TaxTMI 
TaxTMI 
2023 (12) TMI 1492
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....ments had been produced by the assessee. (ii) Whether the CIT (A) has erred in deleting the income arrived at by the AO in respect of "Inside India Revenue" without appreciating the fact that no books of accounts or supporting documents were produced by the assessee in the course of assessment, based on which AO could have examined the consistency in respect of method of accounting adopted by the assessee arrived at the correct income. (iii) Whether on facts and circumstances of the case the CIT (A) has erred in holding that interest u/s 234C of the Act is not chargeable in the case of the assessee ignoring the judgment of Delhi High Court in the case of M/s Alcatel Lucent dated 07.11.2013 in ITA No. 327 & others of 2012, the facts of the issue being identical to the present case. (iv) The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time of or before the hearing of the appeal. 3. We have heard the rival submission and perused the material available on record. Samsung Heavy Industries Co. Ltd ('assessee herein') is a company incorporated in South Korea and is a tax resident of the said country. It is eng....
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....ted 21.04.2014. For the sake of convenience, the relevant operative part of the order passed by this tribunal in MA No. 148/Del/2013 dated 21.04.2014 is reproduced below :- "5. The assessee had filed its return of income in respect of inside India Operations only. 6. The AO had rejected the books of account and determined the income at 25% of gross revenue from inside India operations as the income attributable to the PE of the assessee in India. The AO in the draft assessment order has observed that assessee submitted that it was following percentage completion method and, therefore, revenue as per invoice and revenue as per books could not match. The AO pointed out that this itself showed the contention of the department to be correct that the milestone payments were not related to the cost of the actual activity completed. She pointed out that assessee had not explained basis of percentage completion. She, therefore, observed that the accounts did not reflect correct state of affairs in regard to inside India Operations. She, therefore, rejected the same, and computed 25% of the gross receipts as revenue from inside India operations aggregating to Rs. 60,89,46,....
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....15 declared by the assessee on the basis of percentage of completion method which has been followed by it regularly in earlier years. According to the assessee this variation has been made without any justification and without assigning any reasons. It has been submitted that for the A.Y. 2007-08 the AO had accepted the revenues on the basis of percentage of completion method and that order was confirmed by the DRP. In view of this, it was not open to the AO to take a different approach and adopt the invoiced amount as revenue. The submissions of the assessee on this point have been considered by this Panel. It is seen that this issue has been dealt with in para (c) on page 12 of the draft order. The AO has considered the clarification given by the assessee about the percentage of completion method followed by it and has rejected. However, no reasons have been given by the AO to reject then assessee's reply and to adopt the revenue as per the invoices for working out the 'Inside-India' income. As the assessee has stated that the percentage of completion method has been followed consistently by it in earlier year, there appears to be no reason to reject this explanation ....
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....s per the said article all expenses incurred in earning income are fully deductible based on the commercial accounting principle in computing the said business profits chargeable to Indian Income-tax. The AO observed that Profit & Loss A/c of the Mumbai Project office as showing the gross income of Rs. 23,73,083/- against which the assessee had claimed the expenses of Rs. 24,34,70,741/-. The contract revenue of Rs. 23,73,45,563/- was 14.56% of the total revenue of the for inside India work which was Rs. crore. The invoices raised by the assessee for inside India activity were to the tune of Rs. 3,25,82,569/- which have been listed at para 5 of the assessment order. It was further noticed out of total expenses incurred at Rs. 24,34,70,741/-, which was debited to Profit & Loss A/c, the assessee had incurred expenses on account of cost of revenues, selling, general and administrative expenses and depreciation on total amount of Rs. 24,34,70,741/-. It was further observed that cost of revenues were shown under the following three sub-heads for an aggregate sum of Rs. 23,91,08,293/-: (i) Hook up and commissioning Rs. 89,04,947/- (ii) Insurance Rs. 22,66,85,140/- (iii) Pre....
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....s on percentage completion method. 13. Ld. DRP while rejecting the assessee's contention for the current year under consideration has observed in para 3.3 as under: 3.3 With respect to Objection No. 3 regarding estimating the income @ 25% of the Gross receipts, the DRP has observed that, Objection relates to attribution of a rate of 25% for the purpose of determining the income of the assessee from the operations outside India. The Panel has considered the submissions made by the assessee. It is however, noted that the same issue came up for consideration came up for consideration of this Panel for the A. Y. 2007-08 and this Panel after careful consideration come to a view that the AO was correct in making an attribution of profits at the rate of 25%. As there is no change in the facts and circumstances of the case the addition made by the AO at the rate of 25% is confirmed. It was further observed by the DRP that "3.3.2 During the proceedings the assessee has also raised the issue about application of the rate of 25% for the income relating to the activities carried out within India. It has been stated that for the A. Y. 2007-08 the AO had accepted t....
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....neither produced any accounts nor submitted any basis to substantiate its claims that the profit rate adopted by the AO is on a higher side. The Panel is of the firm view that objection should not be raised by merely making allegations and not complying with the statutory provision of the Income Tax Act. The following datas have been obtained from the database 'Capital Line' the data obtained from Capital Line is as follows: Name of the company Profit margin Artefact Project Ltd 18.57% Engineers India Ltd. 35.56% One source Ezyone Holding Ltd. 30% Dolphin Offshore 14.3% The average of the above four companies comes to 24.7% and, therefore, the AO in absence of any accounts, is justified in estimating the profit of the assessee at 25% of the gross receipts (including inside and outside India revenues), In view of this substantial evidence available with the Panel in the form of comparative and in absence of any evidence produced by the assessee to substantiate its claim of lower profit, the objection raised by the assessee on this account is rejected. Regarding the other disallowance made by the AO, the Panel is in agree....
