HARISH NAGAR,NEW DELHI V. ACIT, CIRCLE-62(1), DELHI

ITA 2744/DEL/2022

AI Insights

The case involves Mr. Harish Nagar appealing against the order of the National Faceless Appeal Centre (NFAC), which confirmed a disallowance made by the Central Processing Centre (CPC), Bangalore. The disallowance of Rs. 7,64,18,432 was related to non-compliance with the provisions of Chapter VIII of the Finance Act, 2016, concerning equalization levy on online advertisements. The assessee argued that no consideration was paid to non-residents for specified services on which the equalization levy is applicable. The NFAC initially did not consider the assessee's revised tax audit report and additional submissions, leading to the appeal to the Income Tax Appellate Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314354 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Laws Referred To: Income-tax Act, 1961, Finance Act, 2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: S.B. GUPTA
• Keywords: Permanent establishment; Non compliance

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No. 2744/Del/2022 (Assessment Year: 2018-19) Mr. Harish Nagar, 9, Atta-ur-rehman Lane, Civil Lines, Delhi-110054 Vs. ACIT, Circle-61(1), Delhi (Appellant) (Respondent) PAN: ACWPN4361M Assessee by : Shri S. B. Gupta, CA Revenue by: Shri Rajesh Kumar Dhanesta, SR. DR Date of Hearing 03/03/2025 Date of pronouncement 07/05/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.2744/Del/2022 for AY 2018-19, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as „ld. NFAC‟, in short] in Appeal No. ITBA/NFAC/S/250/2022- 23/1046026049(1) dated 27.09.2022 against the order of assessment passed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 08.02.2020 by the Assessing Officer, CPC, Bangalore (hereinafter referred to as „ld. AO‟). 2. The only effective issue to be decided in this appeal is challenging the disallowance of Rs. 7,64,18,432/- u/s 40(a)(ib) of the Act in respect of equalization levy for online advertisement. 3. We have heard the rival submissions and perused the material available on record. The return of income for AY 2018-19 was filed belatedly by the assessee on 31.03.2019 declaring total income of Rs. 80,75,700/-. ITA No. 2744/Del/2022 Mr. Harish Nagar Page | 2 The ld CPC made addition of Rs. 7,64,18,432/- u/s 40(a)(ib) of the Act on account of non compliance with the provisions of Chapter VIII of the Finance Act, 2016 with regard to equalization levy. This disallowance was apparently made in the intimation u/s 143(1) of the Act on the basis of disallowance proposed in the tax audit report. The assessee before the ld NFAC contended that this disallowance is not warranted at all as the assessee has not paid any consideration to non-resident for any specified services on which equalization levy is applicable under the provisions of Chapter VIII of the Finance Act, 2016. The assessee submitted that as per Chapter VIII Finance Act, 2016, the expressions „Equalisation levy‟ and „Specified service‟ are defined as under:- “Chapter VIII-Equalisation Levy Sec. 164. In this Chapter unless the context otherwise requires! (d) \"equalisation levy\" means the tax leviable on consideration received or receivable for any specified service under the provisions of this Chapter; (i) \"Specified service\" means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and include any other service as may be notified by the Central Government in this behalf; Sec.165. (1) On and from the date of commencement of this Chapter, there shall be charged an equalisation levy at the rate of six percent of the amount of consideration for any specified service received or receivable by a person, being a non-resident from- (i) a person resident in India and carrying on business or profession, or (ii) a non-resident having a permanent establishment in India. (2) The equalisation levy under sub-section (1) shall not be charged, where- (a) the non-resident providing the specified service has a permanent establishment in India and specified service is effectively connected with such permanent establishment; ITA No. 2744/Del/2022 Mr. Harish Nagar Page | 3 (b) the aggregate amount of consideration for specified service received or receivable in a previous year by the non-resident from a person resident in India and carrying on business or profession, or from a non-resident having a permanent establishment in India, does not exceed one lakh rupees; or (c) where the payment for the specified service by the person resident in India, or the permanent establishment in India is not for the purposes of carrying out business or profession.” 4. The assessee submitted equalization levy is applicable on consideration received or receivable by a non resident from providing online advertisement services to a resident person carrying any business or profession in India or to a non resident having a Permanent Establishment (PE) in India. The assessee pleaded that on bare perusal of the audited financial statements, it clearly reveals that assessee has not paid any consideration to a non resident for any advertisement or any other services on which equalization levy is deductible. Further, it was pleaded that from the profit and loss account enclosed along with return, the assessee has not paid or incurred any advertisement expenditure during the year under consideration. There was only a typographical error in the tax audit report and a revised tax audit report dated 15.12.2021 was filed wherein, no disallowance u/s 40(a)(ib) of the act was proposed thereon. A certificate to this effect duly signed by the assessee as well as by the Chartered Accountant was furnished before the ld NFAC. All the submissions made by the assessee were considered as additional documents by the ld NFAC and since, the assessee had not enclosed a formal petition in terms of Rule 46A of the Income Tax Rules, the said additional documents were not taken cognizance by the ld NFAC which ultimately culminated in confirmation of order of ld CPC. 5. From the above narration of facts, we find that assessee‟s submissions were not considered at all by the ld NFAC. The ld NFAC is directed to considered all those submissions together with documentary ITA No. 2744/Del/2022 Mr. Harish Nagar Page | 4 evidences, if any, and pass an order de novo in accordance with law qua the issue of disallowance u/s 40(a)(ib) of the Act. The assessee is permitted to file fresh evidences, if any, in support of its contentions. All the evidences submitted by the assessee shall have to be admitted by the ld NFAC and the issue to be adjudicated afresh in accordance with law. Accordingly, the grounds raised by the assessee are allowed for statistical purposes. 6. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 07/05 /2025. -Sd/- -Sd/- (VIMAL KUMAR) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 07/05 /2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "