TaxTMI 
TaxTMI 
2013 (1) TMI 1008
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....ed Commissioner of Income-tax (Appeals) -XXXI ['learned CIT (A)'] has erred in upholding the assessment under Section 143(3) of the Income-tax Act, 1961 ('Act'), on the following grounds. Ground No 1 The learned CIT (A) has erred in holding that Satellite Television Asian Region Advertising Sales BV [now known as 'International Global Networks By'] ('SAS By') is a 'conduit' for the Appellant and that the advertisement revenues earned by SAS BV are taxable in the hands of the Appellant. The Appellant respectfully submits that the above finding is erroneous and should be set aside. Ground No 2 Without prejudice to Ground 1, the learned CIT (A) has erred in taxing the advertisement income earned by SAS BV in the hands of the Appellant on an accrual basis. The Appellant respectfully submits that the above finding is erroneous and should be set aside. The Appellant craves leave to submit such further grounds at or before the hearing of the appeal, so as to enable the Income tax Appellate Tribunal to decide the appeal according to law. ITA/3709/M/04-AY 1999-2000 Based on the facts and circumstances of the case, Satellite Television Asian Region Limited (hereinafter ref....
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.... Act, 1961, ignoring the fact that: (a)Interest U/s 234B and 234C is in the nature of compensatory payment and is of penal in character. (b)Since the tax was not deducted at source in the case of assessee, it was obligatory on the part of assessee to pay advance tax as held by the ITAT in the case of DCIT Vs. Castrol Ltd. [ITA No.4055/ Bom/93 dtd. 23.07.2003]. (c)The tax was deducted in the case of the conduit company, STAR Sales BV and refund has been granted to that company along with interest. The charging of interest in the case of assessee is only to compensate the interest granted in the case of conduit company." The appellant prays that the order of the Ld.CIT(A) on the above grounds be set aside and that of the A.O. restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." ITA/4082/M/04 AY.1999-2000 "(1)On the facts and in the circumstances of case and in law, the CIT(A) erred in directing to delete ₹ 1,48,97,094/- included in the total income of the assessee arising out of the agreement with NBC Asia CV Ltd., ignoring the fact that (a)the worldwide financials of the assessee produced before him were....
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.... the ground that since the taxes were deductible at source from payments made by Indian and other advertisers, the assessee to be saddled with the burden of the above interest, ignoring the fact: (a)that the interest is in the nature of compensatory payment and is of penal in character; (b)that since the tax was not deducted at source it was obligatory on the part of the assessee to make the deficit good by way of making payment towards advance tax; (c)that since the assessee failed to pay the advance tax, the provisions of section 234A, 234B and234C of the I.T. Act,196l have been correctly applied by the Assessing Officer." The appellant prays that the order of the Ld.CIT(A) on the above grounds be set aside and that of the A.O. restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 2.Since common issues are involved in all the appeals, they were heard together and are being decided by a common order for the sake of convenience. Details of dates of filing of returns of income, income shown in the returns, dates of completion of assessments, assessed incomes, dates of penalty orders, penalty imposed etc. can b....
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....ecause as per the appellant-company it had not earned /received income from India for the period under consideration. AO issued a notice under section 148 of the Act. In response to the notice, assessee disclosed Nil income for the AY.1998-99.After obtaining explanation of the assessee with regard to certain issues, AO completed the assessment under section 143(3) r.w.s.147 of the Act on 31.3.2003. While finalising the assessment AO held that the advertisement revenues in respect of the channels earned from India by SAS BV was to be taxed in the hands of the Appellant on a substantive basis by treating SAS BV as a 'conduit' for the Appellant. The AO assessed the income of SAS BV at ₹ 32,38,45,287/-.The difference between the returned income and the assessed income was because of the fact that the AO had estimated the income by applying the rate of 20% on gross receipts on accrual basis, whereas the appellant had computed the income by applying the rate of 10% of gross receipts on receipt. The assessed income of SAS BV was added to the income of the Appellant, since SAS BV was held to be a conduit of the Appellant. As stated earlier, income of the assessee was assessed on accr....
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....Departmental Representative(DR)relied upon the order of authorities below. 4. 1.We have heard rival submissions and perused the material available on record as well as the order of the Tribunal dated 21.5.2010 (supra) delivered on the case of International Global Networks BV. Relevant paragraphs of the order of the Tribunal, for the AY. 1998-99,read as under: "8.Based on the material before us in the case of this case, there is no good reason thus to disregard the existence of the assessee company and proceed to tax the entire advertising revenue in the hands of its parent company. It is difficult to understand the reasoning adopted by the CIT(A) who has observed that given the facts of case, it would be "more appropriate" to tax the income in the hands of the STAR Limited. He exercised a choice which was not available to him. What is to be taxed in the hands of STAR Limited is to be decided when the assessment of STAR Limited is finalized, and how can any finding be given against STAR Limited without even hearing the said assessee. The course of action adopted by the CIT (A), in taxing the income in the hands of the STAR Hong Kong rather than doing so in the hands of the assess....
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....sessee. Hon'ble Bombay High Court in the case of Pfizer Corporation has held that non resident assessee can follow "Cash system of accounting" in respect of its income arising from India. The decision of Hon'ble Supreme Court in 201 1TR 391 was rendered with respect to royalty by an Indian company to non-resident under Collaboration Agreement on all sales effected by the Indian company. Under these facts, Hon'ble Supreme Court has held that the credit entry of the royalty to the account of the assessee in the books of the Indian company amounted to receipt of the royalty by the assessee. In the present case, it is pleaded by the ld counsel for the assessee that the assessee does not come to know as to what amount has actually been received by the Indian agent from the advertisers. He pointed out that Advertisers some times do not pay the amount to the Indian agent, therefore, the correct position could not be gathered/ ascertained from the copies of the assessee's account in the books of Indian advertisers. Which particular method of accounting will be proper in a particular case depends on the facts and circumstances of each case. In the case of Pfizer Corporation, Hon'ble Bombay ....
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....e decide Ground No.3 in favour of assessee. In the result, appeal filed by assessee for assessment year 1999-2000 is also allowed. Appeals filed by the AO 9.Now we take up the appeals filed by department i.e.ITA.4081/M/2004,ITA 4082/M/2004& ITA 5704/M/2004 for AYs.1998-99, 1999-2000 and 2000-2001, respectively. The common grounds of appeal, filed by the department for all the three assessment years, is about deleting of interest charged under various sub-section of Section 234 (i.e.234A, 234B and 234C) of the Act. As stated earlier, while passing orders u/s.143(3) and143(3)r.w.s147 of the Act, AO had levied interest u/s. 234A,234B and 234C of the Act. Assessee preferred appeals before the FAA challenging the levy of interest. After considering the submissions of the assessee, FAA held that in a case where income was liable for deduction or tax at source an assessee could not be saddled with the burden of interest u/s.234A, 234B and 234C of the Act, that had the tax been deducted there would not any case for shortfall in tax and resultant levy of interest under said sections, that an assessee could not be penalised for the fault of somebody else. Following the decision of the M....
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....of the Annexure-4 of the said letter only. Therefore, ground No.1 for AY.1999-2000 is also decided against the AO. As stated earlier other ground of appeal was about interest charged u/s.234 of the Act. ITA/5704/M/03-AY.2000-01 11.Ground No.1 filed by the AO for assessment year 2000-01 is about treatment of taxation of the advertisement revenues on accrual/receipt basis. As per the AO in the year under consideration agreement with SAS BV has been terminated and assessee-company entered in to agreement with STAR India for the advertisement revenues. He further held that SAS BV had offered income of earlier years on receipt basis for the AY under consideration. As per the AO to protect the interest of the Revenue he was assessing the said income amounting to ₹ 87.73lakhs of SAS BV in the hands of the assessee. He further held that that although, the income of SAS BV had been taxed on substantial basis in the hands of the assessee-company on accrual basis in earlier years, that the assessee had not accepted the order of the Department, that to protect the interest of revenue till the matter reaches finality. In the appellate proceedings FAA deleted the addition made by the A....
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....e AO, since it was a pre-plan of the assessee to float a conduit company so that the income was not taxed. He held that it was a fit case for levy of penalty u/s. 271(l)(c) of the Act. He imposed penalty of ₹ 5.74 Crores and ₹ 6.24 Crores, as mentioned in the last two columns of the table of paragraph 2. 12.2.Assessee-company preferred appeals before the FAA.After considering the facts of the case and the submissions of the assessee he held that the very basis for the levy of penalty was misplaced, hat it was the belief of the appellant that the income from advertisement was assessable in the hands of SAS BV and not in its hands, that the belief of the appellant was bona fide keeping in view the fact that in the preceding assessment years the said income had been assessed by the department in the hands of SAS BV, that by showing the income in the hands of SAS BV no avoidance of tax had been made,that the issue of assessing the income from adverti- sement in the hands of the appellant or in the hands of SAS BV was a matter of debate, that penalty u/s. 271(1)(c) of the Act could not be levied in such circumstances. Finally, he cancelled the penalty levied by the AO for....