TaxTMI 
TaxTMI 
TaxTMI 
2021 (5) TMI 1056
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....s an exporter involved in export of shoes. The Assessing Officer issued show cause notice to the assessee requiring him to furnish various details and information. While examining the books of account, the Assessing Officer pointed out discrepancies in the books maintained by the assessee. The assessee filed reply to show cause notice. The Assessing Officer considering the reply rejected the books of account and applying the net profit rate of 5% on the turnover, made the addition. In the computation of income, the Assessing Officer has calculated the business income @ 5% on the turnover of Rs.2,99,77,659/-. Besides that, the Assessing Officer had also added disallowance on account of 40(a)(ia) to the tune of Rs.9,63,954/-. The case of Assessing Officer was that the assessee failed to deduct TDS on the commission paid by the assessee to agents, who situated outside India. Further, he has also added duty draw back shown by the assessee in the profit and loss account as income of the assessee. Thus, in total he had calculated the income of the assessee at Rs.49,47,494/-. 3. Feeling aggrieved, the assessee filed appeal before the ld. CIT(A). Before the CIT(A), the assessee drew his a....
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....s they have rightly adopted the method opted by the assessee. Further it was submitted that while calculating the NP rate, the effect of duty draw back has not been taken into account. Therefore, it is required to be separately added. 5. In rebuttal, the ld. AR submitted that duty draw back is nothing but reimbursement of the expenditure/taxes paid by the assessee to various government authorities and was there to give incentives to various exporters. It was the case of assessee that once the expenditure has been taken into account while calculating the profit of the assessee, this should also form part of the total turnover, on which the net profit was to be calculated. It was further submitted that disallowance on account of commission cannot be separately added to the income of the assessee as u/s. 144 of the Act, the total income of the assessee was required to be compute and total income is defined u/s. 5 of the Act. He has also relied upon the decision of jurisdictional High court in the matter of CIT vs. Bhanwari Lal Bansidhar. 6. We have heard the rival contentions. Admittedly, the assessee has not challenged the rejection of books of accounts before us and has challenged....
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....derived which- (a) is received20 or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises20 or is 20deemed to accrue or arise to him in India during such year. Explanation 1.-Income accruing or arising outside India shall not be deemed to be received20 in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Explanation 2.-For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued21 or arisen21 or is deemed to have accrued21 or arisen21 to him shall not again be so included on the basis that it is received or deemed to be received by him in India. 8. The provisions of section 40(a)(ia) provides as under : Amounts not deductible. 40. Notwithstanding anything to the contrary in sections 30 to 4[38], the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",- (a) in the case of any assessee- 5[(i)6 7any interest (not being interest on a loan issued for public su....
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....eemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the 19[***] payee referred to in the said proviso.] 9. A readying of section 40(a)(ia) makes it abundantly clear that the assessee will not be entitled to deduction while computing the income chargeable under the head profits and gains from business if the assessee has not deducted tax at source under Chapter 17B of the Act. The conjoint reading of section 5 and 40(a)(ia) makes it clear that income of the assessee shall be determined under Chapter-III of the Act after taking into account the deductions permissible under law. However, in the same Chapter, the assessee is not entitled to any deduction if the assessee had not deducted tax at source under Chapter 17B. The result of conjoint reading is that under section 144, total income is required to be determined as provided u/s. 5 subject to disallowance, if any, u/s. 40(a)(ia). 10. We accordingly, do not agree with the legal submission of the assessee that after applic....
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....m section 30 - 38. Whereas section 40 A is not worded in the same language as that of section 40(a)(ia) , which is clear from the language used in section 40 A of the act. The language provides as under: "The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head "Profits and gains of business or profession". In view of the above while calculating the estimated total income under section 144 it is not necessary to include the disallowance under section 40(a)(ia) of the act. 12. Now we adjudicate whether the disallowance made u/s. 40(a)(ia) is justified or not. The assessee's case is that the commissions are paid outside India to his agent for procuring orders for the assessee. The element of payment of commission was duly reflected in the bills for that purpose. The commission was paid outside India and not in India. However, the ld. DR disputed the above contention. 13. We have heard the rival contentions and gone through the record. The commission was admittedly paid outside India. There is no situs in India. The modus operandi of assessee is clea....