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Showing 361 to 380 of 1076 Records

• 2014 (10) TMI 721
  

  Maintainability of revision application before the revisional authority - matter related to rebate of duty of excise on goods exported or on excisable material used in the manufacture of goods which are exported - scope of section section 35EE - Held that:- A bare perusal of sub-section (1) of section 35EE shows that the Central Government may, on the application of any person aggrieved by any order passed under section 35A where the order is of the nature referred to in first proviso to sub-section (1) of section 35B, annul or modify such order. The argument before the revisional authority was that the Petitioner before us may be person aggrieved but since the order passed is in the nature stipulated by the proviso to sub-section (1) of section 35B, the revision application does not lie.

  However, the revisional authority while upholding the objection lost sight of sub-section (1a) of section 35EE and that empowers the Commissioner of Central Excise to prefer an application to the Central Government for revision of the order passed under section 35A. Sub-section (1A) of section 35EE has been brought in the statute book with effect from 11th May, 1999. That does not proceed to indicate that a specific order under section 35A could only be revised and not otherwise. Section 35EE(1a) permits invocation of the revisional power of the Central Government, in case the order is passed by the Commissioner (Appeals) and on the satisfaction or opinion of the Commissioner of Central Excise that the said order is not legal or appropriate. It is in these terms that the present application was filed. In these circumstances, the objection could not have been raised as to the maintainability of the revision application.

  The revision application is maintainable and could not have been dismissed for want of jurisdiction in the Central Government. The impugned order is therefore quashed and set aside and the revision application filed by the Petitioner is restored to the file and the same be decided afresh on merits and in accordance with law. - Matter Restored - Decided in favour of Revenue.

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• 2014 (10) TMI 720
  

  Duty evasion - Clandestine removal of goods - Reversal of MODVAT Credit - Held that:- during the period of 21.04.1999 to 26.08.1999, the appellants did job work of 1,29,430 kgs. of inputs used for the manufacture of fabric, bags and wastage for a particular period. The total weight of input used must be equal to the weight of finished product manufactured including wastage and that there is no process loss. The most vital evidence in the instant case is the job work done by the party for different customers from time to time.

  Department has adopted the best possible method i.e. bale weighment charts which means that the average weighment was done on the actual basis and not with hypothetical basis on purchase order etc. From the record, it also appears that the appellants claimed to have consumed 11,134 kgs. of fabrics for packing purposes but their claim had been rightly not accepted by the adjudicating authority. They never informed about this fact to the department, even no entry in this regard was made by them in the statutory records. They also did not pay the duty/reverse the Modvat Credit for this purpose. In fact, they wanted to take advantage on their own fault by not maintaining the record for captive consumption properly. Their record showed that they had no balance of fabrics after 13.8.1998. Whatever fabrics was manufactured till 13.8.1998, they consumed the same in the manufacture of cement/fertilizers bags, during the period 1.8.1998 to 13.8.1998. Similarly, on 17.08.1998, 5000 fertilizer bags were found in excess of the recorded balance and again on 19.3.1999, excess stock of 3899.8 kgs. fabric, 37,739 cement bags and 1,550 kgs. of wastage were found. This circumstance is enough to adversely reflect on the working of the appellants.

  Appellant has manufactured and removed the goods without payment of duty as per the details given in the order of authorities below. The circumstances goes long way coupled with other materials are sufficient to prove that there had been unaccounted production and removal of the goods in clandestine manner by the appellant during the period in question without payment of duty. When it is so, then we find no reason to interfere with the impugned order passed by the Tribunal. Hence, the same is hereby sustained - Decided against assessee.

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• 2014 (10) TMI 719
  

  Cancellation of liquor license - Validity of order passed - Mandatory requirements not fulfilled - Held that:- section 48 clearly places an obligation upon the authorities prescribed therein to enter inspect any place in which any licensed manufacturer carries on the manufacture of or stores any intoxicant but such entry and inspection can only be made within the hours during which sale is permitted, and at any other time during which the same may be open, the authority has to record his reasons. In the present case the raid was admittedly conducted during the period when the shop was required to be closed and even if the shop was found open in the middle of the night recording of reasons by the authority was necessary. None of the impugned orders indicate that any reasons were recorded by the competent authority and therefore, in my opinion the recording of reasons under Section 48 being absolutely mandatory and the same have not been complied with the entire action in cancelling the liquor license of the petitioner as well as the appellate order and the revisional order are illegal and without jurisdiction - Decided in favour of assessee.

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• 2014 (10) TMI 718
  

  CENVAT Credit - Debit notes - Credit on ethyl alcohol - Captive consumption - Held that:- Debit notes raised every month by the appellant to the Superintendent of Division III of Nasik that the molasses used in manufacture of ethyl alcohol was systematically reversed every month either from RG-23 account or from PLA account and intimated to the department. We have seen the copies of the debit notes. One debit note No. 90/03-04 dated 07.06.2003 bears the stamp of Inspector of the Range. In any case the authenticity of the debit notes has not contested by the Revenue. It is seen from the documents submitted in the appeal that Superintendent Range I had directed the appellant to reverse proportionate credit as per the provisions of then Rule 57CC of the Central Excise Rules which provided for the procedure of payment of duty on inputs used in the manufacture of exempted as well as dutiable final products. On this basis, the appellant was reversing the credit on molasses every month and intimating the department by means of the debit notes. The total amount of duty of ₹ 83,95,165/- on quantity of 16790.330 MT's of molasses has admittedly been paid. Therefore, the demand of duty on molasses used in the manufacture of exempted ethyl alcohol is not sustainable - Decided in favour of assessee.

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• 2014 (10) TMI 717
  

  Suo moto credit - earlier when objected by the department, assessee reversed the credit with interest - after winning the appeal he took the re-credit of amount reversed earlier with interest - Held that:- When service tax was not liable to be paid, assessee should not have been made to pay. Having made them to pay, credit should have been allowed gracefully. Having denied the credit, when they won the appeal, they should have been advised to reverse the suo moto credit taken and file a refund claim which they would have done since when department wrote a letter asking them whether they have taken suo moto credit, time was still available for filing refund claim.

  When advice was given to the assessee it was a wrong advice which resulted in proceedings initiated by the department itself. When advice was required to be given, no advice was given instead proceedings were initiated. To add insult to injury, Penalty that too mandatory penalty was imposed. We find approach of the department is not at all correct. Strictly speaking, legally, the credit of interest on CENVAT credit availed is also wrong because only credit could have been taken which was reversed at the insistence of the department and not the interest paid. Nevertheless in this case since the entire proceedings was unnecessary and whole litigation process was unnecessary and the amount recovered itself was not at all recoverable, we consider that at some stage the matter should be closed - there is absolutely no revenue loss caused to the Revenue so far - Decided in favour of assessee.

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• 2014 (10) TMI 716
  

  Suspension of the CHA licence - Regulation 20(3) of the Custom House Agents Licencing Regulations, 2004 - Held that:- as the Hon’ble High Court of Madras had already set aside the enquiry proceedings, the impugned orders of suspension of CHA Licence under the provisions of Regulation 20(3) of the CHALR, 2004, is set aside. The appeal filed by the appellant is allowed - Decided in favour of appellants.

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• 2014 (10) TMI 715
  

  Denial of the extension of the warehousing period - Whether the appellant was given reasonable opportunity of personal hearing before passing the impugned order and whether the principles of natural justice is complied - Held that:- impugned order has been passed by the adjudicating authority without giving any proper opportunity of hearing to explain their case in person. It is also seen that the appellant vide letter dated 27.03.2013, had submitted before the Commissioner that they have obtained necessary authorization (Zero Duty EPCG Licence). On perusal of the said authorization No. 2230002152, it was issued on 20.03.2013 by the JDDGFT for import under ‘Zero Duty EPCG Scheme’ - adjudicating authority had passed the impugned order without giving any proper opportunity of hearing, it is appropriate in the interest of justice to remand the matter to the original authority to decide afresh after considering all the grounds including the notices issued under 72(2) of Customs Act, after giving proper opportunity of hearing to the appellants and pass the order as expeditiously as possible within eight weeks from the date of receipt of this order - Decided in favour of assessee.

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• 2014 (10) TMI 714
  

  Waiver of pre-deposit of duty, interest and penalty - Notification No.104/94 dated 16.03.1994 - Held that:- Since the containers along with the goods are still in the custody of the Revenue, prima facie interest of the Revenue is safeguarded. Accordingly, we grant waiver of pre-deposit of the entire amount of duty, interest and penalty and stay recovery thereof during the pendency of the appeal - Stay granted.

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• 2014 (10) TMI 713
  

  Penalty u/s 112 - Seizure of goods - Held that:- Adjudicating Authority first to satisfy himself that the statement recorded during the course of investigation and thereafter if necessary allow the cross-examination of the persons whose statement has been relied upon. As in this case, this has not happened. Moreover, the statement of Shri Sujit B. Satam has not directly implicated the appellant as accused for the impugned consignment. With regard to the earlier consignments, where the corroborative statement has been recorded by the investigating team, in this case, it has held that for the earlier consignment, there is no evidence on record, same cannot be confiscated. When this finding has been made by the Adjudicating Authority and same has been accepted by the department. In these circumstances, no penalty is warranted against the appellant as the appellant is not importer (as no bill of entry is filed), no inculpatory statement is recorded for the impugned consignment and the provisions of Section 138B of the Act were not followed - Decided in favour of assessee.

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• 2014 (10) TMI 712
  

  Seizure of goods - import of restricted goods - Commissioner refused the provisional release of the goods seized by DRI to Shri Manjit Singh on the ground that M/s. KAM, M/s. Khyati and M/s. KM International are non-existent and the respondent, Shri Manjit Singh is not a bona fide owner of the goods - Held that:- Just by furnishing affidavits claiming to be the owner, the respondent does not become bona fide owner of the seized goods. We also take note of the fact that the Commissioner in his earlier order dated 29-10-2013 addressed to the Advocate, Shri Yogesh M. Rohira of the respondent had mentioned that the goods cannot be provisionally released to Shri Manjit Singh, as he is not the bona fide owner of the imported goods. Though in subsequent order dated 5-11-2017 the Commissioner reversing his earlier stand, has ordered provisional release to the respondent, he has not stated as to how he is satisfied that the respondent is the bona fide owner of the goods. Provisional release of the goods imported in the name of M/s. KAM Enterprises, M/s. Khyati Enterprises, M/s. K.M. International, M/s. Satyam Enterprises and M/s. Vaishali Enterprises has been ordered to the respondent, Shri Manjit Singh on the basis of the affidavits regarding ownership already submitted by him and the provisional release of the goods imported in the name of M/s. Aashavi Enterprises and M/s. Dhruv Enterprises has been ordered to the respondent, Shri Manjit Singh in the event of production of the necessary affidavits/authorization.

  When the importers are fictitious persons and the value of the goods has been grossly undeclared and the adjudication of the matter may result in huge duty demands, against the importers, releasing the goods on provisional basis to a person, who is not the owner of the goods would certainly jeopardize the interests of the Revenue, as, if provisional release is made and the respondent, Shri Manjit Singh vanishes with the goods and subsequently duty demands are confirmed, the department will neither have the goods nor the persons from whom the duty can be recovered. impugned order is contrary to the provisions of the law and in fact is a perverse order - Decided in favour of Revenue.

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• 2014 (10) TMI 711
  

  Suppressed income - undisclosed income towards collection of amount of service tax on taxable services – Held that:- The AO has made addition as regards the difference between the sum credited in the P&L account on account of commission received from M/s. PCPL and as per confirmation received from M/s. PCPL - The bill clearly shows that the amount of bill was ₹ 1,08,36,000/- and service tax component was ₹ 13,39,330/- and the total of the bill thus comes to ₹ 1,21,75,330 - This bill was also before the AO - AO clearly failed to appreciate the reason of the difference noted by him - the difference was on account of service tax is also supported by the service tax return and tax payment challan accepted by the CIT(A) – there was no infirmity in the order of the CIT(A) – Decided against revenue.

  Commission received from Platinum Hospitality Pvt. Ltd & Astek Infracom Ltd. – Undisclosed income deleted – Held that:- Regarding the commission payment to M/s. AIL, the addition was solely on the basis of initial confirmation issued by M/s. Quantium Agencies Ltd. - CIT(A) observed that before the addition, it was necessary for the AO to ascertain the true and correct facts - The CIT(A) has noted that there was no material available in assessment record regarding the existence of M/s. Astek Infracom Ltd (M/s. AIL) - The initial confirmation of M/s. Quantium Agencies Ltd was later on explained by them as a clerical mistake as services were rendered in connection with M/s. PHSPL – the order of the CIT(A) is upheld that there is no evidence on record that the assessee has rendered services in connection with arranging of bank loan to M/s. AIL – Decided against revenue.

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• 2014 (10) TMI 710
  

  Reference made u/s 55A - Transaction of immovable property against the actual deed of conveyance – Adoption of FMV as on 01.04.1981 - Computation of LTCG – Held that:- The long term capital gains arising out of transaction of this property will be assessed in AY 2006-07 and not in AY 2005-06 - following the decision in Commissioner of Income-tax Versus Umedbhai International P. Ltd. [2010 (2) TMI 631 - Calcutta High Court] - once the assessee has filed approved valuer's report, which is in the case of the assessee is dated 18.10.2006 valuing the property as on 01.04.1981 at ₹ 24,03,838/-, is final - No further reference u/s. 55A can be made for estimating the fair market value of the property for determining the value as on 01.04.1981 unless and until the AO forms an opinion that value shown by the assessee was less than fair market value – Decided against revenue.

  Reference made to DVO u/s 50C(2) - Whether the value adopted by the AO based on deemed value determined on the basis of circle rates by stamp valuation authority at ₹ 1,16,58,995/- is to be taken for the purpose of computation of long term capital gain or the property is to be referred to DVO for determining the fair market value in term of section 50C of the Act – Held that:- Following the decision in Sunil Kumar Agarwal Versus Commissioner of Income Tax, Siliguri [2014 (6) TMI 13 - CALCUTTA HIGH COURT] - the value of the property estimated by DVO as on the date of sale is to be taken as the final consideration for the purpose of computation of Long Term Capital Gains u/s. 50C of the Act - The assessee sold the property for a total consideration of ₹ 25 lacs during the relevant financial year relevant to this assessment year - The AO as well as CIT(A) has taken the value as adopted by Sub-registrar based on circle rate for assessing the long term capital gain arising out of sale of the above property - the value of the property estimated by DVO as on the date of sale is to be taken as the final consideration for the purpose of computation of Long Term Capital Gains u/s. 50C(2) of the Act – the AO is directed to refer the matter to DVO u/s 50C(2) of the Act and also allow opportunity of being heard to the assessee – Decided in favour of assessee.

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• 2014 (10) TMI 709
  

  Rejection of books of accounts - Addition u/s 40A(3) – Computation of income as per GP rate – Held that:- When the income of the assessee was computed by applying gross profit rate, there is no need to look into the provisions of Section 40A(3) of the Act, inasmuch as that, when the gross profit rate is applied, then it takes care of the expenditure otherwise by way of crossed cheques - once books of accounts are rejected, no further disallowance can be made – relying upon Commissioner of Income-Tax. Versus Smt. Santosh Jain [2006 (8) TMI 167 - PUNJAB AND HARYANA High Court] - the provisions of Section 40(3) of the Act could not be invoked in the estimation of gross profit – thus, the discretion exercised by the Tribunal is based on relevant consideration and does not suffer from any legal infirmity – as such no substantial question of law would arise for determination – Decided against revenue.

