DY. COMMISSIONER OF INCOMETAX, GHAZIABAD V. MANOJ RAIZADA, GHAZIABAD

ITA 395/DEL/2024

AI Insights

The case involves the Deputy Commissioner of Income Tax (Dy. CIT) appealing against the order of the Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre (NFAC), which had deleted the addition made on account of commission paid to non-resident persons by the assessee, Manoj Raizada. The primary legal contention was whether the commission payments made to foreign agents by the assessee, a proprietor of M/s Man R Consultancy, required TDS under Section 195 of the Income Tax Act, 1961. The CIT(A) had previously ruled in favor of the assessee, referencing a similar case for the Assessment Year 2017-18, which was upheld by the Tribunal. The Tribunal in this instance agreed with the CIT(A)'s decision, dismissing the Revenue's appeal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 38276 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 30-07-2024
• Assessment Year: 2020-2021
• Appeal Filed On: 01-02-2024
• Other Referred Cases: GE India Technology Centre Pvt. Ltd. Vs. CIT (2010) 327 ITR 456 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JATENDER KUMAR KALE
• Assessee Lawyers: MAYANK CHOUDHARY
• Keywords: Principle of natural justice; TDS; Double taxation relief; Permanent establishment; Services rendered outside India
• Section: 143(3); 195; 201; 40(a)(ia); 9(1); 9(1); 9(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI BEFORE PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI YOGESH KUMAR US, JUDICIAL MEMBER ITA No.395/Del/2024 (Assessment Year : 2020-21) Dy. CIT 201-202, 2nd Floor, CGO-1, Near Hapur Chungi, Ghaziabad – 201 002 Vs. Manoj Raizada 148, Sector-14, Vasundhara Ghaziabad, UP-201 012 PAN No. AAIPR 3896 F (APPELLANT) (RESPONDENT) CO No.66/Del/2024 (Arising out of ITA No.395/Del/2024) (Assessment Year : 2020-21) Manoj Raizada 148, Sector-14, Vasundhara Ghaziabad, UP-201 012 PAN No. AAIPR 3896 F Vs. Dy. CIT 201-202, 2nd Floor, CGO-1, Near Hapur Chungi, Ghaziabad – 201 002 (APPELLANT) (RESPONDENT) Assessee by Shri Mayank Choudhary, Adv. Revenue by Shri Jatender Kumar Kale, Sr. D.R. Date of hearing: 30.07.2024 Date of Pronouncement: 24.10.2024 ORDER PER PRADIP KUMAR KEDIA, AM : The captioned appeal has been filed by the Revenue along with Cross Objection against the first appellate order of the Ld. Commissioner of Income Tax (Appeals) – National Faceless Appeal Centre (NFAC), Delhi dated 07.11.2023 arising from the Assessment Order dated 24.09.2022 passed by the Assessment Unit, Income ITA No.395/Del/2024 CO No. 66/Del/2024 Manoj Raizada vs. DCIT A.Y. 2020-21 -2- Tax Department (hereinafter referred to as ‘AO’) under Section 143(3) read with section 144B of the Income Tax Act, 1961 (the Act) for Assessment Year 2020-21. 2. The grounds of appeal raised by the Revenue reads as under: 1. That the CIT(A), NFAC has erred in law and on facts by deleting the addition made on account of commission paid to non-resident person without deducting TDS in contravention to the provision of section 40(a)(ia) read with section 195 the IT Act, 1961. 2. That the CIT(A), NFAC has erred in law and on facts by deleting the addition made on account of commission paid to non-resident person though the income was covered under Explanation-2 to the Section 9(1) of the IT Act, 1961 were squarely applicable to the assessee's case and the provisions. 3. That the CIT(A), NFAC has erred in law and in facts by not appreciating that for the payees [in respect of commission paid by the assessee to his agent which has been held to the Fees for Technical Service by the AO], the cardinal issue to be ascertained is whether the source of income and certainly not the source of receipt is in India or not. As the source of income in the hands of payees is undisputedly in India, the case does not fall in any of the exception provided in section 9(1)(vii) of the IT Act, 1961. 4. That the appellant craves leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.” 3. The grounds of Cross Objections raised by the assessee reads as under: 1. “That on the facts and in the circumstances of the case and in law, the order of the learned lower authority is bad in law and against the facts and circumstances of the case and hence is unsustainable. 2. That on the facts and in the circumstances of the case and in law, the assessee has the right to add or modify any ground of appeal. 3. That on the facts and in the circumstances of the case and in law, in terms of above, the addition of Rs.1,64,99,326/- is illegal and arbitrary and bad in law, hence it is prayed that the addition may kindly be quashed in TOTO. ITA No.395/Del/2024 CO No. 66/Del/2024 Manoj Raizada vs. DCIT A.Y. 2020-21 -3- 4. That on the facts and in the circumstances of the case and in law, the respondent with sufficient Evidence and proper Case Laws presented the Case before Ld. CIT (A) in Context of Section 9 of the Act for which Respondent was awared with Natural Justice. 5. That on the facts and in the circumstances of the case and in law, the money paid by the Respondent, Cross Border was an amount of Commission paid to the agents and no technical service was provided by them. Ld. AO intentionally trying to brag things without any sufficient grounds and is making case on his own. 6. That on the facts and in the circumstances of the case and in law, Ld. AO from the very first day of assessment was told that, the commission paid to the agents was for procuring business from a company based in Australia. Although the agents are the citizens of Australia hence, they are liable to pay their taxes in Australia only. Therefore, no liability arises to deduct TDS for the same transaction. 