TMI Blog2018 (3) TMI 937X X X X Extracts X X X X X X X X Extracts X X X X ..... with section 263 of the Income Tax Act. The above deletion of the addition has not been challenged by the revenue further and hence, it is apparent that there is no error in the order of the ld. Assessing Officer in allowing the claim under section 80-G of the Income Tax Act. In view of this, the order of the ld. CIT is not sustainable so for as it relates to the deduction under section 80-G of the Income Tax Act claimed by the assessee on this point. With respect to the capital loss suffered by the assesses on sale of the property and source of the funds for acquisition of the new property, no addition has been made by the ld. Assessing Officer while passing an order under section 143(3). pursuant to the order under section 263 of the Act. hence, it cannot be said that there was an error in the order of the Ld assessing officer. In view of this, the assumption of jurisdiction by the ld. CIT for revision under section 263 is not sustainable on these points. AO passed u/s. 143 (3) read with section 148 of The Income Tax Act read with section 263 of the Act, in the return of income filed originally, the assessee has not claimed any benefit of Double Taxation Avoidance Agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. This appeal is filed by assessee against the order of the ld. CIT, Delhi-IV, New Delhi passed on 10/3/2005 u/s 263 at the Income Tax Act, 1961 revising the order of the Deputy Commissioner of Income Tax, Circle 10 (1), New Delhi passed under section 143(3) read with section 148 of the Income Tax Act, 1961 on 31/3/2003. Though in appeal memo assessee has raised 23 grounds of appeal, however, all of them challenge the action under section 263 of the ld. CIT. 3. The assessee has raised the following grounds of appeal in ITA No. 1988/Del/2005 for assessment year 2000-01:- 1. On the facts and circumstances of the case, the learned Commissioner of Income Tax erred in passing on order u/s 263 of the Income Tax Act. 2. On the facts and circumstances of the case, the observation of the learned Commissioner of Income-tax that the order passed by the Assessing Officer u/s 147 r.w.s. 143(3) is erroneous and prejudicial to the interest of revenue, is not based on facts and correct interpretation of law and, therefore, the proceedings initiated u/s 263 and subsequent passing of order u/s 263 by the Commissioner of Income-tax is Illegal, arbitrary, void ab initio, unjustified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts are framed offer discussions and consultations with the Addl. Commissioner of Income Tax/Commissioner of Income Tax and, therefore, the observation of the learned Commissioner of Income Tax that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of revenue is unsustainable, arbitrary, illegal and void ab nitio. 7. Without prejudice to the fact that the appellant has not been allowed any benefit in respect of Double Taxation Avoidance Agreements, which he was otherwise entitled to, the learned Commissioner of Income Tax erred in law and facts in invoking provisions of section 263 on this issue without appreciating the fact that income derived by the appellant as an entertainer from his personal activities exercised in the other Contracting state i.e. USA/Canada/UAE, shall be taxed in that other State i.e. USA/Canada/UAE, as per clause 17/18 of DTAA with respective countries. 8. Without prejudice to the above, on the facts and circumstances of the case, the learned Commissioner of Income Tax erred in law and facts in holding that all incomes earned by the appellant from music shows held in foreign countries are taxable in India ignor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no expenditure has been Incurred by the appellant to earn receipts in India, from various sources which is arbitrary, unjustified and against the provisions of law. 14. Without prejudice to the above, the learned Commissioner of Income Tax erred in law and facts in alleging that out of the expenditure incurred in India by the appellant, no expenditure has been incurred to earn royalty income earned by the appellant from making of albums, which is the main activity of the appellant, income from stage shows in India endorsement fee etc. thereby reducing the eligible deduction u/s 80RR of the I.T. Act. which is arbitrary. unjustified and against the provisions of law. 15. On the facts and circumstances of the case, the learned Commissioner of Income Tax erred in law and facts in not appreciating the fact that the income of the appellant from foreign stage shows is net of expenses and no other expenditure is to be allocated towards foreign shows for computing eligible deduction u/s 80RR as the expenses incurred in India pertain to the income earned In India from various activities and sources. Therefore, the order passed by the learned Commissioner of Income Tax u/s 263 is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assesses and has been directly transferred to the drawings of the assessee. 20. On the fact and circumstances of the case, the learned Commissioner of Income Tax erred in law and facts in withdrawing deduction u/s 80G in respect of donation given by the appellant to an Institution approved by the Director Exemption, Income Tax Department, which was earlier allowed by the Assessing Officer in an assessment made u/s 143(3) r.w.s. 147 of the Income Tax Act 21. Without prejudice to the above, on the facts and circumstances of the case, the learned Commissioner of Income Tax erred in law and facts in holding that the receipt for the donation given by the appellant does not appear to be a genuine and reliable document so as to infer that donation was actually given. 