In this case Assessing officer has made disallowance u/s. 40(a)(i) on payment for hiring charges for transponder, paid to PanAmSat Limited on the ground that no tax has been deducted at source by the assessee, u/s. 195 of the Act. Argument of learned Departmental Representative that the amendment to the Finance Act, 2012 changes the position, we find that there is no change in the DTAA between India and USA. Thus, the amendments have no affect on our decision.
Under the mercantile system of accounting, deduction of expenses is allowed when liability to pay such expenses is incurred irrespective of the fact whether such an amount has been paid or remained unpaid at the end of the year. In the like manner, income, under such a method of accounting, is recognized on accrual basis. In other words, only when the assessee finally acquires a right to receive such income, that it is charged to tax. Actual receipt of such amount, whether before or after accrual, is of no consequence.
Income from ‘jeep charges’ and ‘no dues certificates’, as would be apparent from the foregoing, is clearly business income. Revenue’s stand of the same being assessable u/s. 56 is inconsistent with the facts of the case.
After hearing the rival submissions and on careful perusal of materials available on record, keeping in view of the fact that sufficient opportunity of being heard to AO has not been given by ld. CIT(A) for preparation of Remand Report and further keeping in view of the fact that all the materials placed before ld. CIT(A)has not been sent to AO for his consideration, in our considered opinion, the order of ld. CIT(A) is not in accordance with the principles of natural justice. Therefore we set aside the order of ld. CIT(A) and restore the matter to the file of AO to re-decide all the three issues afresh by taking into consideration of the various submissions and documents placed before ld. CIT(A) and after giving a reasonable opportunity of being heard to assessee.
It is not disputed that the directors of the company have undergone foreign travelling for the purpose of export and looking for the business avenues abroad. The details submitted by the assessee though only provides the date of travelling, details of country visited and amount of fare, visa charges and other miscellaneous expenses incurred, however, the Assessing Officer has not brought anything in record to show that the foreign travelling was for personal purposes. Once the foreign travelling has been accepted for the purpose of business then part of the amount cannot be disallowed on account of personal user unless it is established that there was personal and non business expenditure. Since no basis has been given nor anything adverse has been brought on record, the ad hoc addition of Rs. 5,00,000/- cannot be disallowed. Thus, the order of the CIT(A) confirming the addition is set aside and accordingly, ground of appeal No.2 is allowed.
The ld. counsel for the assessee contended that the ld. CIT(A) was not justified in sustaining the disallowance of interest for the reason that the assessee was already doing its business from a rented premises. The new office premises and godown were stated to have been added in the current year to carry on the same business. It has thus been canvassed that the mandate of proviso to section 36(1)()iii) will not apply.
Notification has permitted the development of the land only for hotel; therefore, after the said notification, the land in question cannot be developed other than hotel and there is no dispute on this point that the land was finally developed by constructing the hotel by the assessee. Even, the MCGB vide its letter dated 10.6.1994 has acknowledged this fact that 50% of the land in question is reserved for recreation ground and the remaining 50% is deleted from the reservation and placed in Local Commercial Zone (C-I) for specific purpose of Hotel projects only.
It is necessary that the assessee or the person concerned liable to deduct and pay the TDS must be responsible for paying to a resident any sum, by way of fees for professional services, fees for technical services, royalty or any sum referred to in clause (va) of sec. 28. Whereas just contrary to the said conditions, in the instant case, the assessee company has not paid even a single penny to its super stockiest. Rather, it is just the opposite. The super stockist is paying to the assessee company for the produce of Drugs.
Section 201(1) uses the expression ‘any person, who is required to deduct any sum in accordance with the provisions of the Act…..’. Assessee’s stand was that there was no such requirement. As per the provisions of section 194C, an amount has to be deducted out of the sum in pursuance to a contract, at the time of payment/credit towards income-tax on the income comprised therein in terms of section 194C. When a particular sum is not income at all for an assessee, the requirement of making TDS is non-existent.
Secs. 271C, 271D and 271E, which were inserted in the I T Act w.e.f. 1st April, 1989, by the Direct Tax Laws (Amendment) Act, 1987, provided for the levy of penalties for certain defaults. Penalty under s. 271C was levied for failure to deduct tax at source. Penalty under s. 271D may be levied for failure to comply with the provisions of s. 269SS i.e. for taking or accepting any loan or deposit in excess of Rs. 20,000 otherwise than by an account payee cheque or bank draft. Penalty under s. 271E may be levied for failure to comply with the provisions of s. 269T relating to repayment by a company, including a banking company, a co-operative society or a firm, of deposits, including interest, exceeding Rs. 20,000/- the aggregate otherwise than by an account payee cheque or bank draft.
