ACIT, New Delhi V. M/s. PEC Ltd, New Delhi

ITA 2844/DEL/2009

• Counselvise Citation: 284420114 RSA 2009
• Duration Of Justice: 5 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 25-11-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 11-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: SANJAY AVTAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT & SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 2844/DEL/2009 ASSESSMENT YEAR: 2001-02 ACIT, VS. PEC LTD. CIRCLE 14(1), ROOM NO. 415, HANSALAYA, 4 TH FLOOR, C.R. BLDG., 15-BARAKHAMBA ROAD, NEW DELHI. NEW DELHI. AAACT 0101G (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VIKRAM SAHAY, SR. DR RESPONDENT BY : SH. SANJAY AVTAR, CA ORDER PER H.S. SIDHU, J.M. THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 13/03/2009 PASSED BY THE COMMISSIONER O F INCOME TAX (APPEALS). THE FACTS NARRATED BY THE REVENUE AUTHO RITY ARE NOT DISPUTED BY BOTH PARTIES, THEREFORE, NO NEED TO REPEAT THE S AME FOR THE SAKE OF CONVENIENCE. THE AO COMPLETED THE ASSESSMENT U/S 1 47/143(3) OF THE INCOME TAX ACT, 1961ON 10/07/2008 ON THE ISSUE IN D ISPUTE OBSERVING AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE ASS ESSEES COUNSEL. AS PER THE COPY OF AGENCY AGREEMENT WITH M/S OBAID TRADERS, PARA 1.4 STATES THE SERVICES RENDERED ARE ASSISTANCE IN INSTALLATION, COMMISSIONING OF D MDD RECEIPT SYSTEM AT RMD SITE, WHEREVER NECESSARY/REQUIRE. COPIES OF OTHER AGENCY AGREEMENT ALSO SUGGESTS THE SAME. SECTION 9(1)(VII ) OF THE I.T. ACT CLEARLY STATE THAT INCOME BY WAY OF FEES FOR TE CHNICAL SERVICES PAYABLE BY THE GOVT. OF INDIA ENTERPRISE IS INCOME DEEMED TO BE ACCRUED OR ARISEN IN INDIA AND AS PER SECTION 195 R EAD WITH SECTION 40(A)(IA) THE ENTIRE AMOUNT OF RS. 60,97,18 0/- PAID TO ITA NO. 2844/D/2009 PEC LIMITED 2 FOREIGN AGENT ON WHICH TDS WAS NOT DEDUCTED IS HERE BY DISALLOWED AND ADDED BACK TO THE TAXABLE INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TAX ACT, 1961, ARE BEING INITIATED SEPARATELY FOR FURNISHING INACC URATE PARTICULARS OF ITS TAXABLE INCOME. 2. AGAINST THE ORDER OF THE AO DATED 10/07/2008 ASS ESSEE FILED AN APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO VIDE IMPUGNED ORDER DATED 13/03/2009 PARTLY ALLOWED THE APPEAL OF THE A SSESSEE. NOW THE REVENUE IS AGGRIEVED AGAINST THE IMPUGNED ORDER FIL ED THE PRESENT APPEAL. 3. WE HAVE HEARD THE BOTH PARTIES AND PERUSED THE R ELEVANT RECORD AVAILABLE WITH US SPECIALLY THE IMPUGNED ORDER PASS ED BY THE LD. FIRST APPELLATE AUTHORITY THE RELEVANT PARAGRAPH OF IMPUG NED ORDER IS REPRODUCED HEREUNDER: 5.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ORDER OF THE AO AND SUBMISSIONS MADE BY THE LD. AR APPEARING ON BEHALF OF THE APPELLANT COMPANY. IT IS OBSERVED THAT THE ENTIRE DISALLOWANCE OF RS. 60,97,180/- HAS BEEN MADE BY TH E AO SOLELY ON THE BASIS OF PARA 1.4 OF THE AGREEMENT OF THE AP PELLANT WITH M/S OBAID TRADERS, WHICH IS ONE OF THE SIX PARTIES TO WHOM A TOTAL PAYMENT OF RS. 60,97,180/- WAS MADE BY THE AP PELLANT. IT APPEARS THAT THE AO HAS EITHER NOT GONE THROUGH THE OTHER FIVE AGREEMENTS OR HE HAS JUST KEPT SILENCE ON REMAINING AGREEMENTS AS THE APPELLANT HAS VEHEMENTLY CLAIMED THAT IN RES T OF THE FIVE CASES NAMELY M/S MYITAMKHA ENGG. CO. LTD., M/S CIT INTERNATIONAL TRADING LTD., M/S INTERNATIONAL BUSIN ESS LINK, AND M/S TECHNICOM-TRANS., GOODS WERE SUPPLIED UNDER PUR E EXPORT CONTRACTS AND NO TECHNICAL SERVICES WERE PROVIDED. UNDER THESE CIRCUMSTANCES, DISALLOWANCE OF ENTIRE PAYMENT OF RS . 60,97,180/- ON THE BASIS OF SOME DEFICIENCY/ABNORMALLY IN ONLY ONE AGREEMENT I.E. M/S OBAID TRADERS, AGAINST WHICH ONL Y A PAYMENT OF RS. 4,73,872/- WAS MADE, CANNOT BE UPHELD. SINC E, THE AO HAS NOT BEEN ABLE TO POINT OUT ANY SPECIFIC DEFECT IN T HE AGREEMENTS OF THE REST OF THE PARTIES, NOR THE GENUINENESS OF THE PAYMENTS HAS BEEN QUESTIONED, THEREFORE, DISALLOWANCE IN RESPECT OF THE PARTIES OTHER THAN M/S OBAID TRADERS IS DELETED STRAIGHT WA Y. AS REGARDS THE DISALLOWANCE IN RESPECT OF M/S OBAID TR ADERS OF BANGLADESH TOO, IT IS CONTENDED BY THE LD. AR THAT THE LD. AO HAS ITA NO. 2844/D/2009 PEC LIMITED 3 TOTALLY OVERLOOKED EXPLANATION TO SEC. 9(1)(VII) WH ICH SPECIFICALLY EXCLUDE CONSIDERATION FOR ANY CONSTRUCTION, MINING OR LIVE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATIO N WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEA D SALARIES. IT IS PLEADED BY THE APPELLANT THAT THE CONSIDERATION IN THE CASE OF M/S OBAID TRADERS IS ALSO IN THE NATURE OF THE EXCL UDED CATEGORY AS THE SAID CONCERN WAS ALSO A FACILITATOR IN A HIG HLY SPECIALIZED CONTRACT OF INSTALLATION AND COMMISSIONING OF A PRO JECT. I FIND FORCE IN THE ARGUMENTS OF THE APPELLANT. IT APPEAR S THAT IN THE ORIGINAL ASSESSMENT FRAMED U/S 143(3), THE THEN AO MIGHT ALSO HAVE CONSIDERED THESE ASPECTS, THAT IS WHY SUCH DIS ALLOWANCE WAS NOT MADE. CONSIDERING THE OVERALL CIRCUMSTANCES OF THE CASE IT IS HELD THAT THE PAYMENT MADE TO M/S OBAID TRADERS TOO DOES NOT COME UNDER THE PURVIEW OF FEES FOR TECHNICAL SERVIC ES U/S 9(1)(VII) R.W.S. 40(A)(IA). THEREFORE, IT IS HELD THAT PAYME NT MADE TO M/S OBAID TRADERS CAN ALSO NOT BE DISALLOWED. ACCORDIN GLY, THE ENTIRE DISALLOWANCE OF RS. 60,97,180/- WAS UNWARRAN TED. HENCE, THE SAME IS DELETED. 4. AFTER GOING THROUGH THE AFORESAID IMPUGNED ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORITY. WE ARE OF THE VIEW THAT LD. FIRST APPELLATE AUTHORITY HAS POINTED OUT ABOUT FIVE AGREEMENTS AND DELETED THE ADDITION IN DISPUTE ON THOSE BASIS. BUT LD. CIT(A) HAS NOT DISCUSSED IN DETAIL ABOUT THESE AGREEMENTS AND DELETED THE ADDITION IN DISPUT E ON THAT BASIS WHICH IS CONTRARY TO THE LAW AND FACTS ON THE FILE. THER EFORE, THE IMPUGNED ORDER IS NOT SUSTAINABLE IN THE EYE OF LAW. WE ARE OF TH E VIEW THAT LD. CIT(A) HAVE COTERMINOUS POWERS WITH THE AO, HE SHOULD HAVE EXAMINED ALL THESE AGREEMENTS HIMSELF AND DECIDE THE ISSUE ACCOR DING TO LAW WHICH HE HAS NOT DONE SO. THEREFORE, IN THE INTEREST OF JUS TICE, WE ARE SETTING ASIDE THE ISSUE IN DISPUTE TO THE LD. CIT(A) TO DISCUSS I N DETAIL EACH AND EVERY AGREEMENTS AND DECIDE THE ISSUE IN DISPUTE AFRESH A S PER LAW AFTER GIVING OPPORTUNITY TO THE PARTIES. ITA NO. 2844/D/2009 PEC LIMITED 4 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSE. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28/11/2014 SD/- SD/- (G.D. AGRAWAL) (H.S. SIDHU) VICE PRESIDENT JUDICIAL MEMBER DATED: 28/11/2014 *KAVITA, P.S. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR ITA NO. 2844/D/2009 PEC LIMITED 5