JCIT(OSD), New Delhi V. M/s ACL Mobile Ltd.,(Earlier Known as ACL Wireless Ltd.,), New Delhi

ITA 2244/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5084 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 26-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

1 ITA NO. 2244/DEL/2016 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBE R AND MS SUCHITRA KAMBLE, JUDIC IAL MEMBER ITA NO. 2244/DEL/2016 ( A .Y 2012-13) JCIT (OSD) CIRCLE-1(2), ROOM NO. 368, C. R. BUILDING I.P. ESTATE NEW DELHI (APPELLANT) VS ACL MOBILE LTD. (EARLIER KNOWN AS ACL WIRELESS LTD.) 104-107, HEMKUNT TOWER, 98, NEHRU PLACE NEW DELHI AACCA7370G (RESPONDENT) APPELLANT BY SH. SURENDER PAL, SR. DR RESPONDENT BY SH. R. S. SINGHVI, CA ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 29/02/2016 PASSED BY CIT(A)-1, NEW DELHI FOR ASSESSMENT YEAR 2 012-13. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT (A) HAS ERRED IN DELETING ADDITION OF RS.91,73,003/- MADE ON A/C OF DISALLOWANCE OF COMMISSION. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MOBILE APPLICATION SOFTWARE SERVICES. IT OFFERS A RANGE OF SMS, IVR A ND GPRS BASED APPLICATIONS AND SERVICES TO MOBILE OPERATORS, ENTERPRISES AND C ONSUMERS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE COMPA NY FILED ITS RETURN OF DATE OF HEARING 05.02.2019 DATE OF PRONOUNCEMENT 07.02.2019 2 ITA NO. 2244/DEL/2016 INCOME ON 29.09.2012 DECLARING AN INCOME OF RS.6, 2 9,25,720/-. ASSESSMENT U/S 143(3) WAS MADE ON 19.01.2015 DETERMINING TOTAL INCOME OF RS.7, 31,38,070/-. IN THE ASSESSMENT ORDER, ASSESSING OFF ICER DISALLOWED COMMISSION PAYMENT OF RS.91,73,003/- AND ALSO DISALLOWED EXPEN SES PERTAINING TO EARNING EXEMPT INCOME U/S 14A OF RS. 10,39,356/-. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL O F THE ASSESSEE. 5. THE LD. DR SUBMITTED THAT THE CIT(A) ERRED IN DE LETING ADDITION OF RS.91,73,003/- MADE ON ACCOUNT OF DISALLOWANCE OF C OMMISSION AND RELIED UPON THE ASSESSMENT ORDER. 6. THE LD. AR SUBMITTED THAT THE ISSUE CONTESTED BY THE DEPARTMENT IN THE PRESENT ASSESSMENT ORDER IS ALREADY DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 & 2010-11 BEING IT A NO. 1135/DEL/2013 ORDER DATED 31/1/2014 & ITA NO. 4420/DEL/2014 ORDER DATED 6/3/2018. 7. THE LD. DR COULD NOT REFUTE OR DISTINGUISH THE F ACTS OF THE PRESENT ASSESSMENT YEAR WITH THE FACTS OF EARLIER ASSESSMEN T YEARS. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE CIT(A) HELD AS UNDER:- DECISION I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND OBSERVATION OF THE ASSESSING OFFICER, IT IS SEEN THAT APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF MOBILE APPLICATION SOFTWARE. IT IS ALSO EXPORTING THESE SERVICES TO VARIOUS COUNTRIES AND FOR THAT APPELLANT HAS PAID C OMMISSION TO THE FOREIGN AGENTS. ASSESSING OFFICER TREATED THE ABOVE CLAIM O F COMMISSION AS OF CONTINGENT NATURE AND NOT INCURRED FOR THE PURPOSE OF APPELLANTS BUSINESS. THE AO HAS ALSO MENTIONED THAT THE APPELLANT WAS AS KED TO PRODUCE THE COPY 3 ITA NO. 2244/DEL/2016 OF THE BILLS RAISED BY THE AGENTS TO WHOM COMMISSIO N IS PAID. THE AR OF THE APPELLANT SUBMITTED THAT COMMISSION IS PAYABLE AS P ER AGREEMENT AND THERE IS NO NEED FOR SEPARATE INVOICES. THE APPELLANT HAS SHOWN REVENUE FROM OPERATIONS OF RS.54,18,53,347/- IN A.Y. 2011-12 AND RS.55,09,91,211/- IN A.Y. 2012-13. THE AO HAS ALSO MENTIONED THAT APPELL ANT HAS NOT SUBMITTED ANY DETAILS OF THE SERVICES RENDERED BY THOSE PARTI ES. THE EXPENDITURE CLAIMED BY THE APPELLANT IN NOT AT ALL COMMENSURATE WITH THE TURNOVER SHOWN BY THE APPELLANT. THE APPELLANT SUBMITTED THAT CLAI M OF COMMISSION EXPENSES IS SQUARELY COVERED BY THE APPELLANT ORDER IN APPEL LANTS OWN CASE FOR EARLIER YEARS FOR A.Y. 2009-10, 2010-11 AND 2011-12. THE AP PELLANT HAS FURTHER SUBMITTED THAT FACTS OF THE PRESENT YEAR ARE IDENTI CAL TO THE FACTS OF EARLIER YEARS AND NATURE OF PAYMENT MADE AND PARTIES TO WHO M COMMISSION PAYMENTS HAVE BEEN MADE ARE SAME AND GENUINENESS OF THE SAME CANNOT BE DISPUTED. THE AR FURTHER SUBMITTED THAT COMMISSION