TMI Blog2009 (4) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(1) of the Income-tax Act, 1961 ('Act') under which adjustment to the returned income has been made and tax and interest under sections 234A, 234B and 234C of the Act has been charged. Therefore, the order of the learned Commissioner of Income-tax (Appeals) confirming the intimation issued by the learned Assessing Officer is bad in law and should be annulled. 2. The learned Commissioner of Income-tax (Appeals) has erred on the facts and circumstances of the case and in law in ignoring the disclosures made in the notes to the computation enclosed along with the return of income as per which the appellant has claimed that its income is not liable to be taxed in India. 3. The learned Commissioner of Income-tax (Appeals) has erred on the facts and circumstances of the case and in law confirming the levy of interest under sections 234A, 234B and 234C of the Act in the said intimation. 4. That on facts and in law, the order issued by the learned Commissioner of Income-tax (Appeals) confirming the adjustment made in the intimation issued by the learned Assessing Officer is bad in law and, inter alia, void ab initio." The brief facts of the case are that the assessee-company is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income is not liable to be taxed in India. After considering the facts and circumstances of the case and submission of the assessee and after perusing the assessment records, the Commissioner of Income-tax (Appeals) had taken a view that the Assessing Officer has not made any adjustment in the income offered by the assessee as per return and has computed the tax liability at the rate of 15 per cent. on the amount of income shown in the return filed by the assessee, and after adjusting the pre-paid taxes worked out the net demand including interest charged under sections 234A, 234B and 234C of the Act. The Commissioner of Income-tax (Appeals) further stated that as per the provisions of section 143(1), the Assessing Officer was required to compute tax or interest which is found due on the basis of such return, after adjustment of arty tax deducted at source, any advance tax paid, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest. The Commissioner of Income-tax (Appeals) further stated that on the basis of return filed by the assessee, the Assessing Officer accepted the income as it is without making any adjustment and has determined the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 143(1) of the Act can only be done after providing an opportunity of being heard to the assessee and after selecting the case for making assessment under section 143(3) of the Act and not by way of intimation issued under section 143(1) of the Act. He further submitted that the Assessing Officer has wrongly extended the scope of section 143(1) of the Act in raising a demand of tax of the assessee on the amount shown in the return of income when it was the assessee's case made out in the return of income itself that the assessee was not liable to pay any tax on the amount shown in the return of income. He further contended that the Assessing Officer had erred in reading the return of income filed by the assessee in piecemeal without looking to the return as a whole along with the computation of income and the note thereto enclosed with the return of income. He further submitted that when the assessee's claim denying of its liability to pay tax on the amount was made in the return itself the issue of charging the tax upon the income shown in the return of income cannot be regarded a subject-matter of determining prima facie any tax or interest as contemplated under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer has applied 15 per cent. rate of tax as per the Double Taxation Avoidance Agreement as so have been paid by the assessee under section 191 of the Act. He further submitted that when the assessee itself has paid tax at the rate of 15 per cent. under section 191 of the Act as per the Double Taxation Avoidance Agreement, the Assessing Officer has accepted the total income as declared by the assessee in the return and also calculated the tax liability at 15 per cent. In other words, the learned Departmental representative submitted that the Assessing Officer has neither made any adjustment in the return of income nor in the rate of tax at which rate tax was paid by the assessee itself under section 191 of the Act. He further submitted that the Assessing Officer was also justified in charging mandatory interest chargeable under sections 234A, 234B and 234C of the Act. We have heard both the parties and have gone through the orders of the authorities below. We have carefully perused the materials on record. We have deliberated on the position of law relating to the issue in hand before us. The present appeals are directed against the Commissioner of Income-tax (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment records of the assessee. The Commissioner of Income-tax (Appeals) found that in the statement of total income, which was enclosed with the return of income, the assessee had shown total tax liability as nil, and in the return also the tax payable was shown as nil. In his order, the Commissioner of Income-tax (Appeals) also reproduced the notes given below to the statement of income filed by the assessee along with the return of income. The copy of statement of total income along with the note has also been placed before us, and on perusal thereof, we find that the assessee has shown the total tax liability at nil by making a reference to Note 1 below thereto. The statement of income and Note below thereto, filed by the assessee along with the return of income, reads as under: Statement of total income for the financial year 2001-02 ------------------------------------------------------------ Particulars Amount (Rs.) ------------------------------------------------------------ Total income 5,116,895,840 Total tax liability (refer Note 1 below) Nil Interest under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of the payee or at the time of payment whichever is earlier deduct income-tax at the rates in force. Since the payments made to MRSC are not chargeable to tax in India based on reasons outlined in Note 1, no tax is required to be withheld by the Indian distributors from payments made to MRSC for purchase of computer software. Accordingly, the Indian distributors have not withheld any tax on payments made to MRSC during the said assessment year. However, the Revenue authorities have taken a contrary view and have proceeded against some of the distribution and consequently raised tax demands on the ground that payments made for purchase of software amounts to royalty and should be subject to tax deduction at source under section 195 of the Act at the rate of 15 per cent. as per the rate prescribed under article 12 of the Double Taxation Avoidance Agreement. In order to ensure that, no tax demands are raised on the distributors as a part of their verification proceedings and without prejudice to its position that payment received for sale of software to Indian distributors is not taxable in India, MRSC has paid tax at the rate of 15 per cent. under section 191 on payment recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from June 1, 1999. Sub-section (1) of section 143 reads as under: "(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142,- (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly; and (ii) if any refund is due on the basis of such return, it shall be granted to the assessee and an intimation to this effect shall be sent to the assessee: Provided that except as otherwise provided in this sub-section, the acknowledgement of the return shall be deemed to be intimation under this sub-section where either no sum is payable by the assessee or no refund is due to him: Provided further that no intimation under this sub-section shall be sent after the expiry of one year fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome, and the whole return of income along with relevant note, if any, filed explaining the assessee's liability of tax payable on the amount of income shown in the return of income, should be read and considered by the Assessing Officer while exercising his power to determine the tax payable or refund due on the basis of return of income. The Assessing Officer must, therefore, determine the tax found due on the basis of the return and not otherwise, when the return of income, the assessee has claimed that no tax is payable on the income shown therein, as mentioned in column No. 23 of the return of income and has given the reason thereof vide a note annexed to the return filed. All the columns of the return of income along with the said note filed along with the return must be treated as a part and parcel of the return when the Assessing Officer proceeds to make an intimation under section 143(1) of the Act. Upon considering the scope of section 143(1), we are of the opinion that when the Assessing Officer proposes to differ with the disclosure made in the return and proposes to levy tax at the rate of 15 per cent. by treating the amount shown as "royalty" within the meaning of ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the scope of section 143(1) of the Act while determining tax payable on the returned income, but whether the income returned is chargeable to tax or not, and if chargeable, then what rate of tax is to be applied, or whether the income shown in the return of income is assessable as "royalty" or "business profit" or under any other head within the meaning of the Double Taxation Avoidance Agreement between India and the U.S.A. are not covered by section 143(1) of the Act. Further, the fact that the assessee has paid tax under section 191 of the Act cannot also be considered to be conclusive or binding upon the assessee while determining the tax payable on the returned income under section 143(1) inasmuch as whether the income shown by the assessee in the return of income is to be taxed as royalty or not is a matter for deliberation after considering the assessee's claim made out in a "note" annexed to the return of income and after examining and verifying all the facts and materials relating to the issue, and after examining the relevant provisions of the Double Taxation Avoidance Agreement between India and the U.S.A. along with the provisions of the Income-tax Act and that too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer has also made regular assessment under section 143(3) of the Act on February 28, 2005 and March 18, 2005, for the assessment years 2002-03 and 2003-04 respectively, and levied tax treating the amount to be in the nature of royalty as per the provisions contained in the Double Taxation Avoidance Agreement between India and the U.S.A. Since the regular assessment was already made under section 143(3) of the Act, an impression was raised in our mind as to whether on making the assessment under section 143(3) of the Act, the intimation already issued under section 143(1) of the Act has become infructuous. Therefore, a query was raised by the Bench as to whether the present appeals filed by the assessee have become redundant at this stage. Learned counsel for the assessee pointed out that the Assessing Officer's intimation under section 143(1) of the Act dated March 12, 2004 and March 19, 2004, for the assessment years 2002-03 and 2003-04 has been appealed against before the first appellate authority, who has confirmed the Assessing Officer's order vide order dated December 13, 2004, before the regular assessment under section 143(3) of the Act was made by the. Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
