The Dy. Commissioner of Income Tax, Circle-4(1)(2), Ahmedabad V. Troikaa Pharmaceuticlas Limited, Ahmedabad

ITA 107/AHD/2020

AI Insights

The case involves multiple appeals and cross objections filed by the Revenue and the assessee, Troikaa Pharmaceuticals Ltd., against the orders of the learned Commissioner of Income Tax (Appeals)-8, Ahmedabad. The disputes primarily centered around the disallowance of various expenses claimed by the assessee under different sections of the Income Tax Act, 1961, for the Assessment Year 2013-14. The Revenue challenged the reliefs granted by the CIT(A), while the assessee contested the additions made to its income. The tribunal examined the legality of the disallowances and the applicability of various provisions of the Act, including sections 37(1), 35(2AB), and 80IC, among others.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135811 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 14-06-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 29-01-2020
• Other Referred Cases: M/s Apex Laboratories (P.) Ltd. v. Dy.CIT, Cadila Healthcare Ltd. v. CIT, CIT v. Gujarat State Road Transport Corporation India Limited, Checkmate Services Pvt. Ltd. Vs CIT, CIT v. Farida Leather Co., Muthoot M. George Bankers v. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: FORTHEASSESSEERESPONDENTIS; WOULDNOTATTRACTORPARTAKETHECHARACTEROFFEES; FORTHEREVENUEISTHATTHETRIBUNAL
• Assessee Lawyers: SHRIDHIRENSHAH; OBSERVINGTHATTHEISSUEISCOVEREDIN; THEORDEROFTHISTRIBUNALINTHEOWNCASEOFTHE; .INGROUNDNO.; THEASSESSINGOFFICERISAGGRIEVEDTHATTHELEARNEDCIT A ERREDIN; ORDERDATEDTHJULYOFACOORDINATEBENCH; INASSESSEESOWNCASEFOR; FOLLOWINGTHEORDEROFHISPREDECESSORINTHE; ALARGENUMBEROFJUDICIALPRECEDENTSINCLUDINGHONBLEMADRAS; THEORDEROFTHISTRIBUNALINITSOWNCASEFOR; .WEHAVEHEARDTHERIVALPARTIESANDHAVEGONETHROUGHTHEMATERIALPLACEDONRECORD; .WEHAVEHEARDTHERIVALCONTENTIONSOFBOTHTHEPARTIESANDPERUSEDTHEMATERIALS; THEORDEROFTHEHONBLEJURISDICTIONAL
• Keywords: Gift; Depreciation; TDS

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’B’’BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRIT.RSENTHILKUMAR,JUDICIALMEMBER आयकरअपीलसं ./ITANo.107/AHD/2020 With CO.No.71/Ahd/2020 धििाधरणवरध / Asstt.Year:2013-2014 D.C.I.T., Circle-4(1)(2), Ahmedabad. Vs. TroikaaPharmaceuticalsLtd., CommerceHouse-I, Opp.RajvanshApartment, JudgesBunglowRoad, Ahmedabad-380054. PAN:AABCT6866H And आयकरअपीलसं./ITANo.78/AHD/2020 धििाधरणवरध / Asstt.Year:2013-2014 TroikaaPharmaceuticalsLtd., CommerceHouse-I, Opp.RajvanshApartment, JudgesBunglowRoad, Ahmedabad-380054. PAN:AABCT6866H Vs. D.C.I.T., Circle-4(1)(2), Ahmedabad. (Applicant)(Respondent) Revenueby:ShriSudhenduDas,CIT.D.R Assesseeby:ShriDhirenShah,with MsNupurShah&ShriKaranShah, A.Rs ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 2 सुिवाईकीतारीख/DateofHearing:15/06/2023 घोरणाकीतारीख/DateofPronouncement:13/09/2023 आदेश /ORDER PERWASEEMAHMEDACCOUNTANTMEMBER: ThecaptionedappealsandCOhavebeenfiledattheinstanceofthe RevenueandtheassesseeagainsttheseparateordersoftheLearned CommissionerofIncomeTax(Appeals)-8,Ahmedabad(inshort“Ld.CIT(A)”) arisinginthematterofassessmentorderpassedunders.143(3)oftheIncome TaxAct,1961(here-in-afterreferredtoas"theAct").Theassesseehasfiledthe CrossObjectionintheRevenue’sappealsbearingITANo.107/AHD/2020forthe AssessmentYear2013-14. 2.First,wetakeupITANo.107/AHD/2020,anappealbytheRevenuefor A.Y2013-14.TheRevenuehasraisedfollowinggroundsofappeal: 1.WhethertheLd.CIT(A),haserredinlawandonfactsindeletingthedisallowanceof promotionexpensesamountingtoRs.2,42,73,068/-u/s.37(1)oftheITAct. 2.WhethertheLd.CIT(A)haserredinlawandonfactsindeletingthedisallowanceof depreciationonelectricinstallationofRs.1,36,285/- 3.WhethertheLd.CIT(A)haserredinlawandonfactsindeletingthedisallowanceofforeign commissionexpensesofRs.1,37,26,983/- 4.WhethertheLd.CIT(A),haserredinlawandonfactsindeletingthedisallowanceofclaim amountingtoRs.1,22,29,000/-incurredoutsidetheapprovedfacilityu/s.35(2AB)? 5.WhethertheLd.CIT(A)haserredinlawandonfactsindeletingthedisallowanceof deductionu/s.80ICoftheActamountingtoRs.37,44,802/-inrespectofR&Dexpenses? ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 3 3.ThefirstissueraisedbytheRevenueisthatthelearnedCIT-Aerredin deletingtheadditionofRs.2,42,70,068/-onaccountofdisallowancesof promotionexpensesundersection37(1)oftheAct. 3.1Thefactsinarebriefthattheassesseeisapubliccompanyandengagedin thebusinessofmanufacturingofDrugs&Pharmaceuticals.Duringtheyear,the assesseehasclaimedcertainexpendituresaggregatingtoRs.10,66,27,149/- undertheheadbusinesspromotions.Thedetailsofthesamestandasunder: Sr.No.ParticularsAmountClaimedas expenditure 1Business Convention Rs.1,59,662/- 2.CMEExpensesRs.22,65,108/- 3.ExhibitionExpensesRs.10,35,967/- 4.MCMExpensesRs.25,65,562/- 5.OherBusiness Convention Expenses Rs.26,454/- 6.PatronNetworking Expenses Rs.78,61,571/- 7.Promotional Materials Rs.3,51,38,004/- 8.SalesPromoion Expenses Rs.72,94,225/- 9.Stationary& PrintingForField Staff Rs.3,75,355/- 10.Travellingexpense forDoctors Rs.32,21,338/- 11.Suprabhat Campaign Rs.75,39,670/- 12.ParonNetworking Expenses(IDBI) Rs.1,62,37,214/- 13.Promotional Materials(ABC) Rs.12,13,940/- 14.Promotional Materials(GHC) Rs.1,02,12,210/- 15.Travellingexpense forDoctors(IS) Rs.11,442,529/- 16.TaxiExpensesfor Doctors Rs.38,340/- TotalRs.106,627,149/- ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 4 3.2TheAOwasoftheviewthataboveexpenditureswereincurredinviolation ofIndianMedicalCouncil(ProfessionalConduct,EtiquetteandEthics)Regulation 2002andthus,thesameneedstobedisallowedaspertheCBDTCircularNo. 5/2012dated01-08-2012.Accordingly,theAOpurposedtodisallowthesameby issuingashowcausenoticedated13-01-2014totheassessee. 3.3Theassesseeinresponsetosuchshowcausenoticeexplainedthenature ofexpensesincurredundereachsub-headasdiscussedabove.Thegistof assessee’ssubmissionisthatalltheexpenseswereincurredtopromoteand spreadtheawarenessaboutitsproductswhichwerenecessaryforthegrowthof itsbusiness.Generally,theseexpensesareincurredbyeveryassesseeengagedin thepharmaceuticalsindustry.Theassesseeaccordinglycontendedthatallthese expenseswereincurredwhollyandexclusivelyforthepurposeofthebusinessand therefore,thesameareallowableundersection37oftheAct.Theassesseealso submittedthattheCodeofEthicsissuedbytheMedicalCouncilisapplicableto thedoctorsonlyandnottothemanufacturerofpharmaceuticalsproducts. Therefore,therewasnoviolationofthelawcommittedbyitasallegedbytheAO. 3.4However,theAOdisagreedwiththecontentionsoftheassesseeandafter consideringthefactsindetailmadethedisallowanceofcertainexpensesonad hocbasisandsomeoftheexpensesinfullwhichwerefallingundertheheadsales promotionexpenses.AssuchtheAOinaggregatemadethedisallowanceof ₹5,31,91,547.00andaddedtothetotalincomeoftheassessee. 4.AggrievedassesseepreferredanappealtolearnedCIT-Awhopartly allowedrelieftotheassessee. 4.1AgainstthefindingofthelearnedCIT-A,boththerevenueandthe assesseeareinappealbeforeus.Therevenueisinappealagainsttherelief grantedbythelearnedCIT-AforanamountofRs.2,42,73,068whereasthe ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 5 assesseeisinappealagainsttheconfirmationoftheadditionbythelearnedCIT-A foranamountofRs.2,89,18,509and1,06,925.00only.Theassesseehas challengedtheconfirmationoftheadditioninITANo.78/AHD/2020onthe groundreproducedasunder: 1.Thedisallowanceofu/s.37(1)oftheActofRs.2,89,18,509/-confirmedbytheLd.CIT(A) maykindlybedeleted. 2.ThedisallowanceofRs.1,06,925/-onaccountofbusinessconventionexpensesconfirmed bytheLd.CIT(A)maykindlybedeleted. 4.2ThelearnedDRbeforeuscontendedthatthefreebiesgiventothedoctors arenotallowabledeductionundertheprovisionsofexplanationtosection37of theAct.ThelearnedDRinsupportofhiscontentionhasreferredtothe judgementofHon’bleSupremeCourtinthecaseofM/sApexLaboratories(P.) Ltd.v.Dy.CITreportedin135taxmann.com286. 4.3Onthecontrary,thelearnedARbeforeusfiledacontainingthegistofhis argumentsrunningfrompages1to9andcontendedthattheissueregardingthe freebiestothedoctorshasalreadybeendecidedinitsfavourbytheITATinits owncaseintheearlierassessmentyears.ThelearnedARinsupportofhis contentiondrewourattentiontotheorderoftheITATbearingITANo. 2458/AHD/2017,939and1129/AHD/2019fortheassessmentyears2010-11to 2012-13. 4.4ThelearnedARalsopointedoutthatdisallowanceonaccountoffreebiesto thedoctorswasbroughtunderthestatutebytheFinanceAct2022applicable from01-04-2022.Furthermore,theHon’bleSupremeCourtdeliveredthe judgementinthecaseofApexlaboratoriespriortosuchamendment.Therefore, thelearnedARcontendedthattheprincipleslaiddownbytheHon’bleSupreme Courtcannotbeappliedinthegivencasefortheyearindispute. ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 6 4.5BoththelearnedDRandtheARbeforeusvehementlysupportedtheorder oftheauthoritiesbelowtotheextentfavourabletothem. 5.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Basedonthejudicialtrend,freebiesgivenby pharmaceuticalcompanieswereallowedasadeductionundersection37(1)ofthe ActforalltheexpenditureswhichfalloutsidetheambitofSection30to36ofthe TaxAct.Theseexpenseswereconsideredtohavebeenincurredwhollyor exclusivelyforbusinessorprofessionalpurposes. 5.1However,theCBDTCircularNo.5of2012,forbidsmedicalprofessionals andtheirprofessionalassociatesfromacceptinganyformofincentivesor "freebies"fromthepharmaceuticalandalliedhealthsectorindustries.Inthesaid circular,itwasalsomadeclearthatanycostsincurredinprovidingthefreebiesor thoselikethemwouldbeconsideredillegalexpensesinviolationofRegulation 6.8.1oftheIndianMedicalCouncil(ProfessionalConduct,EtiquetteandEthics) Regulations,2002(theRegulations)inpursuancetotheexplanationattachedto section37(1)oftheAct.Accordingly,thedeductionsforhavingsuppliedfreebies andwrittenthemoffasbusinessexpensesbythecompaniesinthe pharmaceuticalandalliedhealthindustries,aswellasanyotherassesseswillbe denied. 5.2EarliertherewasaconfusionastowhethertheCircularwillbeapplicableto pharmaceuticalcompaniesornotbutafterthejudgmentofHon’bleSupreme CourtinthecaseofM/sApexLaboratories(P.)Ltd.(P.)Ltd.v.Dy.CITreported in135taxmann.com286,thereremainsnoconfusionthatthesamewouldapply topharmaceuticalcompanies.InthecaseofM/sApexLaboratories(P.) Ltd.despitetheHon'bleSupremeCourtmakingtheCircularapplicableon pharmaceuticalcompaniesandholdingthejudgmentagainsttheassessee, highlightedontheessencewherethefreebiesorgiftshavethepotentialto ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 7 influenceormanipulatetheprescriptionofamedicalpractitionerwhichcanbe incentivizethedoctor'sintentiontoavailmoreluxuriousandexpensivefreebies offeredbythepharmaceuticalcompanies.Therelevantextractofthejudgmentis extractedbelow: 33.Thus,pharmaceuticalcompanies'giftingfreebiestodoctors,etc.isclearly"prohibited bylaw",andnotallowedtobeclaimedasadeductionundersection37(1).Doingsowould whollyunderminepublicpolicy.Thewell-establishedprincipleofinterpretationoftaxing statutes-thattheyneedtobeinterpretedstrictly-cannotsustainwhenitresultsinan absurditycontrarytotheintentionsoftheParliament. 5.3Themeaningofgift/freebiehasnotbeendefinedintheCircular.Generally, thewordgiftreferstothetransferofcertainexistingmovableorimmovable propertyvoluntarilyandwithoutanydirectorindirectconsideration.Agiftis understoodtobesomethingthatneitherthedoneeeverdemandednorforwhich thedoneecanbecompelledtogivebacksomethinginreturntothe donor.However,theintentbehindgivinggiftstoamedicalpractitionerhasbeen observedtobeforthemotiveandpurposetoinfluencetheprescriptionofthe medicalpractitionerwiththeintentionofseedingthemedicines/productsofsuch donorpharmaceuticalcompaniestothepatientsatapreferentiallevel.Thus,in viewoftheabove,weholdthattheassesseeisnotentitledtothedeductionon accountofthefreebiesgiventothedoctors. 5.4Atthisjuncture,itisimportanttonotethattheAOhasmadethe disallowanceofcertainitemsoftheexpensesfallingundertheheadbusiness promotionexpensesonad-hocbasiswhichisnotpermissibleintheeyesoflaw. Likewise,thelearnedCIT-Ahasalsoallowedanddisallowedtheexpensesincurred bytheassesseeconsideringthedatei.e.1August2012whentheCBDTcircular bearingnumberNo.5of2012wasissued. 5.5Beforeparting,weareoftheconsideredviewthatonlysomuchofthe expensesinvolvingfreebiestothedoctorsshallbesubjecttodisallowance.Asthe ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 8 basisadoptedbytheAOandtheld.CIT-Aisnotinalignmentwiththefindingof theHon’bleSupremeCourtasdiscussedabove.Forthislimitedpurpose,weare inclinedtosetasidetheissuetothefileoftheAOforfresh/de-novoverification oftheexpensesfallingunderthecategoryoffreebies.Itisalsoequallyimportant tonotethattheAOinthesetasideproceedingsshallnotmakethedisallowance exceedingthedisallowanceoriginallymadeintheassessmentframedunder section143(3)oftheAct.Hence,thegroundsofappealoftherevenueandthe assesseeareallowedforstatisticalpurposes. 6.ThenextissueraisedbytheRevenueisthelearnedCIT-Aerredin deletingthedisallowanceofdepreciationonelectricalinstallationsforRs. 1,36,285/-only. 7.Theassesseeduringtheyearunderconsiderationhasclaimeddeprecation onElectricalInstallationforRs.3,09,321/-@15%bytreatingthesameaspartof plantandmachinery.Theassessee,inadditiontotheabove,alsoclaimed additionaldepreciationofRs.33,178/-onlyonthesame.Theassesseeinsupport itscontention,treatingtheelectricalinstallationasplantandmachinery,submitted thattheElectricalInstallationsareintegralpartofplantandfunctionalongwith theplantonly.Asuchtheimpugnedelectricalinstallationsareincapableofbeing usedseparatelyorindependentlyfromtheplantandMachinery.Therefore,the samearepartandparceltotheplantandmachineryandeligiblefordepreciation alongwithblockofassetsbeingplantandmachinery.Theassesseefurther claimedthatelectricalfittingslikefansetc.werealsoinstalledbutthesamewas addedtotheblockoffurnitureandfixture.However,theseelectricalinstallations areusedalongwithplantsandmachinery.Accordingly,thesamewasshownin theblockofplantsandmachinery. 7.1ThesubmissionoftheassesseewasrejectedbytheAObyholdingthatthe depreciationscheduleexplicitlyprovidestherateofdepreciationforelectrical ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 9 fittingwhichstandat@10%only.Likewise,theadditionaldepreciationisonly applicableinthecaseofinstallationofplantandmachinerybutnotonelectrical installation.Therefore,theAOdisallowedtheexcessdepreciationof Rs.1,03,107/-andadditionaldepreciationofRs.32,178/andaddedtothetotal incomeoftheassessee. 8.AggrievedassesseepreferredanappealbeforethelearnedCIT-Awho allowedtheappealoftheassesseebyobservingthattheissueiscoveredin favouroftheassesseebytheorderofthisTribunalintheowncaseofthe assesseefortheAY2005-06aswellasofsubsequentyears. 9.BeingaggrievedbytheorderofthelearnedCIT-A,theRevenueisin appealbeforeus. 9.1ThelearnedDRbeforeusreiteratedthefindingcontainedinthe assessmentorderbyplacinghisreliancetherein. 9.2Ontheotherhand,thelearnedARbeforeussubmittedthattheissueon handiscoveredinassessee’sfavourbytheorderofthistribunalinitsowncaseof theassesseefortheAY2009-10bearingITANo.2028/Ahd/2013.Theld.AR vehementlysupportedtheorderoftheLd.CIT-A. 10.WehaveheardtheRivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wefindthattheissueofdepreciation allowanceonelectricalinstallationcamebeforethistribunalinowncaseofthe assesseeinITANo.2028/Ahd/2013correspondingtoA.Y.2009-10wherethe coordinatebenchvideorderdated16-08-2016decidedtheissueinfavourofthe assesseebyobservingasunder: 12.Ingroundno.3,theAssessingOfficerisaggrievedthatthelearnedCIT(A)erredin “deletingthedisallowanceofRs10,66,974madeonaccountofelectricinstallations”. ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 10 13.Learnedrepresentativesfairlyagreethatthisissueisalsocovered,infavourofthe assessee,byorderdated9thJuly2010ofacoordinatebench,inassessee’sowncasefor theassessmentyear2005-06.LearnedCIT(A)hasmerelyfollowedthisdecision. Respectfullyfollowingthisbindingjudicialprecedent,weapprovetheconclusionsarrived atbytheCIT(A)anddeclinetointerfereinthematter. 14.Groundno.3isalsodismissed. 10.1Theissueonhandissquarelycoveredbytheorderofthecoordinatebench intheowncaseoftheassesseeasdiscussedabove.Beforeus,nomaterialhas beenplacedonrecordbytheRevenuetodemonstratethatthedecisionofthe Tribunalasdiscussedabovehasbeensetaside/stayedoroverruledbythe HigherJudicialAuthorities.Beforeus,theRevenuehasnotplacedanymaterialon recordpointingoutanydistinguishingfeatureinthefactsofthecasefortheyear underconsiderationandthatofearlieryearsnorhasplacedanycontrarybinding decisioninitssupport.Therefore,respectfullyfollowingthesame,weupholdthe findingofthelearnedCIT-A.Hence,thegroundofappealraisedbytheRevenue isherebydismissed. 11.ThenextissueraisedbytheRevenueisthatthelearnedCIT-Aerredin deletingthedisallowanceofcommissionexpensesofRs.1,37,26,983/-under section40(a)(ia)oftheAct. 12.Theassesseeintheyearunderconsiderationmadepaymentofcommission ofRs.1,37,26,983/-toforeignagentwithoutdeductingwithholdingtaxunder section195oftheAct.Theassesseeexplainedthatcommissionwaspaidto differentagentsbasedindifferentforeigncountriesforservicesprovidedbythem outsideIndia.TheydonothavebusinessestablishmentinIndiainanymanner. Therefore,thepaymentmadetothoseagentsarenottaxableinIndiaand accordingly,itwasnotrequiredtodeductwithholdingtax. 12.1However,theAOdisagreedwiththesubmissionoftheassesseeby observingthatthecommissionschargespaidtotheagentswereinthenatureof ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 11 feeformanagerialorconsultancyserviceswhichfallsundertheambitof“Feefor TechnicalServices”asprovidedundertheprovisionsofsection9(1)(vii)oftheAct. Thus,theassesseewasrequiredtodeductthewithholdingtaxasperthe provisionsofsection195oftheActbutfailedtodoso.Therefore,theAO disallowedtheimpugnedcommissionexpensesbyinvokingtheprovisionsof section40(a)(ia)oftheActandaddedthesametothetotalincomeofthe assessee. 13.TheaggrievedassesseepreferredanappealbeforethelearnedCIT-A,who allowedtheappealoftheassesseebyfollowingtheorderofhispredecessorinthe owncaseoftheassesseeforAY2009-10to2012-13andorderofTribunalincase oftheassesseeforA.Y.2009-10inITANo.2028/Ahd/2013. 13.1BeingaggrievedbytheorderofthelearnedCIT-A,theRevenueisin appealbeforeus. 13.2Boththeld.DRandARbeforeusvehementlysupportedtheorderofthe authoritiesasfavourabletothem. 14.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wefindthattheidenticalissue whethertheassesseewasrequiredtodeductwithholdingtaxoncommissionpaid toforeignagentornotcamebeforethistribunalinowncaseoftheassesseein ITANo.2028/Ahd/2013correspondingtoA.Y.2009-10whereinthecoordinate benchvideorderdated16-08-2016decidedtheissueinfavouroftheassesseeby observingasunder: 3.Sofarasthisgrievanceisconcerned,learnedrepresentativesfairlyagreethattheissue iscoveredbythedecisionofacoordinatebenchofthisTribunal,inthecaseofITOVs ExcelChemicalsIndiaPvtLtd(ITANo5/Ahd/16;orderdated29thJune2016).Learned counsel,however,hastenstoplacehisrelianceonthestandoftheAssessingOfficer,and that,inthepresentcase,reliancehasbeenplacedonSection9(1)(vii)ratherthan9(1)(i) aswasthecaseintheExcelChemicals(supra). ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 12 4.Aslearnedcounselrightlypointsout,theissue,astowhetherthecommissionpaidto nonresidentagentscouldbedisallowedwhenitwaspaidwithoutdeductionoftaxat sourceundersection195,cameupforconsiderationinthecaseofExcelChemicals(supra). Rejectingthecontentionsoftherevenue,thecoordinatebench,interalia,observedas follows: 3.Toadjudicateonthisappeal,onlyafewmaterialfactsneedtobetakenof.The assesseebeforeusisaresidentcompanyengagedinthebusinessoftradingin chemicals.Duringthecourseofthescrutinyassessmentproceedings,the AssessingOfficernoticedthattheassesseehasclaimeddeductionofRs58,73,635 inrespectofthecommissionpaid,outofwhichsumsaggregatingtoRs51,79,355 werepaidtobenon-residententitieswithoutanytaxwithholdingatsource.In responsetotheAssessingOfficer’srequisitiontoshowcauseastowhythese paymentsnotbedisallowedundersection40(a)(i),forwantofappropriatetax withholdingatsource,itwasexplainedbytheassesseethatthesalecommission waspaidinrespectofservicesrenderedabroad,and,assuch,notaxwas deductibleatsource.Sincetherewasnotaxdeductionatsourceinrequirement, accordingtotheassessee,therecouldnothavebeenanyoccasiontoinvoke disallowanceundersection40(a)(i).Theassesseealsoreferredto,andreliedupon, certainjudicialprecedentsinsupportofthepropositionthatunlesstherecipientof commissioniscarryingonbusinessinIndia,throughapermanentestablishment, thesalescommissionsopaidtonon-residententitiesisnottaxableinIndia.None ofthesesubmissions,however,impressedtheAssessingOfficer.TheAssessing Officernotedthatundersection5(2)(b)oftheAct,anonresidentassesseeis taxableinIndiainrespectofallhisincomesaccruingorarisinginIndiaand incomesdeemedtoaccrueorariseinIndia,andthat,bythevirtueofdeeming fictionundersection9(1)(i),incomeaccruingorarisinginIndia,directlyor indirectlythroughanybusinessconnectioninIndiaorthroughanysourceof incomeinIndia,shallbedeemedtoaccrueorariseinIndia.Hethenreferredtoa rulingofHon’bleAuthorityforAdvanceRuling,inthecaseofSKFBoilersand DriersPvtLtdInRe[(2012)343ITR385(AAR)]insupportofthepropositionthat commissionremittedabroadtonon-residentagentrenderingservicesabroad,was incomeaccruingorarisinginIndia,andthefactthatthenon-residentagent renderedservicesabroadwaswhollyirrelevantforthepurposeofdetermining situsoftheirincome.Itwasalso,accordingtotheAssessingOfficer,heldinthe saidcasethatsincetherighttocommissionaroseinIndia,forthesimplereason thattheorderswereexecutedinIndia.TheAssessingOfficerwasoftheviewthat “thefactsoftheassessee’scaseareidenticaltotheaforecitedcasesince assesseewasliabletopaytheexportcommissiontononresidentforexportorder fromabroad,buttheorderswereexecutedfromIndia”.Areferencewasthen madetoExplanation4toSection9(1)(i),introducedbytheFinanceAct2012 w.r.e.f1stApril1962,thattheexpression‘through’shallmeantoinclude,and shallalwaysbedeemedtohaveincluded,“bymeansof”,“inconsequenceof”and “byreasonof”.Theclaimoftheassesseethattheincomedidnotaccrueorarise inIndiawasthusrejected.Asregardstherelianceonthecertificateissuedbythe charteredaccountant,certifyingthatnotaxdeductionatsourcewaswarranted fromtheremittancesforcommission,theAssessingOfficerreliedupondecisionof theTribunal,inthecaseofDCITVsRediff.comIndiaLimited[(2011)47SOT310 (Mum)]insupportofthepropositionthatsuchacertificatecannotbeconclusive determinationoftaxabilityinthehandsoftherecipient.Asregardsallthejudicial precedentscitedbytheassessee,theAssessingOfficerrejectedthesameby observingthat“variousdecisionscitedbytheassessee,CBDTcircularno.786by wayofnewcircular7of2009dated22/10/2009wherebyallthepaymentstonon- residentswithoutdeductionoftaxatsourcehavebeenwithdrawn”.Onthebasis ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 13 ofthislineofreasoning,theAssessingOfficerheldthatthecommissionpaidto nonresidentagents,amountingtoRs51,79,355,istobedisallowedundersection 40(a)(i).Aggrieved,assesseecarriedthematterinappealbeforetheCIT(A)who deletedthedisallowancebyholdingthattheincomewasnottaxableinIndia,as nooperationswerecarriedoutinIndia,andthat,sincenoincomewastaxablein India,therecouldnothavebeenanyoccasiontodeducttaxatsourcefromthe remittancesinquestion.LearnedCIT(A)furtherheldthattheadvancerulingrelied uponbytheAssessingOfficer,i.e.SKFBoilers(supra)andRajeevMalhotraInRe [(2006)284ITR564(Del)]didnotapplytothefactsofthiscase.The disallowancewasthusdeleted.TheAssessingOfficerisaggrievedandisinappeal beforeus. 4.Wehaveheardtherivalcontentions,perusedthematerialonrecordandduly consideredthefactsofthecaseasalsotheapplicablelegalposition. 5.ThebasiccontentionoftheAssessingOfficeristhatinviewofthescopeof deemingfictionundersection9(1)(i),whichinteraliaholdsthatanyincome ‘arisingdirectlyorindirectlyfromanybusinessconnectioninIndia’willbedeemed toaccrueorariseinIndia,readwiththescopeofchargingSection5(2),which enablestaxabilityofanonresidentinrespectof“incomeaccruingorarisingor deemedtoaccrueorarise,inIndia,,incomearisinginthehandsofthenon- residentcommissionagentistaxableinIndia.Whatheoverlooks,however,isthe impactofExplanation1toSection9(1)(i)whichstatesthat“forthepurposeof thisclause[i.e.9(1)(i)],inthecaseofabusinessofwhichalltheoperationsare notcarriedoutinIndia,theincomeofthebusinessdeemedunderthisclauseto accrueorariseinIndiashallbeonlysuchpartoftheincomeasisreasonably attributabletotheoperationscarriedoutinIndia”.Onlyifhewastotakeinto accountthescopeofExplanation1toSection9(1)(i),coupledwiththefactthat admittedlynopartofoperationsofthenon-residentcommissionagentwere carriedoutinIndia,hewouldhaverealizedthateventhoughdeemingdiction undersection9(1)(i)istriggeredonthefactsofthiscase,onaccountof commissionagent’sbusinessconnectioninIndia,ithasnoimpactontaxabilityin thehandsofcommissionagentbecauseadmittedlynobusinessoperationswere carriedoutinIndia,and,thereforeExplanation1toSection9(1)(i)comesintoplay. TheseeminglyeruditeanalysisbytheAssessingOfficerisbasedonahalf-baked legaltheory,andtheconclusions,therefore,clearlyfallacious. 6.AsfortheAARrulinginthecaseofSKFBoilers(supra),onwhichsomuch reliancehasbeenplacedbytheAssessingOfficer,wefindthatthisdecisionmerely followstheearlierrulinginthecaseofRajivMalhotra(supra)which,inour consideredview,doesnottakeintoaccounttheimpactofExplanation1toSection 9(1)(i)properly.Thatwasacaseinwhichthenon-residentcommissionagent workedforprocuringparticipationbyothernon-residententitiesinafoodand wineshowinIndia,andtheclaimoftheassesseewasthatsincetheagenthasnot carriedoutanybusinessoperationsinIndia,thecommissionagentwasnot chargeabletotaxinIndia,and,accordingly,theassesseehadnoobligationto deducttaxatsourcefromsuchcommissionpaymentstothenonresidentagent. Onthesefacts,theAuthorityforAdvanceRuling,interalia,opinedthat“nodoubt theagentrendersservicesabroadandpursuesandsolicitsexhibitorsthereinthe territoryallottedtohim,buttherighttoreceivethecommissionarisesinIndia onlywhenexhibitorparticipatesintheIndiaInternationalFood&WineShow(to beheldinIndia),andmakesfullandfinalpaymenttotheapplicantinIndia”and that“thecommissionincomewould,therefore,betaxableundersection5(2)(b) readwithsection9(1)(i)oftheAct”.TheAuthorityforAdvanceRulingalsoheld that“thefactthattheagentrendersservicesabroadintheformofpursuingand solicitingparticipantsandthatthecommissionisremittedtohimabroadare ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 14 whollyirrelevantforthepurposeofdeterminingsitusofhisincome”.Wedonot considerthisapproachtobecorrect.Whennooperationsofthebusinessof commissionagentiscarriedoninIndia,theExplanation1toSection9(1)(i)takes theentirecommissionincomefromoutsidetheambitofdeemingfictionunder section9(1)(i),and,ineffect,outsidetheambitofincome‘deemedtoaccrueor ariseinIndia’forthepurposeofSection5(2)(b).Thepointoftimewhen commissionagent’srighttoreceivethecommissionfructifiesisirrelevanttodecide thescopeofExplanation1toSection9(1)(i),whichiswhatismaterialinthe contextofthesituationthatweareinseisinof.Therevenue’scasebeforeus hingesontheapplicabilityofSection9(1)(i)and,itis,therefore.importantto ascertainastowhatextentwouldtherigourofSection9(1)(i)berelaxedby Explanation1toSection9(1)(i).Whenweexaminethingsfromthisperspective, theinevitableconclusionisthatsincenopartoftheoperationsofthebusinessof thecommissionagentiscarriedoutinIndia,nopartoftheincomeofthe commissionagentcanbebroughttotaxinIndia.Inthisviewofthematter,views expressedbytheHon’bleAAR,whichdonotfetterourindependentopinion anywayinviewofitslimitedbindingforceunders.245SoftheAct,donot impressus,andwedeclinetobeguidedbythesame.Thestandoftherevenue, however,isthattheserulings,beingfromsuchahighquasi-judicialforum,evenif notbinding,cannotsimplybebrushedasideeither,andthattheserulingsatleast havepersuasivevalue.Wehavenoquarrelwiththisproposition.Wehave,with utmostcareanddeepestrespect,perusedtheaboverulingsrenderedbythe Hon’bleAuthorityforAdvanceRuling.Withgreatestrespect,butwithoutslightest hesitation,wehumblycometotheconclusionthatwearenotpersuadedbythese rulings. 7.Inviewoftheabovediscussions,inourconsideredview,learnedCIT(A)was indeedjustifiedinholdingthatgiventheundisputedanduncontrovertedfactsof thiscase,thenonresidentcommissionagentswerenottaxableinIndiainrespect oftheircommissionearningsfromordersprocuredabroad. 8.Itisalsonowwellsettledinlawthatwhenthepaymentmadetoanon-resident doesnothaveanelementofincome,taxdeductionsourcerequirementsunder section195(2)donotcomeintoplayatall.Hon’bleSupremeCourt,inthecaseof GEIndiaTechnologyCentrePvtLtdVsCIT[(2010)327ITR436(SC)],hasinter aliaobservedasfollows: Inourview,Section195(2)isbasedonthe“principleofproportionality”. Thesaidsub-Sectiongetsattractedonlyincaseswherethepayment madeisacompositepaymentinwhichacertainproportionofpayment hasanelementof“income”chargeabletotaxinIndia.Itisinthiscontext thattheSupremeCourtstated,“Ifnosuchapplicationisfiled,income-tax onsuchsumistobedeductedanditisthestatutoryobligationofthe personresponsibleforpayingsuch‘sum’todeducttaxthereonbefore makingpayment.HehastodischargetheobligationtoTDS”.Ifonereads theobservationoftheSupremeCourt,thewords“suchsum”clearly indicatethattheobservationreferstoacaseofcompositepaymentwhere thepayerhasadoubtregardingtheinclusionofanamountinsuch paymentwhichisexigibletotaxinIndia.Inourview,theabove observationsofthisCourtinTransmissionCorporationcase(supra)which isputinitalicshasbeencompletely,withrespect,misunderstoodbythe KarnatakaHighCourttomeanthatitisnotopenforthepayertocontend thatiftheamountpaidbyhimtothenon-residentisnotatall“chargeable totaxinIndia”,thennoTDSisrequiredtobedeductedfromsuch payment.ThisinterpretationoftheHighCourtcompletelylosessightof theplainwordsofSection195(1)whichincleartermslaysdownthattax ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 15 atsourceisdeductibleonlyfrom“sumschargeable”undertheprovisions oftheI.T.Act,i.e.,chargeableunderSections4,5and9oftheI.T.Act. (Emphasisbyunderliningsuppliedbyus) 9.Clearly,therefore,forapplicationofSection195,itissinequanonthatthe paymenttono-residentmusthaveanelementofincomeliabletobetaxedunder theIndianIncomeTaxAct,1961.Onthefactsofthiscase,aswehavealready concluded,nopartoftheremittancetothecommissionagentwastaxableinIndia. Theassesseewas,therefore,notunderanyobligation,onthefactsofthiscase,to deductanytaxatsourcefromthecommissionpaymentstothenon-residents. Sincetherewasnoobligationtodeducttaxatsource,theveryfoundationof impugneddisallowanceundersection40(a)(i)ceasestoholdgoodinlaw.Learned CIT(A)was,therefore,quitejustifiedindeletingtheimpugneddisallowance.We upholdhisaction,anddismissthegrievanceraisedbytheAssessingOfficer. 5.AsregardsthereferencestoSection9(1)(vii),asmadebytheAssessingOfficerandthe learnedDepartmentalRepresentative,wefindthataspectofthematterisalsocovered,in favouroftheassessee,byalargenumberofjudicialprecedents-includingHon’bleMadras HighCourt’sjudgmentinthecaseofCITVsFaridaLeatherCo.[(2016)66taxmann.com 321(Madras)],whereinTheirLordshipshave,interalia,observedasfollows: 5.Themaincontentionofthelearnedcounselfortheassessee/respondentis thattheagencycommission/salescommissionpaidbytheassesseetonon- residentagents,fortheservicesrenderedbythem,outsideIndia,inprocuring exportordersfortheassessee,wouldnotattractorpartakethecharacterof"fees fortechnicalservices"asexplainedinthecontextof9(1)(vii)oftheActand therefore,thereisnoscopefortheapplicationoftheprovisionsofSection195of theAct(TaxDeductedatSource).Itisalsocontendedthatasthenon-resident agentshaveneitherbusinessconnectioninIndianortheyhavepermanent establishmentinIndia,theyareliabletobetaxedinIndia. 5.1Yetanothercontentionofthelearnedcounselfortheassesseeisthat:(a)the assesseepaidtheamountbywayofcommissiontoforeignagentsfortheservices renderedoutsideIndia;(b)theTaxDeductionatSource(TDS)isrequiredtobe madeonallpaymentstonon-residents,onlyifsuchpaymentsareliabletobe taxedinIndia.(c)followingthedecisionofthisCourt,CITv.FaizanShoes(P.)Ltd. [2014]367ITR155/226Taxman115/48taxmann.com48(Mad.),theassesseeis notliabletodeducttaxatsource,whenthenon-residentagentprovidesservices outsideIndiaonpaymentofcommission. 5.2ThecontentionoftheRevenueisthatsuchservicesareattractedby Explanation(2)toSection9(1)(vii)oftheActandthereforeTDScertificateis essential. 6.Whetherthiscontentioniscorrect,istheissuetobedecided. 7.Inordertoappreciatethiscontention,itisnecessarytoconsidertherelevant provisionsoftheAct:— (i)Section40(a)(i)oftheAct:— "Section40-Amountsnotdeductible: Notwithstandinganythingtothecontraryinsections30to38,thefollowing amountsshallnotbedeductedincomputingtheincomechargeableunderthe head"Profitsandgainsofbusinessorprofession",— (a)inthecaseofanyassessee— (i)anyinterest(notbeinginterestonaloanissuedforpublicsubscriptionbefore the1stdayofApril,1938),royalty,feesfortechnicalservicesorothersum chargeableunderthisAct,whichispayable,— (A)outsideIndia;or (B)inIndiatoanon-resident,notbeingacompanyortoaforeigncompany,on whichtaxisdeductibleatsourceunderChapterXVIIBandsuchtaxhasnotbeen ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 16 deductedor,afterdeduction,hasnotbeenpaidonorbeforetheduedate specifiedinsub-section(1)ofsection139:Providedthatwhereinrespectofany suchsum,taxhasbeendeductedinanysubsequentyear,orhasbeendeducted duringthepreviousyearbutpaidaftertheduedatespecifiedinsub-section(1)of section139,suchsumshallbeallowedasadeductionincomputingtheincomeof thepreviousyearinwhichsuchtaxhasbeenpaid. Explanation:Forthepurposesofthissub-clause,— A"royalty"shallhavethesamemeaningasinExplanation2toclause(vi)of sub-section(1)ofsection9: (B)"feesfortechnicalservices"shallhavethesamemeaningasinExplanation2 toclause(vii)ofsub-section(1)ofsection9: (ia)thirtypercentofanysumpayabletoaresident,onwhichtaxisdeductibleat sourceunderChapterXVIIBandsuchtaxhasnotbeendeductedor,after deduction,hasnotbeenpaidonorbeforetheduedatespecifiedinsub-section(1) ofsection139. Providedthatwhereinrespectofanysuchsum,taxhasbeendeductedinany subsequentyear,orhasbeendeductedduringthepreviousyearbutpaidafterthe duedatespecifiedinsubsection(1)ofsection139thirtypercentof,suchsum shallbeallowedasadeductionincomputingtheincomeofthepreviousyearin whichsuchtaxhasbeenpaid. Providedfurtherthatwhereanassesseefailstodeductthewholeoranypartof thetaxinaccordancewiththeprovisionsofChapterXVII-Bonanysuchsumbut isnotdeemedtobeanassesseeindefaultunderthefirstprovisotosub-section(1) ofsection201,then,forthepurposeofthissub-clause,itshallbedeemedthat theassesseehasdeductedandpaidthetaxonsuchsumonthedateoffurnishing ofreturnofincomebytheresidentpayeereferredtointhesaidproviso.' (ii)Explanation2toSection195(1)oftheAct:— 'Section195-Othersums:(1)Anypersonresponsibleforpayingtoanon-resident notbeingacompany,ortoaforeigncompany,anyinterest(notbeinginterest referredtoinsection194LBorsection194LC)orsection194LDoranyothersum chargeableundertheprovisionsofthisAct(notbeingincomechargeableunder thehead"Salaries")shall,atthetimeofcreditofsuchincometotheaccountof thepayeeoratthetimeofpaymentthereofincashorbytheissueofachequeor draftorbyanyothermode,whicheverisearlier,deductincome-taxthereonatthe ratesinforce: ProvidedthatinthecaseofinterestpayablebytheGovernmentorapublicsector bankwithinthemeaningofclause(23D)ofsection10orapublicfinancial institutionwithinthemeaningofthatclause,deductionoftaxshallbemadeonly atthetimeofpaymentthereofincashorbytheissueofachequeordraftorby anyothermode: Providedfurtherthatnosuchdeductionshallbemadeinrespectofanydividends referredtoinsection115-O. [Explanation1]:............... [Explanation2.-Fortheremovalofdoubts,itisherebyclarifiedthattheobligation tocomplywithsub-section(1)andtomakedeductionthereunderappliesandshall bedeemedtohavealwaysappliedandextendsandshallbedeemedtohave alwaysextendedtoallpersons,residentornon-resident,whetherornotthenon- residentpersonhas— (i)aresidenceorplaceofbusinessorbusinessconnectioninIndia;or (ii)anyotherpresenceinanymannerwhatsoeverinIndia." Explanation4toSection9(1)(i)oftheAct:— "Section9-IncomedeemedtoaccrueorariseinIndia— ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 17 (1)ThefollowingincomesshallbedeemedtoaccrueorariseinIndia:(i)all incomeaccruingorarising,whetherdirectlyorindirectly,throughorfromany businessconnectioninIndia,orthroughorfromanypropertyinIndia,orthrough orfromanyassetorsourceofincomeinIndia,orthroughthetransferofacapital assetsituateinIndia.****** Explanation4.-Fortheremovalofdoubts,itisherebyclarifiedthattheexpression "through"shallmeanandincludeandshallbedeemedtohavealwaysmeantand included''bymeansof","inconsequenceof"or"byreasonof".' 7.1Section40oftheActspellsoutwhatamountsarenotdeductablefromthe incomechargedtotaxundertheprofitsandgainsofbusinessorprofession. 7.2Section40(a)(i)oftheActdealswithinterestandothersumspayableoutside India.Theprovisionsofthissub-clausemadeapplicabletointeresthavebeen extendedtopaymentofroyalty,technicalfeesandanyothersumchargeable underthisAct.Thesectionprovidesthatthesumscoveredbythesub-clause, whicharechargeableundertheActandarepayableoutsideIndia,shallnotbe allowedasanexpendituretotheassessee,unlesstaxispaidthereonoris deductedtherefromunderChapterXVII-BoftheAct. 7.3Section195(1)oftheActdealswithdeductionoftaxfrompaymenttonon- residentsandforeigncompanies.Section195(1)oftheActcomesintoplayata stagewherethepayer,whoisenjoinedtodeductthetax,eithercreditsuch incometotheaccountofthepayeeormakepaymentthereof,whetherincash/ cheque/draftoranyothermode.Thetaxabilityofsuchamountinthehandsof thepayeeoroccasioningofthetaxableeventisalienforthepurposeofSection 195(1)oftheAct. 7.4Section195(2)isanenablingprovision,enablinganassesseetofilean applicationbeforetheAssessingOfficertodeterminetheappropriateproportionof thesumchargeableanduponsuchdetermination,thetaxhastobededucted underSection195(1)oftheAct.Thepaymentismadecreditedtotheaccountof thepayee. 8.Thequestionnowis,whethertheassesseeoughttohavedeductedtaxat sourceascontemplatedunderSection195oftheAct,whentheassesseepaid commissiontoforeignagent. 9.ThisquestionhasbeenansweredbytheHon'bleSupremeCourt,inthecaseof G.E.IndiaTechnologyCentre(P.)Ltd.(supra),inwhich,itisverycategoricallyheld thatthetaxdeductedatsourceobligationsunderSection195(1)oftheActarises, onlyifthepaymentischargeabletotaxinthehandsofthenon-residentrecipient. 9.1Therefore,merelybecauseapersonhasnotdeductedtaxatsourceora remittanceabroad,itcannotbeinferredthatthepersonmakingtheremittance, namely,theassessee,intheinstantcase,hascommittedadefaultindischarging histaxwithholdingobligationsbecausesuchobligationscomeintoexistenceonly whentherecipienthasataxliabilityinIndia. 9.2Theunderlyingprincipleisthat,thetaxwithholdingliabilityofthepayeris inherentlyavicariousliabilityonbehalfofthereceipientandtherefore,whenthe recipient/foreignagentdoesnothavetheprimaryliabilitytobetaxedinrespect ofincomeembeddedinthereceipt,thevicariousliabilityofthepayertodeduct taxdoesnotarise.Thisvicarioustaxwithholdingliabilitycannotbeinvoked,unless primarytaxliabilityoftherecipent/foreignagentisestablished.Inthiscase,the primarytaxliabilityoftheforeignagentisnotestablished.Therefore,thevicarious liabilityonthepartoftheassesseetodeductthetaxatsourcedoesnotexist. 10.Further,justbecause,thepayer/assesseehasnotobtainedaspecified declarationfromtheRevenueAuthoritiestotheeffectthattherecipentisnot liabletobetaxedinIndia,inrespectoftheincomeembeddedintheparticular payment,theAssessingOfficercannotproceedonthebasisthatthepayerhasan ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 18 obligationtodeducttaxatsource.Hestillhastodemonstrateandestablishthat thepayeehasataxliabilityinrespectoftheincomeembeddedintheimpugned payment. 11.Intheinstantcase,itisseen,admittedlythatthenonresidentagentswere onlyprocuringordersabroadandfollowinguppaymentswithbuyers.Noother servicesarerenderedotherthantheabove.Sourcingordersabroad,forwhich paymentshavebeenmadedirectlytothenon-residentsabroad,doesnotinvolve anytechnicalknowledgeorassistanceintechnicaloperationsorothersupportin respectofanyothertechnicalmatters.Italsodoesnotrequireanycontributionof technicalknowledge,experience,expertise,skillortechnicalknow-howofthe processesinvolvedorconsistinthedevelopmentandtransferofatechnicalplan ordesign.Thepartiesmerelysourcetheprospectivebuyersforeffectingsalesby theassessee,andisanalogoustoalandorahouse/realestateagent/broker, whowillbeinvolvedinmerelyidentifyingtherightpropertyfortheprospective buyer/sellerandoncehecompletesthedeal,hegetsthecommission.Thus,by nostretchofimagination,itcannotbesaidthatthetransactionpartakesthe characterof"feesfortechnicalservices"asexplainedinthecontextofSection 9(1)(vii)oftheAct. 12.Asthenon-residentswerenotprovidinganytechnicalservicestotheassessee, asheldaboveandasheldbytheCommissionerofIncomeTax(Appeals),the commissionpaymentmadetothemdoesnotfallintothecategoryof"feesof technicalservices"andtherefore,explanation(2)toSection9(1)(vii)oftheAct,as invokedbytheAssessingOfficer,hasnoapplicationtothefactsoftheassessee's case. 13.Inthiscase,thecommissionpaymentstothenonresidentagentsarenot taxableinIndia,astheagentsareremainingoutside,servicesarerendered abroadandpaymentsarealsomadeabroad. 14.ThecontentionofthelearnedcounselfortheRevenueisthattheTribunal oughtnottohaverelieduponthedecisionG.E.IndiaTechnology'scase,cited supra,inviewofinsertionofExplanation4toSection9(1)(i)oftheActwith correspondingintroductionofExplanation2toSection195(1)oftheAct,bothby theFinanceAct,2012,withretrospectiveeffectfrom01.04.1962. 15.Theissueraisedinthiscasehasbeenthesubjectmatterofthedecision,in therecentcase,CITv.KikaniExports(P.)Ltd.[2014]369ITR96/[2015]232 Taxman255/49taxmann.com601(Mad.)whereinthecontentionoftheRevenue hasbeenrejectedandassesseehasbeenupheldandtherelevantobservation readsasunder:— '...theservicesrenderedbythenon-residentagentcouldatbestbecalledasa serviceforcompletionoftheexportcommitmentandwouldnotfallwithinthe definitionof"feesfortechnicalservices"and,therefore,section9wasnot applicableand,consequently,section195didnotcomeintoplay.Therefore,the disallowancemadebytheAssessingOfficertowardsexportcommissionpaidby theassesseetothenon-residentwasrightlydeleted.' 16.WhenthetransactiondoesnotatracttheprovisionsofSection9oftheAct, thenthereisnoquestionofapplyingExplanation4toSection9oftheAct. Therefore,theRevenuehasnocaseandtheTaxCaseAppealisliabletobe dismissed. 6.Clearly,therefore,thepaymentofcommissioninthehandsofthenon-residentagent, aslongassuchanagentcarriesoutitsactivitiesoutsideIndia,doesnotresultintaxability inthehandsoftheagentinIndia.Accordingly,theprovisionsofSection195,and, therefore,40(a)(i),donotcomeintoplay.LearnedCIT(A)wasthusquitejustifiedin grantingtheimpugnedrelief.Weupholdhisorderonthisissueanddeclinetointerferein thematter. ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 19 7.Groundno.1isthusdismissed. 14.1Theissueonhandissquarelycoveredbytheorderofthecoordinatebench inowncaseoftheassesseeasdiscussedabove.Beforeus,nomaterialhas beenplacedonrecordbytheRevenuetodemonstratethatthedecisionofthe Tribunalasdiscussedabovehasbeensetaside/stayedoroverruledbythe HigherJudicialAuthorities.Beforeus,Revenuehasnotplacedanymaterialon recordpointingoutanydistinguishingfeatureinthefactsofthecasefortheyear underconsiderationandthatofearlieryearsnorhasplacedanycontrarybinding decisioninitssupport.Therefore,respectfullyfollowingthesame,weupholdthe findingofthelearnedCIT-A.Hence,thegroundofappealraisedbytheRevenue isherebydismissed. 15.ThenextissueraisedbytheRevenueisthatthelearnedCIT-Aerredin acceptingtheadditionalclaimoftheassesseeundersection35(2AB)oftheActfor Rs.1,22,29,000/-onaccountofclinicaltrialcarriedoutoutsideapprovedfacility. 16.Theassesseeintheoriginalreturnofincomeintheyearunder considerationhasshownexpenditureonscientificresearchanddevelopmentfor Rs.2,45,40,866/-only,consistingofcapitalexpenditureofRs.62,97,431/-and revenueexpenditureofRs.1,82,43,435/-only.Theassesseeaccordinglyclaimed weighteddeductionundersection35(2AB)oftheActonthesame@200%atRs. 4,90,81,732/-only.Subsequentlytheassesseereviseditsreturnofincome whereinshownexpenditureonscientificresearchanddevelopmentforRs. 3,57,93,182/-,consistingofcapitalexpenditureofRs.62,97,431/-andrevenue expenditureofRs.2,94,95,751/-only.Accordingly,theassesseeclaimedweighted deductionundersection35(2AB)oftheActonthesame@200%forRs. 7,15,86,364/-only. ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 20 16.1However,theAOfromForm3CLandDSIRreportobservedthatthe inhouseexpenditureonscientificresearchanddevelopmentwereofRs.235.64 lakhonly.Thus,aquestionwasraisedtotheassesseetojustifytheclaimmade byit. 16.2Theassesseeexplainedthattherewerecertainexpendituresbeingproduct developmentexpenditure,patentregistrationoutsideIndiaandgeneralcharges whichwereincurredoutsideIndiaandwereeligibleexpendituresbutdueto inadvertentmistakethesameremainedtobedebitedintheprofitandloss account.Theassesseefurtherexplainedthattheproductdevelopment expenditureswereinrelationtobio-equivalentstudyandclinicaltrialwhichin accordancewiththerecentorderofAhmadabadTribunalincaseofCadila HealthcarePvt.Ltd.bearingITANo.2909/Ahd/2011areallowableexpenditure undersection35(2AB)oftheAct.Likewise,thepatentregistrationexpense incurredoutsideIndiahasalreadybeenallowedinitsowncaseforA.Y.2012-13 bytheAOundersection37(1)oftheAct. 16.3However,theAOrejectedtheexplanationoftheassesseebyobserving thattheweighteddeductionundersection35(2AB)oftheActisallowableonly withrespecttoexpenditureincurredonscientificresearchinhousefacility approvedbyDSIR.AspertheForm3CLandDSIRreport,in-houseexpenditureon scientificresearchwasofRs.235.64lakhonlyonwhichassesseeiseligiblefor weighteddeductionofRs.4,71,28,000/-onlywhereasassesseeclaimedexcess deductionofRs.2,44,58,364/-only.TheAOfurtherheldthattheexpenditure incurredonpatentregistration,generalchargesandproductdevelopmentare eligiblefordeductionundersection37(1)oftheAct.Thus,theAOaccordingly madeanadditionofRs.1,22,29,000/-tothetotalincomeoftheassessee. 17.AggrievedassesseepreferredanappealbeforethelearnedCIT-A,whoby followingtheorderofhispredecessorintheowncaseoftheassesseeforAY ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 21 2011-12and2012-13andfollowingthejudgmentofHon’bleGujaratHoghCourt incaseofCITvs.CadilaHealthcareLtdreportedin31taxmann.com300,held thattheexpenditureincurredonscientificresearchoutsidethein-houseapproved facilityareeligibleforweighteddeductionundersection35(2AB)oftheAct. 18.BeingaggrievedbytheorderofthelearnedCIT-A,theRevenueisin appealbeforeus. 18.1ThelearnedDRbeforeusreiteratedthefindingcontainedinthe assessmentorderbyplacinghisreliancetherein. 18.2Ontheotherhand,learnedARbeforeussubmittedthatissuehasbeen coveredinfavouroftheassesseebytheorderofthistribunalinitsowncasefor theA.Y.2010-11inITANo.1325/Ahd/2017. 19.WehaveheardtheRivalcontentionofboththepartiesandperusedthe materialavailableonrecord.Attheoutset,wefindthattheissueofallowabilityof weighteddeductionunder35(2AB)oftheActonclinicaltrialexpensesincurred outsideapprovedfacilitycamebeforethistribunalinowncaseoftheassesseein ITANo.1325/Ahd/2017withCONo.31/Ahd/2018correspondingtoA.Y.2010-11 wherethecoordinatebenchvideorderdated04-03-2020decidedtheissueinthe favourtheassesseebyobservingasunder: 10.Wehaveheardtherivalpartiesandhavegonethroughthematerialplacedonrecord. 11.WefindthatthefirstissueraisedbyRevenueisregardingthedeductionunder s.35(2AB)oftheActwhichtheAOhaddisallowedastheassesseehadcarriedoutcertain expendituresoutsidethein-houseR&Dcenter.ThelearnedCIT(A)hashoweverallowed relieftotheassesseekeepinginviewthejudgmentofHon’bleGujaratHighCourtinthe caseofCadilaHealthcareLtd.(supra)wheretheHon’bleCourthadheldthatclinicaltrials conductedoutsideapprovedfacilitywereeligibleforexemptionunders.35(2AB)oftheAct. ThejudgmentofHon’bleGujaratHighCourtasreproducedbytheCIT(A)alongwithhis findingisreproducedbelow: “5.3Asthefactsandcircumstancesofthepresentcaaseoftheappellantare coveredbythejudgmentofHon’bleHighCourtofGujaratinthecaseofCadila healthcareLtd.(supra),therelevantportionoftheorderofHon’bleHighCourtis quotedasunder: "HELD ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 22 -Section35(2AB)providesfordeductiontoacompanyengagedin businessofbiotechnologyorinthebusinessofmanufactureorproduction ofanyarticleorthingnotifiedbytheBoardtowardsexpenditureof scientificresearchdevelopmentfacilityapprovedbytheprescribed authority.[Para14] -TheExplanationtosection35(2AB)(1)providesthatforthepurposeof saidclause,i.e.clause(I)ofsection35(2AD),expenditureonscientific researchinrelationtodrugsandpharmaceuticalshallincludeexpenditure incurredonclinicaldrugtrial,obtainingapprovalfromanyregulatory authorityundertheCentralStateorProvincialActandfilinganapplication forapatentunderthePatentsAct,1970.[Para15] -Thewholeideaappearstobetogiveencouragementtoscientific research.Bytheverynatureofthings,clinicaltrialsmaynotalwaysbe possibletobeconductedinclosedlaboratoryorinsimilarin-housefacility providedbytheassesseeandapprovedbytheprescribedauthority. Beforeapharmaceuticaldrugcouldheputinthemarket,theregulatory authoritieswouldinsistonstricttestsandresearchonallpossibleaspects, suchaspossiblereactions,effectofthedrugandsoon. -Extensiveclinicaltrials,therefore,wouldbeanintrinsicpartof developmentofanysuchnewpharmaceuticaldrug.Itcannotbeimagined thatsuchclinicaltrialcanbecarriedoutonlyinthelaboratoryofthe pharmaceuticalcompany.Ifonegivessuchrestrictedmeaningtotheterm expenditureincurredoninhouseresearchanddevelopmentfacility,one wouldononehandbecompletelydilutingthedeductionenvisagedunder sub-section(2AB)ofsection35andontheother,makingtheExplanation quitemeaningless. -Asnoticedearlierthatforthepurposeofthesaidclauseinrelationto drugandpharmaceutical,theexpenditureonscientificresearchhaslo includetheexpenditureincurredonclinicaltrialsinobtainingapprovals fromanyregulatoryauthorityorinfilinganapplicationforgrantofpatent. Theactivitiesofobtainingapprovaloftheauthorityandfilingofan applicationforpatentnecessarilyshallhavetobeoutsidetheinhouse researchfacility.Thustherestrictedmeaningsuggestedbytherevenue wouldcompletelymaketheExplanationquitemeaningless.Forthe scientificresearchinrelationtodrugsandpharmaceuticalmadeforits ownpeculiarrequirements,theLegislatureappearstohaveaddedsuchan Explanation.[Para16] -Therefore,theTribunalcommittednoerror.Merelybecausethe prescribedauthoritysegregatedtheexpenditureintotwoparts,namely, thoseincurredwithinthein-housefacilityandthosewereincurredoutside, byitselfwouldnotbe,sufficientlodenythebenefittotheassesseeunder section35(2AB).Itisnotasifthatthesaidauthoritywasaddressingthe issuefordeductionundersection35(2AB)inrelationtothequestionon hand.Thecertificateissuedwasonlyforthepurposeoflistingthetotal expenditureundertheRules.Therefore,noquestionoflawarises." 5.4InviewoftheabovediscussionandtheratiolaiddownbytheHon’bleHigh CourtofGujarat,theAOisdirectedtoallowtheweighteddeductionof Rs.74,50,738/-incurredbytheappellantoutsidetheapprovedfacility.Accordingly, GroundNo.1oftheappealisallowed.” 12.TheRevenuewasnotabletocontrovertthefindingsoflearnedCIT(A)whohadrelied onthejudgmentofGujaratHighCourtandallowedrelieftotheassessee.Therefore, findingnoinfirmityintheorderoflearnedCIT(A),groundno.1ofRevenue’sappealis dismissed. ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 23 19.1Theissueonhandissquarelycoveredbytheorderofthecoordinatebench intheowncaseoftheassesseeinitsfavour.Beforeus,nomaterialhasbeen placedonrecordbytheRevenuetodemonstratethatthedecisionoftheTribunal asdiscussedabovehasbeensetaside/stayedoroverruledbythehigherJudicial Authorities.Beforeus,Revenuehasnotplacedanymaterialonitsrecordpointing outanydistinguishingfeatureinthefactsofthecasefortheyearunder considerationandthatofearlieryearnorhasplacedanycontrarybindingdecision initssupport.Therefore,respectfullyfollowingthesame,weupholdthefindingof thelearnedCIT-A.Hence,thegroundofappealraisedbytheRevenueishereby dismissed. 20.ThenextissueraisedbytheRevenueisthatthelearnedCIT-Aerredin allowingthedeductionundersection80ICoftheActforRs.37,44,802/-only. 21.Duringtheyearunderreference,theassesseehastwomanufacturingunits locatedatTholandDehradun.TheDehradununitwaseligibleunitfordeduction undersection80ICoftheAct.TheAOfoundthattheassesseewasclaiming deductionundersection35(2AB)onaccountofexpenditureincurredwithrespect toresearchanddevelopmentactivity.However,noamountofresearchand developmentexpenditurewasallocatedtotheDehradununitwhilecomputing deductionundersection80ICoftheAct.Onquestion,theassesseesubmittedthat researchanddevelopmentexpenditureswereneitherattributabletoTholunitnor toDehradununit.Assuchtheexpenditures,constituteseparateunitbeingR&D unitandclaimedatbusinesslevelbutonlyforpresentationpurpose,thesamehas beenshowninHOandTholUnit.Theassesseealsosubmittedthattheresearch anddevelopmentactivitiesareconnectedtothefutureproductstobe manufacturedbutinwhichunitthesamewouldbemanufacturedisnotknown. Therefore,forthisreasonalsoresearchanddevelopmentexpenditurecannotbe ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 24 attributedtoanyofthemanufacturingunits,andaccordingly,thesameare allowableseparatelyatbusinesslevelandnotatindividualunitlevel. 21.1However,theAOheldthatresearchanddevelopmentactivitiesarerelated toseveralproductswhicharealreadyinthemanufacturingprocessatboththe unitsi.e.TholandDehradun.Thefutureproductbasedonresearchand developmentwillalsobeproducedatboththeunits.Therefore,itisnecessaryto allocatetheexpendituretoboththemanufacturingunits.TheAOalsofoundthat thecontentionoftheassesseewasonlyacceptabletotheextentexpenditure incurredinrelationtodiscoveryofnewdrugs.However,neithersuchdetailwas furnished,norcontentionraisedbytheassessee.Accordingly,theAOattributed anamountof37,44,802/-totheDehradununitwhichhasresultedinareduction intheprofitofDeharadununitandincreasetheprofitofTholunitbyanamount ofRs.37,44,802/-only. 22.AggrievedassesseepreferredtoappealbeforelearnedCIT-Awhoby followingtheorderofhispredecessorinowncaseoftheassesseeforA.Y.2012- 13heldthattheexpenditureincurredonscientificresearchconstitutesperateunit ofR&Dandthedeductionundersection35(2AB)oftheActisallowableat businesslevelandnottheunitlevel. 23.BeingaggrievedbytheorderofthelearnedCIT-A,theRevenueisin appealbeforeus. 23.1ThelearnedDRbeforeusreiteratedthefindingcontainedinthe assessmentorderbyplacinghisreliancetherein. 23.2Ontheotherhand,thelearnedARbeforeusreiteratedthefinding containedintheCIT-Aorderbyplacinghisreliancetherein. ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 25 24.WehaveheardtheRivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wefindthattheissueofexpenditure incurredonscientificresearchconstituteseparateunitanddeductionunder section35(2AB)oftheActisallowableatbusinesslevelandnotmanufacturing unitlevelcamebeforethistribunalinowncaseoftheassesseeinrevenue’s appealinITANo.939&1129/Ahd/2019correspondingtoA.Y.2011-12and2012- 13wherethecoordinatebenchvideorderdated29-07-2022decidedtheissuein favouroftheassesseebyobservingasunder: 22.Wehaveheardtherivalcontentionsofboththepartiesandperusedthematerials availableonrecord.Thecontroversyinthepresentcaserelateswhethertheresearchand developmentexpensesincurredbytheassesseeshouldbeallocatedtoeligibleunitwhile workingoutthedeductionundersection80-ICoftheAct.Thisquestionhasbeen answeredbythejudgmentoftheHon’bleGujaratHighCourtinthecaseoftheCITVs. TorrentPharmaceuticalsLtd.reportedin88taxmann.com530whereinitwasheldthatthe RandDexpensesshouldnotbeallocatedtotheunitseligiblefordeductionundersection 80-IAoftheAct.Therelevantextractofthejudgmentisreproducedasunder: 8.1Itisnotindisputethatresearchcentreisanindependentcentreandthatits mainobjectistoconductresearchforthebusinessoftheassessee.Theresearch centre,therefore,inouropinion,isnotdirectlylinkedwiththeeligibleundertaking. Thus,forthepurposeofcomputingdeductionu/s.80HHand80I,profitfrom eligibleundertakingistobecomputedonthebasisofgrossincomebyreducing expenditurewhichhasbeenincurredfortheeligibleundertakingoutofthegross incomederivedfromtheindustrialundertaking.Inviewoftheaforesaid,question no.(A)isansweredinfavouroftheassesseeandagainsttheRevenue. 22.1Inadditiontotheabove,wealsonotethattheRevenueintheowncaseofthe assesseefortheassessmentyear2010-11intheassessmentframedundersection143(3) oftheActhasnotallocatedtheresearchanddevelopmentexpensestotheeligibleunitfor thepurposeofcomputingthedeductionundersection80-ICoftheAct.Admittedly,there isnochangeinthefactsandcircumstancesoftheyearunderconsiderationvizavizthe earlierassessmentyeari.e.2010-11,thusweareoftheviewthattheprinciplesof consistencyshouldbeadopted. 22.2WealsodrawsupportandguidancefromthejudgmentofHon’bleDelhiHighCourtin thecaseofCITVs.MuthootM.GeorgeBankersreportedin159taxman22whereinitwas heldasunder: “7.ThisCourthastimeandagaintakentheviewthattheremustbesome consistencyinthestandoftherevenueandtheycannotpickandchoosecasesin whichtofileanappealinrespectofsomeassesseeandnottofileanappealin respectofidenticalordersinrespectofanotherassessee.Thisviewhasalsobeen expressedbytheSupremeCourtonseveraloccasionsanddespitethatwefind thattherevenueinsistsupontakingsucharbitrarydecisionsforwhichthereisno iotaofjustification.Iftherevenueputsforwardsomereasonforitsdifferential treatment,thatwill,ofcourse,beconsideredonmeritsbutinthisparticularcase thereisnosuchreasonexcepttosaythereisnoresjudicataorestoppel.Therule ofconsistencymustbefollowedbytherevenue,whichtheyhavefailedtodoin thisparticularcase.” 23.3Inviewoftheabovefactsandaftertakingintoconsiderationalltherelevantdetails, weholdthattheresearchanddevelopmentexpensesarenottobeallocatedtotheeligible ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 26 undertakingwhilecalculatingthedeductionoftheassesseeundertheprovisionsofsection 80ICoftheAct.Hence,wedonotfindanyinfirmityintheorderofthelearnedCIT-A. 24.1Theissueonhandissquarelycoveredbytheorderofthecoordinatebench inowncaseoftheassesseeinitsfavour.Beforeus,nomaterialhasbeen placedonrecordbytheRevenuetodemonstratethatthedecisionoftheTribunal asdiscussedabovehasbeensetaside/stayedoroverruledbythehigherJudicial Authorities.Beforeus,Revenuehasnotplacedanymaterialonrecordpointing outanydistinguishingfeatureinthefactsofthecasefortheyearunder considerationandthatofearlieryearsnorhasplacedanycontrarybinding decisioninitssupport.Therefore,respectfullyfollowingthesameweupholdthe findingofthelearnedCIT-A.Hence,thegroundofappealraisedbytheRevenue isherebydismissed. 25.Intheresult,theappealoftheRevenueisherebypartlyallowedforthe statisticalpurposes. ComingtoCONo.71/AHD/2020in(ITANo.107/AHD/2020)bythe assesseeforA.Y.2013-14. 26.Attheoutset,wenotethattheassesseeintheCOfiledbyithassupported theorderoftheLd.CIT-A.Accordingly,weholdthatnoseparateadjudicationis requiredfortheCOfiledbytheassessee.Hence,wedismissthesameas Infructuous. 27.Intheresult,theCOfiledbytheassesseeisdismissedasinfructuous. ComingtoITANo.78/AHD/2020bytheassesseeforA.Y.2013-14 28.Theassesseehasraisedthefollowinggroundsofappeal: ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 27 1.Thedisallowanceofu/s.37(1)oftheActofRs.2,89,18,509/-confirmedbytheLd.CIT(A) maykindlybedeleted. 2.ThedisallowanceofRs.1,06,925/-onaccountofbusinessconventionexpensesconfirmed bytheLd.CIT(A)maykindlybedeleted. 3.Theadditionundersection2(24)(x)r.w.s36(1)oftheActofRs.1,73,538/-onaccountof latedepositofemployeescontributiontoESICmaykindlybedeleted. 4.Suchandfurtherreliefasthenatureandcircumstancesofthecasemayjustify 29.Attheoutsetwenotethattheissuesraisedbytheassesseeinitsgrounds ofappealNos.1&2havebeendealtwithRevenue’sappealinITANo. 107/AHD/2020.Theissueshavebeendealtwithindetailvideparagraphno.5of thisorderwherewehavedecidedtheissueinfavoroftheassesseeforstatistical purposes.Fordetaileddiscussion,pleaserefertotherelevantparagraphofthis order.Hence,thegroundsofappealsfiledbytheassesseeareherebyallowedfor statisticalpurposes. 30.ThenextissueraisedbytheassesseeisthatthelearnedCIT-Aerredin confirmingtheadditionofRs.1,73,538/-onaccountoflatedepositofemployees’ contributiontowardsPF/ESIC. 31.ItwasfoundbytheAOduringtheassessmentproceedingsthatthe assesseeduringtheyeardepositedemployees’contributiontowardsPF/ESICofRs. 1,73,538/-intherelevantaccountaftertheduedateasprovidedunderrespective Act.Therefore,theAOaddedthesametothetotalincomeoftheassesseeby invokingtheprovisionsofsection36(1)(va)readwithsection2(24)(x)oftheAct. TheimpugnedadditionwassubsequentlyconfirmedbythelearnedCIT-A. 32.BeingaggrievedbytheorderofthelearnedCIT-A,theassesseeinis appealbeforeus. ITAnos.107/AHD/2020 WithC.O.No.71/Ahd/2020 ITANo.78/Ahd/2020 Asstt.Year2013-14 28 32.1Theld.ARbeforeusdidnotdisputethedisallowancetobemadeon accountofdelayeddepositofemployee’scontributiontowardsPF/ESIC. 32.2Onthecontrary,theld.DRvehementlysupportedtheorderofthe authoritiesbelow. 33.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutsetwenotethattheissueonhandis squarelycoveredagainsttheassesseebytheorderoftheHon’bleJurisdictional HighCourtofGujaratincaseofCITvs.GujaratStateRoadTransportCorporation IndiaLimitedreportedin366ITR170.TheviewoftheHon’bleCourtwasalso affirmedbytheHon’bleSupremeCourtinthecaseofCheckmateServicesPvt.Ltd. VsCITreportedin143taxmann.com178.Accordingly,wedon’tfindanyinfirmity intheorderoftheauthoritiesbelow.Hence,thegroundofappealoftheassessee isherebydismissed. 34.Intheresult,theappealfiledbytheassesseeisherebypartlyallowedfor statisticalpurposes. 35.InthecombinedResults,theappealoftheRevenueandtheassesseeare partlyallowedforstatisticalpurposeswhereasCOfiledbytheassesseeis dismissedbeinginfructuous. OrderpronouncedintheCourton13/09/2023atAhmedabad. Sd/-Sd/- (T.RSENTHILKUMAR)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated13/09/2023 Manish