AI Drafter 
TaxTMI 
TaxTMI 
2021 (7) TMI 729
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....d to bring any evidence of record that the payments made are covered under Circular No. 723 of 1995 and that the non-residents ship owners/charters had filed returns u/s 172 of the Act. (3) The ld. CIT(A) has erred in law and on facts in holding that the provisions of section 40(a)(ia) are not attracted in case where tax has been deducted improperly/inadequately. (4) The ld. CIT(A) has erred in law and on facts in deleting the disallowance made on interest and insurance expenses claimed on vehicle. (5) The ld. CIT(A) has erred in law and on facts in partly deleting the disallowances made of depreciation and incidental expenses claimed on vehicle. (6) The ld. CIT(A) has erred in law and on facts in deleting the addition made of Rs. 34,04,016/- on account of under invoicing of sales made to sister concern." 2. Ground No.1:- The deletion of addition of Rs. 1,01,59,839/- made under Section 2(22)(e) of the Act has been challenged before us by the Revenue. 3. We have heard the rival submission made by the respective parties, we have also perused the relevant materials available on records. 4. The facts culled out from the orders passed by the ....
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.... is substantially interested and, thus, on this score the impugned addition is not justified as also the case made out by the assessee. While dealing with the issue in favour of the assessee the Ld. CIT(A) observed as follows:- "...it is undisputed that appellant was in receipt of loan of Rs. 11510516/- from M/s. Bajaj Food Ltd. and three of the directors of appellant Having equal share holding aggregating to 29.30% of share holding in appellant company while 29.94% in M/s. Bajaj Food Ltd.. The A.O. after observing the accumulated profit of Rs. 10159839/- as on 13/03/2009 in M/s. Bajaj Food ltd. invoked the provision of section 2(22)(e) of the Act relying on ratio of Hon'ble ITAT order in the case of Skyline Corn Pvt. Ltd. The appellant in appeal submitted that M/s. M/s. Bajaj Food Ltd. is not closely held company, as per the share holding pattern of both appellant as well as M/s. M/s. Bajaj Food Ltd., the basic condition of beneficial share holder and substantial interest does not satisfy, none of the share holder of M/s. Bajaj Food Ltd. is having more than 10% share holding except Surya International and as per the ratio of various case laws as relied on provision....
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....owing question of law. "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in reversing the order of CIT(A) and thereby deleting the addition made on account of deemed dividend u/s.2(22)(e) of the Act on inter-corporate deposits?" 2.0 The brief facts are that the assessee filed return of income for the Assessment Year 2000- 01 declaring a loss of Rs. 4,22,792/-. The return was processed under Section 143(1)(a) of the Income Tax Act, 1961 (for short 'the Act') and income of the assessee was declared under Section 115JA of the Act. Thereafter the case was reopened under Section 147 of the Act which was served on the assessee of the case of the department was that the Amigo Brushes Pvt. Ltd. had a total surplus of Rs. 70 lacs as on 31st March 1999 and it has advanced a loan to the assessee to the tune of Rs. 25 lacs. Whereas the assessee contended that he received deposit from Amigo Brushes Pvt. Ltd. and Daisy Packers Pvt. Ltd. was not a shareholder in Amigo Brushes Pvt. Ltd. The Assessing Officer by his order dated 30th September 2004 rejected the claim of the assessee and treated the deposits as loan and cons....
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.... holder of the company lending him money, no occasion to apply it "can arise." The appellant also relied on Hon'ble Karnataka high court in the case of Sarva Equity P. Ltd. (2014) 214 taxmann.com 28(Karnataka) wherein on this issue, ratio of Hon'ble Delhi high court in the case of National Travels Services (supra) was considered but held in favor of assessee. It is therefore, the question of legal binding of ratio of Hon'ble Jurisdictional high court comes into picture. Other Hon'ble high court also held in favors of assessee on the issue that provisions of section 2(22)(e) of the Act is applicable to loan & advance transaction between a company and registered shareholder and not beneficial share holder. Though, as discussed above, the basic objective as per Board circular No. 495 dt. 22/09/2008 as considered and interpreted by Hon'ble Delhi high court in the case of National Travel Services (supra) were not considered in these caw laws, but the ratio of Hon'ble Jurisdictional high court is binding on lower appellate authority, it is therefore following ratio of Hon'ble Gujarat high court in the case of Daisy Packeres Ltd. (supra), it is held th....
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....d forwarding expenses rejecting the appellant's contention that TDS is not applicable for the freight expenses to non-resident shipping agencies agent and added the same to the total income of the assessee which was, in turn, deleted by the Ld. CIT(A) with the following observation:- "From the verification of such bills it has been gathered that bills are raised to appellant with composite amount reflecting freight expenses in foreign currency i.e. US dollar converted into rupees of that date with other charges like terminal handling, documentation etc. in Indian rupees. The appellant's contention that payment in foreign currency by these parties to the non resident shipping company is on account of they are being agent and permitted by RBI guide line found to be justified in view of board circular no. 723 dt. 19/09/1995 and ratio of various case laws relied on by appellant. The appellant deducted TDS out of the terminal handling charges, documentation charges etc. being paid to these parties treating them as contractual payment while payment for non resident shipping company in foreign currency by these parties is treated as reimbursement of actual expenses. Hon'b....
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....the Learned CIT(A) while dealing with this ground observed as follows:- "(B) Ground no. 2 is against the disallowance of freight expenses of Rs. 34,14,124/- u/s. 40(a)(ia) of the Act. The A.O. in the impugned order considered payment of Rs. 34,14,124/- to eight parties in respect of freight and forwarding expenses (already discussed para 4A above) and rejected appellant's explanation that due TDS was deducted as per the provision s as evidenced by photo copies of invoices raised by these parties (submitted by appellant and verified by A.O.) on the amounts attributable to servicing and handling charges and not reimbursement. The A.O. also rejected appellant's contention about non application of TDS for the freight expenses to non resident shipping agencies agent. The appellant in appeal reiterated its contention with copies of such invoices and emphasizing the fact that circular no. 723 dt. 19/09/1995 is applicable for such non resident shipping agencies and its agent since taxable u/s. 172 of the Act and no provision of section 195/194C of the Act is applicable. The appellant further relied on Hon'ble Gujarat High Court order dt. 25/06/2013 in the case of CIT-III Vs. Gujar....
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.... this situation the appellant cannot be held in default u/s. 201(1) of the Act and provisions of section 40(a)(ia) of the Act will not be applicable. It is, therefore, considering the facts and judicial preposition, the A.O. is directed to allow such expenses and delete the addition so made of Rs. 3414124/-. The appellant gets relief accordingly. This ground is allowed. " Heard the parties, perused the relevant materials available on record. 10. It is the case of the assessee that while exporting its goods, it books the container of various foreign shipping companies through their offices in India/clearing and forwarding agents (C&F) who deal with the office of such shipping companies. In fact upon receipt of bills for freight and other related charges of shipping companies the assessee pays to clearing and forwarding agents, who in turn, make such payment to the concerned shipping companies. As it appears from the records that such bills comprise of freight in foreign currency, terminal handling charges, consolidation and documentation charges, detention charges etc. It is further the case of the assessee that the assessee has duly deducted tax at source....
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....der Section 172 of the Act we hold that in that case TDS deduction is not required under Section 194C of the Act and, thus, provision of Section 40(a)(ia) is not applicable to the facts and circumstances of the case in hand. Thus, the ground preferred by the Revenue is found to be devoid of any merit and hence, dismissed. 12. Ground Nos. 4&5:- These grounds are interlinked in respect of the claim of Rs. 64,568/- being depreciation on car, Rs. 26,569/- of insurance on car and interest of Rs. 44,409/- for the loan taken for purchase of the car, petrol expenses of Rs. 28,715/- and repairing expenses of Rs. 29,457/- related to the car. 13. We have heard the respective parties, and we have also perused the relevant materials available on record. The Ld. AO observed that the car was purchased in the name of the Director Shri Sanjay Bajaj. While rejecting the claim of the assessee the Ld. AO observed that only for registration the director's name was used as per the resolution passed by the appellant company whereas all the expenses including repayment of loan for that car has been incurred from the source of appellant company. Moreso, the car is reflected as an asset of the c....
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.... incidental expenses but the provisions of section 38(2) of the Act specifically provided to handle such situation i.e. appellant can claim depreciation for the asset even if the same is partly used to the extent of proportion of its use. In the absence of any detail provided by appellant, I treat that the vehicle so purchased and registered in the name of director is partly used by appellant company for business purpose to the extent of 75% while balance 25% is used for either personal purpose of director or not wholly and exclusively for the purpose of appellant's company business. It is therefore the depreciation claim and other incidental expenses related to use of this vehicle is allowable to the extent of 75%. In respect of disallowances of interest and insurance, since it has been held that motor car was purchased from loan fund and partly used (75%) for appellant business, but such interest and insurance are for the purpose of business and essential to run the car irrespective of fact that whether it is used partly or wholly, therefore such claim are allowable in its entirety. It has been gathered that appellant claimed depreciation of Rs. 64568/-, petrol expenses of Rs....
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....28,995/-" has been partly deleted to extent of 75% i.e. 25% which according to us is unambiguous taking into consideration of the assesses books of accounts maintained in regard to the said asset as it appears from the records and thus we uphold the same. Hence, this ground of appeal preferred by the Revenue is dismissed." 15. Thus, taking into consideration the entire aspect of the matter respectfully relying upon the order passed by the Ld. Tribunal in the absence of any changed circumstances, we do not find any reason to interfere with the order passed by the Ld. CIT(A). Thus, the ground preferred by the Revenue is found to be devoid of any merit and rejected. 16. Ground No.6:- Deletion of addition of Rs. 34,04,016/- made on account of under-invoicing of sales to sister concern has been impugned before us by Revenue. 17. The crux of the matter is this that during the previous year the appellant made export sales of Rs. 34,72,784/- to M/s. Bajaj Herbal FZE LLP (BHFZE) which is appellant's associated concerned. The appellant also exported similar product to third parties. The Ld. AO compared the sale prices made to the sister concern i.e. M/s. BHFZE and other such concern....
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....alysis. I am inclined with appellant that working of average price to find out the difference of these average price and again working out average percentage under invoicing from 3.16% to 366.32% is neither scientific nor on the basis of prescribed method but the same are conjecture and surmises. The working of 49.50% under invoicing is also an estimate with no basis. As per settled legal preposition the A.O. cannot entered in the shoes of any business man and can direct/dictate about how to conduct such business. All the export transaction are genuine and in comparison to such export to other parties of Rs. 18.88 crore the export to M/s. M/s. BHFZE is only Rs. 0.35 crore. It is important to note here that during survey proceedings u/s. 133A of the Act on 22/02/2010 no evidences reflecting such modus operandi were found. I am inclined with the ratio of various case laws relied on appellant that unless and until such export are sham transaction no addition for under invoicing can be made. It is therefore the addition so made by A.O. are not legally sustainable. The A.Q. is directed to delete the addition so made of Rs. 3404016/-. The appellant gets relief accordingly. This ground is....