. The next ground in ITA No.622/Mds/2014 is with regard to disallowance u/s.14A by applying the provisions of Rule 8D while computing the normal income. 42.1 We have heard both the parties. In our opinion, the same issue was considered by this Tribu....
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....company, engaged in trading of bulk and fine, chemicals, solvent and pharmaceutical raw materials declared its income at Rs. 74,40,000/- on 26/09/2009. The assessee credited dividend income of Rs. 1,82,262/- in its profit and loss account. The Assessing Officer while framing the assessment invoke section 14A r.w. Rule 8D by contending that assessee claimed various expenses which are related to exempt income in its profit & loss account and disallowed Rs. 14,58,412/-. On appeal, before the ld. Commissioner of Income tax (Appeals) broadly the stand taken in the assessment order was affirmed against which the assessee is in further appeal before this Tribunal. The totality of facts clearly indicates, as claimed by the assessee that no borrowed funds were utilized for earning the exempt income by the assessee and further the dividend were directly credited in the bank account of the assessee and no expenditure was claimed. What it may be, we find that the assessee only received Rs. 1,82,362/- as dividend income, therefore, there is no question of disallowance of Rs. 14,58.412/- by invoking section 14A r.w. Rule 8D under the facts available on record. It was also explained by the ld. co....