22. Without prejudice to the above the learned Commissioner of Income Tax has erred in law and facts in denying the deduction claimed by the appellant u/s 80G in respect of donations given to the institution duly approved by the Director Exemption alleging that these institutions did not fulfil the conditions prescribed In the 80G certificates, which is arbitrary, unjustified and against the provisions of law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in those countries with which India has Double Taxation Avoidance Agreement is reduced from the income offered by the assessee. It will bring the assessed income below the originally returned income. which cannot be envisaged in section 148 of the Income Tax Act. Therefore, ld. Assessing Officer accepted the claim of the assessee in reassessment at the return filed by the assessee of ₹ 22619631/- in order dated 31/03/2003 u/s 143 u/s 143|3) read with section 148 of the Act. 7. On examination of the records by the ld. CIT. he issued notice under section 263 of Act on 29/01 /2004 proposing to revise the order passed by the ld. Assessing Officer on following grounds because according to her the order passed by the ld. AO is erroneous and prejudicial to the interest of the revenue:- (a) The ld. Assessing Officer has not applied his mind to the manner of allocation of expenditure incurred by the assessee on foreign shows as according to her most of the expenditure debited to the profit and loss account related to such foreign programs. The ld. Assessing Officer has accepted ₹ 7.31 lakhs allocated by the assessee. According to the ld. CIT such expenditure, even if allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d into all these details. With respect to the deduction under section 80RR of the Act, it was submitted that assessee has brought the foreign exchange in India and therefore the deduction is eligible to the assessee. It was further stated that that assessee is doing lot of work in India and also earning royalty on music and therefore it has to incur lot of expenses and all these expenses are incurred whether the assessee perform stage shows out of India or not and they do not have any connection with the foreign stage shows. Therefore, these expenditure cannot be deducted while calculating deduction under section 80RR are of the Act. It was further stated that a sum of ₹ 745185/- is the receipt for payment of tax in Canada and USA in respect of foreign shows. With respect to the flat, it was stated that assessee has incurred a loss of ₹ 415/- on sale of above property which was not claimed. Therefore, the investment in the aforesaid property is not reflected in the balance sheet of the assessee at the end of the year as well as in the wealth tax return, With respect to the purchase of the new house property for ₹ 2.19 crores it was submitted that the investment ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and deduction on account of donations no other addition or adjustment has been made to the returned income of the assessee. Therefore, the revision on account of sale of the house property and source of acquisition of the house property has been shown to be accepted by the ld. Assessing Officer and therefore, on these two counts there cannot be any error in the order of the ld. assessing officer. With respect to the donation under section 80G of ₹ 7.73 lakhs to the family trust was supported in the form of the receipts issued by trust and the assessee has claimed deduction under section 80 G of ₹ 386500/-. In the assessment pursuant to order under section 263 of the Act, the ld. Assessing Officer has disallowed this claim stating trial though the receipts of the donation along with the bank statements have been provided however, there is no justification for the above donation. He stated that there is no requirement of justifying the donation by a donor to a trust when such trust are recognized by the IT (exemption). He further stated that the ld CIT (A) allowed it and same is not challenged by the revenue and therefore it is apparent that there is no error in the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee can get the benefit of DTAA only if the income is charged to tax in the foreign country from which the income is sourced. If that income is not charged to tax in the country, this shows, the income will be taxed in India. He therefore submitted that the assessee, though eligible for the benefit of DTAA but as that income has not been charged to tax in the foreign country the income is rightly charged to fax in India. He further referred to para No. 3.4 of the order of the ld. CIT, which has dealt with article 18 of Double Taxation Avoidance Agreement with USA and submitted that when this article is read with other relevant articles of treaty, it becomes clear that the agreement makes provision only for allowing credit to the income tax paid in the other contracting state and does not permit exempting the income from tax In India. He specifically referred to article 25 of treaty with USA. To support his contentions, he relied upon the plethora of case laws and prominently on an article written by Shri Kamlesh Chandra Varshney (CIT) on this subject published in Asia-Pacific Tax Bulletin. 2016 (Volume 22) No. 6 on 10/11/2016. He extensively read that article to support his view. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the ld. CIT is proper. 