RNM Tax Alert – Direct Tax Part for December 2023

• NOTIFICATION NO. 105/2023; Dated: December 22, 2023

That the CBDT vide Notification No. 105 of 2023; notifies new ITR Forms (ITR-1 SAHAJ & ITR-4 SUGAM) for AY 2024-24.

Important Judicial Precedents

• Whether re-opening of assessment can be resorted to solely on assumption that Assessee did not file ITR for the relevant AYs, thus revealing non-application of mind on part of AO – NO: ITAT

[2023-TIOL-1607-ITAT-DEL ITA No. 2335/Del/2022_AY: 2012-13 DCIT,
INTERNATIONAL TAXATION, Vs. SHRI VIKAS ARORA]

That the Assessing Officer has proceeded to reopen the assessment assuming that the assessee has not filed his return of income for the assessment year under dispute, clearly reveals non-application of mind by the Assessing Officer to the facts and materials on record. On perusal of return of income and the computation of income filed by the assessee, it is evident that the assessee has considered the income derived from sale of property credited to the bank account. That being the factual position emerging on record, in our view, reopening of assessment appears to be without proper application of mind and based on conjectures and surmises. There is no live link between the materials available on record and the formation of belief. Therefore, in our view, learned first appellate authority was justified in holding the reopening of assessment under section 147 of the Act to be invalid;

• [2024] 158 taxmann.com 45 (Delhi – Trib.) HCL Singapore PTE. Ltd. Vs. ACIT, Circle IT-2(1)(1)

Where assessee, a Singapore based company, was engaged in providing onsite software services to clients of HCL India, since place of provision of services was outside India and contract for providing such services had been effectively concluded outside India, payment received by assessee, from its Indian subsidiary was only in nature of revenue share and could not be construed as income that accrues or arises in India or deemed to accrue or arise in India and, hence, could not be brought to tax as fee for technical services under section 9(1)(vii)(b).

• [2024] 158 taxmann.com 10 (Delhi-HC) Angelantoni Test Technologies Srl Vs. ACIT, Circle INT. Tax 1(1)

Where assessee, a foreign company, made investment in shares in its Indian subsidiary, said investments could not be treated as income as same was in nature of capital account transaction and would not give rise to any income, thus impugned orders passed under section 148A(d) and notices issued under section 148 were to be set aside.

• [2023] 157 taxmann.com 298 (Delhi – Trib.) Kirti Singh Vs. ACIT, CC-II

Where AO made addition under section 69A with respect to jewellery found during search on ground that same was relatable to assessee’s sister-in-laws, since assessee and her family members were high net worth individuals and considering their high status, holding such jewellery found in custody of members of their families could not be seen to be abnormal and consequently unexplained.

• [2023] 157 taxmann.com 175 (Delhi) PCIT, Central – 1 Vs. Oxygen Business Park (P.) Ltd.

A search and seizure operation conducted at premises of assessee – Consequently, a notice under section 153A was issued to assessee – In response, assessee requested to treat original return as return filed in response to notice – Assessing Officer disallowed deduction claimed under section 80IAB and added back same to income declared in return – Assessee claimed that no incriminating material was found during search and proceedings under section 153A were bad in law – It was noted that subsequent to search a statement was recorded of valuer which formed basis for disallowance of deduction claimed under section 80IAB – Whether since no assessment was pending on date of search and no incriminating material was found during search, fresh material/information received after date of search would not be sufficient to reopen assessment under section 153A – Held, yes [Para 8] [In favour of assessee]

• [2023] 157 taxmann.com 530 (SC) Gee Cee Metals (P.) Ltd. (AOP) Vs. PCIT

SLP dismissed as withdrawn against impugned order of High Court that where assessee filed an application seeking rectification of assessment and refund of TDS after about 12 years from assessment year, same was barred by limitation and hence not maintainable, with liberty to make a representation to CBDT under section 119 so as to seek adjustment in view of rectification made by Department with regard to PAN number of assessee.

• Whether as per settled law, money lost in doing business has the character of current expenses and writing off such expenses cannot be said to be aimed at reducing tax liability – YES: HC

[2024-TIOL-24-HC-MUM-IT_ITA No. 913 of 2018_PCIT-13, MUMBAI Vs. NATROYAL INDUSTRIES PVT LTD]

It is evident from the explanation of the assessee that the decision taken by it to write off the trade deposit was based on commercial sense and cogent reasoning since RCVPL was already declared as sick Company. Furthermore, RCVPL did not adjust the trade deposit against the trade deposit as per the terms of the agreement and was asking for payments against the bills. The assessee was thus compelled to make the payment in order to ensure future supplies and thus the assessee is justified in making a decision to write off the trade advance. This is perfectly probable and acceptable. Moreover, even the Supreme Court in its decision into the case of Mysore Sugar Company Ltd., has observed that the money lost in doing business based the character of current expenses. We do not find it jurisdictionally proper and necessary to substitute the view of the Tribunal with our view, especially since the same is based on facts. The Revenue is unable to indicate any question of law, leave aside any involving a substantial legal proposition.

• Whether no tax is required to be deducted at source on various payments to foreign consultant in absence of ‘make available’ clause – YES: ITAT

[2024-TIOL-18-ITAT-MUM_ITA No. 1974/Mum/2023_DCIT Vs. KPMG ASSURANCE AND CONSULTING SERVICES LLP]

With respect to the disallowance of claim of professional fees, the AO in its assessment order observed that regarding the TDS on professional fees paid to various outside consultants outside India amounting to Rs. 79,915,590/- on which the tax has not been deducted by the assessee and therefore same has been disallowed. All the recipient are in the business of the services. Therefore, there income first classify under article of Business income. In absence of permanent Establishment, it cannot be taxed in source country [India]. Therefore, it goes out of the residuary article of ‘Other income’. We do not find any infirmity in the order of the CIT(A) thus, the disallowance of Rs. 434,019,511/- for non-deduction of tax at source is correctly deleted.

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