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II. Direct Taxes Case Laws:
1. Pr.
Commissioner of Income Tax Vs. Senior Manager (Finance), Bharat Heavy
Electricals Ltd., I.T.A. No. 242-2016, Date of Order: 09.12.2016, High
Court of Punjab and Haryana
Issue:
Whether where the qualified engineers and supervisors were
employed by contractor for the completion and the testing of the
tangible structure under the contract work, TDS would be deducted u/s
194J of the Income Tax Act, 1961 and not under 194C for payment to
contractor?
Held_No, TDS would be deducted u/s 194C of the Act.
Brief Facts:
TDS inspection was conducted on the assessee u/s 133A of the Income
Tax Act, 1961. It was found that the assessee had made payments to 5
contractors in respect of various contracts and had deducted tax u/s
194C of the Act. The AO contended that all the contracts involves
technical and professional services and therefore TDS would be deducted
u/s 194J and not under 194C. The AO contended that the contracts were
not only for the erection and installation work but also for
commissioning, testing and trial operation of the various equipments and
also to provide all types of labour, supervisors, engineers, inspectors
as well as testing and commissioning for the execution of the project.
The trial operations were handled by the qualified engineers and
technicians and thus, the level of human intervention was high and as
such TDS should be deducted u/s 194J. AO held that the assessee was an
assessee in default u/s 201(1A) of the Act. CIT(A) held that the
services of the qualified engineers and skilled manpower were incidental
for the development of a tangible structure and hence the order was
made in the favour of the assessee. ITAT upheld the order of the CIT(A).
Aggrieved by which, Revenue appealed in the High Court.
Held:
It was held that the testing, pre-commissioning, commissioning and
post-commissioning are required to be carried out by the contractor to
ensure the proper execution of the work and meet the performance
parameters. Also, the technical personnel were deployed for and on the
behalf of the contractor and not for and on the behalf of the customer.
Moreover, the contract between the contractor and the customer did not
involve the supply of the professional and technical services as per
Section 194J of the Income Tax Act, 1961. Therefore, the decision of the
CIT(A) and ITAT is upheld.
The appeal of the Revenue is dismissed.
(Please click here for judgment)
2. Torm Shipping India Pvt. Ltd. Vs. ITO, I.T.A. No. 1272/Mum/2013, Date of Order: 14.10.2016, ITAT - Mumbai
Issue:
Whether where reasons for initiation of reassessment
proceedings ceased to survive then the AO had no jurisdiction to
reassess issue other than the issues in respect of which reassessment
proceedings were initiated.
Held: Yes
Brief Facts:
Survey action u/s 133A was carried on the premises of
the assessee company. During survey proceedings, the survey officers
noticed that the company had rendered certain services which was not
recorded in the books of accounts till the date of survey. Consequent to
that, the MD of the company offered the aforesaid sum as income to be
taxed in the survey proceedings. After that, assessee furnished return
of income and include the aforesaid income under the head of business
income, the AO could not find mention of the disclosure which was made
by the assessee company during the survey proceedings. Therefore, taking
note of the aforesaid non-disclosure of additional income, the AO
issued notice u/s 148 of the Income Tax Act, 1961, asking the assessee
to file the return of income for reassessment for the escapement of
income which was not disclosed.
In response, the assessee filed detailed reply clarifying that the
income alleged to have been escaped in the Reasons has already been
included by the assessee while filing its original return and,
therefore, there was no escapement of income, therefore, the proceedings
should be dropped. But the AO went on with the reassessment proceedings
and completed the same and framed reassessment order by disallowing
other expenditure other than the covered by reasons recorded for
reassessment.
Held:
Hon’ble ITAT held that It is an admitted fact that the impugned
income has already been included by the assessee in the return filed
originally and same was also clarified by the assessee by way of his
reply submitted during re-assessment proceedings. It was also confirmed
by the AO when he made no addition in this regard in the assessment
order. Under these circumstances, the Assessing Officer was obliged
under the law to drop the re-assessment proceedings as per the mandate
given under the law. The Assessing Officer was of course at liberty to
record fresh reasons and initiate re-assessment proceedings in case any
another escaped income was found by him, as permitted under the law. But
once the Assessing Officer was of the view that the escaped income as
alleged in the reasons recorded by him was not the income actually
escaped, but already included in its taxable income and offered to tax
by the assessee, it was not legally permissible for him to continue with
the reassessment, therefore, the same is hereby quashed.
The appeal of assessee is allowed.
(Please click here for judgment)
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