IDC Centre for Consultancy and Research Private Limited, Bangalore V. Deputy Commissioner Of Income Tax, Circle- 3(1)(1), Bangalore

ITA 104/BANG/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2259 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 20-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence; Reasonable cause; Set aside
• Section: 207

Judgement Text

ITA NO.104/BANG/2020 M/S. IDC CENTRE FOR CONSULTANCY AND RESEARCH PVT. LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.104/BANG/2020 ASSESSMENT YEAR: 2015-16 M/S. IDC CENTRE FOR CONSULTANCY AND RESEARCH PRIVATE LTD. NO.23 & 24 GROUND FLOOR AMR TECH PARK 2-B, HONGASANDRA HOSUR MAIN ROAD BANGALORE PAN NO : BLRCO5726A VS. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-3(1)(1) BANGALORE APPELLANT RESPONDENT A PPELLANT BY : SHRI M.P. LOHIA, A.R. RESPONDENT BY : SRI PRIYADARSHI MISHRA, D.R. DATE OF HEARING : 02.11.2020 DATE OF PRONOUNCEMENT : 01.12.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 22-11-2019 PASSED BY LD CIT(A)-3, BENGALURU AND IT RELATES TO THE ASSESSMENT YEAR 2015-16. THE ASSESSEE IS AGGRIEVE D BY THE DECISION OF LD CIT(A) IN NOT ADMITTING ADDITIONAL EVIDENCES AND IN CONFIRMING THE DISALLOWANCE OF MANAGEMENT FEES OF RS.5,05,83,0 87/- PAID BY THE ASSESSEE TO ITS GROUP CONCERNS. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING MARKET INTELLI GENCE & ADVISORY ITA NO.104/BANG/2020 M/S. IDC CENTRE FOR CONSULTANCY AND RESEARCH PVT. LTD., BANGALORE PAGE 2 OF 5 SERVICES TO INFORMATION TECHNOLOGY, TELECOMMUNICATI ON INDUSTRIES AND CONSUMER TECHNOLOGY MARKETS. DURING THE YEAR U NDER CONSIDERATION, THE ASSESSEE HAD PAID MANAGEMENT FEE S TO TWO ITS GROUP CONCERNS, VIZ., M/S IDC RESEARCH INC., USA AN D M/S IDC ASIA/PACIFIC PTE LTD AGGREGATING TO RS.5,05,83,087/ -. THE AO ASKED THE ASSESSEE TO FURNISH DETAILS OF EXPENSES AND ALS O COPIES OF AGREEMENTS, INVOICES AND DETAILS OF WORK DONE/SERVI CES RENDERED BY THE ABOVE SAID TWO COMPANIES. FROM THE DETAILS FUR NISHED BY THE ASSESSEE, THE AO NOTICED FOLLOWING DEFICIENCIES:- THE AGREEMENTS DO NOT PROVIDE THE BAS IS OF CHARGING THE FEES FOR RENDERING SERVICES OR THE MANNER IN WHICH COST IS TO BE ALLOCATED. THE APPELLANT HAS FAILED TO PROVIDE TH E SPECIFIC DETAILS OF WORK DONE OR SERVICES RENDERED BY THE RELATED CONCERNS F ROM ABROAD. THE AGREEMENTS OR INVOICES DO NOT THROW ANY LIGHT O N THE DETAILS OF ACTUAL SERVICES PROVIDED BY THESE COMPAN IES OR THE BASIS ON WHICH PAYMENT HAD BEEN MADE. THE NATURE OF SERVI CES INDICATED IN THE INVOICES WAS VERY GENERIC IZ `INTERNATIONAL ALLOCATION CHARGE BACK-RS. 57,00,547/-', 'GROUP MANAGEMENT FEE-RS. 7, 20,426/- ETC. INVOICE FROM 1DC INC REVEALS THAT MANAGEMENT FEE WA S CHARGED FOR ONE YEAR OF WHICH ONLY SIX MONTHS RELAT ED TO THE YEAR UNDER CONSIDERATION. COMMON INVOICE FOR PERIOD 01.1 0.2013 TO 31.03.2014 AND FOR PERIOD 01.04.2014 TO 20.09.2014 WAS ALSO RAISED ON 27.06.2014. THUS THE AMOUNT RELATED TO FY 201314 DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION. THE INVOICE FOR TH E CURRENT YEAR FOR PERIOD UP TO 20.09.2014 WAS RAISED IN ADVANCE ON 27 .06.2014 I.E. EVEN BEFORE THE PERIOD FOR WHICH THE SERVICES TO BE RENDERED WAS OVER. THIS INDICATED THAT THERE WAS NO BASIS FOR RAISING SUCH INVOICES AND THE SAME WERE BEING RAISED AS ONLY A DEVICE TO SHIF T PROFIT FROM INDIA. THE INVOICES DO NOT SHOW ANY DETAILS OF SPECIFIC SE RVICES PROVIDED TO THE APPELLANT COMPANY. NO MATERIAL EVID ENCE WAS PRODUCED WHICH COULD SHOW THAT THE APPELLANT HAD RECEIVED AN Y ACTUAL SERVICES FOR WHICH PAYMENT WAS MADE. THE YARDSTICK ADOPTED BY THE RELATED CONCERNS TO CH ARGE MANAGEMENT FEE WAS NOT KNOWN AND THE APPELLANT COUL D NOT SHOW THAT ANY TANGIBLE AND SUBSTANTIAL COMMERCIAL BENEFIT WAS DER IVED BY IT FROM SUCH SERVICES. ITA NO.104/BANG/2020 M/S. IDC CENTRE FOR CONSULTANCY AND RESEARCH PVT. LTD., BANGALORE PAGE 3 OF 5 THE AO ALSO RELIED UPON THE DECISION OF BOMBAY HI GH COURT IN THE CASE OF UMAKANT B AGRAWAL VS. DCIT 369 ITR 220 WHEREIN IT WAS HELD THAT PROOF OF RENDITION OF SERV ICES IS A SINE QUA NONE FOR ALLOWABILITY OF EXPENDITURE IN HANDS O F THE RECIPIENT OF THE SERVICES. THE AO ALSO RELIED UPON THE DECISI ONS OF ITAT BANGALORE IN THE CASES OF M/S TAEGUTEC INDIA PVT. L TD. VS. DCIT DATED 24.05.2017 IN ITA NO. T(TP)A NO. 1337/BANG/20 10, [2017] 83 TAXMANN.COM (BANGALORE-TRIB.) AND M/S. VOLVO IND IA (P) LTD. VS. CIT(APPEALS) (2017) 77 TAXMANN.COM 207 (BANG. TRIB.) ACCORDINGLY, THE AO TOOK THE VIEW THAT THE PAYMENT OF MANAGEMENT FEE IS NOTHING BUT SIPHONING OF PROFITS FROM INDIA WITH THE INTENTION TO AVOID PAYMENT OF TAX. ACCORDINGLY THE AO DISALL OWED THE CLAIM OF MANAGEMENT FEE EXPENDITURE. 3. BEFORE LD CIT(A), THE ASSESSEE SOUGHT TO FI LE EVIDENCES IN THE FORM OF ADDITIONAL EVIDENCES. THE LD CIT(A) TOOK T HE VIEW THAT THE ASSESSEE HAS BEEN PROVIDED SUFFICIENT OPPORTUNITY B Y THE AO, BUT IT IS THE ASSESSEE WHO HAS FAILED TO AVAIL THE SAME. ACCORDINGLY THE LD CIT(A) REFUSED TO ADMIT ADDITIONAL EVIDENCES AND AC CORDINGLY CONFIRMED THE ADDITION MADE BY THE AO. 4. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS AVAILED SERVICES FROM ITS GROUP ENTITIES LOCATED IN USA AND SINGAPOR E. BEFORE THE AO, THE ASSESSEE HAS FURNISHED AGREEMENTS, INVOICES ETC ., VIDE ITS LETTER DATED 13.11.2017. HE SUBMITTED THAT THE ASSESSEE W AS PURSUING THE MATTER WITH ITS GROUP CONCERNS FOR GETTING OTHER DE TAILS. IN THE MEAN TIME, THE ASSESSING OFFICER HAS PASSED THE ORDER OR 08 TH OF DECEMBER, 2017. HE SUBMITTED THAT THE ASSESSEE DID NOT GET S UFFICIENT TIME TO FURNISH ALL THE DETAILS BEFORE THE AO, SINCE IT TOO K CONSIDERABLE TIME TO COLLATE ALL THE DETAILS. FURTHER THE EXPENSES W ERE INCURRED BY THE GROUP CONCERNS LOCATED ABROAD AND CROSS CHARGED TO THE ASSESSEE PROPORTIONATELY. HENCE EXACT DETAILS WERE REQUIRED TO BE COLLECTED ITA NO.104/BANG/2020 M/S. IDC CENTRE FOR CONSULTANCY AND RESEARCH PVT. LTD., BANGALORE PAGE 4 OF 5 FROM THEM. HENCE THE ASSESSEE FILED DETAILS/DOCUMEN TS IN THE FORM OF ADDITIONAL EVIDENCES BEFORE LD CIT(A), BUT THE L D CIT(A) HAS REFUSED TO ADMIT THEM. THE LD A.R SUBMITTED THAT T HE ASSESSEE WOULD BE PUT IN GRAVE DIFFICULTIES, IF THE ADDITION AL EVIDENCES ARE NOT ADMITTED AND EXAMINED BY THE TAX AUTHORITIES. ACCO RDINGLY, HE PRAYED FOR ADMISSION OF THE ADDITIONAL EVIDENCES AN D ALSO PRAYED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE AO FO R EXAMINING THIS ISSUE AFRESH. 5. WE HEARD LD D.R AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE HAS FURNISHED LAST OF ITS SUBMISSIONS BEFO RE THE AO ON 13.11.2017, WHEREIN IT HAS FURNISHED COPIES OF AGRE EMENTS, LEDGER ACCOUNT COPY AND COPIES OF SAMPLE INVOICES. ADMITT EDLY, ALL THE DETAILS CALLED FOR BY THE AO HAVE NOT BEEN FURNISHE D. ACCORDING TO LD A.R, IT TOOK CONSIDERABLE TIME FOR THE ASSESSEE TO COLLATE ALL THE DETAILS, SINCE THE EXPENSES WERE INCURRED BY THE GR OUP CONCERNS LOCATED ABROAD AND WAS CROSS CHARGED TO THE ASSESSE E BY WAY OF APPORTIONMENT OF EXPENSES. IT IS THE SUBMISSION OF LD A.R THAT EXACT DETAILS WERE REQUIRED TO BE COLLECTED FROM THE GROU P CONCERNS ONLY. HOWEVER, THE ASSESSMENT ORDER CAME TO BE PASSED ON 8 TH OF DECEMBER, 2017. ACCORDINGLY, IT WAS SUBMITTED THAT SUFFICIENT TIME WAS NOT GIVEN TO THE ASSESSEE BY THE AO TO FURNISH THE DETAILS. 6. CONSIDERING THE ABOVE SAID EXPLANATION OF THE ASSESSEE, WE ARE OF THE VIEW THAT THERE WAS REASONABLE CAUSE FOR THE ASSESSEE IN NOT FURNISHING ALL THE DOCUMENTS BEFORE THE AO. ACCORD INGLY, WE ARE OF THE VIEW THAT THE ADDITIONAL EVIDENCES SHOULD BE AD MITTED, IN THE INTEREST OF NATURAL JUSTICE. IN FACT, THE ASSESSEE IS FURNISHING THE ADDITIONAL EVIDENCES IN ORDER TO SUBSTANTIATE THE E XPENSES CLAIMED BY IT AND THE AO HAS DISALLOWED THE EXPENSES FOR WA NT OF EVIDENCES ONLY. HENCE ADMISSION OF ADDITIONAL EVIDENCES WILL PROMOTE THE CAUSE ITA NO.104/BANG/2020 M/S. IDC CENTRE FOR CONSULTANCY AND RESEARCH PVT. LTD., BANGALORE PAGE 5 OF 5 OF JUSTICE. ACCORDINGLY, WE ADMIT THE ADDITIONAL E VIDENCES FURNISHED BY THE ASSESSEE. HOWEVER, THE SAME REQUIRES EXAMIN ATION AT THE END OF AO. 7. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE AO FOR EXAMINI NG IT AFRESH BY DULY CONSIDERING THE ADDITIONAL EVIDENCES AND/OR ANY OTH ER EVIDENCE, INFORMATION AND EXPLANATIONS THAT MAY BE FURNISHED BY THE ASSESSEE. AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD , THE AO MAY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST DEC, 2020 SD/- (GEORGE GEORGE K. ) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 1 ST DEC, 2020. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE