DCIT, New Delhi V. M/s SRL Ranbaxy Ltd., New Delhi

ITA 1548/DEL/2011

• Counselvise Citation: 154820114 RSA 2011
• Duration Of Justice: 4 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 12-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 30-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR; RAMESH CHANDRA
• Assessee Lawyers: BHAVITA KUMAR
• Keywords: Services rendered outside India
• Section: 143(3); 194C

Judgement Text

ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI J.S. REDDY, ACCOUNTANT MEMBER I.T.A. NO. 1548 /DEL/201 1 A.Y. : 200 6 - 0 7 ACIT, CIRCLE 9(1), ROOM NO. 163, CR BUILDING, NEW DELHI VS. M/S SRL RANBAXY LTD., (NOW KNOWN AS SUPER RELIGARE LABORATORIES LTD., 275 - 276. 4 TH FLOOR, PICCADILY HOUSE, CAPT. GAUR MARG, SRINIVASPURI, NEW DELHI (PAN: AAACS2809J) (APPELLANT) (RESPONDENT) AND I.T.A. NO. 2276 /DEL/2012 A.Y. : 2008 - 09 ACIT, CIRCLE 9(1), ROOM NO. 163, CR BUILDING, NEW DELHI VS. M/S SUPER RELIGARE LABORATORIES LTD., PLOT NO. D - 3, A WING, 2 ND FLOOR, DISTRICT CENTRE, SAKET, NEW DELHI 110 017 (PAN: AAACS2809J) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. RAMESH CHANDRA, CIT(DR) & SH. BRR KUMAR, SR. DR ASSESSEE BY : SH. AJAY VOHRA, SR. ADV. & MS. BHAVITA KUMAR, ADV. ORDER PER H.S. SIDHU : JM TH ESE APPEAL S FILED BY THE REVENUE EMANATE OUT OF THE SEPARATE O RDER S PASSED BY THE LD. CIT(A) - X II , NEW DELHI PERTAINING TO ASSESSMENT YEAR S 2006 - 07 & 200 8 - 0 9 . SINCE THE ISSUES INVOLVED ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 2 IN THESE APPEALS ARE IDENTICAL, HENCE, THESE APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GROU NDS RAISED IN ITA NO. 1548/DEL/20 11 (AY 2006 - 07) REA D AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN LAW AS WELL AS ON MERITS IN RESTRICTING THE DISALLOWANCE FROM RS. 16,80,66,667/ - TO RS.11,78,030/ - WHILE HE HAD CONFIRMED THE DISALLOWANCE OF RS.11,78,24,030/ - WHICH WAS MADE BY AO IN PURSUANCE TO SECTION 40(A)(IA) READ WITH SECTION 194H/194C OF THE I.T. ACT, 1961. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN LA W AS WELL AS ON MERITS IN DELETING THE DISALLOWANCE OF RS. 33,67,000/ - MADE BY AO U/S. 40(A)(I) READ WITH SECTION 195 OF THE INCOME TAX ACT. 3. THE APPELLANT CRAVES TO AMEND MODIFY, ALTER, ADD OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING T HE HEARING OF THIS APPEAL. 3. THE GROUNDS RAISED IN ITA NO. 2276/DEL/2012 (AY 2008 - 09) REA D AS UNDER: - ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 3 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION MADE BY THE AO U/S. 40(A)(IA) AMOUNTING TO RS. 17,28,04,843/ - . 2. TH E LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION MADE BY THE AO U/S. 40(A)(I) AMOUNTING TO RS. 1,23,54,189/ - . 3. THE APPELLANT CRAVES TO AMEND MODIFY, ALTER, ADD OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING THE H EARING OF THIS APPEAL. ITA NO. 1548/DEL/2011 (AY 2006 - 07) 4. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE FILED RETURN DECLARING AN INCOME OF RUPEES NIL (AFTER ADJUSTING BROUGHT FORWARD LOSS OF RS. 8,18,11,190) WAS FILED ELECTRONICALLY ON 30.11.2006 WHICH WAS PROCESSED U/S. 143(1) ON 5.3.2008. THE CASE WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTICE U/S. 14 3(2). IN RESPONSE THERETO, ASSESSEE COUNSEL APPEARED BEFORE THE AO FROM TIME TO TIME AND FILED THE DETAILS / EVIDENCES AND WRITTEN SUBMISSIONS. AUDITED ACCOUNTS IN THE FORM OF BALANCE SHEET, PROFIT AND LOSS ACCOUNT WITH THE RELEVANT ANNEXURE AND TAX AU DIT REPORT IN FORM NO. 3CA & 3CD. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF RUNNING CLINICAL REFERENCE LABORATORIES, TO PROVIDE TESTING, DIAGNOSTIC AND PROGONOSTIC MONITORING SERVICES. THE ASSESSMENT WAS COMPLETED ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 4 U/S. 143(3) VIDE ORDER DATED 2 4 .12.200 8 AT AN INCOME OF RS. 5,30,26,939/ - BY MAKING VARIOUS ADDITIONS. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT(A) WHO VIDE IMPUGNED ORDER DATED 12.11.2010 HAS DELETED THE ADDITIONS IN DISPUTE. 5. AT TH E TIME OF HEARING, LD. DR RELIED UPON THE ORDER OF THE AO AND REITERATED THE CONTENTIONS RAISED BY THE REVENUE IN ITS GROUND OF APPEAL. 6. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER PASSED BY THE LD. CIT(A) AND REQUESTED THA T THE SAME MAY BE UPHELD. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS AVAILABLE ON RECORD WITH US, ESPECIALLY THE ORDERS PASSED BY THE REVENUE AUTHORITIES . AS REGARDS GROUND NO. 1 RELATING TO RESTRICTING THE DISALLOWANCE FROM RS. 16, 80,66,667/ - TO RS. 11,78,24,030/ - MADE U/S. 40(A)(I) OF THE I.T. ACT . WE FIND THAT BEFORE THE LD. CIT(A) ASSESSEE HAS STATED THAT THE RECEIPT INCLUDE PAYMENTS RECEIVED FORM SRL LABS, WALK IN PATIENTS AND PATHOLOGICAL LABS OWNED BY THE ASSESSEE. THE WORKING SUBMITTED BY THE ASSESSEE SHOW THAT THE AMOUNT OF DISCOUNT GIVEN TO THE COLLECTION CENTRE IS RS. 11,78,24,030/ - AS AGAINST THE DISALLOWANCE OF RS. 16,80,66,667/ - MADE BY THE AO. WE FIND THAT LD. CIT(A) HAS RIGHTLY OBSERVED ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 5 REGARDING THE DISALLOWA NCE OF RS. 11,78,24,030/ - THE ASSESSEE HAS ACCEPTED THIS AMOUNT AS DISCOUNT GIVEN TO THE COLLECTION CENTRE AND THERE IS NO DISPUTE REGARDING THIS AMOUNT OF DISCOUNT GIVEN BY THE ASSESSEE. THE HOSPITALS WHICH ACT AS COLLECTION CENTRE HAVE THE SAME AGREE MENT, THEREFORE, THE DISCOUNT GIVEN TO THEM ALSO FALLS WITHIN THE PURVIEW OF SECTION 40(A)(IA) AND HAS TO BE DISALLOWED. KEEPING IN VIEW OF THE LD. CIT(A) HAS RIGHTLY HELD THAT TOTAL DISALLOWANCE OF RS. 16,80,66,667/ - MADE BY THE AO , A SUM OF RS. 11,78 ,24,030/ - (WRONGLY MENTIONED AS RS. 11,78,030/ - IN THE CIT(A) S ORDER) IS CONFIRMED ON THIS ACCOUNT, HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE AFFIRM THE SAME AND THE GROUND NO. 1 RAISED BY THE REVENUE STANDS REJE CTED. 8. AS REGARDS GROUND NO. 2 RELATING TO DELETION OF DISALLOWANCE OF RS. 33,67,000/ - MADE BY THE AO U/S. 40(A)(I) READ WITH SECTION 195 OF THE INCOME TAX ACT ON ACCOUNT OF NON - DEDUCTION OF TAX. WE FIND THAT BEFORE THE LD. CIT(A) ASSESSEE HAS STATE D THAT WITHOUT PREJUDICE TO THE OTHER ARGUMENTS OF THE ASSESSEE, EVEN IF THE DISCOUNT OFFERED IS TREATED AS A PAYMENT TO THE NON - RESIDENT, IT IS A SETTLED POSITION OF LAW THAT THE COMMISSION PAID TO AGENTS OPERATING OUTSIDE INDIA CANNOT BE TAXED IN INDIA . HE FURTHER SUBMITTED THAT THE RULING OF THE HON BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. TOSHOKU LIMITED (125 ITR 525) SUPPORTS THE POSITION OF THE ASSESSEE IN THIS REGARD. IN THE REPORTED CASE, THE TAX PAYER APPOINTED COMMISSION ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 6 AGENTS OUTS IDE INDIA TO PROMOTE ITS EXPORT SALES. ON TAXABILITY OF THE COMMISSION RECEIVED BY THE NON - RESIDENT AGENTS, THE HON BLE SUPREME COURT OF INDIA HAS HELD AS FOLLOWS: SINCE THE AGENTS WERE OUTSIDE INDIA, THE EXPORT PROCEEDS RECEIVED IN INDIA WOULD NOT AMOUNT TO AN OPERATION CARRIED OUT IN INDIA AS CONTEMPLATED BY CLAUSE (A) OF THE EXPLANATION TO SECTION 9(1)(I) OF THE ACT; THE AMOUNT OF SALE COMMISSION CREDITED TO THE ACCOUNT OF AGENTS, IN THE BOOKS OF TAXPAYER COULD NOT TANTAMOUNT TO RECEIPT (ACTUAL OR CONSTRUCTIVE) IN INDIA, AS THE AMOUNTS SO CREDITED WERE NOT AT THEIR DISPOSAL IN INDIA; THE BUSINESS OPERATIONS WERE NOT CARRIED OUT BY THE COMMISSION AGENTS IN INDIA; AND THE COMMISSION WAS EARNED BY THE AGENTS FOR RENDERING SERVICES OUTSIDE INDIA, THEREFORE THE SAME COULD NOT BE DEEMED TO HAVE ARISEN IN INDIA. CIRCULAR 23 DATED JULY 23, 1969 (REFER PAGE NO 220 OF THE CASE LAW INDEX) CLEARLY CLARIFIED THAT INCOME WILL NOT ACCRUE OR ARISE IN INDIA TO A NON - RESIDENT WHEN COMMISSION IS PAID B Y AN INDIAN EXPORTER TO A FOREIGN AGENT OPERATING OVERSEAS AND I~ REMITTED DIRECTLY TO THE AGENT. ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 7 RELEVANT EXTRACTS FROM THE CIRCULA R IS AS FOLLOWS - '3. THE FOLLOWING CLARIFICATIONS WOULD BE FOUND USEFUL IN DECIDING QUESTIONS REGARDING THE APPLICABILITY OF THE PROVISIONS OF SECTION 9 IN CERTAIN SPECIFIC SITUATIONS: (4) FOREIGN AGENTS OF INDIAN EXPORTERS - A FOREIGN AGENT OF INDIAN EXPORTER OPERATES IN HIS OWN COUNTRY AND NO PART OF HIS INCOME ARISES IN INDIA. HIS COMMISSION IS USUALLY REMITTED DIRECTLY TO HIM AND IS THER E FORE NOT RECEIVED BY HIM OR ON HIS BEHALF IN INDIA. SUCH AN AGENT IS NOT LIABLE TO INCOME - TAX IN INDIA ON THE COMMISSION.' THE SAME POINT WAS CLARIFIED BY A SUBSEQUENT CIRCULAR NO 786 DATED FEBRUARY 07, 2000 WHICH CLEARLY STATED THAT NO TAX IS DEDUCTIBLE UNDER SECTION 195 OF THE ACT ON THE EXPENDITURE ON EXPORT COMMISSION. IT IS A SETTLED LAW THAT THE CIRCULARS ISSUED BY THE CBDT ARE BINDING ON THE REVENUE. THE SUPREME COURT HAS IN THE CASE OF K P VARGHESE (131 ITR 597) (REFER PAGE NO 112 OF THE CASE LAW INDEX) HELD THAT THE CIRCULARS OF CBDT ARE 'CONTEMPORANEOUS EXPOSITION' OF LAW AND FURNISH A LEGITIMATE AID F OR CONSTRUCTION. HENCE CIRCULAR 23 HAS A ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 8 BINDING EFFECT ON THE REVENUE AUTHORITIES FOR THE AY 2006 - 07. THOUGH THE CIRCULAR HAS BEEN RECENTLY WITHDRAWN WITH IMMEDIATE EFFECT BY WAY OF CIRCULAR NO 7 OF 2009 DATED OCTOBER 22, 2009, IT SHALL STILL APPLY FOR T HE RELEVANT AY 2006 - 07. THE BOMBAY HIGH COURT HAS IN THE CASE OF SHAKTI RAJ FILMS DISTRIBUTORS (213 ITR 20 ) HELD THAT MODIFICATION OR WITHDRAWAL OF CIRCULARS DURING THE PENDENCY OF THE ASSESSMENT PROCEEDINGS CANNOT PREJUDICIALLY AFFECT THE RIGHT OF THE ASS ESSEE TO HAVE HIS ASSESSMENT MADE IN ACCORDANCE WITH THE CIRCULAR AS IT STOOD PRIOR TO ITS AMENDMENT OR WITHDRAWAL. THIS PROPOSITION IS SUPPORTED BY A FULL BENCH DECISION OF THE KERALA HIGH COURT IN THE CASE OF B M EDWARD, INDIA SEA FOOD (119 ITR 334) (REF ER PAGE NO 130 OF THE CASE LAW INDEX - THE SUPREME COURT HAS DISMISSED THE SPECIAL LEAVE PETITION FILED BY THE REVENUE ON THIS ISSUE. ' 8.1 WE FIND THAT T HE ASSESSING OFFICER ON THE OTHER HAND WAS OF THE OPINION THAT WHILE GIVING DISCOUNT TO THE COLLECTION CENTRES SITUATED OUTSIDE INDIA, THE ASSESSEE HAS MADE PAYMENTS TO FOREIGN PARTIES WITHOUT DEDUCTING TAX U/S 195. FURTHER THE ASSESSING OFFICER WAS OF THE VIEW THAT THE APPELLANT SHOULD HAVE OBTAINED A NIL DEDUCTION ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 9 CERTIFICATE FROM THE ASSESSING OFFICER A ND BECAUSE OF ITS FAILURE TO DO SO HE ADDED AN AMOUNT OF RS 33,67,000 / - FOR VIOLATION OF SECTION 19 5 READ WITH SECTION 40(A)(I). LD. CIT(A) HAS CONSIDERED THE SUBMISSION GIVEN BY THE ASSESSEE AS WELL AS OBJECTIONS OF THE ASSESSING OFFICER AND OBSERVED THAT FO R ANY AMOUNT ON WHICH TAX HAS TO BE DEDUCTED U / S 195, ONE OF THE BASIC CONDITIONS IS THAT THE, SAID AMOUNT SHOULD B E TAXABLE IN INDIA. LD. CIT(A) FURTHER OBSERVED THAT T HE PARTIES WHO HAVE RENDERED SERVICE TO THE A SSESSEE COMPANY OUTSIDE INDIA AND ARE W ORKING AS COLLECTION CENTRES DO NOT FALL WITHIN THE P U RVIEW OF SECTION 195 BECAUSE THE AMOUNT OF DISCOUNT WHICH IS GIVEN TO THEM ARE FOR RENDERING SERVICE OUTSIDE INDIA AND HENCE THESE AMOUNT ARE NOT TAXABLE IN INDIA. KEEPING IN VIEW OF THE FACTS AND CIRCU MSTANCES EXPLAINED ABOVE, WE ARE OF THE VIEW THAT I T WAS NOT REQUIRED ON THE PART OF THE A SSESSEE TO DEDUCT TAX ON THESE DISCOUNTS. THUS, THE ADDITION OF RS . 33,67,000 / - MADE BY THE ASSESSING OFFICER U/S 40(A)(I) WAS RIGHTLY DELETED BY THE LD. CIT(A) . HENC E, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), THEREFORE, WE AFFIRM THE SAME AND THE GROUND NO. 2 RAISED BY THE REVENUE STANDS REJECTED. ITA NO. 2276 /DEL/201 2 (AY 200 8 - 0 9 ) 9 . BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE FILED RETURN DECLARING AN INCOME OF RUPEES 8,26,20,030/ - ELECTRONICALLY ON 28.9.2008 AND THE SAME WAS PROCESSED U/S. 143(1) ON 19.3.2009. ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 10 THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S. 143(2) WAS SENT ON 21.7.2010. IN RESPONSE TO NOTI CES, LD. COUNSEL OF THE ASSESSEE APPEARED BEFORE THE AO FROM TIME TO TIME AND SUBMITTED THE REQUISITE DETAILS WHICH WERE VERIFIED AND PLACED ON RECORD. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF RUNNING STATE OF THE ART, DIAGNOSTIC LABORATORIES, WH ICH CONDUCTS TESTS MEANT FOR DIAGNOSIS OF VARIOUS AILMENTS OF HUMAN BEINGS. THE ASSESSMENT WAS COMPLETED U/S. 143(3) VIDE ORDER DATED 2 0 .12.20 10 AT AN INCOME OF RS. 26,77,79,100/ - BY MAKING VARIOUS ADDITIONS. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT(A) WHO VIDE IMPUGNED ORDER DATED 20.3.2012 HAS DELETED THE ADDITIONS IN DISPUTE. 9.1 AT THE TIME OF HEARING, LD. DR RELIED UPON THE ORDER OF THE AO AND REITERATED THE CONTENTIONS RAISED BY THE REVENUE IN ITS GROUND OF APPEAL. HE ALSO FILED THE WRITTEN SYNOPSIS IN REPLY TO THE ASSESSEE S ARGUMENTS MADE DURING THE HEARING. FOR THE SAKE OF CONVENIENCE WE ARE REPRODUCING THE SAME AS UNDER: - 01 . THE ASSESSEE DURING THE COURSE OF HEARING POINTED OUT THAT THE GROUNDS OF APPEAL AS RAISED BY THE REVENUE IN THE ABOVE APPEAL ARE DIRECTLY COVERED IN ASSESSEE S O W N CASE VIDE TRIBUNAL OWN ORDER DATED 16.12.2011 FOR A.Y. 2006 - 07 IN ITA NO. 434/2011. ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 11 02. BEFORE COMMENTING UPON FURTHER, IT WILL BE RELEVANT TO NOTE THE GROUNDS OF APPEA L AS RAI SED BY THE REVENUE IN THE PRESENT APPEAL WHICH ARE AS UNDER: 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION MADE BY THE AO U/S. 40(A)(IA) AMOUNTING TO RS. 17,28,04,843/ - . 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION MADE BY THE AO U/S. 40(A)(I) AMOUNTING TO RS. 1,23,54,189/ - 3 . 1 IN SO FAR AS THE DISALLOWANCE / ADDITION AS MADE BY THE AD U/ S 40(A)(IA) AMOUNTING TO RS.17,28,04,843/ - IS CONC ERNED IT WOULD BE NOTICED THAT HE FIRST MADE DISALLOWANCE BY HOLDING THE PAYMENTS AS COMMISSION COVERED BY SECTION 194H AS PER WHICH TDS WAS REQUIRED TO BE DONE. BESIDES THIS S E CTION THE AO, IN THE ALTERNATIVE (SEE PARA 5 OF ORDER) HELD THE PAYMENTS TO HE COVERED BY SECTION 194C. 3.2 THE C I T(A) FOLLOWING THE TRIBUNAL'S ORDER REFERRED TO ABOVE I.E. ORDER DATED 16 - 12 - 2011 FOR AY 06 - 07 IN ITA NO. 434 /2011 DELETED THE DISALLOWANCE SO MADE BY THE AO IN SO FAR AS AO'S FINDINGS ABOUT APPLICABILITY OF SECTION 194H ARE CONCERNED. IN THIS CONNECTION, IT WOULD BE NOTICED THAT THE ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 12 CIT(A) HAS FAILED TO DEAL WITH THE ALTERNATIVE COURSE ADOPTED BY THE AO WHEREBY HE FOUND THE PAYMENTS TO BE COVERED EVEN BY SECTION 194C AS A RESULT OF WHICH TDS WAS REQUIRED TO BE DONE. 3.3 IN VIEW OF THE FAILURE OF THE CIT(A) IN ADJUDICATING THE APPLICABILITY OF SECTION 194C IT IS CLEAR THAT THE ISSUE CANNOT AS SUCH BE SAID TO BE COVERED FULLY BY THE TRIBUNAL'S ORDER RELIED BY THE CIT( A) ESPECIA LL Y WHEN THE TRIBUNAL ALSO IN IT ORDER HAS REF RAINED FROM ADJUDICATING THIS PARTICULAR OF THE CASE WHICH WAS CARRIED BY THE ASSESSEE BEFORE IT. 4. THE FACT SITUATION & ADJUDICATION BY THE CIT(A) / ITAT OF THE SECOND GROUND ABOUT THE DISALLOWANCE U / S 40(A)(I) AMOUNTING TO RS.1,23,54,189 / - IS ALSO IDENTI CAL TO THE GROUND REFERRED TO IN PARA 3 ABOVE. IN SHORT, THIS GROUND IS ALSO AS SUCH IS ALSO NOT COVERED BY THE TRIBUNAL'S ORDER. 5. IN VIEW OF THE ABOVE IT IS CLEAR THAT IT WAS NOT PROPER ON ASSESSEE AR'S PART TO SEEK REFUGE OF THE TRIBUNAL'S ORDER WHICH TOO INCIDENT A L L Y IS NOT FOUND TO HAVE ADJUDICATED THE AO'S MATERIAL & ALTERNATIVE ASPECT OF THE CASE QUA THE APPLICABILITY OF SECTION 194C OF THE ACT WHICH IF CONSIDERED WOULD HAVE RESULTED IN ENDORSEMENT OF AO'S ORDER AT LEAST PARTLY. 6. IN VIEW OF THE ABOVE, IT IS PRAYED ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 13 (A) EITHER TO RELEASE THE MATTER FOR BEING HEARD IN REFERENCE TO SEC. 194C DE - NOVO ESPECIALLY WHEN THE REVENUE WAS NOT EVEN HEARD IN THE APPEAL AT ALL; (B) OR TO RESTORE THE MATTER BACK TO THE CIT(A) WITH THE DIRECTIONS TO ADJUDICATE THE ALTERNATIVE APPLICATION OF SECTION 194C OF THE ACT. 10 . ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER PASSED BY THE LD. CIT(A) AND REQUESTED THAT THE SAME MAY BE UPHELD. 11 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS AVAILABLE ON RECORD WITH US, ESPECIALLY THE ORDERS PASSED BY THE REVENUE AUTHORITIES AND THE WRITTEN SYNOPSIS FILED BY THE REVENUE. AS REGARDS GROUND NO. 1 RELATING TO DELETION OF ADDITION MADE BY THE AO U/S. 40(A)(IA) AMOUNTING T O RS. 17,28,04,843/ - IS CONCERNED, W E FIND THAT LD. CIT(A) HAS OBSERVED THAT THE AO HAS MADE A DISALLOWANCE U/S. 40(A)(IA) OF THE ACT OF RS. 1,72,804,803/ - BEING DISCOUNT TO CCS, AS PAYMENT OF COMMISSION WITHIN THE MEANING OF SECTION 194H AND HELD THAT T HE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE ON SUCH AMOUNT. LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE S CASE IS COVERED BY THE ITAT S ORDER VIDE ITA NO. 434/DEL/2011 FOR THE AY 2006 - 07 DATED 16 TH DECEMBER, 2011 IN ITS OWN CASE, WHEREIN THE ITAT HA S HELD THAT ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 14 THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND THE COLLECTION CENTRES AND THAT BEING SO, THE PROVISIONS OF SECTIONS 194H OF THE ACT HAVE WRONGLY INVOKED; (II) THE PROVISIONS OF SECTION 194H OF THE ACT COULD, EVEN OTHERWISE, NOT HAVE B EEN MET, SINCE NO PAYMENT HAS BEEN SHOWN TO HAVE BEEN MADE BY THE ASSESSEE TO THE COLLECTION CENTRES; (III) THE PAYMENT MADE TO THE ASSESSEE BY COLLECTION CENTRES WAS AT THE RATES AGREED TO INTER SE BETWEEN THEM; AND (IV) THE LD. CIT(A) ERRED IN CONFIRMI NG THE DISALLOWANCE OF RS. 11,78,24,030/ - MADE U/S. 40(A)(IA) OF THE ACT FOR THE ALLEGED FAILURE OF TDS BY THE ASSESSEE U/S. 194H OF THE ACT. GROUND NO. 3 STATED THAT THE LD. CIT(A) ERRED IN NOT ADJUDICATING THE CHALLENGE OF THE ASSESSEE TO THE AO S FIND INGS THAT THE DISCOUNT OFFERED BY THE ASSESSEE TO THE COLLECTION CENTRES WAS IN THE NATURE OF PAYMENT FOR WORK, ON WHICH TAX WAS DEDUCTIBLE U/S. 194C OF THE ACT. SINCE THE CLAIM OF THE ASSESSEE HAS ALLOWED AS ABOVE, THERE REMAINS NO REQUIREMENT TO GO INTO THIS ASPECT OF THE MATTER AND WE ARE NOT DOING SO. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 15 11.1 KEEPING IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, W E ARE OF THE VIEW THAT THE LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE AO BY RESPECTFULLY FOLLOWING THE ABOVE PRECEDENT OF THE TRIBUNAL, AS AFORESAID IN ASSESSEE S OWN CASE, HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), THEREFORE, WE AFFIRM THE DECISIO N OF THE LD. CIT(A) OF DELETING THE ADDITION OF RS. 17,28,04,843/ - AND DISMISS THE GROUND NO. 1 RAISED BY THE REVENUE IN ITS APPEAL. 12. AS REGARDS GROUND NO. 2 RELATING TO DELETION OF ADDITION OF MADE BY THE AO U/S. 40(A)(I) AMOUNTING TO RS. 1,23,54 ,189/ - IS CONCERNED, W E FIND THAT THE LD. CIT(A) HAS OBSERVED THAT AO HAS MADE THE DISALLOWANCE U/S. 40(A)(I) OF THE ACT AMOUNTING TO RS. 1,23,54,189/ - BEING DISCOUNT ALLOWED TO INTERNATIONAL CUSTOMERS, BY TREATING SUCH AMOUNT AS FOREIGN PAYMENT M ADE BY THE ASSESSEE AND HOLDING THAT THE ASSESSEE SHOULD HAVE DEDUCTED AT SOURCE U/S. 195 OF THE ACT ON SUCH AMOUNT IN THE ABSENCE OF A NIL WITHHOLDING TAX CERTIFICATE U/S. 195(2) OF THE ACT. WE FIND CONSIDERABLE COGENCY IN THE OBSERVATIONS OF THE LD. CIT (A) THAT HIS PREDECESSOR HAS GIVEN RELIEF TO THE ASSESSEE FOR ITS OWN CASE FOR AY 2006 - 07 STATING THAT: FOR ANY AMOUNT ON WHICH TAX HAS TO BE DEDUCTED U/S. 195, ONE OF THE BASIC CONDITIONS IS THAT THE SAID AMOUNT ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 16 SHOULD BE TAXABLE IN INDIA. THE PARTIE S WHO HAVE RENDERED SERVICE TO THE ASSESSEE COMPANY OUTSIDE INDIA AND ARE WORKING AS COLLECTION CENTRES DO NOT FALL WITHIN THE PURVIEW OF SECTION 195 BECAUSE THE AMOUNT OF DISCOUNT WHICH IS GIVEN TO THEM ARE FOR RENDERING SERVICES OUTSIDE HENCE, THIS AMOUN T IS NOT TAXABLE IN INDIA. 12.1 IN VIEW OF THE ABOVE, THE ADDITION OF RS . 1,23,54,189/ - MADE BY THE ASSESSING OFFICER U/S 4 0(A)(I) WAS RIGHTLY DELETED BY THE LD. CIT(A) . HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), THEREFORE, WE AFFIRM THE SAME AND THE GROUND NO. 2 RAISED BY THE REVENUE STANDS REJECTED. 1 3 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE REVENUE STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT 0 7 - 5 - 201 5 . S D / - S D / - [ J.S. REDDY ] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 0 7 / 5 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, IT A T TRUE COPY BY ORDER, ITA NO. 1548/DEL/2011 & ITA NO. 2276/DEL/2012 17 ASSISTANT REGISTRAR, ITAT, DELHI BENCHES