Saturday, May 11, 2013

[aaykarbhavan] Fw: [Gzb_CA Group -CA. VINAY MITTAL] Chennai bench ITAT : Non resident commission payment TDS u/s 195 (post cbdt circular 786 withdrawal); Cost of improvement to improve/maintain title & tds suffered expenses (automatic allowable); adhoc disallowance; Builder/developer taxation with estimated rate of profit vis a vis 40(a)(ia)/40A(3)




----- Forwarded Message -----
From: Kapil Goel <advocatekapilgoel@gmail.com>
To: CA.KAPIL GOEL <kapilnkgoelandco@gmail.com>
Sent: Wednesday, 8 May 2013 10:30 AM
Subject: [Gzb_CA Group -CA. VINAY MITTAL] Chennai bench ITAT : Non resident commission payment TDS u/s 195 (post cbdt circular 786 withdrawal); Cost of improvement to improve/maintain title & tds suffered expenses (automatic allowable); adhoc disallowance; Builder/developer taxation with estimated rate of profit vis a vis 40(a)(ia)/40A(3)

 
 
 
Gist of ITAT orders:
 
a)     on disallowance u/.s 40(a)(ia) and 40A(3) in case of estimated income (developer/builder 8% rate); entire purchases cannot be disallowed to tax assessee on gross sales;
b)    On disallowance u/s 40(a)(i) Commission payment to Non residents (section 195 obligation);
c)     Cost of Improvement u/s 48 capital gains computation ;
d)    TDS importance claim of business head expenses (adhoc disallowance)
 
M/s Lavens Constructions P. Ltd I.T.A.No.128 & 909/Mds/2010
Assessment years : 2005-06 & 2006-07  IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH : CHENNAI  Date of Pronouncement : 30-04-2013
The brief facts of the case are that the assessee is a
company engaged in construction of flats. The assessee developed
residential project called "Saffire" jointly with one M/s Lavanya
Property Developers (P) Ltd., Trichy
 
As regards the estimation of profit @ 8%, the ld. Counsel
has not been able to show as to how the estimate taken by the
CIT(A) is on the higher side. In our considered view, the estimate of
profit @ 8% is fair and reasonable. We do not deem it appropriate to
interfere with the order of the CIT(A) on this issue.
 
10. The contention of the assessee that estimated work-inprogress
of the earlier year is not correct is also not tenable. The
books of account of the assessee for financial year 2003-04 reveal  that as on 31st March 2004 the assessee had work-in-progress to the
tune of ` 35.08 lakhs. Work-in-progress for financial year 2004-05 has
been declared by the assessee as ` 66.07 lakhs. Thus, as per
assessee's own admission, the work-in-progress as on 31.3.2005 is `
101.16 lakhs. The CIT(A) has adopted the same for determining
estimated profit @ 8%.
 
11. As regards the disallowances u/s 40A(3) and 40(a)(ia) of the
Act are concerned, the CIT(A) was not justified in sustaining the
disallowances. As the profits are assessed on estimate basis, no
disallowance of expenses should be made. We, therefore, delete the
disallowances made by the Assessing Officer u/s 40A(3) and 40(a)(ia)
of the Act.
 
IN THE INCOME-TAX APPELLATE TRIBUNAL
'A' BENCH, CHENNAI I.T.A. Nos. 1394, 1395 and 1396/Mds/2011
Assessment Year : 2002-03, 2003-04 and 2004-05 M/s. Shriram Towertech Ltd Date of pronouncement : 29.04.2013
 
We have heard parties and perused the case file. The only question
sought to be raised by both of them is as to whether section 40(A)(3) has
been wrongly acted upon by the CIT(Appeals) in modifying the addition.
 
We find force in the common contentions that there was no issue of
disallowance under section 40(A)(3) either before the Assessing Officer or
before the CIT(Appeals). The question is whether the purchase of steel
worth of `.1,15,17,967/- was to be accepted or not. The CIT(Appeals) has
held that the purchase cannot be rejected as such because the Assessing
Officer has accepted the corresponding sales out of which income is
generated in hands of the assessee. In the light of quantitative details
available on record, it was not possible for the assessee to achieve the
reported sales turnover without corresponding purchase which also included
the disputed figure of `.1,15,17,967/-. When this is the question, section
40(A)(3) does not come in the picture. On the other hand, we have to see
that the entire amount of disputed purchase cannot take the form of taxable income in the hands of the assessee. In our view, in such a case, it is
desirable and fair to estimate a reasonable amount of gross profit against
such disputed purchase amounting to `.1,15,17,967/-. We have already
stated that the purchase cannot be ignored as corresponding sales are
made out of the purchase which also includes this disputed amount. In such
circumstances, the only fair way is to estimate the gross profit on the
disputed amount of purchase. In view of the above, taking into consideration
of the nature of the trade carried on by the assessee and other relevant
aspects, we direct the Assessing Officer to work out the gross profit on the
disputed purchase of `.1,15,17,967/- at the rate of 6% thereof and add the
same to the income of the assessee. In lieu of the above, we delete the
addition made by the CIT(Appeals) under section 40(A)(3). The 6% gross
profit addition on the disputed amount of purchase alone will stand
 
 
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH, CHENNAI ITA No.757/Mds/2011 (Assessment Year : 2007-08)
Mr. S.P.Balasubramaniyam,  Date of Pronouncement : 29th April, 2013 Heard both sides. Perused the orders of lower authorities and materials on record. It is a fact that the assessee made payments to sub-contractors which is not in dispute. The assessee also deducted TDS on such payments
to contractors is also not in dispute. It is also a fact that assessee himself carried out the unfinished portion of the building without which he could not have used that property as dubbing and recording theatre. It is a fact that assessee has sold the property i.e. dubbing and recording theatre. So it is not the contention of the Assessing Officer that the cost of improvement was not at all met by the assessee. The
assessee has paid amounts to contractors by deducting TDS. Therefore, in our view, the assessee cannot be denied cost of
improvement for the purpose of computing capital gains simply because the contractors to whom the payments were made did not carry out the work. Therefore, we direct the Assessing Officer to consider `13,70,000/- in computing the capital gains as cost of improvement of the asset and recompute the capital gains. 6. In the result, the appeal of the assessee is allowed
 
also refer: IN THE INCOME TAX APPELLATE TRIBUNAL
"G" Bench, Mumbai ITA No. 4329/Mum/2010
(Assessment year: 2007-08 )  M/s Sporting & Outdoor Solutions We have perused the records and considered the rival contentions carefully. The dispute is regarding estimated disallowance of expenses for want of bills and vouchers. The disallowance of expenses on estimated basis on the ground that the
same was not supported by proper bills and vouchers is justified but it is a settled legal position that disallowance has to be made on proper basis. In this case the AO had made Ad hoc disallowance without giving any basis for computing the disallowance. No comparison has been made with similar expenses incurred in the last year in assessee's own case nor any other comparative case has
been cited to prove that expenses were excessive this year. CIT (A) has deleted the disallowance in respect of telephone and traveling expenses as in respect of such expenses the assessee had paid (FBT). As FBT had been paid, we agree with CIT (A), that the disallowance of expenses would not be justified. CIT (A) has also deleted the disallowance on the account of professional fees. The
professional fees had been paid to tax consultants, advocates and architects on which tax had been deducted at source. We, therefore, see no infirmity in the order of CIT (A) that there was no justification for disallowance of such expenses. In relation to other disallowances of expenses which is in dispute such as commission, site expenses etc., the learned DR could not submit before us any supporting material to justify such huge ad hoc disallowance. Therefore in our
view, the order of CIT (A), reducing the disallowance in respect of these expenses is considered reasonable and proper, considering the facts and circumstances and the volume of business. The order of CIT (A) is therefore upheld
 
 
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH, CHENNAI M/s. Faizan Shoes Pvt.Ltd Date of Pronouncement : 23rd April, 2013 The only grievance of the Revenue in this appeal is that the Commissioner of Income Tax (Appeals) erred in deleting the disallowance under section 40(a)(i) of the Act holding that the assessee is not liable to deduct tax at source on the commission payments
made to non-residents under section 195 of the Act On going through the order of the Commissioner of Income Tax (Appeals), we find that the non-residents are only procuring orders for the assessee and following up payments, no other services are rendered other than procuring the orders and collecting the amounts. The non-residents are not providing any technical services to the assessee. The commission payment made to non-residents also does not fall under the category of royalty or fee of technical services,
therefore the Explanation to sub-section (2) of section 9 has no  application to the facts of the assessee's case. We see that this case is squarely covered by the decision of the Supreme Court in the case of GE India Technology Cen. P.Ltd. Vs. CIT (327 ITR 456) wherein the Hon'ble Supreme Court held that the assessee is not liable to deduct TDS when non-residents provided service outside India . It was held that when the services are provided outside India, the commission payments made to non-residents cannot be treated as income deemed to accrue or arise in India, therefore, the provisions of section 195 has no application. In order to invoke the provisions of section 195 of the Act, the income should be chargeable to tax in India. Here the commission payments to non-residents are not chargeable to tax in India and therefore the provisions of section 195 are not applicable. In the circumstances, we sustain the order of the Commissioner of Income Tax (Appeals) in deleting the disallowance made under 40(a)(i) of the Act.
 
 
IN THE INCOME-TAX APPELLATE TRIBUNAL
'A' BENCH, CHENNAI. I.T.A. No.177/Mds/2012
Assessment Year: 2007-08
Shri K. Ramachandran, 6. In previous year relevant to the impugned assessment year, the assessee had sold a property and building appurtenant thereto for `.85.00 lakhs wherein respective valuation for land read as `.78,97,500/- and building's value `.6,02,500/-. In computing capital gains arising therefrom,  he chose to claim deduction of `.12,77,102/- [inclusive of an amount of `.11,98,352/- and also settlement charges] paid to his sisters. Per assessee, the aforesaid amounts represented cost of acquisition of the asset transferred. Therefore, the moot question which arises for our consideration is whether the amount paid by the assessee to the sisters or their L/R calls for relief of deduction for the purpose of computing capital gains under  section 48 of the "Act" or not. Taking cue from the same, we hold that since by making the payment
in question, the assessee also completed and perfected his title by entering
in settlement. This resulted in letter of administration. In these given
circumstances and guided by Hon'ble Full Bench decision duly upheld by the
Hon'ble Supreme Court, we conclude that the amount in question represents
cost of acquisition of the asset sold by the assessee which is liable to be
included in computation of capital gains under section 48 of the "Act".




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