TaxTMI 
TaxTMI 
2018 (3) TMI 937
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....owing grounds of appeal in ITA No. 1988/Del/2005 for assessment year 2000-01:- "1. On the facts and circumstances of the case, the learned Commissioner of Income Tax erred in passing on order u/s 263 of the Income Tax Act. 2. On the facts and circumstances of the case, the observation of the learned Commissioner of Income-tax that the order passed by the Assessing Officer u/s 147 r.w.s. 143(3) is erroneous and prejudicial to the interest of revenue, is not based on facts and correct interpretation of law and, therefore, the proceedings initiated u/s 263 and subsequent passing of order u/s 263 by the Commissioner of Income-tax is Illegal, arbitrary, void ab initio, unjustified and against the provisions of law. 3. On the facts and circumstances of the case, the learned Commissioner of Income-tax has erred in law and facts in invoking provisions of section 263 of the I.T. Act in respect of appellant's case, which has been the subject matter of a reassessment made by the Assessing Officer after issue of notice u/s 148 duly approved by the Addl. Commissioner of Income-tax and assessment made u/s 147 read with section 143(3) after detailed examination, merely ....
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....idance Agreements, which he was otherwise entitled to, the learned Commissioner of Income Tax erred in law and facts in invoking provisions of section 263 on this issue without appreciating the fact that income derived by the appellant as an entertainer from his personal activities exercised in the other Contracting state i.e. USA/Canada/UAE, shall be taxed in that other State i.e. USA/Canada/UAE, as per clause 17/18 of DTAA with respective countries. 8. Without prejudice to the above, on the facts and circumstances of the case, the learned Commissioner of Income Tax erred in law and facts in holding that all incomes earned by the appellant from music shows held in foreign countries are taxable in India ignoring Articles 17/18 of Double Taxation Avoidance Agreements between India and the countries where the appellant had performed such music shows. 9. Without prejudice to the above, on the facts and circumstances of the case, the learned Commissioner of Income Tax erred in law and facts in holding that there existed no DTAA with UAE and the appellant was only entitled to get credit for income tax actually paid u/s 91 of the Act when in fact there existed a DTAA be....
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....hich is the main activity of the appellant, income from stage shows in India endorsement fee etc. thereby reducing the eligible deduction u/s 80RR of the I.T. Act. which is arbitrary. unjustified and against the provisions of law. 15. On the facts and circumstances of the case, the learned Commissioner of Income Tax erred in law and facts in not appreciating the fact that the income of the appellant from foreign stage shows is net of expenses and no other expenditure is to be allocated towards foreign shows for computing eligible deduction u/s 80RR as the expenses incurred in India pertain to the income earned In India from various activities and sources. Therefore, the order passed by the learned Commissioner of Income Tax u/s 263 is arbitrary, illegal and void ab initio. 16. Without prejudice to the above, on the facts and circumstances of the case, the learned Commissioner of Income Tax erred in law and facts in ignoring the submissions of the appellant that certain expenses incurred in India has no relationship to income from foreign stage shows as It pertain to earnings of the appellant in India from various sources like shows in India, royalty on making of a....
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.... of the Income Tax Act 21. Without prejudice to the above, on the facts and circumstances of the case, the learned Commissioner of Income Tax erred in law and facts in holding that the receipt for the donation given by the appellant does not appear to be a genuine and reliable document so as to infer that donation was actually given. 22. Without prejudice to the above the learned Commissioner of Income Tax has erred in law and facts in denying the deduction claimed by the appellant u/s 80G in respect of donations given to the institution duly approved by the Director Exemption alleging that these institutions did not fulfil the conditions prescribed In the 80G certificates, which is arbitrary, unjustified and against the provisions of law. 23. On the facts and circumstances of the case, the learned Commissioner of Income Tax erred in law and facts in initiating penalty proceedings u/s 271 (I)(C) of the Income Tax Act" 4. Briefly stated the facts shows that the assessee. an individual, is a public entertainer. an artist engaged in the profession of singing, music, and performed stage shows in India as well as abroad. He filled his return of income for i....
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....3|3) read with section 148 of the Act. 7. On examination of the records by the ld. CIT. he issued notice under section 263 of Act on 29/01 /2004 proposing to revise the order passed by the ld. Assessing Officer on following grounds because according to her the order passed by the ld. AO is erroneous and prejudicial to the interest of the revenue:- (a) The ld. Assessing Officer has not applied his mind to the manner of allocation of expenditure incurred by the assessee on foreign shows as according to her most of the expenditure debited to the profit and loss account related to such foreign programs. The ld. Assessing Officer has accepted Rs. 7.31 lakhs allocated by the assessee. According to the ld. CIT such expenditure, even if allocated pro rata on the basis of income earned in foreign currency and the Income earned in Indian currency, then such expenses should have been Rs. 38.80 lacs Therefore the income eligible for deduction under section 80RR would get reduced by Rs. 38.80 lacs and hence, such deduction is required to be withdrawn to that extent. (b) The observations of the ld. Assessing Officer in the assessment order that receipt from music shows condu....
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....ws out of India or not and they do not have any connection with the foreign stage shows. Therefore, these expenditure cannot be deducted while calculating deduction under section 80RR are of the Act. It was further stated that a sum of Rs. 745185/- is the receipt for payment of tax in Canada and USA in respect of foreign shows. With respect to the flat, it was stated that assessee has incurred a loss of Rs. 415/- on sale of above property which was not claimed. Therefore, the investment in the aforesaid property is not reflected in the balance sheet of the assessee at the end of the year as well as in the wealth tax return, With respect to the purchase of the new house property for Rs. 2.19 crores it was submitted that the investment has been made through banking channel, duly incorporated in the balance sheet filed with the return of income and construction on that particular property is in Progress. Therefore, there is no error on these counts. With respect to the donation, It was stated that the trust to whom this donation is given have been granted exemption and there is no error in allowing the claim of the assessee under section 80G by the AO and therefore revision on that ac....
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.... 80G of Rs. 7.73 lakhs to the family trust was supported in the form of the receipts issued by trust and the assessee has claimed deduction under section 80 G of Rs. 386500/-. In the assessment pursuant to order under section 263 of the Act, the ld. Assessing Officer has disallowed this claim stating trial though the receipts of the donation along with the bank statements have been provided however, there is no justification for the above donation. He stated that there is no requirement of justifying the donation by a donor to a trust when such trust are recognized by the IT (exemption). He further stated that the ld CIT (A) allowed it and same is not challenged by the revenue and therefore it is apparent that there is no error in the order of the Ld Assessing Officer and therefore on this count no revision under section 263 is possible. 11. He further submitted that the AO cannot be said to have committed an error in not making an adjustment on the issues other than for which reasons were recorded for reopening of the assessment. He submitted that in present case the reopening has been made for different purpose and the ld. Assessing Officer has not made additions thereon and n....
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....ara No. 3.4 of the order of the ld. CIT, which has dealt with article 18 of Double Taxation Avoidance Agreement with USA and submitted that when this article is read with other relevant articles of treaty, it becomes clear that the agreement makes provision only for allowing credit to the income tax paid in the other contracting state and does not permit exempting the income from tax In India. He specifically referred to article 25 of treaty with USA. To support his contentions, he relied upon the plethora of case laws and prominently on an article written by Shri Kamlesh Chandra Varshney (CIT) on this subject published in Asia-Pacific Tax Bulletin. 2016 (Volume 22) No. 6 on 10/11/2016. He extensively read that article to support his view. Therefore, he supported the finding of the ld. CIT that deduction is allowable from income tax In India only of the amount of tax actually paid in that country by an Indian resident and the income does not become 'not chargeable to tax' in India. He further pressed into service that Double Taxation Avoidance Agreement are to be read for avoidance of a same income suffering taxes in the source Jurisdiction and residence jurisdiction but cannot be ....
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....e, wherein the deduction under section 80 RR of the income Tax Act was claimed at Rs. 10703751/- Admittedly, assessee has received the total receipt from foreign show of Rs. 15010254/- and in the original return filed by the assessee. it has not deducted any expenditure but has claimed the deduction on the gross receipt, Subsequently, while filing the return under section 148 of the Income Tax Act, assessee reduced the income from the foreign show by Rs. 738586/- by apportioning expenses of Rs. 731097/- based on the number of days. Further, a sum of Rs. 7489/- was also deducted on account of insurance and thereby net income was shown as Rs. 14271668/- and deduction under section 80RR of 75% of that sum amounting to Rs. 10703751/- was claimed. While allocating the expenses from the gross receipts, assessee submitted a chart wherein it is stated that expenses of Rs. 2347697/- were related to the Indian show therefore, they are not required to be allocated. From the other allocable expenses of Rs. 6526380/-, the assessee derived sum of Rs. 731097/- to be reduced from the foreign show income. It further submitted a chart that a sum of Rs. 794796/- was not at all allocable. The method b....
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....see, the order of the assessment becomes erroneous and consequently prejudicial to the interest of the revenue. In view of this on the claim of deduction u/s 80 RR of the Income Tax Act. the ld. CIT has correctly assumed jurisdiction under section 263 of the Income Tax Act. 20. It is also important to note that similar issue of the allocation of the expenses for the claim of deduction under section 80RR of the income tax Act arose for assessment years 1999-2000,1998- 99 in ITA No. 3977 and 3978/del/2004 whereby order doted 9/02/2007, coordinate bench upheld the order of the ld. CIT under section 263 of the Income Tax Act for those years. The coordinate bench upheld the order of the ld. CIT to the extent that allocation based on revenue from different streams could only be the basis for allocution of expenditure. Therefore, the binding judicial precedent on the identical facts, also forces us to uphold the order of the ld. CIT with respect to the deduction under section 80RR of the Income Tax Act. 21. Similarly, with respect to the observation of the ld. Assessing Officer about the allowability of the benefit to the assessee under the Double Taxation Avoidance Agreement which ....
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....f expenditure for allowability of the claim of the deduction under section 80RR of the income Tax Act as well as observation on applicability of DTAA. Therefore, appeal filed by the assessee in ITA No. 1988/Del/2005 assessment year 2000-01 is dismissed accordingly. ITA No. 1657/Del/ 2007 ( by AO) & Co. No. 45/Del/2007 (By Assessee) AY 2000-01 25. The Revenue has raised the following grounds of appeal in ITA No. 1657/Del/2007 for the Assessment Year 2000-01. "I. On the facts and in the circumstances of the case and in law. the CIT [A] erred in the directing the Assessing Office' to calculate and, allow the deduction u/s 80RR after reducing from the gross receipts from foreign shows only 25% of the total business expanses instead of reducing such expenses calculated on pro rata basis between the Indian shows and the foreign shows." 26. The assessee has raised the following grounds of appeal in CO No. 45/Del/2008 for the Assessment Year 2000-01:- "1. That the CIT (A) erred on facts and in low in not holding that income derived by the respondent as an entertainer from his personal activities exercised in the other contracting state were taxable only in that S....
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....ar when the deduction is required to be calculated @ 25% of the expenditure . which is stated before us, that Is not contested by the revenue, therefore, on this count, we do not find only infirmity in the order of the ld. CIT(A) in considering the expenses for calculating deduction under section 80RR of the Act. In any case, the tax effect in this appeal of the revenue is less than Rs. 10 lacs In view of this we do not find any merit in the appeal of the revenue. Hence, same is dismissed. 31. Coming to the cross objection filed by the assessee which is filed late by 315 days. Assessee has filed application for condonation of delay stating that the CO has been filed in light of the recent decision of the Supreme Court in case of Dy. CIT v. Turquoise Investment & Finance Ltd. [2008] 300 ITR 1 and the assessee has been recently advised about correct position of law about the income of the assessee earned out of foreign shows where right of taxation remains with the source country, in its application for the condonation of delay assessed has relied on the decision of the Supreme Court in case of the Collector Land Acquisition v. MST Katiji [1987] 167 ITR 471. He further stated that....
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..... The ld. departmental representative also repeated the same arguments. 36. We have carefully considered the rival contention and oho perused the order of the lower authorities. Present appeal as well as the cross objection of the revenue has arisen out of the order of the ld. Assessing Officer passed u/s. 143 (3) read with section 148 of The Income Tax Act read with section 263 of the Act, in the return of income filed originally, the assessee has not claimed any benefit of Double Taxation Avoidance Agreement. Further the return in response to notice under section 148 of the Income Tax Act also does not show any such claim made by the assessee. The action under section 147 of the Income Tax Act was taken for the purpose of verification of the claim of the assessee under section 80RR of the Income Tax Act and not for the claim of benefit under Double Taxation Avoidance Agreement. Therefore, it is apparent that in reopened assessment proceedings, the assessee has made a fresh claim. As held by the Hon'ble Supreme Court in CIT v. Sun Engg. Works (P.) Ltd. [1992] 197 ITR 297 a matter not agitated in the concluded original assessment proceedings also cannot be permitted to be agitat....
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...." 40. The cross objection filed by the assessee is delayed by 370 days and assessee has filed condonation application for delay in filing the cross objection stating that the CO has been filed in light of the recent decision of the Supreme Court in case of Turquoise Investment and Finance Ltd. (supra) and the assessee has been recently advised of the correct position of law about the income of the assessee earned out of foreign shows and the right of taxation remains with the source country. In its application for the condonation of delay assessee has relied on the decision of the Supreme Court in case of the MST Katiji (supra). He further stated that issue raised in the cross objection is purely legal issue and does not require any fresh adjudication into the facts of the case. It is stated that the delay is neither wilful or deliberate and therefore in view of the decision of the Hon'ble Supreme Court and advise to assessee delay may be condoned. 41. Ld. departmental representative vehemently objected to the application of the assessee for condonation of delay of 370 days. According to him the delay has not been explained by showing any 'sufficient cause' and therefore it c....
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....state that which country would have the first to tax any particular time of income. Therefore according to him if the income of a resident from a foreign country has not been taxed in that country, then the same is taxable and includible in the Taxable income in India. Therefore in absence of any evidence whether any taxes paid on this Income in foreign country, be taxed a sum of Rs. 37949157/- and consequently allowed the deduction to the assessee under section 80RR of the Income Tax Act. 45. Further for granting deduction under section 80RR of the Act, the ld. Assessing officer considered the foreign receipt of Rs. 37949157/- and reduced be same by the expenditure allocable to foreign show receipts of Rs. 13241612/- determining the net foreign show receipt eligible for deduction of Rs. 24707545/- and granted deduction at the rate of 60% thereon amounting to Rs. 14824527/-. 46. Consequently, assessment under section 143(3) of the Act was passed on 29/03/2004 determining total income of the assessee at Rs. 28811439/- against the revised return of Rs. 7862940/-. 47. The assessee aggrieved with the order of the ld. AO preferred an appeal before the ld. CIT (A), who as per or....
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....- Trib.) e. Apollo Hospital Enterprise Ltd. v. Dy. CIT 53 SOT 103 (Chennai) 50. The ld AR further stated that there is no requirement of proof of payment of taxes in other country for benefit of DTAA. He relied on following decisions:- a. CIT v. Heinrich Wetting [IT Reference No. 77 of 1999, dated 15-6-2007] b. CIT v. RM Muthaiah [1993] 202 ITR 508 (Kar.) 51. In Ld DR vehemently relied on the Notification issued by the Central Government No. 91/2008 dated 28/8/2008 which clarifies where it provided in any article that any income of resident of India 'may be taxed' in the other country such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income Tax Act, 1961 and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement. He therefore submitted that this notification has defined what is the meaning of the term used in the Double Taxation Avoidance Agreement as 'may be taxed'. 52. In rejoinder the ld. authorized representative submitted that this issue is squarely covered in favour of the assessee by the decision of ....
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....ate, may be taxed in that other State, except where the amount of the net income derived by such entertainer or athlete from such activities (after deduction of all expenses incurred by him in connection with his visit and performance) does not exceed one thousand five hundred United States dollars ($ 1,500) or its equivalent in Indian rupees for the taxable year concerned. 2. Where Income in respect of activities exercised by an entertainer or an athlete in his capacity as such accrues not to the entertainer or athlete but to another person, that income of that other person may, notwithstanding the provisions of Articles 7 (Business Profits), 15 (Independent Personal Services) and 16 (Dependent Personal Services), be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised unless the entertainer, athlete, or other person establishes that neither the entertainer or athlete nor person related thereto participate directly or indirectly in the profits of that other person in any manner, including the receipt of deterred remuneration, bonuses, fees, dividends, partnership distributions, or other distributions. 3. Income referr....
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.... China including its territorial sea, in which the Chinese laws relating to taxation apply, and any area beyond it territorial sea, within which; the People's Republic of China has sovereign rights of exploration for any exploitation of resources of the seabed and its subsoil and superjacent water resources in accordance with international law. The ld. authorised representative could not show us any evidence to prove that Chinese law with respect to taxation applies in Hong Kong. In view of this, the claim of the assesses with respect to income earned by assesses for performing stage shows in Hong Kong is rejected. 56. With respect to the income earned by the assesses tor performing stage shows in Canada, USA and Netherland. Where the Double Taxation Avoidance Agreement are entered into by those countries with india, the issue requires consideration whether that income is chargeable to tax in India. Before us, it is submitted that issue is now settled by the decision of Hon'ble Supreme court in TURQUOISE INVESTMENT AND FINANCE LTD. (supra) where in interpreting article 11 where in it agreed that Interest arising in a Contracting State and paid to a resident of the other Contract....
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....4] 208 ITR 400 and the judgment of this court in CIT v. P. V. A. L. Kulandagan Chettiar [2004] 267 ITR 654 and we are satisfied that the point involved in these appeals stands concluded in favour of the assessee on against the Revenue by the decision of the Madras High Court in CIT v. Vr. S. R. M. Firm [1994] 208 ITR 400 which was duly affirmed by this court in the case of CIT v. P. V. A. L Kulandagan Chettar [2004] 267 ITR 654, incidentally, it may be mentioned that the review petition filed against the decision of this court in CIT v. P.V.A.L Kulandagan Chettar [2004] 267 ITR 654 was also dismissed on November 1, 2007." 59. The argument of the ld. DRP is accepted that the above decision was rendered by the Hon'ble Supreme Court before the Notification No. 91 was issued, which got statutory force from section 90(3) of the Income Tax Act introduced w.e.f. 01/04/2004. Be that as it may be. In view of the above paragraph of the decision of the Hon'ble Supreme Court, up to AY 2004-05 till time section 90(3) is introduced, we decide the issue in favour of the assessee that income earned by the assessee from stage show performed in Canada, USA and Netherland are not chargeable to tax....
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....peal of the revenue for the same reasons. Therefore, the appeal of the revenue for assessment year 2003-04 is dismissed. 67. The assessee has raised the following grounds of appeal in CO No. 47/Del/2008 for the Assessment Year 2003-04;- "That the CIT(A) erred on facts and in law in not appreciating that income derived by 'he respondent as an entertainer from his personal activities exercised in the other contracting State were taxable only in that State in terms at the relevant clauses of Double Taxation Avoidance Agreement (DTAA) which Override the provisions of the Act." 68. AS the issue involved in this cross objection of the assessee is similar to the facts decided by us in case of the assessee for assessment year 2001-02 wherein we have held that up to assessment year 2003-04, where the state shows are performed by the assesses outside India and with those countries Double Taxation Avoidance Agreement exist where the taxing rights ore given to the source country using the similar terms we direct the ld. Assessing Officer to grant benefit of the Double Taxation Avoidance Agreement to the assessee. In view of this we set aside this cross objection of the assessee to the....
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....ntries the Double Taxation Avoidance Agreement exists where the taxation rights are given to the source countries using the term 'may be taxed', the assessee is eligible for Double Taxation Avoidance Agreement and such income cannot be taxed in India. However, the senior area changes for assessment year 2004-05, by which the provisions of section 90(3) has been introduced in the Income Tax Act and further notification was issued vide Notification No. 91/2008 issued on 28/08/2008 wherein the term 'may be taxed' is explained. Further, the coordinate bench in case of Essar Oil Ltd. v. Addl. CIT [2014] 42 taxmann.com 21 (Mum.) effect of the above amendment as well as notification was considered and held as under- "CONCLUSSION;- 88. We summaries our conclusion as under:- (i) The ratio of all the judgments rendered by the Hon'ble High Courts, as discussed herein above and confirmed by the Hon'ble Supreme Court specifically in the case of Turquoise investment (supra). On the interpretation of the expression "may be taxed", that once the tax is payable or paid in the country of source, then country of residence is denied of the right to levy tax on such income or the said incom....