TMI Blog2011 (2) TMI 1290X X X X Extracts X X X X X X X X Extracts X X X X ..... pecific query was raised from the Ld. Counsel for the assessee as to what has happened after the order of CIT passed under section 263 of the Act? Whether consequential order was passed by the Assessing Officer and also as to what happened to the consequential order of the Assessing Officer? Since the CIT has passed an order in March, 1998, the Assessing Officer must have passed the consequential order but none of the parties are able to state the facts as to what happened to the consequential order of the Assessing Officer. We have also examined the order of the CIT passed under section 263 and we find that the issue involved is with regard to the payment of ocean freight charges and the hire charges which was disallowed under section 40( a )( i ) of the I.T. Act. This disallowance was made by the Assessing Officer in subsequent years. In the assessment order, this issue was not examined by the Assessing Officer. Since the assessee is not able to state as to what has happened to the order of CIT passed under section 263 of the Act, we are of the view that the order of the CIT deserves to be sustained. More over, the issue of disallowance is required to be adjudicated by us in oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compilation of the assessees. The assessee has filed the confirmation letters of the creditors along with the evidence of refund of amount. The amounts were deposited under a scheme of fixed deposit with the assessee and the application form through which this amount was deposited were also filed before us. 7. The Ld. D.R. placed a heavy reliance upon the order of the CIT(A). 8. We have carefully examined the evidence filed by the assessee and we find that he has filed a sufficient evidence to prove that the creditor has deposited the aforesaid amount under the scheme of fixed deposit with the assessees and the said amount was refunded at his request on 4-10-1997 along with interest through cheque. In the light of these evidence, we are of the view that revenue has wrongly treated this deposit as an unexplained cash credit. We therefore, find no merit in the additions. Accordingly, we set aside the order of CIT(A) in this regard and direct the Assessing Officer to delete the additions. 9. In the result, the appeal of the assessee is partly allowed. ITA No. 150 of 1998 10. This appeal is preferred by the revenue against the order of the CIT(A) on following groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order with the submissions that Assessing Officer himself has admitted in para 1.1 at pg.no. 3 that the impugned vehicles were found to be used occasionally in the business of hire. He however did not allow the higher depreciation on these vehicles. The Ld. Counsel for the assessee further contended that if the assessee is able to prove that the vehicles are used for hire besides his personal use, it is entitled for the higher depreciation. Once the Assessing Officer has himself accepted that the impugned vehicles were occasionally used in the business of hire, he has no right to deny the higher depreciation. The Ld. D.R. has placed a reliance upon the order of the Assessing Officer. 12. We have examined the order of the lower authorities and we find that Assessing Officer himself has admitted in the assessment order that the impugned vehicles were used in the business of the hire, therefore, he has no moral right to deny the higher depreciation to the assessees. We have also examined the order of the CIT(A) and we find that he has properly adjudicated the issue and we find no infirmity therein. We therefore confirm his order in this regard. 13. Ground No. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the concept of ownership under section 32 should be given a wide meaning and that it is not the legal ownership that is required for registration but the ownership by virtue of use, possession and purchase. It was also held that for any property there can be only one owner but there cannot be two owners and that once a person had sold a property that property becomes the property of the purchaser, though transfer of the same may not be complete. It is not disputed that even though registration has not been made in the name of the assessee, the assessee is in possession of the property as per sale of Goods Act, 1930. The seller handed over the vessel to the assessee and has not claimed depreciation on the same. In this view of the matter, we uphold the order of the CIT(A) allowing depreciation as claimed by the assessee. In the result, the Departments appeal is dismissed." 16. Since the Tribunal has taken a particular view on identical facts, we find no reason to take a contrary view, therefore, following the aforesaid order of the Tribunal, we hold that assessee is entitled for depreciation. 17. Ground No. 4 relate to the addition of Rs. 1,13,05,739 made towards trawle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as accrued or arisen in India. It is also pertinent to mention here that the taxability of the income of the non-resident depends upon the place of accruing or arising of income. From the aforesaid agreement, it is clear that the income accrued or arose and was deemed to accrue and arise in India. Hence, there is no doubt about the taxability in India of the receipts of the non-resident towards hire charges for the trawlers used by the assessee for catch. ( c )Since the assessee brought the income on the catch in its accounts and claimed expenditure towards trawler hire charges payable to non-resident, it was under statutory obligation as per the provisions of section 40( a )( i ) of the Act to deduct tax at source for claiming deduction of such expenditure in the relevant year. ( d )The taxability of the aforesaid income of the non-resident in India is already confirmed by the ITAT in the assessees own case in ITA No. 1860 and 1861/Hyd/1990 dated 28-2-1995. ( e )It is also pertinent to mention here that the assessee had taken shelter from the decision of the ITAT in the case of Srinivasa Sea Foods Ltd. v. ITO 56 ITD 64 . But, in the assessee s own case, in the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome at 5 per cent to the total hire charges. 