7. That on the facts and in the circumstances of the case and in law, Ld. AO doing nothing but harassing the Respondent unnecessarily. The order passed by Ld. CIT(A) is true through which the Respondent was awarded with Natural Justice. 8. That the same issue has also been decided in order dated 18.07.2023 by the Ld. ITAT in an appeal i.e. ITA No. 5/Del/2021, raised by the Ld lower authority and the same order has been passed in favour of Assessee.” 4. Briefly stated, the assessee is a proprietor of M/s Man R Consultancy, a business engaged in providing manpower services to various companies. The assessee secures contracts with companies either directly or through agents especially in cases where the companies are located outside India. The assessee states to have hired agents in foreign countries where he does not have physical presence, to assist in procuring these contracts. While framing the assessment u/s 143(3) of the Act, the Assessing Officer inter alia observed that the assessee has incurred commission expenditure of Rs.1,64,99,326/- on which the assessee has failed to deduct TDS under Section 195 of the Act while making remittance of the commission payments. The Assessing Officer accordingly invoked provisions of ITA No.395/Del/2024 CO No. 66/Del/2024 Manoj Raizada vs. DCIT A.Y. 2020-21 -4- Section 40(a)(ia) of the Act and disallowed the commission expenses on service obtained from foreign agents. 5. Aggrieved, the assessee preferred appeal before the CIT(A). 5.1 The CIT(A) applied the view expressed by the CIT(A) in favour of assessee in the similar facts concerning Assessment Year 2017-18 which was, in turn, approved by the Tribunal. The issues was accordingly resolved in favour of the assessee and consequently disallowance made towards commission expenses in the Assessment Order were deleted by the CIT(A). 6. Aggrieved by the relief granted by the CIT(A), the Revenue has knocked the door of the Tribunal. 7. The ld. Sr. DR for the Revenue relied upon the observations made in the Assessment Order. 8. The ld. Counsel for the assessee, on the other hand, supported the order of the CIT(A) and submitted that; i) the assessee hires agents in foreign countries where he does not have a physical presence, to obtain the assistance in procuring contracts since such method is cost effective and operationally feasible for a start up like the assessee. Commission payments made to such non-resident agents in Australia do not attract withholding tax under Section 195 of the Act as such income of the agents did not accrue or arose in India. ii) The commission paid is in respect of services rendered outside India and the agents rendering services have no Permanent Establishment in India. ITA No.395/Del/2024 CO No. 66/Del/2024 Manoj Raizada vs. DCIT A.Y. 2020-21 -5- Therefore, the income in the hands of commission agents not being chargeable to tax in India, the provision of Section 195 of the Act are not attracted in the light of judgment rendered in the case of GE India Technology Centre Pvt. Ltd. Vs. CIT (2010) 327 ITR 456 (SC). iii) Non-submission of Tax Residency Certificate (TRC) raised by the AO is not applicable since TRC is required only when there is a claim for relief under the DTAA. In the present case, no such relief has been claimed as the income did not accrue or arose in India at the first instance. iv) The transactions are well documented with contracts, bills, and bank statements. Besides, Form 15CA for remittance of each commission payment has been filed. Thus, genuineness of the commission payments cannot be doubted. v) The identical issue came to surface in Assessment Year 2017-18 where similar additions were made by the AO. However, the additions stood deleted by the CIT(A) and the action of the CIT(A) granting relief was affirmed by the ITAT in assessee’s own case in ITA No. 5/Del/2021 order dated 18.07.2023. 9. We have carefully considered the rival submissions. As pointed out on behalf of the assessee, the commission payments have been made to non-resident agents for services rendered outside India and therefore, not chargeable to tax in India. In the absence of chargeability to tax, the provisions of Section 195 of the Act are not attracted as rightly held by the CIT(A) in the present case. The action of the CIT(A) granting relief to the assessee is in sync with the view expressed by the Tribunal in assessee’s own case in the Assessment Year 2017-18. We thus see no perceptible reason to interfere with the view expressed in the impugned ITA No.395/Del/2024 CO No. 66/Del/2024 Manoj Raizada vs. DCIT A.Y. 2020-21 -6- appellate order passed by CIT(A). Hence, the contentions on behalf of the Revenue are unfounded on facts and law. 10. In the result, appeal of the Revenue is dismissed. 11. The assessee has also filed Cross Objections which is primarily seeking to support the order of the CIT(A). The assessee has filed an application for withdrawal of such Cross Objection. 12. In the light of such application, the Cross Objection of the assessee is summarily dismissed as withdrawn. 13. In the combined result, both the appeal of the Revenue as well as the Cross Objection of the assessee are dismissed. Order pronounced in the open court on 24.10.2024 Sd/- Sd/- (YOGESH KUMAR US) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Date:- 24.10.2024 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "