TaxTMI 
TaxTMI 
2021 (5) TMI 938
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....he disallowances made under section 40(a)(i) of the Act for alleged non-deduction of tax at source from payments made to professionals for due diligence reports and relocation expenses of employees outside India, without appreciating that the same were not chargeable to tax in India in the hands of non-residents and no tax was required to be deducted under section 195 of the Act. 3. That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in confirming the penalty levied by the Ld. AO on the Appellant on the basis that the Appellant did not file an appeal against the order passed by the CIT(A) before the higher the ITAT against appeal filed by tax department. The C1T(A) failed to appreciate that the appeal filed by the tax department was dismissed by Hon'ble ITAT vide order dated 8 February 2013. 4. That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in alleging that the Appellant has accepted its liability to withhold tax while making payment to non-residents outside India in relation to professional fee for due diligence reports and relocation expenses of employees outside India, merely because t....
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....ection 139(4) of the Act on 31 March 2008, declaring taxable income of Rs. 22,097,130 under the normal provisions of the Act. The assessment was completed under section 143(3) of the Act vide order dated 30 November 2009, wherein the income has been assessed at Rs. 32,463,650 and a demand of Rs. 52,40,385 (including interest) has been raised. The following additions were made to the taxable income: Sr. No. Disallowance Amount (In Rs.) 1 Ad-hoc disallowance at the rate of 80 percent of the total expenditure incurred as under: • Professional fee of Rs. 4,887,931 for due-diligence services paid to M/s Control Risks Group (S) Pte Ltd. ('Control Risk); and • Consultancy fee of Rs. 876,642 for office space paid to AST Invescap Consultancy. 4,611,658/- 2 Expenditure incurred on Advertisement and Sales Promotion 2,013,366/- 3 Depreciation on UPS 193,541/- 4 Recruitment and training expenses 3,547,953/- TOTAL 10,366,518/- Aggrieved by the Assessment Order, the Assessee filed an appeal before CIT(A) and the CIT(A) granted substantial reliefs to the assessee vide order dated 27 April 2012. However,....
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....hhold taxes on the amounts payable to Control Risk, as the same was not taxable in the hands of Control Risk in India. The Ld. AR submitted that out of total expense of INR 48,87,931 in relation to Control Risk, TDS was deducted on an amount of INR 31,69,862 and no TDS was deducted on the balance amount of INR 17,18,069. Therefore, the disallowance was made by the CIT(A) u/s 40(a)(i) of the Act. In this regard, the Ld. AR pointed out that the issue of taxability of amount received by Control Risk is a question of interpretation which involves examination of provisions of Income-tax Act and DTAA between India and Singapore. The Ld. AR further pointed out that payment made to Control risk does not amount to FTS as per provisions of Article 12(4) of India Singapore DTAA as the same does not result into making available technical know-how etc. to the recipient (i.e. to the assessee), hence no taxes were required to be deducted on the said payment. In this regard, detailed submission were made before the CIT(A) in the quantum wherein explaining the reasons as to why the amount paid to Control Risk is not chargeable to tax. However, the CIT(A) without examining the taxability of receipts....
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....onstrued as acceptance by the assesse in order to levy of penalty. The Ld. AR further submitted that the basic principles which emerges from the reading of section 271(1 )(c) of the Act is that the Assessing Officer has to establish that the assessee has either, (i) Concealed income; or (ii) Furnished inaccurate particulars of income; or (iii) Deeming provisions of Explanation 1 to section 271(l)(c) of the Act applies The factum of concealment of particulars of income or furnishing of inaccurate particulars needs to be established before penalty can be levied. In other words, penalty under section 271 (l)(c) of the Act cannot be levied where the assessee acted on a bonafide belief and had furnished all the facts relating to the income of the subject year. At the outset, the Ld. AR submitted that the penalty has been levied based on the disallowance made in the assessment order u/s 40(a)(i) of the Act. The Ld. AR further pointed out that the matter on which disallowance is made involves interpretation of provisions of the Act along with relevant DTAA. Further, the disallowance u/s 40(a)(ia) was upheld in the quantum proceedings without adjudicating the ....
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....ances lead to levy of penalty. Merely because the argument/ contention of the assessee was not accepted, it cannot be assumed that there was concealment of particulars of income or furnishing of inaccurate particulars of income by the assessee. Secondly, the provisions of Explanation 1 to section 271(1)(c) of the Act would also not be applicable to the facts of the assessee's case because the present case does not fall within any of the clauses of the said Explanation. The provisions of the said Explanation are not applicable to the assessee's case because the assessee has given/offered an explanation. The assessee has furnished complete details of the payments made to Control Risk (for due diligence services) and Crown and Schenker for (relocation services), namely copy of invoices, certificate obtained from Chartered Accountants, copy of extract of proposal and report from Control Risk. It has not been alleged in the course of assessment proceedings that the explanation offered by the assessee was false. Merely the contention of the assessee has not been accepted and no material/ evidence were produced before the assessee to contradict the explanation offered by it. During the co....
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....22ITR 158] (SC) b) CIT vs. Nath Bros. Exim International Ltd [2007] 288 ITR 670 (Delhi HC) c) Devsons Pvt. Ltd vs. CIT(A) [2011] 196 TAXMAN 21 (Delhi HC) d) CIT Vs. Bacardi Martini (2007) (288 ITR 585) (Delhi. HC) e) Karan Ragh a v Exports P Ltd vs CIT [2012] 349 ITR 112 (Del HC) f) CIT v. Krishna Maruti Ltd. [2011] 11 taxmann.coml48 (Delhi HC) g) Harshvardhan Chemicals and Minerals Ltd. [2003] (259 ITR 212) (Rajasthan HC) h) Calcutta Credit Corporation [1987] (166 ITR 29) (Calcutta HC) i) Garg Engineering Co [1999] 235 ITR 451) (Allahabad High Court) j) CIT vs GD Naidu and Others (1987) 165 ITR 63 (Madras HC) k) Nuchem Ltd v. Deputy Commissioner of Income-tax [1993] (47ITD 487) (Delhi ITAT) II) Rejection of claim made by the Appellant by the AO cannot result in imposition of penalty under section 271 (l)(c) of the Act. Case laws relied upon by the assessee in this regard are as under: a) CIT vs Reliance Petroproducts Pvt. Ltd. [(2010) 322 ITR 158] (SC) b) CIT Vs Lotus Trans Travels (P) Ltd. [177 Taxman 37 (Del)] (Delhi HC) c) CIT Vs Regency Express Builders (P) L....
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....parties and perused the material available on record. This appeal is related to penalty levied u/s 271(1)(c). For invocation of Section 271(1)(c) of the Act, the three elements should be present which are concealment of income furnishing, inaccurate particulars of income, and if there is any involvement of deeming provisions as per Explanation1 to Section 271(1)(c). And these element whether applicable or not has to be determined first. The penalty is levied by the Revenue on the basis of disallowance made in the assessment order u/s 40(a)(i) of the Act and the same requires interpretation of provisions of the Act along with DTAA between India and Singapore. Expenses disallowed u/s 40(a)(i) on account of non withholding of taxes was subject to payments made to vendors based in Thailand who are in the business of providing movers and packers Services to its client. This was in relation to the expats' transfer movement. The service related to Movers and Packers cannot be characterized as royalty income in the hands of those vendors under the provisions of India Thailand DTAA and the same does not quality as technical service as it does not include the element of technical services re....