TaxTMI 
TaxTMI 
2024 (11) TMI 309
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....unt of commission of Rs. 2,20,71,855/- paid by the assessee to NRIs without deducting TDS in view of the explicit provisions of sections 5 8s 9 of the Income Tax Act, 1961. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition u/s 14A made on account investment made in shares, income (if) earned from such type investment is exempt without taking cognizance of the CBDT's Circular 5 of 2014 wherein it has been clarified that disallowance is to be made even when no exempt income has been earned by the assessee. 4. It is prayed that the order of the Ld.CIT(A) be cancelled and that of the assessing officer may be restored. 5. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard or is disposed off. 3. Ground Nos. 1, 4 and 5 are general. 4. Ground No. 2 pertains to the issue of the ld. CIT(A) having deleted the addition of export commission of Rs. 2,20,71,855/- paid by the assessee to NRIs without deducting TDS. 5. The AO disallowed the expenditure on the commission on exports amounting to Rs. 2,20,71,855/-, invoking the provisions of Section 40(a)(ia) of the In....
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....crue or arise in India. It is important to mention here that the non-resident deductee can avail the benefit of DTAA (Double Taxation Avoidance Agreement) to avoid taxation on same income in both countries. Presently India has comprehensive DTAAs with more than 80 countries. Mowever to avail the benefit of DTAA the non-resident deductee has to submit documents with the deductor which includes Tax Residency Certificate (TRC), passport copy, etc. 2.9 In the instant case the assessee has failed to produce any such document to justify his claim of non-deduction of TDS. The circular No.23 of CBDT has been withdrawn vide another circular No. 7/2009 vide which it has been clarified that the circular No.23. could not be interpreted to allow relief to the tax payer which is not in accordance with the provision of section 9 of the Income Tax Act. 2.10 Under section 9(I)(i) income accruing or arising directly or indirectly, through or from any business connection in India or source of income in India shall be deemed to accrue or arise in India. The words 'accrue' or 'arise' occurring in section 5 have more or less a synonymous sense and income is said to accr....
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....; that under the provisions of Section 9(1)(i), income accruing or arising directly or indirectly, through or from any business connection in India or any source of income in India shall be deemed to accrue or arise in India; that as per both Sections 5 and 9 of the Act, even if the services by Commission Agents have been rendered abroad, income is deemed to accrue or arise in India; that this is so, since the right to receive the commission arises in India; that reliance in this regard was correctly placed by the AO on the decision of the authority for advance rulings in the case of 'S.K. F. Boilers & Driers P. Ltd.", A.R.R No. 983 and 984 of 2010, dated 22.02.2012 which is directly on the issue. It has been contended that therefore, the order passed by the ld. CIT(A), deleting the addition correctly made by the AO, concerning the commission of Rs. 2,20,71,855/-, paid by the assessee to NRIs without making TDSD, be ordered to be reversed and the addition correctly made by the AO be revived. 8. On the other hand, the ld. Counsel for the assessee has placed strong reliance on the impugned order. 8.1 It has been contended that as correctly held by the ld. CIT(A), Sections 5 and....
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....held that the aspect of income deemed to accrue or arise in India, as contained in Section 5(2)(b) of the Act has to be read along with the provisions of Section 9 of the Act; that read together, Sections 5 and 9 of the Act make it clear that remittance made to a non-resident for services rendered abroad, which services are not of the nature specified in Section 9, cannot be brought to tax in India. The ld. CIT(A) has held that incomes which are not chargeable to tax in India are not exigible under the provisions of Section 195. 10.1 The observations of the ld. CIT(A) have not been successfully refuted by the Department before us. It remains undisputed that the assessee is making its sales abroad. It has utilized the services of agents who are non- residents. They are residents of Italy, Thailand, Israel and Germany etc. The services were rendered by these agents to the assessee in order to promote the assessee's sales in the respective country of the agent. Payment of commission was done by the assessee to the agents abroad, through banking channels. It has been found as a fact that the payment was made from the bank account of the assessee directly as a foreign remittance ....
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....so discussed by us in the preceding paragraphs. Further, neither has anything been brought on record that there was any business connection of the agents in India, nor have the services rendered been shown to be services technical in nature. 11.1 Therefore, despite referring to and relying on the provisions of Sections 5 and 9 of the Act, as stated in Ground No. 2, the Department has not been able to make out a case as to how the matter at hand gets covered within the provisions of these two Sections. The findings of the ld. CIT(A) on this issue remains un-hinged and firm. These findings are, therefore, confirmed. 12. The grievance sought to be raised by the Department by way of Ground No.2 is found to be shorn of merit. Accordingly, Ground No. 2 is rejected. 13. Coming to Ground No.3, the AO made addition of Rs. 9,39,450/- under Section 14A of the Act. The facts relating to such addition are that of examination of assessee's Balance Sheet for the year ending 31.03. 2009, the AO found that the assessee had made investment of Rs. 2,45,49,077/- in M/s Amravati Infrastructure Development Fund Ltd. He also found that an investment of Rs. 2,43,36,672/- had been made on 31.0....
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.... (P& H). 15. The ld. DR contending that the ld. CIT(A) has erred in deleting the addition correctly made by the AO under Section 14A of the Act, made on account of investment made in shares; that while doing so, the ld. CIT(A) has failed to take into consideration CBDT Circular No. 5 of 2014, wherein, it has been clarified that disallowance has to be made even when no exempt income has been earned by the assessee. 16. The ld. Counsel for the assessee, on the other hand has placed strong reliance on the impugned order. We find that the ld. CIT(A) has placed reliance on the decision of the Hon'ble jurisdictional High Court in the case of "CIT Vs Lakhani Marketing Inc" (supra). In that decision, it has been held by the Hon'ble High Court that apropos expenditure incurred in relation to income not includible in total income, i.e., investment in shares, as in the present case, the Tribunal was correct in holding that unless and until there is a receipt of exempt income for the concerned assessment years, i.e., dividend from shares, Section 14 A of the Act cannot be invoked. No contrary decision has been brought to our notice. Further, the undisputed facts are that the inve....
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....ssessee has taken the following grounds of appeal : 1. That the order passed under section 250(6) of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals)-I Chandigarh in Appeal No. 262/15-16 dated 02.03.2017 is contrary to law and facts of the case. 2. That in the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) gravelly erred in upholding the disallowance of interest @ 12% per annum on notional basis on the following advances given by appellant. Narration Advance Advance against land Rs. 73,42,000/- HSIDC, Panchkula Rs. 2,92,578/- Zeal Exim Pvt. Ltd. Rs. 9,50,000/- The appellant had sufficient funds of its own, therefore no disallowance is called for. 20.1 Ground No. 1 is general in nature. 21. The solitary grievance of the assessee by way of Ground No. 2 is that the ld. CIT(A) has gone wrong in confirming the disallowance of interest @ 12% per month on notional basis, on the three advances given by the assessee. 22. The AO made disallowance of Rs. 6,49,590/- under Section 36(1)(iii) of the Income Tax Act. The AO observed that the assessee had given loans and advanc....
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....s CC Account in the State Bank of Patiala; that thus, interest bearing funds were used for making investment in a capital asset which was not put to use during the year. It was held that the disallowance is called for as per the proviso to Section 36(1)(iii) of the Act. Holding so, the ld. CIT(A) confirmed the disallowance. 24.2 Regarding the advance of Rs. 9,50,000/- made to "Zeal Exim P. Ltd." (supra), the ld. CIT(A) observed that again the money had been paid out of interest appearing in SBOP, CC Account of the assessee, for which payment of advance, the assessee had not been able to explain the business expediency. Therefore, the disallowance was confirmed. 24.3 On behalf of the assessee, it has been contended that the share capital and reserves and surplus of the assessee were much more than the investment made; that the assessee had sufficient own funds and, therefore, the presumption is that the interest free advances were given out of the own funds of the assessee, for which, the disallowance made requires to be deleted. Reliance has been placed on "Munjal Sales Corporation Vs CIT" 298 ITR 298 (S.C.), "DCIT, Central Circle-2 (1), Bangalore Vs JSR Construction P. Ltd."....
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.... CIT(A), following the Tribunal Order (supra)for A.Y. 2012-13. The facts remain the same for A.Y. 2013-14 as well. The AO is, accordingly, directed to ascertain the position of availability of the funds of the assessee exceeding the advances, as alleged and to grant relief to the assessee in accordance with law. 27. Therefore, the appeal is treated as allowed for statistical purposes. ITA-389/ CHD/ 2019& ITA-394/ CHD/2019 28. These are cross appeals for assessment year 2014-15 filed against the order of the ld. CIT(A) dated 15.01. 2019. ITA 389/ CHD/ 2019 has been filed by the Department whereas ITA 394/CHD/2019 has been filed by the assessee. ITA 389/CHD/ 2019 (Department's Appeal) 29. The Department has taken the following grounds in this appeal : 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in allowing the appeal of the assessee without appreciating the facts of the case. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 3,33,48,160/- made u/s 40(a)(ia) on account of non-deduction of TDS ignoring the detailed finding of the assessing officer that as per....
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....e on account of VAT penalty. Here, the AO found that the assessee had debited, an amount of Rs. 3,710/- on account of VAT penalty. On query, the assessee submitted that this expenditure was compensatory in nature. The AO, however, held the VAT penalty to be penal in nature, having arising due to a penalty on the part of the assessee for not making deposit within the stipulated time. The ld. CIT(A) has held the penalty to be in the nature of a fine which is compensatory. The ld. CIT(A), to hold this, followed "Lachhmandas Mathuradas", 254 ITR 799 (S.C.) and "Gillco Developers & Builders Pvt. Ltd. Vs DCIT" 175 TTJ 81 (CHD). 33. Before us, the Department has not been able to make out any case as to how the ld. CIT(A) is wrong in holding the penalty in question to be compensatory payment. No decision contrary to those relied on by the ld. CIT(A) has been cited before us. Therefore, finding no error therein, the Commissioner's action of deleting the addition is confirmed while allowing Ground No.3. Ground Nos. 4,5 and 6 34. These grounds concern the addition on account of application money paid by the assessee to HUDA and advances made to "M/s Zeal Exim P. Ltd." (supra). 34.....
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....llowance. 35.3 Again, facts on this issue are the same for assessment years 2011-12, 2012-13, 2013-14 and 2014- 15. So, for assessment year 2014-15 also, the AO is directed to ascertain the position of availability of the funds of the assessee exceeding the advances as alleged and to grant relief to the assessee in accordance with law. Ground Nos. 4, 5 and 6 are, therefore, partly accepted. 35. 4. In the result, appeal is partly allowed. ITA 394/CHD/ 2019 (Assessee's appeal) 36. This is assessee's appeal for assessment year 2014-15 against the order dated 15.01.2019 of the CIT(A)-1 Chandigarh. The assessee has taken the following grounds of appeal : 1. That the order passed under section 250(6) by the Ld. Commissioner of Income Tax (Appeals)-I, Chandigarh in Appeal No. 105 85/16-17 dated 15.01.2019 is contrary to law and facts of the case. 2. That in the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) gravelly erred in sustaining the disallowance of Rs. 56,229/- made by the Ld Assessing officer under Section 36(i)(iii) of the Income Tax Act on advance against the land given by the appellant. Although, the appel....