PJSC STROYTRANSGAZ,GURGAON vs. DDIT, NEW DELHI

When the appeals were called out for hearing, none appeared on behalf of the assessee to represent the case. Even, the assessee has not filed any application seeking adjournment.

Briefly the facts are, the assessee is a non-resident corporate entity and incorporated under the laws of Russia. As stated by the Assessing Officer, it is engaged in the business of construction of oil and gas pipelines of large diameters in Russia and other countries. For the purpose of carrying out its business activity in India, the assessee opened a branch office on 1st October, 2003 and rendered technical and consultancy services in connection with various projects. In course of assessment proceeding, while examining the profit and loss account forming part of the audit report, the Assessing Officer noticed that under the head ‘project expenses’, the assessee had claimed the following expenses:

After calling upon the assessee to furnish details of project- wise profit and loss account and various other materials, including expenses incurred, the Assessing Officer observed, the assessee explained that the expenses claimed were not actual expenses, but were in the nature of provisions made in the books of account. After examining in detail the claim of the assessee relating to provisions made of various expenses, the Assessing Officer found that expenses were actually not incurred by the assessee, but were in the nature of provisions. Holding that the expenses claimed by the assessee are not ascertained liabilities, the Assessing Officer disallowed them. Though, the assessee contested the disallowances by raising objections before learned DRP, however, the DRP upheld the disallowances.

Before us, the assessee has neither appeared nor led any evidence to demonstrate that the provisions of expenses debited to the profit and loss account were actually incurred and are in the nature of ascertained liability. Thus, in absence of any cogent materials furnished by the assessee to establish its claim, we do not find any reason to interfere with the decision of the departmental authorities. Accordingly, grounds are dismissed. 4 | P a g e ; 5223/Del/2012; 1133/Del/2014 & 7846/Del/2017

In the result, appeal is dismissed. AY: 2009-10

Most of the issues raised in this appeal are identical to the issues raised in ITA No.5299/Del/2011. Therefore, our decision in will apply mutatis mutandis to this appeal. Accordingly, ground nos. 1 to 6 are dismissed.

In ground no. 7, the assessee has challenged the addition of Rs.1,48,23,267/- as income from royalty.

Briefly the facts are, in the return of income filed for the impugned assessment year, the assessee declared royalty income from the Bharuch Jamnagar Project amounting to Rs.1,48,23,267/- and offered it to tax by applying the rate of 10% on gross basis, as per Article 12 of India – Russia Double Taxation Avoidance Agreement (DTAA). The Assessing Officer, however, did not accept assessee’s claim. He observed that in assessment years 2004-05, 2005-06 and 2006-07, the Assessing Officer had held that such royalty income is effectively connected to the fixed place Permanent Establishment (PE) in India, hence, such income has to be taxed on net basis. Accordingly, following the decision taken in earlier assessment years, the Assessing ; 5223/Del/2012; 1133/Del/2014 & 7846/Del/2017 Officer proceeded to tax the royalty income on net basis. Learned DRP upheld the decision of the Assessing Officer.

Before us, the assessee has neither appeared nor furnished any evidence to demonstrate that royalty income is not connected to the PE. Accordingly, we find no reason to deviate from the decisions taken by the departmental authorities. Accordingly, ground is dismissed.

In the result, appeal is dismissed.

The first issue arising for consideration is disallowance of Rs.5,59,37,328/-. As could be seen from the facts on record, in course of assessment proceeding, the Assessing Officer noted that the assessee had claimed an amount of Rs.1,25,77,629/- as disallowance under section 40(a)(ia) of the Income-tax Act, 1961 (in short ‘the Act’), being payment of TDS amount deducted for assessment year 2009-10 and not paid that year but paid in assessment year 2010-11. After perusing the details furnished by the assessee, the Assessing Officer observed that the assessee has not furnished the challans evidencing deposit of TDS to Government account, amounting to Rs.5,59,37,328/-. Thus, in 6 | P a g e ; 5223/Del/2012; 1133/Del/2014 & 7846/Del/2017 absence of proper evidence, the Assessing Officer disallowed the amount in dispute. Learned DRP also upheld the disallowance.

Before us, the assessee has neither appeared, nor furnished any evidence to demonstrate that the TDS amount of Rs. 5,59,37,328/- was actually deposited in Government account.

The next issue relates to taxability of royalty income on net basis. This issue is identical to the issue raised in ground no. 7 of ITA No.5223/Del/2012. The decision taken therein would apply mutatis mutandis in this appeal also. Accordingly, the decision of the departmental authorities is upheld.

The next issue relates to disallowance of Rs.32.98,997/-, being deduction claimed towards transit office/site office facility expenses. As could be seen from the facts on record, the departmental authorities have disallowed assessee’s claim of deduction on the reasoning that the expenditure is not related to the business activity of the assessee.

Before us, the assessee has not brought on record any evidence to demonstrate that the expenditure incurred is wholly and exclusively for its business activity. That being the case, we 7 | P a g e ; 5223/Del/2012; 1133/Del/2014 & 7846/Del/2017 are inclined to uphold the decision of the departmental authorities.

The next issue raised by the assessee relates to set off of brought forward losses. As could be seen from the facts on record, assessee’s claim of set off of brought forwards losses has been rejected by the Assessing Officer on the reasoning that there is no brought forward losses in view of the additions made in assessment year 2009-10. Keeping in view the aforesaid factual position, we uphold the decision of the departmental authorities.

The assessee has raised one more issue of double disallowance of Rs.5,59,37,328/-. On perusal of record, we find, learned DRP has issued necessary direction to the Assessing Officer in this regard and, pursuant to which, the Assessing Officer has passed the final assessment order. In this view of the matter, we uphold the decision of the departmental authorities.

In the result, the appeal is dismissed. AY: 2011-12

The first issue arising in the appeal relates to taxability of royalty income on net basis. This issue is identical to the issue raised in ground no. 7 of decided in the ; 5223/Del/2012; 1133/Del/2014 & 7846/Del/2017 foregoing paragraphs. The decision taken in by us will apply mutatis mutandis to this appeal also. Accordingly, we uphold the decision of the departmental authorities.

The next issue relates to disallowance of transit office/site office expenses. While deciding identical issue in assessee’s appeal in , we have upheld the disallowance, since the expenditure incurred is not wholly and exclusively for the purpose of business. Following our decision therein, we uphold the disallowance.

The next issue relates to disallowance of Rs.4,000/-, being service tax penalty on late filing of service tax returns. Having perused the orders of the departmental authorities, we find, the amount in dispute was paid towards service tax penalty on late filing of service tax returns. No material has been brought on record by the assessee to demonstrate that the payment made was not prohibited by law or due to infraction of law. Therefore, we uphold the addition.

The next issue relates to disallowance of Rs.23,37,382/- representing professional expenses. ; 5223/Del/2012; 1133/Del/2014 & 7846/Del/2017

Having perused materials on record, we find, the assessee had made certain payments, which were claimed as deduction.

Before us, the assessee has failed to appear and furnish any evidence to substantiate its claim. Therefore, we are inclined to uphold the decision of departmental authorities on the issue.

The next issue relates to addition of Rs. 23,53,40,021/-. In course of assessment proceeding, the Assessing Officer found that, though, there are credit entries of Rs.23,53,40,021/- in various bank accounts, which according to the assessee, were received from various projects, however, the assessee did not offer them for tax. Accordingly, the Assessing Officer treated them as income and brought it to tax. While deciding the issue, the Commissioner (Appeals) has observed that, though, the assessee claimed that these receipts from projects have already been ; 5223/Del/2012; 1133/Del/2014 & 7846/Del/2017 offered to tax in earlier years, however, the assessee could not furnish any cogent evidence to establish such claim.

Learned Commissioner (Appeals) has recorded a finding of fact that neither the assessee could explain the credit entries, nor furnish any evidence to demonstrate that the receipts found in the bank statements are identical to the receipts from projects offered to tax in the earlier assessment years.

Before us, the assessee has not led any evidence to rebut the factual finding of the departmental authorities. In this view of the matter, we do not find any reason to interfere with the decision of learned Commissioner (Appeals). Accordingly, the addition made is sustained.

In the result, the appeal is dismissed.

To sum up, all the appeals are dismissed.