TaxTMI 
TaxTMI 
2023 (8) TMI 1737
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....y the Ld. AO is bad in law insofar as the fact that the Ld. AO did not issue to Dell International Services India Private Limited, a show cause notice, as per proviso to section 92C(3) of the Income-tax Act, 1961 ['the Act']. b) The directions issued by the Ld. Dispute Resolution Panel ('DRP/ Ld. Panel/Hon'ble DRP') did not take cognizance of the objections raised by the Appellant in relation to the transfer pricing matters while issuing the directions under Section 144C(5). c) On the facts and in the circumstances of the case and in law, the Ld. Panel and Ld. AO/ Ld. TPO erred in not demonstrating that the motive of the Appellant was to shift profits outside India by manipulating the prices charged in the international transaction, which is a pre- requisite condition to make any adjustment under the provision of Chapter X of the Act. d) The order passed by the Ld. AO is without jurisdiction, inter cilia, insofar as it purports to give effect to an invalid order of the Ld. Panel. e) The directions issued by the Ld. Panel and the order passed by the Ld. AO is without jurisdiction, inter alia, in so far as it purports to give ef....
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....ed in confirming the same. h) The Ld. AO/ Ld. TPO also erred in treating provisions for doubtful debts as non-operating in nature while calculating the net margins *of the comparable companies: The Ld. Panel also erred in confirming the same. i) The Ld. AO/Ld. TPO also erred on facts in erroneously computing the margins of a certain companies identified as comparable by the Ld. TPO. The Ld. Panel erred in confirming the same. j) The Ld. AO/Ld. TPO erred in rejecting 1) Akshay Software Technologies Ltd, 2) Helios & Matheson Information Technology Ltd., 3) Evoke Technologies Limited, 4) Spry Resources Limited, 5) Cigniti Technologies Limited despite these companies being functionally comparable. The Ld. Panel also erred in confirming the same. k) The Ld. AO/ Ld. TPO erred in including CG-VAK Software Exports Limited, 2) ICRA Techno Analytics Limited 3) Larsen Toubro Infotech Limited, 4) Mindtree Limited and 5) Persistent Systems Limited as comparable despite these companies being functionally dissimilar to the Appellant. The Ld. Panel also erred in confirming the same. l) The Ld. AO/Ld. TPO, while applying the said turnover filter at the l....
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.... Ld. AO has erred in denying the deduction under Section 10AA of the Act amounting to Rs.181,403,235 claimed by the Appellant, by relying on the assessment order and order of Commissioner of Income-tax (Appeals) [' CIT-(A)'] for AY 2010-11. b) The Ld. AO ought to have appreciated that the Appellant had submitted the listing of invoices along with relent FIRCs and endorsed softex forms for Chennai SEZ unit and hence, was eligible for deduction under section 10AA of the Act. c) The Ld. AO has erred in not considering the submissions made by the Appellant during the assessment proceedings, wherein the Appellant had furnished all the records/documents substantiating its claim. d) The Ld. AO has erred in not following the directions provided by the Hon'ble DRP vide its order dated 19 September 2017, wherein the Hon'ble DRP had directed to verify the records and provide relief accordingly. e) The Ld. AO has erred in not considering the submission dated 18 October 2017, wherein the Appellant had furnished all the records/documents substantiating its claim. 8. Re-computation of deduction under section 10AA of the Act - Coimbatore....
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....ition of any asset and therefore, no enduring benefit has been received on payment of such extension charges. c) The Hon'ble DRP and the Ld. AO erred in not relying on the judicial precedents put forth by the Appellant. d) Without prejudice to the above, the Hon'ble DRP has erred in not directing the Ld. AO to provide tax depreciation on the same in the year in which such asset is put to use. 11. Disallowance under section 40(a)(ia) of the Act for short deduction of tax - Rs. 17,562,147 a) The Ld. AO has erred in disallowing an amount of Rs. 17,562,147 under section 40(a)(ia) of the Act for short-deduction of taxes. b) The Hon'ble DRP and Ld. AO erred in not appreciating that section 40(a)(ia) of the Act is attracted in cases of non-deduction of taxes or for non-payment of taxes after deduction within the specified time as per the provisions of the Act. c) The Hon'ble DRP and the Ld. AO erred in not relying on the judicial precedents put forth by the Appellant. d) Without prejudice to the above, the Hon'ble DRP has erred in not directing the Ld. AO to allow deduction to the Appellant in the year of p....
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.... same could be taken into consideration. Relevant extracts in this regard can be found at pages 18 of the transfer pricing order. The DRP upheld the action of the TPO. In this regard, she submitted that the TPO and DRP erred in failing to appreciate that in the absence of segmental details for the software development service being provided, the company cannot be taken as a comparable. In view of the above, as the company cannot be held as a comparable to the Assessee, it ought to stand excluded from the final list of comparables. Also, on account of the revenue recognition policy adopted by the company, its margin fluctuates on a year-on-year basis. Therefore, this company cannot be taken as a comparable to the Assessee. 3.3 In this regard she placed reliance on the decision of (i) the Hon'ble High Court of Delhi in the case of Steria India Ltd. v. DCIT (reported in [2018] 92 taxmann.com 120 (Delhi)); (ii) the decision of this Tribunal in the case of NXP India Pvt. Ltd.v. DCIT (reported in [2020] 116 taxmann.com 421 (Bangalore - Trib.)); (iii) the decision of this Tribunal in the case of Dell International Services India Private Limited (for the merged entity Sonicwall Info....
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....cannot be taken as a comparable to the assessee-company. Accordingly, we direct the TPO to exclude this company from the final list of comparables." 24.1 Similarly, in the case of M/s. ION Trading India Private Limited v. ITO (ITA No.1035/Del/2015 for the assessment year 2010-2011). The Tribunal vide its order dated 07.12.2015, held as under :- "21. We have considered the submission of the ld. counsel for the assessee and have considered the argument of the ld. DR that the assessee is not producing any product, however, we find that CGVak Software and Exports Limited is not only into computer software but it is a product manufacturer too. Since assessee is not into product manufacturing and the segmental details cannot be bifurcated from the financial details, we find that the assessee and the CG-Vak Software and Exports Limited are not comparables. Therefore, we are inclined to uphold the orders of the authorities below in rejecting this company as a comparable. We direct accordingly." 24.2 In our opinion, there is force in the argument of the learned AR. M/s. C G VAX Software & Exports Limited is not only engaged in the business of computer software dev....
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....several intangibles and enjoys significant brand value. The company develops in-house intangibles and owns proprietary software products. Some of the products developed and owned by the company are Unitrax (R), ACCURUSI, Service First TM. Further, as a result of high brand value, the company enjoys a high bargaining power in the market. The company has also incurred significant expenses in foreign currency amounting to 41.37% of its total sales which suggests that the company operated on a business model different from that of the Assessee. This company has been consistently excluded from the final list of comparables in cases of assessees similar to the Assessee. 6.4 In this regard, the ld. A.R. placed reliance on the decisions of this Tribunal in the cases of (i) Dell International Services India Private Limited (for the merged entity Sonicwall Info Security Private Limited) v. ACIT (reported in [2022] 140 taxmann.com 259 (Bangalore - Trib.)); and (ii) NXP India Pvt. Ltd. v. DCIT (reported in [2020] 116 taxmann.com 421 (Bangalore - Trib.)) and the decision of the Hyderabad Bench of this Tribunal in EPAM Systems India (P.) Ltd. v. ACIT (reported in [2018] 100 taxmann.com 335 (H....
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....k page No.1078. Being so, in our opinion, it cannot be compared with the assessee's case. Accordingly, we direct the TPO to exclude the same from the list of comparables." 8.1 In view of the above order of the Tribunal, taking a consistent view, we direct the AO/TPO to exclude this company M/s. Larsen & Toubro Infotech Ltd. from the list of comparables. Persistent Systems Limited: 9. The ld. A.R. submitted that the Assessee objected to the inclusion of this company on the ground that it is functionally incomparable due to various reasons, which was not appreciated by the TPO and the DRP. 9.1 The ld. A.R. submitted that this company is functionally dissimilar to it as it is engaged in software products, services and technology innovation. The company primarily focuses on rendering end-to-end software product development services to IT product companies and offers complete product life cycle services. The company focuses on next generation technology centered on four main themes- Cloud computing, Analytics, Social enterprise and Enterprise Mobility. The company also focuses on establishing a strong IP portfolio and the IP led business of the company saw a significant ....
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....CIT (reported in [2020] 116 taxmann.com 421 (Bangalore - Trib.)) and the decision of the Hyderabad Bench of this Tribunal in EPAM Systems India (P.) Ltd. v. ACIT (reported in [2018] 100 taxmann.com 335 (Hyd-Trib), where in the cases of similarly placed assessees, this company was directed to be excluded. Further reliance is placed on the decision of the Hon'ble Delhi High Court in the case of PCIT v. Cashedge India Pvt. Ltd. (Order dated 04.05.2016 passed by the Hon'ble High Court of Delhi in ITA No. 279/2016) wherein, in the case of a similarly placed assessees, the exclusion of the company came to be upheld. Therefore, this company ought to be excluded from the final list of comparables. 10. The ld. D.R. relied on the order of ld. DRP. 11. We have heard the rival submissions and perused the materials available on record. We are of the opinion that this comparable has been considered by the coordinate bench of this Tribunal in the case of NXP India Pvt. Ltd. vs. DCIT cited (supra), wherein held as under: "23. As discussed in earlier year, Persistent Systems Limited is engaged in product engineering services, platforms and solutions, IP and related business, ....
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....different (viz. being engaged in product development and product design services) from the assessee in the case on hand which is rendering software development services. It is ordered accordingly." 23.1 Therefore, Persistent Systems Limited cannot be compared with the assessee's case. Accordingly, we direct the TPO to exclude the said company from the list of comparables, with the similar directions given in the above order of the Tribunal (supra)." 11.1 In view of the above order of the Tribunal, taking a consistent view, we direct the AO/TPO to exclude this company M/s. Persistent Systems Ltd. from the list of comparables. 12. Next ground No.3 in this appeal is general in nature, which do not require any adjudication. 13. Ground No.4 is with regard to negative working capital adjustment. 13.1 The ld. A.R. submitted that vide this ground, the Assessee is challenging the action of the TPO in determining a negative working capital adjustment, which came to be upheld by the DRP. In this regard, the ld. A.R. submitted that working capital adjustment is made for the time value of money lost when credit time is given to the customers. The Assessee however is not....
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....l adjustment Making a negative working capital adjustment without appreciating the fact that the company does not bear any working capital risks. On this issue, the assessee submitted as under: "The learned TPO determined the ALP for the international transactions with A.Es by making a negative working capital adjustment for the differences in working capital between the assessee and the companies considered as comparables. The assessee does not agree with the learned TPO as the company does not bear any working capital risk since it is been fully funded by it's A.E. from its inception and has no working capital contingencies. * The company has never taken any loans till date from the date of incorporation nor has incurred any expense for meeting the working capital requirement." We have gone through the submissions and the order of the TPO. The assessee pleaded that the DRP has acceded such a plea in some other case. On examination, we find that the DRP, Hyderabad in the case of Cordys Software India P. ltd., for A.Y. 2008-09 in its directions dated 03.08.2012 has given a finding as under: "7.7.4 Thus, working capital adjustment is made for the time ....
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....een put before us by the ld. A.R., hence not considered for adjudication. 17. Ground No.7 is with regard to disallowance of deduction claimed u/s 10AA of the Act in respect of Chennai SEZ Unit. 17.1 The ld. A.R. submitted that the assessee had claimed a sum of Rs. 18,14,03,235/- as deduction under Section 10AA of the Act in respect of its SEZ unit at Chennai. It is submitted that the claim for deduction under Section 10AA of the Act commenced in the year 2010-11 when the Chennai unit was part of the erstwhile company i.e., Perot Systems Business Process Solutions India Pvt. Ltd. which was subsequently merged with the Assessee's company. 17.2 She submitted that the Perot was engaged in the business of process outsourcing services in the nature of data processing and software development since 1998. Until 2009, Perot had two units, one in Chennai and one in Coimbatore. Perot later set up a third unit in Chennai in a Special Economic Zone ("SEZ") and was registered with the SEZ authorities in 2008 and the said unit commenced its activities in the year 2009. Thereby, FY 2009-10 was the first year of claim of deduction under Section 10AA of the Act for the Chennai SEZ unit.....