19. We have carefully considered the rival contention as well as perused the orders of the lower authorities. The assessee filed his original return of income and there under. He claimed deduction under section 80 RR of the Income Tax Act of the rate of 75% of ₹ 15010254.85 amounting to ₹ 1257691/-. Subsequently, on issue of the notice under section 148 of the Income Tax Act, assessee submitted his return of income, wherein the deduction under section 80 RR of the income Tax Act was claimed at ₹ 10703751/- Admittedly, assessee has received the total receipt from foreign show of ₹ 15010254/- and in the original return filed by the assessee. it has not deducted any expenditure but has claimed the deduction on the gross receipt, Subsequently, while filing the return under section 148 of the Income Tax Act, assessee reduced the income from the foreign show by ₹ 738586/- by apportioning expenses of ₹ 731097/- based on the number of days. Further, a sum of ₹ 7489/- was also deducted on account of insurance and thereby net income was shown as ₹ 14271668/- and deduction under section 80RR of 75% of that su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lieved he Annexure attached with the return of income filed in response to notice under section 148 of the Income Tax Act. After raising the query neither the assessee submitted the details before the Assessing Officer nor AO made any inquiry therefore correctly the ld. Assessing Officer also did not examine the same and it is not the case of inadequate enquiry but it is absence of any enquiry It is an established judicial principle that if the ld. Assessing Officer has failed to make any enquiry on the claim of the assessee, the order of the assessment becomes erroneous and consequently prejudicial to the interest of the revenue. In view of this on the claim of deduction u/s 80 RR of the Income Tax Act. the ld. CIT has correctly assumed jurisdiction under section 263 of the Income Tax Act. 20. It is also important to note that similar issue of the allocation of the expenses for the claim of deduction under section 80RR of the income tax Act arose for assessment years 1999-2000,1998- 99 in ITA No. 3977 and 3978/del/2004 whereby order doted 9/02/2007, coordinate bench upheld the order of the ld. CIT under section 263 of the Income Tax Act for those years. The coordinate bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or acquisition of the new property, no addition has been made by the ld. Assessing Officer while passing an order under section 143(3). pursuant to the order under section 263 of the Act. hence, it cannot be said that there was an error in the order of the Ld assessing officer. In view of this, the assumption of jurisdiction by the ld. CIT for revision under section 263 is not sustainable on these points. 24. In view of the above. We uphold the order of the ld. CIT under section 263 of the Act on the issue of allocation of expenditure for allowability of the claim of the deduction under section 80RR of the income Tax Act as well as observation on applicability of DTAA. Therefore, appeal filed by the assessee in ITA No. 1988/Del/2005 assessment year 2000-01 is dismissed accordingly. ITA No. 1657/Del/ 2007 ( by AO) Co. No. 45/Del/2007 (By Assessee) AY 2000-01 25. The Revenue has raised the following grounds of appeal in ITA No. 1657/Del/2007 for the Assessment Year 2000-01. I. On the facts and in the circumstances of the case and in law. the CIT [A] erred in the directing the Assessing Office to calculate and, allow the deduction u/s 80RR after reducing from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntentions and also perused the orders of the lower authorities. In the present case, the ld. Assessing Officer has granted deduction under section 80 RR of the Income Tax Act. of ₹ 8590188/- whereas the claim of the assessee was of ₹ 10703751/-. After the order of the ld. CIT (A) the deduction available to the assessee is of ₹ 10274109/- [15010254/ -1311442/-)=13698812/-75%] Therefore, now the deduction contested by the revenue of ₹ 1683971/-. The issue has already been decided in case of assessee by the order of the ld. CIT [A] for earlier year when the deduction is required to be calculated @ 25% of the expenditure . which is stated before us, that Is not contested by the revenue, therefore, on this count, we do not find only infirmity in the order of the ld. CIT(A) in considering the expenses for calculating deduction under section 80RR of the Act. In any case, the tax effect in this appeal of the revenue is less than ₹ 10 lacs In view of this we do not find any merit in the appeal of the revenue. Hence, same is dismissed. 31. Coming to the cross objection filed by the assessee which is filed late by 315 days. Assessee has filed application for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee as an entertainer from his personal activities exercised in the other state were taxable only in that state in terms of the relevant clauses of the Double Taxation Avoidance Agreement which override the provisions of the Act and were not taxable in India, notwithstanding non-furnishing of evidence of payment of taxes in the other contracting state. 35. The ld. Authorised Representative repeated the same arguments as advanced before us while deciding the appeal of the assessee s challenge to the order passed by the ld. CIT under section 263 of the Income Tax Act. The ld. departmental representative also repeated the same arguments. 36. We have carefully considered the rival contention and oho perused the order of the lower authorities. Present appeal as well as the cross objection of the revenue has arisen out of the order of the ld. Assessing Officer passed u/s. 143 (3) read with section 148 of The Income Tax Act read with section 263 of the Act, in the return of income filed originally, the assessee has not claimed any benefit of Double Taxation Avoidance Agreement. Further the return in response to notice under section 148 of the Income Tax Act also does not show any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. 39. The assessee has also preferred cross objection in Co No. 46/del/2008 raising following ground:- That the CIT (A) erred on facts and in law in not holding (hat income derived by the respondent as an entertainer from his personal activities exercised in the other contracting State were taxable in only in that State in terms of the relevant clauses of Double Taxation Avoidance (DTAA) which override the provisions of the Act, and were not taxable in India, notwithstanding non-furnishing of evidence of payment of taxes in the other contracting state. 40. The cross objection filed by the assessee is delayed by 370 days and assessee has filed condonation application for delay in filing the cross objection stating that the CO has been filed in light of the recent decision of the Supreme Court in case of Turquoise Investment and Finance Ltd. (supra) and the assessee has been recently advised of the correct position of law about the income of the assessee earned out of foreign shows and the right of taxation remains with the source country. In its application for the condonation of delay assessee has relied on the decision of the Supreme Court in case of the MST Katij ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avoid double taxation and not to exempt the income. As in the present case the assessee failed to give details or provide evidence proving that tax on subject income was actually paid in those countries, benefit of the Double taxation Avoidance Agreement was not available to the assessee. The ld. Assessing Officer was of the view that global Income of a resident Indian is chargeable to tax in India, and if any taxes paid in other countries, then credit is allowed while calculating tax payable in India. He referred to the respective clause of the Double Taxation Avoidance Agreement to state that which country would have the first to tax any particular time of income. Therefore according to him if the income of a resident from a foreign country has not been taxed in that country, then the same is taxable and includible in the Taxable income in India. Therefore in absence of any evidence whether any taxes paid on this Income in foreign country, be taxed a sum of ₹ 37949157/- and consequently allowed the deduction to the assessee under section 80RR of the Income Tax Act. 45. Further for granting deduction under section 80RR of the Act, the ld. Assessing officer considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit. The ld AR has relied upon the several decisions for the reason that when the expression may be taxed in Double Taxation Avoidance Agreement is used, (DTAA) it should be construed as shall be taxed , when the power of taxing a receipt is specifically recognized as vesting in one state then exercise of such a power by other state is considered as not being available to the other state. a. Dy. CIT v. Mideast India Ltd. [2009] 28 SOT 395 (Delhi) b. Mideast India Ltd. (supra) c. CIT v. Essar Oil Ltd. [2012] 345 ITR 443 (Bom.) d. Asstt. CIT v. Karan Thapar [2014] 64 SOT 334 (Delhi - Trib.) e. Apollo Hospital Enterprise Ltd. v. Dy. CIT 53 SOT 103 (Chennai) 50. The ld AR further stated that there is no requirement of proof of payment of taxes in other country for benefit of DTAA. He relied on following decisions:- a. CIT v. Heinrich Wetting [IT Reference No. 77 of 1999, dated 15-6-2007] b. CIT v. RM Muthaiah [1993] 202 ITR 508 (Kar.) 51. In Ld DR vehemently relied on the Notification issued by the Central Government No. 91/2008 dated 28/8/2008 which clarifies where it provided in any article that any income of resident of India may be taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , such as a theatre, motion picture, radio or television artiste of a musician or on athlete, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State. USA ARTICLE 18 INCOME EARNED BY ENTERTAINERS AND ATHLETES 1. Notwithstanding the provisions, of Articles 15 (independent Personal Services) and 16 (Dependent Personal Services), income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as on athlete, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State, except where the amount of the net income derived by such entertainer or athlete from such activities (after deduction of all expenses incurred by him in connection with his visit and performance) does not exceed one thousand five hundred United States dollars ($ 1,500) or its equivalent in Indian rupees for the taxable year concerned. 2. Where Income in respect of activities exercised by an entertainer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an entertainer or on athlete who is a resident of one of the States from his personal activities as such exercised in the other State, shall be taxable only in the first-mentioned State, if the activities in the other State are supported wholly or substantially from the public funds of the first-mentioned State including any of its political sub-divisions or local authorities, and such activities are exercised under the terms of a bilateral cultural agreement between the two States. 