DCIT, New Delhi V. M/s. Mantec Consultants Pvt. Ltd., New Delhi

ITA 1207/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3751 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 04-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K YADAV SENIOR
• Assessee Lawyers: B B BHAGAT
• Keywords: Retrospective amendment; Non-deduction of tax

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1207/DEL./2016 (ASSESSMENT YEAR : 2011-12) DCIT, CIRCLE 16 (1), VS. M/S. MANTEC CONSULTANTS PV T. LTD., NEW DELHI. 805, VISHAL BHAWAN, 95, NEHRU PLACE, NEW DELHI 110 019. (PAN : AAACM1496R) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI B.B. BHAGAT, ADVOCATE REVENUE BY : SHRI A.K. YADAV, SENIOR DR DATE OF HEARING : 26.10.2017 DATE OF ORDER : 31.10.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, DEPUTY COMMISSIONER OF INCOME-TAX, C IRCLE 16 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE), BY FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 16.12.2015 PASSED BY THE COMMISSIONER OF INCO ME-TAX (APPEALS)-19, NEW DELHI QUA THE ASSESSMENT YEAR 201 1-12 ON THE GROUNDS INTER ALIA THAT :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) IS JUSTIFIED IN ITA NO.1207/DEL./2016 2 DELETING THE ADDITION OF RS.64,19,424/- ON ACCOUNT OF NON DEDUCTION OF TDS ON EXPORT COMMISSIONER MADE BY THE ASSESSING OFFICER (THE AO) EVEN WHEN THE ASSESSEE HAD NOT MADE AN APPLICATION TO THE AO UNDER SUBSECTION (2) OF SECTION 195 THAT SUM PAID TO A NON RESIDENT WOULD NOT BE INCOME CHARGEABLE TO TAX? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.1,00,000/- MADE BY THE AO ON ACCOUNT OF PAYMENT FOR CORPORATE SOCIAL RESPONSIBILITY (CSR) BY IGNORING THE FACT THAT CONCEPT OF CSR WAS NOT PART OF THE COMPANIES ACT DURING YEAR UNDER CONSIDERATION AND THE ASSESSEE HAD FAILED TO PROVE THAT THE EXPENDITURE WAS ACTUALLY COVERED UNDER PRESCRIBED SCOPE OF CSR? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.1,00,000/- MADE BY THE AO ON THE GROUND THAT THE PAYMENT WAS NOT DIRECTLY CONNECTED OR RELATED WITH THE CARRYING ON THE BUSINESS OF THE ASSESSEE AND DISREGARDING THE RATION DECIDENDI LAID DOWN BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VENKATA SATYANARAYANA RICE MILL CONTRACTORS COMPANY 223 ITR 101 (SC)? 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICATION OF THE CONTROVERSY AT HAND ARE : DURING SCRUTINY PROCEEDIN GS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS PAI D EXPORT COMMISSION OF RS.62,26,671/- AND RS.1,89,753/- TO S HRI ISHWINDER SINGH BARAR, BROTHER OF THE DIRECTOR OF THE ASSESSE E COMPANY WITHOUT DEDUCTING TAX AT SOURCE. CONSEQUENTLY, ASS ESSEE WAS CALLED UPON TO SHOW CAUSE AS TO WHY THE SAID COMMIS SION BE NOT ITA NO.1207/DEL./2016 3 ALLOWED FOR NON-DEDUCTION OF TAX AT SOURCE. ASSESS EE FILED COMPREHENSIVE EXPLANATION WHICH HAS NOT BEEN ACCEPT ED BY THE AO WHO HAS MADE ADDITION OF RS.64,19,424/- TO THE I NCOME OF THE ASSESSEE AFTER MAKING DISALLOWANCE OF THE SAME UNDE R SECTION 40(A) (IA) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE AC T). 