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• 2014 (10) TMI 708
  

  Entitlement for claim of deduction u/s 80HH and 80I – Claim can be made independent of set off and carry forward provision or not – Whether the deductions under the respective provisions must be made from the respective incomes of the concerned sources or the aggregate of both - Held that:- The intention of Section 80AB is to maintain the distinction between the respective sources of income, referable to the sections contained in heading C of Chapter VI-A - The intention appears to be to discourage or to prevent an assessee from avoiding tax by posting the profits earned in one industry, against the losses incurred in the other - the hard work put by an entrepreneur resulting in profits in an industry cannot be wiped away if he suffered losses in another industry of the same category – following the decision in M/s Synco Industries Ltd Versus Assessing Officer [2008 (3) TMI 13 - Supreme court] - It is often encountered in High Courts that two or more mutually irreconcilable decisions of the Supreme Court are cited - the inviolable recourse is to apply the earliest view as the succeeding ones would fall in the category of per incuriam – the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (10) TMI 707
  

  Principles of natural justice not followed - Opportunity of being heard - Validity of direction made by AO for audit of accounts u/s 142(2A) - Whether Section 142(2A) of the Act renders it imperative that before passing an order an AO is required to afford a reasonable opportunity of being heard to an assessee – Held that:- An opportunity of being heard was not granted to the assessee thereby prohibiting the AO from exercising power u/s 142(2A) of the Act, to order audit of the assessee's accounts by an auditor nominated by the AO – the contention of the revenue cannot be accepted that during the process of examination of accounts, spread over the period of six months during which various queries were raised with respect to the accounts, may be considered as an opportunity of hearing, disregards the fact that a hearing is to be afforded after the AO forms a prima-facie opinion, based upon credible material that the accounts produced by the assessee require to be audited by an auditor nominated by the department - The AO formed such an opinion and served a show cause notice upon the assessee but thereafter did not afford an opportunity of being heard - The absence of an opportunity of being heard cannot be cured by reference to queries that preceded the show cause notice – thus, the order is to be set aside though department would be at liberty to proceed afresh/further and if permissible in law – Decided in favour of assessee.

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• 2014 (10) TMI 706
  

  Sum received as written off amount – Cessation of liability or not - Whether the Tribunal was correct in holding that the sum received by the assessee as fixed deposit during the earlier AY was written off by forfeiture during the current AY under a settlement resulted in cessation of a liability in the ordinary course of the business of the assessee resulting in income liable to tax – Held that:- As decided in ISKRAEMECO REGENT LTD. Vs COMMISSIONER OF INCOME TAX [2010 (11) TMI 43 - Madras High Court] - The assessee received the deposits which were repayable with interest - The assessee sustained loss in the business - They framed a scheme of compromise/arrangement - During the course of such a claim before the High Court, the assessee entered into an arrangement with the depositors who were willing to receive a portion of the amount deposited by them towards settlement of their claim - Therefore, those depositors were paid a portion of the money which they had deposited - With such payment, the entire liability to pay the amount received stood extinguished.

  By extinguishment of the liability, the assessee did not receive any amount either by forfeiture or by discount and it is a case of sheer inability to pay the amount received by way of deposits - though such rebate or remission has benefitted the assessee insofar as discharging his liability to the depositor, in reality it did not result in any income at the hands of the assessee unless there is accrual or receipt of income by the assessee, it would not constitute income for the purpose of levy of tax - The income to be taxed under the Act should be real income and not fictional one - the tribunal was justified in holding that the balance amount of deposit which was not repaid under the arrangement, did not constitute an income and therefore, the assessee is not liable to pay any tax under the context – Decided against revenue.

