Alstom T & D India Limited, CHENNAI V. DCIT, CHENNAI

CO 12/CHNY/2014

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2085 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 31-01-2014
• Court: TRIBUNAL
• Department Lawyers: M M BHUSARI
• Keywords: Reopening of assessment; Source of fund; Question of law; Condonation of delay; Revised return
• Section: 143(3); 147; 148; 12

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER I.T.A.NO S . 661, 662 & 663/MDS/2013 ASSESSMENT YEAR S : 200 1 - 02, 2003 - 04 & 2004 - 05 & C.O. NO S . 12 & 13 /MDS/201 4 [IN I.T.A. NO S . 662 & 663/MDS/2013 ] THE DEPUTY COMMISSIONER OF INCOME TAX OFFICER , LARGE TAXPAYER UNIT C HENNAI 600 101 . VS. M /S. ALSTOM T & D INDIA LTD., [ FORMERLY AREVA T&D INDIA LTD.], 19/1, GST ROAD, PALLAVARAM, CHENNAI 600 043. [PAN: A AACG2115R ] ( APPELLANT ) ( RESPONDENT /CROSS OBJECTOR ) DEPARTMENT BY : SHRI M.M. BHUSARI, CIT ASSESSEE BY : SHRI L.V. SRINIVASAN, I NDIA TAX DIRECTOR / DATE OF HEARING : 0 2 . 03 .201 6 / DATE OF P RONOUNCEMENT : 31 . 0 3 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THE APPEALS PREFERRED BY THE REVENUE AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) LARGE TAXPAYER UNIT, CHENNAI DATED 11.01.2013 FOR THE ASSESSMENT YEARS 2003 - 04 AND 2004 - 05. THE REVENUE HAS ALSO PREFERRED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A) LTU, CHENNAI DATED 11.01.2013 FOR THE ASSESSMENT YEAR 2001 - 02. WITH REGARD TO I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 2 CROSS OBJECTION S FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2003 - 04 AND 2004 - 05, SINCE THE ASSESSEE HAS RAISED THE GROUND WITH REGARD TO ASSUMPTION OF JURISDI CTION UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] AFTER THE EXPIRY OF FOUR YEARS, WE PROCEEDED TO DECIDE THE CROSS OBJECTION S FIRST. 2. THE CROSS OBJECTIONS OF THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS ARE FOUND TO HAVE FILED LATE BY 240 DAYS. THE ASSESSEE HAS FILED AN AFFIDAVIT FOR CONDONATION OF DELAY OF 240 DAYS IN FILING THE CROSS OBJECTIONS BEFORE THE TRIBUNAL. THE L D . COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE GROUND RAISED IN THE CROSS OBJECTIONS HA S BEEN DECIDED BY THE LE ARNED CIT(A) AGAINST THE ASSESSEE AND SUBMITTED THAT DELAY IN FILING THE CROSS OBJECTIONS WAS DUE TO THE BONA FIDE BELIEF THAT THE ASSESSEE COULD SUPPORT THE ORDER PASSED BY THE LEARNED CIT(A) WITHOUT FILING THE CROSS OBJECTIONS BECAUSE RULE 27 OF THE APPE LLATE TRIBUNAL RULES PERMIT THE RESPONDENT IN DEPARTMENTAL APPEAL TO SUPPORT THE ORDER APPEALED AGAINST ON ANY OF THE GROUNDS DECIDED AGAINST HIM. HE HAS, THEREFORE, SUBMITTED THAT THE ASSESSEE HOWEVER, DUE TO ABANDONED PRECAUTION FILED THE CROSS OBJECTION S. THE LD . DR HAS SUBMITTED THAT THE POINTS RAISED IN THE CROSS OBJECTIONS ARE DECIDED AGAINST THE ASSESSEE BY THE LD . CIT(A) AND SUBMITTED THAT THE ABOVE REASON WOULD NOT DISCLOSE ANY SUFFICIENT CAUSE FOR FILING THE CROSS OBJECTIONS BELATEDLY. THE L D. DR HAS ALSO SUBMITTED THAT THE APPREHENSION OF THE I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 3 ASSESSEE IS MISPLACED IN MOVING THE CROSS OBJECTIONS; THEREFORE, SAME SHOULD BE DISMISSED BEING TIME BARRED 240 DAYS AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE SHOULD NOT BE ADMITTED . 3. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CASE, THE LD. CIT(A) HAS PASSED THE FIRST APPELLATE ORDER ON 11.01.2013 FOR BOTH THE ASSESSMENT YEARS 2003 - 04 AND 2004 - 05, WHEREIN, CHALLENGING THE JURISD ICTION OF REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT HAS BEEN QUASHED BY THE LD. CIT(A) AND HELD TO BE VALID AND DISMISSED THE GROUND RAISED BY THE ASSESSEE. AGAINST THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS NOT PREFERRED ANY APPEAL S BEFORE T HE TRIBUNAL. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) ON OTHER ISSUE , THE REVENUE HAS FILED APPEALS FOR BOTH THE ASSESSMENT YEARS WITH REGARD TO THE ISSUE OF DELETION OF DISALLOWANCE UNDER SECTION 40(A)(I) OF THE ACT. THE APPEALS FILED BY THE REVENUE WERE POSTED FOR HEARING ON 24.06.2013 AND NOTICES WERE ISSUED TO BOTH THE PARTIES. THOUGH THERE WAS NO REPRESENTATION FROM ASSESSEE S SIDE ON THE DATE OF HEARING FIXED ON 24.06.2013, BUT WHEN THE HEARING OF THE APPEALS WERE ADJOURNED TO 02.09.2013 AT THE REQUES T OF THE AUTHORIZED REPRESENTATIVE SHRI L.V. SRINIVASAN, INDIA TAX DIRECTOR VIDE HIS LETTER DATED 29.08.2013 , THE HEARING OF THE APPEALS FILED BY THE REVENUE WERE ADJOURNED SUBSEQUENTLY. DESPITE SERVICE OF NOTICE ON THE ASSESSEE FOR PUTTING ITS APPEARANCE AGAINST THE I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 4 APPEALS FILED BY THE REVENUE, THE ASSESSEE HAS SLEPT ON THE ORDER OF THE LD. CIT(A) DATED 11.01.2013 AS WELL AS NOTICE SERVED BY THE TRIBUNAL OVER A PERIOD OF 240 DAYS AND FINALLY ON 31.01.2014, THE ASSESSEE HAS FILED ITS CROSS OBJECTIONS FOR B OTH THE ASSESSMENT YEARS. THOUGH THE ASSESSEE HAS STATED SOME REASONS IN THE NATURE OF ASSUMPTION/BELIEF IN THE AFFIDAVIT FOR BELATEDLY FILING THE CROSS OBJECTIONS BEFORE THE TRIBUNAL, THE REASONS MENTIONED IN THE AFFIDAVIT ARE VERY VAGUE AND NOT SUFFICIEN T TO CONDONE THE HUGE DELAY OF 240 DAYS. IT IS AN UNDISPUTED FACT THAT IN FORM NO. 36A FILED BY THE ASSESSEE IN THE CROSS OBJECTIONS, THE ASSESSEE HAS RECEIVED NOTICE OF HEARING ON 06.05.2013 ISSUED TO THE ASSESSEE INTIMATING THE DATE OF HEARING OF APPEALS OF THE REVENUE ON 24.06.2013. THE FIRST APPELLATE ORDER WAS PASSED ON 11.01.2013 DISMISSING THE GROUND RAISED BY THE ASSESSEE WITH REGARD TO CHALLENGING JURISDICTION OF REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT. THE INCOME TAX ACT HAS PROVIDED SUFFICIENT TIME OF 60 DAYS FOR CONSULTATION, PREPARING APPEAL PAPERS, ETC. FOR FILING FURTHER APPEALS/CROSS OBJECTIONS BEFORE THE