Tribunal held that the payment made by assessee to a foreign company for the services rendered by it for uploading and display of the banner advertisement on its portal was in the nature of business profit and not royalty and such payment was not chargeable to tax in India as the recipient has no PE in India and, therefore, assessee was not liable to deduct tax at source from the payment for such services and the same cannot be disallowed by invoking the provisions of section 40(a)(i) for non-deduction of tax.
It is undisputed that the Revenue is aggrieved against the allowability of expenditure incurred in respect of earning dividend and interest income liable to tax at special rate u/s 115A, against the income chargeable to tax at normal rate. It is not a case and cannot be that such dividend and interest income are not at all chargeable to tax. The contention which has been made is that the expenses incurred by the assessee in respect of income liable to tax at special rate u/s 115A should not be allowed as deduction against the income chargeable to tax at normal rate.
Hon’ble Delhi High Court in case of CIT vs. Ravinder Kumar Arora (supra) and also by the ITAT, Madras Bench in 33 TTJ 466 (supra), we hold that the assessee will be entitled for deduction u/s 54F for the flat purchased in the name of his daughter subject to the restrictions under the proviso to section 54F(1) of the Act.
The provisions of TDS were introduced in the statute so that tax is collected by Revenue at source on certain types of income. In other words, it is the income which determines the extent or amount of tax to be deducted at source. Income sought to be taxed by taxing statutes is always the real income. In the instant case, it is clear that the lease rent for the relevant period was fixed at Rs. 6 Crores per annum.
In this case during the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee company had incurred loss of Rs. 1,15,880/- in respect of derivative transaction during the period under consideration. Assessing Officer further noticed that the transactions in question have been made on National Stock Exchange and Bombay Stock Exchange which were not recognized for the purpose of Rule 6DDA and the notification to recognize these stock exchanges was issued only on 25.1.2006.
Delhi High Court in the case of Rajiv Tondon vs. ACIT 294 ITR 488 has held that in a case where two donors had absolutely no connection with the assessee and they made gifts to the assessee only because he needed money to buy a house and they wanted to help him. It was held that this was not only quite unusual but also quite unnatural. It was incredible that a complete stranger would want to gift lakhs of rupees to a person only because that person wanted the amount for purchasing a house.
Income from deferred guarantee commission did not accrue or arise in the year in which guarantee agreements were entered’. It was held that such income should be spread over the period to which the guarantee commission related and should be assessed proportionately.
The learned Counsel for the assessee submitted that section 234D cannot apply to the extant case because refund was granted on 24.04.2003 which is well before the date of insertion of section 234D itself. Referring to the language of sub-section (1) : ‘… where any refund is granted …….’, it was stated that since the only word ‘is’ used which is not accompanied by ‘or has been’, it would mean that if the refund is granted after 01.06.2003, the provision shall fail.
The old flat had been sold on 7.3.2006 and therefore the assessee was required to construct a new residential house by 6.3.2009. The purpose of section 54 is to allow exemption to the assessee of long term capital gain arising from sale of residential house if the capital gain is invested in construction of new residential house within a period of three years from the date of transfer and, therefore, in case, the assessee had invested the capital gains in construction of a new residential house within a period of three years, this should be treated as sufficient compliance of the provisions.
High Court of Madras in the case of CIT v. M/s. High Energy Batteries (India) Ltd. (supra), which in our view is distinguishable. In that case the Hon’ble Court held that the mere fact that the asset purchased had been leased back and vendor had undertaken to pay lease charges can not per se lead to the conclusion that the transaction is sham in the absence of any other material.
