DCIT CENTRAL CIRCLE 7 4 MUMBAI, MUMBAI V. ROHA DYECHEM PVT. LTD, MUMBAI

ITA 3848/MUM/2024

AI Insights

The case revolves around an appeal by the Revenue against the order of the Commissioner of Income-tax (Appeals) which had deleted the addition made by the Assessing Officer (AO) under Section 40(a)(ia) of the Income-tax Act, 1961. The AO had disallowed certain payments made by Roha Dyechem Pvt. Ltd. to foreign entities, including the USFDA, on the grounds that they were not subjected to TDS and constituted FTS. The CIT(A) found that these payments were normal business expenditures and did not fall under the category of FTS as they did not involve the provision of technical, managerial, or consultancy services. The Tribunal's decision emphasized the principle of consistency, noting that the Department had previously accepted a similar position in a related case involving the same assessee for the same assessment year.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471346 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2014-2015
• Other Referred Cases: CIT(International tax) Vs Star Rays
• Laws Referred To: Income-tax Act, 1961, India-USA Double Taxation Avoidance Agreement
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JANCY ELIZABETH
• Assessee Lawyers: HARIDAS BHAT
• Keywords: Business expenditure; Rule of consistency; TDS; Double taxation relief
• Section: 153; 22; 40a(ia)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “I” MUMBAI BEFORE SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER) AND SHRI OMKARESHWAR CHIDARA (ACCOUNTANT MEMBER) ITA No. 3848/MUM/2024 Assessment Year: 2014-15 DCIT Central Circle 7 4 Mumbai Room No. 655, 6th Floor, Aayakar Bhavan, Maharishi Karve Road, Mumbai - 400020. Vs. Roha Dyechem Pvt. Ltd 1 Jit House, A 44-45 Road No.2 MIDC, Andheri East, Mumbai - 400093. PAN NO. AAACR4974P Appellant Respondent Assessee by : Shri Haridas Bhat Revenue by : Ms. Jancy Elizabeth, Sr. DR Date of Hearing : 28/10/2024 Date of pronouncement : 24/01/2025 ORDER PER OMKARESHWAR CHIDARA, AM This appeal by the Revenue is directed against order dated 05/06/2024 passed by the Ld. Commissioner of Income-tax (Appeals)-57, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2014-15. 2. In the above captioned appeal, the Revenue has filed an appeal against the order passed by Ld. CIT(A) with the following Grounds of Appeal: “1. \"Whether on the the Ld. CIT(A) has erred in deleting the addition made by AO of Rs.2,03,91,052/- under section 40(a)(i) of the Income the ground that foreign agent provided referral services to the appellant without distinguishing how the FTS takes the nature of a statutory by undefined referral service and such referral services do not fall in the category of technical, managerial or consultancy service, therefore, it could not be in the nature of 'fees for 2. \"Whether the Ld.CIT(A) has erred in holding that the foreign agent had no PE in India without recognizing that income earned as a part Export Sales is deemed to have accrued or arisen in India u/s.9(1)(vii) of the I.T. Act, 1961?\" 3. Whether Ld. CIT(A) has erred in not recognizing that even as per Article 12(4)(b) of the India the said article as \"fees for included services\" as defined therein. The expression \"provision for services\" is wider t rendering of services\" and covers services rendered in the one State but used in the other State? 3. The issue to be decided in applicable for the amount received by the appellant company whic was treated by Ld. AO as corollary issue raised by Revenue is Ld. CIT(A) erred in adjudicating that the income has not ac raised by the Revenue is that Ld. CIT(A) has incorrectly h the payment to appellant company was not covered as “Fees for Technical Services” as per Article 12(4)(b) of India Taxation Avoidance Agreement. Thus, the only issue to be decided in this case is, “whether the remittances made by assess Roha Dyechem Pvt. Ltd. ITA No. above captioned appeal, the Revenue has filed an appeal against the order passed by Ld. CIT(A) with the following Grounds \"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by AO of under section 40(a)(i) of the Income-tax Act, 1961 on the ground that foreign agent provided referral services to the appellant without distinguishing how the FTS takes the nature of a statutory by undefined referral service and such referral services do not fall in the category of technical, managerial or consultancy service, therefore, it could not be in the nature of 'fees for technical services?\" \"Whether the Ld.CIT(A) has erred in holding that the foreign agent had no PE in India without recognizing that income earned as a part Export Sales is deemed to have accrued or arisen in India u/s.9(1)(vii) of Whether Ld. CIT(A) has erred in not recognizing that even as per Article 12(4)(b) of the India-USA DTAA, the payment was covered under the said article as \"fees for included services\" as defined therein. The expression \"provision for services\" is wider than the term \"provision for rendering of services\" and covers services rendered in the one State but used in the other State?” The issue to be decided in this appeal is whether Sec 40 a applicable for the amount received by the appellant company whic was treated by Ld. AO as “Fees for Technical Services”. The corollary issue raised by Revenue is Ld. CIT(A) erred in adjudicating that the income has not accrued/arisen in India. The third ground raised by the Revenue is that Ld. CIT(A) has incorrectly h the payment to appellant company was not covered as “Fees for Technical Services” as per Article 12(4)(b) of India Taxation Avoidance Agreement. Thus, the only issue to be decided in this case is, “whether the remittances made by assess Roha Dyechem Pvt. Ltd. 2 ITA No. 3848/MUM/2024 above captioned appeal, the Revenue has filed an appeal against the order passed by Ld. CIT(A) with the following Grounds facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by AO of tax Act, 1961 on the ground that foreign agent provided referral services to the appellant without distinguishing how the FTS takes the nature of a statutory by undefined referral service and such referral services do not fall in the category of technical, managerial or consultancy service, therefore, it \"Whether the Ld.CIT(A) has erred in holding that the foreign agent had no PE in India without recognizing that income earned as a part Export Sales is deemed to have accrued or arisen in India u/s.9(1)(vii) of Whether Ld. CIT(A) has erred in not recognizing that even as per USA DTAA, the payment was covered under the said article as \"fees for included services\" as defined therein. The han the term \"provision for rendering of services\" and covers services rendered in the one State but this appeal is whether Sec 40 a(i) is applicable for the amount received by the appellant company which “Fees for Technical Services”. The corollary issue raised by Revenue is Ld. CIT(A) erred in adjudicating ued/arisen in India. The third ground raised by the Revenue is that Ld. CIT(A) has incorrectly held that the payment to appellant company was not covered as “Fees for Technical Services” as per Article 12(4)(b) of India-USA Double Taxation Avoidance Agreement. Thus, the only issue to be decided in this case is, “whether the remittances made by assessee company as sales and marketing services during A.Y. 2014 the extent of Rs. 6.57 crore is liable for TDS.” The amounts were paid, as claimed by a company, towards testing charges, reimbursements and commission. They were paid to USFDA, AE for testing fees to FDA and to export sale agent. 4. The Ld. AO held that all under Article 22 of DTAA and as TDS was not done, they are for disallowance u/s. 40 assessment. The Ld. CIT(A) stating that these payments won’t attract TDS provisions as they are normal business expenditure because US FDA has never made available knowledge or skills to carry out the testing of the products of the assessee and Certificate” in lieu of the payments made by was also held that US FDA is a US Government agency and payments made to the same don’t govern the provisions of Indo USA DTAA. Hence, the testing char assessee company’s AE towards testing char not in the nature of “Fees for Technical Services” and hence the assessee company is not under obligation to make TDS. Consequently, Sec 40a(ia) provisions can’t payments made by assessee made by Ld. A.O. was deleted by Ld. CIT(A). Roha Dyechem Pvt. Ltd. ITA No. company as sales and marketing services during A.Y. 2014 s. 6.57 crore is liable for TDS.” The amounts were paid, as claimed by a company, towards testing charges, reimbursements and commission. They were paid to USFDA, AE