TaxTMI 
TaxTMI 
TaxTMI 
2024 (11) TMI 309
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....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 Income Tax Act, 1961. The assessee had made payments on the commission as follows : Sr. No ....
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....n 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 The circular No.23 of CBDT has been withdrawn vide another circular No. 7/2009 vide which it has been clarified that the circular No.23.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 accrue or arise when the right to receive it comes into existence. As per section 5 and section 9 of the Act the income is deemed to accrue or arise in India even if the services by commission....
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....emed 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 9 of the Income Tax Act, rendered abroad, cannot be taxed in India; that as further correctly held by the ld. CIT(A), once this is so, the provisions of Section 195 are not attracted and so, no q....
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.... 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 to the agents abroad, as available from the bank certificates furnished by the assessee. The remittance to the agents was in foreign currency, i.e., in the currency of the respective country of the agent. The....
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....e 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 31.03.2012. These investments had been shown in the Balance Sheet as long term advances. The assessee was queried as to why the provisions of Section 14A be not applied and disallowance of expenditure be not made by appl....
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.... 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 investment made was of Rs. 2, 45,49,077/-. As against this, the income during the year was of Rs. 6,57,17,670/-. Income for the immediately preceding assessment year, i.e., assessment year 2012-13, was of Rs. 3,69, 48, 862/-. Th....
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....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 advances to various parties, amounting to Rs. 92,24,578/- plus Rs. 24,98,733/- = Rs. 1,17,23,311/-, as follows : Narration Advance Advance against land Rs. 73,42,000/- Application money for HUDA Rs. 6,40,000/- HSIIDC, Panchkula Rs, 2,92,578/- Zeal Exim Pvt. Ltd. Rs. 9,50,0....
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....he 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." 71 Taxman 184, "ACIT Vs Omaxe Bikes Ltd." 156 ITD 566 (CHD). 25. The ld. DR, on the other hand, has placed strong reliance on the impugned order, stating that the ld. CIT(A) has correctly confirmed the disallowance in these three cases, since in the first transaction, i.e., purchase of land, there was a capita....
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..... 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 section 5 and section 9 of the Act the income is deemed to accrue or arise in India even if the services by the commission agents have been rendered abroad. Further since the right to receive the commission arises in India, the income of such commission agents is deemed to accrue or arise in India and accordingly tax deduction would be ma....
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....ated 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). 34.1 Regarding the application money paid to HUDA, the ld. CIT(A), for the year under consideration, has deleted the disallowance made by the AO by following the CIT(A)'s order for assessment year 2013-14, where the assessee had contended that the amount had been paid from the assessee's Current Account in HDFC Bank, in January, 2012. The ld. CIT(A) observed that since the funds ....