Mumbai bench ITAT Duty of AO to allow rectification for TDS credit inadvertently missed reflected in 26AS online; India USA Tax Treaty exposition on Force of Attraction in WNS case (ass fav order); Data processing charges to Head Office (not royalty u/s 9); Consultancy work business nature income no TDS when no PE/Business connection; Reopening CIT Sanction using word "approved" bad; not valid satisfaction (void reopening) Search Third party evidence/notings Lata Mangeshkar case applied ass fav order (on money)

M/s. Hemlata Investment

Pvt . Ltd. , IN THE INCOME TAX APPELLATE TRIBUNAL “ H” BENCH, MUMBAI 24.07.2013

Facts of the case show that the assessee filed return of income declaring net income of Rs. 24,14,640/- electronically on 21.10.2007. The return was processed u/s. 143(1) of the I.T. Act. The assessee noticed that credit for advance tax of Rs. 1,10,000/- and TDS of Rs. 5,38,560/- was not allowed to the assessee. The assessee moved an

application u/s. 154 of the Act dt. 21.7.2010. The AO allowed credit for advance tax of Rs. 1,10,000/- but declined credit for the TDS for Rs. 5,38,560/- received from M/s. Prathiba Shipping Company.

5. Aggrieved by this, the assessee preferred an appeal before the Ld. CIT(A). It was explained that while uploading the e-return , inadvertently, the assessee could not mention the TDS of Rs. 5,38,560/- in the e-return though the credit for the same is allowed by the NSDL and is also reflected in the statement in Form No. 26-AS in department’s official website. After considering the facts and submissions of the case, the Ld. CIT(A) was convinced that it is a mistake apparent from record

We have carefully perused the facts on record. We do not find any reason to tamper with the findings of the Ld. CIT(A) as the TDS has been reflected in the official website of the department in the statement in Form No. 26-AS. We do see any reason why the credit of the same should not be given to the assessee, even if by inadvertence , the assessee could not claim the same in the e-return filed by it. Findings of the Ld. CIT(A) are accordingly confirmed.

9. In the result, the appeal filed by the Revenue is dismissed.

 

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI /ITA NO.2603/Mum/2011 Assessment year:- 2005-06 7-8-2013 M/s Pipavav Shipyard Ltd, We have perused the records and considered the rival contentions carefully. The dispute  is regarding treating the assessee in default u/s 201 (1) and consequential levy of interest u/s  201 (1A) for failure to deduct TDS in respect of amounts payable to M/s Overseas Shipbuilding  Cooperation Centre in connection with consultancy work (The services rendered pertained to consultancy advice given towards construction, supervision work in connection with ship building and dismantling yard being put up by the assessee company. Therefore, it was argued that the same was excluded from the definition of fees for technical services) The actual payment of the amount was  dependent on certain regulatory compliances and approvals which were ultimately not received.  The payment had also not been made. Therefore in such a situation no income on account of  such payment could said to have been accrued to the non resident. The assessee had neither  made the payment nor had claimed any revenue expenditure. Therefore only on the basis of  entry in the books of accounts, the assessee could not be held liable for deduction of tax at  source when ultimately the amount was found not payable nor it was paid, income therefore had  not accrued to the Overseas Shipbuilding Cooperation Centre. The said company had also no PE  in India nor had any business connection in India. There is no material placed on record before us  to controvert the claim of the assessee that the assessee had no PE in India nor any business  connection in India. The income on this account even if paid is not taxable in India. Therefore no tax was required to be deducted. Considering the facts and circumstances of the case, we see no  infirmity in the order of CIT(A) canceling order of AO passed u/s 201(1) 201(1A) and the same is,  therefore, upheld.

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL COME TAX APPELLATE TRIBUNAL ““““L” BENCH, L” BENCH, L” BENCH, MUMBAI /I.T.A. No. I.T.A. No... 2944/Mum/2012 2944/Mum/2012  Assessment Year : 2007-08) 31st July 2013 M/s WNS North America Inc.,  C/o- WNS Global Services P. Ltd.,

We have considered the rival submissions as well as relevant material on record. There is no dispute that out of total marketing and management fee of ` 8,15,11,339/- received from WNS India only a sum of ` 6,52,13,074/- has been attributed to such PE because the services were  rendered in India. The remaining amount of marketing and management  fee received by the assessee is regarding the services rendered outside  India. The Ld. DR has contended that since the services which were  rendered in India and outside India are same or similar in nature and as  per the composite agreement therefore, the entire service is attributable  to the service PE in India by applying the force of attraction Rule. We do  not find merit in the contention of Ld. DR  The plain reading of Article 7(1) makes it clear that only in case  when enterprise of Contracting State carries on business in the other  Contracting State through its PE as well as otherwise and both the  activities are of same or similar kind then the business activities carried  on not through PE shall also be treated as attributable to the PE and the  profit of the enterprise may be taxed in the other State so much of them as its is attributable to PE. There is no scope of any ambiguity as the  Article 7(1) gives a clear understanding that the force of attraction Rule  applied only in respect of the business carried on by an enterprise of Contracting State in the other Contracting State through PE as well as  without involvement of PE. Therefore, the two essential conditions emerge  for applying the force of attraction rule are (i) the business activity carried  on should be in the other State where the PE is situated (ii) the business  activity carried on must be of the same or similar kind as those effected through PE. In the case in hand the condition of business activity carried  on in the other State where the PE is situated is not satisfied because the marketing and management services in question are provided by the  assessee outside India. Since the said issue of providing the services  outside India has been decided time and again by this Tribunal as well as  by the Hon’ble High Court in assessee’s own case therefore in view of the  finding on the ground no. 1 to 3 there is no need for further  deliberation/discussion on the same. Having held that the marketing and  management services in question were rendered outside India and  income of such services cannot be said to have accrued or arisen to the assessee or deemed to have accrued or arisen to assessee in India, the  existence of service PE in India would not make it taxable under Article 7  of Indo-US DTAA

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “L”, MUMBAI ITA No. : 4295/Mum/2005

(Assessment year: 2001-02)  M/s Credit Agricole Indosuez Date of Pronouncement : 07-08-2013 Briefly stated the facts of the case are that the assessee claimed deduction for Rs. 91,03,072/-, being the data processing costs paid to the head office. The AO treated this amount in the nature of royalty. In the absence of the assessee having deducted tax at source, the AO made disallowance under section 40(a)(i) of the Act. The CIT(A) upheld the assessment order on this point. 18. After considering the rival submissions and perusing the relevant material on record, we find that the action of the revenue authorities on treating the amount being in the nature of royalty and hence not allowable under section 40(a)(i) cannot be allowed. The obvious reason is that the assessee made the payment on account of data processing costs to its head office. By no standard this amount can be considered as royalty as a consideration for the use of the assets specified under Explanation 2 to section 9(1)(vi). This amount is in the nature of head office expenses

IN THE INCOME TAX APPELLATE TRIBUNAL “ E ” BENCH, MUMBAI  Shri Amarlal Bajaj,  Shri  I.T.A. No.611/Mum/2004   /Date of Pronouncement : 24.07.2013 A simple reading of the provisions of Sec. 151(1) with the proviso clearly show that no such notice shall be issued unless the  Commissioner is satisfied on the reasons recorded by the AO that it is a  fit case for the issue of notice which means that the satisfaction of the  Commissioner is paramount for which the least that is expected from the  Commissioner is application of mind and due diligence before according  sanction to the reasons recorded by the AO. In the present case, the order  sheet which is placed on record show that the Commissioner has simply  affixed “approved” at the bottom of the note sheet prepared by the ITO  technical. Nowhere the CIT has recorded his satisfaction.  The observations of the Hon’ble High Court are very much relevant in the instant case as in the present case also the Commissioner  has simply mentioned “approved” to the report submitted by the concerned AO. In the light of the ratios/observations of the Hon’ble High Court mentioned hereinabove, we have no hesitation to hold that the reopening proceedings vis-à-vis provisions of Sec. 151 are bad in law and the assessment has to be declared as void ab initio. Ground No. 1 of assessee’s appeal is allowed.

IN THE INCOME TAX APPELLATE TRIBUNAL “ H” BENCH, MUMBAI /I.T.A. No. 4979/Mum/2009 M/s. Housing Development & Infrastructure Ltd. (Formerly known as Housing Development and  Improvement India Pvt. Ltd Assessment Year : 2005-06 There are six grounds of appeal. However, all the six grounds relate to one issue of deleting the addition of “On Money” of Rs,1,66,40,000/-.During the course of the scrutiny assessment proceedings, the Assessing Officer observed that Search and seizure proceedings were conducted in the case of M/s. Rochem Separation System (I) Pvt. Ltd. and Shri K.K. Goel HUF. The AO observed that in those search operations, it was found that they have paid certain “on money” outside regular books to the assessee company for purchase of office and residential premises. Based on these facts of M/s. Rochem Separation System and M/s. K.K. Goel, the AO issued notice u/s. 153C and served upon the assessee. The assessee filed requisite return of income declaring total income at Rs. 5,41,27,880/-. The assessee is engaged in business of real estate developments. The AO further noted that the assessee has sold office premises No. 101 in a building known as Dheeraj Arma situated at Bandra (E), Mumbai to M/s. Rochem Separation System for a consideration of Rs. 508 lacs vide agreement dt. 16.12.2004 The AO after receiving the detailed submission of the assessee once again issued summons to Shri K.K. Goel u/s. 131 of the Act. A detailed reply was filed on behalf of Shri K.K. Goel explaining that M/s. Rochem Separation System purchased office premises in financial year 2004-05 from M/s. HDIL for a total consideration of Rs. 341.60 lakhs. It was also explained that in addition to the total consideration of Rs 341.60 lakhs, M/s. Rochem Separation System also incurred in cash a sum of Rs. 1,66,40,000/- for the interior electrical, plumbing, civil and finishing work done in the office, which was paid to the contractors of the builder directly. Since developer did not want to provide the said services as per specification of the buyer company, therefore, the amount of Rs. 1,66,40,000/- was paid in cash not to the builder (assessee) but to the contractors 3.4. After considering the reply of both the assessee and the purchaser M/s. Rochem Separation System, the AO was of the firm belief that the total purchase agreement value was Rs. 341.60 lakhs and the balance amount of Rs. 1,66,40,000/- was payable in cash out of which Rs. 50 lakhs was immediately paid and the balance of Rs. 80 laskhs was paid by the cheque to M/s. HDIL i.e. assessee as shown in the books of the purchasing company. On such firm belief, the AO went on to make an addition of Rs. 1,66,40,000/- as undisclosed income of the assessee.

8. We have considered the rival submissions, perused the orders of the lower authorities and the material evidences brought on record. The undisputed facts emerging out of the assessment record show that the search and seizure operation were conducted at M/s. Rochem Separation System and Shri K.K. Goel. It is also not in dispute that the payment of ‘on money’ was accepted by Shri K.K. Goel in his statement recorded u/s. 132(4) of the Act. However, it is also not in dispute that no opportunity was given to the assessee to cross examine the said statement of Shri K.K. Goel. It is also an undisputed fact that subsequently during the assessment proceedings of M/s. Rochem Separation System, it was

explained that no such payment was made directly to the assessee but the payment was made to certain contractors for furnishing and interior decoration work. In our humble opinion, no addition can be made to the income of the assessee on the basis of documents seized from third party without any corroborative evidence and without allowing opportunity to cross examine the person concerned who were alleged the payment of  ‘on money’ The Hon’ble Jurisdictional High Court in the case of Miss Lata Mangeshkar  r 97 ITR 696  (supra) has held that mere entries in the accounts regarding payments to the assessee was not sufficient as there was no guarantee that the entries were genuine.