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2018 (8) TMI 2086 - AT - Income TaxDisallowance of expenditure claimed to be personal in nature - disallowing adhoc 7.5% of total travel and conveyance expenses incurred by the Appellant on grounds that these expenses are personal in nature - HELD THAT:- As noted that the disallowance has been made on the ground that the expenses are personal in nature. That is exactly what the Assessing Officer states in the impugned assessment order, and he also specifically follows the orders, on that issue, in the preceding assessment year. On this aspect, however, we have Hon’ble jurisdictional High Court’s judgement in the case of Sayaji Iron & Engineering Company Limited vs. CIT [2001 (7) TMI 70 - GUJARAT HIGH COURT] observed that it cannot be stated that when the vehicles are used by the directors, "even if they are personally used by the directors" the vehicles are personally used by the company, because a limited company by its very nature cannot have any “personal use”. The limited company is an inanimate person and there cannot be anything personal about such an entity. The view that we are adopting is supported by the provision of section 40(c) and section 40A(5) of the Act. Addition of Income reflected in Form 26AS - CIT(A) held that amount incorrectly reflected in Form 26AS ought to be included in income even though it has not been received by the Appellant - HELD THAT:- CIT(A) has not even disputed the fact of lower actual receipt of interest and yet he has confirmed the interest as shown in 26AS because that is what is shown by the State Bank of India. That approach is certainly incorrect. Once the assessee produces reasonable evidence establishing a particular quantum of interest income in his hands and such evidence is not found fault with, he cannot be taxed on some other figure merely because a tax deductor states that figure. Obviously, the assessee has no control over such inputs which are clearly incorrect. In view of these discussions, in our considered view, the impugned addition must stand deleted. We order so. TDS u/s 195 - Disallowance of payments made to non-residents under section 40(a)(i) - Indian taxability of payments to US residents - connotations of 'make available' clause - HELD THAT:- There is no dispute on the legal position that unless the technical services payment for which is sought to be taxed as fees for technical services (termed as fees for included services in the Indo US tax treaty) “make available” the technical skill, knowledge and know-how, the same cannot be brought to tax as such. It is also beyond dispute that the provisions of the Income Tax Act, 1961, in a case covered by a double taxation avoidance agreement entered into under section 90- as is admittedly the present case, apply only to the extent these provisions are more favourable to the assessee. Once the assessee is out of the ambit of Indian taxability thus, there is no occasion to deal with the taxability requirements under the Income Tax Act. The reasons for holding that these services satisfy “make available” clause have been specifically and unambiguously rejected by us, the authorities below have not made out any case for application of tax deduction requirements on these payments. In any case, we have carefully examined the material on record and nature of each payment and we donot find any situation in which services can be said to have made available technical skill, knowledge and know how in the legal sense of “make available” clause as discussed above. As a matter of fact, we did ask the learned Departmental Representative to point out one case in which the “make available” clause can be said to be satisfied on merits, but there was no specific assistance beyond reliance on the orders of the authorities below. These orders and the reasoning contained therein, however, does not meet our approval. Once there is no material to hold the taxability of these amounts in India, there can be no tax withholding liability under section 195 either, and, as a corollary thereto, the very foundation of impugned disallowance under section 40(a)(i) ceases to hold good in law. We uphold the plea of the assessee, and having noted that no case has been made out for satisfaction of make available clause- as is the sine qua non for Indian taxability of such payments to US residents, we direct the Assessing Officer to delete the impugned disallowance. - Decided in favour of assessee.
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