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2017 (10) TMI 244

ers - non deduction of tds - Held that:- AO has chosen to make addition of TDS on foreign remittance but has not chosen to make any addition in respect of the payments made to resident in India because he was satisfied that each of the payments were less than the limits for which TDS has to be made in terms of section 194C of the Act. The presumption of the CIT in the impugned order is that the AO was satisfied that even the payments referred to in the show cause notice required compliance of Sec.194C of the Act, but were omitted to be disallowed u/s.40(a)(ia) of the Act. There is no basis on which the CIT has drawn such inference. Therefore we agree with the submissions of the ld. Counsel for the assessee that it was a conscious decision of the AO not to make any disallowance in respect of these payments by invoking the provisions of Section 40(a)(ia) of the Act. - At best it can be said that two views were possible on the question whether TDS provisions were attracted to 3 payments as mentioned above to examiners by the Assessee. The AO has adopted one view which is permissible in law. The jurisdiction u/s 263 of the Act cannot be invoked in a case where two views are possibl .....

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23,53,685/- at the time of making payment to the assessee. The AO was of the view that the when the assessee makes payments for venues and other services she had not deducted tax at source. The plea of the assessee before AO was that each of the payments made by the assessee for meeting the expenses like rent for the venues, fees for examiners, guards etc., were less than the limits for which the tax deduction at source (TDS) is mandatory as per section 194C of the Act. The assessee had given all these information in the form of CD. The contents of the CD have been given in the form of print out and it contains details of each of payment made and the purpose of making such payments etc. These details are placed at pages 24 to 78 of the assessee s paper book. The AO after analyzing all the details came to the conclusion that there is a TDS violation in so far as the payment of ₹ 1,18,000/- in respect of payment made for a venue at Nepal and ₹ 86,000/- paid to the principal of an institution at Nepal. Thereafter after getting the reply from the assessee, the AO disallowed the payments of ₹ 1,18,000 for venue charges at Nepal and ₹ 86,000/- paid to the principa .....

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stretch the meaning for payments made to person(s) of Nepal. Hence, a total amount of Rs.l,18,,000/- on venue charges and ₹ 86000/- paid to Principal of an institution situated at Nepal is disallowed in the hands of the assessee and added to the business income. 4. The CIT in exercise of his powers u/s 263 of the Act was of the view that the aforesaid of the AO was erroneous and prejudicial to the interest of the revenue because of the action of the AO in not making the disallowance of ₹ 52,79,866/- which was payments made towards hire of various venues, ₹ 32,64,500/- which was payments to principals to various colleges and another sum of ₹ 28,07,393/- which was the payment made to examiners. According to the CIT the AO having consciously come to a conclusion that there was TDS obligation when the payments are made by the assessee to third parties who are non-residents for and on behalf of Merit Trac ought to have applied the same logic to other payments made to residents and made disallowances u/s 40(a)(ia) of the Act. A show cause notice u/s 263 dated 10.03.2016 was accordingly issued by CIT calling upon the assessee to explain why the order passed u/s 14 .....

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8,000/- on venue charges at Nepal and ₹ 86000/- paid to Principal of an institution situated at Nepal were detected. 5.3. Show cause and Reply of AR: The assessee vide letter dated 08/03/2015 was requested to explain as to why she failed to deduct TDS u/s 194C of the Act on the above mentioned cases (stated at Para-5.2 above). In response, The AR instead of explaining the factual position, submitted an elaborative reply consisting of 9{nine) pages misplacing the interpretation of the statute, exemplifying a Barber's hair cutting with provisions of Section 194C and relying on various court cases his own contention about of the applicability of section 194C read with section 40(a)(ia) of the Act. The reply of AR dated 12-03-2015 is annexed herewith as Annexure-"A" to this order . 9. The conclusion of the AO after extracting the reply of the Assessee to the show cause notice have already been set out in paragraph-3 of this order and hence not being repeated. It is clear that the details of each of the payments made by the assessee which are given in pages 24 to 78 of the assessee s paper book clearly demonstrates that each of the payments made did not attract deduc .....

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ea of the assessee. He proceeded on the basis that the AO erroneously omitted to make addition in respect of three payments viz., payment of ₹ 52,79,366/- as venue charges, payment of ₹ 32,64,500/- to principals of schools and colleges and payment of ₹ 28,07,393/- to examiners. At best it can be said that two views were possible on the question whether TDS provisions were attracted to the payment of ₹ 52,79,366/- as venue charges, payment of ₹ 32,64,500/- to principals of schools and colleges and payment of ₹ 28,07,393/- to examiners by the Assessee. The AO has adopted one view which is permissible in law. The jurisdiction u/s 263 of the Act cannot be invoked in a case where two views are possible and the AO has taken one view with which the CIT does not agree. The decision of the Hon ble Supreme Court in the case of Malabar Industries Ltd. 243 ITR 83 (SC) clearly supports the plea of the assessee in this regard. We are therefore of the view that in the facts and circumstances of the present case, the CIT ought not to have exercised his jurisdiction u/s 263 of the Act. His Order u/s 263 of the Act is accordingly quashed and the appeal of the asse .....

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