TMI Blog2018 (9) TMI 1542X X X X Extracts X X X X X X X X Extracts X X X X ..... not accrue or arise directly or indirectly, through or from any business connection in India or through the transfer of capital asset situated in India, the provisions of section 9(1) were not applicable on the facts of the case. Although the relevant details in respect of the impugned addition were not filed before the Assessing Officer, the CIT (A) has admitted the details submitted before him in terms of the copy of bills, FIRCs issued by the bank, agreement with the foreign agents etc. Although not been specifically mentioned in the impugned order that the same were being admitted as additional evidence by the CIT(A), it is apparent that these documents/details were not field by the assessee before the Assessing Officer and CIT(A) admitted these evidences during the course of first appellate proceedings before him without calling for a remand report from the Assessing Officer in this regard. Without going into the merits of the deletion of addition by the Ld. Commissioner of Income Tax (A), on the basis of factual matrix as appearing from the orders of both the lower authorities, it is apparent that the Ld. Commissioner of Income Tax (A) did not resort to the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(vii) r/w section 195(1) of the Income Tax Act, 1961 (hereinafter called 'the Act') and further deletion of addition of ₹ 1,02,48,572/- made by the Assessing Officer u/s 50C r/w section 69A of the Act. 2.0 Brief facts of the case are that the assessee filed its return declaring income of ₹ 61,72,830/- which was processed u/s 143(1) of the Act and was later on selected for scrutiny. Assessee firm was engaged in the business of manufacturing and export of readymade garments. During the course of assessment proceedings it was noted by the Assessing Officer (AO) that the assessee had debited a sum of ₹ 78,74,229/- in the Profit Loss account as commission on export consignments and ₹ 1,02,74,037/- as commission on export turnover apart from discount and rebate of ₹ 76,86,139/- booked under the head selling and distribution expenses . The AO asked the assessee to furnish copies of agreements, details and evidence of services rendered by the concerned parties to earn the commission and evidence of TDS while making commission payment. In response, the assessee filed letter dated 14.08.2013 filing general particulars of commission expenses witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for allowance of commission expense without TDS as per the provisions of Section 195 of the Act. It was held by the AO that commission expenses of ₹ 1,81,48,266/- in respect of export sale were not allowable. 2.2 Further, during the course of assessment proceedings, the AO asked the assessee to furnish the details of investment made in properties in response to which he filed a letter dated 30.12.2013 along with a copy of sale deed in respect of purchase of industrial premises no. 666 measuring 1000 sq.mts situated at Section -37- II (Pace City), Gurgaon, Tehsil and District Gurgaon, Haryana for a sum of ₹ 3,91,00,000/-. The AO noticed that on the copy of the sale deed, the stamp value computation of the property in question for stamp duty purpose was ₹ 4,93,48,950/- as against the sale consideration of ₹ 3.91 crore. Considering the same, the AO asked the assessee to show cause as to why the value of the property be not taken as adopted by the sub-registrar of properties for stamp duty purpose at ₹ 4,93,48,950/-. In response, the assessee contended that the value at which the immovable property was acquired was the actual transaction value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of ₹ 1,02,48,572/- made by the AO in view of provisions of Section 50-C and Section 69A of the Income Tax Act, 1961 . 4. Whether the Ld. CIT(A), on law, has erred in deleting the addition of ₹ 1, 02, 48, 572/- made by the AO in view of provisions of Section 50-C and Section 69A of the Income Tax Act, 1961 . 5. The appellant craves leave to add, alter or amend any of the ground(s) of appeal before or during the course of hearing of the appeal . 3.0 The Ld. Sr. DR submitted that ground nos. 1 and 2 challenge the deletion made by the Ld. Commissioner of Income Tax (A) with respect to non-deduction of tax at source on commission paid to two foreign entities namely Ancare Trade Consultants and M/s Whynot Buying House Services Others. It was submitted that as per the assessee itself, no tax was deducted at source in respect of payment of commission of ₹ 78,74,229/- to M/s Ancare Trade Consultants on export consignments. Similarly, no tax was deducted at source on account of commission of ₹ 1,02,74,037/- paid to M/s Why not Buying House Services Others. The Ld. Sr. DR drew our attention to the observations of the Assessing Officer in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced on record copy of the FIRC and to demonstrate that the deduction with respect to the discount had already been made abroad and only the net amount had been remitted to the assessee company and, thus, it was not a case of payment by the assessee to the two parties on account of commission but was a receipt in respect of payment from the two parties after deduction of discount by the two parties. 4.1 In respect to the other issue in challenge before us regarding deletion of addition u/s 53 r/w 69A, Ld. AR placed reliance on the findings of the Ld. Commissioner of Income Tax(A) and vehemently supported his order and argued that the deletion had been rightly made. 5.0 We have heard the rival submissions and perused the material available on record. As far as the first issue i.e. deletion of addition made u/s 195 of the Act is concerned, it is seen that the Ld. Commissioner of Income Tax (A) has stated in the impugned order that the assessee has brought on record details pertaining to the commission paid, rebate and discount, copy of bills, FIRCs issued by the banks, agreement with the foreign agent as evidence in support of submissions etc. The Ld. Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een argued by the Ld. AR that the nature of impugned payment/s was not commission but was discount and this plea has been advanced before us for the first time. The lower authorities did not have any occasion to consider this plea of the assessee. Therefore, it is our considered opinion that in the interest of justice, this issue should be restored to the file of the Ld. Commissioner of Income Tax (A) with the direction to adjudicate the issue de novo after properly following the provisions of Rule 46A of the Income Tax Rules, 1962 and also after giving a proper opportunity to the assessee to present its case on the issue. It is so directed accordingly. Accordingly, ground nos. 1 and 2 stand allowed for statistical purposes. 5.1 As far as the second issue being challenged before us i.e. deletion of addition on account of difference in valuation of property u/s 50C of the Act is concerned, it is seen that the assessee is the purchaser of industrial premises at 666, Sector 37-II-(Pace City), Gurgaon, for a consideration of ₹ 3,91,00,000/-. The stamp duty was purchased on a value of ₹ 4,93,48,950/- which was the value determined for the purpose of stamp duty on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r accruing as a result of transfer of land or building or both is less than the value adopted or assessed by any authority of a State Government for the purposes of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the ^consideration and capital gains shall be computed, accordingly, under s. 48 of the Act. In case the value adopted or assessed for stamp duty purposes is revised in any appeal, revision or reference, the assessment made shall be amended to recompute the capital gains by taking the revised value as the full value of consideration. Accordingly, we are of the view that the provisions of s. 50C are applicable only for the computation of capital gains in real estate transaction in respect to seller only and not for the purchaser. We find from s. 50C of the Act that it creates a legal fiction thereby apparent consideration is substituted by valuation done by Stamp Valuation Authorities and capital gains are calculated, accordingly. Legal fiction cannot be extended any further and has to be limited to the area for which it is created. Hon'ble Andhra Pradesh High Court in the case of Addl CIT vs. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribution of accumulated profits. Thus, a legal fiction was invoked in the hands of the assessee company and was not extended in the hands of the shareholders. In the present case, s. 50C creates a legal fiction for taxing capital gains in the hands of the seller and it cannot be extended for taxing the difference between apparent consideration and valuation done by Stamp Valuation Authorities as undisclosed investment u der s. 69. In fact, s. 69 itself is a legal fiction whereby investment into an asset is treated as ncome if it is not disclosed in the regular books of account. No further legal fiction from elsewhere in the statute can be borrowed to extend the field of s. 69. It is for the legislature to otroduce legal fiction to overcome difficulty in taxing certain receipts or expenditure which otherwise was not possible under normal provisions of the Act. It is with this purpose that when it was found difficult to prevent tax evasion by understating apparent sale consideration as compared to the valuation made by Stamp Valuation Authorities for the purposes of levying stamp duty then it was thought necessary to introduce s. 50C for substituting apparent sale consideration by va ..... X X X X Extracts X X X X X X X X Extracts X X X X
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