TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 1540
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.... the Act on 30.11.2010. Subsequently, according to the Ld. counsel, the return was taken for scrutiny assessment and notice was issued under Section 143(2) of the Act on 19.08.2010. The Assessing Officer completed the assessment under Section 143(3) of the Act by an order dated 29.12.2011. The assessee, according to the Ld. counsel, furnished all the details with regard to payment made to foreign company. The Assessing Officer has not disallowed any payment under Section 40(a)(ia) of the Act. Subsequently, according to the Ld. counsel, the Assessing Officer issued a notice under Section 148 of the Act on 30.03.2014. According to the Ld. counsel, no fresh material came to the possession of the Assessing Officer. Even though the notice under Section 148 of the Act was issued within a period of four years, unless the conditions were complied with for reopening assessment under Section 147 of the Act, the Assessing Officer cannot reopen the assessment. Placing reliance on the judgement of Madras High Court in Tanmac India v. Dy. CIT[2017] 78 taxmann.com 155, the Ld. counsel submitted that on identical circumstances, the Madras High Court found in the case before it, the return was proc....
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....puting the taxable income. To that extent, according to the Ld. D.R., there was escapement of income from taxation, hence, the CIT (Appeals) has rightly found that the Assessing Officer has rightly reopened the assessment. 6. Now coming to the merit of the claim made by the assessee, Smt. Ruby George, the Ld. Departmental Representative submitted that the payment was already made to a non-resident company M/s. Canadian Crystalline Emirates Trading Company, UAE towards erection and commission charges. According to the Ld. D.R., the amount paid by the assessee towards erection and commission charges is in the nature of fee for technical service, therefore, it requires deduction of tax at source. According to the Ld. D.R., the non-resident company M/s. Canadian Crystalline Emirates Trading Company, UAE utilised its technical skill and expertise for erection and commission of unit. Therefore, according to the Ld. D.R., the profit of the non-resident company is taxable in India, hence, the assessee is liable to deduct tax. Referring to retrospective amendment made by the Parliament in Section 9(1)(vii) of the Act with effect from 01.06.1976, the Ld. D.R. pointed out that the income of ....
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.... day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date. Explanation 2.- For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries". 9. When a non-resident company rendered a technical service and Indian company paid fees irrespective of the fact whether the non-resident company has a place of residence or business or business connection in India or the non-resident company rendered service in India, the assessee is liable to deduct tax. In this case, the question arises for consideration is whether the commissioning and erection of the machinery by M/s. Canadian Crystalline Emirates Trading Company, UAE is a technical service or not? If the servic....
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.... Principal." 12. In view of the above specific agreement between the assessee and M/s. Canadian Crystalline Emirates Trading Company, UAE, it is obvious that M/s. Canadian Crystalline Emirates Trading Company, UAE has erected and commissioned the desalination equipment outside the country, therefore, it cannot be construed to be a technical service within the meaning of Section 9(1)(vii) of the Act. Therefore, this Tribunal is of the considered opinion that the fee paid by the assessee to M/s. Canadian Crystalline Emirates Trading Company, UAE is not a fee for technical service. Hence, it does not require any deduction of tax under Section 195 of the Act. Therefore, no income has escaped from taxation. 13. We have also carefully gone through the judgment of Madras High Court in Tanmac India (supra). In the case before Madras High Court, the assessee-partnership firm paid Rs. 5,50,000/- to a retiring partner towards compensation. The firm claimed the above said payment of Rs. 5,50,000/- as deduction while computing the taxable income. Initially, the return was processed under Section 143(1)(a) of the Act. No notice was issued under Section 143(2) of the Act. Subsequently, the Asse....
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....0/- is not allowable for the following reasons: 1. The payment has not been authorised by partnership deed. 2. Serving of future profit is contingent one. Contingent expenditure cannot be allowed. 3. Future profits does not relate to the AY in question. And so, the expenditure cannot be allowed in this AY." 8. A perusal of the Reasons would indicate that the assessing officer proceeds solely on the basis of the return of income and the enclosures thereto, being the financials and the deed of partnership, to initiate proceedings for re-assessment. The aforesaid documents however are part of record and the basis on which the intimation under section 143(1)(a) has been issued on 1.12.98. Let us bear in mind that the intimation dated 1.2.1998 has been manually issued, being prior to the electronic era which came into force on and with effect from 2003. The assessing officer has thus evidently applied his mind to the return and annexures even at that stage. 9. The scheme of assessment as set out in section 143 requires an assessing officer to process the return by issue of an intimation (which has been done in the present case) and thereafter issue a notice under sub-section (....
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....f power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a link with the formation of the belief." 12. If the assessing officer, after issuing intimation u/s. section 143(1) does not to issue a notice u/s. 143(2) of the Act to initiate proceedings for scrutiny of the return of income, the obvious conclusion is that he does not consider it necessary or expedient to do so, the inference being that the Return of Income filed in order. It is this opinion that cannot be arbitrarily changed by the assessing officer, to re-assess income on the basis of stale material, already on record. If we thus keep in the mind the above fundamental requirement of section 147, it would be apparent that the exercise undertaken by the Revenue in this case is not one of re-assessment, but of review. The reasons make it abundantly clear that the re-assessment is sought to be initiated on the basis of the return of income and the enclosures which were available with the assessing officer since 2.11.1998 and which ought to have....