TaxTMI 
TaxTMI 
TaxTMI 
2017 (1) TMI 1613
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..... (India) Ltd. vs. ITO (223 ITR 809) ignoring the fact that facts of that case are different from the present case and approval of BIFR is not received in the present case. (ii) deleting the addition of Rs. 4,14,78,795/- made by AO u/s 40a(ia) for non deduction of TDS on payment made to foreign parties holding that payment of commission to these parties was in lieu of services rendered by them for the business purposes of the assessee and holding that circular no. 7 of 22-10-2009 it not clarificatory in nature and is not applicable with retrospective effect. ITA No. 586/JP/2012 - A.Y. 2009-10 ''(i) On the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in allowing set off current year and brought forward losses and unabsorbed depreciation of M/s. Modern Terry Towels Ltd. against the income of the assessee company in directing to pass protective assessment order in case of assessee company presuming that no amalgamation has taken place following the scheme devised by Hon'ble Hon'ble Apex Court in the case of Marshall Sons and Co. (India) Ltd. vs. ITO (223 ITR 809) ignoring the fact that facts of that case are different from the present ca....
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....he drafts scheme of amalgamation has been circulated by the Board and final order of amalgamation is expected to be received shortly. The Hon'ble Supreme Court in the case of Marshall Sons & Co. (India) vs. ITO (223 ITR 809) has observed as under:- ''The Counsel of the Revenue contended that if the aforesaid view is adopted then several complications will ensue in case the court refuses to sanction the scheme of amalgamation. We do not see any basis for this apprehension. Firstly, an assessment can always be made and is supposed to be made on the transferee company taking into account the income of both the transferor and transferee companies. Secondly, and probably the more advisable course from the point of view of the Revenue would be to make one assessment on the transferee company taking into account the income of both the transferor or transferee companies and also to make separate protective assessments on both the transferor and transferee companies separately. There may be a certain practical difficulty in adopting this course inasmuch as separate balance sheets may not be available for the transferor and transferee companies. But that may not be an insuperable probl....
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....ents of Section 72A of the Income Tax Act have been met. Therefore, BIFR cannot sanction any scheme without declaring that carry forward of looses is allowable. (Indian Shaving Products Ltd. vs. BIFR 218 ITR 140). In the case of Beck India Ltd. vs. DCIT (319 ITR AT 253), the Assessing Officer held that there was no express provision in the staute to debit any brought forward loss of amalgamating company against the book profit of the amalgamated company and completed the assessment based on the original computation submitted by the assessee. On appeal, it was held that on account of retrospective operation of the Court's decision approving the scheme of amalgamation, book losses of the amalgamating company also became the loss of the company as on January 1,2001, and hence, such losses had to be considered while computing the book profit under section 115JB of the Act. Moreover, in view of the decision of Hon'ble Supreme Court in the case of Marshall Sons & Co. (India) Ltd., it is obvious that the AO has to make substantive assessment order in the case of appellant taking into account the income of both the transferor and transferee companies. The scheme of amalgamation specifi....
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....s a sick company and therefore, the permission of BIFR was required for statutory amalgamation and the return filed by the assessee was subject to the order of BIFR which is pending. However, the assessee could not receive the approval before the assessment proceeding and therefore the AO raised his contention to restrict the assessment only in respect of the assessee company without considering amalgamation of MTTL with the assessee company treating the assessee company as the separate company. In this regard, assessee placed his reliance on the decision of Hon'ble Supreme Court in the case of M/s Marshal Sons & Co. (India) Ltd. vs ITO 223 ITR 809 in which it has been held that once a scheme is sanctioned by the appropriate authority, it is operative from the date mentioned in the scheme and not from the date of which order is passed by the authority. The relevant finding of the Court is as under:- "Every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place. The scheme concerned herein does so provide, viz., January 1, 1982. It is true that while sanctioning the scheme, it is open to the court to modify the sa....
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....llotment of shares, etc., may have all taken place subsequent to the date of amalgamation/transfer, yet the date of amalgamation in the circumstances of this case would be January 1, 1982. This is also the ratio of the decision of the Privy Council in Raghubar Dayal v. Bank of Upper India Ltd., AIR 1919 PC 9." It is further noted that the AO did not apply the judgement given by the Supreme Court and disallowed the set-off of current year loss of M/s Modern Terry Towels Limited (MTTL). However, in first appeal the ld. CIT(A) after considering the submission of the assessee and the order passed by the AO passed a detailed order highlighting the specific aspects of the provisions of Sick Industrial Companies Act and BIFR and the provisions of the I.T. Act . It is further noted that the ld. CIT(A) gave its finding at para 3 and 4.1 allowing the ground no. 1 of the assessee taking into consideration the judgement of M/s Marshall Sons & Co. (India) Ltd. vs ITO 223 ITR 809 (SC) by holding that the scheme was effective from 01.01.2008 and accordingly the assessee was eligible to claim losses of amalgamated company and therefore the AO was directed to allow set-off of current year losses a....
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....nd Hon'ble Jaipur Tribunal (ITA No. 281/JP/2010) dated 13-04-2011 for A.Y. 2007-08. The observation of the Hon'ble Tribunal in para 2.14 on page 8 are reproduced as under:- ''2.14 We have already reproduced Section 9(1)(i) of the Act. It is not disputed after the finding of the ld. CIT(A) that non-residents have provided services for earning commission. The services have been rendered outside India. The commission so earned by non-resident is business profit. As per DTAA between India and UK and DTAA between India and UAE, it is mentioned in Article 7 of both the DTAA that business profit can be taxed in other contracting State in case the enterprise of a contracting State is having permanent establishment in other contracting State. It is not the case of the Revenue that non-resident companies are having their permanent establishment. Hence, even if commission has been received by the non- residents on account of the business connections mentioned in Section 9(1)(i) of the Act then the same is not chargeable in India because such non- resident companies are not having any permanent establishment. The CBDT circular No.333 dated 2-4-1982 has stated that the specific provis....
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....e written submission to this effect which has been taken into consideration. 3.4 We have heard the rival contentions and perused the materials available on record. Taking into consideration all the facts and circumstances of the case, we have observed that such an issue has been decided by this Coordinate Bench in case of ACIT vs. Modern Insulators Ltd. in ITA No. 281/JP/2010 dated 13-04-2011 for the assessment year 2007-08 by observing as under:- ''2.19 We also agree with the view taken by the ld. CIT(A) that TDS was not required to be deducted at source on account of Circular No. 786 dated 7-2-2000. The Circular No.7 of 22-10-2009 cannot be considered retrospectively to make it applicable for payments before that date. This has been considered by Lucknow Bench in the case of DCIT vs Sanjiv Gupta 50 DTR (Lucknow) Tribunal 225. 2.20 The Hon'ble Apex Court in the case of G.E.India Technologies Centre (P) Ltd. vs CIT 327 ITR 456 has held that in case whole remittance is not chargeable in India then there is no question of tax at source being deducted. Since the tax at source is nor required to be deducted then Section 40(a) will not be applicable. It is further noticed that ....
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....R dated 21-11-2011 wherein it has been categorically stated that the direction of BIFR at para 3(i) regarding submissions of DRS with cutoff date on 31-03-2010 and direction at para 3(ii) shall remain stayed till the disposal of appeal. Even after the disposal of appeal by AAIFR, there will be an option to the assessee company total income file appeal before Hon'ble Jurisdictional High Court and Supreme Court. Considering these difficulties, I had directed the AO to pass both the substantive assessment and protective assessment in the case of the appellant. In case if the amalgamation scheme was not sanctioned by the AAIFR and higher Courts with effect from 01-01-2008 then the protective assessment completed by the AO shall prevail over the substantive assessment. I therefore, direct the AO to allow set off of current year losses and brought forward losses/unabsorbed depreciation of M/s. Modern Terry Towels Ltd. as per Section 72A against the income of the appellant. At the same time, the AO shall pass a protective assessment order in the case of the appellant for A.Y. 2009-10 presuming that no amalgamation has take place. This ground of appeal is allowed. 4.3 We have heard th....
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....008. The issue in question is covered by the appellate order of CIT(A)-II, Jaipur for A.Y. 2008-09 (Appeal No. 464/10-11, dated 27-06.2011) and for A.Y 2009-10 (Appeal No. 502/11-12, dated 20.03.2012) wherein the additions made by the Assessing Officer on the above issue have been upheld by the CIT(A) on protective basis, in view of the decision of the Supreme Court in the case of Marshall Sons and Co. (India) Ltd. vs. ITO (1997) 223 ITR 809. The relevant extract of the order of the CIT (A)-II, Jaipur for A.Y. 2009-10 is reproduced below:- ''The findings in para 4.1 (of the order of A.Y. 2008- 09) are relevant wherein it was held that prior to the date of sanction by BIFR and higher Courts, there was provision in the scheme that business done by Modern Terry Towels Ltd. shall be on behalf of the appellant company..... Considering these difficulties, I had directed the AO to pass both the substantive assessment and protective assessment in the case of the appellant. In case if the amalgamation scheme was not sanctioned by AAIFR and higher Courts with effect from 01-01-2008 then the protective assessment completed by the AO shall prevail over the substantive assessment. I therefore....