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2017 (4) TMI 919 - GUJARAT HIGH COURT

2017 (4) TMI 919 - GUJARAT HIGH COURT - TMI - Reopening of assessment - payment made towards Tanker Hire Charges in foreign currency on cash basis - Held that:- From the objections it appears that payment of Tanker Hire Charges was made to the resident of U.K. and Singapore only. Revenue is not in a position to point out any tangible material available with the A.O. in support of his belief that any payment of Tanker Hire Charges was made to the resident of France, on which T.D.S. was required t .....

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yment of Tanker Hire Charges to the resident of France, on which T.D.S. was required to be deducted and thereby no income chargeable to tax has assessed the assessment, the impugned reassessment proceedings cannot be sustained and the same deserves to be quashed and set aside. - It is required to be noted that one of the grounds on which the assessment is sought to be reopened is that the interest was paid to the banks situated in India. However, the same is factually not correct. As per the .....

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, 1961 for the A.Y. 2009-2010 is hereby quashed and set aside. - Decided in favour of assessee. - SPECIAL CIVIL APPLICATION NO. 21471 of 2016 - Dated:- 13-2-2017 - MR. M.R. SHAH AND MR. B.N. KARIA, JJ. FOR THE PETITOINER : MR SN ROPARKAR, SENIOR ADVOCATE with MR BS SOPARKAR, ADVOCATE FOR THE RESPONDENT : MR KM PARIKH, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.00. RULE. Mr. K.M. Parikh, learned advocate waives service of notice of rule on behalf of the respondent. 2.00. In .....

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d to as the Act for short), by which the A.O. has sought to reopen the assessment for the A.Y. 2009-2010 alleging inter-alia that the income chargeable to tax for the A.Y. 2009-2010 has escaped assessment within the meaning of section 147 of the Act. 4.00. Facts leading to the present Special Civil Application, in nutshell, are as under :- 4.01. That the petitioner assessee engaged in the business of manufacturing and trading of chemicals, filed its return of income for the A.Y. 2009-2010 declar .....

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2009-2010 is sought to be reopened. 4.02. At the request of the assessee, the A.O. has furnished reasons recorded to reopen the assessment for the A.Y. 2009-2010, which read as under : On verification of details, it was observed that as per section 40(a) [(I) any interest (not being interest on a loan issued for public subscription before the 1st day of April 1938), royalty, fees for technical services or other sum chargeable under this Act, which is payable, - (A) Outside India; or (B) In Indi .....

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chargeable under the provisions of this Act (not being income chargeable under the head Salaries ) shall, at the time of credit of such income to the account of the payment thereof in cash or by the issue of a cheque or draft of by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force. Failure to deduct tax at source make the expenditure disallowance under section 40(a)(i). Besides this, mandatory penalty equal to amount of tax is also leviable under section 271C. .....

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h 2009 that the following payments were made in foreign currency on cash basis : Particulars Amount in Lakhs Tanker Hire charges 111.96 Interest 93.57 Total 205.53 The Tanker Hire Charges of ₹ 111.96 lakh and interest of ₹ 93.57 lakh which were paid in foreign currency attracts the provisions of section 195 which says TDS was required to be deducted on interest or any sum payable to a non-resident. The interest charges debited to the profit and loss account were in nature of interest .....

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s not been deducted or after deduction has not been paid into Central Government s Account during the previous year or in subsequent year before the expiry of the time prescribed under section 200(1), shall not be allowed for computing the income chargeable under the head profit and gains of the business or profession. The assessee company has paid the Tanker Hire Charges mainly to UK and France parties. As per Article 9 of the DTAA with UK and France, no TDS is required to be deducted for the a .....

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a non-resident. The term royalty is defined in the Act to mean consideration for use or the right to sue any industrial, commercial or scientific equipment. The word equipment has not been defined in the India tax laws. As per Article 13 of the tax treaty (DTAAA) with France, the definition of royalty included receipts arising from the use or right to use of industrial, commercial and scientific equipment. Thus, lease income receipts were included under royalty. Time charter being one for usage .....

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India chartered under time charter agreement or for the use of ship between the ports in India, constitutes royalty under section 9(1)(vi) of the Income Tax Act, 1961 (the Act) for the relevant tax treaties. As per Section 43(3) the inclusive definition the word plant is widely defined to include a ship and therefore, a ship is equipment of the business of a ship owner. The moving ship has a place of business in the place where the ship docked and the fact that the ship moved from one point to a .....

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payments for the use of equipment) and not under Article 8 of the tax treaty. Now, as per the tax treaty with UK, rental income from hire/lease of ships incidental to the activity directly connected with the operation of ships in international traffic is specifically included from the definition of the term royalty and the said income is taxable as per the shipping article of the said tax treaties. However, as in the case of treaty with France, if the agreement states that the payments received .....

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believe that ₹ 205.53 lakhs which was income chargeable to tax has escaped assessment or that the assessee has failed to make a return of his income for that assessment year or that the assessee has failed to disclose fully and truly all material facts necessary for assessment of that year, as per the case may be within the meaning of section 147 of the IT Act, 1961. Therefore, I am satisfied that this is the fit case for initiation of proceedings under section 147 of the Act. 4.03. On re .....

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o 15 pages and same is too broad and general in nature and not tenable in law, the A.O. has disposed of the objections and has not agreed with the objections raised by the assessee and hence the petitioner has referred present Special Civil Application under Article 226 of the Constitution of India challenging the impugned reassessment proceedings. 5.00. Mr.S.N. Soparkar, learned Senior Advocate appearing on behalf of the assessee has vehemently submitted that in the facts and circumstances of t .....

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. there is any failure on the part of the assessee in not disclosing the true and correct facts necessary for the assessment, reopening beyond the period of four years is not permissible. It is submitted that there was no failure on the part of the assessee in not disclosing true and correct facts necessary for the assessment for th year under consideration. 5.02. Mr.S.N. Soparkar, learned Senior Advocate appearing on behalf of the assessee has further submitted that even otherwise, there was no .....

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assumption of the jurisdiction by the A.O. to reopen the assessment and that too beyond the period of four years is wholly without jurisdiction and bad in law, which deserves to be quashed and set aside. 5.03. Mr.S.N. Soparkar, learned Senior Advocate appearing on behalf of the assessee has further submitted that as such no interest was paid to any of the banks situated in India and therefore, the impugned reopening on the aforesaid ground is also bad in law. 6.00. Mr.K.M. Parikh, learned counse .....

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with by the A.O. We also asked the learned counsel for the revenue to point out whether any tangible material was available with the A.O. to show that any payment of Tanker Hire Charges to the resident of France during the year under consideration was made by the assessee, but he is not in a position to point out any such material on the basis of which the A.O. has formed an opinion that the income chargeable to tax has escaped assessment. However, he has submitted that after considering the Not .....

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that any payment was made towards Tanker Hire Charges in foreign currency on cash basis to any of the resident of France, again he has no answer. However, the learned counsel appearing on behalf of the revenue has submitted that In light of the aforesaid facts and circumstances of the case, present petition is required to be dismissed. 7.00. Having heard the learned counsel appearing on behalf of the respective parties and considering the material on record and more particularly the reasons reco .....

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r Hire Charges to the resident of France during the year under consideration. The same has not been dealt with by the A.O. while disposing of the objection by the A.O. From the objections it appears that payment of Tanker Hire Charges was made to the resident of U.K. and Singapore only. The learned counsel appearing on behalf of the revenue is not in a position to point out any tangible material available with the A.O. in support of his belief that any payment of Tanker Hire Charges was made to .....

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