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ABM STEELS PRIVATE LIMITED Versus INCOME TAX OFFICER WARD-1 (1)

2016 (10) TMI 51 - GUJARAT HIGH COURT

Reopening of assessment - Disallowance u/s 40(a)(ia) - late deposit of TDS - Held that:- We have noticed in the order of assessment, to the extent the Assessing Officer wanted to, disallowed the expenditure on the assessee's failure to deposit the tax deducted at source. He, however, did not disturb the assessee's claim of expenditure of foreign commission though apparently no tax was deducted at source on such commission. Only on this ground, the notice must fail. - Prima-facie, we also fee .....

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survive. The same is, therefore, set aside. Petition is allowed and disposed of. - SPECIAL CIVIL APPLICATION NO. 9250 of 2010 - Dated:- 27-9-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE PETITIONER : MRS SWATI SOPARKAR, ADVOCATE FOR THE RESPONDENT : MRS MAUNA M BHATT, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The petitioner has challenged a notice dated 8.1.2010 issued by the respondent - Assessing Officer under Section 148 of the Income Tax Act, 1961 (' .....

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39;s various claims arising out of the return. The Assessing Officer passed the order of assessment on 25.7.2007 in which he disallowed a sum of ₹ 3.11 lacs (rounded off) under Section 40(a)(ia) of the Act towards late deposit of TDS. 2.2 To reopen such assessment, the Assessing Officer issued the impugned notice. For doing so, he had recorded following reasons: The assessee-company filed its Return of income for A.Y.2005-06 on 28.10.2005 declaring the total income of ₹ 31,55,450/-. .....

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w of the provisions of Section 195/194H of the I.T. Act. Therefore, the amount of ₹ 6,10,000/- is disallowable in view of the provisions of section 40(a)(i) of the I.T. Act. This resulted in to under assessment of income of ₹ 6,10,000 for A.Y. 2005-06. Therefore, I have reasons to believe that income of assessee company to the above extent of ₹ 6,10,000 for A.Y. 2005-06 has escaped assessment. The case is reopened u/s.147 of the I.T. Act . 2.3 Upon being supplied with such reas .....

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e question of deducting tax at source on foreign commission agent was governed by two CBDT circulars which provided that no TDS would be required. These circulars were later on withdrawn by a circular No.7 of 2009 dated 22nd October, 2009. This circular would not have retrospective effect and the assessee would be governed by the previous circulars. In this context, counsel relied on decision of Division Bench of Allahbad High Court in case of Commissioner of Income Tax and Another V/s. Model Ex .....

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x and Another reported in (2010) 327 ITR 456 (SC). 4. On the other hand, learned counsel for the revenue submitted that the notice for reopening has been issued within a period of 4 years from end of relevant assessment year. The question of deducting tax at source on foreign commission was not examined by the Assessing Officer in the original assessment. The question whether the income accrued or arose in India cannot be examined at this stage. 5. Having heard learned counsel for the parties, w .....

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included the following. (d) Commission on sales with copy of agreement and also furnish what type of service rendered by the agent. (h) Copy of TDS & Sales tax return filed along with all annexure. 7. In response to such queries, the assessee under a letter dated 7.6.2007, provided the following answers: (d) The copy of account of sale commission is attached herewith. (Page:77 to 78) The remaining details will be placed on your record in the next hearing. (h) The copy of TDS return in Form N .....

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unted in the assessee's account books in Rupee equivalent thereto. The assessee produced further material under letter dated 25th June, 2007 along with which the assessee also produced the copies of agreements of two of its foreign agents. As per the agreement, the agent would provide appropriate target unit and would receive quota from the assessee on the basis of which would receive agent's commission. It can thus be seen that during the original assessment proceedings, the question of .....

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