TaxTMI 
TaxTMI 
2016 (8) TMI 1256
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessment order was passed u/s. 143(3) of the Act r.w.s. 144C determining the total income at Rs. 247.74 crore. Assuming the jurisdiction cast upon him, the ld. Principal Commissioner on perusal of the assessment record found that the assessee company has paid Rs. 108.47 lakhs for SAP Service Charges to CLP Asia Services, British Virgin Island and interest of Rs. 170.13 lakhs to Kreditanstallt Fur Wiederaufbau (KFW), Germany on which no tax was deducted at source. The ld. Principal CIT was of the firm belief that TDS was deductible u/s. 195(1) of the Act and since no TDS was made, the above expenditure was liable to be disallowed u/s. 40(a)(ia) of the Act. Since, the A.O. has apparently failed to invoke this provision which has led to under assessment of total income. The ld. Principal CIT was of the opinion that the assessment order passed by the A.O. is erroneous and prejudicial to the interest of the revenue. 4. Accordingly, a show cause notice was issued and served upon the assessee to show cause why the assessment order should not be revised invoking the provisions of section 263 of the Act. 5. In response to the show cause notice, the assessee filed a detailed reply stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....IT is that the assessee has failed to deduct tax at source on the payments made to CLP Asia Services, British Virgin Island amounting to Rs. 108.47 lacs on account of SAP Service Charges. A perusal of the show cause notice issued by the DCIT (OSD)-Range-1,Ahmedabad dated 05/03/2014, interalia, show the following query raised during the course of the assessment proceedings:- 3. Please furnish the details of debited not raised alongwith proof for TDS made on such payments in respect of the following reimbursement expenses. CLP Holding Rs. 2,86,659/- JPL Rs. 7,14,06,301/- CLP Rs. 22,68,555/- 10. The same was replied vide reply dated 07/03/2014, interalia, as follows:- 3. Details of TDS on Reimbursement of Expenses 3.1. Vide point 3, the assesses Company has been asked to provide details of TDS . on reimbursement of expenses to CLP Holding, JPL and CLP. It is submitted before your good self that in case of CLP Holding, the expenses have been recovered from the said associated enterprise and there was an inadvertent mistake in annual report of the assessee Company. The assessee Company likes submit the copy of debit note raised by the assessee Com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cation of submission made by the assessee, the A.O. has made addition of Rs. 3,43,700/- u/s. 40(a)(ia) of the Act. Therefore, it cannot be said that the Assessing Officer overlooked the provisions of Section 40(a)(ia) of the Act as alleged by the ld. Principal Commissioner in his order made u/s. 263 of the Act. 14. After considering the facts and the submissions along with the related evidences as mentioned hereinabove, in our considered opinion, the ld. Principal CIT had no occasion to invoke the provisions of Section 263 of the Act insofar as payments to CLP Asia is concerned. 15. The second issue which prompted the ld. Principal CIT to assume the jurisdiction relates to the payment of interest of Rs. 170.13 lacs to KFW, Germany. We find that vide show cause notice dated 05.03.2014, interalia, following query was raised during the course of the assessment proceedings:- 4. On verification of submission it is seen that you have made interest and financial charged payment of Rs. 42,36,29,374/-. Please furnish the proof for TDS deducted and paid to Govt. A/c. or else explain as to why the same should not be disallowed u/s. 40(a)(ia). 16. The assessee vide reply dated 07.0....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd that ever since that borrowing was made in the early nineties, interest is being remitted by the assessee Company directly to KFW in Germany without any of its offices in India having any effective connection therewith. Without prejudice to the above, it is submitted that since the interest payable to KFW on the above loans are exempt u/s. 10(15)(iv)(f), the assessee Company has been paying the same to the lender without deducting TDS ever since the loans were borrowed in the year 1994. It was thus that the current year's payments too were made without deducting tax at source. For record purposes, the assessee Company attaches herewith (at Annexure - 4) a Xerox copy of the above referred letter dated 5.12.1994 received from the Government of India granting its approval for the purposes of Section 10(15)(iv)(f). 18. Once again, we find that, to a specific query, a specific reply was filed by the assessee along with supporting evidences. For the detailed reasons mentioned hereinabove, we find that insofar as this issue is concerned, once again the ld. Principal CIT erred in assuming the jurisdiction by invoking the provisions of Section 263 of the Act. Considering the fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the Government for wind power project. It was explained that the payment of Registration Fees does not attract the provisions of section 194J of the act. Since, the same cannot be construed as Professional Fees. 25. After considering the facts and the submissions and the related documentary evidences, the ld. Principal CIT was of the opinion that the assessee should have deducted tax @ 20% and since it has deducted tax @ 10%, the assessment order is found to be erroneous and pre-judicial to the interest of the revenue within the meaning of section 263 of the Act. The ld. Principal CIT further held that even the registration fee paid to IREDA attracts the provisions of section 194J of the Act and since no tax was deducted at source, the assessment order becomes erroneous and pre judicial to the interest of the revenue. Accordingly, the assessment order was cancelled/set aside on these issues with a direction to the A.O. to re-frame the assessment de novo. 26. The first thing which has to be considered is whether the Learned Commissioner has rightly assumed the power under section 263 of the Act. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd. 243 ITR 83 has laid dow....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ITR 83 has explained that "there is a distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter." 29. Considering the totality of the facts, in our considered opinion, the ld. Principal CIT has wrongly assumed the jurisdiction u/s. 263 insofar as the alleged lower deduction of tax at source on payments made to M/s. CLP Asia Services Ltd. 30. The second payment considered by the ld. Principal CIT relates to the Registration Fees to IREDA. The ld. Principal CIT was of the firm belief that the said payment attracts provisions of section 194J of the Act. The provisions of Section 194J of the Act read as under:- 194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of- (a) fees for professional services, or (b) fees for technical services, or (ba) any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of....