ACIT, CHENNAI V. M/s. Changepond Technologies P. Ltd., CHENNAI

ITA 2499/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4475 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 26-08-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Double taxation relief; Opportunity of being heard; Earning of tax free income; Services rendered outside India; Retrospective amendment; Permanent establishment; Question of law; Initiation of penalty proceedings
• Section: 14A; 90

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER I . T.A. NO S . 2498 AND 2499 /MDS/201 6 ASSESSMENT YEAR S :20 0 8 - 0 9 AND 2013 - 14 THE ASSISTANT COMMISSIONER OF INCOME TAX, C ORPORATE CIRCLE 1( 2 ) , CHENNAI 600 034. VS. M/S. CHANGEPOND TECHNOLOGIES PVT. LTD., H - 2, 2 ND MAIN ROAD, SIPCOT IT P ARK, OMR, SIRUSERI, CHENNAI 603 103. [PAN : A ABCC3252G ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI SHIVA SRINIVAS , J CIT / RESPONDENT BY : SHRI PADAMCHAND KHINCHA, C.A. / DATE OF HEARING : 27 . 0 2 .201 7 / DATE OF P RONOUNCEMENT : 24 . 0 5 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : BOTH THE APPEAL S FILED BY THE REVENUE PERTAINING TO SAME ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDER S OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1 , C HENNAI BOTH DATED 0 2 . 0 6 .201 6 RELEVANT TO THE ASSESSMENT YEAR S 20 0 8 - 0 9 AND 2013 - 14. I.T.A. NO. 2498/MDS/2016 2. THE FIRST EFFECTIVE GROUND RAISED IN THIS APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE EXCLUSION OF EXPENSES INCURRE D IN I.T.A. NO S . 2498 & 2499 /M/16 2 FOREIGN CURRENCY FROM THE EXPORT TURNOVER. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS EXCLUDED THE FOLLOWING EXPENSES INCURRED IN FOREIGN CURRENCY FROM THE FIGURE OF EXPORT TURNOVER IN THE PROCESS OF COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT]: SL.NO. PARTICULARS AMOUNT 1. TRAVELLING & BOARDING 93,24,857 2. FOREIGN BRANCH EXPENSES 3,75,03,492 3. SOFTWARE APPLICATION HOSTING EXPENSES 2,29,66,453 4. BUSINESS DEVELOPMENT EXPENSES 69,47,107 TOTAL 7,67,41,909 THE ASSESSING OFFICER HAS REDUCED ABOVE EXPENSES FROM THE EXPORT TURNOVER ON THE GROUND THAT THE SAME HAVE BEEN INCURRED IN CONNECTION WITH RENDERING OF TECHNICAL SERVICES OUTSIDE INDIA AND THEREFORE HAVE TO BE EXCLUDED WHILE ARRIVING AT EX PORT TURNOVER AS PER THE DEFINITION OF THE SAID EXPRESSION UNDER SECTION 10A OF THE ACT. MOREOVER, THE ABOVE EXPENDITURE HAS NOT BEEN REDUCED FROM TOTAL TURNOVER AS PER THE DECISION IN THE CASE OF M/S. ISOFT PVT. LTD. IN I.T.A. NO. 465/MDS/2007 DATED 05 .06.2008. 2.1 THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEARS, THE LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 2.3 ON BEING AGGRI EVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND THE LD. DR AND STRONGLY SUPPORTED THE ORDER PASSED BY THE ASSESSING I.T.A. NO S . 2498 & 2499 /M/16 3 OFFICER. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESS EE BY THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEARS AND PRAYED THAT THE SAME SHOULD BE FOLLOWED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. 2.4 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GON E THROUGH THE ORDERS OF AUTHORITIES BELOW. ON SIMILAR FACTS AND CIRCUMSTANCES IN AN IDENTICAL ISSUE IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 & 2007 - 08 IN I.T.A. NOS. 876/MDS/2014 & 1674/MDS/2013 VIDE ORDER DATED 08.04.2015, THE COORDINATE BEN CHES OF THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: 4. THE FIRST EFFECTIVE GROUND RAISED BY THE REVENUE FOR THE ASSESSMENT YEAR 2007 - 08 AND THE SECOND GROUND RAISED BY THE REVENUE FOR THE ASSESSMENT YEAR 2006 - 07, BE ING SAME, IS RELATING TO EXPENSES INCURRED IN FOREIGN CURRENCY. THE FOREIGN CURRENCY EXPENSES INCURRED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2007 - 08 AND 2006 - 07 ARE DISALLOWED BY THE ASSESSING OFFICER. ON APPEAL, THE LD. CIT(A), BY FOLLOWING THE DECISIO N OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN I.T.A. NOS.2222 & 2223/MDS/2007, DIRECTED THE ASSESSING OFFICER TO FOLLOW THE ORDERS OF THE TRIBUNAL AND ALLOWED THE APPEAL FILED BY THE ASSESSEE. 5. AFTER HEARING BOTH SIDES, WE FIND THAT THE ABOVE ISSUE FOR B OTH THE ASSESSMENT YEARS IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2003 - 04 IN I.T.A. NO. 1169/MDS/2007 DATED 03.10.2012, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 2. THE FIRST GROUND RAISED BY THE RE VENUE IS THAT THE COMMISSIONER OF INCOME - TAX(APPEALS) HAS ERRED IN HOLDING THAT I.T.A. NO S . 2498 & 2499 /M/16 4 ESTABLISHMENT AND MAINTENANCE EXPENSES PERTAINING TO FOREIGN BRANCH ARE NOT EXCLUDIBLE FROM EXPORT TURNOVER WHILE COMPUTING RELIEF UNDER SEC.10A. THIS ISSUE WAS CONSIDERED BY INCOME - TAX APPELLATE TRIBUNAL, CHENNAI IN ASSESSEE S OWN CASE, IN THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2003 - 04 REPORTED IN 119 TTJ 18 (CHENNAI). IN THE SAID APPEAL, THE THIRD GROUND RAISED BY THE ASSESSEE WAS THAT THE COMMISSIONER OF I NCOME - TAX(APPEALS) HAS ERRED IN CONCLUDING THAT THE EXPENSES INCURRED OUTSIDE INDIA ON SALARIES, TRAVELLING AND OTHER PERQUISITES IN RESPECT OF EMPLOYEES ARE INCURRED IN CONNECTION WITH PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. THE FOURTH GROUND WAS THA T THE COMMISSIONER OF INCOME - TAX(APPEALS) HAS ERRED IN NOT APPRECIATING THAT THE ASSESSEE IS NOT ENGAGED IN PROVIDING ANY TECHNICAL SERVICES OUTSIDE INDIA AND, THEREFORE, THE QUESTION OF EXCLUSION OF EXPENSES FROM EXPORT TURNOVER DOES NOT ARISE. 