PAYMENT IS DIRECTLY LINKED WITH THE REVENUE BOOKED BY THE APPELLANT AND THE OBSERVATION MADE BY THE AO THAT SAME IS IN THE NATURE OF CONTINGENT LIABILITY IS HIGHLY IRRELEVANT AND MISPLACED. THE APPELLANT SUBMITTED THAT COMMISS ION HAS BEEN PAID IN TERMS OF THE AGREEMENT MADE BY THE APPELLANT WITH T HE FOREIGN AGENTS. THE AR ALSO SUBMITTED THAT FOREIGN AGENTS ARE INTEGRAL PART OF THE FOREIGN BUSINESS AND EXPENSES INCURRED FOR THE COMMISSION PURPOSES A RE WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES. VIDE ITS SUB MISSION DATED 18.01.2016, THE APPELLANT SUBMITTED COPIES OF AGREEMENT MADE WI TH VARIOUS PARTIES WITH RESPECT TO COMMISSION PAYMENT AND ALSO FORM 15CA SU BMITTED TO RBI FOR REMITTANCE OF COMMISSION TO THE FOREIGN AGENTS. THE APPELLANT SUBMITTED THAT THESE FOREIGN AGENTS PROVIDED SERVICES TO THE APPEL LANT REGARDING INTRODUCTION OF THE CUSTOMERS, NEGOTIATION FOR EXPORT CONSIDERAT IONS, COLLECTION OF DUES AND OTHER RELATED SERVICES. APPELLANT ALSO SUBMITTED TH AT THESE AGENTS DO NOT HAVE ANY OTHER PE OR BUSINESS CONNECTIONS IN INDIA, THER EFORE, THE COMMISSION IS FULLY ALLOWABLE TO THESE AGENTS. VIDE ITS SUBMISSION DATED 26.02.2016, APPELLANT SUB MITTED THAT THE MAJOR 4 ITA NO. 2244/DEL/2016 COMMISSION HAS BEEN PAID TO M/S M-NOVATIONS AND M/S ARAB ASIA TRADE. THE COMMISSION TO M/S M-NOVATIONS IS PAYABLE AT FIXED P ERCENTAGE OF NET REVENUE RECEIVED BY THE APPELLANT THROUGH ITS AGENTS. THE C OPY OF THE AGREEMENT OF THE SAID PARTY HAS BEEN FILED BY THE APPELLANT VIDE ITS SUBMISSION DATED 18.01.2016. THE APPELLANT SUBMITTED THE DETAILS OF THE TRANSACTIONS UNDERTAKEN OR REVENUE BOOKED BY M/S M-NOVATIONS WHI CH IS AS UNDER: OPERATOR REVENUE BOOKED RATE OF COMMISSION EXPENSE EXPENSE CLARO (AMERICELL S/A)-SMS CHAT 20,765,148 20% 4,153,030 TELECEL, PARAGUAY 793,505 25% 198,376 TIGO BOLIVIA-SMS 5,071,020 25% 1,267,755 GRAND TOTAL 26,629,673 5,619,161 FROM THE ABOVE DETAILS, IT IS SEEN THAT AGENTS HAS WORKED FOR VARIOUS COMPANIES. THE APPELLANT ALSO SUBMITTED THAT COMMIS SION MADE TO THIS PARTY HAS BEEN ALLOWED IN EARLIER YEARS. AS REGARDS THE ARAB ASIA TRADE, THE APPELLANT SUBMI TTED THAT IT HAS ENTERED INTO AN AGREEMENT WITH THE SAID PARTY ON 01.04.2011 FOR PROVIDING LIASONING ARRANGEMENT WITH TELECOM OPERATOR STC SAUDI IN SAUD I ARABIA. THE PAYMENT OF COMMISSION HAS BEEN MADE TO SAID PARTY AS PER AG REEMENT. ALL THESE FACTS ESTABLISH THAT COMMISSION PAYMENT HAVE BEEN MADE BY THE APPELLANT FOR PROMOTING ITS SALES BY THE AGENTS IN THE FOREIGN MARKET AND SAME IS CORROBORATED FROM THE COPIES OF THE AGREEME NTS FILED BEFORE ME MADE WITH DIFFERENT AGENTS. THE APPELLANT HAS ALSO FILED COPIES OF FORM 15CA SUBMITTED TO THE RBI FOR REMITTANCE OF COMMISSION T O THE FOREIGN AGENTS WHO DO NOT HAVE ANY PE OR BUSINESS CONNECTION IN INDIA. IT IS ALSO OBSERVED THAT COMMISSION PAYMENT HAS BEEN ALLOWED IN THE EARLIER YEARS TO THE VERY SAME PARTIES FOR RENDERING SERVICES, THEREFORE, THE ASSE SSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE COMMISSION PAYMENTS WH ICH HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE BY THE APPELLANT. HENCE, THE DISALLOWANCE OF COMMISSION PAYMENT IS DELETED. 5 ITA NO. 2244/DEL/2016 THUS, THE CIT(A) HAS RELIED UPON THE DECISION OF T HE TRIBUNAL IN ASSESSMENT YEAR 2009-10 & 2010-11 & 2011-12 WHEREIN THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE. THUS , THERE IS NO NEED TO INTERFERE WITH THE FINDINGS OF THE CIT(A). HENCE, APPEAL OF THE REVENUE IS DISMISSED. 9. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH FEBRUARY, 2019 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 07/02/2019 R. NAHEED COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 6 ITA NO. 2244/DEL/2016 DATE OF DICTATION 05.02 .201 9 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 06.02 .201 9 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 7 . 02.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 7 . 02.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7 . 02.2019 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER