2019 (2) TMI 455

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....ed on 2.11.2012 declaring total income of Rs. 10.30 crore (rounded off). In such return, the petitioner had debited an amount of Rs. 8.84 crore (rounded off) in the profit and loss account towards payment of fees as per the Global Service Agreement. The petitioner would point out that said payment would be made initially on estimation basis and subsequently upon finalization of accounts be adjusted in the books by making reversal entry. (b) With respect to such payment, the question of deducting tax at source came up for consideration before the Assessing Officer during the scrutiny assessment. To the extent, the assessee had failed to deduct tax at source, the expenditure was disallowed. The order of assessment passed by the Assessing O....

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....0(a)(i) for non deduction of tax, in the scrutiny assessment. Since the tax was not deducted on a sum of Rs. 4,65,32,582/-, this amount was disallowable but for reversals of expenditure. The netting of sum on which tax was not deducted with sum of reversals amounted to allowance of deduction of expenditure on account of reversals. However, the allowance of deduction on account of reversals of expenditure pertaining to earlier years is permissible only if the amount was disallowed in the relevant years. The verification of earlier year records (for AY 2010-11 and AY 2009-10) revealed that in AY 2010-11, an amount of Rs. 1,95,13,243/- (Rs. 1,04,54,076/- and Rs. 90,59,167/-) was disallowed u/S. 40a(i) and in AY 2009-10, no disallowanc....

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....the income chargeable to tax has escaped assessment due to the failure on the part of the assessee to disclose truly and fully all material facts flowing from first proviso to Section 147 of the Act, therefore, needs to be satisfied. In the present case, the Assessing Officer has recorded reasons which neither state nor demonstrate that there was any failure on the part of the assessee to disclose truly and fully all material facts. 4. There is one more reason why the impugned notice cannot be sustained. The reason is that the Assessing Officer had occasion to examine the entire transaction during the scrutiny assessment. To appreciate this ground, we may summarize the reasons on the basis of which the Assessing Officer has issued the im....

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....4 and supplied following details:- "5. Details of tax deducted at source on General Services Agreement (GSA) fees. Please refer Annexure C. Out of the total expenses of Rs. 88,429,729/-, tax has duly been deducted and deposited on expenses of Rs. 80,722,454/-. Along with this letter, the petitioner had annexed details of Global Services Agreement and tax deducted thereon which reads as under:- Details of Global Services Agreement (GSA) and tax deducted thereon Sr. No. Particulars Total Remarks 1 2009-True-up-GSA Chgs - $287552 12,982,973 No Tax deducted 2 2009-True-up-GSA Royalty Chgs - $142990 5,810,895 No Tax deducted 3 2010 Q1 & Q2 Royalty Chgs - $401291-Nilesen Co LLC 18,973,570 ....

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.... on expenses of Rs. 80,722,454/-. The balance expenditure amount to Rs. 7,707,275 (i.e. aggregate reflected at sr. nos. 1, 2, 6 and 10 as reduced by the aggregate of amounts reflected at 4,5, 8 and 9 (aggregating to Rs. 46,532,582), the expense claim for the year stands reduced (to the extent of such reversals). Accordingly, the said reversals are required to be taken into consideration (i.e reduced from the expenditure amount) while determining the amount on which the Company was required to deduct tax at source. In other words, if the Company had deducted tax without reducing the aforesaid reversals, excess tax would have been deposited into the exchequer as compared to the Company's expense claim for the year. In view of the ab....