TaxTMI 
TaxTMI 
2019 (10) TMI 769
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....n Project International Pvt. Ltd., against the order dated 30.11.2017 of CIT(Appeals)-13, Bengaluru, relating to assessment year 2009-10 wherein order passed by the AO u/s 201(1) and 201(1A) of the Income-Tax Act, 1961 ["the Act"] was upheld. 2. The assessee is a private limited company and is a subsidiary of M/s Avestagen Ltd. A survey was conducted in the case of the assessee u/s 133A of the I.T. Act on 26-07-2013. During the course of survey, it was identified from the assessee's books of accounts that TDS dues by the assessee for the FY 2008-09 stood at Rs. 7,271/- . It was also noticed from the assessee's books of accounts that tax deduction entries for sum Rs. 92,67,940 were reversed at the end of the year. These deducti....
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....d that when the agreement to pay Royalty was cancelled before the closure of account, though earlier the debit entries were made monthly for royalty, no TDS liability arises when once the entries are cancelled subsequently. The observations of the Hon'ble High Court are as follows:- "From the aforesaid material on record, it is clear that agreement with regard to payment of royalty was cancelled, no royalty was payable and therefore, the question of deducting TDS on such royalty does not arise. These facts are not in dispute. Therefore, in the facts and circumstances of the case we are of the view that the order passed by the Tribunal is correct. Hence, we pass the following order: Appeal is allowed." 6. The assessee su....
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....er did not produce the invoices, although the same were specifically asked for vide notesheet entry dated 31.03.2017. Logical interference is that the payments credited to the account of Avestagen Ltd. in the books of the Assessee were after the services were rendered by Avestagen Ltd. to the Assessee and therefore there is no case for reversal of entries. b) The reversal of entries is not supported by any valid document. The Agreement to render services by Avasthagen Ltd., is dated 13.4.2008 and the cancellation entries is dated 15.4.2008. Within two days the agreement has been terminated. No acceptable reason has been given for cancellation of the agreement. c) The stamp paper on which this Agreement was signed was purch....
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....urse of survey the Officer conducting the Survey found that the entries in the name of Avastagen Ltd., were reversed. The case of the Assessee was that payments were to be made to Avastagen Ltd., for common research which they were to do for all the group entities and the benefit of such common research would be passed on to the Assessee. There was an agreement dated 13.4.2008 between Avastagen Ltd., and the Assessee for providing benefit of research carried out by the former to the Assessee. However that agreement was terminated by a letter dated 15.4.2008 and therefore the entries for payments to be made to Avastagen Ltd., were made in the books of accounts and subsequently there were reversal of entries and therefore there was neither en....
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....of agreement between the parties was unilateral and there is no material on record to show that the plea of termination of the agreement was not true. The parties to an agreement are at liberty to vary the terms of the agreement or terminate the agreement. The conclusions of the revenue authorities in this regard are purely based on surmises and cannot be sustained. 12. In the case of CIT Vs. Wipro Healthcare IT Ltd., (2013) 34 taxmann.com 74 (Karnataka), the facts were that the assessee in that case entered into a Collaboration Agreement with M/s. GE Information Technology Inc., USA (GEMS IT, USA). According to the contract, the USA company had given license to the assessee, the right to use the IPRs belonging to that company and als....
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....d by the Tribunal was correct. 13. The aforesaid decision of the Karnataka High Court is squarely applicable to the facts of the present case. Apart from the above, entries in the books of accounts are not conclusive with regard to liability to tax when it is shown that the taxable event had in fact not taken place or was given up or abandoned. We therefore hold that there was no obligation on the part of the Assessee to deduct tax at source and therefore the orders u/s.201(1) & 201(1A) of the Act are liable to be vacated and are hereby vacated. 14. The appeal of the Assessee is allowed. Since the appeal is allowed, the Stay Petition becomes infructuous and hence the same is dismissed. ITA No.433/Bang/18. 15. This is an appea....