TaxTMI 
TaxTMI 
2026 (10) TMI 180
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.... 1. General Ground 1.1 The order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as CIT(A), NFAC) under section 250 of the Act and the order passed by the Deputy Commissioner of Income Tax, Circle 2(1)(1), Bangalore (hereinafter referred to as learned AO) under section 147 rws 144B of the Act are bad in law and liable to be quashed. 2. Grounds relating to notice issued under section 148 and proceedings under section 147. 2.1 The learned assessing officer has erred by not appreciating the fact that the disallowance of payments to foreign vendors for non-deduction of TDS, is a subject matter of appeal before the Commissioner of Income Tax (Appeals) filed by the Appellant against the order u/s. 201 issued for the same assessment year. The learned assessing officer has thus erred in reassessing income under section 147 involving a matter which is already a subject matter of appeal, in violation of third proviso to erstwhile section 147. 2.2 The learned assessing officer has erred in not appreciating the fact that the procedure for re-assessment is a procedural law and he....
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...., NFAC has erred in passing a mechanical order without considering the submissions of the Appellant and without application of mind. 3.6 On facts and circumstances of the case and law applicable, the order passed by the CIT(A), NFAC under section 250 of the Act being against the principles of natural justice, is invalid, bad in law and liable to be quashed. 4. Grounds relating to treating AMC and maintenance charges as taxable 4.1 The learned assessing officer and the CIT(A), NFAC have erred in treating the payments for AMC and Maintenance charges of Rs. 1,04,37,320 as fees for technical services under section 9(1)(vii) of the Act. 4.2 The learned assessing officer and the CIT(A), NFAC have erred in not appreciating that certain payments classified as AMC and maintenance charges were in the nature of purchase of spares and other maintenance equipment and will thus not be taxable in India in the absence of permanent establishments of such foreign vendors in India. 4.3 Without prejudice to the above, the learned assessing officer and the CIT(A), NFAC have erred in not adopting the beneficial provisions under the Double Tax Avoidance Agreem....
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....bership and subscription charges were not chargeable to tax as technical services as per the provisions of the Act and DTAA. 7. Grounds relating to treating testing charges as taxable 7.1 The learned assessing officer and the CIT(A), NFAC have erred in treating the payments for testing charges of Rs. 15,14,99,488 as fees for technical services under section 9(1)(vii) of the Act. 7.2 Without prejudice to the above, the learned assessing officer and the CIT(A), NFAC have erred in not adopting the beneficial provisions under the Double Tax Avoidance Agreements. 7.3 The leaned AO and the CIT(A), NFAC have erred is not appreciating that payments for testing charges shall not constitute fees for technical services under relevant articles of the relevant Double Ties Avoidance Agreement as the make available condition is not satisfied. 7.4 Based on the facts and circumstances of the case and law, payments for testing charges were not chargeable to tax as technical services as per the provisions of the Act and DTAA. 8. Ground relating to deduction of tax at source on payments made to non-residents-Section 195 and disallowance under secti....
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....e assessee is a limited company engaged in contract research for global pharmaceutical, biotechnology, and other industries. It provides an end-to-end preclinical development platform for pharmaceutical and group products under development, together with capabilities in other areas of chemical development. Its services include process development, drug metabolism and pharmacokinetics, clinical pharmacology, and safety assessment, enabling clients to improve cost efficiency. 03. For the assessment year under consideration, the assessee filed its return of income on 30 November 2016, declaring a loss of Rs. 223,387,440. It filed a revised return on 31 March 2017, declaring a loss of Rs. 750,837,277. The case was selected for scrutiny following a notice issued under section 143(2) of the Income-tax Act, after which the assessment was completed. 04. During the course of the assessment proceedings, the learned assessing officer disallowed a sum of Rs. 3,606,228 on account of provident fund and employee state insurance act contributions, which were paid late, beyond the due dates prescribed under the respective act, resulting in the assessment of a total loss of the assessee at Rs.....
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....c) of the applicable treaty, under which fees for technical services include consideration for technical or consultancy services that "make available" technical knowledge, experience, skill, know-how, or processes, or involve the development and transfer of a technical plan or design. e. Relying on the coordinate bench's decision in Raymond Ltd. v. Deputy Commissioner of Income Tax, the assessee argued that merely rendering a service does not satisfy this test unless the recipient can independently apply the technical knowledge for its own business or benefit without further assistance from the service provider. Thus, the service provider must transmit technical knowledge, experience, or skill to the recipient. 10. The learned Assessing Officer rejected the assessee's contention. Based on the nature and description of the services, he concluded that the assessee had obtained technical expertise from the non-resident service providers and that the services constituted fees for technical or consultancy services under both the Income-tax Act and the applicable Double Taxation Avoidance Agreement. He further observed that the assessee used these services for business develo....
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.... the assessee applied for admission of the following additional grounds of appeal: i. The learned Assessing Officer erred in carrying forward certain errors from the order under section 201(1) of the Act into the reassessment order passed under section 147 read with section 144B, without properly considering them during the assessment proceedings. ii. The learned Assessing Officer erred in failing to appreciate that, of the total disallowance of Rs. 6,518,302 relating to membership and subscription charges, the assessee had deducted and paid tax on payments amounting to Rs. 5,896,266. The Assessing Officer further erred in treating tax as not having been deducted on these payments and disallowing them under section 40(a)(i) of the Act. iii. The learned Assessing Officer erred in treating Rs. 136,716 as membership and subscription charges on which tax had not been deducted at source, without appreciating that the amount represented a reversal of expenses in the appellant's books and was therefore not liable to tax. iv. The learned Assessing Officer erred in including Rs. 8,024,515 as testing charges on which tax had not been deducted at source, wi....
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....invoked by the learned assessing officer, resulting in the assessee being held to be an assessee in default, and that finding is pending before the learned CIT - (A) as the subject matter of appeal, the learned assessing officer could not have invoked the provisions of section 147 of the Income Tax Act in this case. 21. He further referred to ground No. 2.4 of the appeal and submitted that the learned Assessing Officer failed to appreciate that the foreign payments considered in the reassessment had already been examined in the scrutiny assessment under section 143(3) of the Act. He therefore argued that reopening the assessment amounted to a mere change of opinion and was invalid in law. 22. Referring to the assessment order dated 12 December 2018, passed under section 143(3) of the Income-tax Act, he submitted that the learned Assessing Officer had verified all relevant details before completing the assessment. He further noted that the survey was conducted on 15 November 2017 and the order under section 201 was passed on 31 July 2018. Thus, when assessment order u/s. 143(3) of the Act was passed on 12 December 2018, the section 201 order was already in existence and known ....
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....ncial Software and Systems Private Limited, [447 ITR 370]. The Court held that, where the Assessing Officer had raised specific queries during the original assessment under section 143 of the Income-tax Act, the assessee had duly responded, and the assessment order was thereafter passed, the Revenue could not reopen the assessment on the same issue. The reassessment proceedings, having been initiated solely on a change of opinion, were therefore set aside. 28. He also relied on the Supreme Court's decision in Commissioner of Income Tax v. Canara Bank, reported in 460 ITR 6, referring to paragraph 15 of the Karnataka High Court's judgment reported in 155 taxmann.com 289. The recorded reasons stated that, upon verifying the details furnished by the bank, the Assessing Officer found that certain branches reported as being in rural areas were not, in fact, so situated. He submitted that the reasons therefore showed that the Assessing Officer had formed his conclusion after examining the bank's details. Accordingly, as the Assessing Officer had similarly verified the relevant details during the original assessment proceedings in the present case, the reopening was invalid in law. ....
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.... taxable under article 7 of the India-US Double Taxation Avoidance Agreement; the payments were, in substance, for booth or stall services and sponsorship fees for a trade event in the United States. He stated that the other payments were similar and likewise did not require tax deduction at source. He also referred to a table covering payments for studies and analyses, including screening involving rats, mice, and rabbits. According to him, these were outsourced studies incorporated into the final deliverables to clients and did not satisfy the "make available" condition under the relevant treaties. As the vendors in the respective countries had no permanent establishment in India, the payments were not taxable in India under the business-profits articles of those treaties. 31. He further submitted that Rs. 6,798,870 was recorded as a negative amount in the ledger but was incorrectly treated as a positive figure when the learned Assessing Officer made the adjustment. 32. Regarding the taxability of the amount, he relied on the Karnataka High Court's decision in CIT v. De beers India Minerals Private Limited reported in 346 ITR 467 MANU/KA/1698/2012 [2012] 208 TAXMAN 406. He ....
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....ails, had been presented to the learned Assessing Officer. The statement now produced before the Tribunal therefore requires detailed verification to determine whether the "make available" test is satisfied for each service transaction. A mere assertion that the test is not met is insufficient; the nature of each service and the manner in which it was rendered and received must be examined. As these details were not furnished before the learned Assessing Officer or the learned CIT(A), the matter should be remanded to the learned Assessing Officer for verification. 37. The learned authorised representative also submitted a copy of the coordinate bench's decision in the assessee's own case for assessment years 2013-14 and 2014-15, in which the bench, by order dated 13 December 2014, quashed the reopening on identical facts and circumstances. 38. We have carefully considered the rival contentions, reviewed the orders of the lower authorities, and examined the judicial precedents cited by the learned authorised representative in the case-law compilation. We will discuss the relevant authorities, as appropriately, when addressing the challenge to the reopening of the assessment an....
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....d to be an assessee in default for that tax. The provision governs recovery of the tax that should have been deducted or paid, together with the related interest, penalties, and possible prosecution. It does not assess the assessee's income or form part of the income-computation mechanism. Proceedings under section 201, which fall within Chapter XVII's tax collection and recovery framework, are therefore independent of the assessee's assessment proceedings. Consequently, a disallowance of expenditure in computing total income and recovery proceedings under section 201 do not concern the same subject matter. 46. In our view, disallowing expenditure in computing income for failure to deduct tax at source is distinct from proceedings under section 201 to recover tax that should have been deducted. As the two proceedings concern different subject matters, the third proviso to section 147 did not prevent the Assessing Officer from making the disallowance in reassessment. 47. The learned authorized representative relied on the Karnataka High Court's decision in EIT Services India Private Limited v. Deputy Commissioner of Income Tax, reported in 159 taxmann.com 424 and 460 ITR 774. ....
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....cer formed the belief that tax should have been deducted at source. 53. These payments had already been examined in the original assessment completed under section 143(3) on 12 December 2018, and no disallowance was made. The Assessing Officer later reopened the assessment solely because the International Taxation Officer forwarded the same information that had been available during the original proceedings. He did not identify any new fact or show that the assessee's earlier disclosure was inaccurate or incomplete. His later conclusion that tax should have been deducted at source therefore represents a change of opinion on the same material. Permitting reassessment in these circumstances would amount to a review of the original decision, which section 147 does not authorize. The power of revision lies with the higher authority under section 263, subject to the conditions prescribed therein. 54. Before concluding that the reassessment was initiated merely on a change of opinion, we must determine whether the original assessment expressly or by necessary implication reflected an opinion on the issue now sought to be reassessed. An assessment order may be brief or non-speaking.....