TRIBUNAL. BUT IN THIS CASE, IT WAS SHEER NEGLIGENCE ON THE PART OF ASSESSEE TO SIMPLY SLEPT ON THE ORDERS OF THE FIRST APPELLA TE AUTHORITY AND DID NOT WAKE - UP EVEN THOUGH THE TRIBUNAL HAS ISSUED NOTICE OF HEARING AND THE ASSESSEE HAS NOT ONLY RECEIVED THE NOTICE , BUT ALSO THE HEARINGS WERE ADJOURNED AT THE REQUEST OF LD. AR, WHO PUT HIS APPEARANCE ON MANY OCCASION BEFORE THE TRIB UNAL BUT FACTUALLY NOT FIL ED ITS CROSS OBJECTIONS BEFORE THE TRIBUNAL IN TIME . TO CONDONE THE DELAY, THE ONUS LIES I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 5 ON THE ASSESSEE TO SUBSTANTIATE SUFFICIENT CAUSE FOR DELAY IN FILING THE CROSS OBJECTIONS. SINCE THE ASSESSEE HAS FAILED TO SUBSTANTIATE SUFF ICIENT CAUSE FOR DELAY IN FILING THE CROSS OBJECTIONS BEYOND THE STIPULATED TIME, THE AFFIDAVITS FILED FOR CONDONATION OF DELAY IS LIABLE TO BE DISMISSED. OUR VIEW FIND SUPPORT FROM THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MADHU DADHA V. ACIT [2009] 317 ITR 458, WHEREIN THE HON BLE HIGH COURT DISMISSED THE APPEAL FILED BY THE ASSESSEE AND CONFIRMED THE ORDER OF THIS TRIBUNAL SINCE THE ASSESSEE HAD NOT TAKEN PROPER PLEA TO SHOW SUFFICIENT CAUSE FOR CONDONING THE DELAY IN FILING T HE APPEAL . IN THE PRESENT CASE, THE NEGLIGENT ATTITUDE OF THE ASSESSEE CANNOT BE TAKEN CARE TO PRESERVE THE RIGHT OF FILING ITS CROSS OBJECTIONS SINCE THE ASSESSEE HAS SLEPT OVER FOR 240 DAYS AND NOT EXPLAINED SUFFICIENT CAUSE TO CONDONE THE DELAY IN FILI NG THE CROSS OBJECTIONS. THEREFORE, THE AFFIDAVITS FILED FOR CONDONATION OF DELAY STAND DISMISSED AND ACCORDINGLY, BOTH THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. 4. THE ONLY COMMON GROUND RAISED IN BOTH THE APPEALS OF THE REVENUE FOR THE ASSESSMENT YEARS 2003 - 04 AND 2004 - 05 IS WITH REGARD TO DELETION OF DISALLOWANCE UNDER SECTION 40(A)(I) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] IN RESPECT OF PAYMENT TO NON - RESIDENTS FOR THE PURPOSE OF TESTING CHARGES. FOR THE ASSESSMENT YEAR 2001 - 02, THE REVENUE HAS RAISED TWO GROUNDS VIZ., (1) THE LD. CIT(A) ERRED IN HOLDING THAT THE REASSESSMENT I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 6 PROCEEDINGS ARE INVALID AND (2) DELETION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER OF .41,73,000/ - CLAIMED UNDER VRS PAYMENT TREATING THE SAME AS RETRENCHMENT COMPENSATION. I.T.A. NO. 661/MDS/2013 [A.Y. 2001 - 02] 5 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF HEAVY ELECTRICAL EQUIPMENT INCLU DING HIGH VOLTAGE AND MEDIUM VOLTAGE SWITCH GEARS, TRANSFORMERS, CONTROL PANELS, ROTATING MACHINES, INDUSTRIAL FANS, RELAYS, CUBICLE GEAR PANELS AND ENERGY METERS. THE ASSESSEE FILED ITS RETURN OF INCOME ON ADMITTING TOTAL INCOME OF .18,40,240/ - . THE RETU RN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 04.03.2002 DETERMINING A REFUND OF .96,43,455/ - . 6 . SUBSEQUENTLY, THE ASSESSEE HAS FILED REVISED RETURN ON 08.05.2002, ENHANCING INTER ALIA, THE CLAIM ON ACCOUNT OF PROVISIONS MADE IN EARLIER YEAR BUT ACTUALLY SPENT DURING THE CONCERNED PREVIOUS YEAR. THE CLAIM WAS ENHANCED FROM .3,52,50,200/ - TO .4,45,50,000/ - BY INCLUSION OF CLAIM ON ACCOUNT OF REVERSAL OF ENTRIES ON THE PROVISIONS MADE FOR C FORMS. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER T HAT THESE PROVISIONS WERE CREATED EARLIER, THEY ARE FULLY ADMISSIBLE DURING THE CURRENT YEAR SINCE DURING THE EARLIER YEAR, THESE PROVISIONS WERE NOT TAKEN INTO ACCOUNT AS DEDUCTION WHILE COMPUTING THE TAXABLE INCOME. AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 7 UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 18.10.2002. IN RESPONSE TO SUBSEQUENT HEARING NOTICE, THE AR OF THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER AND FILED EXPLANATIO N TO QUERIES RAISED BY THE ASSESSING OFFICER. AFTER CONSIDERING VARIOUS SUBMISSIONS, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 20.01.2004 BY DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT .1,55,99,729/ - AFTER MAKING VARIOUS ADDITION S. 7 . THE ASSESSING OFFICER SUO MOT U REOPENED THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT ON 28.03.2008. IN RESPONSE TO THE NOTICE, T HE ASSESSEE H AS FILE D THE RETURN OF INCOME ON 20.01.2004 AND REQUESTED THAT THE REVISED RETURN FILED ON 08.05.2002 MAY BE TAKEN AS RETURN FILED. IN RESPONSE TO THE NOTICE ISSUED, REASONS WERE COMMUNICATED TO THE ASSESSEE ON 11.09.2008 AND NOTICE UNDER SECTION 143(2) ALSO ISSUED ON 11.09.2008. IN RESPONSE TO WHIC H THE ASSESSEE HAS FILED ITS OBJECTION VIDE LETTER DATED 20.10.2008, WHICH WAS DISPOSED OFF BY THE ASSESSING OFFICER ON 31.10.2008. THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT WAS COMPLETED ON 19.12.2008 BY MAKING AN ADDITION OF .41,73,000/ - AND REVISED THE LOSS TO THE EXTENT OF .2,79,48,783/ - . 8 . ON APPEAL, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E AND FACTS OF THE CASE, THE LD. CIT(A) HAS OBSERVED THAT THE REOPENING OF I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 8 ASSESSMENT UNDER SECTION 147 OF THE ACT BEYOND 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WAS BAD IN LAW AND HELD THAT THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT DATED 19.12.2008 IS INVALID AND QUASHED BY ALLOWING THE GROUND RAISED BY THE ASSESSEE. 9 . AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL . 10 . WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CASE, ORIGINAL ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 29.01.2004 . IN THE RETURN OF INCOME, THE ASSESSEE HAD CLAIMED A SUM OF .4,79,09,000/ - TOWARDS PAYMENT OF VRS LAUNCHED DURING THE VARIOUS FINANCIAL YEARS PRIOR TO THE ASSESSMENT YEAR. THE ASSESSING OFFICER RESTRICTED THE ALLOWANCE OF .88,07,800/ - BEING 1/5 TH OF 4,40,39,000 [ 4,79 ,09,000 - 31,33,000 7,37,000] BY APPLYING SECTION 35DDA OF THE ACT. 11. AGAINST THE ORIGINAL ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT ON 29.01.2004, THE ASSESSEE PREFERRED APPEAL S BEFORE THE LD. CIT(A) AS WELL AS THE TRIBUNAL [IN I.T.A. N O. 2035/MDS/2005] . THE REVENUE ALSO FILED APPEALS IN ITA NOS. 2317/MDS/2005 & 1218/MDS/2006 FOR AY 2001 - 02 AND 2000 - 01 AND AGAINST THESE REVENUE S APPEALS, THE ASSESSEE ALSO FILED COS IN C.O. NOS. 5 & 3/MDS/2006. THE TRIBUNAL VIDE ITS CONSOLIDATED ORDER DATED 16.05.2007 , AGAINST THE APPEAL PREFERRED BY THE REVENUE HAS HELD AS I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 9 UNDER: 14. THE NEXT ISSUE RELATES TO THE ALLOWABILITY OF THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS VRS IN RESPECT OF THE SCHEMES LAUNCHED PRIOR TO THE ASSESSMENT YEAR 2001 - 2002. SECTION 35DDA WAS INSERTED BY THE FINANCE ACT, 2001 WITH EFFECT FROM 01.04.2001. IN THE INSTANT CASE THE SCHEME WAS LAUNCHED PRIOR TO THE ASSESSMENT YEAR 2001 - 2002 AND AS SUCH, THE PRESCRIPTION OF SECTION 35DDA IS NOT APPLICABLE. BOTH THE PARTIES AGR EED THAT THE CLAIM OF THE ASSESSEE IS TO BE ALLOWED SUBJECT TO VERIFICATION. THE ASSESSING OFFICER IS REQUIRED TO SEE WHETHER SUCH PAYMENTS WERE ALLOWED ON MERCANTILE BASIS IN THE PRECEDING ASSESSMENT YEARS. IF SUCH PAYMENTS ARE NOT CLAIMED IN THE PRECEDIN G YEAR, THIS CAN BE ALLOWED IN THE YEAR UNDER CONSIDERATION. WE SET ASIDE THE IMPUGNED ORDER ON THIS COUNT AND RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE IT DE NOVO IN ACCORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPP ORTUNITY OF BEING HEARD TO THE ASSESSEE. 11 . AGAINST THE ABOVE ORDER OF THE TRIBUNAL, THE ASSESSING OFFICER SHOULD HAVE PASSED ORDER GIVING EFFECT TO THE FINDINGS OF THE TRIBUNAL. WE FIND THAT THE ASSESSING OFFICER HAS SIMPLY IGNORED THE ORDER PASSED BY THE TRIBUNAL ON 16.05.2007 AND SUO MOTO REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT ON 28.03.2008 AFTER 4 YEARS FROM THE END OF THE ASSESSMENT YEAR 2001 - 02 . AGAINST THE ORDER OF THE REASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT DATED 19.12.2008, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING VARIOUS JUDICIAL PRECEDENTS, AND FACTS OF THE CASE, THE LD. CIT(A) HAS OBSERVED THAT REOPENING OF THE ASSESSMENT UNDER SECTION 147 BEYOND 4 YEARS FROM T HE END OF THE RELEVANT ASSESSMENT YEAR WAS BAD IN LAW AND IS ACCORDINGLY HELD IT AS INVALID AND QUASHED THE REASSESSMENT AFTER CONSIDERING THE PROVISIONS I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 10 OF THE ACT AS WELL AS VARIOUS JUDICIAL PRECEDENTS . THUS, WE FIND NO INFIRMITY IN THE ORDER PASSED BY T HE LD. CIT(A) WITH REGARD TO REOPENING OF ASSESSMENT. ONCE THE ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S. 147 OF THE ACT WAS HELD TO BE INVALID AND QUASHED BY THE LD. CIT(A), THE ADDITION MADE IN THE REASSESSMENT ORDER HAS NO LEGS TO STAND. UNDER THE ABO VE FACTS AND CIRCUMSTANCES, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. I.T.A. NOS. 662 & 663/MDS/2014 [AY: 2003 - 04 & 2004 - 05] 13 . THE ONLY COMMON GROUND RAISED IN BOTH THE APPEALS OF THE REVENUE IS WITH REGARD TO DELETION OF DISALLOWANCE UNDER SECTION 40(A)(I) OF THE ACT IN RESPECT OF PAYMENT TO NON - RESIDENT FOR THE PURPOSE OF TESTING CHARGES. 1 4 . THE ASSESSING OFFICER HAS OBSERVED FROM THE FINANCIAL STATEMENT FILED BY THE ASSESSEE THAT THE ASSESSEE HAS MADE PAYMENT OF .1,01,37,434/ - FOR T HE PURPOSE OF TESTING CHARGES TO THE NON - RESIDENTS IN FOREIGN CURRENCY WITHOUT DEDUCTING TDS UNDER SECTION 195 OF THE ACT. HENCE, THE ASSESSEE WAS SHOW - CAUSED TO EXPLAIN AS TO WHY THE SAME SHOULD NOT BE DISALLOWED AS PER THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT. IN RESPONSE TO THE SAME, THE ASSESSEE HAS FILED A DETAILED REPLY AND SUBMITTED THAT SECTION 40(A)(I) OF THE ACT CANNOT BE INVOKED IN THE PRESENT CASE FOR DEDUCTING TDS UNDER SECTION 195 OF THE ACT. HOWEVER, AFTER CONSIDERING THE FACTS OF THE CA SE AND ALSO BY I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 11 CONSIDERING JUDICIAL PRECEDENTS, THE ASSESSING OFFICER DISALLOWED THE FOREIGN REMITTANCE WITHOUT MAKING TDS AND ADDED TO THE TOTAL INCOME OF THE CURRENT YEAR AS PER THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT. 15 . ON APPEAL, BY FILING D ETAILED SUBMISSIONS, THE ASSESSEE HAS CHALLENGED THE ABOVE DISALLOWANCE ON TWO COUNTS VIZ., (1) DISALLOWANCE UNDER SECTION 40(A)(I) OF THE ACT CAN BE MADE ONLY WHEN THE AMOUNT IS PAYABLE AS ON THE BALANCE SHEET DATE AND (2) , PAYMENTS MADE TO CERTIFYING AGE NCIES FOR CERTIFYING EXPORTS ARE NOT FEES FOR TECHNICAL SERVICES AS THEY FALL UNDER THE PROVISION OF SECTION 9(1)(VII)(B) OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING THE DECISION OF THE DELHI BENCHES OF THE ITAT IN THE CA SE OF HAVELLS INDIA LTD. V. ADDL. CIT 13 TAXMANN 64, THE LD. CIT(A) HAS ALLOWED THE GROUND RAISED BY THE ASSESSEE. 16 . AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 17 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF AUTHORI TIES BELOW. T HE ASSESSEE HAD DEVELOPED PROTOTYPES OF 420 KV 40/50 KA SF6 GAS CIRCUIT BREAKERS & 36 KV 200A OUTDOOR TYPE PCOB 36 VACUUM CIRCUIT BREAKERS AND THE SAID PROTOTYPE DEVELOPMENT WILL BE COMPLETE D ONLY AFTER THE DESIGN TESTS AS SPECIFIED IN THE IEC STANDARDS ARE FULFILLED. KEMA IS AN INTERNATIONALLY RECOGNISED TESTING AGENCY IN EUROPE WHICH CARRIES OUT THESE DESIGN TESTS FOR THE ELECTRICAL ENGINEERING INDUSTRY. I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 12 TOWARDS THIS PURPOSE, THE ASSESSEE COMPANY HAD ENTERED INTO CONTRACT WITH KEMA TO CONDUCT VARIOUS TYPES OF TESTS TO THESE CIRCUIT BREAKERS THAT IS MANDATORY TO ACHIEVE WORLD WIDE ACCEPTANCE OF THE COMPANY'S CIRCUIT BREAKERS AND COMPONENTS THEREBY MAKE THESE PRODUCTS SALEABLE IN EXPORT MARKETS. LIKE KEMA NETHERLANDS, CESL , LTALY WAS ANOTHER INT ERNATIONAL AGENCY TO CARRY OUT THE DESIGN TESTS FOR THE ELECTRICAL ENGINEERING INDUSTRY. THE COMPANY AT ITS FACTORY AT NAINI/ KOLKATA HAD ENTERED INTO A CONTRACT WITH CESI ITALY (AN INTERNATIONAL TESTING LABORATORY) TO CONDUCT VARIOUS TYPES OF TESTS TO VACU UM CIRCUIT BREAKERS. THESE TESTS ARE MANDATORY TO ACHIEVE WORLD WIDE ACCEPTANCE OF THE COMPANY'S CIRCUIT BREAKERS AND COMPONENTS, THEREBY MAKE THESE PRODUCTS SALEABLE IN EXPORT MARKETS. FOR THE ABOVE PURPOSE, THE ASSESSEE HAS PAID .1,01,37,434/ - TOWARDS T ESTING CHARGES AND CLAIMED DEDUCTION OF THE EXPENDITURE. HOWEVER, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS NOT DEDUCTED TDS UNDER SECTION 195 OF THE ACT TOWARDS THE PAYMENT FOR THE PURPOSE OF TESTING CHARGES TO THE NON - RESIDENTS IN FOREIGN CURRENCY AND THEREFORE, DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) MAINLY BY FOLLOWING THE DECISION OF THE DELHI BENCHES OF ITAT IN THE CASE OF HAVELLS INDIA LTD. V. ADDL. CIT (SUPRA), OBSERVED THAT THE ASS ESSEE S CASE IS SQUARELY COVERED BY THE EXCEPTION PROVIDED IN CLAUSE (B) OF SECTION 9(1)(VII) OF THE ACT AND HELD THAT NO INCOME HAS ACCRUED OR ARISEN IN INDIA ON THESE I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 13 TRANSACTIONS AND THEREFORE TDS IS NOT DEDUCTIBLE AND ALLOWED THE GROUND RAISED BY THE A SSESSEE. 18 . AGAINST THE DECISION OF THE DELHI BENCHES OF THE ITAT IN THE CASE OF HAVELLS INDIA LTD. V. ADDL. CIT (SUPRA), THE DEPARTMENT HAS PREFERRED AN APPEAL BEFORE THE HON BLE DELHI HIGH COURT AND THE HON BLE HIGH COURT IN THE CASE OF CIT V. HAVELL S INDIA LTD. IN ITA NO.55/2012 & ITA NO. 57/2012 VIDE ORDER DATED 21.05.2012, HAS GIVEN AN ELABORATE OBSERVATION AND FINDINGS AND DECIDED THE ISSUE AGAINST THE ASSESSEE, WHICH IS REPRODUCED HEREUNDER: 4. AS REGARDS FIRST SUBSTANTIAL QUESTION OF LAW, THE BRIEF FACTS ARE AS FOLLOWS. THE ASSESSEE PAID A SUM OF . 14,71,095/ - TO M/S. CSA INTERNATIONAL, CHICAGO, ILLINOIS, USA FOR THE PURPOSE OF OBTAINING WITNESS TESTING OF AC CONTRACTOR AS PART OF CB REPORT AND KEMA CERTIFICATION. THE US COMPANY HAD SPECIALISED KNOWLEDGE AND FACILITIES FOR CARRYING OUT THE TYPE OF TESTING AND THE NECESSARY CERTIFICATION, WHICH WAS REQUIRED BY THE ASSESSEE. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE UNDER SECTION 195 OF THE ACT FROM THE AMOUNT PAID TO TH E US COMPANY. HE ACCORDINGLY PROPOSED TO DISALLOW THE PAYMENT BY INVOKING SECTION 40(A)(IA) OF THE ACT. THE ASSESSEE BY LETTER DATED 04.10.2007 STATED THAT THE AMOUNT WAS PAID AS TESTING CHARGES TO THE US COMPANY, THAT THE TESTING WAS CARRIED OUT BY THE US COMPANY OUTSIDE INDIA, THAT NO INCOME AROSE OR ACCRUED TO THE US COMPANY IN INDIA AND, THEREFORE, THE ASSESSEE DID NOT DEDUCT ANY TAX FROM THE AMOUNT PAID. THE ASSESSEE, THEREFORE, CLAIMED THAT THE PROVISIONS OF SECTION 40(A)(IA) CANNOT BE INVOKED TO DISA LLOW THE PAYMENT ON THE GROUND OF NON - DEDUCTION OF TAX AT SOURCE. 5. THE ASSESSING OFFICER DID NOT AGREE WITH THE ASSESSEE S CONTENTIONS. ACCORDING TO HIM THE ASSESSEE WAS NOT RIGHT IN SAYING THAT NO INCOME HAD ACCRUED OR ARISEN TO THE US COMPANY IN IND IA. ACCORDING TO HIM THE DEEMING PROVISIONS OF SECTION 9(1)(VII) OF THE ACT WAS APPLICABLE AND THAT THE AMOUNT PAID REPRESENTED FEES FOR TECHNICAL I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 14 SERVICES RENDERED BY THE US COMPANY TO THE ASSESSEE WITHIN THE MEANING OF EXPLANATION 2 BELOW SECTION 9(1)(VI I)(B) OF THE ACT. ACCORDING TO THE ASSESSING OFFICER THE TESTING OF THE EQUIPMENT WAS A HIGHLY SPECIALISED JOB OF TECHNICAL NATURE AND, THEREFORE, THE AMOUNT PAID BY THE ASSESSEE TO THE US COMPANY REPRESENTED CONSIDERATION FOR THE RENDERING OF TECHNICAL SE RVICES TO THE ASSESSEE. HE, THEREFORE, HELD THAT THE AMOUNT WAS ASSESSABLE IN THE HANDS OF THE US COMPANY AS INCOME DEEMED TO HAVE ACCRUED OR ARISEN IN INDIA AND SINCE NO TAX WAS DEDUCTED BY THE ASSESSEE FROM THE REMITTANCE OF THE AMOUNT, SECTION 40(A)(IA) CAME INTO OPERATION AND THUS THE AMOUNT OF .14,71,095/ - FELL TO BE DISALLOWED. THE ASSESSING OFFICER ALSO REFERRED TO ARTICLE 12(4)(B) OF THE AGREEMENT FOR THE AVOIDANCE OF DOUBLE TAXATION ENTERED INTO BETWEEN INDIA AND USA AND OBSERVED THAT THE PAYMENT WAS ALSO COVERED UNDER THE SAID ARTICLE AS FEES FOR INCLUDED SERVICES AS DEFINED THEREIN. ACCORDING TO THE ASSESSING OFFICER, THE TESTING REPORT AND CERTIFICATION REPRESENTED TECHNICAL SERVICES WHICH MADE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE AND SKILL TO THE ASSESSEE BECAUSE THEY WERE UTILIZE D IN THE MANUFACTURE AND SALE OF THE PRODUCTS IN THE BUSINESS OF THE ASSESSEE. IN THIS VIEW OF THE MATTER THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF . 14,71,095/ - UNDER SECTION 40(A)(IA) OF THE ACT. 6. THE ASSESSEE APPEALED TO THE CIT (APPEALS) AGAINST THE DISALLOWANCE. THE CIT (APPEALS) REFERRED TO THE JUDGMENT OF THE KERALA HIGH COURT IN COCHIN REFINERIES LTD. V. CIT, (1996) 222 ITR 354 AND HELD T HAT THE PAYMENT MADE BY THE ASSESSEE TO THE US COMPANY WAS FOR OBTAINING TECHNICAL SERVICES FOR THE PURPOSE OF ITS BUSINESS AND SUCH SERVICES WERE UTILISED IN THE MANUFACTURE AND SALE OF THE ASSESSEE S PRODUCTS. HE ACCORDINGLY AGREED WITH THE ASSESSING OFF ICER THAT SECTION 195 OF THE ACT WAS APPLICABLE. HE, THEREFORE, HELD THAT THE AMOUNT WAS RIGHTLY DISALLOWED UNDER SECTION 40(A)(IA) FOR NOT BEING SUBJECTED TO DEDUCTION OF TAX. 7. THE ASSESSEE CARRIED THE MATTER IN FURTHER APPEAL TO THE TRIBUNAL IN ITA NO.1300/DEL/2010. SEVERAL CONTENTIONS WERE RAISED BEFORE THE TRIBUNAL ON BEHALF OF THE ASSESSEE. THE PRINCIPAL CONTENTIONS WERE: - (A) THAT SECTION 9(1)(VII)(B) OF THE ACT EXEMPTED FROM TAX THE FEES FOR TECHNICAL SERVICES IF THEY WERE PAID FOR SERVICES W HICH WERE UTILISED BY THE ASSESSEE IN A BUSINESS OR PROFESSION CARRIED ON OUTSIDE INDIA OR FOR THE PURPOSE OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA. SINCE THE ASSESSEE WAS MAKING EXPORTS TO OTHER COUNTRIES, THE FEES FOR TECHNICAL SERVI CES I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 15 WERE PAID FOR THE PURPOSE OF MAKING OR EARNING INCOME FROM A SOURCE OUTSIDE INDIA AND HENCE THE PAYMENT WAS NOT CHARGEABLE TO TAX IN INDIA. THERE WAS THUS NO LIABILITY TO DEDUCT TAX. (B) THE DEPARTMENTAL AUTHORITIES ERRED IN CONCLUDING THAT THE TECH NICAL REPORT AND CERTIFICATION WERE UTILISED IN THE MANUFACTURE AND SALE OF THE ASSESSEE S PRODUCTS IN THE ASSESSEES BUSINESS IN INDIA. (C) THE KEMA CERTIFICATION ENABLES THE ASSESSEE TO SELL ITS PRODUCTS FREELY IN THE EUROPEAN UNION. THE ASSESSEE EXPOR TS THE PRODUCTS WHICH BEAR THE KEMA CERTIFICATION AND THAT SUCH CERTIFICATION IS NOT REQUIRED IN INDIA OR BY THE INDIAN BUYERS AND THE TAXING AUTHORITIES WERE WRONG IN SAYING THAT THE TECHNICAL SERVICES WERE UTILISED BY THE ASSESSEE FOR ITS BUSINESS IN IND IA. (D) IN ANY CASE UNDER ARTICLE 12(4)(B) OF THE DOUBLE TAX AVOIDANCE AGREEMENT BETWEEN INDIA AND USA MAKES IT A CONDITION THAT THE MERE RENDERING OF TECHNICAL SERVICES IS NOT SUFFICIENT AND THAT IT IS ALSO NECESSARY, IN ORDER THAT THE FEES FOR INCLUDE D SERVICES ARE TAXABLE IN INDIA, THAT SUCH SERVICES SHOULD HAVE RESULTED IN MAKING AVAILABLE TO THE ASSESSEE TECHNICAL KNOWLEDGE, EXPERIENCE AND SKILL. 8. THE TRIBUNAL, ON THE BASIS OF ARGUMENTS AND THE MATERIALS PLACED BEFORE THEM AND AFTER REFERRING TO SECTION 9(1)(VII)(B) OF THE ACT RECORDED THE FOLLOWING FINDINGS: - (A) THE CERTIFICATION OBTAINED BY THE ASSESSEE FROM THE US COMPANY WAS FOR ENABLING THE EXPORT OF ITS PRODUCTS. (B) THE INCOME TAX AUTHORITIES HAVE NOT BEEN ABLE TO BRING ANYTHING ON RECORD TO SUPPORT THEIR STAND THAT THE SERVICE OF TESTING AND CERTIFICATION HAS BEEN APPLIED BY THE ASSESSEE FOR ITS MANUFACTURING ACTIVITY WITHIN INDIA. (C) THE CIT (APPEALS) HAS NOT SPECIFICALLY MET THE CONTENTION OF THE ASSESSEE, RAISED BEFORE HI M, THAT THE TECHNICAL SERVICES WERE RENDERED BY THE US COMPANY OUTSIDE INDIA AND THE ASSESSEE HAS ALSO UTILISED THEM OUTSIDE INDIA AND THE PAYMENT WAS ALSO RECEIVED BY THE US COMPANY OUTSIDE INDIA. THE ASSESSEE S CONTENTION WAS THAT THE TECHNICAL SERVICES WERE UTILISED FOR THE PURPOSE OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 16 OUTSIDE INDIA AND WAS THEREFORE COVERED BY THE SECOND EXCEPTION MADE IN SECTION 9(1)(VII)(B) OF THE ACT. (D) THE ASSESSEE HAS BEEN ABLE TO SHOW THAT THE TESTING AND CERTIFICAT ION WERE NECESSARY FOR THE EXPORT OF ITS PRODUCTS AND THAT THESE WERE ACTUALLY UTILISED FOR SUCH EXPORT AND WERE NOT UTILISED FOR THE BUSINESS ACTIVITIES OF PRODUCTION IN INDIA. THE ASSESSEE HAS THUS DISCHARGED ITS BURDEN, WHEREAS THE REVENUE HAS NOT BEEN ABLE TO SHOW TO THE CONTRARY AND THEY HAVE NOT DENIED THAT THE UTILISATION OF THE TESTING AND CERTIFICATION WAS IN RESPECT OF THE EXPORTS. IN VIEW OF THE ABOVE FINDINGS, THE TRIBUNAL DELETED THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT. 9. I T IS AGAINST THE AFORESAID DECISION OF THE TRIBUNAL THAT THE REVENUE HAS COME IN APPEAL BEFORE THIS COURT. IT APPEARS TO US ON A READING OF THE ORDERS OF THE DEPARTMENTAL AUTHORITIES AND THE ORDER OF THE TRIBUNAL THAT THERE IS NO DISPUTE THAT THE AMOUNT PA ID BY THE ASSESSEE TO THE US COMPANY REPRESENTED FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF SECTION 9(1)(VII)(B) OF THE ACT. IN FACT, TO THE SPECIFIC QUERY PUT BY US IN THE COURSE OF THE HEARING TO THE LEARNED COUNSEL FOR THE ASSESSEE, HE FRANKLY STATED THAT HE COULD NOT DISPUTE THIS POSITION, HAVING REGARD TO THE WIDE DEFINITION OF FEES FOR TECHNICAL SERVICES IN THE AFORESAID PROVISION. IF THAT IS SO, THE ONLY QUESTION WHICH WE ARE REQUIRED TO EXAMINE IS (A) WHETHER THE FEES WERE PAYABLE IN RESP ECT OF SERVICES UTILISED IN A BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE OUTSIDE INDIA OR (B) THEY WERE PAID FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA. IN EITHER OF THESE TWO CASES, THE AMOUNT PAID WILL NOT BE TA XABLE IN THE HANDS OF THE NON - RESIDENT COMPANY AND CORRESPONDINGLY THERE WILL BE NO LIABILITY UPON THE ASSESSEE TO DEDUCT TAX UNDER SECTION 195 OF THE ACT. IT WAS STATED BEFORE US BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT EXCEPTION (B) WILL BE APPLICABL E IN THE ASSESSEE S CASE AND NOT (A). IN OTHER WORDS HIS CONTENTION WAS THAT THE FEES WERE PAYABLE FOR THE PURPOSES OF MAKING OR EARNING INCOME FROM A SOURCE OUTSIDE INDIA. HE ELABORATED THIS BY SUBMITTING THAT THE CERTIFICATION BY THE US COMPANY THAT THE PRODUCTS TURNED OUT BY THE ASSESSEE WERE KEMA CERTIFIED AND WERE FIT FOR BEING USED IN EUROPEAN COUNTRIES AND IN COUNTRIES WHERE SUCH CERTIFICATION IS ACCEPTED, WAS INDISPENSABLE FOR THE EXPORT OF SUCH PRODUCTS TO THOSE COUNTRIES AND ACCORDINGLY THE FEES F OR SUCH CERTIFICATION AND TESTING WERE FOR THE PURPOSES OF MAKING OR EARNING INCOME FROM A SOURCE OUTSIDE INDIA. IT WAS ACCORDINGLY CONTENDED THAT I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 17 THE CONDITIONS OF THE SECOND EXCEPTION IN SECTION 9(1)(VII)(B) OF THE ACT WERE SATISFIED. 10. IN SUPPORT H IS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO A JUDGMENT OF THE MADRAS HIGH COURT IN CIT V. AKTIENGESELLSCHAFT KUHNLE KOPP & KAUSCH W. GERMANY BY BHEL, (2003) 262 ITR 513. IN THIS CASE IT WAS HELD THAT THE EXPORTS OF GOODS REPRE SENTED A SOURCE OUTSIDE INDIA. THE HIGH COURT WAS CONCERNED WITH SECTION 9(1)(VI) WHICH WAS CONCERNED WITH PAYMENT OF ROYALTY BY A PERSON RESIDENT IN INDIA TO A NON - RESIDENT. THOUGH THAT PROVISION WAS CONCERNED WITH ROYALTY, THE EXCEPTIONS PROVIDED FROM TA XABILITY OF THE ROYALTY INCOME IN THE HANDS OF THE NON - RESIDENT ARE THE SAME AS IN THE CASE OF FEES FOR TECHNICAL SERVICES DEALT WITH IN SECTION 9(1)(VII)(B) OF THE ACT. IN THAT CASE THE RESIDENT COMPANY PAID ROYALTY TO A WEST GERMAN COMPANY. THE ROYALTY W AS PAYABLE ON EXPORT SALES EFFECTED BY THE RESIDENT - ASSESSEE. THE QUESTION BEFORE THE HIGH COURT WAS WHETHER THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THAT THE ROYALTY ON EXPORT SALES WAS NOT TAXABLE WITHIN THE MEANING OF SECTION 9(1)(VI) OF THE ACT. THE HI GH COURT HELD AS UNDER: - AS FAR AS ROYALTY ON EXPORT SALES IS CONCERNED, THAT AMOUNT IS ALSO EXEMPT UNDER SECTION 9(1)(VI) OF THE INCOME - TAX ACT. THOUGH THE ROYALTY WAS PAID BY A RESIDENT IN INDIA, IT CANNOT BE SAID THAT IT WAS DEEMED TO HAVE ACCRUED O R ARISEN IN INDIA AS THE ROYALTY WAS PAID OUT OF THE EXPORT SALES AND, HENCE, THE SOURCE FOR ROYALTY IS THE SALES OUTSIDE INDIA. SINCE THE SOURCE FOR ROYALTY IS FROM THE SOURCE SITUATE OUTSIDE INDIA, THE ROYALTY PAID ON EXPORT SALES IS NOT TAXABLE. THE APP ELLATE TRIBUNAL WAS THEREFORE CORRECT IN HOLDING THAT THE ROYALTY ON EXPORT SALES IS NOT TAXABLE WITHIN THE MEANING OF SECTION 9(1)(VI) OF THE INCOME - TAX ACT. 11. THE JUDGMENT OF THE MADRAS HIGH COURT CERTAINLY SUPPORTS THE CONTENTION OF THE LEARNED CO UNSEL FOR THE ASSESSEE. IN AN EARLIER JUDGMENT IN CIT V. ANGLO FRENCH TEXTILES LTD., (1993) 199 ITR 785, A DIVISION BENCH OF THE MADRAS HIGH COURT HAD OCCASION TO CONSIDER A SOMEWHAT SIMILAR QUESTION ARISING UNDER SECTION 9 OF THE ACT. IN THAT CASE THE ASS ESSEE WAS A COMPANY INCORPORATED UNDER THE FRENCH LAWS WHICH WERE APPLICABLE TO POSSESSIONS IN PONDICHERRY IN INDIA. IT HAD A TEXTILE MILL IN PONDICHERRY AND ITS ACTIVITY CONSISTED IN THE MANUFACTURE OF YARN AND TEXTILES AS WELL AS EXPORT OF TEXTILES FROM PONDICHERRY. THE ENTIRE BUSINESS OPERATIONS WERE CONFINED TO THE TERRITORY OF PONDICHERRY. AFTER THE MERGER OF PONDICHERRY WITH INDIA IN AUGUST, 1962, THE INCOME TAX ACT WAS EXTENDED TO PONDICHERRY W. E. F. I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 18 1.4.1963. TILL THEN, THE FRENCH LAW RELATING TO I NCOME TAX WAS IN FORCE IN PONDICHERRY. DURING THE PERIOD WHEN THE FRENCH TAX LAW WAS IN FORCE, THE ASSESSEE SURRENDERED CERTAIN RAW COTTON IMPORT AND MACHINERY IMPORT ENTITLEMENT AND RECEIVED PAYMENTS FROM THE TEXTILE COMMISSIONER (BOMBAY). THE QUESTION AR OSE AS TO THE TAXABILITY OF THE INCOME REFERABLE TO THE IMPORT ENTITLEMENTS. WHILE THE INCOME TAX DEPARTMENT TOOK THE STAND THAT THE INCOME ACCRUED TO THE ASSESSEE OUTSIDE PONDICHERRY AND WAS THEREFORE TEXALITE UNDER THE ACT, THE ASSESSEE MAINTAINED THAT T HE RECEIPTS WERE ONLY IN PONDICHERRY AND SINCE THE EXPORTS WERE MADE FROM PONDICHERRY, THE INCOME ACCRUED OR AROSE TO THE ASSESSEE IN THE TERRITORY OF PONDICHERRY WHICH WAS OUTSIDE THE PURVIEW OF THE ACT. THE MADRAS HIGH COURT OBSERVED THAT THE IMPORT ENTI TLEMENTS AROSE OUT OF THE EXPORT ACTIVITY WHICH WAS CARRIED ON BY THE ASSESSEE ONLY IN PONDICHERRY, THAT NO PART OF THE MANUFACTURING OR SELLING ACTIVITY OF THE ASSESSEE WAS CARRIED ON OUTSIDE PONDICHERRY, THAT THE IMPORT ENTITLEMENTS WERE RELATABLE ONLY T O THE EXPORT PERFORMANCE WHICH TOOK PLACE IN PONDICHERRY AND THAT ON THE FULFILLMENT OF THE EXPORT ACTIVITY, A RIGHT TO RECEIVE THE EXPORT INCENTIVE ACCRUED IN FAVOUR OF THE ASSESSEE IN THE TERRITORY OF THE PONDICHERRY. THE ARGUMENT OF THE DEPARTMENT WAS T HAT THE INCENTIVE WAS QUANTIFIED AND SENT FROM BOMBAY FROM THE OFFICE OF THE TEXTILE COMMISSIONER AND, THEREFORE, THE INCOME AROSE WITHIN THE TAXALITE TERRITORIES. THIS ARGUMENT WAS REJECTED BY THE MADRAS HIGH COURT BY HOLDING THAT THE RIGHT TO RECEIVE TH E IMPORT ENTITLEMENTS AROSE WHEN THE EXPORT COMMITMENT WAS FULFILLED BY THE ASSESSEE IN PONDICHERRY, THOUGH SUCH AMOUNT WAS SUBSEQUENTLY ASCERTAINED OR QUANTIFIED . IT WAS ALSO ARGUED ON BEHALF OF THE REVENUE BEFORE THE HIGH COURT THAT THE IMPORT ENTITLEME NT SHOULD BE REGARDED AS A SOURCE OF INCOME IN THE TAXABLE TERRITORIES AND UNDER SECTION 9(1) OF THE ACT, THE INCOME ARISING OUT OF THE ENCASHMENT OF THE IMPORT ENTITLEMENTS SHOULD BE DEEMED TO ACCRUE OR ARISE IN THE TAXABLE TERRITORIES. THIS ARGUMENT WAS ALSO REJECTED BY THE MADRAS HIGH COURT WHICH HELD: - EQUALLY, IT IS DIFFICULT TO REGARD THE IMPORT ENTITLEMENTS AS A SOURCE OF INCOME WHICH SHOULD BE LOOKED AT FROM A PRACTICAL VIEW - POINT AND NOT MERELY AS AN ABSTRACT LEGAL CONCEPT. WE ARE, THEREFORE, U NABLE TO AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL FOR THE REVENUE THAT THE IMPORT ENTITLEMENTS CONSTITUTED A SOURCE OF INCOME WITHIN THE MEANING OF SECTION 9 OF THE ACT AS TO DEEM THE IMPORT ENTITLEMENTS AS HAVING ACCRUED OR ARISING IN INDIA. I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 19 TH IS EARLIER JUDGMENT OF THE MADRAS HIGH COURT DOES NOT APPEAR TO HAVE BEEN BROUGHT TO THE NOTICE OF THE DIVISION BENCH WHICH DECIDED THE LATER CASE. THE OBSERVATIONS OF THE MADRAS HIGH COURT IN THE EARLIER CASE, WHICH WE HAVE QUOTED ABOVE, CLEARLY SUGGEST T HAT THE EXPORT ACTIVITY OR EXPORT SALES WERE THE SOURCE OF THE IMPORT ENTITLEMENTS AND THE EXPORT ACTIVITY TOOK PLACE IN PONDICHERRY AND IT WAS ONLY ON FULFILLMENT OF THE EXPORT ACTIVITY THAT A RIGHT TO RECEIVE THE IMPORT ENTITLEMENT/ INCENTIVE ACCRUED IN FAVOUR OF THE ASSESSEE. SINCE THE EXPORT ACTIVITY WAS FULFILLED IN PONDICHERRY, THE SOURCE OF INCOME WAS LOCATED IN PONDICHERRY. APPLYING THIS JUDGMENT TO THE FACTS BEFORE US IN THE PRESENT CASE, WE HAVE TO CONCLUDE THAT THE EXPORT ACTIVITY HAVING TAKEN PL ACE OR HAVING BEEN FULFILLED IN INDIA, THE SOURCE OF INCOME WAS LOCATED IN INDIA AND NOT OUTSIDE. MOREOVER, JUST AS IN THE MADRAS CASE IT WAS HELD THAT THE MERE FACT THAT THE IMPORT ENTITLEMENTS WHICH HAD THEIR SOURCE IN BOMBAY, DID NOT CONSTITUTE A SOURCE OF INCOME WITHIN THE MEANING OF SECTION 9 OF THE ACT, WE HAVE ALSO TO HOLD IN THE PRESENT CASE THAT THE MERE FACT THAT THE EXPORT PROCEEDS EMANATED FROM PERSONS SITUATED OUTSIDE INDIA DID NOT CONSTITUTE THEM AS THE SOURCE OF INCOME. 12. THE QUESTION AS TO WHAT IS A SOURCE OF INCOME HAS BEEN DEALT WITH IN SOME AUTHORITATIVE PRONOUNCEMENTS. THE JUDICIAL COMMITTEE IN RHODESIA METALS LTD. V. COMMISSIONER OF INCOME TAX, (1941) 9 ITR (SUPPL.) 45 OBSERVED THAT A SOURCE MEANS NOT A LEGAL CONCEPT BUT ONE WHICH A PRACTICAL MAN WOULD REGARD AS A REAL SOURCE OF INCOME. THIS OBSERVATION WAS ADOPTED BY MALIK, J. IN HIS SEPARATE BUT CONCURRING JUDGMENT IN THE CASE OF RANI AMRIT KAUR V. CIT, (1946) 14 ITR 561, A DECISION OF THE FULL BENCH OF THE ALLAHABAD HIGH COURT. A SOURCE OF INCOME WAS DESCRIBED BY R. S. PATHAK, J. (AS HE THEN WAS) IN THE FOLLOWING WORDS IN SETH SHIV PRASAD V. CIT, (1972) 84 ITR 15 (ALL.) AT PAGE 18: - A SOURCE OF INCOME, THEREFORE, MAY BE DESCRIBED AS THE SPRING OR FOUNT FROM WHICH A CLEARLY DE FINED CHANNEL OF INCOME FLOWS. IT IS THAT WHICH BY ITS NATURE AND INCIDENTS CONSTITUTES A DISTINCT AND SEPARATE ORIGIN OF INCOME, CAPABLE OF CONSIDERATION AS SUCH IN ISOLATION FROM OTHER SOURCES OF INCOME, AND WHICH BY THE MANNER OF DEALING ADOPTED BY THE ASSESSEE CAN BE TREATED SO. THE OBSERVATIONS OF THE JUDICIAL COMMITTEE (SUPRA) AS TO WHAT IS A SOURCE OF INCOME HAVE BEEN APPROVED BY THE SUPREME COURT IN CIT V. LADY KANCHANBAI, (1970) 77 ITR 123. THE LOCATION OR SITUS OF A SOURCE OF INCOME IS ANOTHER ASPECT. THE THIRD ASPECT IS THE ACCRUAL OF THE I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 20 INCOME. THOUGH IT IS TRUE, AS HELD BY KANIA, C.J., SPEAKING FOR A CONSTITUTION BENCH OF THE SUPREME COURT IN CIT V. AHMEDBHAI UMARBHAI, (1950) 18 ITR 472 (SC) AT PAGE 479, THAT THE PLACE WHERE THE SOURCE OF IN COME IS LOCATED MAY NOT NECESSARILY BE THE PLACE WHERE THE INCOME ALSO ACCRUES, THAT QUESTION IS NOT MATERIAL IN THE PRESENT CASE BECAUSE HEREIN WE ARE CONCERNED ONLY WITH THE QUESTION AS TO THE LOCATION OF THE SOURCE. THE REAL QUESTION IS WHETHER THE EXPO RT SALES PROCEEDS RECEIVED FROM GOODS MANUFACTURED AND EXPORTED FROM INDIA CONSTITUTE A SOURCE INSIDE OR OUTSIDE INDIA. TO DECIDE THE SAME WE HAVE TO TAKE A PRAGMATIC AND A PRACTICAL VIEW AND NOT APPROACH THE QUESTION FROM A THEORETICAL PERSPECTIVE. 13. SECTION 9(I)(VII)(B) CONTEMPLATES A SOURCE LOCATED OUTSIDE INDIA. IT IS DIFFICULT TO CONCEPTUALISE THE PLACE/SITUS OF THE PERSON WHO MAKE PAYMENT FOR THE EXPORT SALES AS THE SOURCE LOCATED OUTSIDE INDIA FROM WHICH ASSESSEE EARNED PROFITS. THE EXPORT CONTR ACTS OBVIOUSLY ARE CONCLUDED IN INDIA AND THE ASSESSEE S PRODUCTS ARE SENT OUTSIDE INDIA UNDER SUCH CONTRACTS. THE MANUFACTURING ACTIVITY IS LOCATED IN INDIA. THE SOURCE OF INCOME IS CREATED AT THE MOMENT WHEN THE EXPORT CONTRACTS ARE CONCLUDED IN INDIA. T HEREAFTER THE GOODS ARE EXPORTED IN PURSUANCE OF THE CONTRACT AND THE EXPORT PROCEEDS ARE SENT BY THE IMPORTER AND ARE RECEIVED IN INDIA. THE IMPORTER OF THE ASSESSEE S PRODUCTS IS NO DOUBT SITUATED OUTSIDE INDIA, BUT HE CANNOT BE REGARDED AS A SOURCE OF I NCOME. THE RECEIPT OF THE SALE PROCEEDS EMANATE FROM HIM FROM OUTSIDE INDIA. HE IS, THEREFORE, ONLY THE SOURCE OF THE MONIES RECEIVED. THE INCOME COMPONENT OF THE MONIES OR THE EXPORT RECEIPTS IS LOCATED OR SITUATED ONLY IN INDIA. WE ARE MAKING A DISTINCTI ON BETWEEN THE SOURCE OF THE INCOME AND THE SOURCE OF THE RECEIPT OF THE MONIES. IN ORDER TO FALL WITHIN THE SECOND EXCEPTION PROVIDED IN SECTION 9(1)(VII)(B) OF THE ACT, THE SOURCE OF THE INCOME, AND NOT THE RECEIPT, SHOULD BE SITUATED OUTSIDE INDIA. THAT CONDITION IS NOT SATISFIED IN THE PRESENT CASE. THE TRIBUNAL, WITH RESPECT, DOES NOT APPEAR TO HAVE EXAMINED THE CASE FROM THIS ASPECT. ITS CONCLUSION THAT THE TECHNICAL SERVICES WERE NOT UTILISED FOR THE ASSESSEE S BUSINESS ACTIVITY OF PRODUCTION IN INDI A DOES NOT BRING THE ASSESSEE S CASE WITHIN THE SECOND EXCEPTION IN SECTION 9(1)(VII)(B) OF THE ACT. IT DOES NOT BRING THE CASE UNDER THE FIRST EXCEPTION EITHER, BECAUSE IN ORDER TO GET THE BENEFIT OF THE FIRST EXCEPTION IT IS NOT SUFFICIENT FOR THE ASSESS EE TO PROVE THAT THE TECHNICAL SERVICES WERE NOT UTILISED FOR ITS BUSINESS ACTIVITIES OF PRODUCTION IN INDIA, BUT IT IS FURTHER NECESSARY FOR THE ASSESSEE TO SHOW THAT THE TECHNICAL SERVICES WERE UTILISED IN A BUSINESS CARRIED ON OUTSIDE INDIA. THEREFORE, WE CANNOT ALSO APPROVE OF THE TRIBUNAL S CONCLUSION IN PARA 29 OF ITS ORDER TO THE EXTENT IT SEEMS TO SUGGEST THAT THE ASSESSEE I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 21 SATISFIES THE CONDITION NECESSARY FOR BRINGING ITS CASE UNDER THE FIRST EXCEPTION. BE THAT AS IT MAY, AS WE HAVE ALREADY POINTED OUT, SINCE THE SOURCE OF INCOME FROM THE EXPORT SALES CANNOT BE SAID TO BE LOCATED OR SITUATED OUTSIDE INDIA, THE CASE OF THE ASSESSEE CANNOT BE BROUGHT UNDER THE SECOND EXCEPTION PROVIDED IN THE SECTION. 14. MR. VOHRA, LEARNED COUNSEL FOR THE ASSESSEE , HOWEVER, CONTENDED THAT INCOME AROSE NOT ONLY FROM THE MANUFACTURING ACTIVITY BUT ALSO AROSE BECAUSE OF THE SALES OF THE PRODUCTS AND IF NECESSARY A BIFURCATION OF THE INCOME SHOULD BE MADE ON THIS BASIS AND THAT PORTION OF THE INCOME WHICH IS ATTRIBUTAB LE TO THE EXPORT SALES SHOULD QUALIFY FOR THE SECOND EXCEPTION. THIS ARGUMENT IS ONLY A LIMB OF THE MAIN CONTENTION THAT THE INCOME ARISES FROM THE EXPORT SALES AND THE SOURCE OF THE INCOME IS LOCATED OUTSIDE INDIA. WE HAVE ALREADY EXPRESSED OUR DIFFICULTY IN ACCEPTING THAT ARGUMENT. IT IS TRUE THAT THE PROFITS ARISE BOTH FROM THE MANUFACTURING ACTIVITY AND FROM THE SALE. THERE ARE SEVERAL AUTHORITIES DEALING WITH THIS QUESTION IN THE CONTEXT OF CASES WHERE AN ASSESSEE HAD ITS MANUFACTURING FACILITY IN BRIT ISH INDIA BUT SOLD THE GOODS OUTSIDE BRITISH INDIA. IN SUCH CASES, IT HAS BEEN HELD THAT THE PROFITS AROSE BOTH FROM MANUFACTURE AND THE SALES AND THAT PART OF THE PROFIT WHICH ARISES FROM SALES OUTSIDE BRITISH INDIA WOULD BE EXEMPT FROM TAX: SEE ANGLO FRE NCH TEXTILES CO. LTD. V. CIT, (1953) 23 ITR 101 (SC); CIT V. AHMEDBHAI UMARBHAI & CO. (SUPRA). BUT THESE CASES ARE NOT OF ANY ASSISTANCE TO THE ASSESSEE IN THE PRESENT CASE SINCE THE CONTENTION HERE IS THAT THE SOURCE OF INCOME IS THE EXPORT SALES AND TH E EXPORT SALES ARE LOCATED OUTSIDE INDIA. 