INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Validity - Difference between amount of service income on which tax was deducted by service provider and income which was shown in Profit and Loss Account by assessee -

Assessee was engaged in business of pharmaceutical products. AO passed the assessment order under Section 143(3). Disallowance of Royalty payment was not taken for computation and in the way for taxation to avoid double taxation being the upward adjustment included the same. However, PCIT found such assessment order erroneous and prejudicial to the interest of Revenue. He therefore, issued show cause notice under section 263(1). Assessee filed reply that presumption of the Revenue that income should also be in direct proportion to the amount of TDS was not correct because at times there were some timing difference between Revenue recognition and deduction of tax at source. It was submitted by assessee that deductor had effected TDS on account of service tax which was included in invoice whereas service tax collected by service provider was not the income of the assessee and hence, the same was not reflected in the Profit and Loss Account. Held: PCIT had not considered the submissions made by assessee and had arrived at conclusion with regard to the issue of less income as stated by him in the show-cause notice. However, Tribunal after considering the submissions made by assessee and on the basis of material on record had arrived at finding that because there was some difference in the service income as per the Profit & Loss Account and as worked out based on TDS, the assessment order cannot be said to be erroneous and prejudicial to the interest of the Revenue. Hence, appeal of Revenue was dismissed.

Relied:Malabar Industrial Co. Ltd. v. CIT 2000 TaxPub(DT) 1227 (SC) A. Menarini India Pvt. Ltd. v. Pr. CIT [I.T.A. No.1441/Ahd/2016, dt. 7-8-2019]

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2011-12

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