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M/s. Linde India Limited (formerly known as BOC India Limited) , D.C.I.T, Cir-12, Kolkata Versus Addl. CIT, Range-12, Kolkata, M/s. Linde India Limited (formerly known as BOC India Limited)

2016 (2) TMI 668 - ITAT KOLKATA

Applicability of TDS provision - Disallowance u/s 40(a)(ia) - payment made on account of offshore supply of equipments - Held that:- We hold that the provisions of section 40(a)(ia) of the Act are applicable only in the cases where any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services has been paid or payable to a resident. In the case of assessee company, the payments were made to a non resident German company, the fact which is undi .....

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templates the adoption of fair market value for the purpose of valuation of the property. We hold that once the determination of fair market value is under consideration all the relevant factors i.e. land area available for construction should be taken into account irrespective of the actual land area conveyed. Accordingly, we are in agreement with the area of land as adopted by the ld.DVO . However, we find that as per the valuation of property is concerned, it is not correct on the part of ld. .....

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ng ₹ 861/- per sq.ft being the guideline value in the same manner in which the Ld DVO had carried out the valuation.

Valuation of building - the assessee has adopted ₹ 1,34,02,000/- as sale consideration attributable to the building in the sale deed - Held that:- As we find from the ld. DVO’s report that the same valuation has been adopted for the building. We hold that no interference needs to be made with regard to the valuation of the building. - I.T.A No. 806/Kol/2011 .....

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ated 30-03-2011 for the Asst Year 2007-08 against the order of assessment framed by the Learned AO u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. Both the appeals are taken up together and disposed off by this common order for the sake of convenience. 3. The first issue to be decided in both the appeals of the assessee as well as the revenue is as to whether the provisions of section 40(a)(ia) of the Act could be invoked towards the payment of ₹ 72,89,71, .....

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raised the following ground:- The ld. CIT(A) erred in deleting the disallowance of ₹ 72,89,71,972/- u/s. 40(a)(ia) without appreciating the facts and circumstances of the case. 6. The brief facts of this issue are that the assessee is a company engaged, inter-alia, in the business of manufacture and sale of various industrial and mechanical gases (viz. oxygen, nitrogen, dissolved acetylene etc) cryogenic and non-cryogenic plants and vessels. The ld. AO observed that in respect of advances .....

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r of title to the goods outside India. Hence, there is no income being chargeable to income-tax in India. Accordingly, the provisions of section 195 of the Act are not attracted. It was also stated that such advances to suppliers have not been charged to the P & L account for the year under consideration as per the method of accounting followed by the assessee. In view of the aforesaid facts, it was argued that question of advances falling under the ambit of disallowance/addition u/s. 40(a)( .....

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onship and commonness interest between M/s. BOC India Ltd, the assessee herein and Linde AG, a German company. According to the ld.AO, the technical contract is covered u/s. 9(1)(vii) of the Act. Section 195 of the Act is applicable on entire amount paid to Linde AG, a German company and therefore, withholding tax should have been deducted u/s. 195 of the Act. In view of this, the ld.AO treated the entire payment of ₹ 4,45,03,392/- and advance of ₹ 42,10,04,615/- and ₹ 81,86,94 .....

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7. Before the ld. CIT(A), it was contended by the assessee that no tax was required to be deducted on this transaction, as equipments were purchased outside India and the payment was also made outside India. It was argued that such sum is not chargeable to tax in India and hence there is no requirement withholding the tax in terms of section 195 of the Act. It was explained before the ld.AO that such sum was not charged to the P & L account for the year under consideration. The assessee has .....

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We find that the ld.AO was not justified in invoking the provisions of section 40(a)(ia) of the Act to make disallowance of ₹ 72,89,71,972/-, because it is not in dispute that the payment of the aforesaid amount has been made by the assessee company as advance to a non-resident company named as Linde AG, a resident of Germany. We hold that the provisions of section 40(a)(ia) of the Act are applicable only in the cases where any interest, commission or brokerage, rent, royalty, fees for pro .....

