Device Driven(India) P.Ltd, Trivandrum V. ITO, Trivandrum

CO 9/COCH/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 9041 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 05-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 16-07-2013
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: V SATHYANARAYANAN
• Keywords: Business income; Double taxation relief; Opportunity of being heard; Services rendered outside India; Permanent establishment; Non-deduction of tax; Revised return
• Section: 10B; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 282/COCH/2013 ASSESSMENT YEAR : 2009-10. THE INCOME TAX OFFICER, WARD-1(1), TRIVANDRUM. VS. M/S. DEVICE DRIVEN (INDIA) PVT. LTD., GROUND FLOOR, PADMANABHAM, TECHNOPARK, KARIYAVATTOM, TRIVANDRUM. [PAN: AACCD 3979Q] (REVENUE-APPELLANT) (ASSESSEE-RESPONDENT ) C.O. NO. 09/COCH/2013 (ARSG. OUT OF I.T.A. NO. 282/COCH/2013 ASSESSMENT YEAR : 2009-10. M/S. DEVICE DRIVEN (INDIA) PVT. LTD., GROUND FLOOR, PADMANABHAM, TECHNOPARK, KARIYAVATTOM, TRIVANDRUM. [PAN: AACCD 3979Q] VS. THE INCOME TAX OFFICER, WARD-1(1), TRIVANDRUM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) REVENUE BY SMT. S. VIJAYAPRABHA, JR. DR ASSESSEE BY SHRI V. SATHYANARAYANAN, CA DATE OF HEARING 05/09/2013 DATE OF PRONOUNCEMENT 29/11/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 22-02 -2013 PASSED BY LD CIT(A), TRIVANDRUM AND THEY RELATE TO THE ASSESSMENT YEAR 2 009-10. I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 2 02. THE REVENUE IS ASSAILING THE DECISION OF LD CIT (A) IN ALLOWING DEDUCTION U/S 10A OF THE ACT IN THE PLACE OF DEDUCTION CLAIME D BY IT U/S 10B OF THE ACT, WHICH WAS FOUND TO BE NOT ALLOWABLE. 03. IN THE CROSS OBJECTION, THE ASSESSEE IS AS SAILING THE DECISION OF LD CIT(A) IN UPHOLDING THE DISALLOWANCE MADE U/S 40(A)(I) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE FROM THE SALES COMMISSION PAID TO SHR I BALAJI BAL, A NON-RESIDENT DIRECTOR OF THE ASSESSEE COMPANY. 04. THE FACTS RELATING TO THE ISSUES UNDER CONS IDERATION ARE DISCUSSED IN BRIEF. THE ASSESSEE IS ENGAGED IN DEVELOPMENT AND SALE OF SOFTWARE. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE AO NOTICED THA T THE ASSESSEE HAS PAID A SUM OF RS.55,51,605/- TO ONE OF ITS DIRECTOR NAMED SHRI BALAJI BAL AS EXPORT COMMISSION AND CLAIMED THE SAME AS DEDUCTION. IT W AS FURTHER NOTICED THAT SHRI BALAJI BAL IS A RESIDENT OF SWITZERLAND. THE AO N OTICED THAT THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE U/S 195 OF THE ACT FROM THE SA ID PAYMENT. THE ASSESSEE, BY PLACING RELIANCE ON THE CIRCULAR NO.23 OF 1969 A ND CIRCULAR NO.786 DATED 7.2.2000 ISSUED BY THE CBDT, CONTENDED THAT THE TAX IS NOT REQUIRED TO BE DEDUCTED AT SOURCE FROM THE SALES COMMISSION PAID T O A FOREIGN AGENT FOR SERVICES RENDERED OUTSIDE INDIA. IT WAS FURTHER SU BMITTED THAT SHRI BALAJI BAL DOES NOT HAVE A PERMANENT ESTABLISHMENT IN INDIA A ND HENCE NO PART OF THE COMMISSION IS TAXABLE IN INDIA. ACCORDINGLY, BY PL ACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GE INDIA TEC HNOLOGY CEN (P) LTD VS. CIT (2010)(193 TAXMAN 234), THE ASSESSEE CONTENDED THAT IT WAS NOT LIABLE TO DEDUCT TAX AT SOURCE ON THAT COUNT ALSO. 05. THE AO ASKED THE ASSESSEE TO FURNISH FULL D ETAILS OF SHRI BALAJI BAL AND ALSO THE DETAILS OF SPECIFIC SERVICES RENDERED BY HIM. THE ASSESSEE SUBMITTED THAT SHRI BALAJI BAL IS ITS SOLE FOREIGN COMMISSION AGEN T. IT WAS FURTHER SUBMITTED THAT HE IS A QUALIFIED ARCHITECT AND HAS GOT VAST EXPERI ENCE IN TECHNICAL FIELD, ESPECIALLY IN MOBILE COMMUNICATIONS. THE ASSESSEE ALSO GAVE DETAILS OF I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 3 COMPANIES PROMOTED BY HIM, DIRECTORSHIP HELD BY HIM ETC. THE AO ALSO EXAMINED THE COMMISSION AGENCY AGREEMENT DATED 01-1 2-2007 ENTERED BETWEEN THE ASSESSEE AND SHRI BALAJI BAL. IN THE A REAS OF CO-OPERATION, THE AGREEMENT STATED AS UNDER:- (I) COMMISSION AGENT WILL FACILITATE MARKETIN G OF THE ASSESSEES SERVICES IN THE TERRITORY AND WILL PROVIDE SUPPORT AS WELL AS SALES EXPERTISE FOR PROJECTS TO BE EXECUTED AT CUSTOMER SITE OR AT THE ASSESSEES CENTRE IN TRIVANDRUM. (II) THE COMMISSION AGENT SHALL BE RESPONSIBL E FOR GENERATING LEADS AND INITIATING INTERACTION WITH END CUSTOMERS IN TH E RELEVANT COMPETENCY AREAS OF THE ASSESSEE. (III) THE COMMISSION AGENT SHALL IF REQUIRED PROVIDE SUPPORT TO ASSESSEE IN EVALUATION FROM A BUSINESS PERSPECTIVE, IN THE LIGHT OF HIS RELATIONSHIPS WITH THE PROPOSED CLIENTS AND LOCAL E XPERTISE, ASSESSEE PRESENTATIONS AND OTHER COLLATERAL PROPOSALS AND CO NTRACTS. THE AGREEMENT FURTHER PROVIDED THAT THE COMMISSION AGENT SHALL REVIEW PROPOSALS OF THE ASSESSEE FOR TARGET PROSPECTS AND SHALL PROVIDE ADVICE AND ASSISTANCE, WHERE APPROPRIATE, TO HELP SECURE PROJE CT. FURTHER IT IS STATED THE COMMISSION AGENT SHALL HOLD PERIODIC MEETINGS WITH THE ASSESSEE TO TRACK PROJECT PROGRESS AND STATUS. THE AO TOOK THE VIEW THAT THE SE TERMS ARE BEYOND THE SCOPE OF NORMAL COMMISSION AGENCY AGREEMENT. ACCOR DINGLY, THE AO TOOK THE VIEW THAT THE TECHNICAL SKILLS OF SHRI BALAJI BAL H AVE BEEN UTILIZED BY THE ASSESSEE. ACCORDINGLY THE AO TOOK THE VIEW THAT THE PAYMENT M ADE TO SHRI BALAJI BAL SHOULD BE TREATED AS HIS INCOME ACCRUING OR ARISING IN INDIA. IN THIS REGARD, THE AO PLACED RELIANCE ON THE DECISION RENDERED BY THE MUMBAI BENCH OF TRIBUNAL IN THE CASE OF HINDALCO INDUSTRIES LTD (2004)(91 ITD 6 4)(MUM) AND ALSO ON THE PROVISIONS OF SEC. 9(1)(VII) OF THE ACT. SINCE THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE, THE AO DISALLOWED THE PAYMENT OF RS.55,51,6 05/- BY INVOKING THE PROVISIONS OF SEC. 40(A)(I) OF THE ACT. THE ASSESS EE HAD CLAIMED DEDUCTION U/S 10B OF THE ON ITS INCOME. HOWEVER, THE AO TOOK THE VIEW THE ABOVE SAID I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 4 DISALLOWANCE IS NOT CONNECTED WITH THE EXPORT TURNO VER AND ACCORDINGLY DENIED EXEMPTION U/S 10B OF THE ACT ON IT. 06. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) AGREED WITH THE VIEW TAKEN BY THE ASSESSING OFFICER WITH REGARD TO THE NATURE OF PAYMENT OF RS.55,51,605/- MADE TO SHRI BALAJI BAL, I.E., THE LD CIT(A) ALSO H ELD THAT THE NATURE OF SERVICES RENDERED BY SHRI BALAJI BAL TO THE ASSESSEE IS IN T HE NATURE OF TECHNICAL SERVICES AS DEFINED UNDER EXPLANATION 2 TO SECTION 9(I)(VII) OF THE ACT. BEFORE LD CIT(A), THE ASSESSEE CONTENDED THAT THE PROVISIONS OF AGREE MENT FOR AVOIDANCE OF DOUBLE TAXATION (DTAA) ENTERED BETWEEN THE GOVERNME NT OF INDIA AND SWISS FEDERAL COUNSEL IN EXERCISE OF POWERS CONFERRED BY SEC. 90 OF THE IT ACT, SHOULD BE APPLIED TO THE IMPUGNED PAYMENT. 07. THE ASSESSEE SUBMITTED BEFORE LD CIT(A) THAT AS PER ARTICLE 7 OF DTAA, THE BUSINESS PROFITS ARE TAXABLE IN INDIA ONLY IF THE R ECIPIENT HAS GOT A PERMANENT ESTABLISHMENT IN INDIA. ACCORDINGLY, THE ASSESSEE CONTENDED THAT, EVEN IF THE PAYMENT MADE TO SHRI BALAJI BAL IS CONSIDERED AS BU SINESS INCOME IN HIS HANDS, THE SAME WOULD NOT BE TAXABLE IN INDIA, SINCE SHRI BALAJI BAL DOES NOT HAVE A PERMANENT ESTABLISHMENT IN INDIA. IT WAS FURTHER SU BMITTED THAT EVEN IF THE PAYMENTS ARE TAKEN AS INDEPENDENT PERSONAL SERVICE S FALLING UNDER ARTICLE 14 OF DTAA, THE SAME CANNOT BE TAXED IN INDIA, SINCE SHRI BALAJI BAL DID NOT STAY FOR 183 DAYS OR MORE IN INDIA. IT WAS ALSO SUBMITTED T HAT EVEN IF THE PAYMENTS ARE TAKEN AS OTHER INCOME, THEN ALSO IT WALL NOT TAXA BLE IN INDIA IN TERMS OF ARTICLE 22 OF THE DTAA. 08. THE LD CIT(A) EXAMINED THE PROVISIONS OF ART ICLE 14 OF DTAA, WHICH PROVIDED TWO CONDITIONS IN ORDER TO MAKE THE INCOME FROM INDEPENDENT PERSONAL SERVICES TAXABLE IN INDIA VIZ., (A) HAVIN G A FIXED BASE REGULARLY AVAILABLE TO HIM IN INDIA OR (B) STAY FOR A PER IOD OR PERIODS AGGREGATING TO 183 DAYS OR MORE IN INDIA. THE LD CIT(A) NOTICED THAT SHRI BALAJI BAL, BEING A DIRECTOR OF THE ASSESSEE COMPANY I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 5 (I) IS REQUIRED TO ATTEND THE BOARD MEETINGS REGULARLY AND INVOLVE HIMSELF IN THE AFFAIRS OF THE ASSESSEE COMPANY (II) FURTHER, AS PER THE TERMS OF THE AGREEME NT, HE WAS REQUIRED TO HOLD REGULAR MEETINGS FOR MONITORING THE PROJECT PR OGRESS AND STATUS OF PROJECTS UNDERTAKEN BY THE ASSESSEE AT TRIVANDRUM. ACCORDINGLY, THE LD CIT(A) TOOK THE VIEW THAT THE A SSESSEE COMPANY MUST HAVE PROVIDED A FIXED BASE IN THE FORM OF OFFICE TO SHRI BALAJI BAL, EVEN IT IS TAKEN THAT SHRI BALAJI BAL DID NOT HIRE OR OTHERWISE OCCUPY AN Y OTHER PLACE ON HIS OWN. ACCORDINGLY, THE LD CIT(A) HELD THAT SHRI BALAJI BA L IS HAVING A FIXED BASE IN INDIA,, WHICH WAS REGULARLY AVAILABLE TO HIM FOR PE RFORMING HIS ACTIVITIES. ACCORDINGLY, THE LD CIT(A) HELD THAT THE PAYMENTS M ADE TO HIM IS TAXABLE IN INDIA IN HIS HANDS AS PER ARTICLE 14 OF THE DTAA. THOUGH THE LD CIT(A) DID NOT STATE ANYTHING FURTHER, THE RESULT OF THE ABOVE OBS ERVATIONS IS THAT HE HAS CONFIRMED THE DISALLOWANCE MADE BY THE AO U/S 40(A) (I) OF THE ACT. 09. THE ASSESSEE CONTENDED BEFORE LD CIT(A) THA T THE DISALLOWANCE MADE U/S 40(A)(I) OF THE ACT GOES TO INCREASE THE TOTAL INCO ME OF THE ASSESSEE. SINCE THE ASSESSEE HAD CLAIMED 100% DEDUCTION U/S 10B OF THE ACT, IT WAS CONTENDED THAT THE DISALLOWANCE SO MADE IS ALSO ELIGIBLE FOR DEDUC TION U/S 10B OF THE ACT. THE LD CIT(A) ACCEPTED THE SAID CONTENTION OF THE ASSESSEE AND ACCORDINGLY HELD THAT THE EXEMPTION U/S 10B, IF ALLOWABLE, SHALL BE COMPU TED WITH REFERENCE TO SUCH ENHANCED INCOME. 10. HOWEVER, THE LD CIT(A) NOTICED THAT THE ASS ESSEE HAS BEEN WRONGLY ALLOWED DEDUCTION U/S 10B OF THE ACT IN RESPECT OF ITS BUSINESS INCOME, SINCE IT DID NOT SATISFY THE CONDITIONS PRESCRIBED IN SEC. 1 0B, VIZ., IT DID NOT HAVE 100% EOU APPROVAL GIVEN BY THE BOARD APPOINTED BY THE CEN TRAL GOVERNMENT IN EXERCISE OF POWERS CONFERRED U/S 14 OF INDUSTRIES ( DEVELOPMENT AND REGULATION) ACT, 1951. ACCORDINGLY HE HELD THAT THE ASSESSEE I S NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S 10B OF THE ACT. HENCE THE ASSESSEE R AISED AN ALTERNATIVE CLAIM BEFORE LD CIT(A) TO THE EFFECT THAT IT IS ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT. I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 6 IN THIS REGARD, THE ASSESSEE ALSO FILED AUDIT REPOR T IN NO.56F FOR CLAIMING DEDUCTION U/S 10A OF THE ACT IN THE PLACE OF DEDUCT ION U/S 10B. THE LD CIT(A) FORWARDED A COPY OF THE DOCUMENTS FILED BY THE ASSE SSEE TO THE ASSESSING OFFICER SEEKING HIS COMMENTS AND ALSO FOR VERIFICATION OF I NFORMATION GIVEN IN THE FORM. HOWEVER, IT SEEMS THAT THE AO HAS DECLINED TO EXAMI NE THE SAME WITH THE PLEA THAT NEW CLAIMS COULD BE MADE BY THE ASSESSEE ONLY THROUGH A REVISED RETURN. THE OBSERVATIONS MADE BY LD CIT(A) IN THIS REGARD A RE EXTRACTED BELOW:- THE AO HAS MENTIONED IN HIS REPORT DATED 15.2.2013 THAT AS PER PROVISIONS OF SECTION 10A(5), DEDUCTION U/S 10A IS ALLOWABLE ONLY IF THE PRESCRIBED FORM, I.E., FORM NO.56F ALONG WITH THE R EPORT OF THE ACCOUNTANT AS DEFINED IN SUB SECTION (2) OF SEC. 288 CERTIFYIN G THAT THE DEDUCTION HAS BEEN CORRECTLY CLAIMED IN ACCORDANCE TO THE PROVISI ONS OF THE SECTION IS FILED ALONG WITH RETURNS OF INCOME AND SINCE THE AS SESSEE NEITHER MADE ANY CLAIM U/S 10A IN THE RETURN OF INCOME NOR FILED THE SAID FORM WITH THE RETURN, THEREFORE, AS PER DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF GOETZE (INDIA) LTD VS. CIT REPORTED IN (200 6) 157 TAXMANN 1, A CLAIM FOR DEDUCTION NOT MADE IN THE ORIGINAL RETURN CANNOT BE CONSIDERED OTHER THAN THROUGH A VALID REVISED RETURN. THE ASSESSEE, INTER ALIA, PLACED RELIANCE BEFORE LD CIT(A) ON THE DECISION RENDERED BY THE COCHIN BENCH OF ITAT IN THE CASE OF C.W.P. TAYLOR VS. DCIT (ITA NO.695/COCH/2008 ) WHEREIN IT WAS HELD THAT THE DEC ISION RENDERED BY THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD (SUPRA) DOES NOT IMPINGE THE POWER OF THE TRIBUNAL OR THE LD CIT(A) TO ENTERTAIN FIRST TIME A POINT OF LAW, PROVIDED THE FACTS ON THE BASIS OF WHICH TH E ISSUE IS RAISED IS THERE ON RECORD. THE LD CIT(A), BY FOLLOWING THE ABOVE SAID DECISION, TOOK THE VIEW THAT HE IS ENTITLED TO CONSIDER THE CLAIM FOR DEDUCTION U/S 10A OF THE ACT, EVEN IF IT WAS NOT MADE BEFORE THE AO. SINCE THE ASSESSING OF FICER DID NOT MAKE ANY ADVERSE COMMENT WITH REGARD TO THE SAID CLAIM, THE LD CIT(A) DIRECTED THE AO TO ALLOW THE DEDUCTION U/S 10A OF THE ACT. 11. WE SHALL FIRST TAKE UP THE CROSS OBJECTION FILED BY THE ASSESSEE, WHEREIN THE ASSESSEE IS CHALLENGING THE DECISION OF LD CIT( A) IN UPHOLDING THE DISALLOWANCE MADE U/S 40(A)(I) OF THE ACT. THE VAL IDITY OF THE SAID DISALLOWANCE REVOLVES AROUND THE TAXABILITY OF PAYMENTS RECEIVED BY SHRI BALAJI BAL IN INDIA. IF I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 7 IT IS TAXABLE IN HIS HANDS IN INDIA, THEN THE ASSES SEE HAS GOT A LIABILITY TO DEDUCT TAX AT SOURCE FROM IT U/S 195 OF THE ACT. SINCE TH E ASSESSEE DID NOT SO DEDUCT TAX FROM THE SAID PAYMENT, THEN THE SAME IS LIABLE TO BE DISALLOWED U/S 40(A)(I) OF THE ACT. ON THE OTHER HAND, IF THE SAID PAYMENT IS NOT LIABLE TO BE TAXED IN INDIA IN THE HANDS OF SHRI BALAJI BAL, THEN THE ASS ESSEE IS NOT REQUIRED TO DEDUCT TAX AT SOURCE FROM THE SAID PAYMENT, AS PER THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CEN (P) LTD VS. CIT (2010)(193 TAXMAN 234). 12. ACCORDING TO THE ASSESSEE THE PAYMENT MADE BY IT IS PURELY SALES COMMISSION ON EXPORT SALES FOR THE MARKETING SERVI CES RENDERED BY SHRI BALAJI BAL OUTSIDE INDIA. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF EON TECHNOLOGIES PVT LTD ( 203 TAXMANN 255)(DELHI) AND ALSO ON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF CIT VS. TOSHOKU LTD (125 ITR 525) IN ORDER TO CONTEND THAT THE INCOME RECEIVED OUT SIDE INDIA BY WAY OF EXPORT COMMISSION BY A NON-RESIDENT AGENT OPERATING OUTSIDE INDIA IS NOT TAXABLE IN INDIA. THE ASSESSEE ALSO P LACED RELIANCE ON THE CIRCULARS NO.23 DATED 23.7.1969 AND NO.786 DATED 07.2.2000 IS SUED BY CBDT. THOUGH THE SAID CIRCULARS HAVE BEEN WITHDRAWN BY THE BOARD , VIDE CIRCULAR NO. 7 DATED 22.10.2009, THE ASSESSEE CONTENDED THAT THE SAID WI THDRAWAL SHALL OPERATE ONLY PROSPECTIVELY AS HELD BY THE HONBLE MUMBAI HIGH CO URT IN THE CASE OF UTI VS. ITO (249 ITR 612). 13. ACCORDING TO THE ASSESSEE, THE TAX AUTHORITI ES ARE NOT CORRECT IN PRESUMING THAT THE IMPUGNED PAYMENT HAS BEEN MADE FOR TECHNIC AL SERVICES. ACCORDING TO THE ASSESSEE, SHRI BALAJI BAL HAS PROVIDED ONLY MAR KETING ASSISTANCE/SUPPORT AND GUIDANCE FOR SECURING THE ORDERS FROM THE OVERSEAS CLIENTS AND NOWHERE IN THE AGREEMENT; IT IS STATED THAT TECHNICAL EXPERTISE/SE RVICES OF THE AGENT IS TO BE MADE AVAILABLE TO THE ASSESSEE IN ANY MANNER. ACCO RDING TO THE ASSESSEE, THE AGREEMENT PROVIDES ONLY FOR CONTINUING RESPONSIBILI TY ON THE AGENT TO KEEP TRACK OF SALES ORDERS AND TO ADVISE THE ASSESSEE TO MONIT OR AND TO TAKE NECESSARY I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 8 STEPS TO FACILITATE PROPER FLOW OF MARKETING ORDERS . ACCORDINGLY, THE ASSESSEE CONTENDED BEFORE US THAT THE IMPUGNED SERVICES SHAL L NOT FIT INTO THE DEFINITION OF TECHNICAL SERVICES, AS GIVEN U/S 9(1)(VII) OF THE ACT. 14. ACCORDING TO THE ASSESSEE, SHRI BALAJI BAL IS A RESIDENT OF SWITZERLAND AND HENCE THE DTAA ENTERED BY GOVERNMENT OF INDIA WITH SWITZERLAND IS APPLICABLE TO THE IMPUGNED TRANSACTION. ACCORDING TO THE ASSE SSEE SHRI BALAJI BAL WAS NOT PRESENT IN INDIA FOR A PERIOD OF 183 DAYS OR MORE D URING THE YEAR UNDER CONSIDERATION. ALSO, HE DOES NOT HAVE A FIXED PLAC E OF BUSINESS OR OFFICE IN INDIA. HENCE, AS PER ARTICLE 14 OF DTAA, THE IMPUGNED PAYM ENT IS NOT TAXABLE IN INDIA, EVEN IF IT IS CONSIDERED AS A PAYMENT MADE FOR PROV IDING INDEPENDENT PERSONAL SERVICES. ACCORDING TO THE ASSESSEE, THE IMPUGNED PAYMENT CONSTITUTES BUSINESS PROFITS ONLY IN THE HANDS OF SHRI BALAJI BAL. SINCE SHRI BALAJI BAL DOES NOT HAVE A PERMANENT ESTABLISHMENT IN INDIA, THE SA ME IS NOT TAXABLE IN INDIA AS PER ARTICLE 7 OF THE DTAA. 15. THE LD A.R FURTHER SUBMITTED THAT THE LD CI T(A) HAS CONCLUDED THAT SHRI BALAJI BAL MUST HAVE BEEN PROVIDED A FIXED BASE IN THE FORM OF OFFICE BY THE ASSESSEE. THE SAID CONCLUSION IS REACHED ONLY ON THE BASIS OF PRESUMPTIONS ONLY. HE SUBMITTED THAT THE ASSESSEE COMPANY, VIDE ITS AF FIDAVIT DATED 6.3.2013, HAS CONFIRMED BEFORE LD CIT(A) THAT IT HAS NOT PROVIDED ANY FIXED BASE TO SHRI BALAJI BAL. FURTHER THE ASSESSEE COMPANY HAS ALSO CERTIFI ED THAT SHRI BALAJI BAL DID NOT ATTEND ANY OF THE BOARD MEETINGS OF THE COMPANY HEL D DURING THE F.Y 2008-09. ACCORDINGLY, HE SUBMITTED THAT THE CONCLUSION REACH ED BY LD CIT(A) WAS NOT CORRECT. 16. ON THE CONTRARY, THE LD D.R SUBMITTED THAT SHRI BALAJI BAL IS A DIRECTOR OF THE COMPANY AND IS TECHNICALLY QUALIFIED AND EXPERI ENCED IN THE MOBILE APPLICATION SOFTWARE. THE ASSESSEE HAS LISTED OUT H IS EXPERIENCE IN THE SUBMISSIONS MADE BEFORE THE AO AND THE SAME HAS BEE N INCORPORATED IN THE ASSESSMENT ORDER. SHRI BALAJI BAL HAS PROMOTED MAN Y SOFTWARE COMPANIES AND IS I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 9 HOLDING DIRECTORSHIP IN MANY COMPANIES. BECAUSE OF HIS VAST EXPERIENCE AND TECHNICAL KNOWLEDGE ONLY, HE COULD SECURE ORDERS FO R THE COMPANY AND COULD GET THE IMPUGNED PAYMENT FROM THE ASSESSEE. FURTHER, A CAREFUL READING OF TERMS AND CONDITIONS OF THE AGREEMENT WOULD SHOW THAT THE SERVICES TO BE PROVIDED BY SHRI BALAJI BAL ARE TECHNICAL IN NATURE AND MORE TH AN THAT EXPECTED FROM A NORMAL COMMISSION AGENT. ACCORDING TO THE AGREEMENT, HE H AS TO REVIEW THE ASSESSEES PROPOSAL FOR TARGET PROSPECTS AND SHALL ALSO PROVID E ADVICE AND ASSISTANCE TO HELP SECURE PROJECT. HE SHALL ALSO TRACK PROJECT PROGRE SS AND ITS STATUS. THESE ACTIVITIES CAN BE DONE BY A TECHNICAL EXPERT ONLY A ND HENCE THESE FACTS CLEARLY PROVE THAT SHRI BALAJI BAL IS PROVIDING ONLY TECHNI CAL SERVICES TO THE ASSESSEE COMPANY. FURTHER HE IS THE DIRECTOR OF THE ASSESSE E COMPANY AND HENCE HE IS CONSIDERED AS HAVING A FIXED BASE IN INDIA IN THE F ORM OF OFFICE OF THE ASSESSEE COMPANY. ACCORDINGLY, THE LD D.R CONTENDED THAT TH E LD CIT(A) WAS JUSTIFIED IN HOLDING THAT SHRI BALAJI BAL HAS PROVIDED INDEPENDE NT PERSONAL SERVICE IN TERMS OF ARTICLE 14 OF THE DTAA AND HENCE THE IMPUGNED PAYME NT IS TAXABLE IN INDIA, IN WHICH CASE, THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE FROM THE SAID PAYMENT U/S 195 OF THE ACT. SINCE THE ASSESSEE DID NOT SO DEDUCT TAX AT SOURCE, THE IMPUGNED PAYMENT IS LIABLE TO BE DISALLOWED U/S 40( A)(I) OF THE ACT. 17. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE AND PERUSED THE RECORD. THE MAIN DISPUTE IS WHETHER THE PAYMENTS MADE TO SH RI BALAJI BAL CONSTITUTE SALES COMMISSION PAYMENT OR IT IS THE PAYMENT MAD E TOWARDS TECHNICAL SERVICES OFFERED BY HIM. THE TAX AUTHORITIES HAVE INTERPRETED THE AGREEMENT ENTERED BY THE ASSESSEE COMPANY WITH SHRI BALAJI TO REACH THE CONCLUSION THAT IT CONSTITUTES PAYMENT TOWARDS TECHNICAL SERVICES OFFE RED BY HIM. HENCE, IT IS IMPERATIVE TO EXAMINE THE CLAUSES OF THE AGREEMENT, CITED ABOVE. WE EXTRACT BELOW FOLLOWING CLAUSES, WHICH WE CONSIDER TO BE RE LEVANT TO RESOLVE THIS DISPUTE. 1. AREAS OF COOPERATION COMMISSION AGENT WILL FACILITATE THE MARKETING OF DEVICEDRIVEN(INDIA)S SERVICES IN THE TERRITORY AND W ILL PROVIDE PRE- SALES SUPPORT AS WELL AS SALES EXPERTISE FOR PROJEC TS TO BE EXECUTED AT I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 10 CUSTOMER SITE OR AT THE DEVICEDRIVEN (INDIA) CENTRE I N TRIVANDRUM, WHEREIN DEVICEDRIVEN (INDIA) SHALL ENDEAVOUR TO DELIV ER WITHIN BUDGET AND ON TIME, THE ENTIRE PROJECT OBTAINED THR OUGH THIS ALLIANCE. COMMISSION AGENT SHALL BE RESPONSIBLE FOR GENERATING LEADS AND INITIATING INTERACTION WITH END CUSTOMERS (HEREINAF TER REFERRED TO AS CLIENTS) IN THE RELEVANT COMPETENCY AREAS OF DEVICED RIVEN (INDIA). COMMISSION AGENT SHALL, IF REQUIRED, PROVIDE SUPPORT TO DEVICEDRIVEN (INDIA) IN EVALUATION FROM A BUSINESS PE RSPECTIVE, IN THE LIGHT OF HIS RELATIONSHIPS WITH THE PROPOSED CL IENTS AND LOCAL EXPERTISE. DEVICEDRIVEN (INDIA) PRESENTATIONS AND OTH ER COLLATERAL PROPOSALS AND CONTRACTS. 2. ROLE OF COMMISSION AGENT COMMISSISON AGENTS SERVICES, SHALL BE PRINCIPALLY CONCERNED WITH MARKETING, PRE-SALES AND SALES SUPPORT OF DEV ICEDRIVEN (INDIA)S BUSINESSES IN THE TERRITORY WHICH SHALL E SSENTIALLY COMPRISE GENERAL COUNSEL, ASSISTANCE AND SUPPORT IN AREAS IN CLUDING BUT NOT LIMITED TO THE FOLLOWING: 2.1 SIZING UP MARKET SITUATIONS AND BUSINESS OPPOR TUNITIES IN THE REGION. 2.2 ASSISTING AND SUPPORTING DEVICEDRIVEN (INDIA) IN DEVELOPING AND BUNDLING AN APPROPRIATE MIX AND SERVICE OFFERING FO R THE REGION. 2.3 IDENTIFYING SPECIFIC TARGET-PROSPECTS AND MAKIN G PRELIMINARY INTRODUCTORY CONTACTS. 2.4 SECURING MEETINGS WITH TARGET-PROSPECTS FOR DEV ICEDRIVEN (INDIA) TO MAKE CREDENTIAL PRESENTATIONS AND MARKET ING PITCHES. 2.5 REVIEW DEVICEDRIVEN (INDIA)S PROPOSALS FOR TARG ET-PROSPECTS AND PROVIDE ADVICE AND ASSISTANCE WHERE APPROPRIATE TO HELP SECURE PROJECT. 2.6 HOLD PERIODIC MEETINGS WITH DEVICEDRIVEN (INDIA) TO TRACK PROJECT PROGRESS AND STATUS. 2.7 COMMISSISON AGENT SHALL ASSIST IN ALL PAYMENT C OLLECTION FROM THE CLIENT. COMMISSISON AGENTS FURTHERANCE OF DEVICEDRIVEN (INDIA )S BUSINESS INTERESTS IS ON A NON EXCLUSIVE BASIS. DE VICEDRIVEN (INDIA) SHALL HAVE RIGHT OF FIRST REFUSAL ON ALL PROJECTS F ALLING WITHIN I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 11 DEVICEDRIVEN (INDIA)S DOMAIN OF EXPERTISE, ARISING F ROM COMMISSISON AGENTS COMPANIES, THEIR CLIENTS AN CORP ORATE AND PERSONAL RELATIONSHIPS. COMMISSISON AGENT SHALL ALSO PROVIDE A DEDICATED TEL EPHONE AND FAX NUMBER FOR THE USE OF DEVICEDRIVEN (INDIA)S CLIENTS, IF REQUIRED FOR DIRECT CLIENT INTERACTION PURPOSES. 18. ON PERUSAL OF THE ABOVE SAID TERMS AND CONDI TIONS, THE TAX AUTHORITIES HAVE TAKEN THE VIEW THAT THE RESPONSIBILITIES AND OBLIGA TION PLACED UPON THE COMMISSION AGENT (SHRI BALAJI BAL) IS MORE THAN WHA T IS NORMALLY PLACED UPON AGENTS WORKING IN NORMAL BUSINESS TRANSACTIONS. AC CORDING TO THEM, SHRI BALAJI BAL ASSUMES TECHNICAL ROLE, SINCE HE IS REQUIRED TO ADVICE THE ASSESSEE COMPANY AND ALSO REVIEW THE ASSESSEES PROPOSAL FOR TARGET PROSPECTS. FURTHER HE IS REQUIRED TO HOLD PERIODIC MEETINGS WITH THE ASSESSE E COMPANY IN ORDER TO TRACK PROJECT PROGRESS AND ITS STATUS. WE TEND TO AGREE WITH THE SAID VIEW OF THE TAX AUTHORITIES. SOFTWARE IS A HIGHLY TECHNICAL PRODUC T AND IT IS REQUIRED TO BE DEVELOPED IN ACCORDANCE WITH THE REQUIREMENTS OF TH E CUSTOMERS. EVEN AFTER THE DEVELOPMENT, IT REQUIRES CONSTANT MONITORING SO THA T NECESSARY MODIFICATIONS ARE REQUIRED TO BE CARRIED OUT IN ORDER TO MAKE IT SUIT ABLE TO THE REQUIREMENTS. THE WORK OF THE ASSESSEE COMPANY ALSO DOES NOT END UPON DEVELOPING AND INSTALLING THE SOFTWARE AT THE CLIENTS SITE. AS STATED EARLI ER, IT REQUIRES ON-SITE MONITORING, ESPECIALLY WHEN THE CUSTOMIZED SOFTWARE IS DEVELOPE D. HENCE, IN OUR VIEW, IT CANNOT BE EQUATED WITH THE COMMODITIES, WHERE THE R OLE OF THE COMMISSION AGENT NORMALLY ENDS AFTER SUPPLY OF GOODS AND RECEI PT OF MONEY. HENCE, IN THE CASE OF SOFTWARE COMPANIES, THE SALES AGENT SHOULD ALSO POSSESS REQUIRED TECHNICAL KNOWLEDGE AND THEN ONLY HE COULD PROCURE ORDERS FOR THE COMPANY BY UNDERSTANDING THE NEEDS OF CLIENTS AND FURTHER CONV INCING THEM. IN THE INSTANT CASE, THERE IS NO DISPUTE WITH REGARD TO THE FACT T HAT SHRI BALAJI BAL IS HAVING VAST TECHNICAL KNOWLEDGE AND EXPERIENCE. FURTHER HE IS ALSO ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY. THERE SHOULD NOT BE ANY DISP UTE THAT HE IS ABLE TO SECURE ORDERS ONLY BECAUSE OF HIS VAST TECHNICAL KN OWLEDGE AND EXPERIENCE. I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 12 19. AS PER THE CLAUSES OF THE AGREEMENT, WHICH ARE EXTRACTED ABOVE, THE COMMISSION AGENT IS RESPONSIBLE IN SECURING ORDERS AND FOR THAT PURPOSE ONLY HE HAS TO ASSIST THE ASSESSEE COMPANY IN ALL RESPECTS INCLUDING IDENTIFYING MARKETS, MAKING INTRODUCTORY CONTACTS, ARRANGING MEETING WIT H PROSPECTIVE CLIENTS, ASSISTING IN PREPARATION OF PRESENTATIONS FOR TARGE T CLIENTS. HIS DUTY DOES NOT END ON SECURING THE ORDERS, BUT HE HAS TO MONITOR THE S TATUS AND PROGRESS OF THE PROJECT, MEANING THEREBY THE COMMISSION AGENT IS RE SPONSIBLE FOR ENSURING SUPPLY OF THE SOFTWARE AND ALSO FOR RECEIVING THE P AYMENTS. ALL THESE ACTIVITIES, IN OUR VIEW, COULD BE CARRIED ON ONLY BY A PERSON W HO IS HAVING VAST TECHNICAL KNOWLEDGE AND EXPERIENCE. HENCE, WE AGREE WITH THE TAX AUTHORITIES VIEW THAT THE PAYMENT MADE TO SHRI BALAJI BAL CONSTITUTES THE PAYMENT MADE TOWARDS TECHNICAL SERVICES. 20. IT IS SUBMITTED THAT SHRI BALAJI BAL IS THE RESIDENT OF SWITZERLAND AND IT APPEARS THAT THERE IS NO DISPUTE ON THIS FACT. WE NOTICE THAT THE GOVERNMENT OF INDIA AND THE GOVERNMENT OF SWISS CONFEDERATION HAV E ENTERED IN TO A DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). THE LD CIT(A ) HAS TAKEN THE VIEW THAT THE PROVISIONS OF DTAA SHALL APPLY TO SHRI BALAJI B AL. THE REVENUE IS NOT DISPUTING THIS ASPECT. HENCE, AS PER SEC. 90(2) OF THE ACT, THE PROVISIONS OF INCOME TAX ACT SHALL APPLY TO SHRI BALAJI BAL TO TH E EXTENT THEY ARE MORE BENEFICIAL TO SHRI BALAJI BAL. 21. WE NOTICE THAT THE ASSESSEE COMPANY AS WELL AS LD CIT(A) HAS TAKEN THE VIEW THAT ARTICLE 14 OF DTAA, WHICH DEALS WITH IND EPENDENT PERSONAL SERVICES SHALL APPLY TO THE PAYMENT MADE TO SHRI BALAJI BAL. ACCORDING TO THE ASSESSEE, THE PAYMENT MADE TO SHRI BALAJI BAL WILL NOT FALL W ITHIN THE PURVIEW OF ARTICLE 14 OF DTAA. WE NOTICE THAT ARTICLE 14 DEALS WITH PROF ESSIONAL SERVICES OR OTHER ACTIVITIES OF AN INDEPENDENT CHARACTER. THE AMENDED ARTICLE 14 IS REPORTED IN 248 ITR (ST.) 209 @ PG. 214. ORIGINAL DTAA AGREEMENT IS REPORTED IN 214 ITR (ST.) 223). HOWEVER, THE LD CIT(A) HAS HELD THAT THE AR TICLE 14 SHALL APPLY TO THE ASSESSEE, SINCE THE OFFICE OF THE ASSESSEE COMPANY CAN BE TREATED AS THE FIXED I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 13 BASE OF SHRI BALAJI BAL. THOUGH THE ASSESSEE STRON GLY REFUTES THE SAID PRESUMPTION ENTERTAINED BY LD CIT(A), WE ARE INCLIN ED TO ACCEPT THE VIEW ENTERTAINED BY LD CIT(A). SHRI BALAJI BAL IS THE D IRECTOR OF THE COMPANY AND ALSO THE SOLE FOREIGN MARKETING AGENT. HENCE, HE HAS GO T RESPONSIBILITY TO TAKE CARE OF BUSINESS INTERESTS OF THE ASSESSEE COMPANY. HEN CE IT IS HARD FOR ANYBODY TO BELIEVE THE CONTENTIONS OF THE ASSESSEE THAT THE OF FICE OF THE ASSESSEE COMPANY CANNOT BE TREATED AS THE FIXED BASE OF SHRI BALAJI BAL. AS A DIRECTOR, HE HAS EVERY RIGHT LOOK INTO AND IS ALSO HE IS REQUIRED TO TAKE CARE OF THE AFFAIRS OF THE ASSESSEE COMPANY. HENCE, IN OUR VIEW ALSO, THE OFF ICE OF THE ASSESSEE COMPANY CAN CONVENIENTLY BE TREATED AS FIXED BASE FOR SHRI BALAJI BAL. THE CERTIFICATE/AFFIDAVIT GIVEN BY THE ASSESSEE COMPANY , IN OUR VIEW, CANNOT BE OF ANY HELP DUE TO THE CLOSENESS OF SHRI BALAJI BAL WI TH THE ASSESSEE COMPANY. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A) IN TAKING THE VIEW THAT THE ASSESSEE COMPANY MUST HAVE PROVIDED A FIXED BASE FOR SHRI BALAJI BAL. WE NOTICE THAT ARTICLE 15 DEALS WITH DEPEND ENT PERSONAL SERVICES. SINCE SHRI BALAJI BAL IS THE DIRECTOR OF THE COMPANY, THE POSSIBILITY OF THE APPLICABILITY OF ARTICLE 15 CANNOT ALSO BE RULED OUT, EVEN THOUGH IT WAS NOT EXAMINED BY THE LD CIT(A). SINCE WE HAVE UPHELD THE APPLICABILITY OF ARTICLE 14 TO THE IMPUGNED PAYMENTS GIVEN TO SHRI BALAJI BAL, WE DO NOT FIND I T NECESSARY TO GO FURTHER ON THE APPLICABILITY OF ARTICLE 15. ACCORDINGLY, WE U PHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. ACCORDINGLY, THE ASSESSEE WOULD BE LIA BLE TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE TO SHRI BALAJI BAL. SINCE THE TD S WAS NOT DEDUCTED U/S 195 OF THE ACT, THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING DISALLOWANCE U/S 40(A)(I) OF THE ACT. ACCORDINGLY, WE UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. 22. NOW WE SHALL TAKE UP THE APPEAL FILED BY TH E REVENUE. AS STATED EARLIER, THE DEDUCTION ALLOWED TO THE ASSESSEE U/S 10B OF TH E ACT WAS FOUND TO BE NOT CORRECT BY THE LD CIT(A). HOWEVER, BEFORE LD CIT(A ), THE ASSESSEE CLAIMED DEDUCTION U/S 10A OF THE ACT. THOUGH THE LD CIT(A) SOUGHT COMMENTS FROM THE AO WITH REGARD TO THE ALTERNATIVE CLAIM OF THE ASSE SSEE, YET THE AO DECLINED TO ACCEPT THE SAID CLAIM ON TECHNICAL REASONS. HOWEVE R, THE DEDUCTION U/S 10A WAS I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 14 ALLOWED BY LD CIT(A). THE REVENUE IS AGGRIEVED BY T HE SAID DECISION OF LD CIT(A). 23. WE HEARD THE PARTIES ON THIS ISSUE AND PERU SED THE RECORD. WE NOTICE THAT THE LD CIT(A) HAS EXAMINED THE ALTERNATIVE CLA IM OF THE ASSESSEE VIS--VIS THE TECHNICAL OBJECTIONS RAISED BY THE AO. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEVANT OBSERVATIONS MADE AND DE CISION TAKEN BY LD CIT(A):- 8.9 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E APPELLANT ALSO FILED AN ALTERNATIVE CLAIM OF DEDUCTION U/S. 10A OF THE IT ACT VIDE LETTER DT. 7.12.2013. FORM NO. 56F I.E. REPORT U/S. 10A O F THE IT ACT WAS ALSO FILED. A REQUEST WAS MADE THAT THE CLAIM IF N OT ALLOWABLE U/S. 10B MAY BE ALLOWED U/S. 10A. A COPY OF THE LETTER DATED 07.2.2013 OF THE APPELLANT ALONG WITH FORM NO. 56F WAS SENT TO THE A SSESSING OFFICER FOR COMMENTS AND ALSO FOR VERIFICATION OF THE INFOR MATION GIVEN IN THIS FORM AND TO POINT OUT WHETHER THE ASSESSEE MEETS TH E REQUIREMENTS OF SAID SECTION OR NOT. THE ASSESSING OFFICER HAS MENTIONED IN HIS REPORT DTD. 15.2.2013 THAT AS PER PROVISIONS OF SEC TION 10A(5), DEDUCTION U/S. 10A IS ALLOWABLE ONLY IF THE PRESCRI BED FORM I.E. FORM NO. 56F ALONG WITH THE REPORT OF THE ACCOUNTANT AS DEFINED IN SUB- SECTION (2) OF SEC. 288 CERTIFYING THAT THE DEDUCTI ON HAS BEEN CORRECTLY CLAIMED IN ACCORDANCE TO THE PROVISIONS OF THE SECT ION IS FILED ALONG WITH RETURNS OF INCOME AND SINCE THE ASSESSEE NEITH ER MADE ANY CLAIM U/S. 10A IN THE RETURN OF INCOME NOR FILED THE SAID FORM WITH THE RETURN, THEREFORE, AS PER DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS CIT REPORTED IN (200 6) 157 TAXMANN 1, A CLAIM FOR DEDUCTION NOT MADE IN THE ORIGINAL RETU RN CANNOT BE CONSIDERED OTHER THAN THROUGH A VALID REVISED RETUR N. A COPY OF THE REMAND REPORT WAS GIVEN TO THE APPELLANT FOR COMMEN TS. THE APPELLANT VIDE HIS LETTER DT. 19.2.2013 MADE A SUBM ISSION THAT THE FIRST APPELLATE AUTHORITY IS COMPETENT TO CONSIDER THE CL AIM OF ANY DEDUCTION EVEN IF THE SAME WAS NOT MADE BEFORE THE ASSESSING OFFICER. RELIANCE HAS BEEN PLACED ON THE UNDER MENTIONED DECISIONS:- 1. C.W.P. TAYLOR VS. DY CIT RANGE 2, TVM IN I.T.A. NO. 695/COCH/2008 HONBLE ITAT, KOCHI. 2. COMMISSIONER OF INCOME TAX VS DELHI GYMKHANA CL UB LTD. (2011) 53 DTR 330 HONBLE ITAT, DELHI. 3. GOPI S. SHIVNANI (MRS.) VS ITO 57 DTR 18/139 T TJ 308 HONBLE ITAT, MUMBAI. 4. MOHAN MEAKING LTD. VS CIT (2011) 59 DTR 401 HONBLE DELHI HIGH COURT. I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 15 5. CIT VS NHK SPRINGS INDIA LTD. JUDGMENT DELIVERE D ON 29.8.2012 IN INCOME TAX ACT, 1961 (THE 'ACT' HEREI NAFTER) NO. 285/DEL/2012 HONBLE ITAT, DELHI. 6. CIT VS M/S. PRUTHVI BROKERS & SHARES HOLDINGS (P) LTD. IN I.T.A. NO. 3908 OF 2010 HONBLE BOMBAY HIGH COURT ORDER DTD. 21.6.2012. 7. CIT VS MANTEC CONSULTANTS (P) LTD. (41 STC 322 ) HONBLE HIGH COURT OF DELHI. HONBLE ITAT KOCHI IN THE CASE OF CWP TAYLOR HAS HE LD AS UNDER: WE HAVE HEAR RIVAL SUBMISSIONS. NO DOUBT, IN THE CASE OF GOETZE (INDIA) LTD. 284 ITR 323 THE APEX COURT HELD THAT A N ASSESSEE COULD NOT MAKE A CLAIM FOR DEDUCTION BEFORE THE ASSESSING OFFICER OTHERWISE THAN BY FILING REVISED RETURN. HONBLE APEX COURT DISTINGUISHED ITS OWN DECISION IN THE CASE OF NATIONAL THERMAL POWER CORP ORATION VS. CIT (SUPRA) BY MENTIONING THAT THE QUESTION THERE WAS R EGARDING THE POWER OF THE TRIBUNAL U/S. 254 OF THE ACT TO ENTERT AIN, FOR THE FIRST TIME, A POINT OF LAW, PROVIDED THE FACTS ON THE BAS IS OF WHICH THE ISSUE COULD BE RAISED WERE THERE BEFORE THE TRIBUNAL. TH EIR LORDSHIPS SPECIFICALLY HELD THAT ITS DECISION DID NOT IMPINGE THE POWER OF THE TRIBUNAL TO ENTERTAIN FIRST TIME A POINT OF LAW PRO VIDE THE FACTS ON THE BASIS OF WHICH THE ISSUE IS RAISED IS THERE ON RECO RD. THIS DECISION OF HONBLE APEX COURT IS LIMITED TO THE POWER OF ASSES SING AUTHORITIES FOR CONSIDERING A CLAIM MADE BY THE ASSESSEE WHICH WAS ORIGINALLY NOT THERE IN THE RETURN IN OUR OPINION, THOUGH THE ASSESSING OFFICER COU LD NOT ENTERTAIN THE CLAIM MADE BY THE ASSESSEE OTHERWISE THAN THROUGH A REVISED RETURN, NOTHING PREVENTED THE LEARNED COMMISSIONER OF INCOM E-TAX(APPEALS) FROM CONSIDERING THE CLAIM OF THE ASSESSEE, WHICH T HE ASSESSEE HAD SPECIFICALLY, RAISED IN ITS GROUND OF APPEAL IN VIE W OF THE DECISION OF THE HONBLE APEX COURT IN NTPCS CASE REFERRED SUPRA. 8.10 RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT S OF HONBLE ITATS, AND HIGH COURTS, IT IS HELD THAT THE FIRST APPELLAT E AUTHORITY HAS POWER TO ENTERTAIN A CLAIM OF DEDUCTION NOT MADE BEFORE T HE ASSESSING OFFICER. THE ASSESSING OFFICER HAS NOT COMMENTED ADVERSELY O N THE ALLOWABILITY OF DEDUCTION U/S. 10A OF THE APPEL LANT EXCEPT FOR POINTING OUT THAT THE CLAIM IS NOT ALLOWABLE AS PER DECISION OF THE HONBLE SUPREME COURT IN GOETZE INDIA LTD . AND FAILURE ON THE PART OF THE APPELLANT TO FILE THE FORM NO. 56F ALONG WITH THE RETURN OF INCOME. AS SUCH AS PER RULE 12(2) APPLICABLE FO R THE YEAR UNDER CONSIDERATION, NO DOCUMENT WAS REQUIRED TO BE ATTAC HED WITH THE RETURN OF INCOME. FURTHER PROVISIONS REGARDING FIL ING OF AUDIT REPORT ETC. HAVE BEEN DECLARED DIRECTORY (AND NOT MANDATOR Y) ONLY AND IT HAS BEEN HELD THAT THE AUDIT REPORT ETC. CAN BE FILED D URING THE COURSE OF I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 16 ASSESSMENT PROCEEDINGS ALSO. AS HELD BY HONBLE IT ATS AND HONBLE HIGH COURTS THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF GOETZE INDIA LTD. IS LIMITED TO POWER OF ASSESSING OFFICER ONLY AND DOES NOT AFFECT THE POWERS OF AN APPELLATE AUTHORITY IN ENTERTAINING A CLAIM NOT MADE BEFORE THE ASSESSING OFFICER BY WAY OF FIL ING OF REVISED RETURN OF INCOME. 8.11 IN VIEW OF THE ABOVE, IT IS HELD THAT THE AP PELLANT IS ELIGIBLE FOR DEDUCTION U/S 10A. FURTHER, THE ADDITION OF RS. 55 51605/- MADE BY THE ASSESSING OFFICER U/S. 40(A)(IA) WOULD INCREASE THE PROFIT OF THE BUSINESS AND SHALL BE SO TAKEN FOR WORKING OUT THE DEDUCTION U/S. 10A BY THE ASSESSING OFFICER. THE APPEAL IS DECIDED AC CORDINGLY. 24. WE HAVE CAREFULLY CONSIDERED THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND WE DO NOT FIND ANY INFIRMITY IN HIS DECISION IN ADMITTING THE ALTERNATIVE CLAIM FOR DEDUCTION U/S 10A OF THE ACT MADE BY THE ASSESS EE. IN FACT, VARIOUS JUDICIAL PRONOUNCEMENTS QUOTED BY LD CIT(A) SUPPORT THIS VIE W. HOWEVER, WE NOTICE THAT THE LD CIT(A) HAS ALLOWED THE DEDUCTION WITH T HE OBSERVATION THAT THE AO DID NOT MAKE ANY ADVERSE COMMENT AGAINST ALLOWING D EDUCTION U/S 10A OF THE ACT. WE NOTICE THAT THE AO DID NOT EXAMINE THE DOC UMENTS FILED BY THE ASSESSEE BEFORE LD CIT(A), WHICH WERE FORWARDED TO HIM BY TH E FIRST APPELLATE AUTHORITY AND HENCE THERE WAS NO OCCASION FOR THE AO TO EXAMI NE THE CLAIM OF DEDUCTION U/S 10A OF THE ACT. IN THAT CASE, NATURALLY, THE A O WOULD NOT MAKE ANY COMMENT, EITHER POSITIVE OR ADVERSE. HOWEVER, AS S TATED EARLIER, THE LD CIT(A) HAS ALLOWED THE DEDUCTION U/S 10A OF THE ACT ON THE REASONING THAT THE AO DID NOT MAKE ANY ADVERSE COMMENT, WITH WHICH WE ARE UNA BLE TO AGREE. IN OUR VIEW, THE ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDU CTION U/S 10A OF THE ACT NEEDS TO BE EXAMINED AT THE END OF THE AO. ACCORDINGLY, WE MODIFY THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE MATTER OF DEDU CTION U/S 10A OF THE ACT BEFORE THE AO WITH THE DIRECTION TO EXAMINE THE CLA IM FOR DEDUCTION U/S 10A OF THE ACT AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW, AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD. I.T.A. NO. 282/COCH/2013 & C.O. NO. 09/COCH/2013 17 25. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 29-11-2013. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 29TH NOVEMBER, 2013 GJ COPY TO: 1. M/S. DEVICE DRIVEN (INDIA) PVT. LTD., GROUND FLO OR, PADMANABHAM, TECHNOPARK, KARIYAVATTOM, TRIVANDRUM. 2. THE INCOME TAX OFFICER, WARD-1(1), TRIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS),TRIVAND RUM. 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN