Clause 4 of the agreement indicates that the Smt Shah surrendered the tenancy rights along with the property to the assessee. If that is true, where is the need for Smt Shah to be the signatory to the agreement in giving the property on monthly rent to the new tenants and why should there be a tripartite agreement? Letting off the impugned property becomes the matter for settlement between the landlord and the new tenant as per the terms and conditions of the land lord, which is not the case here.
In the books of account, assessee had made provision for doubtful debts for this amount. The matter is sub-judice before court or arbitration. This shows that the amount was not ascertained. It remained contingent at the relevant time. Moreover, it had been gone against assessee due to amendment in Act. The amendment made by inserting clause (i) in Explanation 1 to section 115JB by the Finance Act, 2009 with retrospective effect 1.4.2001, the amount set aside and provision for diminution in the value of an asset is to be added to arrive at the book profit under section 115JB of the Act. This empowers the Assessing Officer to add to income any amount debited in profit & loss account for provision of bad and doubtful debts.
There can be no concealment or non-disclosure, as the assessee had made a complete disclosure in the IT return and offered the surrendered amount for the purposes of tax and therefore no penalty under s. 271(1)(c) could be levied. The words ‘in the course of any proceedings under this Act’ in Sec. 271(1)(c ) of the Act are prefaced by the satisfaction of the AO or the CIT(A).
Since the entire services were rendered outside India having nothing to do with the permanent establishment, there can be no taxability of this amount in India. Further in para (12) it has been held that the offshore services are inextricably linked to the supply of goods, so it must be considered in the same manner.
the commission or brokerage definition does not include transactions in securities. There is no doubt that Mutual Funds are categorised as securities on which there is no objection from the Revenue either before the A.O. or before the CIT(A). In fact the CIT(A) also gives a finding that the A.O. has not disputed that units of Mutual Funds are securities as per Securities Contracts (Regulation) Act, 1956. Assessee is in the business of Mutual Funds distribution and investment agent.
The words used in Article 12(1) was ‘paid to a resident of other contracting state’. The term royalties also means “payment of any kind received”. Since the word used in the DTAA is ‘paid’ or ‘received’, assessee’s contention that amounts cannot be taxed on accrual basis is correct. This interpretation is also supported by the decision of the Hon’ble Bombay High Court in the case of DIT (IT) v. Siemens Aktiengesellschaft ITA no 124 of 2010 dt.22.10.12 wherein the Hon’ble Bombay High Court on a question as follows:
In respect of a taxpayer to whom the double taxation avoidance agreement applies, the provisions of the Indian Income-tax Act shall apply to the extent they are more beneficial to that taxpayer. In other words, if the provisions of DTAA are more beneficial to the taxpayer, then the provisions of DTAA would prevail over the Indian Income-tax Act. Since the DTAA is silent about the surcharge and education cess for the purpose of deduction of tax at source, this Tribunal is of the considered opinion that the taxpayer may take advantage of that provision in the DTAA for deduction of tax. The CIT(A) has only deleted the tax component to the extent of surcharge and education cess at the rate applicable under the DTAA. Therefore, this Tribunal do not find any infirmity in the orders of lower authority. Accordingly the same are confirmed.
In the present case, the AO had levied penalty under s. 271(1)(c) of the Act, for furnishing inaccurate particulars of income. It is not under dispute that the assessee had claimed wrong depreciation on account of additions made in the machinery and factory building accounts, which has been surrendered by the assessee to buy peace of mind. The explanation had been submitted during the assessment proceedings as well as in the penalty proceedings.
In our opinion, the assessee himself having taken these two non-related parties as comparables in its TP study, it cannot now turn back and say that one of the parties is not comparable without giving any cogent or convincing reason. The only reason given by the assessee in this regard is that the use of technology availed from Dupont has restricted application. It is, however, observed from the relevant figures that the domestic sales generated by the assessee using the technology of Dupont is quite comparable with the domestic sales generated from the use of technology of its AE Kansai Japan. There is thus no merit in the stand of the assessee that Depont is not a comparable case with Kansai Japan.
The hon’ble Ahmedabad Income-tax Appellate Tribunal in the case of Well Pack Packaging v. Deputy CIT reported at [2003] 78 TTJ (Ahd) 448 has held that revaluation of depreciable assets and conversion of a partnership firm into company does not lead to incidence of capital gain inasmuch as revaluation is made in the hands of the assessee by writing up the value of assets in the books. In view of the provisions of sections 575, 576 and 577 of the Companies Act, 1956, there is no transfer involved when a company got itself registered under Part IX of the Companies Act. In view of this, there is no question of applicability of the provision of section 45 or 50 or any other provisions of the Income-tax Act arise on conversion of a firm into company.
