DCIT, New Delhi V. M/s NDC Telecommunications India Pvt. Ltd., New Delhi

ITA 2149/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65897 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 08-11-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 07-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SEHGAL
• Keywords: Double taxation relief; Period of limitation
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.2149/DEL/2010 ASSESSMENT YEAR : 2002-03 DCIT, CIRCLE 13 (1), ROOM NO.406, CR BUILDING, IP ESTATE, NEW DELHI. VS. NDC TELECOMMUNICATIONS INDIA PVT. LTD., PWC CENTRE, SUCHETA BHAWAN (GATE NO.2), 3 RD FLOOR, 11-A, VISHNU DIGAMBER MARG, NEW DELHI. PAN : AABCN2219C CO NO.337/DEL/2011 (ITA NO.2149/DEL/2010) ASSESSMENT YEAR : 2002-03 NDC TELECOMMUNICATIONS INDIA PVT. LTD., PWC CENTRE, SUCHETA BHAWAN (GATE NO.2), 3 RD FLOOR, 11-A, VISHNU DIGAMBER MARG, NEW DELHI. PAN : AABCN2219C VS. DCIT, CIRCLE 13 (1), ROOM NO.406, CR BUILDING, IP ESTATE, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SALIL KAPOOR, ADVOCATE REVENUE BY : SHRI DEEPAK SEHGAL, SR.DR ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE AND THE CO BY THE ASSESSEE E MANATE FROM THE ORDER OF THE LD. CIT (A) DATED 26.02.2010 AND PERTAIN TO ASSESSMENT YEAR 2002-03. ITA NO.2149/DEL/2010 CO NO.337/DEL/2011 2 2. IN THE CO, THE ASSESSEE HAS AGITATED THE ISSUE OF JURISD ICTION. IN THE APPEAL, IT HAS BEEN CONTENDED THAT JURISDICTION U/S 147 OF THE IT ACT WAS NOT VALID AS THERE HAS BEEN NO ESCAPEMENT OF INCOM E CHARGEABLE TO TAX FOR THAT YEAR. WE NOTE THAT THE ABOVE CO WA S BELATED BY 73 DAYS. NO COGENT EXPLANATION FOR THIS HAS BEEN GIVEN. UNDER THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THIS CO CANNOT BE ENTERTAINED AS IT IS HIT BY THE PERIOD OF LIMITATION. ACCORDINGL Y, THE CO STANDS DISMISSED. REVENUES APPEAL. 3. THE ISSUE RAISED IS AS UNDER:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN RESTRICTING THE ADDITION TO RS.21 50873/- AS AGAINST RS.40,10,217/- MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(I) OF THE ACT. CIT (A) FAILED TO APPRECIATE THAT THE ASSESSEE, DESPIT E SPECIFIC OPPORTUNITY PROVIDED BY THE ASSESSING OFFICER, COULD N OT RECONCILE THE DIFFERENT BETWEEN THE FIGURES QUANTIFIED A ND REPORTED BY THE AUDITORS IN THE AUDIT REPORT AND THAT R EPORTED BY THE ASSESSEE. THE LD. CIT (A) SIMPLY RELIED ON THE P LEA OF THE ASSESSEE THAT THE TAX AUDIT REPORT FURNISHED WITH THE RETUR N WAS ONLY A DRAFT. 4. IN THIS CASE, THE ASSESSING OFFICER NOTED THAT THE AU DITORS OF THE ASSESSEE COMPANY AS PER FORM NO.3CD VIDE POINT NO.17(F) HAVE MENTIONED THAT ` 1,61,37,740/- PAYABLE TOWARDS TECHNICAL FEE WAS INADMISSIBLE EXPENDITURE U/S 40(A)(I) AS NO TAX WAS DEDU CTED AT SOURCE OR PAID UNDER CHAPTER XVII-B OF THE IT ACT. HOWEVE R, IN THE EXAMINATION OF THE COMPUTATION OF INCOME, IT WAS NOT ED THAT THE ASSESSEE HAS NOT DISALLOWED THE SUM IN ITS COMPUTATION. TH E ASSESSING OFFICER ISSUED NOTICE TO THE ASSESSEE IN THIS REGARD . THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS RIGHTLY DISALLOWED ` ITA NO.2149/DEL/2010 CO NO.337/DEL/2011 3 1,21,27,526/- PAYABLE TO NDMC IN ACCORDANCE WITH TH E PROVISIONS OF SECTION 40(A)(I) OF THE ACT. IT WAS SUBMITTED THAT THE FIGURE OF ` 1,61,37,740/- NOTED IN THE AUDITORS REPORT WAS INADV ERTENT MISTAKE. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED. HE H ELD THAT THE ASSESSEE COULD NOT FILE ANY JUSTIFICATION TO THE EFFECT THAT THE FIGURES MENTIONED BY THE AUDITORS IN THEIR TAX AUDIT REPORT WAS WRONG. ACCORDINGLY, THE ASSESSING OFFICER TOOK THE AMOUNT INA DMISSIBLE U/S 40(A)(I) OF THE IT ACT AS PER THE AUDITORS AT ` 1,61,37,740/- AND KEEPING IN VIEW THE FACT THAT THE ASSESSEE IN ITS COMPUTATION OF INCOME HAS ALSO DISALLOWED ` 1,21,27,526/-, THE BALANCE AMOUNT OF TECHNICAL FEE PAID TO M/S NDC LTD. AMOUNTING TO ` 40,10,214/- ( ` 1,61,37,740 - ` 1,21,27,526/-) WAS DISALLOWED AS PER SECTION 40(A)(I) OF THE IT ACT AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. 5. BEFORE THE LD. CIT (A), THE ASSESSEE SUBMITTED THAT I T HAD DECLARED THE INCOME OF ` 2,37,08,826/- AFTER CONSIDERING A DISALLOWANCE OF TECHNICAL FEE OF ` 1,21,27,526/- PAYABLE TO NDC LTD., AUSTRALIA U/S 40 (A)(I) OF THE ACT. HOWEVER, IT WAS SUBMITTED THAT T HERE WAS A DISCREPANCY IN THE FORM OF TYPOGRAPHICAL ERROR IN TH E TAX AUDIT REPORT WHICH REFLECTED HIGHER INADMISSIBLE AMOUNT OF ` 1,61,37,740/- U/S 40(A)(I) OF THE ACT INSTEAD OF ` 1,21,27,506/-. THE ASSESSEE ALSO SUBMITTED THE DETAILS IN THIS REGARD. CONSIDERING THE ABOVE, THE LD. CIT (A) NOTED THAT THE ASSESSEE HAS INCURRED EXPENDITURE ON COST OF TECHNICAL SECONDED EMPLOYEE AT ` 1,02,90,276/- WHICH PERTAINED TO LONG-TERM SECONDED EMPLOYEES ON WHICH THE ASSESSEE HAD DE DUCTED TAXES AND PAID THEM IN TIME. THE LD. CIT (A) OBSERVE D THAT NO DISALLOWANCE WAS CALLED FOR ON THIS AS THE CONTENTIONS O F THE ASSESSEE WERE FOUND IN ORDER. HOWEVER, THE BALANCE AMOUNT O F ` 21,50,893/- WHICH PERTAINED TO SHORT TERM SECONDED EXPATRIATE EMP LOYEES, THE ASSESSEES COUNSEL SUBMITTED THAT IN VIEW OF THE DTAA WITH AUSTRALIA, NO TAXES ARE DEDUCTIBLE. THE LD. CIT (A) OBSERVED TH AT THIS CONTENTION ITA NO.2149/DEL/2010 CO NO.337/DEL/2011 4 OF THE ASSESSEE IS NOT ACCEPTABLE AS THE ASSESSEES COUNSEL SHOW ED INABILITY TO FILE DOCUMENTARY EVIDENCES TO PROVE THA T THESE PERSONNEL ARE SHORT-TERM SECONDED EXPATRIATE EMPLOYEES. THE LD. CIT (A) HELD THAT THERE IS NO DOUBT THAT THE ASSESSEE TOOK HELP OF THESE TECHNICAL PERSONNEL IN THE INITIAL PHASE OF ITS BUSINESS AND, HEN CE, THE PAYMENT MADE TO THESE SO-CALLED SHORT-TERM SECONDED EXPATRIATE EMPLOYEES ARE TO BE TAKEN AS PAYMENTS ON ACCOUNT OF TECHNICAL SE RVICES ON WHICH NO TAX HAS TO BE DEDUCTED AND THE SAME CALLS FOR DISALL OWANCE U/S 40(A)(IA) OF THE ACT. ACCORDINGLY, THE LD. CIT (A) DIRECTED TO DELETE THE ADDITION OF ` 40,10,217/- AND, INSTEAD, MAKE AN ADDITION OF ` 21,50,893/-. 6. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS IN THE LIGHT OF THE MATERIAL AVAILABLE ON RECORD AND THE PRECEDENTS. WE FIND THA T THE LD. CIT (A) HAS GIVEN A FINDING THAT THE ASSESSEE HAS GIVEN PROPER EX PLANATION AND HAS BEEN ABLE TO ESTABLISH THAT THE TOTAL AMOUNT OF ` 1,02,90,276/- PERTAINED TO LONG-TERM SECONDED EMPLOYEES ON WHICH TH E ASSESSEE COMPANY HAS DEDUCTED TAXES AND PAID THEM IN TIME. HE NCE, THE LD. CIT (A) HAS RIGHTLY HELD THAT NO DISALLOWANCE IS CALLE D FOR IN THIS REGARD. HOWEVER, FOR THE BALANCE AMOUNT OF ` 21,50,893/-, THE LD. CIT (A) HAS RIGHTLY HELD THAT THE SAME IS HIT BY THE SECTION 40(A )(IA) OF THE ACT. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE LD. CIT (A) ACCORDING TO WHICH HE HAS DIRECTED TO DELETE THE ADD ITION OF ` 40,10,217/- AND INSTEAD MAKE AN ADDITION OF ` 21,50,893/-. 8. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISM ISSED. ITA NO.2149/DEL/2010 CO NO.337/DEL/2011 5 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AN D THE CO BY THE ASSESSEE BOTH STANDS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 23.11.20 12. SD- SD/- [RAJPAL YADAV] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 23.11.2012. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES