TaxTMI 
TaxTMI 
2016 (7) TMI 1333
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....a return on 27.11.2003 for assessment year 2003-04 and 29.10.2005 for assessment year 2005-06. For assessment year 2003-04, the assessee filed a revised return of income on 25.3.2004. For both the assessment years, the case was selected for scrutiny and the assessment u/s.143(3) was completed on 10.3.2006 (A.y.2003-04) and on 24.12.2008 (A.Y.2005-06). AO reopened the assessment for both the assessment years on the reason that the assessee had not furnished fully and truly details of Bandwidth connectivity charges and fees for Technical Services in the return filed by the assessee and issued a notice u/s.148 of the Act. Thereafter, the AO completed the reassessment proceedings by the order u/s.143(3) r.w.s.147 dated 29.12.2010 for the both the assessment years with certain additions. 4. On appeal, the CIT(A) observed that just because the assessment was completed u/s.143(3) vide order dated 10.03.2006, it does not mean that AO has considered all the issues and relevant to the provisions of the Act. He further placed reliance on the following judgments. a) In the case of Siemens Info. Systems Ltd. Vs. ACIT in 343 ITR 188 (Bom.) b) In the case of CIT Vs. S C Finance Ltd., in 207 ....
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....alty, expenditure of Rs. 76,67,323/- approximately (US $ 160834) requires to be disallowed u/s.40(a)(i). b) Further, the assessee company has paid a sum of Rs. 14,49,800/- approximately (Euro 2876 per month for 8.6 months and US $ 2664 per month for 2 months) as fees for technical services in terms of sec.9(i)(vii) read with Explanation 2 therein which attracts TDS u/s.195. As tax has not been deducted at source on these payments, disallowance u/s.40(a)(ia) is warranted on this expenditure. The assessee has not disclosed all the material facts fully and truly necessary for the assessment at the time of scrutiny. It is to be further noted that as per Explanation 1 to sec.147, production of books at the time of scrutiny will not amount to disclosure of all facts necessary for assessment." As such in our opinion, there is no infirmity in the order of Ld.CIT(A) and the same is confirmed. This ground of assessee is rejected in all these three appeals on same reason. 8. The next ground in ITA Nos.1330,1331 & 1333/Mds./15 is with regard to disallowance of Bandwidth Connectivity charges for non deduction of TDS from the said payment u/s.195 of the Act. 8.1 The facts of the i....
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....ectivity - Assessee used its telecom service equipment situated outside India in providing international half circuit - Assessing Officer opined that VSNL and assessee were partners in providing International Private Leased Circuit (IPLC) and related services to various customers and thus assessee had business connection in India on account of source of income and location of business assets and software in India - Accordingly, Assessing Officer held that payments made by Indian customers to assessee in respect of aforesaid bandwidth services were in nature of 'royalty' taxable under section 9(1)(vi) as also under Article 12(3)(b) of DTAA with Singapore - Tribunal upheld order of Assessing Officer - Whether in view of insertion of Explanations 4 and 5 to section 9(1)(vi) by Finance Act, 2012 with retrospective effect from 1- 6-1976, payment in question made to assessee was taxable in India under section 9(1)(vi) read with Explanation 2(iva) and correspondingly Article12(3) of India-Singapore DTAA-Held, yes (in favour of Revenue]" Hence, in our opinion the payment is nothing but a 'royalty' as defined under clause (i) of Explanation 2 to section 9(1)(vi) read with Explanation 6 to....
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....oes not accrue or arise in India, the same is not liable to tax. Hence, the question of withholding tax does not arise. According to Ld.CIT(A), the Co-ordinate Bench of the Tribunal Chennai in the case of ACIT Vs. Evolve Clothing Co. Pvt. Ltd. in ITA No.2100/Mds./2012 dated 11.03.2013, held that the systematic research services fall under the definition of technical services and it is not necessary for non-resident to have residence or place of business or business connection in India for deducting tax on fees for technical services. Hence, the payments made to be disallowed u/s 40(a)(ia) of the Act. 9.3 The Ld.CIT(A) further observed that in the present case, the transaction is between the appellant and the Technip Italy. It is important to point out as mentioned in the assessment order, the assessee had applied for a Certificate for non-deduction of tax at source u/s 195(2) of the Act before the Authorities for International Taxation for payments to be made in the year 2002-03. However, for the year under consideration, no such application was made as per the order of the AO. It is an important point to note that the appellant himself was aware of the provisions of Chapter-XVIIB....
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....he assessee carried the appeal before the CIT(A). 10.2 On appeal, the Ld.CIT(A) observed that the assessee claimed the expenditure is revenue in nature and further submitted that if it is assumed for argument sake that the expenditure under consideration is capital expenditure, the rate of depreciation admissible to the assessee is 100% and not 10% as assumed by the AO, as the expenditure was incurred on pure temporary wooden structures like wooden partitions, false ceilings etc. and such assets are eligible for a depreciation @ 100% of their cost as per IT Rules, 1962. According to him, on perusing the details of nature of expenditure furnished by the assessee, the claim of the assessee that the same is revenue expenditure seem misplaced. For an expenditure to be treated as revenue normally the same is incurred periodically. According to CIT(A), the quantum of money spent on repairs to building, cannot be the basis for treating the expenditure as revenue or capital. Further, he observed that the claim of expenditure spent on repairs to building taken on lease and the nature of improvements made like A/C ducting etc. as revenue expenditure is difficult to accept. Hence, CIT(A) con....
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.... to sec. 32(1). In the instant case, it is an admitted fact that the assessee has taken building on lease for setting up of bakery. It is also undisputed that the assessee has carried on interior work in the leased building. These interior decoration works carried out by the assessee if put on to the test of Explanation 1 would show that the construction made by the assessee on the leased out premises would amount to capital expenditure. The assessee in order to support his case has relied on the judgment of the Madras High Court in the case of TVS Lean Logistics Ltd. (supra). In the said case, the assessee had constructed a building on the leased land for the business advantage. The Court held that the entire cost of construction is admissible as revenue expenditure. Explanation 1 categorically states that the business or profession is carried on in a leased building and not on land. The High Court in para 4.4 of the judgment further held as under:- "4.4 What constitutes a capital expenditure and what does not, to attract Expln. 1 to section 32(1) of the Act depends upon the construction of any structure or doing any work or in relation to and by way of renovation, extension or....
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....reciation. Looking to the nature of the advantage which the assessee obtained in a commercial sense, the expenditure appears to be revenue expenditure." 13. Thereafter, the Apex Court referring to several cases decided held as under: "11.All these cases have looked upon expenditure which did bring about some kind of an enduring benefit to the company as a revenue expenditure when the expenditure did not bring into existence any capital asset for the company. The asset which was created belonged to somebody else and the company derived an enduring business advantage by expending the amount. In all these cases, the expenses have been looked upon as having been made for the purpose of conducting the business of the assessee more profitably or more successfully. In the present case also since the asset created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using modern premises at a low rent, thus saving considerable revenue expenditure for the next 39 years, both the Tribunal as well as the high Court have rightly come to the conclusion that the expenditure should be looked upon as revenue expenditure." 14. From the ....