2022 (9) TMI 312

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....e assessee alleging that tax was not deducted at source in terms of the provisions of Section 40(a)(ia) of the Act in respect of the advances lying on 31-03-2007 for import of capital goods. 3. In the reply to the show cause notice, the assessee contended that the said advances was made towards import of capital goods on FOB basis at foreign sea ports, leading to transfer of title to the goods outside India and hence there is no income chargeable to tax in India and therefore the provisions of Section 195 of the Act are not attracted. It was also contended that such advances to suppliers have also not been charged to Profit and loss Account for the relevant assessment year. 4. The Assessing Officer completed the assessment under Section 143(3) of the Act by passing an order dated December 30, 2010. While completing the assessment, the Assessing Officer made disallowances aggregating to Rs.128,48,02,479/- under Section 40(a)(ia) of the Act. The Assessing Officer also enhanced the long term capital gain on sale of Chennai land by invoking the provisions of Section 50C of the Act. 5. The order under Section 143(3) dated December 30, 2010 was rectified by the Assessing Officer....

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....tion 195 of the Income Tax Act, 1961 that withholding of tax from payment made by the Assessee to the Foreign Company, Offshore, is not attracted under Section 195 of the Income Tax Act, 1961, whereas the technical services extended by the said Foreign Company was having sufficient territorial and economic nexus with India as there was commonness of Interest between the Assessee and Foreign Company and therefore, payment of composite contract price including the cost of Technical Contract Service was covered under Section 9(1) (vii) of the Income Tax Act, 1961 and the Assessee company was liable to deduct tax on all payments made to the Foreign Company including advances in the light of provision of Section 196 of the Income Tax Act, 1961? (b) Whether on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal, "B" Bench Kolkata is a competent authority to judge the Valuation of Department of Valuation Officer who is an expert in the area of valuation of assets and without giving any opportunity for revaluation of assets? (c) Whether on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal, "B" Ben....

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....ty and the Tribunal directed deletion of the disallowance made by the assessing officer under Section 40(a)(ia) of the Act only on the ground that the said amount was not debited to the profit and loss account by totally misreading the provisions laid down under Section 40(a)(ia) of the said Act. 13. On the issue regarding computation of long term capital gains, Mr. Rai contended that the learned Tribunal ought not to have interfered with the order passed by the first appellate authority in as much as the assessee did not challenge the valuation made by the DVO before the first appellate authority. 14. Mr. Khaitan, learned Senior counsel appearing for the assessee respondent seriously disputed the contentions raised by Mr. Rai. He placed reliance upon the decision of the Punjab and Haryana High court in the case of Commissioner of Income-Tax vs. Mark Auto Industries Ltd. reported at (2013) 358 ITR 43 (P&H) and a decision of the Karnataka High court in the case of Principal Commissioner of Income-Tax and anr. vs. Tally Solutions Pvt. Ltd. reported at (2021) 430 ITR 527 (Karn) and contended that the provisions contained in Section 40(a)(ia) cannot be invoked if the assessee had....

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....e synonym of deduct is subtract. 22. The word "deduction" has been defined in the said dictionary to mean the process of taking an amount of money away from a total. An amount can be deducted in computing the business or professional income by taking away the said amount from the total profits and gains of such business and profession. While computing the income chargeable to tax under the head profits and gains of business or profession an amount may be deducted from the profits and gains of business and profession in order to take away the said amount from the total chargeable amount under the said head. 23. While preparing the profit and loss account of a business or profession an amount can be deducted from the professional and/or business income by debiting the profit and loss account prepared in connection with such profession or business with such amount. Such amount may also be deducted while computing the profits and gains of business or profession for the purpose of arriving at the business or professional income chargeable to tax. Therefore, if the disputed amount is neither debited from the profit and loss account of the business or profession nor has been deducte....

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....aid Act. 27. The Punjab and Haryana High Court in the case of Mark Auto Industries (supra) did not interfere with the findings of the learned Tribunal holding that the provisions contained in Sections 40(a)(i) were not attracted in case the assesseee had not claimed deduction for the amount paid for technical knowhow. The Karnataka High Court in Tally Solutions (supra) also held that when no amount was claimed as revenue expenditure, no disallowance under Section 40(a)(i) and (ia) of the Act would be made. The aforesaid decisions also support the view of this Court on the issue as to applicability of the provisions of Section 40a(ia) of the Act. 28. The decision in the case of Regan Powertech Pvt. Ltd. (supra) do not have any manner of application to the case on hand as the substantial questions of law raised therein was whether the assessee is an assesseee in default in respect of payment made towards the rent for leasing a crane when the entire transaction occurred outside India which is not the issue involved in the case on hand. 29. For the reasons as aforesaid, this court is of the considered view that the first appellate authority was justified in deleting the disall....