TaxTMI 
TaxTMI 
TaxTMI 
2023 (2) TMI 25
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...., the assessee a resident corporate entity, is stated to be engaged in the business of providing mobile phone services for international use. For the Assessment year under dispute, the assessee filed its return of income on 30.11.2016 declaring total income of Rs. 3,18,77,680/-. In course of scrutiny assessment proceedings, the Assessing Officer noticed that during the year under consideration, the assessee has debited certain expenditure, being payment made to overseas entities, without withholding tax under section 195 off the Act. Therefore, he called upon the assessee to explain why such payment made should not be disallowed under section 40(a)(i) of the Act. Though, the assessee objected to the proposed disallowance by contending that ....
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....That being the factual position, there was no obligation on the assessee to withhold tax at source under section 195 of the Act while making such payment. At this stage, we must observe, the Assessing Officer while disallowing the payment under section 40(a)(i) of the Act has made a general observation that payments are covered under Article 12 of the DTAA, without specifying which particular DTAA he is referring to Article 12 of India-Malaysia DTAA is in relation to income in the nature of royalty. In our view, the payment made by the assessee to the Malaysian entity certainly cannot be considered to be in the nature of royalty under Article 12 of the DTAA. 5. Having held so, it is necessary to examine whether the payment made would quali....
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.... nature of business profit can be taxable in the source country only if the resident of the other country carries on business in the source country through a Permanent Establishment situated therein. In the facts of the present appeal, admittedly, the Bangladesh entity has no PE in India. Therefore, income, if considered to be business profit is not taxable in India. As per Article 13 of the DTAA, the payment made by the assessee cannot be treated as royalty. If at all, the payment can be considered to be towards rendering of independent professional services as per Article 15 of the DTAA. However, the payment made towards independent professional services is taxable in the country of residence of recipient, unless, the recipient has a faxe....
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....it of Section 35D of the Act. Accordingly, he disallowed the deduction. The disallowance so made was upheld by learned Commissioner (Appeals). 12. Before us, learned Counsel submitted that the assessee had paid fee of Rs. 12,09,862/- to IIFL Holdings Ltd. towards getting approval from SEBI for issue of IPO. He submitted, since these were in the nature of preliminary expenses for business expansion, assessee claimed 1/10th of such expenses as deduction under section 35D. 13. He submitted, the proposed IPO was ultimately dropped because of adverse market condition. Since, the expenditure was incurred for the business of the assessee, it is otherwise allowable under section 37 of the Act. In support of such contention, he relied upon the fol....
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....referred to Note 39 of the audited financial statement and observed that the assessee failed to explain the method of valuation. Thus, ultimately he disallowed the amount. 19. Learned Commissioner (Appeals) upheld the disallowance. 20. We have considered rival submissions and perused material on record. Undisputedly, the assessee had granted ESOP to its employee and during the year has booked the expenses in dispute. 21. On perusal of the balance sheet and profit and loss account of the assessee, it is observed that the assessee offered the ESOP to the employees at discounted value and the difference between the actual value and the discounted value was debited to the profit and loss account. It is also observed, the assessee has reverse....