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....lso furnished before the Assessing Officer. In light of the same, she requested that the ground of appeal is to be decided in favour of the Assessee. 18. The ld. D.R. relied on the order of lower authorities. 19. We have heard the rival submissions and perused the materials available on record. This issue came for consideration before this Tribunal in assessee's own case for the assessment year 2012-13 in IT(TP)A No.844/Bang/2017 & 932/Bang/2017 vide order dated 14.11.2022, wherein held as under: "55. We heard the rival submissions and perused the material on record. According to the provisions of section 10AA the benefit in respect of newly established Industrial Undertaking in SEZ is available to all Assessee on export of certain articles or things or software subject to certain conditions. The term export turnover is defined to mean the consideration in respect of export by the undertaking, being the Unit of articles or things or services received in, or brought into, India by the assessee but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India or expenses, if any, incurred in fo....
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.... is inadequate and restrictive since it impacts the competitiveness of Indian Software Industry in global market in terms of quality of product and delivery time-lines. Global competitiveness can be ensured only when highly skilled and experienced manpower is deployed for software development. Requests have, therefore, been made seeking enhancement of the limit of 20% in line with the recommendation of Rangachary Committee, which was set up to review the taxation of IT Sector and Development Centers. 3. The matter has been re-examined by the Board. In supersession of the Circular No. 12/2014 dated 18th July, 2014, it has now been decided that the transfer or re-deployment of technical manpower from existing unit(s) to a new unit located in SEZ, in the first year of commencement of business, shall not be construed as splitting up or reconstruction of an existing business, provided the number of technical manpower so transferred as at the end of the financial year does not exceed 50 per cent of the total technical manpower actually engaged in development of software or IT enabled products in the new unit." (emphasis supplied) 58. In terms of the above circular, i....
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....omputer software outside India. However Explanation 2(iv) specifically seeks to exclude these three categories of expenditure incurred for delivering the export of articles, things or computer software. It also seeks to exclude expenses for providing technical service, etc. outside India. Where an Indian technician goes abroad and receives fees for services, the foreign client will normally be required to reimburse the expenses as well. Therefore, out of the consideration received, the portion representing reimbursement of expenditure has to be excluded. "Total turnover" has been defined in sections 80HHC and 80HHE only to exclude additional items given under section. But for this additional exclusion, there was no need to define "total turnover". Export turnover is a component of total turnover. If the entire turnover represents export proceeds, then the export turnover and the total turnover are identical. It is clear that any exclusion in the export turnover in the numerator will automatically imply exclusion in the denominator as well because export turnover is always a component of total turnover." Accordingly, this ground of appeal of the assessee is allowed. 2....
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....A No.1151/Bang/2015 & 1644/Bang/2014 for the assessment year 2012-13 dated 25.3.2022, wherein held as under: "9. Admittedly, the entire provisioned amount being Rs.158,25,21,633/- has been suo moto disallowed by the assessee in the computation income for the year under consideration u/s. 40(a)(ia) of the Act. Under such circumstances, no benefit has accrued to the assessee to that extent which already stands disallowed while computing the taxable income. 10. It is not the case of the revenue that with the help of the provisioned amount assessee has been able to reduce the profits thereby any benefit has been drawn. We place reliance on the decision of Coordinate Bench of this Tribunal in case of Robert Bosch Engineering and Business Solutions Pvt. Ltd. v. ITO (supra) wherein on identical situations this Tribunal observed as under: "9. We have perused the submissions advance by both sides in light of records placed before us. 9.1. Before us the assessee concerned is the deductor of TDS. For AY 2012-13: Total Provision created : Rs.4,48,04,866/- TDS deducted on receipt of Invoice and paid in the FY:2013-14 :Rs.3,25,21....