15. FOR THESE REASONS WE ARE UNABLE TO HOLD THAT THE ASSESSEE S CASE FALLS UNDER THE SECOND EXCEPTION PROVIDED IN SECTION 9(1)(VII)(B) OF THE ACT. IN OTHER WORDS, WE ARE UNABLE TO ACCEPT THAT THE FEES FOR TECHNI CAL SERVICES WERE PAID BY THE ASSESSEE TO THE US COMPANY FOR THE PURPOSE OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA. 16. THE RESULT OF OUR DISCUSSION IS THAT THE FEES FOR TECHNICAL SERVICES ARE TAXABLE IN THE HANDS OF THE US COMPANY UNDER THE PROVISIONS OF THE ACT. THE QUESTION TO BE CONSIDERED THEN WOULD BE WHETHER THERE IS ANYTHING IN THE AGREEMENT FOR AVOIDANCE OF DO UBLE TAXATION BETWEEN INDIA AND USA WHICH WOULD EXEMPT OR REDUCE THE BURDEN OF TAXATION IN RESPECT OF THE FEES FOR TECHNICAL SERVICES RECEIVED BY THE US COMPANY. THIS ASPECT OF THE MATTER HAS NOT BEEN EXAMINED BY THE TRIBUNAL, THOUGH RAISED BEFORE IT BY TH E ASSESSEE, SINCE THERE WAS NO OCCASION FOR THE TRIBUNAL TO DO SO ON ACCOUNT OF THE VIEW IT TOOK REGARDING THE I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 22 TAXABILITY OF THE FEES FOR TECHNICAL SERVICES UNDER THE ACT. IT IS AXIOMATIC THAT IF THE RECEIPT IS NOT TAXABLE UNDER THE ACT, THEN THERE IS NO N EED TO EXAMINE WHETHER IT WOULD FALL UNDER ANY OF THE PROVISIONS OF THE AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION. WE CANNOT THEREFORE FIND FAULT WITH THE TRIBUNAL FOR NOT HAVING DISCUSSED THE APPLICABILITY OF ARTICLE 12 OF THE INDO - US TREATY, WHICH DEFIN ES FEES FOR INCLUDED SERVICES IN A MANNER WHICH IS DIFFERENT FROM THE DEFINITION OF FEES FOR TECHNICAL SERVICES IN EXPLANATION 2 BELOW SECTION 9(1)(VII) OF THE ACT. IT WOULD THEREFORE NOT BE PROPER OR NECESSARY FOR US TO EXAMINE THE APPLICABILITY OF TH E TREATY WHICH SHOULD BE LEFT TO THE TRIBUNAL. WHILE THEREFORE ANSWERING THE FIRST SUBSTANTIAL QUESTION OF LAW IN THE NEGATIVE, IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE, WE RESTORE THE ISSUE RELATING TO THE APPLICABILITY OF THE INDO - US TREATY TO T HE RECEIPT IN QUESTION AND CONSEQUENTLY THE APPLICABILITY OF SECTION 40(A)(IA) OF THE ACT TO THE TRIBUNAL. 19 . IN THE INSTANT CASE , IT IS A FACT THAT THE EXPORT CONTRACTS ARE CONCLUDED IN INDIA AND THE ASSESSEE 'S PRODUCTS ARE SENT OUTSIDE INDIA UNDER TH ESE CONTRACTS. FURTHER THE MANUFACTURING ACTIVITY OF THE ASSESSEE IS ALSO LOCATED IN INDIA. THE SOURCE OF INCOME IS CREATED AT THE MOMENT WHEN THE EXPORT CONTRACTS ARE CONCLUDED IN INDIA. EVEN THOUGH THE IMPORTER OF THE ASSESSEE S PRODUCTS IS SITUATED OUTS IDE INDIA, HE IS ONLY THE SOURCE OF THE MONIES RECEIVED AND HE CANNOT BE REGARDED AS A SOURCE OF INCOME. IN ORDER TO FALL WITHIN THE SECOND EXCEPTION PROVIDED IN SECTION 9(1)(VII)(B) OF THE ACT, THE SOURCE OF THE INCOME, AND NOT THE RECEIPT SHOULD BE SITUA TED OUTSIDE INDIA AND THIS CONDITION IS NOT SATISFIED IN THE PRESENT CASE. 20 . THE ASSESSEE S CASE DOES NOT EVEN FALL UNDER THE FIRST EXCEPTION, SINCE IN ORDER TO GET THE BENEFIT OF THE FIRST EXCEPTION IT IS NOT SUFFICIENT FOR THE ASSESSEE TO PROVE THAT THE TECHNICAL SERVICES WERE NOT UTILISED FOR ITS I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 23 BUSINESS ACTIVITIES OF PRODUCTION IN INDIA, BUT IT IS FURTHER NECESSARY FOR THE ASSESSEE TO SHOW THAT THE TECHNICAL SERVICES WERE UTILISED IN A BUSINESS CARRIED ON OUTSIDE INDIA. 21 . THE MEANING OF THE T ERM SOURCE OF INCOME IN S ECTION 9(1)(VI)/(VII) OF THE ACT HAS BEEN A SUBJECT MATTER OF DISPUTE SINCE OVER SOME TIME. IN KEEPING WITH FEW OTHER JUDICIAL PRECEDENTS, THE HON BLE DELHI HIGH COURT HAS LAID DOWN THAT IT IS NOT THE PAYER OF INCOME BUT THE LOCATI ON OF THE MANUFACTURING ACTIVITY AND CONCLUDING OF THE EXPORT CONTRACT FROM INDIA THAT WILL DETERMINE THE SOURCE OF INCOME. FURTHER THE ASSESSEE NEEDS TO SPECIFICALLY DEMONSTRATE THAT THE TECHNICAL SERVICES WERE UTILISED IN A BUSINESS CARRIED ON OUTSIDE IN DIA IN ORDER TO FALL UNDER THE EXCEPTION . 22 . UNDER THE ABOVE FACTS AND CIRCUMSTANCES , THE HON BLE DELHI HIGH COURT IN THE ABOVE CASE HAS HELD THAT THE ASSESSEE S CASE DOES NOT FALL WITHIN THE SECOND EXCEPTION PROVIDED IN SECTION 9(1)(VII)(B) OF THE ACT . ACCORDINGLY, RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT V. HAVELLS INDIA LTD. (SUPRA), WE HOLD THAT THE FTS PAID TO KEMA NETHERLANDS AND CESI, ITALY, TDS IS, THEREFORE, DEDUCTIBLE UNDER SECTION 195 OF THE ACT AN D THE ASSESSING OFFICER HAS RIGHTLY INVOKED PROVISIONS OF SECTION 40(A)(I) OF THE ACT AND MADE DISALLOWANCE . THUS, THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE IS HEREBY REVERSED AND RESTORED I.T.A. NO S . 661 - 663 /M/ 1 3 & C.O. NO S . 12 - 13 /M/1 4 24 THAT OF THE ASSESSING OFFICER AND ALLOWED THE APPEAL FILED B Y THE REVENUE FOR THE ASSESSMENT YEAR 2003 - 04 . 23 . FOR THE ASSESSMENT YEAR 2004 - 05 IN I.T.A. NO. 663/MDS/2013 ALSO, SIMILAR GROUND ON IDENTICAL FACTS HAS BEEN RAISED BY THE REVENUE EXCEPT CHANGE IN FIGURES. HENCE, BY FOLLOWING OUR ABOVE DECISION IN I.T. A. NO. 662/MDS/2013, THE APPEAL FILED BY THE REVENUE STANDS ALLOWED. 2 4 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE REVENUE FOR THE ASSESSMENT YEARS 2003 - 04 AND 2004 - 05 ARE ALLOWED AND THE CROSS OBJECTION S FILED BY THE ASSESSEE ARE DISMISSED. THE APPE AL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2001 - 02 STANDS DISMISSED. ORDER PRONOUNCED ON THE 31 ST MARCH , 20 16 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 31 . 0 3 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.