3. THESE GROUNDS WERE CONSIDERED BY THE TRIBUNAL IN PARAGRAPHS 10 TO 14 OF THEIR ORDER DATED 15.2.2008. THE TRIBUNAL HELD THAT THE TECHNICAL SERVICES PROVIDED OUTSIDE INDIA BY THE ASSESSEE WAS FOR DEVELOPMENT OF COMPUTER SOFTWARE WHICH WAS ALSO A PART OF THE REQU IREMENT OF THE ASSESSEE IN DEVELOPMENT OF SOFTWARE AS PER THE REQUIREMENTS AND SPECIFICATIONS OF THE CLIENTS. THEREFORE, THE TRIBUNAL HELD THAT THE SAID ACTIVITY OF THE ASSESSEE COMES UNDER THE DEFINITION OF ON SITE DEVELOPMENT OF COMPUTER SOFTWARE INCLUD ING SERVICES FOR DEVELOPMENT OF SOFTWARE OUTSIDE INDIA AS PROVIDED IN EXPLANATION 3 TO SUB - SEC.(8) OF SEC.10A OF THE ACT. ACCORDINGLY, THE TRIBUNAL HELD THAT THE EXPENSES INCURRED ON SALARIES, TRAVELLING AND OTHER PERQUISITES SHALL BE INCLUDED IN THE EXPO RT TURNOVER OF THE ASSESSEE. 4. IN VIEW OF THE ABOVE ORDER OF THE CO - ORDINATE BENCH IN ASSESSEE S OWN CASE, WE FIND THAT THE GROUND RAISED BY THE REVENUE ON THIS ISSUE FAILS. 6. THE LD. DR HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THE ABOVE DECISION OF THE TRIBUNAL HAS BEEN EITHER MODIFIED OR REVERSED BY ANY HIGHER COURTS. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, THE GROUND RAISED BY THE REVENUE FOR THE ASSESSMENT YEARS 2007 - 08 AND 2006 - 07 IS DISMISSE D. 2.5 THE LD. DR COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE TRIBUNAL. HENCE, RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE COORDINATE BENCHES I.T.A. NO S . 2498 & 2499 /M/16 5 OF THE TRIBUNAL, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 3. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE EXCLUSION OF 50% OF INTERNET ACCESS CHARGES AND 100% VISA PROCESSING CHARGES FROM THE EXPORT TURNOVER WITH OUT APPRECIATING THE FACT THAT THE SAID EXPENSES WERE NOT FORMING PART OF THE EXPORT TURNOVER AS DEFINED IN EXPLANATION 2(IV) TO SECTION 10A OF THE ACT. 3.1 THE ASSESSEE HAS CLAIMED TO HAVE INCURRED AN AMOUNT OF .27,26,622/ - TOWARDS TELECOMMUNICATION (I NTERNET ACCESS CHARGES), PORTION OF WHICH CAN BE ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA. BY FOLLOWING THE DECISION IN THE CASE OF ISOFT PVT. LTD. (SUPRA), THE ASSESSING OFFICER EXCLUDED 50% OF INTERNET ACCESS CHARGES FROM THE EXPOR T TURNOVER AND NOT FROM THE TOTAL TURNOVER. 3.2 FURTHER, THE ASSESSEE HAS CLAIMED TO HAVE SPENT VISA PROCESSING FEES OF 10,23,892/ - TOWARDS PERSONNEL BEING SENT ABROAD TOWARDS DELIVERY OF SOFTWARE. SINCE THE ASSESSEE HAS NOT EXCLUDED THIS ITEM OF EXPENDITURE FROM THE EXPORT TURNOVER AS REQUIRED IN SECTION 2(IV) OF SECTION 10A OF THE ACT, MAINTAINING CONSISTENCY ON THIS CLA IM AS DONE IN PREVIOUS YEARS. 3.3 THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) CHALLENGING EXCLUSION OF 50% OF INTERNET ACCESS CHARGES AND 100% VISA I.T.A. NO S . 2498 & 2499 /M/16 6 CHARGES FROM EXPORT TURNOVER IN THE PROCESS OF COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT. BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEARS, THE LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 3.4 ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND THE LD. DR AND STRONGLY SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EAR LIER ASSESSMENT YEARS AND PRAYED THAT THE SAME SHOULD BE FOLLOWED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. 3.5 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. SO FAR AS EXCLUSION OF 50% OF INTERNET ACCESS CHARGES, O N SIMILAR FACTS AND CIRCUMSTANCES IN AN IDENTICAL ISSUE IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 & 2007 - 08 IN I.T.A. NOS. 876/MDS/2014 & 1674/MDS/2013 VIDE ORDER DATED 08.04.2015, THE COORDINATE BENCHES OF TH E TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: 7. THE NEXT COMMON GROUND RAISED BY THE REVENUE FOR THE ASSESSMENT YEAR 2007 - 08 AND 2006 - 07 IS RELATING TO TELECOMMUNICATION CHARGES. THE ASSESSING OFFICER EXCLUDED INTER NET ACCESS CHARGES BOTH FROM THE EXPORT TURNOVER AND TOTAL TURNOVER AND ACCORDINGLY DISALLOWED 50% OF THE EXPENSES INCURRED BY THE ASSESSEE FOR BOTH THE ASSESSMENT I.T.A. NO S . 2498 & 2499 /M/16 7 YEARS. ON APPEAL, THE LD. CIT(A), BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE S O WN CASE IN I.T.A. NOS.2222 & 2223/MDS/2007, DIRECTED THE ASSESSING OFFICER TO FOLLOW THE ORDERS OF THE TRIBUNAL AND ALLOWED THE APPEAL FILED BY THE ASSESSEE. 8. AFTER HEARING BOTH SIDES, WE FIND THAT THE ABOVE ISSUE FOR BOTH THE ASSESSMENT YEARS IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 IN I.T.A. NOS. 2222 & 2223/MDS/2008 DATED 30.11.2012, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 6. BOTH THE ASSESSING OFFICER AND THE COMM ISSIONER OF INCOME TAX (APPEALS) HELD THAT 50% OF TELECOMMUNICATION CHARGES ARE ATTRIBUTABLE FOR DELIVERY OF GOODS OUTSIDE INDIA AND, THEREFORE, THE SAME ARE TO BE EXCLUDED FROM EXPORT TURNOVER. THE COMMISSIONER OF INCOME TAX (APPEALS), IN HIS ORDER HELD A S UNDER : - THE NEXT COMMON GROUND OF APPEAL FOR BOTH THE ASSESSMENT YEARS IS REGARDING EXCLUSION OF 50% OF TELECOMMUNICATION CHARGES FOR BOTH THE ASSESSMENT YEARS FROM THE FIGURE OF EXPORT TURNOVER. THE LEARNED ASSESSING OFFICER IN HIS ORDER OF THE AY 2 00405 HAS HELD THAT 50% OF THE TELECOMMUNICATION CHARGES OF RS. 6,78,750/ ARE ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA. SIMILAR CONCLUSION WAS MADE IN THE ORDER PASSED FOR THE AY 200506 OF RS.14,89,526/ - . ACCORDINGLY, TELECOMMUNIC ATION CHARGES TO THE EXTENT OF 50% WERE REDUCED FROM THE EXPORT TURNOVER. I HAVE CONSIDERED THE SUBMISSIONS AND THE ARGUMENTS RELATING TO THE IMPUGNED ISSUE. THE DEFINITION OF 'EXPORT TURNOVER' IN SECTION 10A MANDATES THE EXCLUSION OF, INTER ALIA, THE 'TEL ECOMMUNICATION CHARGES' ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA. THE LANGUAGE EMPLOYED IN THE SAID DEFINITION IS 'ATTRIBUTABLE' AND NOT THE EXPRESSION 'DERIVED'. IT IS A SETTLED LEGAL PRINCIPLE THAT THE EXPRESSION 'DERIVED' IS MORE RIGOROUS THAN THE TERM 'ATTRIBUTABLE' AS HELD IN THE CASE OF THE SUPREME COURT'S DECISIONS IN STERLING FOODS'S CASE (237 ITR 79). IN THE PRESENT CASE, IT IS NOT A CASE .WHERE THE LEARNED ASSESSING OFFICER HAS REDUCED THE ENTIRE TELECOMMUNICATION EXPENSES F ROM THE EXPORT TURNOVER. ONLY 50% OF THE IMPUGNED EXPENDITURE HAS BEEN EXCLUDED FROM EXPORT TURNOVER. IT ALSO CANNOT BE SAID THAT NO EXPENDITURE WAS INCURRED FOR THE DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA. THE ORDER PASSED BY THE CIT(A) III FOR THE ASSESSMENT YEAR 200304 IN APPELLANTS OWN CASE HAS UPHELD THE EXCLUSION OF 50% OF TELECOMMUNICATION CHARGES FROM THE EXPORT TURNOVER. THE ORDER OF THE ITAT, CHENNAI FOR THE AY 2003 - 04 ALSO DOES NOT RECORD A CONTRARY FINDING TO THE I.T.A. NO S . 2498 & 2499 /M/16 8 ORDER OF THE CIT (A) - II I. HOWEVER, THE LEARNED AR SUBMITS THAT THE TELECOMMUNICATION EXPENDITURE INCLUDES TELEPHONE CHARGES AND INTERNET ACCESS CHARGES WHICH ARE NOT AT ALL INCURRED IN RELATION TO DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA. THE CONTENTIONS OF THE APPELLANT ARE FOUND TO BE JUSTIFIED TO SOME EXTENT ONLY. I HAVE CONSIDERED THE ISSUE AND SUBMISSION OF THE AR CAREFULLY AND I AM OF THE OPINION THAT EXCLUSION OF TELECOMMUNICATION CHARGES FROM THE EXPORT TURNOVER TO THE EXTENT OF 50% IS JUSTIFIED IN THE PRESENT CASE. HO WEVER, THE LEARNED ASSESSING OFFICER IS DIRECTED NOT TO EXCLUDE THE TELEPHONE CHARGES AND INTERNET ACCESS CHARGES WHICH ARE NOT INCURRED IN RELATION TO DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA. THE REMAINING PART OF THE TELECOMMUNICATION CHARGES IS TO B E EXCLUDED ONLY TO THE EXTENT OF 50%. IN THE RESULT, THIS GROUND OF APPEAL IS PARTLY ALLOWED IN THE AFORESAID MANNER. ON GOING THROUGH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), WE FIND THAT THERE IS NO INFIRMITY IN HOLDING THAT 50% OF TELEC OMMUNICATION CHARGES ARE NOT TO BE EXCLUDED FROM EXPORT TURNOVER. 9. THE LD. DR HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THE ABOVE DECISION OF THE TRIBUNAL HAS BEEN EITHER MODIFIED OR REVERSED BY ANY HIGHER COURTS. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, THE GROUND RAISED BY THE REVENUE FOR THE ASSESSMENT YEARS 2007 - 08 AND 2006 - 07 IS DISMISSED. 3.6 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE COORDINATE BENCHES OF THE TRIBUNAL, THE ISSUE WITH RE GARD TO EXCLUSION OF 50% OF INTERNET ACCESS CHARGES FROM THE EXPORT TURNOVER IS DECIDED AGAINST THE REVENUE. 3.7 WITH REGARD TO THE GROUND RAISED BY THE ASSESSEE IN RESPECT OF EXCLUSION OF 100% OF VISA CHARGES FROM THE EXPORT TURNOVER , THE LD. CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISIONS OF THE COORDINATE BENCHES OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER I.T.A. NO S . 2498 & 2499 /M/16 9 ASSESSMENT YEARS. HOWEVER, ON PERUSAL OF THE ORDERS OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSME NT YEARS 2004 - 05 & 2005 - 06 IN I.T.A. NOS. 2222 & 2223/MDS/2008 DATED 30.11.2012 AS WELL AS ASSESSMENT YEARS 2006 - 07 & 2007 - 08 IN I.T.A. NOS. 876/MDS/2014 & 1674/MDS/2013 DATED 08.04.2015, THERE WAS NO SUCH ISSUE ADJUDICATED AND DECIDED BY THE TRIBUNAL. UND ER THIS FACT AND CIRCUMSTANCES, WE REMIT THE MATTER BACK TO THE LD. CIT(A) TO SPECIFICALLY ADJUDICATE THE ISSUE OF EXCLUSION OF 100% OF VISA CHARGES FROM EXPORT TURNOVER AND PASS SPEAKING ORDER AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE AS WELL AS ASSESSING OFFICER. THUS, THIS PART OF THE GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 4. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN ALLOWING THE CARRY FORWARD OF LOSSES PERTAINING TO THE ASSESSMENT YEAR 2007 - 08. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE HAS SET OFF THE BROUGHT FORWARD BUSINESS LOSSES OF ASSESSMENT YEAR 2007 - 08 TO THE TUNE OF .74,17,121/ - FROM THE PROFIT DERIVED AFTER THE CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT DURING THE CURRENT YEAR. AS PER THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2007 - 08, IT WAS DETERMINED THAT THE ASSESSEE WAS NOT HAVING ANY BROUGHT FORWARD LOSSES TO SET OFF WITH THE PROFIT OF THE CURRENT YEAR. THE O RIGINAL CLAIM OF LOSSES IN ALL THE PRECEDING YEARS HAVE BEEN ABSORBED FIRST AND DEDUCTION I.T.A. NO S . 2498 & 2499 /M/16 10 UNDER SECTION 10A OF THE ACT WAS GRANTED NEXT. THEREFORE, THE ASSESSING OFFICER HAS REJECTED THE CLAIM OF THE ASSESSEE OF SETTING OFF OF THE BROUGHT FORWARD LOSSES IN THE CURRENT YEAR. 4.1 THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEARS, THE LD. CIT(A) HAS OBSERVED AS UNDER: 12. I HAVE GONE THROUGH THE FAC TS IN ISSUE AND SUBMISSIONS OF THE AR. THE APPELLANT WILL BE ELIGIBLE TO SET OFF THE LOSS OF EARLIER YEARS, ONCE THE ORDER GIVING EFFECT TO THE ORDER OF CIT(A) AND ITAT IN RESPECT OF AY 2007 - 08 IS PASSED. IN VIEW OF ORDERS OF CIT(A) AND ITAT FOR AY 2007 - 0 8 THE AO IS DIRECTED TO VERIFY AND ALLOW THE BROUGHT FORWARD LOSSES BASED ON THE GIVING EFFECT ORDER TO BE PASSED FOR THE AY 2007 - 08. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 4.2 AFTER HEARING BOTH SIDES, WE FIND NO INFIRMITY IN THE ORDE R PASSED BY THE LD. CIT(A) AND THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 5. THE LAST GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT R.W. RULE 8D. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE S INVESTMENTS IN TAX FREE INCOME DERIVING TERRITORY WAS .2,77,88,285/ - AND THE ASSESSEE HAS RECEIVED DIVIDEND OF .18,694/ - , WHICH REMAINS TAX - FREE. BY FOLLOWING THE DECISION OF GO DREJ & BOYCE LTD. AND APPLYING THE PROVISIONS OF RULE 8D, THE ASSESSING OFFICER I.T.A. NO S . 2498 & 2499 /M/16 11 DETERMINED THE EXPENDITURE OF .1,04,514/ - RELATABLE TO INVESTMENTS IN TAX FREE TERRITORY AND ADDED TO THE TAXABLE INCOME OF THE ASSESSEE. 5.1 ON APPEAL, ON VERIFICATION OF D ETAILS AVAILABLE ON RECORD, THE LD. CIT(A) HAS OBSERVED THAT A SUM OF .374/ - COMPUTED AT 2% OF THE DIVIDENDS OF .18,694/ - RECEIVED BY THE ASSESSEE HAS BEEN DISALLOWED IN THE RETURN OF INCOME. THE LD. CIT(A) HAS NOTED THAT RULE 8D IS NOT APPLICABLE FOR T HE ASSESSMENT YEAR 2008 - 09 AS IT WAS INTRODUCED W.E.F. 24.03.2008. BY FOLLOWING THE DECISION IN THE CASE OF SIMPSON & CO. LTD. V. DCIT IN TCA 2621 OF 2006 DATED 15.10.2012, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DISALLOW 2% OF EXEMPT INCOME TOWAR DS EXPENDITURE INCURRED TO EARN EXEMPT INCOME. 5.2 ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5.3 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. AGAINST THE I NVESTMENT OF .2,77,88,285/ - THE ASSESSEE HAS RECEIVED DIVIDEND OF .18,694/ - . ON VERIFICATION OF PROFIT AND LOSS ACCOUNT, THE ASSESSING OFFICER HAS NOTICED THAT THERE WAS NO EXPENDITURE DIRECTLY ATTRIBUTABLE TO THE INVESTMENTS. FURTHER, HE HAS NOTICED THA T INTEREST OUTGO FOR THE YEAR WAS .64,511/ - . BY APPLYING CLAUSE (I), (II) AND (III) TO RULE 8D, THE ASSESSING OFFICER HAS DISALLOWED .1,04,140/ - AS AN EXPENDITURE RELATABLE TO INVESTMENT IN TAX FREE TERRITORY . I.T.A. NO S . 2498 & 2499 /M/16 12 ON APPEAL, THE LD. CIT(A) DIRECTED THE ASSES SING OFFICER TO RESTRICT THE DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A OF THE ACT TO 2% OF THE DIVIDEND INCOME. D URING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAS SUBMITTED BEFORE THE LD. CIT(A) THAT RULE 8D WAS NOTIFIED ON 24.03.2008 AND THE REFORE, IT IS NOT APPLICABLE TO THE ASSESSMENT YEAR 2008 - 09 AND TO THIS SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) ALSO AGREED UPON . WITH REGARD TO APPLICATION OF RULE 8D, THE HON BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V. DCIT [ 2010] 328 ITR 81 HAS HELD AS UNDER: . HOWEVER, UNLESS EXPRESSLY OR BY NECESSARY IMPLICATION, A CONTRARY PROVISION IS MADE, NO RETROSPECTIVE EFFECT IS TO BE GIVEN TO ANY RULE SO AS TO PREJUDICIALLY AFFECT THE INTERESTS OF THE ASSESSEE. THE RULES WERE NOT IFIED TO COME INTO FORCE ON MARCH 24, 2008. IT IS A TRITE PRINCIPLE OF LAW THAT THE LAW WHICH WOULD APPLY TO AN ASSESSMENT YEAR IS THE LAW PREVAILING ON THE FIRST DAY OF APRIL. CONSEQUENTLY, RULE 8D WHICH HAS BEEN NOTIFIED ON MARCH 24, 2008, WOULD APPLY WI TH EFFECT FROM ASSESSMENT YEAR 2008 - 09 . IN VIEW OF THE ABOVE LAW LAID DOWN BY OF THE HON BLE MUMBAI HIGH COURT THAT THE APPLICATION OF PROVISIONS OF R ULE 8D NOTIFIED WITH EFFECT FROM 24.03.2008 WOULD APPLY WITH EFFECT FROM ASSESSMENT YEAR 2008 - 09 , WHICH WAS NOT FOUND TO HAVE BEEN REVERSED BY THE HIGHER COURT, THE QUESTION OF RESTRICTION OF DISALLOWANCE @ 2% AS WELL AS APPLICATION OF THE ABOVE SAID NOTIFICATION WHETHER FROM RETROSPECTIVELY OR PROSPECTIVELY DOES NOT ARISE. FURTHER, IN THE CASE OF M/S. TVS M OTOR COMPANY LTD. V. JCIT IN I.T.A. NO. 1707/MDS/2012 DATED 27.04.2016, THE TRIBUNAL HAS DECIDED THAT RULE 8D SHALL BE APPLICABLE FROM THE ASSESSMENT YEAR 2008 - 09 ONWARDS BY FOLLOWING VARIOUS DECISION OF I.T.A. NO S . 2498 & 2499 /M/16 13 THE C BENCH OF THE TRIBUNAL. ACCORDINGLY, WE SET A SIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE . 5.4 HOWEVER, ON PERUSAL OF THE ASSESSMENT ORDER, WE FIND THAT NO DETAILS WITH REGARD TO INVESTMENTS OF THE ASSESSEE ARE AVAILABLE. MOREOVER, ASSESSING OFFICER MADE THE DISALLOWANCE OVER AND ABOVE THE DIVIDEN D INCOME EARNED BY THE ASSESSEE. AGAINST THE DIVIDEND INCOME OF .18,694/ - , THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE TO THE EXTENT OF .1,04,514/ - . IN THE CASE OF JOINT INVESTMENTS PVT. LTD. V. CIT 372 ITR 694, THE HON BLE DELHI HIGH COURT HAS OBSE RVED AND THE HEAD - NOTES ARE AS UNDER: INCOME - EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME - DISALLOWANCE - ASSESSEE WAS ENGAGED IN DIVERSE INVESTMENT ACTIVITIES AND IN THE COURSE OF ITS BUSINESS DERIVED INCOME FROM RENT, SALE OF IN VESTMENTS, DIVIDEND AND INTEREST - FOR AY 2009 - 10, ASSESSEE HAD REPORTED A LOSS OF SPECIFIED AMOUNT - ASSESSEE DECLARED TAX EXEMPT INCOME IN THE FORM OF DIVIDEND TO THE TUNE OF RS.4 8 ,90,000 - ASSESSEE VOLUNTEERED RS.2,97,440 AS ATTRIBUTABLE U/S14A FOR THE PURPOS E OF DISALLOWANCE - AO ON THE BASIS OF HIS OWN UNDERSTANDING OF RULE 8 D OF THE INCOME TAX RULES DISALLOWED THE SUM U/S 14A READ WITH RULE 8 D - ASSESSEE CLAIMED THAT THE ENTIRE TAX EXEMPT INCOME OF RS.48,90,000 WAS LOWER THAN THE DISALLOWANCE - CIT(A) AND ITAT UP HELD AO'S ORDER - HELD, IN CASE OF CIT(A) V. TAIKISHA ENGINEERING INDIA LTD., IT WAS HELD BY PRESENT COURT THAT IN VIEW OF THE PECULIAR WORDING OF SECTION 14A (2) THAT COMPUTATION OR DISALLOWANCE OF THE ASSESSEE, OR CLAIM THAT NO EXPENDITURE WAS INCURRED FOR EARNING EXEMPT INCOME SHOULD BE EXAMINED WITH REFERENCE TO THE ACCOUNTS AND ONLY IF THE ASSESSEE'S EXPLANATION WAS UNSATISFACTORY, CAN THE AO PROCEED FURTHER - IN THE PRESENT CASE, FIRSTLY IT WAS NOT DISCLOSED BY THE AO THAT THE APPELLANT/ASSESSEE'S CLAIM F OR ATTRIBUTING RS.2,97,440 AS A DISALLOWANCE U/S 14A HAD TO BE REJECTED - SECONDLY, THERE APPEARS TO HAVE BEEN NO SCRUTINY OF THE ACCOUNTS BY THE AO AN ASPECT WHICH WAS COMPLETELY UNNOTICED BY THE CIT(A) AND THE ITAT - THIRDLY, AN IMPORTANT I.T.A. NO S . 2498 & 2499 /M/16 14 ANOMALY WHICH INSTA NT COURT CANNOT BE UNMINDFUL OF WAS THAT WHEREAS THE ENTIRE TAX EXEMPT INCOME WAS RS.48,90,000, THE DISALLOWANCE ULTIMATELY DIRECTED WORKS OUT TO NEARLY 110 PERCENT OF THAT SUM, THAT IS RS.52,56,197 - BY NO STRETCH OF IMAGINATION CAN SECTION 14A OR RULE 8D BE INTERPRETED SO AS TO MEAN THAT THE ENTIRE TAX EXEMPT INCOME WAS TO BE DISALLOWED - THE WINDOW FOR DISALLOWANCE WAS INDICATED IN SECTION 14A, AND WAS ONLY TO THE EXTENT OF DISALLOWING EXPENDITURE 'INCURRED BY THE ASSESSEE IN RELATION TO THE TAX EXEMPT INCO ME' - THIS PROPORTION OR PORTION OF THE TAX EXEMPT INCOME SURELY CANNOT SWALLOW THE ENTIRE AMOUNT AS HAS HAPPENED IN THIS CASE - ITAT AS WELL AS THE AO AND CIT(A) HAD ESCAPED THE MANDATE OF SECTION 14A(2) - IMPUGNED ORDER OF THE ITAT WAS SET ASIDE - QUESTION OF LA W WAS ANSWERED IN FAVOUR OF THE ASSESSEE - ORDER OF THE AO WAS SET ASIDE - INITIATION OF PENALTY PROCEEDINGS ALSO WAS SET ASIDE - MATTER WAS REMITTED TO THE AO FOR FRESH CONSIDERATION IN ACCORDANCE WITH THE ABOVE DIRECTIONS ASSESSEE S APPEAL ALLOWED. 5.5 F URTHER, THE HON BLE HIGH COURT OF KARNATAKA IN THE CASE OF UNITED BREWERIES LTD. VS. DCIT IN [2016] 72 TAXMANN.COM (KARNATAKA) WHEREIN HELD THAT: - 8. SO FAR AS SECOND QUESTION OF APPLICABILITY OF SEC. 14A OF THE ACT TO THE EXPENSES INCURRED BY THE APPELL ANT TOWARDS INTEREST AND OTHERS ON THE LOAN BORROWED IS CONCERNED, THE FINDING OF THE TRIBUNAL IS AT PARAGRAPH 11 WHICH READS AS UNDER: 11. THE REVENUE IS IN APPEAL AND WE HAVE CONSIDERED THE RIVAL CONTENTIONS. IN OUR VIEW, THE RECENT JUDGMENT OF THE SPE CIAL BENCH IN BOMBAY IN ITO V. DAGA CAPITAL MANAGEMENT PVT. LTD (2009) 312 ITR (AT) 1, IS APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THIS ORDER, IT HAS BEEN HELD THAT SECTION 14A IS APPLICABLE EVEN WHERE THE MOTIVE IN ACQUIRING THE SHARES WAS TO OBTAI N CONTROLLING INTEREST IN THE COMPANIES. THE FINDING OF THE COMMISSIONER OF INCOME - TAX (APPEALS) CANNOT, THEREFORE, BE UPHELD AS IT IS CONTRARY TO THE DECISION OF THE SPECIAL BENCH. WE, ACCORDINGLY, UPHOLD IN PRINCIPLE THE APPLICABILITY OF SECTION 14A. HOW EVER, IT IS FOR THE ASSESSING OFFICER TO ASCERTAIN FROM THE FACTS OF THE CASE AS TO HOW MUCH INTEREST BEARING BORROWINGS WAS UTILIZED TO ACQUIRE SHARES IN THE COMPANIES. IT IS ALSO NECESSARY TO SEE AS TO WHETHER ANY INTEREST BEARING BORROWED FUNDS WERE USE D IN MAKING THE ADVANCES AND EXPENDITURE IN THE I.T.A. NO S . 2498 & 2499 /M/16 15 CASE OF CASTLE BREWERIES. THIS FACTUAL EXERCISE HAS TO BE CARRIED OUT BY THE ASSESSING OFFICER AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. THE ASSESSING OFFICER MAY MAKE THE DISALLOWANCE OF I NTEREST U/S. 14A ONLY IF IT IS FOUND THAT INTEREST BEARING BORROWED FUNDS WERE USED TO ACQUIRE SHARES IN THE COMPANIES OR FOR MAKING ADVANCES TO CASTLE BREWERIES. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE ABOVE DIRECTI ONS. THE GROUND IS TREATED AS PARTLY ALLOWED. 9. THE AFORESAID SHOWS THAT THE TRIBUNAL AFTER HOLDING IN PRINCIPLE THE APPLICABILITY OF SEC. 14A, HAS FURTHER DIRECTED THE ASSESSING OFFICER TO ASCERTAIN FROM THE FACTS OF THE CASE AS TO HOW MUCH INTEREST BE ARING BORROWINGS WAS UTILIZED TO ACQUIRE SHARES IN THE COMPANIES AND THE MATTER IS RELEGATED TO THE ASSESSING OFFICER. AS PER THE LANGUAGE IN SEC. 14A, THE ENQUIRY HAS TO BE UNDERTAKEN BY THE ASSESSING OFFICER WHICH HAS BEEN SO ORDERED BY THE TRIBUNAL. HEN CE, IT CAN BE SAID THAT THE TRIBUNAL HAS EXERCISED THE DISCRETION WHERE RIGHTS OF BOTH SIDES ARE KEPT OPEN FOR ADMISSIBLE DEDUCTION UNDER SEC. 14A. WHEN SUCH A DISCRETION IS EXERCISED AND THE RIGHTS OF THE APPELLANT - ASSESSEE IS ALSO KEPT OPEN TO SATISFY TH E ASSESSING OFFICER, IT CANNOT BE SAID THAT ANY SUBSTANTIAL QUESTIONS OF LAW WOULD ARISE FOR CONSIDERATION, AS SOUGHT TO BE CANVASSED. IN OUR VIEW, AT THE STAGE OF ENQUIRY UNDER SEC. 14A, IT IS OPEN TO THE ASSESSING OFFICER TO INDEPENDENTLY CONSIDER THE MA TTER FOR ADMISSIBILITY OF THE INTEREST ON BORROWINGS AND IF YES TO WHAT EXTENT. HENCE, WHEN THE QUESTION AT LARGE IS FURTHER TO BE CONSIDERED BY THE ASSESSING OFFICER, WE DO NOT FIND ANY FURTHER OBSERVATIONS ARE REQUIRED TO BE MADE IN THIS REGARD. IN ANY C ASE, THE QUESTION OF LAW AS SOUGHT TO BE CANVASSED WOULD NOT ARISE FOR CONSIDERATION AT THIS STAGE ON THE SAID ASPECTS BE CANVASSED. 5.6 FURTHER, THERE IS A RECENT JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CHETTINAD LOGISTICS P LTD. I N TC(A) NO.24 OF 2017 DATED 13.03.2017. BEING SO, IN OUR OPINION IT IS APPROPRIATE TO REMIT THE ISSUE TO THE FILE OF A SSESSING O FFICER TO CONSIDER THE DISALLOWANCE U NDER SECTION 14A R.W. RULES 8D TO FIND OUT WHETHER INTEREST BEARINGS BORROWED FUND S WERE US ED FOR I.T.A. NO S . 2498 & 2499 /M/16 16 MAKING INVESTMENTS . WITH THIS OBSERVATION, WE RESTORE THE ISSUE TO THE FILE OF A SSESSING O FFICER FOR FRESH CONSIDERATION. I.T.A. NO. 2499/MDS/2016 [A.Y. 2013 - 14] 6. THE FIRST GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN RESTRICTING THE 14A DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME EARNED. AGAINST THE AVERAGE INVESTMENT OF .19,33,20,216/ - IN EQUITY SHARES/MUTUAL FUNDS OF DIFFERENT COMPANIES, THE ASSESSEE HAS ADMITTED DIVIDEND INCOME OF .60,868/ - BUT THE ASSESSEE HAS NOT ADMITTED ANY EXPENDITURE FOR MAKING INVESTMENTS OR THE ASSESSEE HAS MAINTAINED ANY SEPARATE BOOKS OF ACC OUNTS FOR THE PURPOSE OF DIVIDEND INCOME ALONG WITH DETAILS OF PERSON WHO ARE INVOLVED IN THE DECISION MAKING PROCESS AND THEIR EXPENDITURE. THEREFORE, BY APPLYING THE PROVISIONS OF RULE 8D, THE ASSESSING OFFICER DETERMINED THE EXPENDITURE OF .18,71,582/ - RELATABLE TO INVESTMENTS AND ADDED TO THE TAXABLE INCOME OF THE ASSESSEE. 