for fees to FDA and to export sale agent. The Ld. AO held that all their payments are liable for TDS under Article 22 of DTAA and as TDS was not done, they are for disallowance u/s. 40a(ia) of I.T. Act, while completing the assessment. The Ld. CIT(A) deleted the addition made by Ld. A.O. stating that these payments won’t attract TDS provisions as they are normal business expenditure because US FDA has never made available knowledge or skills to carry out the testing of the products and the USFDA has simply issued “ ” in lieu of the payments made by assessee was also held that US FDA is a US Government agency and payments made to the same don’t govern the provisions of Indo A. Hence, the testing charges paid to USFDA or paid to ompany’s AE towards testing charges paid to US not in the nature of “Fees for Technical Services” and hence the company is not under obligation to make TDS. Consequently, Sec 40a(ia) provisions can’t be invoked for the assessee company and accordingly, the addition made by Ld. A.O. was deleted by Ld. CIT(A). Roha Dyechem Pvt. Ltd. 3 ITA No. 3848/MUM/2024 company as sales and marketing services during A.Y. 2014-15 to s. 6.57 crore is liable for TDS.” The amounts were paid, as claimed by a company, towards testing charges, reimbursements and commission. They were paid to USFDA, AE for payments are liable for TDS under Article 22 of DTAA and as TDS was not done, they are liable a(ia) of I.T. Act, while completing the deleted the addition made by Ld. A.O. stating that these payments won’t attract TDS provisions as they are normal business expenditure because US FDA has never made available knowledge or skills to carry out the testing of the products simply issued “Testing assessee company. It was also held that US FDA is a US Government agency and payments made to the same don’t govern the provisions of Indo- ges paid to USFDA or paid to ges paid to US-FDA are not in the nature of “Fees for Technical Services” and hence the company is not under obligation to make TDS. be invoked for the company and accordingly, the addition 5. In the above circumstances, the Revenue filed an appeal to ITAT with the Grounds of Appeal mentioned in Page 1 of this order. 6. During the hearing proceeding before ITAT, Ld. DR relied on the assessment order and Grounds of Appeal. The Ld. AR of assessee has stated that the same issue was raised by the Revenue by the International Tax Wing of Income Tax Department for the same assessment year. The Ld. AO of International tax added the amounts and Ld. CIT(A) dealing with International Tax of I.T. Department held the issue in favour of detailed speaking order after relying on several judicial Pronouncements. It was has not further appealed to ITAT on the order passed CIT(A), i.e., accepted the order of Ld. CIT(A) which implies that the department has accepted the is not deductable on these payments. But, the same information was sent to the assessment wing of I.T. Department and they have reopened the assessment and completed the assessment. Against this order, the assessee company against filed an appeal and the same Ld. CIT(A)-57 has passed another order in assessee’s favour. This subsequent Ld. CIT(A)’s order is now appealed against by revenue, it was submitted. The Ld. AR of assessee company paper book containing the assessment order and the related Ld. CIT(A) order which were passed by the International Tax Division with a submission that the Department did not file an appeal to Roha Dyechem Pvt. Ltd. ITA No. In the above circumstances, the Revenue filed an appeal to ITAT with the Grounds of Appeal mentioned in Page 1 of this order. ing the hearing proceeding before ITAT, Ld. DR relied on the assessment order and Grounds of Appeal. The Ld. AR of has stated that the same issue was raised by the Revenue by the International Tax Wing of Income Tax Department for the ent year. The Ld. AO of International tax added the amounts and Ld. CIT(A) dealing with International Tax of I.T. Department held the issue in favour of assessee detailed speaking order after relying on several judicial . It was submitted that the International Tax wing has not further appealed to ITAT on the order passed CIT(A), i.e., accepted the order of Ld. CIT(A) which implies that the department has accepted the reason of assessee company that TDS e on these payments. But, the same information was sent to the assessment wing of I.T. Department and they have reopened the assessment and completed the assessment. Against this order, the assessee company against filed an appeal and the 7 has passed another order in assessee’s favour. This subsequent Ld. CIT(A)’s order is now appealed against by revenue, it was submitted. The Ld. AR of assessee company paper book containing the assessment order and the related Ld. ch were passed by the International Tax Division with a submission that the Department did not file an appeal to Roha Dyechem Pvt. Ltd. 4 ITA No. 3848/MUM/2024 In the above circumstances, the Revenue filed an appeal to ITAT with the Grounds of Appeal mentioned in Page 1 of this order. ing the hearing proceeding before ITAT, Ld. DR relied on the assessment order and Grounds of Appeal. The Ld. AR of has stated that the same issue was raised by the Revenue by the International Tax Wing of Income Tax Department for the ent year. The Ld. AO of International tax added the amounts and Ld. CIT(A) dealing with International Tax of I.T. assessee company in a detailed speaking order after relying on several judicial that the International Tax wing has not further appealed to ITAT on the order passed by the Ld. CIT(A), i.e., accepted the order of Ld. CIT(A) which implies that the of assessee company that TDS e on these payments. But, the same information was sent to the assessment wing of I.T. Department and they have reopened the assessment and completed the assessment. Against this order, the assessee company against filed an appeal and the 7 has passed another order in assessee’s favour. This subsequent Ld. CIT(A)’s order is now appealed against by revenue, it was submitted. The Ld. AR of assessee company filed a paper book containing the assessment order and the related Ld. ch were passed by the International Tax Division with a submission that the Department did not file an appeal to ITAT. As the Department accepted the order of Ld. CIT(A), now they cannot agitate the same before ITAT and hence the appeal of revenue should be dismissed on the principle of consistency as well as on merits. 7. Heard both sides. There is force in the argument of Ld. AR of appellant company and the issues are adjudicated in favour of appellant company for the following reasons: a) The payments were ma Government agency of USA for the purpose of getting “Testing Certificate” and knowledge or skill testing products were not given to assessee company in lieu of the payment made. Only “testing charges” were paid to US FDA. b) Payments made to a Government governed by the provisions of Indo Avoidance Agreements. c) The USFDA doesn’t have PE in India and such, the income received by it, is not taxable in India. d) The assessee’s case was mere rendering of services couldn’t be roped into FTS since assessee company utilising services was unable to make use of technical knowledge etc., even w rendering by a US company, as held by Hon’ble Roha Dyechem Pvt. Ltd. ITA No. ITAT. As the Department accepted the order of Ld. CIT(A), now they cannot agitate the same before ITAT and hence the appeal of e dismissed on the principle of consistency as well Heard both sides. There is force in the argument of Ld. AR of appellant company and the issues are adjudicated in favour of appellant company for the following reasons: The payments were made by assessee company to USFDA, a Government agency of USA for the purpose of getting “Testing Certificate” and knowledge or skill testing products were not given to assessee company in lieu of the payment made. Only “testing charges” were paid to US FDA. Payments made to a Government agency, USFDA, are not governed by the provisions of Indo-USA’s double Taxation Avoidance Agreements. The USFDA doesn’t have PE in India and such, the income received by it, is not taxable in India. The assessee’s case was protected under India mere rendering of services couldn’t be roped into FTS since assessee company utilising services was unable to make use of technical knowledge etc., even where were services were rendering by a US company, as held by Hon’ble Roha Dyechem Pvt. Ltd. 5 ITA No. 3848/MUM/2024 ITAT. As the Department accepted the order of Ld. CIT(A), now they cannot agitate the same before ITAT and hence the appeal of e dismissed on the principle of consistency as