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Showing 281 to 300 of 692 Records
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2010 (5) TMI 684 - ITAT DELHI
Charitable/religious purpose ... ... ... ... ..... self-dependent. No specific instance has been brought on record by the learned Commissioner of Income-tax to show that what is stated by the assessee is not correct. Rather the assessee has submitted all the documents as contended in the grounds of appeal. Therefore, we find no justification in non-grant of renewal of certificate under section 80G. Therefore, we direct the learned Commissioner of Income-tax to grant renewal to the assessee under section 80G. 7. The case law relied upon by the learned Commissioner of Income-tax in the case of Self Employers Service Society (supra) does not apply to the facts of the present case as in that case the petitioner society did not do any charitable work during the relevant period and the activity of that society was for the purpose of generating income for the members of the society and thus, it was held that society was not entitled to get registration. 8. In view of the above discussion, the appeal filed by the assessee is allowed.
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2010 (5) TMI 683 - ITAT MUMBAI
Income deemed to accrue or arise in India - agency PE - nature of the business activities carried out by the assessee - whether assessee had a fixed place of business through which he was carrying out his business? - HELD THAT:- Undoubtedly, the consignment stock of the assessee was stored at specific physical locations but this storage was under control of the airlines and the assessee did not have any place at his disposal in the sense that he could carry out his business from that place.
The existence of PE in a country cannot warrant or justify taxation of all the profits arising to a foreign enterprise in that country. The business with regard to that consignment is over when that consignment is given for standby purposes to the airline. It is thus clear that not only that the assessee did not have any right to use the location of consignment stock, such a location was also not used for the purposes of assessee’s business. There is also no projection of the assessee at this physical location in the sense that the business of the assessee is not carried out, or sought to be carried out or even projected, from these locations. When the physical locations at which consignment stock is kept do not project the assessee, it cannot be said that these locations constitute PE of the assessee.
As a matter of fact, there is no sale involved in this transaction, and as such, there is no question of delivery for sale. In view of these discussions, it is clear that the revenue authorities have not been able to establish that the assessee had a PE in India. It is a settled position of law, as noted by the Special Bench of this Tribunal in the case of Motorola Inc. [2005 (6) TMI 226 - ITAT DELHI-A], that the onus is on the revenue to demonstrate that a PE of the foreign enterprise exists in India. That onus is not discharged. Having said that, we may also add that, in our considered view, the business model of the assessee-company is such that in the above arrangements, a PE in the source location does not come into existence.
We are of the considered opinion that the assessee-company did not have any PE in India, and, accordingly, the entire income attributable to the India operations could not have been taxed in India. The grievances raised against quantification of income attributable to the PE, under article 7(1), are thus rendered infructuous. To that extent, we uphold the grievance of the assessee and vacate the orders of the authorities below.
In the case before us, as evident from a plain reading of the consideration clause in the agreement between the parties, consideration for use of replacement components is distinct and separate and the same can perhaps be neatly segregated from the overall receipts. In this view of the matter, non-taxability under article 7 will still mean that application of article 13 is to be considered and adjudicated upon. However, since this aspect of the matter has not been heard by any the authorities below, we deem it fit and proper to remit the matter to file of the CIT(A) for limited adjudication on this aspect of the matter.
We are not inclined to uphold the orders of the authorities below on the issue of existence of the PE and for quantification of taxable income. The matter is, however, remitted to the file of the CIT(A) for adjudication on the question of taxability, if any, of consideration for use, or right to use, of industrial, scientific or commercial equipment contained in the payments made by the airlines to the assessee-company. We make it clear that our above observations should not influence the decision of the CIT(A) on merits of this issue, and that the CIT(A) will decide the matter in accordance with the law, by way of a speaking order and after giving due and fair opportunity of hearing to the parties. We direct so.
In the result, the appeal is allowed for statistical purposes in the manner and in the terms indicated above.
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2010 (5) TMI 682 - ITAT MUMBAI
Interest, chargeable as ... ... ... ... ..... der section 195. The short issue requiring our adjudication is whether or not levy of interest under sections 234B and 234C, in respect of income from such payments received by the non resident, is justified. While the Assessing Officer has levied the interest under sections 234B and 234C, the CIT(A) has deleted the same by following his orders for the earlier years. 7. The learned representatives agree that the issue is now covered in favour of the assessee by a large number of decision of th Tribunal, including Special Bench decision in the case of Motorola Inc. v. Dy. CIT 2005 95 ITD 269 (Delhi) which has since been approved by the Hon rsquo ble jurisdictional High Court in the case of DIT (International Taxation) v. NGC Network Asia LLC 2009 313 ITR 187 (Bom.). Respectfully following these decisions, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. 8. Ground No. 2 is also thus dismissed. 9. In the result, the appeal is dismissed.
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2010 (5) TMI 681 - ITAT LUCKNOW
Income escaping assessment ... ... ... ... ..... intended to be given by the legislature to the assessee. It is also well-settled that where there are two possible interpretations of a taxing provision the one which is favourable to the assessee should be preferred. Therefore the case relied upon by the learned Departmental Representative is of no help to the Revenue Department. Moreover, the controversy involved in the present case has now been settled by the Hon rsquo ble apex Court in the aforesaid referred to case of Dhariya Construction Co. (supra). We, therefore, considering the totality of the facts and the various judicial pronouncements discussed hereinabove, are of the confirmed view that the learned CIT(A) was fully justified in setting aside the assessment orders passed by the Assessing Officer by reopening the assessment under section 147 of the Act solely on the basis of the DVO rsquo s report. Accordingly, we do not see any merit in these appeals of the Department. 7. In the result, the appeals are dismissed.
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2010 (5) TMI 680 - ITAT MUMBAI
Income escaping assessment, Exemption of income from property held under ... ... ... ... ..... ing at the conclusion arrived at by the officer recording the reasons. 10. In view of the above discussions and bearing in mind entirety of the case, we are of the considered view that the very initiation of reassessment proceedings, on the facts of this case and on the basis of reasons recorded by the Assessing Officer, is bad in law. We, therefore, quash the reassessment proceedings. As we have quashed the reassessment proceeding itself, we see no need to deal with ground No. 3 raised by the assessee to the effect that on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming and the Assessing Officer erred in holding that the provisions of section 11(5) read with section 13(1)(d) of the Act were violated in respect of investment made in 11.5 per cent Government of India Bonds, 2005 . That grievance is rendered academic and does not call for any adjudication at this stage. 11. In the result, the appeal is allowed in the terms indicated above.
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2010 (5) TMI 679 - ITAT AMRITSAR
Firm - Assessed as such ... ... ... ... ..... bmissions filed by the learned Departmental Representative, we are of the considered opinion that this Bench has adjudicated the issue in dispute on 22-7-2009 in the case of the Reshi Construction Co. (supra) in which the assessment was also completed under section 144 of the Act and the Assessing Officer disallowed the interest and salary to the assessee since the books of account have not been produced before him but later on the assessee produced the same and this Bench had allowed the deduction of interest and salary to the assessee. Keeping in view the facts and the circumstances of the present case, we are of the considered opinion that the issue involved in the present case is squarely covered by the decision of the Tribunal, Amritsar Bench, Amritsar, in the case of the Reshi Construction Co. (supra) and respectfully following the same, the addition in dispute is deleted by allowing the ground No. 2. 7. In the result, the appeal filed by the assessee is partly allowed.
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2010 (5) TMI 678 - ITAT MUMBAI
Levy of Penalty u/s 271(1)(c) - bogus purchases - AO noticed that the assessee was making bogus purchases from various concerns belong to Mr. F.H. Rizvi and treated as bogus purchases for AY 1996-97 and levied penalty u/s 271(1)(c). CIT(A), confirmed the addition to the extent of 25 per cent of total purchases.
HELD THAT:- We find that the assessee had tried to substantiate its claim by filing affidavit and other material in quantum matter. In quantum matter, the CIT(A) asked the assessee to produce Mr. Rizwi for examination but the assessee failed to do so. The AO has also mentioned in the remand report, which was reproduced by the CIT(A) in quantum order that summons u/s 131 issued to Mr. Rizwi but the same was not complied by Mr. Rizwi. It was submitted by the AO that the assessee has not availed opportunity as he did not impress upon Shri Rizwi to attend before the AO.
In respect of quantum matter if the assessee failed to submit such material information to substantiate their claim addition could be sustained but this aspect of human probability tendency of non-co-operation by the parties after business transaction is over, is required to be considered while deciding bona fide aspect of the assessee in penalty matter u/s 271(1)(c). The case of the assessee falls under the essence of Part B of the Explanation. The assessee offered reasonable explanation.
The AO has not given finding based on some contradictory evidence to disapprove that explanation offered by the assessee which the assessee is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him. Penalty u/s 271(1)(c) cannot be levied unless the case is strictly covered by the provisions of section 271(1)(c).
There is no finding that that the assessee has concealed particulars of income or furnished inaccurate particulars of income, discussed above. Under the circumstances, it cannot be held that the AO has found that the assessee has concealed particulars of income or furnished inaccurate particulars of income.
We find that this is not a fit case for levy of penalty u/s 271(1)(c). We hereby cancel the penalties made by the AO u/s 271(1)(c) in all the three years under consideration.
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2010 (5) TMI 677 - ITAT DELHI
Deduction of tax at source - Commission or brokerage, etc. ... ... ... ... ..... ssment year 2005-06. Following our aforesaid order, we allow this ground of the assessee. 11. Apropos the issue about section 194C, it has not been contended by learned DR that the printing material purchased by the assessee can be treated as work of any special skill or secrecy, the transaction between the assessee and printing material suppliers being one of sale and purchase of goods under Sale of Goods Act, the same is not liable for reduction under section 194C. Our view is fortified by Hon rsquo ble Delhi High Court judgment in the case of Dabur India Ltd. (supra). Respectfully, following the same, we hold that the assessee is not liable for TDS in respect of printing material purchased by it and this ground of assessee for assessment years 2004-05 and 2005-06 is allowed. In the result, the appeals of the assessee for assessment years 2004-05 and 2005-06 are allowed. 12. To sum up, the appeal of the revenue is dismissed and both the assessee rsquo s appeals are allowed.
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2010 (5) TMI 676 - ITAT MUMBAI
Penalty - For concealment of income ... ... ... ... ..... ances, claim of the assessee that confirmatory letters is sufficient compliance to the requirements under section 68 of the Act is not in accordance with law. An explanation tendered by the assessee, in the penalty proceedings should be substantiated with documentary evidence which should prima facie show that the credits are genuine. In the instant case, Assessing Officer mentioned that most of the loan creditors are not income-tax assessees and the assessee failed to establish identity and genuineness of the creditors, apart from the fact that they do not have creditworthiness. Therefore, it cannot be said that explanation of the assessee is substantiated with proper material and, thus, Assessing Officer was justified in levying penalty under section 271(1)(c) of the Act with reference to the addition made under section 68 of the Act. Order passed by the learned CIT(A) on this aspect is, therefore, set aside. 28. In the result, appeal filed by the revenue is partly allowed.
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2010 (5) TMI 675 - ITAT MUMBAI
Double taxation relief ... ... ... ... ..... tled to invoke the provision most beneficial to him, be they the provisions of a treaty or statute. Since the activity fell short of 120 days, the applicant could not be said to have a permanent establishment in India. The element of permanence in relation to an establishment, if any, would be attracted under article 5(2)(k) only if the installation project continues for a period of more than 120 days and that condition was not satisfied here. It was not disputed that earnings from the work performed by the applicant constituted business profits. However, in the absence of a permanent establishment, article 7 of the DTAA would not be attracted. As such, there was no tax liability on the applicant for the business profits earned by it. Thus, the ratio of this decision is squarely applicable to the facts of the assessee. Therefore, we find nothing wrong in the order of ld. CIT(A) and, accordingly, uphold the same. 11. In the result, appeal filed by the revenue stands dismissed.
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2010 (5) TMI 674 - ITAT MUMBAI
Income - Deemed to accrue or arise in India ... ... ... ... ..... as used by HAM for the purpose of business. Mere dry lease of an equipment does not result in a PE. Thus, we uphold the findings of the first appellate authority on this issue and dismiss the appeal of the revenue on this ground. 24. Coming to the ground on the issue of levy of interest under section 234B, the same is consequential in nature. 25. Thus, the appeal for the assessment year 1999-2000 by the revenue is dismissed. 26. For the assessment year 2000-01 in ITA No. 8888/Mum./2004, the issue is identical and for the detailed reasons given for the assessment year 2002-03 in ITA No. 2118/Mum./2006 and for assessment year 2001-02 in ITA No. 1542/Mum./2005, we dismiss the revenue appeals. 27. Coming to the C.O. No. 256/Mum./2006, the sole issue is levy of interest under section 234B. The same is dismissed as the levy is mandatory and consequential in nature. 28. In the result, the appeals of the revenue are dismissed and the cross-objection of the assessee is also dismissed.
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2010 (5) TMI 673 - ITAT HYDERABAD
Revision - Of orders prejudicial to interest of revenue ... ... ... ... ..... he decision of the Madras High Court in the case of Hindu Bank Karur Ltd. v. Addl. CIT 1976 103 ITR 553 . In view of the above, since the present order is made consequent to the order of the CIT passed under section 263 of the Act directing the Assessing Officer to redo the assessment only for a specific issues involved therein, the assessment made in pursuant to section 263 of the Act are only for the benefit of the revenue and not for the assessee. Only in the cases where the assessment order is erroneous and prejudicial to the interests of the revenue and not prejudicial to the interest of the assessee can be reopened under section 263 of the Act and the assessee is not eligible to claim any new benefit in the assessment proceedings pursuant to section 263 of the Act. Hence, the CIT(A) is not justified in allowing the aforesaid claim of the assessee while computing the book profit under section 115JA of the Act. 8. In the result, the appeal filed by the revenue is allowed.
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2010 (5) TMI 672 - ITAT DELHI
Cash credits ... ... ... ... ..... artment is free to reopen their individual assessments in accordance with law. This proposition is only confined to the amount received on account of share capital and not in respect of the unsecured loans or loan creditors. In the instant case before us, even the CIT(A) has given finding only with respect to the identity of the loan creditors and did not speak anything about the genuineness of the loan transaction nor with regard to creditworthiness of the loan creditor. We, accordingly, do not find any merit in the action of the CIT(A) for deleting the addition of Rs. 87.29 lakhs on account of loan creditors. In the fitness of things, we restore the addition made in respect of loan creditors amounting to Rs. 87.29 lakhs which was deleted by CIT(A) back to the file of Assessing Officer for deciding the same afresh as per law after affording reasonable opportunity to the assessee. 18. In the result, the appeal of the revenue is allowed in part, in terms indicated hereinabove.
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2010 (5) TMI 671 - ITAT HYDERABAD
Export oriented undertaking ... ... ... ... ..... ver, for the assessment year 2000-01 the unamended provisions of section 10B is applicable and income of E.O.U is totally exempted from the tax and it is not become part of the total income of the assessee for the assessment year 2000-01, as such, there is no question of set off of brought forward losses of earlier years with the income of the assessee in the current year. Accordingly, ground No. 3 in ITA No. 150/Hyd./2009 is dismissed. The ground No. 4 in this appeal related to Ground No. 3, consequently this ground also dismissed. 14. Respectfully following the above ratio laid down by the Tribunal in its order cited supra, we reverse the order of the CIT(A). Before us the AR relied on Dy. CIT v. Glenmark Laboratories Ltd. 2010 127 TTJ (Mum.) 719. The facts of the above case is entirely different from the facts of the present case. Hence, we decline to comment on this issue. 15. In the result, the appeal of the assessee is dismissed and the revenue appeal is partly allowed.
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2010 (5) TMI 670 - ITAT MUMBAI
Double taxation relief ... ... ... ... ..... owed, ground No. 2 becomes academic in nature as the entire income would be exempted, otherwise the rate at which tax is to be levied on interest income is to be decided. The learned D.R. accepted that the Assessing Officer has given a factual finding that tax rate to be accepted at 15 per cent. Accordingly he has no objection if the ground is decided by the Bench or remitted it back to the CIT(A). Since the ground No. 1 is held against the assessee and interest income is held liable to be taxed under Article 11, as provided in Article 11(2) the tax on same can be charged at 15 per cent of the gross amount. The Assessing Officer has also given a factual finding and tax rate is at 15 per cent. In view of this, Assessing Officer is directed to levy the tax at 15 per cent of the gross amount and not at 40 per cent as was done by him in the order. To that extent, ground No. 2 is allowed. 20. In the result, revenue appeal is dismissed and assessee rsquo s appeal is partly allowed.
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2010 (5) TMI 669 - ITAT HYDERABAD
Charitable or religious trust - Registration procedure ... ... ... ... ..... n, the DIT(E) has observed that the Hon rsquo ble High Court has introduced a new concept known as charitable religious trust . According to him, trust has to be either wholly religious or wholly charitable. Otherwise, it is not entitled for registration and the Hon rsquo ble Gujarat High Court did not consider the word or which has been employed under section 11(1)(a) and section 12 of the Act and the Hon rsquo ble High Court has interpreted section 13(1)(b) of the Act. We are unable to agree with the DIT(E) as to how and why the judgment of the Hon rsquo ble Gujarat High Court is not applicable to the facts of the present case. There is no such bar since there is no jurisdictional High Court rsquo s judgment on this issue, to the contrary and this observation of the DIT(E) is unwarranted. Consequently, we direct the DIT(E) to grant registration to the assessee-society subject to fulfilment of other conditions, if any. 7. In the result, the appeal of the assessee is allowed.
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2010 (5) TMI 668 - ITAT HYDERABAD
Deduction u/s 80 HHC - book profit and not the income - HELD THAT:- this is an appeal against the order passed u/s 263. The original assessment order has been passed u/s 143(3) for the AY 2002-03. The AO after proper appraisal of the material on record taken one view. The action taken by CIT u/s 263 is not justified because different view was possible on the said issues considered by CIT. In the case of CIT v. Max India Ltd.[2007 (11) TMI 12 - SUPREME COURT] held that where the order passed by the AO was a possible view supported by subsequent decision of Tribunal it was not amenable to revisional jurisdiction of CIT.
In the present case, there are various decisions available at the time of completing assessment which are in favour of the assessee on the impugned issues. In the case of Starchik Specialities Ltd.[2003 (7) TMI 283 - ITAT HYDERABAD-B], Govind Rubber (P.) Ltd.’s case [2003 (1) TMI 231 - ITAT BOMBAY-E], Tushako Pumps Ltd. v. Asstt. CIT [2005 (1) TMI 586 - ITAT MUMBAI] and in the case of Syncome Formulations (I) Ltd [2007 (3) TMI 288 - ITAT BOMBAY-H], wherein it was held that the deduction u/s 80HHC deserves to be computed by taking into consideration book profit and cannot be restricted to the profits of the business as comupted under the normal provisions of the IT Act.
Therefore, we are of the opinion, that the AO’s decisions are based on various judicial pronouncements though decision of the AO is prejudicial to the revenue, it cannot be treated as erroneous. In view of this, in our opinion, the CIT cannot invoke the provisions of section 263 to set right the errors committed by the AO. In the result, the appeal of the assessee is allowed.
Addition to the book profit - provision for gratuity - an ascertained liability - we are of the opinion that this issue is required to be re-examined by the AO. Hence, we set aside this issue to the file of AO to see the crystallization of the liabilities in the assessment year under consideration. If the liabilities towards gratuity is crystallized in the assessment year under consideration, then it is to be considered as ascertained liability and claim of the assessee is to be allowed. Accordingly, this issue is set aside to the file of AO with a direction to assessee to place necessary evidence to prove that the liabilities are ascertained.
In the result, the appeal of the assessee is partly allowed.
Unabsorbed business losses - deducted u/s 80HHC - calculating the book profit u/s115JA - The AO set off the losses of earlier year while computing the deduction u/s 80HHC on book profit determined u/s115JA while passing order u/s 143(3). In our opinion, the lower authorities taken correct view since section 80AB, which is also in Chapter VI-A, starting with the words ‘where any deduction is required to be made or allowed under any section of this Chapter’ would include section 80HHC also. Further, section 80AB uses the words ‘notwithstanding anything contained in that section’. Thus, section 80AB has been given an overriding effect over all other sections in Chapter VI-A. But, section 80HHC does not provide that its provisions are to prevail over section 80AB or over any other provisions of the Act. Section 80HHC would thus be governed by section 80AB.
The unabsorbed business losses, unabsorbed depreciation etc., should be taken into account while computing the income for the purpose of deduction u/s 80HHC. Moreso, these grounds are covered against the assessee by the Judgment of Supreme Court in the case of IPCA Laboratory Ltd. v. Dy. CIT [2004 (3) TMI 9 - SUPREME COURT] and in the case of Shirke Construction Equipment Ltd. [2007 (5) TMI 194 - SUPREME COURT]. Accordingly, the grounds are dismissed.
Interest u/s 234B and 234C - HELD THAT:- This issue is covered in favour of the assessee by the judgment of Hon’ble Supreme Court in the case of CIT v. Kwality Biscuits Ltd.[2006 (4) TMI 121 - SC ORDER] wherein it was held that when assessee is liable for to pay tax u/s 115J, interest u/s 243 B & C cannot be charged. This issue decided in favour of the assessee and the ground taken by the assessee on this issue is allowed.
Determination of total turnover - deduction u/s 80HHC - HELD THAT:- The assessee raised additional grounds relating to the computation of total turnover which includes sales tax and also contended before the CIT(A) that these issues are borne out of assessment order and prayed to adjudicate the issue but he failed to adjudicate the same. In our opinion, the CIT(A) must have considered these issues while deciding the appeal. His jurisdiction is co-terminus with AO. Accordingly, we set aside this issue to the file of AO for fresh consideration.
In the result, the appeal of the assessee is partly allowed.
Deduction of loss - HELD THAT:- On perusal of the profit and loss account, the CIT(A) came to the conclusion that no such loss of the earlier year company has been brought forward in the profit and loss account of the relevant year and also he was of the opinion that the judgment of Hon’ble Supreme Court in the case of Apollo Tyres Ltd. v. CIT [2002 (5) TMI 5 - SUPREME COURT] as per which profit arrived at the profit and loss account which is prepared in accordance with the Companies Act has to be adopted for the purpose of book profit.
As no such loss of earlier company reflected in the profit and loss account of the relevant year, the CIT(A) held that there is no justification for deduction of such loss in arriving at the book profit of this year. However, before us the authorised representative submitted that the loss of the Deccan are merged in the final accounts of the assessee company on the date of merger of Deccan Drugs Ltd., with the assessee company. As such, the said loss to be considered for deduction while arriving at book profit of the assessee company.
In our opinion, the argument of the assessee is to be examined by the lower authorities w.r.t. the evidence in support of that claim. Accordingly, We remit back matter to AO for fresh consideration.
Disallowance of depreciation - state subsidy received - HELD THAT:- If the payment of subsidy is not related to actual acquisition of assets and the subsidy is granted on capital investment on land, building and machinery, then it cannot be reduced from the value of the asset (written down value). Further, if there is no special mention regarding the intention to adjust the said subsidy against the actual cost of machinery, then that amount of subsidy cannot be reduced from the cost of the plant and machinery.
Hence, we set aside this issue to the file of AO to examine the terms and conditions of sanction of subsidy and if the subsidy was not given to meet the cost of any specific capital asset and the amount of subsidy so received was quantified according to the investment made by the assessee in plant and machinery and building, the claim of the assessee to be allowed. With this direction, the issue set aside to the file of AO for fresh consideration.
In the result, the appeals of the assessees are allowed.
-
2010 (5) TMI 667 - ITAT AHMEDABAD
Bad debts, Business loss/deductions, Cash credits ... ... ... ... ..... nature and source of credits is proved. In view of this, we hold that ld. CIT(A) was not justified in deleting the addition. This addition is, accordingly, restored. 33. As a result, appeal filed by the revenue is partly allowed. ITA. No. 615/Ahd./05 (Assessee rsquo s appeal) 34. Ground No. 1 is not pressed and is, therefore, rejected. 35. Ground Nos. 2, 3, 4 and 5 relate to the claim under section 36(1)(vii), 36(2) and in the alternative under section 28. As per the discussion in Departmental appeal, entire claim of Rs. 5,77,44,844 is allowed. Therefore, these three grounds are allowed in favour of the assessee. 36. Ground No. 6 relates to charging of interest under sections 234A, 234B, 234C and 234D. Charging of interest is consequential and, therefore, rejected. 37. Ground No. 7 is general in nature is, therefore, rejected. 38. As a result, appeal filed by the assessee is partly allowed. 39. As a result, appeal of the assessee as well as of revenue both are partly allowed.
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2010 (5) TMI 666 - ITAT BANGALORE
Income taxable in India - Income from sale of software as income from royalty chargeable under the IT Act/DTAA - assessees had supplied off-the-shelf shrink-wrapped software to Infosys Technologies Ltd., (ITL) in India - assessee did not find any reason to declare any income in India in the hands of the assessees for the reason that the software sold by the company to Indian entities were shrink-wrapped off-the-shelf software which is only the sale of copies of copyrighted articles
HELD THAT:- A very similar issue in similar circumstances was considered by Larger Bench of the ITAT, Delhi Bench ‘A’ (Special Bench) in the case of Motorola Inc. [2005 (6) TMI 226 - ITAT DELHI-A] the cellular operator did not transfer or load any part of the software as to the SIM card or the handset of the subscriber. That established that the software supplied by the assessee to the cellular operator was installed on the hardware and no part of it was loaded on the SIM card or the handset of the subscriber. The Tribunal held that the crux of the issue was whether the payment was for a copyright or for a copyrighted article. If it was for a copyright, it should be classified as ‘Royalty’ both under the Income-tax Act and under the DTAA and it would be taxable in the hands of the assessee on that basis. If the payment was for a copyrighted article, then it only represented the purchase price of the article and, therefore, could not be considered as ‘Royalty’, either under the, IT Act or under the DTAA.
The very same principle has been upheld by the Authority for Advance Rulings in the case of Airports Authority of India [2010 (3) TMI 110 - AUTHORITY FOR ADVANCE RULINGS] where they have held that the earnings of contract is only purchase of certain copyrighted software on outright basis and when there is no PE in India, royalty income does not arise either within the framework of the Income-tax Act or under the realm of DTAA. In the present case, there is no doubt that both the assesses do not have any PE in India.
Also in the case of Sonata Software Ltd. [2005 (4) TMI 530 - ITAT BANGALORE] software packages were brought in India for the purpose of distributing to ultimate users and imports were made from non-residents. The Tribunal held that the payments partook the character of purchase and sale of goods; and as there is no PE in India, it could be concluded that no income accrued or deemed to accrue or arise in India.
Therefore, in the facts and circumstances of the case, and in the light of the above binding decisions, we find that the sale of software cannot be treated as income from royalty either under the IT Act or under the terms of DTAA. Assessee appeal allowed.
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2010 (5) TMI 665 - ITAT AHMEDABAD
Penalty u/s 271 - disallowance for bad and doubtful debts - According to the AO, the assessee committed the default of concealment of its income due to furnishing inaccurate - CIT(A) confirmed penalty levy
HELD THAT:- The assessee is a Government company having professional assistance in computation of its income, and its accounts are compulsorily subjected to audit. In the absence of any details/evidence from the assessee, we fail to appreciate how such deductions could have been left out while computing the income of the assessee company and how these escaped the attention of the auditors of the company. Since the onus placed upon the assessee to explain the difference in the returned income and finally assessed income has not been discharged, in terms of Explanation 1(B) to section 271(1)(c), the amount added in computing the total income is deemed to represent income in respect of which particulars have bean concealed. The ld. AR on behalf of the assessee has not referred us to any material so as to enable us to take a different view in the matter.
We, therefore, have no alternative but to uphold the order of the ld. CIT (A) insofar as levy of penalty on the amount in relation to claim for deduction of provision for bad and doubtful debts and provision for diminution in value of investments, is concerned.
Disallowance of 1 per cent of administrative expenses - We are of the opinion that levy of penalty of the aforesaid disallowance made by the AO at the rate of 10 per cent of the total expenses and reduced to 1 per cent by the ld. CIT(A) is not justified.
The provisions of section 271(1)(c) are not attracted in cases where the income of an assessee is assessed on estimate basis and additions are made therein. CIT v. Sangrur Vanaspati Ltd. [2008 (2) TMI 285 - PUNJAB AND HARYANA HIGH COURT]. The decisions in the case of Sahyog Sahakari Shram Samvida Samiti Ltd.[2007 (5) TMI 281 - ITAT LUCKNOW-A] and Raj Bans Singh’s case[2004 (8) TMI 73 - ALLAHABAD HIGH COURT] support this view.
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