Case Law Details
JCIT Vs ADF Foods Ltd. (ITAT Ahmedabad)
In this case, the assessee himself has claimed that certain payments are covered in provisions of Section 5, 9, 195 of the Act and also under DTAA. Therefore, tax was not applicable. As per this letter, the assessee has explained that it is engaged in the business of processing and packaging various food items and its turnover is mainly from exports to foreign countries. Hence, to improve its international market it had paid the said payment to the persons who were non residents and they provided all business and marketing related services abroad.
These expenses were booked under the head advertisement expenses, legal and professional fees and sales commission expenses. In circular dated 20th August, 2018, it is mentioned ‘where addition relates to undisclosed foreign income/undisclosed foreign assets (including financial assets)/ undisclosed foreign bank account. But in this case, everything has been disclosed by the assessee only payments were made to the foreign entities under double taxation avoidance agreement. In our considered opinion, circular dated 20th August, 2018 is not applicable in this case.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This miscellaneous application has been filed by the Revenue under s.254(2) of the Act against the Tribunal order dated 01.10.2019 for dismissing the appeal on the basis of low tax effect Circular No. 17 of 2019 dated 08.08.2019.
2. Now Revenue is before us by stating that the case of the assessee is covered by the exceptional clause of circular wherein it is held that in para 10 of the said circular provides that adverse judgments relating to the issues enumerated in the said para should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 thereof or there is no tax effect. Para 10 of the Circular No. 3 of 2018 dated 11.07.2018 is hereby amended as under:
“10. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect:
(a) Where the Constitutional validity of the provisions of an Act or Rule is under challenge, or
(b) Where Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or
(c) Where Revenue Audit objection in the case has been accepted by the Department, or
(d) Where addition relates to undisclosed foreign income/undisclosed foreign assets (including financial assets)/ undisclosed foreign bank account.
(e) Where addition is based on information received from external sources in the nature of law enforcement agencies such as CBI/ ED/ DRI/ SFIO/ Directorate General of GST Intelligence (DGGI).
(f) Cases where prosecution has been filed by the Department and is pending in the Court.”
3. As we can see in this case, the assessee himself has claimed that certain payments are covered in provisions of Section 5, 9, 195 of the Act and also under DTAA. Therefore, tax was not applicable. As per this letter, the assessee has explained that it is engaged in the business of processing and packaging various food items and its turnover is mainly from exports to foreign countries. Hence, to improve its international market it had paid the said payment to the persons who were non residents and they provided all business and marketing related services abroad.
These expenses were booked under the head advertisement expenses, legal and professional fees and sales commission expenses. In circular dated 20th August, 2018, it is mentioned ‘where addition relates to undisclosed foreign income/undisclosed foreign assets (including financial assets)/ undisclosed foreign bank account. But in this case, everything has been disclosed by the assessee only payments were made to the foreign entities under double taxation avoidance agreement. In our considered opinion, circular dated 20th August, 2018 is not applicable in this case. Therefore we dismiss the Miscellaneous Application filed by the Revenue.
4. In the result, the miscellaneous application filed by the Revenue is dismissed.
This Order pronounced in Open Court on 18/04/2022
