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Fractal Analytics Pvt. Ltd. (Formerly known as Fractal Analytics Ltd.) Versus Dy. CIT-8 (1) , Mumbai

2017 (11) TMI 254 - ITAT MUMBAI

Reopening of assessment - addition u/s.40(a)(i) - Held that:- The ground relating to disallowance of the expenditure by holding it as not incurred wholly and exclusively for the purpose of the business was already before the ld CIT-A, but the same was not adjudicated by him. Hence, following the Tribunal in assessee's own case, we remit the adjudication of this aspect to the file of CIT-A. CIT-A is directed to complete the appellate order by considering the issue whether the disallowance on acco .....

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itting as above. Both the counsel fairly agreed to the above proposition. - I.T.A. No. 3510/Mum/2015 - Dated:- 1-11-2017 - SHRI SHAMIM YAHYA, AM AND SHRI SANDEEP GOSAIN, JM For The Appellant : Shri Niraj Sheth For The Respondent : Shri M. V. Rajguru ORDER Per Shamim Yahya, A. M.: This Appeal by the assessee is directed against the Order by the Commissioner of Income Tax (Appeals)-16, Mumbai ( CIT(A) for short) dated 27.02.2015 and pertains to the assessment year (A.Y.) 2007-08. 2. The grounds of .....

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ssessment order under section 143(3) of the Income-tax Act, 1961 ('the Act') and no new tangible material has come to the knowledge of the learned AO after the completion of the assessment proceedings under section 143(3) of the Act. 2) That based on the facts and circumstances of the case and in law, the learned CIT(A) has erred in considering the SG Business Development Expenses amounting to INR 1,85,90,396 as Tees for technical services' ('FTS') under section 9(1)(vii) of .....

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b) of the Act which provides that FTS shall not be taxable in India where said services are utilized for earning income from any source outside India. 4) That based on the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the requirement of withholding of tax at source to transactions entered by your Appellant in AY 2007-08 by applying Explanation to section 9(1) of the Act amended by Finance Act, 2010 with retrospective effect from 01/06/1976 which provi .....

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rred in confirming the disallowance of SG Business Development Expenses without appreciating the applicability of beneficial provision of 'make available' as provided by Article 12 - 'Royalties and Fees for Technical Services' of the Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Singapore ('India-Singapore tax treaty') which provides that the payment in relation to the FTS will not be taxable in India if such services are not "make .....

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g to INR 1,85,90,396 without appreciating that the beneficial Circular 23 of 1969 dated July 23, 1969 was in force during the AY 2007-08 since the payments made to the Fractal Singapore were considered by the learned AO as akin to commission. 7) That based on the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the levy of interest under section 234B of the Act amounting to INR 45,91,224. Your Appellant respectfully submits that on granting relief under .....

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For the admission of the addition ground, the learned counsel of the assessee has prayed as under: Sub: Application for admission of Additional Ground of Appeal - Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963 ('the IT AT Rules') The Appellant is moving this application for admission of additional ground for due adjudication by your Honours. The Appellant had filed the captioned appeal against the order dated 27 February 2015 passed by the Commissioner of Income-tax (Appeals .....

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ch does not require investigation into; or examination of, any new facts or evidences, which were not already available before the CIT(A) and the Assessing Officer. In the light thereof, we humbly request your Honours to exercise the powers provided in Rule 11 of the ITAT Rules and admit the additional ground of appeal which was inadvertently omitted to be raised in the original memo of Appeal. The Appellant most humbly pray to your honour to kindly admit and adjudicate upon aforesaid ground of .....

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n of tax at source. Over and above the aforesaid deduction u/s. 40(a)(i), the assessing officer held that without prejudice to the above, the payment also cannot be said to have been incurred wholly and exclusively for the purpose of business of the assessee-company. 6. Against the above order, the assessee appealed before the ld. CIT(A), challenging the following : Validity of reopening, challenging the disallowance u/s. 40(a)(i) and challenging the disallowance as not incurred wholly and exclu .....

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challenged the reopening and addition u/s.40(a)(i). In the additional ground, the assessee has agitated that the ld. CIT(A) has erred in not adjudicating the issue of disallowance as not wholly and exclusively incurred for the purpose of the business. In this regard, the ld. counsel of the assessee referred to ground no. 2 of the grounds of appeal before the learned CIT-A, where this aspect has been raised as under: Ground No._ 2 - Objection against the disallowance of expenses amountint go INR .....

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of Article 12 of the Agreement of Double Taxation and Prevention of Fiscal Evasion between India and Singapore (hereinafter referred to as, the 'the India-Singapore tax treaty') whereby if the services are not made available to your appellant then the payment will not be taxable. The amount will only be taxable if Fractal Singapore P. Ltd (hereinafter referred to as 'Fractal Singapore') constitutes a Permanent Establishment in India. As neither services are not made available no .....

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ave adjudicated this aspect of the grounds of appeal raised before him, that the Assessing Officer erred in holding that expenses have not been incurred wholly and exclusively for the purpose of business. In this regard, he referred to the decision of the tribunal in the assessee's own case in ITA No. 4037/Mum/2015 for the assessment year 2006-07 vide order dated 21.08.2017, wherein the matter was remitted back to the file of learned CIT-A to complete the order, as in that case he had omitte .....

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der: 10. Upon careful consideration, in our considered opinion, when the reopening as well as merits of the case were before the learned CIT(A), it was incumbent upon him to pass an order and adjudicate by speaking order on both aspects. In the cross objection assessee is rightly aggrieved that despite filing the appeal and raising the necessary grounds the learned CIT(A) has not adjudicated upon the merits of the case. There are catena of decisions of higher Courts when it has been held that it .....

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