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TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 352
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....ted therefrom when in fact he was a independent consultant per details provided by the assessee 3. Wrongly disallowing Rs 349,255 being miscellaneous payments made to staff in Head office Japan on ground of non evidence of the payment proof- even though same was provided to Hon'ble DRP 4. Wrongly disallowing debit of Rs 13,76,205 credited in project office 's books for bank Guarantee and performance Bonds arranged by Nk's head office Tokyo from their global bankers situated in Tokyo on the ground that the same is "income" in hands of head office Tokyo and TDS should have been deducted there from . 5. Dropping of penalty proceedings u/s 270 A of the Income tax Act - on the ground that of undisclosed income .- Our prayer thereto 3. The brief facts of the case are that the assessee is a foreign company engaged in the business of engineering, consultancy, and electric power. The assessee filed its return of income for the Assessment Year 2021-22 declaring total income of Rs. 6,27,12,098/- for its branch office in India. The case of the assessee was selected for scrutiny and accordingly, notice under section 143(2) of the Income Tax Act, 1961 ("....
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....iture incurred wholly and exclusively for business purposes. Accordingly, the Ld. DR prayed for upholding of the disallowance made by the Ld. AO. 7. We have carefully considered the rival submissions and perused the material available on record. The issue under consideration relates to the allowability of interest paid under section 201(1A) of the Act as a business expenditure. We have gone through the decision of this Tribunal in the case of Trinity Infraventures Ltd. vs. ACIT (supra), as relied upon by the Ld. AR. On perusal of the same, we found that the decision of the Hon'ble Madras High Court in the case of CIT vs. Chennai Properties & Investment Ltd. 239 ITR 435 was not considered by the Tribunal while passing that order. We have gone through the relevant portion of the order of the Hon'ble Madras High Court in the case of CIT vs. Chennai Properties & Investment Ltd (Supra) which is to the following effect: 14. As already noticed, the payment of interest which takes colour from the nature of the levy with reference to which such interest is paid and the tax required to be paid but not paid in time, which rendered (sic) the assessee liable for payment of i....
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....ies & Investment Ltd. (supra), the Hon'ble Madras High Court categorically held that interest paid on account of delayed remittance of TDS cannot be treated as business expenditure under section 37(1) of the Act and cannot be regarded as a compensatory payment. Therefore, following the binding judicial precedent of the Hon'ble Madras High Court, we hold that the interest paid under section 201(1A) of the Act is not allowable as a deduction under section 37(1) of the Act as business expenditure. Accordingly, we find no infirmity in the order of the Ld. AO in disallowing the sum of Rs. 2,10,265/-. Consequently, Ground No.1 raised by the assessee stands dismissed. 9. Ground No. 2 of the assessee relates to disallowance of Rs. 3,08,08,089/- under Section 40(a)(i). In this regard, the Ld. AR submitted that the assessee is engaged in providing consultancy services to Chennai Metro Rail Limited ("CMRL") in connection with Chennai Metro Rail Project Phase-2. Since the assessee itself did not have the requisite expertise for carrying out certain technical functions, it engaged Mr. Anthony Burchell ("Mr. Tony"), an international expert, as an independent freelance consultant. The ....
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....pproval from the GM (Article-4). e. He is engaged as Team Leader of the assessee's Design Task Team, h is part of the assessee's organizational framework (Appendix-1). f. At para no. 2, 10 and 11 of Appendix-1, the term "employer" has been used in the context of the assessee. g. He shall be paid monthly fees of US$ 35,000 and shall be allowed 15 days paid leave per year (Appendix-2). 10.1 The Ld. DR emphasized that exclusive full-time engagement, reporting hierarchy, leave sanction process, and monthly payment structure are characteristics of a typical employer-employee arrangement. The Ld. DR also pointed out that Mr. Tony was engaged continuously for the entire year and also during the preceding year, which is not consistent with a freelance consultancy model. The use of term "employer" at Appendix-1 in the context of the assessee further strengthens the contention of the Revenue that Mr. Tony is an employee of the assessee. The Ld. DR therefore submitted that the payments made to Mr. Tony are salary, attracting TDS under section 192 of the Act, and since the assessee has failed to deduct tax, the disallowance under section 40(a)(i) of the Ac....
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.... TDS under section 192 of the Act. Since no TDS was deducted, the disallowance made by the Ld. AO under section 40(a)(i) is upheld. Accordingly, Ground No. 2 of the assessee is dismissed. 13. The Ground No.3 of the assessee pertains to the addition of Rs. 3,49,255/- made by the Ld. AO on account of disallowance of certain expenses under section 44DA of the Act. It was submitted that these expenses represent small amounts incurred towards reimbursement of expenses incurred by the staff of the Head Office located in Japan. The Ld. AR submitted that though the assessee could not produce the necessary supporting evidence before the Ld. AO during the assessment proceedings, the same was duly furnished before the Ld. DRP along with explanations. The Ld. AR invited our attention to para nos. 2.4 to para no. 2.4.3 of the order of the Ld. DRP, wherein the relevant factual details were recorded. It was further submitted that although the Ld. DRP, in para no. 2.4.1 of its order, noted the factual position and the evidences furnished by the assessee, in the subsequent paragraphs, the Ld. DRP discussed certain unrelated issues and omitted to adjudicate this specific ground. Therefore, the Ld....
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....under exempt provisions to section 201 of the I.T. Act,1961. However, for various reasons we were unable to secure the copies of their tax returns or the certificate from their CA that the above was complied with. In view of the above - we are unable to claim deduction there for and withdraw our application to Hon'ble DRP. We also submit before the Hon'ble Panel that there was no intention to avoid TDS or any lapse in our efforts to secure the same - which we tried. In this regard we pray that no penalty be levied for non-TDS - due to reasons beyond our control." (Emphasis supplied) 2.4.3 In view of the assessee withdrawing this ground, the Panel has no case to adjudicate on this objection. 15.1 On perusal of the above, we find that although the relevant facts and explanations were noted, there is no clear finding or adjudication given by the Ld. DRP on the disallowance made by the Ld. AO under section 44DA of the Act. Therefore, considering these facts and in the interest of justice, we deem it appropriate to set aside this issue to the file of the Ld. AO with a direction to re-adjudicate the matter afresh, after affording....
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...., which is to the following effect: 7. So, following the decision rendered by the coordinate Bench of the Tribunal, when the bank has issued bank guarantee on behalf of the assessee there is no principal - agent relationship between the bank and the assessee which is a mandatory condition for invoking the provisions contained u/s 194H and in these circumstances, the assessee was not liable to deduct tax at source u/s 194H from payment of bank guarantee commission to the bank. Moreover, bank guarantee commission also partakes the character of interest u/s 2(28A) of the Act and as such, exemption provided u/s 194A(3)(iii) is available to the assessee qua such payment. So, we are of the considered view that the ld. CIT (A) has erred in not following the decision rendered by the coordinate Bench of the Tribunal in Kotak Securities Ltd. (supra) on the ground that the decision of Kotak Securities Ltd. (supra) is not applicable having been pronounced before the issue of Notification No.56/2012 dated 31.12.2012 because ordinarily any provision of the statute has to be read having prospective effect and not having retrospective effect unless it is specifically provided. So, when th....
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....y be given detailed instructions where necessary from time to thine by GM. 1.3 Assignment period of Tony shall be the duration to cover man-months as per the Agreement with CMRL. The assignment period may, however, be extended or shortened upon written consent of the parties hereto, subject to the prior approval of CMRL. ARTICLE 2 RESPONSIBILITIES 2.1 Tony will perform the Services with due diligence and efficiency, in conformity with sound engineering, administrative and financial. practices, in a manner acceptable and satisfactory to NK and CMRL, and act at all times to protect the interests of NK and CMRL. 2.2 During the assignment period, Tony is exclusively assigned to the Project and shall devote his full time to perform the Services. 23 Tony shall ensure that he is in good health to complete the Services, and if required NK may ask for a medical certification from his phystelan to confirm his health conditions. 24 Tony will only use licensed, or otherwise legally obtained computer software for this GC. Document 2 ARTICLE 4 WORKING HOURS AND LEAVE 4.1 Tony shall follow the standard working hours and legal holidays observed to to. Tony acknowledges ....
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....ficate. 17. Prepare a final report for each and all contracts. Document 4 Appendix 2 FINANCIAL TERMS AND CONDITIONS The following terms and conditions apply for this assignment with the company. 1 Monthly fee : US$35,000 a month 2 Subsistence Allowance INR 1,000/day as provided by CMRL 3 Accommodation : To be arranged by NK including all utility costs 4 Transportation : Allowance One exclusive vehicle and driver to be arranged by NK S | Paid Leave 15 days Paid Leave per year 6 Return Flights to Home Country Maximum 4 Business return tickets per year each to Tony and his Spouse. All tickets reimbursed by CMRL will be counted into the 4 tickets. 7 Miscellaneous Travel Expenses Reimbursement with approval from GM 8 Medical Coverage Accident & Medical Insurance Following maximum coverages as per NK insurance policy: i) Life insurance for accidental death amounting to Japanese Yen 50,000,000. i) Residual disability amounting to Japanese Yen 50,000,000. il) Life insurance for death from illness or residual disability, but not extending to chronic illnesses, amounting to Yen 10,000,000. iv) Medical insurance for illness, but not extended to chronic....