3. AO FURTHER NOTICED THAT THE ASSESSEE HAS PAID RS .1,00,000/- TO PEC UNIVERSITY AS PART OF ITS CORPORATE SOCIAL R ESPONSIBILITY (CSR). ASSESSEE CLAIMED TO HAVE PAID RS.1,00,000/- TO PEC UNIVERSITY FOR INSTITUTING AN ANNUAL AWARD BUT THE AO NOTICED THAT THE AWARD NAMED AS MANTEC-BRARA PERPETUAL AWARD GAV E A LOT OF PUBLICITY TO THE ASSESSEE COMPANY. ASSESSEE HAS AL SO FAILED TO PRODUCE ANY SUPPORTING DOCUMENT TO PROVE THAT IT RE CRUITED YOUNG TALENT FROM PEC UNIVERSITY DURING THE YEAR OR SUBSE QUENTLY AND AS SUCH, THE ASSESSEE HAS FAILED TO PROVE THAT THE EXP ENSES WAS PART OF THE CSR AND THEREBY DISALLOWED AN AMOUNT OF RS.1,00 ,000/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4. ASSESSEE CARRIED THE MATTER BY WAY OF FILING APP EAL BEFORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION MADE B Y THE AO BY ACCEPTING THE APPEAL. FEELING AGGRIEVED, THE REVEN UE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF CHALLENGING THE IMPUG NED ORDER PASSED BY LD. CIT (A) . ITA NO.1207/DEL./2016 4 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 6. LD. AR FOR THE ASSESSEE BY RELYING UPON THE DECI SION RENDERED BY COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2009-10 IN ITA NO.4497/DEL/2013 ORDER D ATED 15.01.2016 AFFIRMED BY HONBLE DELHI HIGH COURT IN ITA 521/2016 ORDER DATED 05.09.2016 CONTENDED THAT THE ISSUE IS SQUARELY COVERED. HOWEVER, LD. DR FOR THE REVENUE RELIED UPON THE ORDER PASSED BY THE AO. 7. IDENTICAL ISSUE AS TO NON-DEDUCTION OF TDS ON EX PORT COMMISSION U/S 40(A)(IA) OF THE ACT BY THE ASSESSEE COMPANY DURING AY 2009-10 HAS BEEN DEALT WITH BY THE COORDI NATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) AND DEC IDED IN FAVOUR OF THE ASSESSEE BY RELYING UPON THE DECISION RENDER ED BY HONBLE APEX COURT IN KRISHNASWAMY S. PD. VS. UNION OF INDI A (2006) 281 ITR 305 BY RETURNING FOLLOWING FINDINGS :- 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. FIRSTLY IT IS AN ADMITTED FACT THAT AS SESSEE HAS PAID COMMISSION TO MR. ISH BRARA FOR RENDERIN G SERVICES IN USA. IT IS ALSO NOT IN DISPUTE THAT HE HAS ITA NO.1207/DEL./2016 5 PROVIDED SERVICES TO THE COMPANY OUTSIDE INDIA AND NO PART OF SERVICES HAVE BEEN RENDERED IN INDIA. FURTH ER THERE IS NO CLARITY ON THE AMOUNT OF COMMISSION PAI D ON WHICH PROVISIONS OF SECTION 40A (I) IS APPLIED BY L D AO. AT SOME PART OF THE ORDER THE AMOUNT IS MENTIONED AS RS. 21,83,306/- AND ULTIMATELY THE AMOUNT DISALLO WED IS RS. 7395110/-. FOR VERIFICATION OF THIS AMOUNT CIT (A) HAS SET ASIDE THE ISSUE FOR DETERMINATION OF A MOUNT TO THE FILE OF AO. ON MERITS CIT (A) HAS HELD THAT AS THE SERVICES HAVE BEEN RENDERED OUTSIDE INDIA AND NO PART OF SERVICES ARE RENDERED IN INDIA BY NONRESIDE NT. ACCORDING TO THE PROVISION OF SECTION 5 (2) RWS 9 ( 1) OF THE INCOME TAX ACT THIS SUM IS NOT CHARGEABLE TO TAX IN INDIA. NOW THE REVENUE HAS RAISED THE GROUND THA T BY VIRTUE OF INTRODUCTION OF EXPLANATION TO SECTION 9 W.E.F. 1.6.1976 BY THE FINANCE ACT 2010 IT IS PROV IDED THAT IRRESPECTIVE OF RESIDENCE OR PLACE OF BUSINESS OR BUSINESS CONNECTION IN INDIA OF NON RESIDENT AND IRRESPECTIVE OF WHETHER SERVICES HAVE BEEN RENDERED INDIA OR NOT , FOR INTEREST, ROYALTY AND FEES FOR TECHNICAL SERVICES SHALL NOT BE RELEVANT. IDENTICA L ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCH IN DEP UTY COMMISSIONER OF INCOME-TAX, CIRCLE-52, KOLKATA V. SUBHOTOSH MAJUMDER [2016] 65 TAXMANN.COM 42 (KOLKATA - TRIB.) WHERE IN FOLLOWING THE DECISION O F HONOURABLE DELHI HIGH COURT IN CIT V. ANGELIQUE INTERNATIONAL LTD. [2013] 359 ITR 9/219 TAXMAN 104/38 TAXMANN.COM 425 (DELHI) HAS HELD THAT :- 20. FROM THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO PRECEDENTS CITED ABOVE, WE ARE OF THE VIEW THAT TILL AMENDMENT IN EXPLANATION TO SEC. 9(2) OF THE ACT, THE PREVAILING LEGAL POSITION WAS THAT UNLESS THE TECHNICAL SERVICES WERE RENDERED IN INDIA, THE FEES FOR SUCH SERVICES COULD NOT BE BROUGHT TO TAX UNDER SECTION 9(1)(VII) OF THE ACT. THE LAW AMENDED WAS UNDOUBTEDLY RETROSPECTIVE IN NATURE BUT SO FAR AS TAX WITHHOLDING LIABILITY IS CONCERNED, IT DEPENDS ON THE LAW AS IT EXISTED AT THE POINT OF TIME WHEN PAYMENTS, FROM WHICH TAXES OUGHT TO HAVE BEEN WITHHELD, WERE MADE. THE TAX DEDUCTOR IS NOT EXPECTED TO KNOW HOW THE LAW WILL CHANGE IN ITA NO.1207/DEL./2016 6 FUTURE. A RETROSPECTIVE AMENDMENT IN LAW DOES CHANGE THE TAX LIABILITY IN RESPECT OF AN INCOME, WITH RETROSPECTIVE EFFECT, BUT IT CANNOT CHANGE THE TAX WITHHOLDING LIABILITY, WITH RETROSPECTIVE EFFEC T. THE TAX WITHHOLDING OBLIGATIONS FROM PAYMENTS TO NON-RESIDENTS, AS SET OUT IN SECTION 195 OF THE ACT, REQUIRE THAT THE PERSON MAKING THE PAYMENT 'AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME TAX THEREON AT THE RATES IN FORCE'. WHEN THESE OBLIGATIONS ARE TO BE CHARGED AT THE POINT OF TIME WHEN PAYMENT IS MADE OR CREDITED, WHICHEVER IS EARLIER, SUCH OBLIGATIONS CAN ONLY BE DISCHARGED IN THE LIGHT OF THE LAW AS IT STANDS THA T POINT OF TIME. SECTION 40(A)(I) OF THE ACT PROVIDES THAT INTER ALIA, NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 38 OF THE ACT, ANY AMOUNT PAYABLE OUTSIDE INDIA, OR PAYABLE IN INDIA TO A NON-RESIDENT, SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED. ACCORDINGLY, THE ASSESSEE CANNOT BE FAULTED FOR NOT DEDUCTING TDS AND CONSEQUENTLY, THE DELETION OF DISALLOWANCE BY CIT (A) IS CONFIRMED. THIS COMMON ISSUE OF ALL THE THREE APPEALS OF REVENUE IS DISMISSED. 12. CONCURRING WITH THE VIEWS OF COORDINATE BENCH, WE ALSO HOLD THAT ASSESSEE CANNOT BE HELD TO BE LIA BLE TO DEDUCT TAX AT SOURCE RELYING ON THE SUBSEQUENT AMENDMENTS MADE IN THE ACT WITH RETROSPECTIVE EFFEC T. IN THIS CASE, EXPLANATIONS TO SEC. 9(2) WAS INSERTE D BY THE FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FRO M 1.6.1976 AND IT WAS IMPOSSIBLE FOR THE ASSESSEE TO DEDUCT TAX IN THE FINANCIAL YEARS 2008-09 RELEVANT TO AY 2 009- 10 WHEN AS PER THE RELEVANT LEGAL POSITION PREVALEN T IN THAT YEAR, THE OBLIGATION TO DEDUCT TAX WAS NOT ON THE ASSESSEE. LAW CANNOT COMPEL A PERSON TO DO SOMETHIN G, WHICH IS IMPOSSIBLE TO PERFORM. OUR VIEW ALSO GETS ITA NO.1207/DEL./2016 7 SUPPORT FROM DECISION OF HONOURABLE SUPREME COURT I N CASE OF KRISHNASWAMY S. PD V. UNION OF INDIA [2006 ] 281 ITR 305/151 TAXMAN 286, WHEREIN THE SAID LEGAL MAXIM WAS ACCEPTED BY THE HON'BLE SUPREME COURT AS UNDER :- 17. THE MAXIMUM OF EQUITY, NAMELY, ACTUS CURIAE NEMINEM GRAVABIT - AN ACT OF COURT SHALL PREJUDICE NO MAN, IS FOUNDED UPON JUSTICE AND GOOD SENSE WHICH SERVES A SAFE AND CERTAIN GUIDE FOR THE ADMINISTRATION OF LAW. THE OTHER RELEVANT MAXIM IS, LEX NON COGIT AD IMPOSSIBILIA - THE LAW DOES NOT COMPEL A MAN TO DO WHAT HE CANNOT POSSIBLY PERFORM. THE LAW ITSELF AND ITS ADMINISTRATION IS UNDERSTOOD TO DISCLAIM AS IT DOES IN ITS GENERAL APHORISMS, ALL INTENTION OF COMPELLING IMPOSSIBILITIES, AND THE ADMINISTRATION OF LAW MUST ADOPT THAT GENERAL EXCEPTION IN THE CONSIDERATION OF PARTICULAR CASES - UP SRTC V. IMTIAZ HUSSAIN [2006] 1 SCC 380, SHAIKH SALIM HAJI ABDUL KHAGUMSAB V. KUMAR [2006] 1 SCC 46, MOHAMMAD GAZI V. STATE OF MP [2000] 4 SCC 342 AND GURSHARAN SINGH V. NEW DELHI MUNICIPAL COMMITTEE [1996] 2 SCC 459. 13. IN VIEW OF ABOVE OBSERVATIONS WE CONFIRM THE OR DER OF CIT (A) IN DELETING THE DISALLOWANCE OF RS. 7395 110/- U/S 40A (I) OF THE INCOME TAX ACT. 8. THE DECISION RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2009-10 HAS BEEN AFFIRMED BY HONBLE DELHI HIGH COURT IN ITA 521 /2016 (SUPRA). SO, WE ARE OF THE CONSIDERED VIEW THAT SINCE THERE IS NO C HANGE OF FACTS AND CIRCUMSTANCES OF THE CASE QUA THE YEAR UNDER ASSESS MENT IN THE PRESENT CASE, WE HEREBY AFFIRM THE FINDINGS RETURNE D BY THE LD. CIT (A) WHO HAS DELETED THE ADDITION BY PASSING A REASO NED AND VALID ITA NO.1207/DEL./2016 8 ORDER. CONSEQUENTLY, GROUND NO.1 IS DETERMINED AGA INST THE REVENUE. GROUNDS NO.2 & 3 9. AO MADE AN ADDITION OF RS.1,00,000/- CLAIMED BY THE ASSESSEE HAVING BEEN INCURRED BY THE ASSESSEE COMPA NY AS PART OF THE CSR ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY SUPPORTING DOCUMENT AND ON THE GROUND THAT THE ASSE SSEE HAS FAILED TO PROVE THAT IT HAS RECRUITED YOUNG TALENT FROM PE C UNIVERSITY DURING THE YEAR UNDER ASSESSMENT OR SUBSEQUENTLY. HOWEVER, THE LD. CIT (A) DELETED THE ADDITION BY RELYING UPON TH E DECISION RENDERED BY HONBLE APEX COURT CITED AS VENKATA SATYANARAYANA RICE MILL CONTRACTORS COMPANY VS. CIT 223 ITR 101 WHEREIN CONCEPT OF CSR HAS BEEN EXPLAINED. 10. ASSESSEE COMPANY HAS EXPENDED THE AMOUNT OF RS.1,00,000/- FOR INSTITUTING ANNUAL AWARD NAMED MA NTEC BARAR PERPETUAL AWARD. SINCE THE AWARD HAS BEEN INSTITUT ED TO PROMOTE THE EDUCATION IN PEC UNIVERSITY, IT CANNOT BE SEGRE GATED FROM THE PART OF CSR BECAUSE ANYBODY WHO IS GETTING EDUCATIO N FROM THE PEC UNIVERSITY WOULD BE ENTITLED TO GET THE AWARD A ND IT WOULD AUTOMATICALLY ENHANCE INTER SE COMPETITIVENESS AMON GST THE STUDENTS WHICH IS PART OF THE CORPORATE SOCIAL RESP ONSIBILITY TO OUR ITA NO.1207/DEL./2016 9 MIND. EVEN OTHERWISE, AO CANNOT DECIDE THE EXPENSE S TO BE INCURRED BY THE BUSINESSMAN BY SITTING ON HIS ARMCH AIR. SO, WE FIND NO ILLEGALITY OR PERVERSITY IN THE FINDINGS RE TURNED BY LD. CIT (A), HENCE GROUNDS NO.2 & 3 ARE ALSO DETERMINED AGA INST THE REVENUE. 11. RESULTANTLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2017. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 31 ST DAY OF OCTOBER, 2017 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-19, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.