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....peraton @119,24,77,604/- and 25% for Indian revenue @15,22,36,596/-. The dispute before us is only with regard to profit attribution for domestic revenue (Inside India revenue) and not for overseas revenue. 6. The ld CIT(A) observed that the ld AO had not complied with the clear cut directions given by the Tribunal in the first round of proceedings. The ld CIT(A) also observed that assessee have been consistently following percentage of completion method of offering the revenue to tax in all the earlier years and also in subsequent years and accordingly held that the revenue offered by the assessee is to be accepted and no estimation of profit @25% of domestic revenue need to be done. The relevant observations of the ld CIT(A) in this regard would be relevant for reproduction:- "5.4 1 have considered the submission of the appellant, perused the original assessment order, Ld ITAT order against the original assessment order. Miscellaneous Application order dated April 21, 2014 in MA No. 148/ Del/ 2011, Hon'ble High court order in appellant's own case for assessment year 2007-2008 and other material available on records. 5.5 Against the original assessment....
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....A. Y 2007-2008. 5.8 In any case, the AO is bound to follow the direction of the Ld. ITAT while giving effect to the direction in assessment order passed u/s 143(3)/254 of the Act. It was a clear direction by the Ld. ITAT that "we consider it necessary that the facts be re- marshalled and, therefore, in the interest of justice restore the matter to the file of AO to examine the assamee's stand of consistently returning the revenue from inside India operations over four years on percentage completion method as claimed by assessee noted in Para 7 of this order. If the assessee's stand is found to be correct over earlier year and subsequent year then no divergent stand can be taken by department during the year under consideration." The AO has completely ignored the direction of the AO and proceeded manner adopt findings of AO in original assessment order. 5.9 It is submitted that the appellant is regularly and consistently following the percentage completion method of accounting for inside India revenues earned from the contract with ONGC. In this regard, the appellant submitted its audited financial statements with respect to inside India activities for prec....
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....ethod and also in view of the same had been accepted by the ld AO himself in AYs 2007-08, 2009-10 and 2010-11, there is absolutely no reason for the ld AO to take a divergent stand during the year under consideration by rejecting the books of account and resorting to estimation of 25% profit for domestic revenues. Hence we do not find any infirmity in the order of the ld CIT(A). Accordingly, Ground Nos. (i) and (ii) raised by the revenue are dismissed. 8. Ground No. (iii) raised by the revenue is with regard to chargeability of interest u/s 234B of the Act through wrongly typed in the ground as section 234C of the Act. This typographical error is hereby condoned by the Bench and we proceed to adjudicate the issue of chargeability of interest u/s 234B of the Act. 9. We have heard the rival submission and perused the material available on record. It is not in dispute that the revenue earned by the assessee is tax deductible at source. Up AY 2012-13, section 209 of the Act duly provides that tax payable by a non resident assessee would be reduced by tax deductible at source by the payer and only on the reduced figure thereon, the assessee would be liable for the payment of advan....
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....e have heard the rival submission and perused the material available on record. It is not in dispute that the assessee made payments to Arjun Engineering Pvt. Ltd and Builcraft Interior Pvt. Ltd and deduced tax at source @2% thereon in terms of section 194C of the Act for carrying out electrification work and interior work respectively. The revenue concluded that the said work falls under the limb of professional services and fee for technical services warranting deduction of tax at source u/s 194] of the Act @10%. Since the assessee had not deducted tax at source in terms of section 194J of the Act, the ld AO proceeded to disallow the expenses u/s 40(a)(ia) of the Act. Now the short question that arises for our consideration is whether the provision of section 40(a)(ia) of the Act per se could be made applicable for short deduction of tax at source. This issue is no longer res integra in view of the decision of Hon'ble Calcutta High Court in the case of S. K. Tekriwal in ITA No. 183/2012 GA No. 2067/2012 dated 03.12.2012 wherein it had been categorically held that section 40(a)(ia) of the Act cannot be made applicable to short deduction of tax at source and the disallowance ma....
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.... of this appeal. 17. The only effective issue to be decided in this appeal is whether service tax input credit receivable which was written of by the assessee in the sum of Rs. 42,72,229/- in respect of project completed by the assessee in India, would be eligible for deduction in the facts and circumstances of the instant case. 18. We have heard the rival submissions and perused the materials available on record. It is not in dispute that the assessee had completed all the projects in India and had duly surrendered its service tax registration to the competent authority. The assessee had not adjusted the service tax input credit receivable lying in its balance sheet as on 31.03.2015. This sum was duly written off by the assessee during the year under consideration as the service tax input credit could not be adjusted with any other service tax payable by the assessee in view of the fact that the project had already been completed by the assessee in India during the year and service tax registration is also duly surrendered to the competent authority. This write off of service tax input credit receivable was duly claimed by the assessee as deduction which was denied by the lo....