Tejas Networks Limited, Bangalore V. ACIT, Bangalore

ITA 1080/BANG/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0657 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-11-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 14-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K R VASUDEVAN SHRI FARHAT
• Keywords: Non-deduction of tax; Revised return; Revenue expenditure
• Section: 133A; 148

Judgement Text

PAGE 1 OF 12 ITA NOS.1080 & 1081/BANG/2011 & 1042 & 1 043/BANG/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NOS.1080 & 1081/BANG/2011 (ASST. YEARS 2005-06 & 2006-07) M/S TEJAS NETWORKS LTD., NO.58, 1 ST MAIN ROAD, J P NAGAR, 3 RD PHASE, BANGALORE-78. PA NO. AABCT 1670 M VS THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE- 12(4), BANGALORE. (APPELLANT) (RESPONDENT) ITA NOS. 1042 & 1043/BANG/2011 (ASSESSMENT YEARS 2005-06 & 2006-07) (BY REVENUE) DATE OF HEARING : 06.02.2013 DATE OF PRONOUNCEMENT : 15.02.2013 APPELLANT BY : SHRI K R VASUDEVAN, ADVOCATE RESPONDENT BY : SHRI FARHAT HUSSAIN QURESHI, CIT -II OR DER PER GEORGE GEORGE K : THESE FOUR APPEALS INSTITUTED, AT THE INSTANCES O F THE REVENUE AS WELL AS THE ASSESSEE COMPANY, ARE DIRECTED AGAINS T THE IMPUGNED APPELLATE ORDERS OF THE LEARNED CIT(A)-III, BANGALORE, BOTH D ATED 23.8.2011. THE RELEVANT ASSESSMENT YEARS ARE 2005-06 AND 2006-07. PAGE 2 OF 12 ITA NOS.1080 & 1081/BANG/2011 & 1042 & 1 043/BANG/2011 2 I. ITA NOS.1042 & 1043 AYS 2005-06 & 06-07 BY THE REVENUE: 2. THE REVENUE HAS RAISED, IN ITS GROUNDS OF APPEA LS FOR BOTH THE AYS UNDER DISPUTE, FIVE GROUNDS IN AN IDENTICAL MAN NER. SINCE GROUND NOS.1, 4 & 5 BEING GENERAL IN NATURE, THEY HAVE BECOME INCONSEQUE NTIAL. THE REMAINING GROUNDS RELATE TO A SOLITARY ISSUE, NA MELY: THAT THE CIT(A) ERRED IN HOLDING THAT THE PRODUCT DEVELOPMENT EXPENSES OF RS.9,11,859/- (SIC) RS.9,11,85,931/- AND RS.9,83,76,929/- AS REVENUE EXPENDITURE FOR THE AYS 2005-06 AND 2006-07 RESPECTIVELY. II. ITA NOS.1080 & 1081 AYS 2005-06 & 06-07 BY THE ASSESSEE: A.Y. 2005-06 : 3. FOR THIS ASSESSMENT YEAR, THE ASSESSEE COMPANY HA S RAISED A SOLITARY GROUND IN AN ILLUSTRATIVE AND NARRATIVE MAN NER. HOWEVER, THE SUBSTANCE OF THE ISSUE IS THAT THE CIT(A) ERRED IN UPHOLDING THE STAND OF THE AO IN DISALLOWING RS.2,70,000/- ON ACCOUNT OF N ON-DEDUCTION OF TAX AT SOURCE. A.Y. 2006-07 : 3.1. LIKEWISE, FOR THIS AY ALSO, THE ASSESSEE COMP ANY HAS RAISED TWIN ISSUES ELABORATELY, HOWEVER, THE ESSENCE OF WHICH AR E REFORMULATED IN A CONCISE MANNER, AS UNDER: (I) THAT THE CIT(A) ERRED IN SUSTAINING THE DISALLOWANC E OF RS.3.54,960/- ON ACCOUNT OF NON-DEDUCTION OF TAX DEDUCTED AT SOURCE [TDS]; & (II) THAT THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF LEGAL AND PROFESSION EXPENSES OF RS.16,07,182/- FOR NON- DEDUCTION OF TDS. PAGE 3 OF 12 ITA NOS.1080 & 1081/BANG/2011 & 1042 & 1 043/BANG/2011 3 4. AS THE ISSUES RAISED BY BOTH THE PARTIES PERTAIN ING TO THE SAME ASSESSMENT YEARS, ALL THE APPEALS WERE HEARD, CONSID ERED TOGETHER AND DISPOSED OFF, FOR THE SAKE OF CONVENIENCE AND CLARI TY, IN THIS CONSOLIDATED ORDER. 5. WE SHALL NOW TAKE UP THE ISSUES RAISED BY THE RE VENUE FOR CONSIDERATION. I. ITA NOS.1042 & 1043 AYS 2005-06 & 06-07 BY THE REVENUE: A.YS. 2005-06 & 06-07 : 5.1. SINCE THE ISSUES RAISED BY THE REVENUE FOR BOT H THE ASSESSMENT YEARS BEING COMMON, THEY ARE TAKEN UP TOGETHER FOR CO NSIDERATION. BRIEFLY STATED, THE FACTS OF THE ISSUES ARE AS UNDER : 5.1.1. THE ASSESSEE COMPANY [THE ASSESSEE IN SHOR T] ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT, MANUFACTURING AND TRADING OF NET-WORKING EQUIPMENT, HAD FURNISHED ITS RETURN OF INCOME FOR T HE AY 2005-06, DECLARING A TOTAL LOSS OF RS.13,25,57,199/-. THE C ASE WAS REOPENED BY THE AO BY ISSUANCE OF A NOTICE U/S 148 OF THE ACT FOR IN COME ESCAPED ASSESSMENT. SUBSEQUENTLY, THE ASSESSEE HAD FILED A REVISED RETURN OF INCOME, DECLARING A TOTAL LOSS OF RS.12,82,42,556/- . 5.1.2. INITIALLY, THE ASSESSEES BUSINESS PREMISE W AS SUBJECTED TO A SURVEY U/S 133A OF THE ACT ON 7.2.2005. 5.1.3. DURING THE COURSE OF REASSESSMENT PROCEEDIN GS, THE AO NOTICED THAT THE ASSESSEE HAD DEBITED TOWARDS PRODUCT DEVEL OPMENT EXPENSES CONSISTING OF (I) DESIGN LAYOUT COMPONENTS AND PRO TOTYPES OF RS.5.71 CRORES, PAGE 4 OF 12 ITA NOS.1080 & 1081/BANG/2011 & 1042 & 1 043/BANG/2011 4 EMPLOYEE COST PRODUCT DEVELOPMENT OF RS.1.54 CRORE S AND EMPLOYEE COST STPI DIVISION OF RS.1.85 CRORES, AGGREGATING TO RS. 9,11,85,931/-. BEING QUERIED, IT WAS CONTENDED BY THE ASSESSEE THAT THE A BOVE EXPENDITURE WAS FOR THE PURPOSE OF DEVELOPING ENHANCED AND IMPROVIS ED VERSION OF OPTICAL TRANSMISSION TELECOM EQUIPMENTS AND, THUS, SHOULD B E REGARDED AS REVENUE IN NATURE. 5.1.4. REJECTING THE ASSESSEES CLAIM, THE AO HELD THAT THE EXPENSES TOWARDS PRODUCT DEVELOPMENT WERE IN THE NATURE OF E NDURING BENEFIT TO THE ASSESSEE AND, THUS, THE SAME WAS NOT REVENUE EXPEND ITURE. IT WAS ALSO THE CASE OF THE AO THAT THE ASSESSEE HAD NOT BEEN ABLE TO SUBSTANTIATE THAT THE PRODUCT CLAIMED TO HAVE BEEN DEVELOPED WAS READY FOR DEPLOYMENT AND, THUS, HE CONSIDERED THE SAME BEING WORK-IN-PROGRESS. A.Y. 2006-07 : 5.1.5. FOR THIS ASSESSMENT YEAR TOO, THE ASSESSEE HAD FURNI SHED ITS RETURN OF INCOME, ADMITTING A TOTAL LOSS OF RS.12,4 1,88,285/-. THIS ASSESSMENT YEAR ALSO, THE ASSESSEE HAD CLAIMED RS.9, 83,76,929/- TOWARDS PRODUCT DEVELOPMENT EXPENSES. BEING QUERIED, THE A SSESSEE HAD TAKEN THE SAME STAND WHICH IT HAD TAKEN FOR THE PRECEDING ASS ESSMENT YEAR. HOWEVER, THE AO TOOK A SIMILAR VIEW THAT THE EXPENDITURE BEI NG IN THE NATURE OF CONTINUOUS PROCESS TO DEVELOP AND IMPROVISE NEW PRO DUCTS CREATES VALUE ADDITION FOR THE PRODUCT WHICH WAS AN ENDURING BENE FIT AND, THUS, CAPITAL IN NATURE. PAGE 5 OF 12 ITA NOS.1080 & 1081/BANG/2011 & 1042 & 1 043/BANG/2011 5 6. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUES, AMO NG OTHERS, FOR BOTH THE AYS UNDER CONSIDERATION BEFORE THE LEARNED CIT(A). AFTER DUE CONSIDERATION OF THE ASSESSEES CONTENTIONS AND ALS O IN CONFORMITY WITH THE FINDINGS OF THE EARLIER BENCH OF THIS TRIBUNAL IN T HE ASSESSEES OWN CASE FOR THE AYS 2002-03, 2003-04 AND 2004-05 ON A SIMILAR I SSUE, THE CIT(A) HELD THAT THE PRODUCT DEVELOPED EXPENSES OF RS.9.11 CROR ES AND RS.9.83 CRORES FOR THE AYS 2005-06 AND 2006-07 RESPECTIVELY BE TREA TED AS REVENUE EXPENDITURE. 7. AGGRIEVED, THE REVENUE HAS COME UP WITH PRESENT APPEALS BEFORE US. DURING THE COURSE OF HEARING, IT WAS RE ITERATED ON BEHALF OF THE REVENUE THAT THE CIT (A) HAD GROSSLY ERRED IN HOLDIN G SUCH HUGE EXPENSES AS REVENUE WHICH HAVE BEEN INCURRED ON DEVELOPING IMPR OVISED VERSIONS OF OPTICAL TRANSMISSION TELECOM EQUIPMENTS YIELDING END URING BENEFIT TO THE ASSESSEE AND TRANSLATE INTO INTANGIBLE ASSET OF THE NATURE OF INTELLECTUAL PROPERTY FOR FUTURE EXPLOITATION. IT WAS, THEREFORE , PLEADED THAT THE FINDINGS OF THE CIT (A) REQUIRE TO BE REJECTED FOR BOTH THE AYS UNDER CONSIDERATION. 7.1. ON THE OTHER HAND, THE LEARNED AR HAD PLACED STRONG RELIANCE ON THE FINDINGS OF THE EARLIER BENCH OF THIS TRIBUN AL ON A SIMILAR ISSUE IN THE ASSESSEES OWN CASE FOR THE AYS 2002-03, 2003-04 AN D 2004-05. IT WAS, THEREFORE, PLEADED THERE WAS NO CASE FOR THE REVENU E AND THE ISSUE REQUIRES TO BE DECIDED IN FAVOUR OF THE ASSESSEE. PAGE 6 OF 12 ITA NOS.1080 & 1081/BANG/2011 & 1042 & 1 043/BANG/2011 6 7.2. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F EITHER PARTY, PERUSED THE RELEVANT CASE RECORDS. 7.2.1. IT IS AN UNDISPUTED FACT THAT THE EARLIER B ENCH OF THIS TRIBUNAL HAD, AFTER ANALYZING THE ISSUE IN DEPTH, TAKING COGN IZANCE OF THE RULINGS OF VARIOUS JUDICIARY ON A SIMILAR ISSUE AND ALSO FOR TH E DETAILED REASONS RECORDED THEREIN, OBSERVED AS UNDER: (ON PAGE 26) 19 IN THE INSTANT CASE, THE BENEFIT I S NOT DERIVED FOR A PERIOD OF MORE THAN FIVE YEARS. HENCE , IN THE INSTANT CASE, IT CANNOT BE SAID THAT THE BENEFI T IS OF ENDURING NATURE AND THE EXPENDITURE IS TO BE TREATE D AS CAPITAL. ACCORDINGLY, WE HOLD THAT THE EXPENDITURE ON PROTOTYPE DEVELOPMENT IS TO BE TREATED AS REVENUE AN D NOT AS CAPITAL. 7.2.2. IN CONFORMITY WITH THE FINDING OF THE CO-ORD INATE BENCH OF THIS TRIBUNAL (SUPRA), WE ARE OF THE CONSIDERED VIEW THA T THERE IS NO INFIRMITY IN THE REASONING OF THE CIT (A) FOR THE BOTH THE AYS U NDER REVIEW, WARRANTING OUR INTERVENTION. IT IS ORDERED ACCORDINGLY. 7.2.3. IN ESSENCE, THE REVENUES APPEALS FOR BOTH THE ASSESSMENT YEARS ARE DISMISSED. 8. WE SHALL NOW TAKE UP THE ASSESSEES APPEALS FOR ADJUDICATION. PAGE 7 OF 12 ITA NOS.1080 & 1081/BANG/2011 & 1042 & 1 043/BANG/2011 7 II. ITA NOS.1080 & 1081 AYS 2005-06 & 06-07 BY THE ASSESSEE: A.Y. 2005-06 : (I) DISALLOWANCE OF RS.2,70,000/-- BARTON GROUP LLC N RI PAYMENT: ON VERIFICATION OF THE DETAILS FU RNISHED, THE AO HAD NOTICED THAT THE ASSESSEE HAD DEBITED, AMONG OTHERS, A SUM OF RS .2,70,000/- TOWARDS BARTON GROUP LLC NRI PAYMENT FOR WHICH NO TAX WAS DEDUCTED AT SOURCE. ACCORDINGLY, THE AO HAD ADDED BACK THE SAME TO THE I NCOME OF THE ASSESSEE, AS THE ASSESSEE HAD FAILED TO SUBSTANTIAT E THE REASON FOR NON- DEDUCTION OF TDS. A.Y. 2006-07 : (II) DISALLOWANCE OF RS.3,54,960/- - DUBAI WORLD TR ADE CENTRE: WHILE EXAMINING THE BOOKS OF ACCOUNT OF THE ASSE SSEE, THE AO NOTICED THAT THE ASSESSEE HAD DEBITED RS.33.89 LAKH S TOWARDS ADVERTISEMENT AND PUBLICITY AND THAT AN AMOUNT OF RS .3,54,960/- WAS DEBITED TOWARDS DUBAI WORLD TRADE CENTRE, FOR WHICH , NO TDS HAS BEEN EFFECTED. (III) DISALLOWANCE OF RS.16,07,182/-: LIKEWISE, THE ASSESSEE HAD DEBITED RS.23,14,301/ - TOWARDS LEGAL AND PROFESSIONAL FEES. WHILE SCRUTINIZING THE BOOK S OF ACCOUNT OF THE ASSESSEE, THE AO NOTICED THAT A SUM OF RS.16.07 LAK HS HAS BEEN DEBITED TOWARDS M/S. BATTERY VENTURE- A NON-RESIDENT PAYMENT FOR WHICH, NO TDS HAS BEEN EFFECTED. PAGE 8 OF 12 ITA NOS.1080 & 1081/BANG/2011 & 1042 & 1 043/BANG/2011 8 8.1. THUS, THE AO WENT AHEAD IN DISALLOWING OF RS. 2.70 LAKHS AND RS.3.54 LAKHS AND RS.16.07 LAKHS FOR THE AYS 2005-0 6 AND 2006-07 RESPECTIVELY. 8.2. AGGRIEVED, THE ASSESSEE CARRIED THE ISSUES FO R BOTH THE AYS UNDER CONSIDERATION TO THE CIT(A) FOR CONSIDERATION . THE LEARNED CIT(A), AFTER PERUSAL OF THE SUBMISSIONS OF THE ASSESSEE AN D ALSO THE DOCUMENTARY EVIDENCES ADDUCED THEREIN, UPHELD THE ACTION OF THE ASSESSING OFFICER FOR THE IDENTICAL REASONING THAT I AM INCLINED TO AGREE WITH THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE APPELLANT SHOULD HAVE APPROACHED THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 1 95(2) OF THE ACT TO DETERMINE THE TAXABILITY. CONSIDERING THAT THE AP PELLANT DID NOT APPROACH THE ASSESSING OFFICER TO DETERMINE THE TAX ABILITY U/S 195(2) OF THE ACT, I UPHOLD THE ACTION OF THE ASSESSING OFFIC ER. [REFER: PARA 9.1 FOR AY.2005-06] IN RESPECT OF DISALLOWANCES OF BARTON GROUP LLC N RI PAYMENT OF RS.2,70 LAKHS [AY 2005-06] AND OF RS.3,54 ,960/- - DUBAI WORLD TRADE CENTRE [AY 2006-07]. 8.2.1. WITH REGARD TO THE DISALLOWANCE OF RS.16,07 ,182/- BEING PAYMENT MADE TO M/S. BATTERY VENTURES, MAURTITUS [FOR THE AY 2006-07], THE CIT (A) HAD MADE THE FOLLOWING OBSERVATIONS: 6.6..HOWEVER, I AM INCLINED TO AGREE WITH THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE APPE LLANT SHOULD HAVE APPROACHED THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 195(2) OF THE ACT TO DETERMIN E THE TAXABILITY. CONSIDERING THAT THE APPELLANT DID NOT APPROACH THE ASSESSING OFFICER TO DETERMINE THE TAXABILITY U/S 195(2) OF THE ACT, I UPHOLD THE ACTI ON OF PAGE 9 OF 12 ITA NOS.1080 & 1081/BANG/2011 & 1042 & 1 043/BANG/2011 9 THE ASSESSING OFFICER. FURTHER, THERE IS NO DISPUT E THAT SUCH PAYMENTS ARE SUBJECT MATTER OF TDS AS THE INCOM E HAS ACCRUED IN INDIA AND ALSO THE TAXABILITY OF THE SAME IN THE OTHER COUNTRY IS ALSO NOW KNOWN. THUS, IN EF FECT, IF THE CONTENTION OF THE APPELLANT IS ACCEPTED SUCH IN COME WILL NOT BE TAXED ANYWHERE. 9. AGGRIEVED, THE ASSESSEE HAS COME UP WITH THE PR ESENT APPEALS. DURING THE COURSE OF HEARING, THE LEARNED A R SUBMI TTED THAT THE CIT(A) HAD ERRED IN UPHOLDING THE ASSESSING OFFICERS CONT ENTIONS THAT MERELY BECAUSE THE APPLICATION U/S 195(2) OF THE ACT WAS N OT MADE TO THE AO, THE EXPENSES SHOULD BE DISALLOWED UNDER THE ACT. IN TH IS CONNECTION, THE LEARNED AR DREW THE ATTENTION OF THIS BENCH TO THE EFFECT THAT THE FIRST APPELLATE AUTHORITY HAD FAILED TO CONSIDER THE RULIN G OF THE HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE & OT HERS WHEREIN THE HONBLE COURT HELD THAT WHERE THE PAYMENT MADE BY THE RESIDENT TO THE NON-RESIDENT WAS AN AMOUNT WHICH WAS NOT CHARGEABLE TO TAX IN INDIA, THEN NO TAX IS DEDUCTIBLE AT SOURCE EVEN THOUGH THE ASSE SEE HAD NOT MADE AN APPLICATION. 9.1. FURTHER, WITH REGARD TO PAYMENT TO BATTERY VENT URES, MAUTRITIUS, THE LEARNED A R SUBMITTED THAT AMARCHAN D MANGALDAS & SURESH A SHROFF & COMPANY HAD EARNED INCOME FOR THE PROFESS IONAL SERVICES RENDERED BY THE FIRM TO BATTERY VENTURES (USA) AND, T HEREFORE, SUCH INCOME HAD ALREADY BEEN OFFERED FOR TAX BY AMARCHAND MANGALDAS & SURESH A SHROFF & CO., AND THAT THE AMOUNT REMITTED BY THE ASSESSEE TO BATTERY VENTURES (USA) WAS IN THE NATURE OF REIMBURSEMENT O F EXPENSES. TO SUBSTANTIATE HIS ASSERTION, THE LEARNED AR HAD PROD UCED A CERTIFICATE ISSUED PAGE 10 OF 12 ITA NOS.1080 & 1081/BANG/2011 & 1042 & 1 043/BANG/2011 10 BY A CHARTERED ACCOUNTANT TO THE EFFECT THAT THE EXP ENDITURE OF DUE DILIGENCE INCURRED BY THE ASSESSEE WAS IN THE NATUR E OF REIMBURSEMENT AND, THEREFORE, OUTSIDE THE PURVIEW OF INDIAN TAX LAWS. 9.2. IN CONCLUSION, THE LEARNED AR SUBMITTED THAT AS THESE PAYMENTS MADE BY THE ASSESSEE TO NON-RESIDENTS WERE OF THE AM OUNTS WHICH WERE NOT CHARGEABLE TO TAX IN INDIA, AND HENCE, NO TAXES WER E DEDUCTIBLE AT SOURCE EVEN THOUGH THE ASSESSEE HAD NOT MADE AN APPLICATIO N TO THAT EFFECT. 9.3. ON THE OTHER HAND, THE LEARNED DR STRONGLY SUP PORTED THE STAND OF THE AUTHORITIES BELOW IN DISALLOWING THE A SSESSEES CLAIMS. FURTHER, THE LEARNED DR SUBMITTED THAT SINCE THE ASSESSEE HA D FAILED TO APPROACH THE ASSESSING OFFICER UNDER THE PROVISIONS OF S. 195(2) OF THE ACT TO DETERMINE THE TAXABILITY ISSUE, AS HIGHLIGHTED BY THE CIT (A), THE AO WAS WITHIN HIS REALM TO DISALLOW THE ASSESSEES CLAIM FOR BOTH THE AYS UNDER DISPUTE WHICH HAS BEEN DULY SUSTAINED BY THE CIT(A). IT WAS, THER EFORE, PLEADED THAT THE FINDINGS OF THE CIT(A) REQUIRE TO BE SUSTAINED. 9.4. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS, PERUSED THE RELEVANT MATERIALS ON RECORDS AND ALSO A NOTE SUBMI TTED BY THE LEARNED AR DURING THE COURSE OF HEARING WHICH CONTAINED, AMONG OTHERS, A COPY OF THE CERTIFICATE OF A CHARTERED ACCOUNTANT. 9.4.1. ON A DECISIVE PERUSAL OF THE IMPUGNED ASSES SMENT ORDERS AS WELL AS THE FINDINGS OF THE LEARNED CIT(A) FOR BOTH THE ASSESSMENT YEARS UNDER DISPUTE, IT IS NOTICED THAT THERE WAS NO DETA ILED DISCUSSION EITHER BY THE AO OR BY THE CIT(A) WITH REGARD TO THE NATURE OF THOSE PAYMENTS AND PAGE 11 OF 12 ITA NOS.1080 & 1081/BANG/2011 & 1042 & 1 043/BANG/2011 11 AS TO WHETHER SUCH PAYMENTS WERE TAXABLE IN INDIA OR OTHERWISE. THE LEARNED AR, DURING THE COURSE OF HEARING, EXPLAINED THE NATURE OF PAYMENTS AND ASSERTED THAT THE AMOUNT PAID TO M/S BATTERY VEN TURE (USA) WAS ONLY REIMBURSEMENT OF EXPENSES. IT WAS SUBMITTED BY HIM THAT THE PAYMENTS MADE BY THE ASSESSEE TO THE NON-RESIDENTS WERE THE AMOUNTS WHICH WERE NOT CHARGEABLE TO TAX IN INDIA. THUS, IT WAS CONTENDED , THE ASSESSEE WAS NOT OBLIGED TO DEDUCT ANY TAX AT SOURCE. TO SUBSTANTIA TE ITS CLAIM, THE ASSESSEE HAD PLACED STRONG RELIANCE ON THE RULING OF THE HON BLE APEX COURT IN THE CASE OF GE INDIA TECHNOLOGY & OTHERS. THESE ASPECTS HAVE NOT BEEN CONSIDERED BY THE AO WHILE CONCLUDING THE ASSESSMENT S FOR BOTH THE AYS UNDER CONSIDERATION AND THE LEARNED CIT(A) FOLLOWED HIM SUIT WITHOUT ANALYZING THE ISSUES. 9.4.2. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCU MSTANCES OF THE ISSUE AS DELIBERATED UPON IN THE FORE-GOING PARAGRAPHS, W E ARE OF THE CONSIDERED VIEW THAT THIS ISSUE SHOULD BE REMANDED BACK ON THE FILES OF THE AO FOR A DETAILED VERIFICATION. ACCORDINGLY, THE MATTER IS R ESTORED TO THE FILES OF THE AO WITH A SPECIFIC DIRECTION TO LOOK INTO THE ISSUE AFRESH AND TO TAKE APPROPRIATE ACTION IN ACCORDANCE WITH THE PROVISION S OF THE ACT. WHILE DOING SO, THE AO SHALL KEEP IN VIEW THE RULING OF THE HON BLE SUPREME COURT (SUPRA). IN THE MEANWHILE, THE ASSESSEE, THROUGH ITS LEARNED AR, IS ADVISED TO FURNISH ALL THE RELEVANT MATERIALS AT ITS POSSES SION BEFORE THE AO WHICH SHALL FACILITATE HIM TO RESOLVE THE ISSUE EXPEDITIO USLY. IT IS ORDERED ACCORDINGLY. PAGE 12 OF 12 ITA NOS.1080 & 1081/BANG/2011 & 1042 & 1 043/BANG/2011 12 IN THE RESULT: (I) THE REVENUES APPEALS FOR BOTH THE AYS., 2005-06 A ND 2006-07 ARE DISMISSED; & (II) THE ASSESSEES APPEALS FOR THE AYS 2005-06 AND 2006 - 07 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 15 TH DAY OF FEBRUARY, 2013. SD/- SD/- (JASON P BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL ME MBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.