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....ncome; and (iii) The recipient has paid the tax due on the income declared by him in such return of income; And the person furnishes a certificate to this effect from an accountant in such form as may be prescribed." As the section 201(1) is to be read, one must keep in mind that these provisions seeks to make good any loss of revenue, from an assessee who is the payee, on account of any lapse by the recipient of such income. We draw our support from the decision of Hon'ble Kolkata Tribunal in case of Ramkrishna Vedanta Math vs. ITO reported in (2012) 24 taxmann.com 29. Hon'ble Kolkata Tribunal also held as under: "9. It is important to bear in mind that the lapse on account of non-deduction of tax at source is to be visited with three different consequences - penal provisions, interest provisions and recovery provisions. The penal provisions in respect of such a lapse are set out in Section 271C. So far as penal provisions are concerned, the penalty is for lapse on the part of the assessee and it has nothing to do with whether or not the taxes were ultimately recovered through other means. The provisions regarding interest in delay in de....
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....shed before the AO, details regarding the actual payment of TDS in subsequent financial year, on the provisions made in the various financial years. These details were verified by the AO. The AO has addressed a letter to the DR in which the AO after verification has found that the Assessee had deducted tax at source at the time when the provision made in one financial year is subsequently reversed and the expense booked in the subsequent financial year. The following are the contents of the said letter (copy filed by DR in Court), in so far as it relates to taxes deductible at source. "3. During the course of appellate proceedings before the Hon'ble ITAT the assessee company took the same plea that it had deducted tax at source in the subsequent year on all the amounts that was disallowed u/s. 40a(i) and 40a(ia) as and when these amounts were paid. The Hon'ble ITAT therefore directed that such details be produced before the Income Tax Officer (TDS) for verification. 4. At the remand stage the assessee company has now submitted year wise details of rental charges paid, professional charges paid, contract amounts paid and details of other payments. The detai....
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....est u/s.201(1A) of the Act. Therefore the appeals in so far as it relates to challenge to order u/s.201(1) of the Act have to be allowed." Respectfully following the same we also hold the present assessee cannot be treated to be an "assessee in default" to the extent TDS has been effectuated though in subsequent financial year. 14. Now the issue that needs to be considered is in a situation where the assessee has not been treated to be an assessee in default, interest under section 201(1A) deserves be levied. In our humble opinion, the provision of TDS provisions cannot applicable where there is no claim of expenditure made by the assessee. In the present facts assessee made suo motu disallowance of the entire provision under Section 40(a)(i)/(ia) of the Act. Once the amount is disallowed u/s. 40(a)(i)/(ia) for non- deduction of tax, it cannot be subject to TDS provisions again so as to make the assessee liable to interest u/s. 201(1A). In our considerate view, the assessee(deductor) gets exonerated from the applicability of TDS provisions on disallowance of the expenditure in question under section 40(a)(i)/(ia) of the Act. This rational is base....
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.... requires to be viewed in the same manner. This again is a proviso intended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not in default of deducting tax at source under certain contingencies. 12. Relevant to the case in hand, what is common to both the provisos to Section 40 (a) (ia) and Section 210 (1) of the Act is that the as long as the payee/resident (which in this case is ALIP) has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the Assessee would not be treated as a person in default. As far as the present case is concerned, it is not disputed by the Revenue that the payee has filed returns and offered the sum received to tax. 13. Turning to the decision of the Agra Bench of ITAT in Rajiv Kumar Agarwal v. ACIT (supra ), the Court finds that it has undertaken a thorough analysis of the second proviso to Section 40 (a)(ia) of the Act and also sought to explain the rationale behind its insertion. In particular, the Court would like to refer to para 9 of the said order which reads as under: ....
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....e unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an "intended consequence" to punish the assessee for non deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax. That will be going much beyond the obvious intention of the section. Accordingly, we hold that the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1 st April, 2005, being the date from which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004." Emphasis supplied 16. We place reliance on the above decision to emphasize on the interpretation of t....
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....ourt in case of Volvo India Pvt.Ltd vs. ITO(TDS), in ITA no. 369/2018 by order dated 15/11/2021, the Revenue argued regarding interplay of Section 40(a)(ia) and 194C would make it clear that the default by a person in compliance of the requirements of the provisions contained in Part B of Chapter-XVII of the Act leads, that when the obligation of Section 194C of the Act is not complied with, the consequences under Section 40[a][ia] will operate. The Revenue sought to rely on the decision of Hon'ble Supreme Court in case of Shree Choudhary Transport Company vs.ITO reported in (2021) 118 taxmann.com 47. Hon'ble Karnataka High Court considered the decision of Hon'ble Supreme Court in favour of assessee by observing as under: "10. It is ex-facie apparent that the contention of the assessee inasmuch as non-identification of the payees in the provisions and the disallowance of deduction expenditure under Section 40(a)(ia) of the Act has not been rightly appreciated by the Tribunal. In this scenario, the judgment of the Hon'ble Apex Court in the case of Shree Choudhary Transport Company': would not be of any assistance to the Revenue unless the material aspect....
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....n the manner that the amount of such interest, commission, brokerage or fees shall not be deducted in computing the income chargeable under "profits and gains of business or profession". In other words, it shall be computed as income of the assessee because of his default in not deducting the tax at source. 16.2 In the overall scheme of the provisions relating to collection and recovery of tax, it is evident that the object of legislature in introduction of the provisions like sub-clause (ia) of clause (a) of section 40 had been to ensure strict and punctual compliance of the requirement of deducting tax at source. In other words, the consequences, as provided therein, had the underlying objective of ensuring compliance of the requirements of TDS. It is also noteworthy that in the proviso added to clause (ia) of section 40(a) of the Act, it was provided that where in respect of the sum referable to TDS requirement, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid in any subsequent year after the expiry of the time prescribed in section 200(1), such sum shall be allowed as a deduction in computing the income of the previou....
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....e argued that the onus is on the revenue to demonstrate that the taxes have not been recovered from the person who had the primary liability to pay tax, and it is only when the primary liability is not discharged that vicarious recovery liability can be invoked. Ld.Counsel therein contended that once all the details of the persons to whom payments have been made, it is for the Assessing Officer, who has all the powers to requisition the information from such payers and from the income tax authorities, to ascertain whether or not taxes have been paid by the persons in receipt of the amounts from which taxes have not been withheld. It was the submission of the Ld. Counsel therein that, as a result of decision of Hon'ble Allahabad High Court's judgment in the case of Jagaran Prakashan (supra), there is a paradigm shift in the interpretation of Section 201(1). Hon'ble Kolkata Tribunal observed as under: "8. The plea is indeed well taken. Learned counsel is quite right in his submission that, as a result of the judgment of Hon'ble Allahabad High Court in Jagran Prakashan's case (supra) and in the absence of anything contrary thereto from Hon'ble....
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....lways able to obtain the same. The provisions to make good the shortfall in collection of taxes may thus end up being invoked even when there is no shortfall in fact. On the other hand, once assessee furnishes the requisite basic information, the Assessing Officer can very well ascertain the related facts about payment of taxes on income of the recipient directly from the recipients of income. It is not the revenue's case before us that, on the facts of this case, such an exercise by the Assessing Officer is not possible. It does put an additional burden on the Assessing Officer before he can invoke Section 201(1) but that's how Hon'ble High Court has visualized the scheme of Act and that's how, therefore, it meets the end of justice." 18. Hon'ble Mumbai Tribunal in case of Pfizer Ltd vs. ITO(TDS)(OSD)(supra) on identical issue and similar facts held as under: "12. As already explained and evidenced from the computation of income as well as the orders of AO in the assessment proceedings, the entire provision has been disallowed under section 40(a)(ia) and section 40(a)(i). Once the amount has been disallowed under the provisions of section 40(a....
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....entire provision under section 40(a)(i)/(ia) of the Act on which TDS could not be effectuated. All details of payee and the details regarding when subsequently the actual payments were effectuated on receipt of Invoice/bill, was submitted before the Ld.AO. The Ld.AO without verifying the same levied interest under section 201(1A) of the Act. Then, the question that arises to our minds that, is it logical to put such assessee(deductor) into double jeopardy by casting the liability under chapter XVII-B on an assumption of non payment of taxes on income embedded in the receipt by an assessee(payee)? We answer this question in negative. 20. On the amount on which TDS could not be effectuated due to non receipt of invoices, the Ld.AO will first have to ascertain if the payee has paid taxes on the income embedded therein. This is the pre condition for levying interest u/s. 201(1A) of the Act. 21. In our considered opinion applicability of section 201(1A) needs verification of payment of tax by the recipient (payee) at the end of the Ld.AO since the Ld.AO failed to carry out necessary verification in respect of the payees, the details of which were provided by assessee. ....
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....that there is no principal agent relationship, for which provisions of TDS could be applied on such payments. It is also noted that wherever the payment of commission included the element of income in the hands of the recipient, TDS has been effectuated by assessee. Coordinate Benches of this Tribunal. 14. However, in respect of the amount shown as rebate and commissioned to the dealers, the agreement has not been looked into by the authorities below. In the event any amount provisioned as commission / rebate falls under the purview of TDS provisions, the disallowance cannot be simply made for the reason that no TDS has been effectuated as the assessee has suo moto disallowed the entire provisioned amount for each year under consideration u/s. 40(a)(ia) of the Act. 15. We also draw our support from the decision of Hon'ble Supreme Court in case of Hindustan Coca Cola Beverage P. Ltd., Vs. Commissioner of Income Tax reported in (2007) 293 ITR 226 (SC) has held that in the event the payee has paid taxes, the deductor cannot be held liable for not deducting the TDS. As the Ld.AO has not verified this aspect and considering the fact that assessee has paid taxes by ....
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....ovision for development of the land. Since the expenditure was incurred purely for business purpose, the same was claimed as an allowable revenue expenditure under Section 37 of the Act. However, though the Assessing Officer, did not question the commercial exigency, he disallowed the same on the ground that on completion of the construction, the building would become the asset of the Assessee and the extension charges would add to the cost of acquisition of the building and thus, a capital expenditure and since the building was not put to use during the year, no depreciation is allowable. The DRP upheld the disallowance and concluded the expenditure to be a capital expenditure. However, the DRP failed to adjudicate on the alternate ground for claim of depreciation raised by the Assessee. 26.3 The ld. A.R. submitted that a reference to 'Note (i) to schedule 10" of the financial statements for assessment year 2013-14 wherein the movement of the provision created and utilized during the year is provided. Thus, the Assessee has discharged a part of the liability i.e. Rs. 3,03,43,629/- during the assessment year, and deduction for the same was claimed. 26.4 In this regard, sh....
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.... the Act. 28. We have heard the rival submissions and perused the materials available on record. We have carefully gone through the lease deed executed by the assessee on 4.9.2001 with New Okhla Industrial Development Authority. As per this, clause No.(1) stipulates payment of premium towards the land and the last and 10th instalment falls due only on 14.2.2006. The relevant clauses 8 & 11 reads as follows: 8. "That the Lessee will start construction and implement the project within six months from the date of possession and will construct complete area as per bye-laws of the Lessor as applicable for buildings and put the same in operation as per plans approved by the Lessor within a period of five years from the actual date of execution of lease deed or due date of lease deed, whichever is earlier and shall obtain the completion certificate from buildings cell failing which a levy of 4% of premium cost per annum or part thereof as applicable will be charged as extension charges being allowed by Chief Executive Officer of the Lessor or his duly authorised officer. The rate of extension charges, as mentioned above may be reviewed by the Lessor. In the event of extension ....
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....blish the accrual of the expenditure and also not able to establish the quantification of this expenditure in the assessment year under consideration. The only argument of the assessee is that in the earlier assessment, assessee made a provision for some expenditure and on later date the same was reversed, as such it should be allowed in the assessment year when the assessee actually incurred this expenditure. This argument holds no merit as the assessee has not placed any evidence to show that how the Lessor invoked this clause in lease deed after a long lapse of 12 years. As such, we are not in a position to appreciate the argument of ld. A.R. In our opinion, the liability to incur this expenditure will arise only as per clause 8 and as per the clause 8, the assessee has to construct complete area within 5 years from the actual date of execution of lease deeds or due date of lease deeds, whichever is earlier and shall obtain Completion Certificate from the Building Cell. This liability of the expenditure cannot be considered as a contractual liability as per the clause 8 of the lease, being so, this expenditure cannot be allowed as accrued in the assessment year under considerati....