TMI Blog2016 (8) TMI 1256X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar Sharma [2010 (2) TMI 75 - DELHI HIGH COURT] has explained that “there is a distinction between “lack of inquiry” and “inadequate inquiry”. If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter.” The assessment order reveals that on verification of submission made by the assessee, the A.O. has made addition of ₹ 3,43,700/- u/s. 40(a)(ia) of the Act. Therefore, it cannot be said that the Assessing Officer overlooked the provisions of Section 40(a)(ia) of the Act as alleged by the ld. Principal Commissioner in his order made u/s. 263 of the Act. Principal CIT had no occasion to invoke the provisions of Section 263 of the Act insofar as payments to CLP Asia is concerned. - Decided in favour of assessee. Interest paid on Foreign Currency Loan - Held that:- To a specific query, a specific reply was filed by the assessee along with supporting evidences. For the detailed reasons mentioned hereinabove, we find that insofar as this issue is concerned, once again the ld. Principal CIT erred in assuming the jurisdiction by invoki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Since, the A.O. has apparently failed to invoke this provision which has led to under assessment of total income. The ld. Principal CIT was of the opinion that the assessment order passed by the A.O. is erroneous and prejudicial to the interest of the revenue. 4. Accordingly, a show cause notice was issued and served upon the assessee to show cause why the assessment order should not be revised invoking the provisions of section 263 of the Act. 5. In response to the show cause notice, the assessee filed a detailed reply stating that the assessee has already deducted tax at source on the payments made to CLP Asia Services. Supporting evidences were also filed and the ld. Principal Commissioner was requested to drop the proceedings. It was further explained that insofar as payments to KFW, Germany is concerned, the said interest payment was not liable for TDS and, therefore, no tax was deducted at source. In support, the assessee relied upon the Double Taxation Avoidance Agreement between Indian and Germany. 6. After considering the facts and the submissions, the ld. Principal CIT held that all the relevant aspects of the case pertaining to the aforementioned two issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,14,06,301/- CLP ₹ 22,68,555/- 10. The same was replied vide reply dated 07/03/2014, interalia, as follows:- 3. Details of TDS on Reimbursement of Expenses 3.1. Vide point 3, the assesses Company has been asked to provide details of TDS . on reimbursement of expenses to CLP Holding, JPL and CLP. It is submitted before your good self that in case of CLP Holding, the expenses have been recovered from the said associated enterprise and there was an inadvertent mistake in annual report of the assessee Company. The assessee Company likes submit the copy of debit note raised by the assessee Company on the aforesaid party which will make it clear that the assessee Company has not reimbursed expense, but the same has been recovered and hence the IDS requirements are not applicable to the assessee Company. The copy of the debit note has been attached herewith vide Annexure - 8. 3.2. In case of JPL, the assessee Company would like to draw your good self's attention to the fact that the amount mentioned by your honour is not reimbursement of expenses, but it is actually interest recovered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Section 263 of the Act insofar as payments to CLP Asia is concerned. 15. The second issue which prompted the ld. Principal CIT to assume the jurisdiction relates to the payment of interest of ₹ 170.13 lacs to KFW, Germany. We find that vide show cause notice dated 05.03.2014, interalia, following query was raised during the course of the assessment proceedings:- 4. On verification of submission it is seen that you have made interest and financial charged payment of ₹ 42,36,29,374/-. Please furnish the proof for TDS deducted and paid to Govt. A/c. or else explain as to why the same should not be disallowed u/s. 40(a)(ia). 16. The assessee vide reply dated 07.03.2014, interalia, replied to the query raised as under:- 1.4. Interest paid on Foreign Currency Loan 1.4.1. Your honour has observed that the assessee Company has not deducted TDS on payment of Interest on Foreign Currency Loans. The assessee Company submits that such foreign currency loans were obtained from two non - resident banks, namely Bayerische Landesbank and Kreditanstallt Fur Wiederaufbau while one such loan was obtained from Financial Institution in India name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrowed in the year 1994. It was thus that the current year's payments too were made without deducting tax at source. For record purposes, the assessee Company attaches herewith (at Annexure - 4) a Xerox copy of the above referred letter dated 5.12.1994 received from the Government of India granting its approval for the purposes of Section 10(15)(iv)(f). 18. Once again, we find that, to a specific query, a specific reply was filed by the assessee along with supporting evidences. For the detailed reasons mentioned hereinabove, we find that insofar as this issue is concerned, once again the ld. Principal CIT erred in assuming the jurisdiction by invoking the provisions of Section 263 of the Act. Considering the facts in totality as discussed hereinabove, in our considered opinion, the assumption of jurisdiction u/s. 263 of the Act is uncalled for. We, accordingly, quash the order of the ld. Principal CIT made u/s. 263 of the Act. 19. In the result, the appeal filed by the Assessee is allowed. ITA No. 998/Ahd/2016 for A.Y. 2010-11 20. With this appeal, the Assessee has challenged the order of the Principal Commissioner of Income Tax-1, Ahmedabad dated 03-03- 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der is found to be erroneous and pre-judicial to the interest of the revenue within the meaning of section 263 of the Act. The ld. Principal CIT further held that even the registration fee paid to IREDA attracts the provisions of section 194J of the Act and since no tax was deducted at source, the assessment order becomes erroneous and pre judicial to the interest of the revenue. Accordingly, the assessment order was cancelled/set aside on these issues with a direction to the A.O. to re-frame the assessment de novo. 26. The first thing which has to be considered is whether the Learned Commissioner has rightly assumed the power under section 263 of the Act. The Hon ble Supreme Court in Malabar Industrial Co. Ltd. 243 ITR 83 has laid down the following ratio:- A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is errone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 insofar as the alleged lower deduction of tax at source on payments made to M/s. CLP Asia Services Ltd. 30. The second payment considered by the ld. Principal CIT relates to the Registration Fees to IREDA. The ld. Principal CIT was of the firm belief that the said payment attracts provisions of section 194J of the Act. The provisions of Section 194J of the Act read as under:- 194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of- (a) fees for professional services, or (b) fees for technical services, or (ba) any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company, or (c) royalty, or (d) any sum referred to in clause (va) of section 28, shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as Incometax on income comprised therein : 31. A perusal of the aforementioned secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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