TaxTMI 
TaxTMI 
2018 (9) TMI 1542
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.... business of manufacturing and export of readymade garments. During the course of assessment proceedings it was noted by the Assessing Officer (AO) that the assessee had debited a sum of Rs. 78,74,229/- in the Profit & Loss account as commission on export consignments and Rs. 1,02,74,037/- as commission on export turnover apart from discount and rebate of Rs. 76,86,139/- booked under the head "selling and distribution expenses". The AO asked the assessee to furnish copies of agreements, details and evidence of services rendered by the concerned parties to earn the commission and evidence of TDS while making commission payment. In response, the assessee filed letter dated 14.08.2013 filing general particulars of commission expenses without furnishing specific party wise details and without any supporting documentary evidences. The AO required the assessee to furnish complete details of commission expense with evidences of identification of parties to whom commission was paid and further required the assessee to file copies of agreement entered into with them, details of services rendered and details of business provided by them along with the copies of related documents/corresponden....
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....66 measuring 1000 sq.mts situated at Section -37- II (Pace City), Gurgaon, Tehsil and District Gurgaon, Haryana for a sum of Rs. 3,91,00,000/-. The AO noticed that on the copy of the sale deed, the stamp value computation of the property in question for stamp duty purpose was Rs. 4,93,48,950/- as against the sale consideration of Rs. 3.91 crore. Considering the same, the AO asked the assessee to show cause as to why the value of the property be not taken as adopted by the sub-registrar of properties for stamp duty purpose at Rs. 4,93,48,950/-. In response, the assessee contended that the value at which the immovable property was acquired was the actual transaction value of the property which was Rs. 3.91 crore. The AO found the assessee's contention without merit in view of the provisions of Section 50C along with provisions of Section 69A of the I.T. Act. It was held by the AO that since the purchase consideration of the property was shown less by the assessee as compared to the value determined by the Sub-Registrar for the purpose of stamp duty, as per provisions of Section 50C of the Act it was mandatory to adopt the sale consideration as worked out on the basis of circle rate o....
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.... 2 challenge the deletion made by the Ld. Commissioner of Income Tax (A) with respect to non-deduction of tax at source on commission paid to two foreign entities namely Ancare Trade Consultants and M/s Whynot Buying House Services & Others. It was submitted that as per the assessee itself, no tax was deducted at source in respect of payment of commission of Rs. 78,74,229/- to M/s Ancare Trade Consultants on export consignments. Similarly, no tax was deducted at source on account of commission of Rs. 1,02,74,037/- paid to M/s Why not Buying House Services & Others. The Ld. Sr. DR drew our attention to the observations of the Assessing Officer in this regard and submitted that the assessee was not able to furnish any evidence/s in respect of genuineness of commission expenses as no agreement/s or document/s had been filed containing terms and conditions of the arrangement between the assessee and the two parties. The Ld. Sr. DR also made reference to section 195(2) of the Act and submitted that the assessee had not moved any application for non-deduction of tax at source in the case of these two parties. It was also submitted by the Ld. Sr. DR that the final destination of the re....
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....s of the Ld. Commissioner of Income Tax(A) and vehemently supported his order and argued that the deletion had been rightly made. 5.0 We have heard the rival submissions and perused the material available on record. As far as the first issue i.e. deletion of addition made u/s 195 of the Act is concerned, it is seen that the Ld. Commissioner of Income Tax (A) has stated in the impugned order that the assessee has brought on record details pertaining to the commission paid, rebate and discount, copy of bills, FIRCs issued by the banks, agreement with the foreign agent as evidence in support of submissions etc. The Ld. Commissioner of Income Tax (A) has deleted the addition in this respect by observing that the Assessing Officer was not justified in disallowing the commission expenses by holding the expenses as not genuine. The Ld. Commissioner of Income Tax (A) has also observed that tax is not liable to be deducted with respect to payments which is paid to non-residents particularly when the services were rendered outside India, used outside India and the payments were made outside India in the absence of a Permanent Establishment in India. The Ld. Commissioner of Income Tax (A) ....
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....lso after giving a proper opportunity to the assessee to present its case on the issue. It is so directed accordingly. Accordingly, ground nos. 1 and 2 stand allowed for statistical purposes. 5.1 As far as the second issue being challenged before us i.e. deletion of addition on account of difference in valuation of property u/s 50C of the Act is concerned, it is seen that the assessee is the purchaser of industrial premises at 666, Sector 37-II-(Pace City), Gurgaon, for a consideration of Rs. 3,91,00,000/-. The stamp duty was purchased on a value of Rs. 4,93,48,950/- which was the value determined for the purpose of stamp duty on the basis of circle rates prevailing at the time of execution of the sale deed. The Assessing Officer has invoked provisions of section 50C of the Act and has proceeded to tax the difference between the sale price paid and the value for the purpose of stamp duty as undisclosed investment u/s 69A of the Act. The Memorandum explaining the provisions of section 50C in the Finance Bill, 2002 clearly states that where the consideration declared to be received or accruing as a result of transfer of land or building or both is less than the value adopted or as....
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....pital gains by taking the revised value as the full value of consideration. Accordingly, we are of the view that the provisions of s. 50C are applicable only for the computation of capital gains in real estate transaction in respect to seller only and not for the purchaser. We find from s. 50C of the Act that it creates a legal fiction thereby apparent consideration is substituted by valuation done by Stamp Valuation Authorities and capital gains are calculated, accordingly. Legal fiction cannot be extended any further and has to be limited to the area for which it is created. Hon'ble Andhra Pradesh High Court in the case of Addl CIT vs. P. Durgamma (1987) 64 CTR (AP) 304 : (1987) 166 ITR 776 (AP) held that it is not possible to extend the fiction beyond the field legitimately intended by the statute. The Hon'ble Court was dealing with the provisions of s. 171(1) of the IT Act in the context of which it was held that joint family shall be deemed to continue for the limited purpose of assessing cases of joint families which have been hitherto assessed as such. It is not possible to extend that fiction to other cases. Similar view was taken by the Hon'ble Kerala High Cour....
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....ed in the regular books of account. No further legal fiction from elsewhere in the statute can be borrowed to extend the field of s. 69. It is for the legislature to otroduce legal fiction to overcome difficulty in taxing certain receipts or expenditure which otherwise was not possible under normal provisions of the Act. It is with this purpose that when it was found difficult to prevent tax evasion by understating apparent sale consideration as compared to the valuation made by Stamp Valuation Authorities for the purposes of levying stamp duty then it was thought necessary to introduce s. 50C for substituting apparent sale consideration by valuation done by Stamp Valuation Authorities. This fiction cannot be extended any further and, therefore, cannot be invoked by AO to tax the difference in the hands of the purchaser. Hon'ble Madras High Court in CGT vs. R. Damodaran (2001) 247 ITR 698 (Mad) held that Stamp Valuation Authorities have their own method of evaluating the property. Merely because for the purpose of stamp duty, property is valued at higher cost, it cannot be said that assessee has made more payment than what is stated in the sale deed. The Hon'ble Allahabad H....