well Heard both sides. There is force in the argument of Ld. AR of appellant company and the issues are adjudicated in favour of de by assessee company to USFDA, a Government agency of USA for the purpose of getting “Testing Certificate” and knowledge or skill testing products were not given to assessee company in lieu of the payment made. Only agency, USFDA, are not USA’s double Taxation The USFDA doesn’t have PE in India and such, the income rotected under India-USA DTAA as mere rendering of services couldn’t be roped into FTS since assessee company utilising services was unable to make use of ere were services were rendering by a US company, as held by Hon’ble Gujarat High Court in CIT(International tax) Vs Star Rays 153 taxman.com 226 (Guj). In the impugned case, payments were made to FDA of USA, which is a Government Agency. So, the payments can’t be roped into the amount of FTS and TDS provisions/Sec. 40a(ia) provisions are not applicable. e) The Ld. AR of appellant filed a copy of letter of Internation Tax wing of Income Tax Department signed by ITO (IT) 4(1) (2), Mumbai vide letter dated 13/08/2024 stating that in assessee’s own case for the same A.Y, on same appeal was preferred on CIT(A)’s order to ITAT. These payments were made by assessee company in earlier and subsequent years too, it was submitted by Ld. AR of appellant and no disallowance u/s. 40a(ia) was made by Department, and this fact was years, the Department accepted the assessee’s company’s stand that TDS Provisions are not applicable to payments made USFDA. There being no change in facts and circumstances, Rule of consistency should be follo Department. 8. In view of the above, the appeal of Revenue is dismissed. Roha Dyechem Pvt. Ltd. ITA No. Court in CIT(International tax) Vs Star Rays 153 taxman.com 226 (Guj). In the impugned case, payments were made to FDA of USA, which is a Government Agency. So, the payments can’t be roped into the amount of FTS and TDS provisions/Sec. ) provisions are not applicable. The Ld. AR of appellant filed a copy of letter of Internation Tax wing of Income Tax Department signed by ITO (IT) 4(1) (2), Mumbai vide letter dated 13/08/2024 stating that in assessee’s own case for the same A.Y, on same appeal was preferred on CIT(A)’s order to ITAT. These payments were made by assessee company in earlier and subsequent years too, it was submitted by Ld. AR of appellant and no disallowance u/s. 40a(ia) was made by Department, and this fact was not controverted by the Ld. DR. Thus, all the the Department accepted the assessee’s company’s stand that TDS Provisions are not applicable to payments made USFDA. There being no change in facts and circumstances, Rule of consistency should be follo In view of the above, the appeal of Revenue is dismissed. Roha Dyechem Pvt. Ltd. 6 ITA No. 3848/MUM/2024 Court in CIT(International tax) Vs Star Rays 153 taxman.com 226 (Guj). In the impugned case, payments were made to FDA of USA, which is a Government Agency. So, the payments can’t be roped into the amount of FTS and TDS provisions/Sec. The Ld. AR of appellant filed a copy of letter of Internation Tax wing of Income Tax Department signed by ITO (IT) 4(1) (2), Mumbai vide letter dated 13/08/2024 stating that in assessee’s own case for the same A.Y, on same issues, no appeal was preferred on CIT(A)’s order to ITAT. These payments were made by assessee company in earlier and subsequent years too, it was submitted by Ld. AR of appellant and no disallowance u/s. 40a(ia) was made by Department, not controverted by the Ld. DR. Thus, all the the Department accepted the assessee’s company’s stand that TDS Provisions are not applicable to payments made USFDA. There being no change in facts and circumstances, Rule of consistency should be followed by In view of the above, the appeal of Revenue is dismissed. Order pronounced in the open Court on Sd/- (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Mumbai; Dated: 24/01/2025 Poonam Mirashi, Stenographer Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Roha Dyechem Pvt. Ltd. ITA No. Order pronounced in the open Court on 24/01 Sd/ SANDEEP SINGH KARHAIL) (OMKARESHWAR CHIDARA JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Roha Dyechem Pvt. Ltd. 7 ITA No. 3848/MUM/2024 /01/2025. Sd/- OMKARESHWAR CHIDARA) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai "