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

2015 (11) TMI 1450 - ITAT CHENNAI

2015 (11) TMI 1450 - ITAT CHENNAI - TMI - Business of plantations in Malaysia - whether there was a permanent establishment in India? - whether plantation income received from Malaysian cannot be taxed in India? - Held that:- Admittedly, a similar issue was considered by the Supreme Court in the case of PVRM Kulandayan Chettiar (2004 (5) TMI 8 - SUPREME Court) wherein it was held that business income arising out of rubber plantations in Malaysia cannot be taxed in India because of closer economi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessee and applying the test of permanent establishment the income from the plantation would be taxable only in Malaysia and not in India. The assessee already filed its return of income and the return filed for all these assessment years which was kept in record. Accordingly, in our opinion the order of the Commissioner of Income Tax (Appeals) is to be confirmed. - Decided in favour of assessee.

Disallowance of expenditure - according to the assessee the said amount was incurred b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssion, building maintenance etc, these expenses have no nexus with earning of interest on bank deposits and cannot be allowed as deduction u/s.57 of the Act. Further, the assessee made a plea before us that expenditure at head office at ₹ 15,65,918/- instead of ₹ 43,35,061/-. In our opinion, the Assessing Officer already brought on record the total expenditure at ₹ 43,35,061/- as recorded in earlier para. Being so, the contention of assessee counsel is devoid of merit as it is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ny averment that the assessment is sought to be reopened by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for the relevant assessment year, the very initiation of proceedings under section 147 by issuance of notice under section 148 after expiry of four years from the end of relevant assessment year is bad and cannot be sustained. - Decided in favour of assessee - I.T.A.Nos.2772 & 2773/Mds/2014, I.T.A.Nos. 2946, 2947 & 2948/ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s)-I, Madurai, dated 25.09.2014 for the above assessment years. 2. First we take up ITA No.2947/Mds/2014 for adjudication. The Department has raised the following grounds:- 2. The CIT(A) erred in holding that the AO has not made out a case that there was a permanent establishment in India in regard to carrying on the business of plantations in Malaysia. 3. The CIT(A) failed to note that the reason for assessing the income stated by the AO was The assessee is a company registered in India under 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

n the case of CIT vs. P.V.A. Kulandagan Chettiar (267 ITR 657) is not applicable to the present case since the control and management of the affairs of the Malaysian Branch of the assessee is situated in India as the Share Holders and Annual General Meeting were conducted in India . 3. The facts of the case are that the assessee filed its return of income for the AY 2006-07 on 21.11.2006 declaring a total income of ₹ 13,77,120/-. The return was processed u/s 143(1)(a) on 15.02.2008. As inc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d not qualify for deduction u/s.57. Similarly, on verification of miscellaneous records for the AY 2006-07, it has been found that the assessee is in receipt of only interest income against which they have claimed expenditure of _13,54,443/- which is not allowable. Further, on verification of statement of income, it has been found that the income from Malaysian Branch amounting to _55, 92,897/- is not included in the total income for the purpose of taxation in India. The case law CIT vs.PVRM Kul .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Malaysian branch is included in the accounts of the company and profits appropriated. In view of the above, the Assessing Officer had reasons to believe that income to the tune of ₹ 69,47,340/- has escaped assessment. Accordingly assessment was computed interalia taxing the Malaysian plantation. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). 4. The Commissioner of Income Tax (Appeals) upheld the assessment. Further, he observed that in view o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in India because of closer economic relations between the assessee and Malaysia which determines the fiscal domicle of the assessee in terms of Article 4 of the DTAA between India and Malaysia; Being so, the Assessing Officer not justified in treating the assessee having permanent establishment in India. In Article 5(2)(g) the term permanent establishment shall include especially a farm or plantation . 6. In this case, the plantation in Malaysia would be the permanent establishment through which .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ee Appeal) 7. In this appeal, the first ground raised by the assessee is with regard to disallowance of expenditure at ₹ 43,35,061/- and according to the assessee the said amount was incurred by the Malaysain branch of the company and the expenditure incurred by the head office of the company at Chennai was ₹ 15,65,918/- only which is allowable as income from business/other sources. 8. The facts relating to the issue are that the Assessing Officer observed that in the profit and loss .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

: ₹ 32,860/- Repairs & Maintenance : ₹ 34,150/- Income tax paid : ₹ 10,89,929/- Total : ₹ 43,35,061/- The Assessing Officer held that as the interest income from banks is to be taxed as income from other sources, the above expenses cannot be claimed as per Sec.57 of the I.T. Act. The Assessing Officer also held that the assessee has no known business activity in India. Hence, the Assessing Officer disallowed the expenses to the tune of ₹ 43,35,061/-and computed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

deposits. It was seen that the expenditure made by the assessee towards salary, remuneration, commission, building maintenance etc, these expenses have no nexus with earning of interest on bank deposits and cannot be allowed as deduction u/s.57 of the Act. Further, the assessee made a plea before us that expenditure at head office at ₹ 15,65,918/- instead of ₹ 43,35,061/-. In our opinion, the Assessing Officer already brought on record the total expenditure at ₹ 43,35,061/- as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sessment order. 11. The facts of the issue are that the Assessing Officer noted that the assessee received ₹ 8,04,623/- on account of exchange rate fluctuation which was not offered as income. The Assessing Officer proceeded to tax ₹ 8,04,623/- as income of the assessee. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). 12. The Commissioner of Income Tax (Appeals) observed that the assessee had earned ₹ 8,04,623/- due to exchange rate .....

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 that the sum of ₹ 8,06,423/- was shown in the profit and loss account for the year ended 31st March, 2006 with the narration Amount adjusted for the purposes of finalizing the balance between the head office and the branch owing to fluctuation in foreign exchange and is a mere notional entry made for the purpose of equalizing the balance between the head office and the Malaysian branch office. The assessee further submitted that the sum of ₹ 8,06,423/- was a notional amount and no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

this ground of the appeal of the assessee is dismissed. In the result, the assessee of the appeal in ITA No.2773/Mds/2014 is dismissed. ITA No.2946/Mds/2014, assessment year 2005-2006 (Department appeal) 16. The issue in this appeal is identical which was considered in ITA No.2773/Mds/2014 for the assessment year 2006-2007,. Applying the above ratio, this appeal of the Revenue is also dismissed. ITA No.2772/Mds/2014, assessment year 2005-2006 (assessee appeal): 17. The grounds in this appeal is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nces of the case. 2.1 The learned Commissioner of Income tax (Appeals) has erred in holding that the proceedings for the reopening of the assessment u/s 147 of the IT Act, 1961 in the assessee s case for the assessment year 2007 08 are; invalid. 2.2 The learned Commissioner (Appeals) has also erred in holding that re-visiting of the same issue which was considered in the original assessment with a different meaning for initiating proceedings u/s 147 amounts to change of opinion. 2.3 The learned .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r 2007-08 had been under assessed in the original assessment order dated 22.12.2009, inter alia to an extent of RS.9841036/- being income from Plantation from Malaysia which was not earlier included to the total income of the assessee company in the said original assessment thereby attracting application of provisions of clause © of Explanation (2) to section 147 of the. Income tax Act, 1961 i.e where an assessment has been made but income chargeable to tax has been under assessed . 2.5 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

rutiny assessment u/s 143(3) were to be considered, Explanation (1) to section 147 of the Act which is reproduced below may kindly be taken note of :- Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing provision i.e proviso 1 of section 147). 2.7 This issue of jurisdiction to reopen assessment u/s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

elevant facts if the Assessing Officer might not. But if there is omission to disclose material facts, the Assessing Officer has jurisdiction to reopen the assessment. This decision was taken in the following cases by the Supreme Court. 1. Indo-Aden Salt Mfg. & Trading Co. Vs CIT(SC) 159 ITR 124 2. Hazi Amir Moh. Mir Ahmed Vs CIT, Amritsar (SC) 110 ITR 630 3. ITO I Ward, Distt. VI Calcutta & others Vs Lakhmani Mewal Das (SC) 103 ITR 437 4. Malegon Electricity Co. P. Ltd vs. CIT , Bombay .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n India as the share holders and the annual general meeting was conducted in India. As there is omission or failure to make a true and full disclosure by the assessee, the Assessing Officer has a valid reason to believe that income has escaped assessment for the A.Y. 2007-2008 in respect of this case. 2.8 The learned Commissioner (Appeals) ought to have upheld the reopening of assessment u/s.147 for the assessment year 2007-2008. 19. The facts of the case are that the assessee filed its return o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ings for the AY 2007-08, the expenditure claimed against the interest income was disallowed on the ground that the interest income had to be assessed under the head Income from other sources . Since the company did not have any other business income, the expenditure did not qualify for deduction u/s.57. Similarly, on verification of miscellaneous records for the AY 2006-07, it has been found that the assessee is in receipt of only interest income against which they have claimed expenditure of _1 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ort and Directors report stated that the assessee company has its branch in Malaysia and the control and management of the affairs of the Malaysian Branch is situate in India as the share holders and annual general meeting were conducted in India. c)The income of the Malaysian branch is included in the accounts of the company and profits appropriated. In view of the above, the Assessing Officer had the reasons to believe that income to the tune of ₹ 98,41,036/- has escaped assessment. Acco .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

me Tax (Appeals) placed reliance on the order of the Tribunal in assessee s own case in ITA No.2326/Mds/2012, dated 05.07.2013 for the assessment year 2004-2005, wherein it was held as under:- 16. So far as income from Malaysian Branch is concerned, the Assessing Officer in the assesemnt order has considered the MD s salary and commission of Malaysian Branch and examined the issue and came to the conclusion that the income of Malaysian Branch is an exempt income and therefore, commission paid to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ent and there is no tangible material to come a conclusion that there is an escapement of income. Mere change of opinion cannot per se to be reason to reopening . 17. In the present case, the Assessing Officer, having considered entire material and after applying the mind, completed assessment t under section 143(3) of the Act. Thereafter, a notice under section 148 was issued on 24.03.2011 i.e. after four years and reopened the assessment. In our opinion, the Assessing Officer has reopened 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

n the Tribunal annulled reassessment observed as follows:- 16. So far as income from Malaysian Branch is concerned, the Assessing Officer in the assessment order has considered the MD s salary and commission of Malaysian Branch and has examined the issue and came to the conclusion that the income of Malaysian Branch is an exempt income and therefore, commission paid to the MD is not allowable and accordingly disallowed the same. It means, the Assessing Officer has examined the issue and applied .....

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 per se to be reason to reopening . 17. In the present case, the Assessing Officer, having considered entire material and after applying the mind, completed assessment under section 143(3) of the Act. Thereafter, a notice under section 148 was issued on 24.03.2011 i.e. after four years and reopened the assessment. In our opinion, the Assessing Officer has reopened the assessment is change of opinion, which is not permissible under law. Therefore, the reopening is invalid. 18. Apart from the abo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

must summarily record his reasonable belief that income has escaped assessment, but also default on failure of the assessee to disclose fully and truly all the materials facts. Notice issued under section 148 after expiry of four years cannot be sustained as escapement of income, if any, not on account of any failure on the part of the assessee to disclose material facts fully and truly. The Hon ble Jurisdictional High Court in the case of CIT v. Elgi Finance Ltd. [286 ITR 674] has observed 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

Tax Law (Amendment) Act, 1987. Two sets of provisions are available under section 147 in clause (a) and clause (b). This distinction has now been taken away by the Amendment Act. Previously, the line of distinction was a limitation period of four years and the limitation period exceeding four years. The Assessing Officer would reopen a back assessment within a period of four years as long as he had reason to believe in consequence of any information, that income has been under assessed or income .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aw has inserted a proviso to section 147 in the following words: Providing that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax had escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or 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

ed to have escaped assessment was made out as a result of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Hon ble Jurisdictional High Court has further observed that in cases where the initiation of the proceedings is beyond the period of four years from the end of the assessment year, the Assessing Officer was necessarily record not only his reasonable belief that income has escaped assessment but also the default or failure o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

8 was issued after four years. There is no specific finding by the Assessing Officer in the reasons recorded as extracted from the assessment order that the assessee failed to disclose fully and truly all the particulars required to complete the assessment. Therefore, we find that the notice issued under section 148 is not valid. 21. In similar circumstances, the Hon ble Bombay High Court in the case of Hindustan Lever Ltd. v. ACIT (268 ITR 332) has observed that reasons recorded by the Assessin .....

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