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• 2014 (10) TMI 705
  

  Grant of registration u/s 12AA - Objects of the trust deed was never amended - Whether the Tribunal was justified in upholding the order of CIT granting registration u/s 12AA from the date of amendment of trust deed – Held that:- The registration was initially declined on the ground that CCIT was not satisfied in regard to genuineness of the objects of the trust and since the assessee was not able to establish that the trust was indeed carrying on an activity for the benefit of the general public - Subsequently, a supplementary trust deed was executed on 20 April 2013 - It was in view of the execution of the deed on 20 April 2013 that the Tribunal, while acceding to the submission of the assessee, remanded the proceedings back - The CIT, on remand, has correctly granted registration w.e.f. 01 April 2013, upon being duly satisfied that the registration should be granted u/s 12AA of the Act after the necessary amendments were carried out – thus, no substantial question of law arises for consideration – Decided against assessee.

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• 2014 (10) TMI 704
  

  Waiver of interest – Adjustment of advance tax - Held that:- Revenue seized ₹ 21 lacs from M/s Ram Lal Kesar Dass, of which the petitioner and one Sh.Kesar Dass were partners - no credible reason has been assigned for rejecting the assessee's prayer for adjustment or for treating him differently - assessee's application has been rejected by referring to irrelevant provisions and facts that were not germane to the controversy and without considering whether benefit granted to the firm and Sh. Kesar Dass should also be granted to the assessee by adjusting the amount towards advance tax – thus, the matter is to be remitted back to the AO for fresh consideration – Decided in favour of assessee.

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• 2014 (10) TMI 703
  

  Validity of Power to transfer cases u/s 127 – Ten cases transferred – Direction made to file reply - Held that:- The assessee’s are directed to file reply/objection petition/ representation before the AO, to whom the case has been transferred vide order dated 18.05.2011, within a period of 30 days from today, challenging the jurisdiction to initiate the action under the provisions of Income Tax Act, 1961.

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• 2014 (10) TMI 702
  

  Correctness of ALP adjustment - The nature of assessee's trading activity – Applicability of berry ratio - Held that:- Even with respect to the trading transactions, which were claimed by the assessee to be in the nature of a service rather than a trading activity, the assessee will only be compared with such entities "which are similarly placed as the assessee including in respect of their functional and risk profile as well as working capital exposure would be chosen as comparables" - the unique intangible of sogo shosha business model, even if that can be treated as a unique intangible asset, belongs to the MCJ group and not the MCI individually - neither the assessee has performed any functions on or with respect to the goods traded by it, beyond holding flash title for the goods in some of the cases, nor has the assessee borne any significant risks associated with the goods so traded - All the functions, assets and risk of the assessee are quite reasonably reflected by the operating costs incurred and the value of goods traded does not have much of an impact on its analysis of FAR - The cost of goods sold would be relevant if and only if the assessee would have assumed any significant risks associated with such goods sold and when monetary impact of such risks is not reflected in operating expenses of the assessee - GAP International Sourcing India Pvt Ltd Vs ACIT [2012 (9) TMI 766 - ITAT DELHI] - a business entity does not assume any significant inventory risk or perform any functions on the goods traded or add any value to the same, by use of unique intangibles or otherwise, the right profit level indicator should be operating profit to operating expenses i.e. berry ratio.

  There is neither anything inappropriate in the use as such of berry ratio per se, nor there are any real issues with respect to accounting policies of the assessee vis-à-vis accounting policies of the comparables finally selected – there is nothing wrong in principle in use of berry ratio in the case of an assessee, though, in the absence of any specific comparables before us, it is not possible to visualize and deal with the difficulties with regard to variations in, and impact of, accounting policies in such cases - the use of berry ratio as PLI is appropriate to the facts and circumstances of this case, the objections taken by the authorities below to the use of berry ratio are unsustainable in law, and the adjustments for use of intangibles and locational savings are unwarranted - the computation of ALP so far as buy sell segment of assessee's activities are concerned stands restored to the assessment stage – thus, the matter is to be remitted back for fresh examination.

  Service fee/commission segment of assessee's activities – Held that:- It is impermissible to make notional additions in the cost base and thus take into account the costs which are not borne by the assessee – following the decision in LI And Fung India Pvt. Ltd. Versus Commissioner of Income Tax [2014 (1) TMI 501 - DELHI HIGH COURT] - It is no longer open to the revenue authorities to reconstruct the financial statements of the assessee by including the cost of products incurred by the AEs, in respect of which services are rendered, in its reconstructed financial statements, and then putting the hypothetical trading profits, so arrived at in these reconstructed financial statements, to the tests for determining arms' length price - the adjustments carried out in the cost base of ALP computation, in respect of service fee/commission segment, are indeed devoid of legally sustainable merits – the AO is directed to delete these adjustments.

  Correctness of disallowance u/s 40(a)(i) – Payments made to the foreign entities – No permanent establishment in India - Held that:- once it is an undisputed position that the recipient entities did not have any permanent establishment in India and the transactions are of purchases simplictor, the payments made to entities cannot give rise to any income taxable in India - It is so for the reason that it is only when the recipient has a PE in India under article 5 of India Japan tax treaty, it's income from trading can be brought to tax in India only when such an income is "directly or indirectly" attributable to such a PE – relying upon GE Technology Center Pvt Ltd. v. CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] - unless the non-resident has a tax liability in respect of income embedded in the payment, tax deduction obligation under section 195 cannot come into play – as the assessee did not have any obligation to deduct tax at source from these payments, the very foundation of disallowances ceases to hold good in law - The disallowances of payments to MC Metal Services Asia (Thailand), Metal One Corporation (Japan) and to Metal One (Asia) Pte Ltd Singapore is to be deleted.

  Payment made to foreign entities – TDS not deducted – Held that:- There is no failure on the part of the assessee in deducting tax at source u/s 195 and there is no cause of action for disallowance u/s 40(a)(ia) - the AO is directed to delete the disallowance u/s 40(a)(ia) in respect of payment to Mitsubishi Corporation Singapore, MC Tubular Inc USA, Thai MC Co Ltd, Thailand, and Peto Diamond Corporation, Japan.

  Payment made without deducting TDS – PE in India – Held that:- As decided in Daimlerchrysler India (P) Limited. Versus Deputy Commissioner Of Income-Tax [2009 (1) TMI 339 - ITAT PUNE-B] – so far as payments made to Japanese non-residents is concerned, there cannot be any discrimination so far as deductibility of the payments in the hands of the person making the payment is concerned - If appropriate tax withholding by the person making the payment is a sine qua non for business deduction so far as payments to non-residents are concerned, unless there is a similar pre-condition for deductibility of related expenses to the payments to residents as well, that disabling provision cannot be enforced in respect to payments made to non-residents either - no disallowance can be made in respect of payments made to a resident assessee, even without applicable deduction of tax at source, as long as related payments are taken into account by the recipients in computation of their income, and taxes in respect of such income are duly paid and related income tax returns are duly filed by the resident recipients u/s 139(1).

  Section 40(a)(i) does not have an exclusion clause similar to second proviso to Section 40(a)(ia), so far as payments made to nonresidents, without deduction of applicable tax deduction at source, are concerned, such payments will be disallowable even in a situation, as is the admitted factual position in this case, even when the non-resident recipient has taken into account such payments in computation of his income, has paid taxes on the same and duly filed, under section 139(1), related income tax return - so far examining discrimination to the non resident Japanese taxpayers is concerned, the right comparator will be a resident Indian taxpayer - it will be contrary to the scheme of the tax treaties in question that if rigour of disallowance of a payment, on account non-deduction of tax at source from the related payment, is to be relaxed in the situations in which the resident recipient has taken the said amount into account in computation of income, paid taxes on the income so computed and filed, under section 139(1), related income tax return, and yet the rigour of disallowance in respect of payments made, without appropriate deduction of tax at source, to the non-residents are concerned, is not relaxed in the cases in which the non-resident recipient has taken such receipts into account in computation of income, paid taxes on the income so computed and filed, under section 139(1), related income tax return - the AO was in error in making a disallowance – Decided in favour of assessee.

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