6.1 ON APPEAL, BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF AMBATTUR CLOTHING LTD. V. JCIT IN I.T.A. NO. 1436, 1643/MDS/2014 & 910/MDS/2015 DATED 28.12.2015, WHEREIN T HE DECISION IN THE CASE OF JOINT INVESTMENTS P. LTD. V. CIT 372 ITR 694 (DELHI) HAS BEEN FOLLOWED, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF DIVIDEND EARNED DURING THE YEAR. I.T.A. NO S . 2498 & 2499 /M/16 17 6.2 ON BEING AGGRIEVED, THE R EVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND THE LD. DR HAS SUBMITTED THAT EARNING OF EXEMPT INCOME ONLY IS NOT THE CRITERIA TO INVOKE THE PROVISIONS OF SECTION 14 A OF THE ACT AND EVEN IF EXEMPT INCOME BEARING INVESTMENTS ARE THERE, 14A DISALLOWANCE GETS T RIGGERED. HE ALSO ARGUED THAT NO CEILING HAS BEEN FIXED WHILE WORKING OUT THE DISALLOWANCE AS PER RULE 8D AND THEREFORE STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE HAS STRONGLY SUPPORTED THE ORDERS OF THE LD. CIT(A) ON THIS ISSUE. 6.3 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THE ASSESSMENT YEAR UNDER CONSIDERATION ALSO, THE ASSESSING OFFICER HAS NOT VERIFIED AND GIVEN ANY FINDINGS AS TO WHETHER ANY BORROWED FUND WAS UTILIZED FOR MAKING THE INVESTMENTS IN EQUITY SHARES/MUTUAL FUNDS. SINCE THE FACTS ARE MORE OR LESS SIMILAR WE REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING TO VERIFY AND DECIDE THE ISSUE AFRESH AS DIRECTE D HEREINABOVE AT PARA 5.6 FOR EARLIER ASSESSMENT YEAR. THUS, THE ISSUE RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 7. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE UN DER SECTION 40(A)(I) OF THE ACT. IN ITS PROFIT &LOSS ACCOUNT UNDER THE HEAD 'BUSINESS DEVELOPMENT EXPENSES', THE ASSESSEE HAS DEBITED A SUM OF .4,32,38,582/ - AS UNDER: I.T.A. NO S . 2498 & 2499 /M/16 18 (A) BUSINESS DEVELOPMENT EXPENSES IN INDIA . 6,73,670 (B) BUSINESS DEVELOPMENT EXPENSES IN USA .3,41,14,659 (C) BUSINESS DEVELOPMENT EXPENSES IN UK . 84,50,253 IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT THE ABOVE EXPENSES INCURRED IN USA AND UK ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES. HE FURTHER OBSERVED THAT THE NON - RESIDENT SERVICE PROVIDER HAS MADE AVAILABLE THE TECHNICAL KNOWLEDGE AS REQUIRED UNDER ARTICLE 12/13 OF INDIA - USA AND INDIA - UK TREATY. SINCE THE ASSESSEE HAS NOT DEDUCTED TDS AS REQUIRED UNDER SECTION 195 OF THE ACT, THE AMOUNTS PAID TO THE CONCERNS IN USA AND UK ARE DISALLOWED UNDER SECTION 40(A)(I) OF THE ACT AND BROUGHT TO TAX. 7.1 THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) ALLOWED THE GROUND RAISED BY THE ASSESSEE. 7.2 ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. DR HAS SUBMITTED THAT WITHOUT FILING ANY PIECE OF EVIDENCE PROVING THAT THE SERVICES WERE UTILIZED BY THE ASSESSEE IN A BUSINESS CARRIED ON OUTSIDE INDIA AND FOR THE PURPOSE OF EARNING INCOME FROM A SOURCE OUTSIDE INDIA, EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE LD. CIT(A), THE LD. C IT(A) WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITIONS MADE ON THIS ACCOUNT AND THUS PLEADED THAT THE ORDER OF THE LD. I.T.A. NO S . 2498 & 2499 /M/16 19 CIT(A) SHOULD BE SET ASIDE AND RESTORED THAT OF THE ASSESSING OFFICER. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 7.3 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THA T IN THE CASE OF BUSINESS DEVELOPMENT EXPENSES IN USA AND UK (AGGREGATING TO . 4,25,64,912), THE ASSESSEE HAS NOT DEDUCTED TDS AS REQUIRED U NDER SECTION 195 OF THE IT ACT. THESE PAYMENTS WERE MADE TO NON - RESIDENTS FOR THE SERVICES RENDERED OUTSIDE INDIA. THE ASSESSEE WAS, THEREFORE , ASKED AS TO WHETHER ANY APPLICATION BEFORE THE ASSESSING OFFICER/ITO(T D S) AS REQUIRED U/S 195(2) AND 195(3) OF THE ACT WAS MADE FOR NON DEDUCTING THE T D S ON THE SUM OF . 4,25,64,912 AND I F NOT, WHY DISALLOWANCE UNDER SECTION 4 0(A)(I) R.W.S . 195(1) OF THE ACT SHOULD NOT BE MADE ON THE ABOVE SUM. IN R ESPONSE TO THIS , THE ASSESSEE MADE HIS SUBMISSIONS VIDE I TS LETTER DATED 13.1.2016 AS UNDER. 'BASICALLY, THESE REPRESENTS PAYMENTS MADE BY THE OVERSEAS BRANCH OUT OF THEIR EARNINGS OUTSIDE INDIA. HERE THE PERSON RENDERING THE SERVICE ALSO STATIONED OUTSIDE INDIA. IN OTHER WORDS THE PAYMENTS ARE MADE FOR SERVICE RENDERED OUTSIDE INDIA BY FOREIGN BRANCH OF AN INDIAN COMPANY. AS NO PART OF INCOME ACCRUES IN INDIA, NO TAX IS DEDUCTIBLE I N INDIA. EVEN OTHERWISE AS PER SECTION 9(1)(VII), IF THE FEES ARE PAYABLE IN RESPECT OF SERVICE UTILIZED IN BUSINESS OR PROFESSION CARRIED OUT BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSE OF MAKING OR EARNING ANY INCOME FROM OUTSIDE INDIA IS FLAT ELIGIB LE TO TAX IN INDIA. PAYMENT TOWARDS BUSINESS DEVELOPMENT EXPENSES WERE MODE TO NON RESIDENTS HAVING ESTABLISHMENTS IN USA, UK. IN VIEW OF THE ABOVE, EVEN AS PER ARTICLE 12 OF DTA ENTERED BY INDIA WITH US & UK, AS THERE IS NO I.T.A. NO S . 2498 & 2499 /M/16 20 IMPARTING OF SERVICE, NO INCOME OF THE OTHER CONTRACTING PERSON CAN BE TAXED IN INDIA.' 7.4 THOUGH THE ASSESSEE HAS CLASSIFIED THE PAYMENTS MADE TO CONCERNS RAPID WEB G LOBAL INC. RWG AMERICA, PAPERLESS SOLUTIONS, IN C . PUERTO RICO AND LOVELL MANAGEMENT AND CONSULTANCY SERVICES, UK UNDE R THE HEAD OF BUSINESS DEVELOPMENT, FROM THE COPY OF INV OICES SUBMITTED BY THE ASSESSEE , THE ASSESSING OFFICER HAS ASCERTAINED THAT THE SERVICES RECEIVED ARE CONSULTANCY AND TECHNICAL IN NATURE. THE ASSESSEE HAS SUBMITTED THAT IN ALL THE CASES, THE RECIPIE NT CARRIES ON THE BUSINESS ONLY IN THE OTHER CONTRACTING STATE AND THE RECEIPT CONSTITUTE BUSINESS PROFIT FOR THE RECIPIENT AND A S THE RECIPIENT OF THE INCOME HAS NO PERMANENT ESTABLISHMENT IN INDIA, NO PART OF THE INCOME ACCRUES IN INDIA IN TERMS OF ARTI CLE 7 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT ENTERED BY INDIA WITH THE RESPECTIVE COUNTRIES. HERE ALSO, THE ASSESSEE COMPANY HAS NOT DEDUCTED TDS AS REQUIRED UNDER SECTION 195 OF THE ACT. 7.5 AS PER SECTION 90 OF THE ACT, THE ASSESSING OFFICER HAS AS CERTAINED IF ANY BENEFIT IS AVAILABLE TO THE ASSESSEE AS PER THE PROVISIONS OF DTAA ENTERED INTO BY THE GOI WITH THE RESPECTIVE GOVERNMENT AND FIND THAT T HE ASSESSEE HAS NOT DEDUCTED THE TAX FROM THE SAID PAYMENTS MADE TO THE USA, UK ASSOCIATES WHICH COMES UNDER FEE FOR TECHNICAL SERVICES/ I NCLUDED SERV I C ES UNDER SECTION 9(1)(V II ) OF THE ACT AND ARTICLE 12 OF THE RESPECTIVE DTAA. THE SAID S ERVICES ARE TECHNICAL SERVICES AND THE ASSESSEE I.T.A. NO S . 2498 & 2499 /M/16 21 IS LIABLE FOR DEDUCTION OF TAX FROM THE SAID PAYMENTS. THE SERVICES PRO VIDED BY THE CONCERNS HAVE MADE AVAILABLE TECHNICAL KNO WLEDGE, EXPERIENCE, AND TECHNICAL KNOWHOW TO THE ASSESSEE IN EXECUTING THE BUSINE SS. 7.6 THE TERM 'MAKE AVAILABLE' NARROWS DOWN THE SCOPE OF FTS TO INCLUDE ONL Y THOSE PAYMENTS FOR FTS WHICH FULFIL CON DITIONS SET OUT FOR 'MAKE AVAILABLE' . THE TERM AVAILABLE' MEANS: - TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW - HOW, OR - PROCESS, OR - CONSIST OF DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. IF ANY OF ABOVE THREE CONDITIONS AS SETOUT IS MET IT CAN BE SAID THAT THE FTS I S MADE AVAILABLE. PAYMENTS MADE FOR CONSULTING SERVICES (AS PER THE INVOICES SUBMITTED BY THE A SSESSEE) ARE TECHNICAL IN NATURE AND ALSO MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE AND THUS TAXABLE UNDER FTS, MAKE AVA ILABLE MEANS RECIPIENT OF THE SERVICE SHOULD BE IN A POSITION TO DERIVE AN ENDURING BENEFIT AND SHOULD BE IN A POSITION TO UTILIZE THIS KNOWLEDGE IN FUTURE ON HIS OWN. IF FEE RECEIVED FROM THE THIRD PARTY SATISFIES AND IS COVERED BY EXPLANATION 2 TO SECT ION 9(1)(VII) IT IS FEE FOR TECHNICAL SERVICES. IT WILL BE IMMATERIAL WHETHER THE ASSESSEE HAD ACQUIRED OR GAINED THE SAID TECHNICAL INFORMATION BECAUSE OF BUSINESS OR TRADING ACTIVITY OR AFTER CONDUCTING TESTS , MAPPING ETC. D IT V RIO TINTO TECHNICAL SERVI CES (2012) 340 ITR 507. 7.7 FURTHER , IN THIS CASE, THE ASSESSEE HAS NOT SUBMITTED COPY OF THE A GREEMENT OR OTHER MATERIAL EVIDENCES , WHICH PROVES THAT THE SERVICES PROVIDED BY THE CONCERNS HAS NOT MADE AVAILABLE SERVICES TO THE ASSESSEE I.T.A. NO S . 2498 & 2499 /M/16 22 COMPANY. IT IS NO TED THAT THE ASSESSEE HAS ARGUED FOR THE MAKE AVAILABLE CLAUSE OF KNOWHOW AND CLAIMS THAT THE SAID CLAUSE IS NOT APPLICABLE IN THE CONTRACT BETWEEN THE ASSESSEE COMPANY AND ITS ASSOCIATES. HOWEVER AFTER CAREFUL CONSIDERATION OF INVOICES AND SCOPE OF WORK , THE ASSESSING OFFICER WAS OF THE OPINION THAT THE MAKE AVAILABLE CLAUSE IS CLEAR AND EXPLICIT IN THE DOCUMENTS. 7.8 THE ASSESSING OFFICER FURTHER OBSERVED THAT I N THE ABSENCE OF ANY IMM U NITY GRANTED TO BUSINESS DEVELOPMENT EXPENSES/FEES FOR TECHNICAL SER VICES MADE ABROAD TO NON - RESIDENTS FROM THE PURVIEW OF S EC TION 195(1) AND SECTION 40(A)(I) OF THE ACT , THE CASES HAVE TO BE DEALT WITH INDIVIDUALLY AND SUCH PAYMENT TO NON - RESIDENT IS TO BE DEALT IN ACCORDANCE WITH THE PROVISIONS OF S ECTION 9 (VI I) READ WIT H S ECTION 195 OF THE ACT. UNDER SECTION 195(1) OF THE IT ACT, IT IS OBLIGATORY ON THE PART OF THE ASSESSEE WHILE MAKING PAYMENT OF ANY INTEREST OR ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT SHALL AT THE TIME OF CREDIT OF SUCH INCOME TO THE AC COUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF DEDUCT INCOME TAX THEREON A T THE RATES IN FORCE. FURTHER, S ECTION 195 (2) MAKES OBLIGATORY ON THE PART OF THE ASSESSEE 'WHILE MAKING PAYMENT OF ANY SUCH SUM CHARGEABLE UNDER THE ACT TO A NON - RESIDENT CON SIDERS THAT THE WHOLE OF SUCH SUM WOULD NOT BE INCOME CHARGEABLE IN THE CASE OF THE RECIPIENT, HE MAY MAKE AN APPLICATION TO THE ASSESSING OFFICER TO DETERMINE, THE APPROPRIATE PROPORTION OF SUCH SUM SO I.T.A. NO S . 2498 & 2499 /M/16 23 CHARGEABLE, AND UPON SUCH DETERMINATION, TAX SHALL BE DED UCTED UNDER SUB SECTION (1) OF S ECTION 195 ONLY ON THAT PROPORTION OF THE SUM WHICH IS SO CHARGEABLE. W.E.F. 1.4.2008, SECTION 195(6) WAS INSERTED, ACCORDING TO WHICH; THE ASSESSEE SHALL FURNI S H THE INFORMATION RELATING TO PAYMENT OF ANY SUM IN SUCH FO RM AND MANNER AS MAY BE PRESCRIBED BY THE BOARD. 7.9 THE APPLICATION OF SECTION 195(2) OF THE ACT PRE - SUPPOSES THAT THE PERSON RESPONSIBLE FOR MAKING THE PAYMENT TO THE NON - RESIDENT IS IN NO DOUBT THAT TAX IS PAYABLE IN RESPECT OF SOME PART OF THE AMOUNT TO BE REMITTED TO A NON - RESIDENT BUT IS NOT SURE AS TO WHAT SHOULD BE THE PORTION SO TAXABLE OR IS NOT SURE AS TO THE AMOUNT OF TAX TO BE DEDUCTED. IN SUCH A SITUATION , HE I S REQUIRED TO MAKE AN APPLICATION TO THE ITO (TDS) FOR DETERMINING THE AM OUNT. IT IS ONLY WHEN THESE CONDITIONS ARE SATISFIED AND AN APPLICATION IS MADE TO THE ITO( TDS) THAT THE QUESTION OF MAKING AN ORDER UNDER SECTION 195(2) WILL ARISE. THE ASSESSEE HAS NOT MADE ANY SUCH APPLICATION BEFORE THE ITO (T DS ) TO DETERMINE THE AMOUNT OF 'INC OME' CHARGEABLE TO TAX IN INDIA. 7.10 SINCE, THE ASSESSEE HAS NOT APPLIED AND OBTAINED FROM THE ASSESSING OFFICER, THE NECESSARY CERTIFICATE AS REQUIRED U NDER SECTION 195(2)/195(3) REGARDING 'N IL ' DEDUCTION OR DEDUCTION AT A LOWER RATE OF TDS BEFORE MAKI NG TECHNICAL SERVICES FEES TO THE NON - RESIDENTS AND MOREOVER, THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO THE EFFECT THAT THE PAYMENT IS COVERED UNDER I.T.A. NO S . 2498 & 2499 /M/16 24 DTAA WITH USA/UK AND THAT NO DEDUCTION I S REQUIRED TO BE MADE ACCORDING TO THAT TREATY AND THE ASSESSEE HAS NOT DEDUCTED TDS AS REQUIRED U NDER SECTION 195(1) ON THE TECHNICAL SERVICES FEE MADE TO THE NON - RESIDENTS, THE SUM OF . 4,25,64,912 / - ( .3,41,14,659 AND . 84,50,253 ) TOWARDS BUSINESS DEVELOPMENT EXPENSES PAID TO CONCERNS IN USA AND BUSINESS DEVELOPM ENT EXPENSES PAID TO CONCERNS IN UK RESPECTIVELY) WA S DISALLOWED U NDER SECTION 40(A)(I) OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE . 7.11 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAS SUBMITTED AS UNDER: 8. ASSAILING THE VIEW TAKEN BY THE AO IT WAS PLEADED THAT APPELLANT HAS MADE COMMISSION AND CONSULTANCY PAYMENTS TO NON - RESIDENTS RESIDING IN USA AND UK. THE ABOVE PAYMENTS REPRESENT PAYMENTS MADE BY THE OVERSEAS BRANCH OF THE APPELLANT IN RESPECT OF SERVICES UTILIZED IN A BUSI NESS CARRIED ON OUTSIDE INDIA. THE COMMISSION IS PAID TO THE NON - RESIDENTS FOR PROCURING SALES ORDER/NEW PROJECTS OUTSIDE INDIA. IN PERFORMING THE FUNCTION OF PROCURING OF SALES ORDER, THE NON - RESIDENT AGENT IN NO WAY IS MANAGING ANY PART OF THE BUSINESS O R THE OPERATIONS OF THE COMPANY. THE AGENTS GENERALLY WORK AS FREELANCERS AND PROCURE ORDERS FOR A CONSIDERATION. IN THESE CIRCUMSTANCES MANAGERIAL SERVICES CANNOT BE SAID TO BE PERFORMED IN THE COURSE OF PROCURING OF SALES ORDER. IT IS FURTHER SUBMITTED THAT THE COMMISSION AND CONSULTANCY CHARGES PAID TO NON - RESIDENTS OF USA AND UK DID NOT 'MAKE AVAILABLE' ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW - HOW OR PROCESSES TO THE APPELLANT, THEY DO NOT THERE FORE CONSTITUTE 'FEES FOR INCLUDED SERVICES'/'FEES FOR TECHNICAL SERVICES' UNDER THE DTAA WITH US/UK. RELIANCE WAS - PLACED ON THE DECISION OF THE JURISDICTIONAL COURT, AMONGST OTHERS IN CIT VS. AKTIENGESELLSCHAFTKUNNLE KOPP AND KAUCH (2003) 262 ITR 513 (MD S) WHICH HELD ROYALTY PAYABLE TO A FOREIGN COMPANY ON EXPORT SALES WOULD NOT BE TAXABLE IN INDIA FOR THE REASON THAT SOURCE FOR ROYALTY WAS THE SALES OUTSIDE INDIA APPLYING THE 'ACTIVITY TEST'. I.T.A. NO S . 2498 & 2499 /M/16 25 AFTER CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING VARIOUS CASE LAW, THE LD. CIT(A) HAS HELD AS UNDER: 13. I HAVE ALSO CONSIDERED THE PLEA ADVANCED THAT THE DOUBLE TAXATION AVOIDANCE AGREEMENT ENTERED BETWEEN INDIA AND USA (ARTICLE 12) AND ALSO BETWEEN INDIA AND UK (ARTICLE 13), THE AMOUNT PAI D WILL NOT CONSTITUTE FEES FOR INCLUDED SERVICES / TECHNICAL SERVICES, IN AS MUCH AS THERE IS NO MAKING AVAILABLE THE SERVICE BY THE SERVICE PROVIDER. IN RAYMOND LTD V. DCIT (2003) 86 ITD 791 (MUM - TRIB), THE TRIBUNAL HELD THAT UNLESS TECHNICAL SERVICES ARE RENDERED IN A MANNER WHICH WOULD ENABLE THE RECIPIENT TO APPLY THE TECHNOLOGY, IT WOULD NOT CONSTITUTE FEES FOR INCLUDED SERVICES UNDER THE INDO US TREATY. 14. IN VIEW OF THE FOREGOING AND TAKING THE SUM TOTALITY OF FACTS BEFORE ME INTO ACCOUNT IT IS HELD THEREFORE THAT SINCE THE PAYMENTS ARE NOT CHARGEABLE TO TAX IN INDIA U/S 9(1)(VII) R.W.S. 195, THE PROVISIONS OF S. 40(A)(I) WILL NOT BE APPLICABLE. THE AO IS DIRECTED TO DELETE THE ADDITION MADE. THIS GROUND OF APPEAL IS ALLOWED. ADMITTEDLY, THE A SSESSEE IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT. IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAS DEBITED AND CLAIMED TO HAVE INCURRED THE EXPENSES TOWARDS BUSINESS DEVELOPMENT IN USA AND UK. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS NOT DEDUCTED TDS AS REQUIRED UNDER SECTION 195 OF THE ACT. BEFORE THE ASSESSING OFFICER THE ASSESSEE HAS CONTENDED THAT THE PAYMENTS ARE MADE FOR SERVICE RENDERED OUTSIDE INDIA BY FOREIGN BRANCH OF AN INDIAN COMPANY. FURTHER, IT WAS SUBMITTED THAT NO P ART OF INCOME ACCRUES IN INDIA; NO TAX IS DEDUCTIBLE IN INDIA. HOWEVER, THE ASSESSEE HAS NOT FILED ANY AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND FOREIGN AGENT. FURTHER, THE ASSESSING OFFICER HAS OBSERVED FROM THE INVOICES FILED BY THE ASSESSEE THAT T HE SERVICES RENDERED ARE CONSULTANCY AND TECHNICAL IN NATURE. IT IS NOT CLEAR I.T.A. NO S . 2498 & 2499 /M/16 26 FROM THE SUBMISSIONS OF THE ASSESSEE AS TO WHETHER THE PAYMENT MADE TO NON - RESIDENT HAS PERMANENT ESTABLISHMENT IN INDIA OR NOT SINCE THE ASSESSEE HAS MADE TWO CONTRARY SUBMISSIO NS BEFORE THE ASSESSING OFFICER THAT THE PAYMENTS ARE MADE FOR SERVICE RENDERED OUTSIDE INDIA BY FOREIGN BRANCH OF AN INDIAN COMPANY AS WELL AS THE RECIPIENT HAS NO PERMANENT ESTABLISHMENT IN INDIA . BEFORE THE LD. CIT(A) OR BEFORE THE TRIBUNAL, THE ASS ESSEE HAS NOT FILED ANY AGREEMENT HAVING ENTERED INTO BETWEEN THE ASSESSEE AND THE FOREIGN AGENT, FOR THE IDENTICAL SERVICES, THE ASSESSEE HAS CLAIMED TO HAVE INCURRED EXPENSES. HOWEVER, BEFORE THE LD. CIT(A), THE ASSESSEE HAS CLAIMED TO HAVE INCURRED THE EXPENSES TOWARDS COMMISSION AND CONSULTANCY CHARGES PAID TO NON - RESIDENTS OF USA AND UK, WITHOUT ANY CONCRETE EVIDENCE. WITHOUT ANY AGREEMENT, NO ASSESSEE CAN UTILIZE ANY SORT OF SERVICES OUTSIDE INDIA WITH NON - RESIDENTS. IN THE ABSENCE OF AGREEMENT ENTERE D INTO BETWEEN THE ASSESSEE AND NON - RESIDENT, IT IS NOT AS TO WHETHER THE PAYMENT MADE BY THE ASSESSEE IS FOR COMMISSION PURPOSE OR THE SERVICES OFFERED TO THE ASSESSEE ARE CONSULTANCY AND TECHNICAL IN NATURE AND MOREOVER, THE NON - RESIDENT HAS PERMANENT ES TABLISHMENT IN INDIA OR NOT. UNDER THESE FACTS AND CIRCUMSTANCES, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER AND DIRECT THE ASSESSEE TO FURNISH ALL RELEVANT DETAILS WITH REGARD TO T HE AGREEMENT HAVING ENTERED INTO FOR THE SERVICES UTILIZED IN A BUSINESS CARRIED ON OUTSIDE INDIA AND THEREAFTER, THE ASSESSING OFFICER IS DIRECTED TO I.T.A. NO S . 2498 & 2499 /M/16 27 VERIFY THE SAME AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER ALLOWING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 24 TH MAY , 201 7 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 24 . 0 5 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.