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(a)(i) of the Act any interest, royalty, fees for technical services or other sum chargeable under this Act, which is payable outside India; or in India to a non-resident, not being a company or to a foreign company, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of Section 200, such an expenditure .....

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chargeable under the Act, i.e it should have been debited to the Profit & Loss A/c and claimed as deduction. If an assessee has paid any sum of the nature mentioned above outside India or in India to a resident, but has not been debited to the Profit & Loss A/c and has not been claimed as deduction in computing the income chargeable under the head profits and gains of business or profession, the disallowance cannot be made. On perusal of letter dated 1/12/2010 and balance sheet as on 31 .....

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2,33,40,648/- made to M/s. Linde AG and besides there was payment of ₹ 56,31,324/- to the said German company, which was appearing under the head loans & advances . Thus, we find that the total of aforesaid amounts come to ₹ 72,89,71,972/- i.e (Rs.72,33,40,648 + ₹ 56,31,324). These sums are part of capital work-in-progress and loans and advances and not charged to the Profit & Loss A/c and the assessee has not claimed the same as deduction while computing the income und .....

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y the DVO(District Valuation Officer) for the purpose of computing capital gains in the facts and circumstances of the case. 10. The brief facts of this issue are that the assessee sold measuring 13.90 acres of land structure thereon to M/s. Emmar MGF Land Pvt. Ltd on 21st June 2006 in respect of property situated at Old Door No.7A, New No.75, Vythianatha Mudali Street, Thondiarpet Village, Chennai for a sum of ₹ 25.05 crores and declared long term capital gains thereon. The ld.AO observed .....

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that the ld.DVO did not submit his valuation report, the ld.AO proceeded to complete the assessment u/s. 143(3) on 30-12-2010 by adopting the stamp duty valuation u/s. 50C of the Act and re-computed the long term capital gains in respect of the subject mentioned property. The assessee preferred first appeal before the ld. CIT(A). During the course of appellate proceedings, the ld.DVO had submitted his report on 4-3-2011 valuing the subject mentioned property at ₹ 27,13,27,000/-. The ld.CI .....

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valuation officer. 2(b) Without prejudice to ground no. 2(a) above, for that the appellant having challenged the constitutional validity of Section 50C of the Act as violative of Article 14, 265 and 300A of the Constitution of India, the purported order of assessment on the basis of the value of the land as determined under the Tamil Nadu Stamp Duty Act for determining the capital gains is illegal, invalid and without any authority of law. 2( c) Without prejudice to ground no. 2( a) & 2(b) .....

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of subject mentioned property. We also find from the paper book that the assessee submitted the registered valuer s report, wherein the said valuer had adopted the rate @ ₹ 830/- per sq. ft for the valuation of land. In the said valuation report the rate per sq.ft prevailing in various streets are mentioned as below:- Vaidyanathan Street - ₹ 728/- per sq.ft Thiruvottriyur High Road (particular stretch) - ₹ 983/- per sq.ft Elaya Mudali Street - ₹ 537/- per sq.ft Senniamma .....

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ing the area required for layout services and amenities @25% and then estimated the net area available for sale of land at ₹ 44,98,09,470/- [ 454353x ₹ 990 i.e. the rate of ₹ 861/sq.ft being guidelines value + ₹ 129/sq.ft 15% frontage on both sides]. Now, it is pertinent to reproduce the provisions section 50C of the Act at this juncture:- Special provision for full value of consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result .....

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sult of such transfer. (2) Without prejudice to the provisions of sub-section (1), where- (a) the assessee claims before any Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed or assessable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been .....

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on to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation 1.-For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). Explanation 2.-For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to .....

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of the consideration received or accruing as a result of the transfer. 11.1 From the above, it could be seen that even the provisions of section 50C contemplates the adoption of fair market value for the purpose of valuation of the property. We hold that once the determination of fair market value is under consideration all the relevant factors i.e. land area available for construction should be taken into account irrespective of the actual land area conveyed. Accordingly, we are in agreement wi .....

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