TMI Blog2015 (5) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... thout a finding that the order of the AO is erroneous is not sustainable. Therefore, we are of the view that the manner in which the Ld. Commissioner has given direction to the AO are not in line with several decisions of Hon’ble courts namely, Arvind Jewellers [2005 (7) TMI 90 - GUJARAT High Court]. About the second issue raised by Ld. Commissioner, we hereby hold that firstly the AO has examined that issue on those relevant facts hence cannot be said to have committed an error and secondly the issue can not be said to be controversial because in the case of DIC Asia Pacific Lt. [2012 (6) TMI 686 - ITAT, KOLKATA], it was held that Surcharge and education cess is not applicable on income covered under DTAA . Moreover,We have noted that Ld. Commissioner has not demonstrated any breach of law or procedure by the AO to allege that the impugned order of the AO was prejudicial to the interest of the revenue. Rather the direction of Ld. Commissioner appears to be general in nature asking the AO to verify the facts again afresh. In the absence of any independent finding and leaving the AO to start a fresh investigation is not within the powers assigned us. 263 of the IT Act. We therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act , on account of non-deduction of taxes on the same and in any case disallowance us 40(a)(i) is not attracted in respect of short deduction of tax. 2. This is the case of a public limited company engaged in the business of manufacturing of copper coted steel tubes. A return of loss was filed, however, consequence upon an order of the TPO an upward adjustment in Arms Length Price of ₹ 10,58,37,071-was made. The AO has passed an order us. 143(3) r.w.s. 144C(3) of IT Act dated 6th January, 2012 according to which the income was assessed at ₹ 8,57,52,857-. 2.1 The objection of Ld. CIT was that no adjustment of the loss was permissible against the enhancement of income made vide TPO order us. 92CA(3) of IT Act. A show cause notice was issued in the following manner- (i) It is noticed that the assessed income of ₹ 8,57,52,857- included of arm s length price of ₹ 10,58,37,071- computed us. 92CA(3). The total taxable income computed in the Assessment Order was as per the following table Total loss as per revised return 2,04,77,664 Add: 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losses The Assessing Officer has allowed the additions made on account of arms' length price computed us 92CA(3) to be set off against brought forward bases. He has not examined that since determining of arms' length price does not fall under any of the heads of income specified us 14 and therefore, the allowability of the same against the brought forward losses should have been examined in detail. Accordingly, the Assessing officer is directed to verify and decide afresh this issue keeping in view he relevant provision in this regard and also after giving the assessee an opportunity of being heard. 3.2 Short deduction of TDS Perusing the form 3CER submitted by the assessee, it has been noticed that the assessee has paid management charges of ₹ 2,04 ,77,664- to Ms Tl Group Automotive Systems Ltd, UK. On this amount the assessee company was required to deduct TDS @ 15% with applicable surcharge and education cess i.e. ₹ 61,96,656-, but it had deducted only ₹ 28,53,891- as TDS. With this regard, the assessee had submitted that it had paid total ₹ 3,64,642- to Ms Tl Group Automotive Systems Ltd. UK (Tl UK) as management charges and out of this amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f TDS, Ld. AR has pleaded that all the relevant facts and informations were very much before the AO wherein it was informed that the assessee suo moto has deducted the tax on the eligible amount but on the balance amount deducted the tax @ 15% as provided under Article 13 pertaining to royalties and fees for technical services of DTAA between India and UK. So Ld. AR has pleaded that as per the provision of DTAA, the surcharge and educational cess was not required to be added to the tax. He has concluded that the Ld. Commissioner has simply asked the AO to verify the contention of the assessee and failed to record his satisfaction about the escapement of tax in so far as prejudicial to the interest of the revenue. 4. On the other hand from the side of the Revenue Ld DR, Shri Vimlendu Verma, has supported the order of Ld. Commissioner 5. We have heard both sides and perused the orders of the authorities below. As far as the first objection of the Ld. Commissioner about the correct method of the computation of assessed income is concerned, since other authority of the Revenue Department i.e. DRP has already held that the benefit of set offcarry forward of losses are to be comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only corollary thereto that the education cess will also be covered by the scope of article 2. Accordingly, provisions of articles 11 and 12 must find precedence over the provisions of the Income-tax Act and restrict the taxability, whether in respect of income-tax or surcharge or additional surcharge - whatever name called, at the rates specified in the respective Article. In any case, education cess was introduced the Finance Act, 2004, with effect from assessment year 2005-06 which was much after the signing of lndia- Singapore tax treaty on 24-1-1994. In view of the specific provisions to the effect that the scope of article 2 shall also cover 'any identical or substantially similar taxes which are imposed by either contracting State after the date of signature of the present agreement in addition to, or in place of the taxes referred to in paragraph 1, and in view of the fact that education cess is essentially of the same nature as surcharge, being an additional surcharge, the scope of article 2 also extends to the education cess. [Para 9] Therefore, the education cess cannot be levied in respect of tax liability of the assessee-company. [Para 10] 8. We have reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X
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