55. With respect to the income earned by the assessee from Hong Kong ld. authorized representative relied upon the Double Taxation Avoidance Agreement of India with China. It was submitted that the Double Taxation Avoidance Agreement should be applied. According to the Double Taxation Avoidance Agreement with China term China means the People Republic of China; when used in geographical sense means all the territory of the People s Republic of China including its territorial sea, in which the Chinese laws relating to taxation apply, and any area beyond it territorial sea, within which; the People s Republic of China has sovereign rights of exploration for any exploitation of res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm, which the Hon ble court said that it affirmed in CIT v. PVAL Kulandagan Chettiar [2008] 300 ITR 5 stated that Hon ble Supreme Court had not confirmed the decision of S.R.M. firm in the above case, in PVAL Kulandagan Chettlar case (supra), the Supreme Court held that the assessee to be resident of Malaysia on the facts of that case, it clearly refrained from Considering the issue of interpretation of the term may be taxed . Therefore according to the ld. departmental representative, it cannot be said that the decision of the Hon ble High Court in S.R.M. firm was confirmed by the Hon ble Supreme Court in PVAL Kuiandagan Chettiar (supra). Further, the above decision also was prior to the issue of Notification No. 91, which was issued by the CBDT. In this regard, the Hon ble Supreme Court in the decision in para No. 10 has held as under:- 10. We have gone through the judgment of the Madras High Court in CIT v. S. R. M. Firm [1994] 208 ITR 400 and the judgment of this court in CIT v. P. V. A. L. Kulandagan Chettiar [2004] 267 ITR 654 and we are satisfied that the point involved in these appeals stands concluded in favour of the assessee on against the Revenue by the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the following grounds of appeal in ITA No. 3976/Del/2006 for the Assessment year 2003-04:- On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the Assessing Officer to allow deduction u/s 80RR of the income-tax Act, 1961, after reducing from gross receipt from foreign shows only 25% of total business expenses instead of reducing such expenses calculated on pro rata basis between India shows and foreign shows. 66. While adverting to the appeal of the revenue. Both the parties admitted before us that there is no change in the facts and circumstances of the case in the impugned appeal compared to the earlier years. As we have already decided this issue in the appeal of the assessee for assessment year 2000-01 and as both the parties have admitted that the facts are similar, for the reasons given thereunder for deciding that ground in the appeal of the revenue for that year, we dismiss the appeal of the revenue for the same reasons. Therefore, the appeal of the revenue for assessment year 2003-04 is dismissed. 67. The assessee has raised the following grounds of appeal in CO No. 47/Del/2008 for the Assessment Year 2003-04;- That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts are similar, for the reasons given thereunder for deciding that ground in the appeal of the revenue lot that year, we dismiss the appeal of the revenue for the same reasons. Therefore, the appeal of the revenue tor assessment year 2004-05 is dismissed. 72. The assessee has raised the following grounds of appeal in CO No. 48/Del/2008 for the Assessment Year 2004-05:- 1, That the CIT(A) erred on facts and in law in not appreciating that income derived by the respondent as on entertainer from his personal activities exercised in the other contracting State were taxable only in that Stale in terms of the relevant clauses of Double Taxation Avoidance Agreement [DTAA] which override the provisions of the Act. 73. Though the above issue in the cross objection of the assesses has already been decided by us up to assessment year 2003-2004 holding that where the stage shows performed by the assessee outside India and with those countries the Double Taxation Avoidance Agreement exists where the taxation rights are given to the source countries using the term may be taxed , the assessee is eligible for Double Taxation Avoidance Agreement and such income cannot be taxed in Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a notification has to be reckoned as clarificatory in nature and hence interpretation given by govt. of India through this notification will be effective from 1st April 2004, i.e., from the date when provision of section 90(3) was brought in the statute, giving a Legal frame work for clarifying the intent of one of the negotiating parties: (iii) The phrase may be foxed is not appearing in the statute, but it is appearing in the agreement and therefore, the interpretation as understood and intended by the negotiating parties should be adopted. Here one of the parties i.e., Government of India has clearly specified the intent and the object of this phrase, if phrase is used in a statute, then any interpretation given by the High Court or the Supreme Court is binding on all the subordinate Courts and has to be reckoned as law of the land. However, the meaning assigned by Government of India for a phrase or term used in the agreement through notification will prevail at least from the assessment year 2004-05. Because, while interpreting the treaty, the intention of the parties to the agreement has to be given primacy and has to be understood in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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