20. The CIT(A) re-examined the issue in the light of assessee s contentions. Having accepted the contention of the assessees, the CIT(A) has concluded that disallowance under section 40( a )( i ) in the relevant year is not the entire hire charges paid to the non-resident company but only the taxable income attributable to the said charter hire charges. He accordingly estimated the 5 per cent of the total hire charges as an income chargeable to tax and disallowed the same. 21. Now the revenue is in appeal before the Tribunal. The Ld. D.R. has emphatically argued that CIT(A) has not given the basis on which he has estimated that the 5 per cent of the total hire charges would be the sum chargeable to tax under the Act in the hands of the non-resident. He has blindly followed a view taken by the Assessing Officer in the year 1985-86 without looking to the terms of agreement on which the trawler was hired by the assessee. The Ld. D.R. has invited our attention to the charter hire agreement appearing at pg.nos. 61 to 81 of the compilation filed by the assessee. As per this agreement, vessels shall be employed in carrying on the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has placed a reliance upon the judgement of the Frontier Offshore Exploration India Ltd. v. Dy. CIT [2009] 118 ITD 494 (Chennai) and Transmission Corpon. of A.P. Ltd. v. CIT [1999] 239 ITR 587 (SC) in support of the contentions that the entire payment cannot be treated to be the sum chargeable to tax under the Act for the purpose of disallowance under section 40( a )( i ) of the I.T. Act. The Ld. Counsel for the assessee further urged that in earlier years, the Assessing Officer has adopted the 5 per cent of the total payment as the sum chargeable to tax for the purpose of disallowance and as such the same has been rightly followed by the CIT(A). Besides, he placed a heavy reliance upon the order of the CIT(A). 23. Having heard the rival submissions and from a careful perusal of the order of the Jower authorities we find that CIT(A) has taken a view after having examined the various aspects that the provisions of the section 40( a )( i ) are to be attracted in this payment to the non-resident. The order of the CIT(A) is not challenged by the assessees,. Therefore, finding in this regard attained the finalities. Moreover, we have also examined the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f payment there of in cash or by the issue of a cheque or draft or by any other mode whichever is earlier deduct income tax there of at the rates in force. The sub section 2 of section 195 makes more clarification by saying that where the person responsible for paying any such sum chargeable under this Act to a non-resident considers that the whole of such sum would not be income chargeable in the case of the non-resident, he may make an application to the Assessing Officer to determine by general or a special order, the appropriate portion of such sum so chargeable and upon such determination, tax shall be deducted under sub-section 1 only on that proportion of the sum which is so chargeable. The provisions of section 195 is also extracted hereunder for reference: "[(1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of this Act (not being income chargeable under the head "Salaries" shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (3) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith.] (6) The person referred to in sub-section (1) shall furnish the information relating to payment of any sum in such form and manner as may be prescribed by the Board.]" 25. Having read both the sections conjointly, we find that the legislature has clarified all areas of doubt by saying that the tax is to be deducted on payment of interest or other sum chargeable under the provisions of the Act. Wherever the person responsible for paying to non-resident has any doubt about the sum which is chargeable under the provisions of the Act he has to approach the Assessing Officer with a request to determine the appropriate proportion of such sum so chargeable and upon such determination, tax shall be deducted on that proportion of the sum which is so chargeable. Nowhere the assessee has been given any liberty to estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenses which are to be incurred by the non-resident to maintain the vessels, we estimate the 10 per cent of the receipt as a sum chargeable under the provisions of the Act. We therefore modify the order of the CIT(A) and direct the Assessing Officer to adopt the 10 per cent of the total payment worked out on 85 per cent of catch to the non-resident as a sum chargeable under the provisions of the Act. Since no deduction has been made on this amount, the disallowance is to be made to that extent. Accordingly, the matter is remitted to the file of the Assessing Officer for recalculation of the disallowance. 26. With regard to ground No. 5 relating to disallowance of ocean freight charges as per provisions of section 40( a )( i ) of the Act we find that the Assessing Officer has noticed during the course of assessment proceedings that the assessee has paid ocean freight charges totaling to Rs. 79,05,712 to different foreign companies during the relevant year and no tax was deducted on the payments made to them. He accordingly held that the assessee has violated the provisions of section 40( a )( i ) for which the payment of ocean freight made could not allowed as a legitim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant to various foreign companies without any deduction of tax at source from the payments so made. Thus, the only question that survives for consideration in the present issue is whether the aforesaid payment was hit by the mischief of section 40( a )( i ) of the Act. Admittedly, the provisions of section 40( a )( i ) apply to any sum chargeable under the Income-tax Act, 1961, which is payable outside India, on which tax has not been paid or deducted under Chapter XVII-B. A plain reading of the provisions of this section would show that two conditions are necessarily required to be satisfied in order to attract the disallowance under the said section. First, the amount is payable outside India and the second, is that tax has not been paid or deducted under Chapter XVII-B on the said amount. If either of the two conditions is not satisfied, the provisions of section, in my opinion, cannot be attracted at all. As is evident from the discussion made by the Assessing Officer in detail in the order of assessment, the amounts towards ocean freights were paid to three companies viz. (1) M/s. South India Export (P.) Ltd. (2) Chakiat Agencies (P.) Ltd. And (3) M/s. Aspinwall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance. Undisputedly the payments were made to the foreign companies without deducting the tax. Therefore, the Assessing Officer has rightly disallowed the payment under section 40( a )( i ) of the I.T. Act. 30. The Ld. Counsel for the assessee on the other hand has invited our attention to the order of the Assessing Officer as well as the CIT(A) with the submission that for invoking the provisions of section 40( a )( i ) of the Act, two conditions are necessarily required to be satisfied. First, the amount is payable outside India and second is that tax has not been paid or deducted under chapter XVII B on the said amount. As discussed by the Assessing Officer, the amounts towards the ocean freight charges were paid to 3 companies M/s. South India Export (P.) Ltd., Chakiat Agencies (P.) Ltd. And Aspinwall and Company through their agents located in India. Therefore, it could not be said that the amounts were paid to them outside India. In the light of these facts, the basic requirement for making the disallowance under section 40( a )( i ) was not satisfied, therefore, the CIT(A) has rightly deleted the additions. 31. Having heard the rival submissions and from a caref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer for the year under consideration. 6. The CIT(A) ought to have appreciated the fact that the Assessing Officer has disallowed the claim for the detailed reasons given in the assessment order and also on the ground that the information furnished by the assessee, is not tallying with the evidences filed along with the information. Further the assessee has not produced the details of the ships, mode and place of payment and also the details of the income-tax, particulars of M/s. Aspinwal Co. In the circumstances, the CIT(A) ought to have confirmed the addition or in the alternative, set aside the assessment for further examination by the Assessing Officer. The CIT(A) ought not to have followed his decision for assessment years 1994-95 1996-97, in the very assessee s case, on the same issue, for the reason that the decisions of CIT(A) for these years are not accepted and they are pending with ITAT. 7. For these and such other grounds that may be urged at the time of hearing of the appeal, the order of the CIT(A) may be set aside and that of the Assessing Officer be restored. 8. The appellant craves to add, to alter, to amend or to delete any of the grounds that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout going into the grounds on which the claim was rejected by the Assessing Officer for the year under consideration. 6. The CIT(A) ought to have appreciated the fact that the Assessing Officer has disallowed the claim for the detailed reasons given in the assessment order and also on the ground that the information furnished by the assessee, is not tallying with the evidences filed along with the information. Further the assessee has not produced the details of the ships, mode and place of payment and also the details of the income-tax, particulars of M/s. Aspinwal Co. In the circumstances, the CIT(A) ought to have confirmed the addition or in the alternative, set aside the assessment for further examination by the Assessing Officer. The CIT(A) ought not to have followed his decision for assessment years 1994-95 1996-97, in the very assessees case, on the same issue, for the reason that the decisions of CIT(A) for these years are not accepted and they are pending with ITAT. 7. For these and such other grounds that may be urged at the time of hearing of the appeal, the order of the CIT(A) may be set aside and that of the Assessing Officer be restored. 8. The appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allow depreciation on trawler which was disallowed on the ground that the ownership of the trawler was not transferred to the assessee. Since the orders of the CIT(A) for the assessment years 1991-92 1992-93 was not accepted by the Department second appeal was preferred to keep the matter alive, second appeal is now filed on the same grounds. 4. The orders of CIT(A) in directing to delete the addition of Rs. 1,13,05,739 stating that the hire charges to the trawler were paid in India, cannot be accepted. The CIT(A) for deciding the issue in favour of the assessee, relied upon the decision of the ITAT in ITA No. 1860 1861/Hyd./90 dated 28-2-95 in the case of VBC Exports Limited for the asst. year 1985-86. In this case, the assessee was treated as agent of M/s. Guan Watt Enterprises of Singapore (NRI company). In the impugned assessment, the charter charges were paid to a different company. Hence, the facts stated in the above ITAT s order cannot be applied to the impugned case and year of assessment. 5. The CIT(A) is not justified in giving relief to the assessee in the matter of hire charges as per reasons given below. As per clause ( vi ) of Charter Party Agreement dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecide this issue in favour of the assessee and confirm the order of the CIT(A). 48. Ground No. 3 relate to the depreciation on trawlers. This issue is also adjudicated by us in foregoing appeals in favour of the assessee. Following the same, we decide this issue in favour of the assessee and confirm the order of the CIT(A). 49. Ground nos. 4, 5 6 relate to the hire charges for trawlers/vessels. This issue was examined by us in the foregoing appeals in which we confirm the action of the Assessing Officer for disallowing the payments after invoking the section 40( a )( i ) of the Act. Simultaneously we have also held that the sum chargeable under the Act can only be disallowed. The sum chargeable under the Act is to be determined by the Assessing Officer To avoid further delay we estimated at 10 per cent of the total receipt by the foreign companies as sum chargeable under the Act and for that we restored the matter back to the file of the Assessing Officer for re-computation of the disallowance. Following the same, we decide the impugned issue in the same manner and remit the matter to the Assessing Officer for re-computation of the sum chargeable under the Act at 10 per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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