Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (7) TMI 743 - GUJARAT HIGH COURT

2015 (7) TMI 743 - GUJARAT HIGH COURT - TMI - Disallowance u/s 40A(2)(b) r.w. S 40A(2)(a) - Tribunal deleting the addition - Held that:- The respondent company as well as the parent company, both are assessed to income tax at the maximum marginal rate and, therefore it cannot be said that the service charge is paid to the respondent company at a unreasonable rate to evade income tax. Even the learned Counsel Mr. Bhatt for the revenue does not dispute this fact.

We are in agreement wit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

6.7.1968 is concerned, it makes clear that the provisions under Section 40A (2) and particularly with regard to the transaction between the relatives and associates is concerned, the same shall be treated as bona fide case unless the officer finds it that one of them is trying to evade payment of tax. Considering the overall facts of the case and the ratio laid down by the Hon’ble Apex Court in the case of Commissioner of Income Tax vs Excel Industries Ltd, [2013 (10) TMI 324 - SUPREME COURT] w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

different tax appeals under Section 260A of the Income Tax Act, 1961, the revenue has challenged the Order dated 5.12.2014, passed by the Income Tax Appellate Tribunal, Ahmedabad as well as the Order dated 15.10.2009 passed by the Assistant Commissioner of Income Tax (Appeals), Ahmedabad, by which the assessment order dated 26.12.2008 passed by the Assistant Commissioner of Income Tax, Circle-IV, Ahmedabad, had disallowed the claim of the respondent assessee company under the provisions of Secti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uestion of law in the case for determination of this Court under Section 260A of the Act: "Whether the Appellate Tribunal has substantially erred in law in deleting the addition of ₹ 7.70 crores made on account of disallowance u/s 40A(2)(b) r.w. S 40A(2)(a) of the Act, without properly appreciating the facts of the case and the material brought on record?" 4. Brief facts emerging from the record are as under: 4.1. The respondent assessee company is a 100% subsidiary company of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

/- for each connection. Accordingly, the Assessee company paid ₹ 5,82,89,000/- for the assessment year 2004-05 and ₹ 7,70,28,000/- for the assessment year 2005-06. The said charges were claimed for deduction of tax under Section-37 of the Act. The Assessment Officer allowed the claims made for different Assessment Year in the assessment made under Section-143( 3) of the Act. 4.3 The Assessment Officer under the provisions of Section-143 of the Act, issued notice to the assessee for t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing company with regard to the expenditure unreasonable and held that since the assessing company is using some space of the parent company, the expenditure claimed by the assessee is much on higher side. The officer also held that the office occupied by the assessing company, considering the infrastructure provided by the parent company to the assessing company, the same can be treated at the rate of ₹ 10 lacs per month i.e. ₹ 1.2 crore for an assessment year and, therefore, he dedu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed the said decision before the Income Tax Appellate Tribunal, which dismissed the appeal filed by the Revenue by its Order dated 5.12.2015. Hence these appeals. 5. Mr M.R.Bhatt, learned Senior Council, appearing for the appellant, submitted that the Commissioner of Income Tax (Appeals) as well as Tribunal have erred in holding that whatever expenses the assessee has claimed under Section-37 is just and legal since there was an agreement between two parties. He would further submit that the Asse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

value, facility or legitimate needs of the business or provision of the assessee. He would submit that the in response to the notice issued, the assessee company did not provide details about the size of the accommodation provided by the parent company. He would further submit that in absence of any details provided by the assessee company, the assessment officer was right in holding that an amount of ₹ 10 lacs per month would be a correct expenditure for occupying some part of the office .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sel Mr. Soparkar, for the respondent, has vehemently opposed, even admission of these appeals. He would submit that the assessee company as well as parent company are government companies and each of the company pays the tax at maximum marginal rate. He would further submit that it is not the case of the revenue that the assessee has tried to evade any tax liability. He would further submit that the assessee and the parent company have agreed to enter into a contract, by which it was agreed that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

with the case in detail and have rightly passed the order, which does not call for any interference under Section 260A of the Act. He would submit that the specific contention was raised by the assessee before the Assessment Officer about the contractual relationship between the parties and, therefore, in absence of any cogent evidence or material, the Assessment Officer could not have fixed or assessed the case as if the same relates only for the accommodation and infrastructure provided by the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Income Tax-III vs Ashok J Patel, as reported at (2014) 43 Taxmann. com 227 (Gujarat), he would submit that the Assessing Officer has to ascertain the fair market price of such goods and facilities and before giving the verdict, the assessee must have an opportunity of explaining the same, which is not the case on hand. He has also placed reliance in the case of Commissioner of Income Tax-I vs Enviro Control Associated (P) Ltd., as reported at (2014) 43 Taxmann.com 291 (Gujarat) and would submit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

a decision of this Court in the case of Commissioner of Income Tax-I vs. Enviro Control Associated (P) Ltd., as reported at (2014) 43 Taxmann.com. 227 and submitted that since the assessee company as well as the parent company are paying the tax at maximum marginal rate, the entire exercise undertaken by the Assessment Officer is viewed, since it is a neutral exercise as far as the payment of tax is concerned and there is no question of evading payment of tax by any of the two companies. He woul .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

High Court in the case of Commissioner Of Income Tax vs Indo Saudi Services (Travel) P. Ltd. as reported as (2009) 310 ITR 306 (Bom), he would submit that the Central Board of Direct Taxes had issued a Certificate Non.6P dated July 6, 1968, which debars the Assessment Officer from not allowing such payments made to the relative and sister concern where there is no attempt to evade the tax. 9. He, therefore, would submit that the appeals are meritless and the same are required to be dismissed in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ears, it should not have reopened the issue in the subsequent assessment year. In the case on hand also, there cannot be any avil that, strictly speaking, the principle of res judicata is applicable to income tax proceedings. Still, however, the revenue had allowed deduction of service charges from the income to assess the income tax of the respondent in the preceding year. In asbence of any material change, it could not have disallowed the claim of service charges under Section-40( A) of the Ac .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ken by the assessee company. For such works, the assessee company would be entitled for service charges and the charges agreed between the parties is ₹ 3,205/- per connection. Accordingly, for the assessment year 2004-2005, the assessee company had paid ₹ 5,00,84,000/- towards service charges. which was deducted by the Assessment Officer under the provisions of Section 37 of the Act. Similar is the case for assessment year 2005-06 to the tune of ₹ 7,07,00,028/-. The Assessment .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aim made towards the expenditure was accepted by the Officer on the ground that there is no question of res judicata, however, has held that without any material, the maximum expenditure of the assessee company towards service charges is ₹ 10 crores as, if, the assessee company was only received the premiums belong to the foreign company, which is contrary to law laid down by the various courts and tribunals. As far as this aspect is concerned, the Hon ble Apex Court in the case of Commiss .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ew unless there are very convincing reasons, none of which have been pointed out by the learned counsel for the revenue. 29. In Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) this court did not think it appropriate to allow the reconsideration of an issue for a subsequent assessment year if the same " fundamental aspect" permeates in different assessment years. In arriving at this conclusion, this court referred to an interesting passage from Hoystead v. Commissioner of Taxation (19 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle - namely, that of a setting to rest rights of litigants, applies to the case where a point, fundamental to the decision,taken or assumed by the plaintiff and traversable by the defendant, has not been tranversed. In that case also a defendant is bound by the judgment, although it maybe true enough that subsequent light or ingenuity might suggest some traverse which had not been take .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ave allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter - and if there was no change, it was in support of the assessee we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income Tax in the earlier proceedin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version