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IN THE INCOME-TAX APPELLATE TRIBUNAL “L” BENCH MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER (Assessment Year 2011-12) Shri Chetan Shantilal Shah ITO (International Taxation)- 36, Lavkush Apartment, 2(1), Mumbai. Pratapganj, Vs. Baroda-390002 PAN: BLNPS4745R Appellant Respondent Appellant by : Shri Nirmit Mehta (AR) Respondent by : Shri Himanshu Sharma (Sr. DR) Date of Hearing : 08.08.2018 Date of Pronouncement : 13.08.2018 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee under section 253 of Income Tax Act (The Act) is directed against the order of Ld. Commissioner of Income-tax (Appeals) [the ld. CIT(A)]- 56, Mumbai dated 2nd November 2015 which in turn arises from the Assessment Order passed by Assessing Officer under section 143(3) of the Act on 24th March 2014 for assessment year 2011-12. The assessee has raised the following ground of appeal; (i) The learned Commissioner (Appeals) erred in facts and in law in confirming the action of assessing officer in making addition of Rs. 21,76,154/- to the total income of the assessee. (ii) The learned Commissioner (Appeals) erred in fact and in law in confirming the action of assessing officer in taxing the income of Rs. 21,76,154/- at normal rate enlisted of applying special rate of 10%. (iii) The learned Commissioner (Appeals) erred in fact and in law in confirming action of assessing officer in not applying provisions of section 115A(1)(b)(BB) of the income tax Act for determining the rate of tax applicable on fees for technical services.
(iv) The learned Commissioner (Appeals) erred in facts and in law in not appreciating that the contention of assessee, that he had no Permanent Establishment (PE) in India. (v) The learned Commissioner (Appeals) erred in fact and in law in confirming the action of AO in disallowing the tax credit on the addition of Rs. 21,76,154/-. (vi) The learned Commissioner (Appeals) erred in facts and in law in confirming action of assessing officer in charge interest under section 234B of the Act. (vii) The learned Commissioner (Appeals)erred in facts and in law in confirming action of assessing officer in charging interest under section 234D of the Act. (viii) The learned Commissioner (Appeals) erred in facts and in law in confirming action of assessing officer in initiating the penalty proceeding under section 271 (1)(c) of the Act. (ix) Your appellant craves the right to add to or alter, amend, substitute, delete or modified all or any of the above grounds.
Brief facts of the case are that the assessee filed his return of income for relevant Assessment Year declaring total income at Rs. 3,13,743/-. The return of income was selected for scrutiny and the Assessment Order under section 143(3) was passed on 24th March 2014. The Assessing Officer on the basis of AIR information noted that assessee has received Rs. 25,62,202/- from various companies on which TDS has been deducted, however, the assessee has not disclosed this income in his return. When the assessee was confronted about the difference of income offered, the assessee contended that he is residing in United States of America, hence, the income was not offered in India. The contention of the assessee was not accepted by Assessing Officer holding that assessee earned income in India on which TDS was deducted. Therefore, the assessing officer held the income earned by assessee is liable for taxation in India. The Assessing Officer added the difference of income of Rs. 2 21,76,154/- and treated the same as ‘Income from Other Sources’. On appeal before the ld. CIT(A), the action of Assessing Officer was confirmed. Hence, further aggrieved by the order of ld. CIT(A) the assessee has filed the present appeal before us.
We have heard the submission of learned authorised representative (AR) of the assessee and learned departmental representative (DR) for the revenue and perused the material available on record. At the outset of hearing the learned AR of the assessee submits that he is not pressing Ground No. 1 & 4. Considering the submission of learned AR for the assessee Ground No. 1 & 4 of the appeal is dismissed as not pressed. Four remaining grounds of appeal
. The learned AR of the assessee filed written synopsis in the form of chart.
4. Ground No.1 relates to taxing the income of Rs. 21,76,154/- at normal rate instead at special rate. The learned AR of the assessee submits that assessee is a non-resident Indian, engaged in providing technical consultancy services to various industries. The assessee received the fee for consultancy services of Rs. 21,76,154/-which was treated by Assessing Officer as Income from undisclosed sources and taxed it under the head ‘Income from Other Sources’. The learned AR further submits that the nature and source of the income received by assessee has been accepted by Assessing Officer as well as learned CIT(A). It was also accepted by lower authorities that TDS has been duly deducted. 3 Therefore, there is no dispute about the nature and source of the income.
The Assessing Officer cannot treat this income as unexplained income and to tax under the head ‘Income from Other Sources’. In support of his submission, the learned AR of the assessee relied upon the decision of Prashanti Surya Construction Co. P. Ltd. versus DCIT[2017] 56 ITR (T)
202 (Chandigarh), Gaurish Steels (P.) Ltd. versus ACIT [2015] 43 ITR (T) 414 (Chandigarh) and Dev Raj Hi-tech Machines Ltd. versus DCIT [2015] 174 TTJ 9 (Amritsar).
On the other hand, the learned DR for the revenue supported the order of lower authorities.
We have considered the rival submission of the parties and have gone through the orders of authorities below. We have noted that the Assessing Officer has accepted that the assessee has received an amount of Rs. 25,62,202/- from various companies in India for providing consultancy services, on which TDS has been deducted. The learned CIT (A) also accepted the fact that TDS was deducted on the payment made to the assessee. We have noted that neither the Assessing Officer nor the learned CIT (A) disputed the status of assessee being non-resident Indian.
Once the status of the assessee is not disputed, nor the source of income was disputed, the income cannot be treated as income from unexplained sources and has to be taxed under the specific head. The Assessing Officer treated the income received on account of fees for technical 4 services as income from ‘other source’ in place of ‘income from business and profession’. The treatment of income from ‘income from business and profession’ cannot be treated as income from ‘other source’. We have further noted that income received by assessee is in the nature of fee for technical service( FTS) and the assessee is non-resident, therefore, the income is to be taxed at the special rate prescribed under the Act.
Considering the above factual discussion we direct the assessing officer to tax the income of Rs. 21,76,154/- as special rate prescribed under the Act. In the result ground No.2 of the appeal is allowed.
Ground No.3 relates to not applying the provision of section 115A of the Act. The ld AR for the assessee submits that the assessee received Rs. 20,79,626/- as FTS from Heubach Colour Pvt Ltd, which is liable to taxed @ 10% under section 115A(1)(b)(BB), the details of which were provided to lower authorities, which was accepted by them. Further Rs. 10,528/- received on account of interest is chargeable @ 20% as per section 115A(b)(a)(B). On the contrary the ld. DR for the revenue supported the order of the authorities below.
We have considered the rival submission of the parties and have gone through the orders of authorities below. As we have already noted that the income of the assessee is to be taxed at the special rate prescribed under the Act and directed the assessing officer to tax the income of Rs. 21,76,154/- as special rate prescribed under the Act. Therefore, the 5 assessing officer is further directed to tax Rs. 20,79,626/- as received on account of FTS from Heubach Colour Pvt Ltd, @ 10% under section 115A(1)(b)(BB), and Rs. 10,528/- received on account of interest @ 20% as per section 115A(b)(a)(B). In the result ground No.3 of the appeal is allowed.
Ground No.5 relates to not allowing the credit of tax on the addition. The ld. for the assessee submits that assessing officer has not allowed the credit of tax deducted at source on the income received by assessee. The ld. AR for the assessee submits that the assessee is entitled to raise additional claim before appellate authorities as per the decision of Hon’ble Bombay High Court in CIT Vs Pruthvi Brokers & Shareholders 349 ITR 336 (Bom). The ld. AR for the assessee prayed for giving necessary direction to the assessing officer to give credit of tax deducted at source. On the contrary the ld. DR for the revenue has no objection if the assessing officer is directed to verify the fact and to give credit of tax deducted at source.
We have considered the rival submission of the parties and have gone through the orders of authorities below. We have noted that the ld CIT(A) not allowed the assessee to raise additional ground of appeal holding that the assessee has not file revised return on income nor the assessee raised such claim was raised by the assessee. Considering the decision of Hon’ble Bombay High Court in CIT Vs Pruthvi Brokers & Shareholders 6 349 ITR 336 (Bom) the assessee is entitled to raise additional claim before appellate authorities, we admit this ground of appeal raised by assessee and direct the assessing officer to verify the figures of tax deducted at source and allow the credit of the same to the assessee. In the result this ground of appeal is allowed for statistical purpose.
11. Ground No. 6 to 8 are consequential and need no adjudication