Gujarat Gas Tradiang Company Limited, Ahmedabad V. The Dy.CIT, Circle-4, Ahmedabad

ITA 3069/AHD/2014

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3818 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 25-03-2020
• Assessment Year: 2010-2011
• Appeal Filed On: 20-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR; PARIN SHAH A RS I T A NOS
• Keywords: Business income; Transfer pricing; Double taxation relief; Opportunity of being heard; Principle of natural justice; International transaction; Earning of tax free income; Permanent establishment; TDS; Rule 8D
• Section: 271(1)(c); 143(3); 92E; 5(2); 14A; 195; 143(2); 9(1); 9(1); 9(1); 13; 22; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (VIRTUAL COURT) BEFORE: SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEM BER SL. NO. ITA NO. APPELLANT RESPONDENT A.Y. 1 3397/AHD/2014 DY. CIT, CIRCLE- 2(1)(1), ABAD GUJARAT GAS TRADING COMPANY LTD., ABAD 2010-11 2 2407/AHD/2015 DY. CIT, GANDHINAGAR CIRCLE, GANDHINAGAR DO 2011-12 3 2028/AHD/2016 DO DO 2012-13 4 1974/AHD/2017 DO DO 2013-14 5 3069/AHD/2014 GUJARAT GAS TRADING COMPANY LTD., ABAD DCIT, CIRCLE-4. ABAD 2010-11 6 2340/AHD/2015 DO DO 2011-12 7 2339/AHD/2015 DO DO 2011-12 8 1887/AHD/2016 DO DCIT, CIRCLE- 2(1)(1), ABAD 2012-13 9 2006/AHD/2017 DO DY. CIT, GANDHINAGAR CIRCLE, GANDHINAGAR 2013-14 PAN NO: AAACK7745B REVENUE BY: SHRI VINOD TANWANI, SR. D.R. ASSESSEE BY: SHRI S.N. SOPARKAR & SHRI PARIN SHAH, A.RS. I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 2 DATE OF HEARING : 07-10-2020 DATE OF PRONOUNCEMENT : 22-10-2020 /ORDER PER BENCH:- THESE NINE APPEALS FILED FOUR BY REVENUE AND FIVE B Y ASSESSEE FOR A.Y. 2010-11 TO 2013-14, ARISE FROM ORDER OF THE CIT(A), AHMEDABAD, IN PROCEEDINGS UNDER SECTION 143(3) & 154 OF THE INCO ME TAX ACT, 1961; IN SHORT THE ACT. 3397/AHD/2014 ASSESSMENT YEAR 2010-11 FILED BY REVE NUE 2. THE FACT IN BRIEF IS THAT RETURN OF INCOME DECLA RING LOSS OF RS. 1,50,45,426/- WAS FILED ON 7 TH SEP, 2010. THE CASE WAS SELECTED OF SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 26 TH SEP, 2011. THE ASSESSMENT U/S. 143(3) OF THE ACT WAS FINALIZED ON 22 ND MARCH, 2013. THE REMAINING FACT OF THE CASE RELATING TO THE GROUNDS OF APPEAL FILED AGAINST THE DECISION OF LD. CIT(A) ARE DISCUSSED AS FOLLOWS:- GROUND NO. 1(DELETING ADDITION OF RS. 4,73,06,676/- ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT) 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN NATURAL GAS. DURING THE COURSE OF ASSESSMENT, THE ASSESSIN G OFFICER NOTICED THAT ASSESSEE COMPANY HAS ENTERED INTO INTERNATIONAL TRA NSACTIONS WITH ITS ASSOCIATE ENTERPRISE AS PER THE DETAILS GIVEN BELOW :- SL. NO. NAME & ADDRESS OF THE ASSOCIATE ENTERPRISE DESCRIPTION OF TRANSACTION AMOUNT (RS.) 1 BRITISH GAS ENERGY HOLDING LTD PAYMENT FOR CORPOR ATE GUARANTEE COMMISSION 38,70,000 2 BRITISH GAS ENERGY HOLDING LTD PAYMENT FOR CORPOR ATE 63,10,000 I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 3 GUARANTEE COMMISSION THE ASSESSEE HAS FILED A TRANSFER PRICING STUDY REP ORT OF THE AUTHORIZED REPRESENTATIVES ALONG WITH SUPPORTING DOCUMENTS AND DETAILS. THE ASSESSING OFFICER HAS NOT AGREED WITH THE SUBMISSIO N OF THE ASSESSEE REGARDING CONCLUSION DRAWN IN RESPECT OF ARMS LENGT H TRANSACTION. THE ASSOCIATED ENTERPRISE B.G. ENERGY HOLDING LTD. HAD NEGOTIATED THE TRANSACTION WITH CAIRN ENERGY GROUP FOR PURCHASE OF NATURAL GAS FROM ITS LAXMI GAS FIELD. THE CONTRACT FOR PURCHASE OF GAS WAS TRANSFERRED BY THE ASSOCIATED ENTERPRISE TO GUJARAT GAS COMPANY LIMITE D AND SUBSEQUENTLY IT WAS TRANSFERRED TO THE ASSESSEE COMPANY. THEREFORE , THE ASSESSING OFFICER WAS OF THE VIEW THAT THE TRANSACTIONS OF PURCHASE OF GAS BY THE ASSESSEE FROM CAIRN ENERGY GROUP WERE COVERED UNDER THE DEF INITION OF INTERNATIONAL TRANSACTION AS PER PROVISION OF SEC TION 92B(2) OF THE ACT. THE PAYMENT OF COMMISSION TO THE ASSOCIATE ENTERPRI SE WAS BENCHMARKED BY USING CUP AS THE MOST APPROPRIATE ME THOD AND US NATURAL GAS WELLHEAD PRICE AS COMPARABLE UNCONTROLLED PRICE . THE ASSESSING OFFICER HAS BENCHMARKED THE TRANSACTIONS OF PAYMENT OF COMMISSION WITH THE COMPARABLE UNCONTROLLED PRICE ON MONTHLY BASIS AS AGAINST THE AVERAGE U.S. DOLLAR 3.9975 PER GIGA JOULE TAKEN BY THE ASSE SSEE. AS AGAINST THE COMPARABLE PRICE, THE PURCHASE PRICE OF THE GAS PUR CHASED IS CALCULATED AT USA DOLLAR 3.9414 PER GIGA JOULE WHICH INCLUDED THE COMMISSION OF 1% PAID TO THE ASSOCIATED ENTERPRISE. THE ASSESSEE E XPLAINED THAT THERE WAS NO AGREEMENT BETWEEN THE ASSOCIATED ENTERPRISE BGEH AN D CAIRN GROUP IN RELATION TO THE GAS SUPPLY TO THE ASSESSEE AND THE AGREEMENT WAS WITH BRITISH GAS INDIAN PVT. LTD. WHICH WAS AN INDIAN ENTITY. T HE ASSESSEE EXPLAINED I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 4 THAT THE BGEH HAD ONLY RENDERED NEGOTIATION SERVICE S WITH CAIRN GROUP AND THERE WAS NO PRIOR AGREEMENT BETWEEN THE THIRD PART Y AND THE ASSOCIATED ENTERPRISE, THEREFORE, THE APPLICATION OF THE PROVI SIONS OF SECTION 92B(2) WAS NOT JUSTIFIED. THE ASSESSEE HAS ALSO SUBMITTED TH AT PURCHASE OF GAS FROM LAXMI FIELD WAS ASSIGNED TO A NUMBER OF PARTIES INC LUDING INDEPENDENT PARTIES NAMELY ONGC AND WORLD TATA PETRODYNE LTD. APART FROM THE CAIRN GROUP. THE ASSESSEE ALSO SUBMITTED THAT IT HAD PUR CHASED GAS FROM TWO OTHER ENTITIES APART FROM CAIRN GROUP AND THE SAME PRICE WAS PAID TO ALL OF THEM AND THE PURCHASE OF GAS WAS ALREADY BENCHMARKE D IN THE BENCHMARKING FOR PAYMENT OF COMMISSION MADE BY THE ASSESSEE IN T HE TRANSFER PRICING DOCUMENTATION. THE ASSESSEE HAS ALSO SUBMITTED THA T IT HAS ENTERED INTO SUBSEQUENT CONTRACT WITH THE SELLERS OF LAXMI FILED WITHOUT ANY ASSISTANCE FROM THE ASSOCIATED ENTERPRISE BGEH. THE ASSESSEE HAS SUBMITTED THAT ASSOCIATED ENTERPRISE WAS NOT INVOLVED IN NEGOTIATI ON OF THIS CONTRACT AND THE COMPARABLE PRICE WAS HIGHER THAN THE PRICE CONSIDER ED UNDER THE DEEMED INTERNATIONAL TRANSACTION. IN RESPECT OF COMMISSIO N PAYMENT, THE ASSESSEE HAS SUBMITTED THAT BENCHMARKING SHOULD BE TAKEN FOR THE TRANSACTION FOR ENTIRE YEAR AS THE AGREEMENT WAS MADE ON A LONG TER M BASIS. THE ASSESSING OFFICER HAS NOT AGREED WITH THE SUBMISSION. HE WAS OF THE VIEW THAT ASSOCIATED ENTERPRISE BGEH WAS ENGAGED IN NEGOTIATI NG THE PURCHASE PRICE OF THE GAS FROM CAIRN ENERGY AND THE PURCHASE PRICE OF THE GAS WAS NEGOTIATED BY THE BGEH WITH THE GAS SELLER THEREFOR E THE TRANSACTION WAS COVERED IN THE SECOND LIMB OF THE DEFINITION OF DEE MED INTERNATIONAL TRANSACTION. THE ASSESSING OFFICER HAS ALSO REJEC TED THE CONTENTION OF THE ASSESSEE TO AGGREGATE ALL THE TRANSACTIONS AND EVAL UATE THEM ON ANNUAL BASIS AS A COMPARABLE PRICE FOR BENCHMARKING AND ASSESSIN G OFFICER WAS OF THE I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 5 VIEW THAT TRANSACTIONS SHOULD BE COMPARED INDIVIDUA LLY AND NOT ON AGGREGATE BASIS. ACCORDINGLY, THE ASSESSING OFFICER HAS DETE RMINED THE ADJUSTMENT AS UNDER:- S. NO. DATE US NATURAL GAS WELL HEADSPOT PRICE (USD) PRICE IN INTERNATIONAL TRANSACTION DIFFERENCE QUANTITY ADJUSTMENT IN USD 1 APRIL 2009 3.180 3.9414 0.7614 238366.5 181492.3 2 MAY 2009 3.230 3.9414 0.7114 253038.2 180011.4 3 JUNE 2009 3.380 3.9414 0.5614 246891.7 138605 4 JULY 2009 3.450 3.9414 0.4914 192997.9 94839.16 5 AUGUST 2009 3.370 3.9414 0.5714 240583.2 137469.2 6 SEPTEMBER 2009 2.980 3.9414 0.9614 251388.2 241684.6 7 OCTOBER 2009 3.830 3.9414 0.1114 211027.9 23508. 51 8 NOVEMBER 2009 4.200 3.9414 -0.2586 259551.1 NIL 9 DECEMBER 2009 4.660 3.9414 -0.7186 278555.3 NIL 10 JANUARY 2009 5.690 3.9414 -1.7486 274123.7 NIL 11 FEBRUARY 2009 5.300 3.9414 -1.3586 240284.8 NIL 12 MARCH 2009 4.700 3.9414 -0.7586 248560.6 NIL TOTAL 997610.2 CONSEQUENTLY, A TOTAL ADJUSTMENT OF RS. 4,73,06,676 /- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE L D. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER:- 4.3 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE APPELLANT COMPANY IS IN THE BUSINESS OF TRADING OF NATURAL GAS. IT HAS ENTERED INTO A L ONG-TERM CONTRACT FOR PURCHASE OF GAS FROM CAIRN INDIA LTD. THE CONTRACT HAS BEEN SIGNED BY THE APPELLANT AFTER THE NEGOTIATIONS FOR THE PRICE OF GAS WAS MADE BY BGEH LTD, AN AE OF THE APPELLANT COMPANY. THE APPELLANT HAS I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 6 PAID CORPORATE GUARANTEE COMMISSION AND COMMISSION ON SUCH PURCHASES TO ITS AE. THESE PAYMENTS HAVE BEEN SHOWN BY THE APPELLANT AS INTERNATIONAL TRANSA CTIONS AND T.P STUDY REPORT HAS ALSO BEEN SUBMITTED . THE AO INVOKED THE PROVISIONS OF SECTION 92B(2) ON THE TRANSACTION OF PURCHASE OF GAS FROM CAIRN ENERGY GR OUP AND HELD THAT THE TRANSACTIONS WERE COVERED UNDER T HE DEFINITION OF 'INTERNATIONAL TRANSACTION'. IT WA S HELD BY HIM THAT SINCE THE TRANSACTIONS FOR PURCHASE OF GAS WAS AS A RESULT OF THE TRANSACTION BETWEEN CAIRN G ROUP AND THE AE, (BGEH) THE PROVISIONS OF SECTION 92B(2) WILL BE APPLICABLE AND THE TRANSACTIONS FOR PURCHA SE OF GAS WERE ACCORDINGLY BENCHMARKED BY HIM AFTER COMPA RING THE PURCHASE PRICE WITH THE WELLHEAD SPOT PRIC ES OF US NATURAL GAS. HE TOOK AN AVERAGE RATE OF 3.941 4 AS THE COMPARABLE PRICE AND MADE AN ADJUSTMENT OF RS. 4.73 CRORES TO THE INCOME OF THE APPELLANT ON A CCOUNT OF ARM'S-LENGTH ADJUSTMENT OF THE INTERNATIO NAL TRANSACTIONS. THE APPELLANT ON THE OTHER HAND HAS SUBMITTED THAT ONE OF THE BG GROUP'S COMPANY, BG ENERGY HOLDINGS LIMITED - BGEH, A COMPANY INCORPORATED IN THE UNITE D KINGDOM, USED ITS SKILLS AND TIME FOR NEGOTIATING WITH CAIRN GROUP FOR SUPPORTING PURCHASE OF GAS FRO M LAKSHMI FIELD LOCATED IN INDIA. ANOTHER BG GROUP COMPANY, BG INDIA PRIVATE LIMITED - BGIPL, A COMPAN Y INCORPORATED IN INDIA, ENTERED INTO AN AGREEMENT FOR PURCHASE OF GAS FROM CAIRN. HOWEVER, GUJARAT GA S COMPANY LIMITED - GGCL WAS DESIROUS OF ENTERING INTO A CONTRACT FOR PURCHASE OF GAS ON A LONG TERM BASIS FOR ITS EXPANSION PLANS AND ACCORDINGLY BGIPL NOMINATED GGCL TO ENTER INTO A LONG TERM GAS SUPPLY AGREEMENT WITH CAIRN. SUBSEQUENTLY, THE SAID CONTR ACT WAS ASSIGNED BY GGCL TO GUJARAT GAS TRADING COMPANY LIMITED - GTCL I.E., TO THE APPELLANT. SINCE THE APPELLANT IS THE BENEFICIARY OF THE LONG-TERM AGREE MENT FOR PURCHASE OF GAS THE PAYMENT OF COMMISSION FOR NEGOTIATING PURCHASE, CORPORATE GUARANTEE PAYMENT O F COMMISSION WAS MADE BY THE APPELLANT COMPANY. IT HAS BEEN SUBMITTED BY THE APPELLANT THAT THE PROVIS IONS OF SECTION 92B(2) HAVE BEEN INCORRECTLY APPLIE D BY THE AO. THE AE OF THE APPELLANT I.E. BGEH HAS NO CO NTRACT WITH CAIRN. THE APPELLANT HAS ENTERED THE CONTRACT WITH CAIRN FOR PURCHASE OF GAS. THE APPELL ANT WAS ALSO PURCHASING GAS FROM OTHER PARTIES OTHE R THAN THE CAIRN GROUP ON THE SAME TERMS ON WHICH THE GAS IS BEING PURCHASED FROM CAIRN. THE GAS SALE CONTRAC T HAS SUBSEQUENTLY BEEN REVISED ALSO. THE APPELLANT H AS ACCORDINGLY SUBMITTED THAT SINCE THERE WAS NO PR IOR AGREEMENT AS ENVISAGED UNDER SECTION 92B(2) THE SEC TION SHOULD NOT BE APPLIED. THE APPELLANT HAS ALSO GIVEN A SUBMISSION, ON WITHO UT PREJUDICE BASIS, REGARDING THE BENCHMARKING OF G AS ALSO. THE APPELLANT HAS SUBMITTED THAT SAME PRICE H AS BEEN PAID BY THE APPELLANT TO THE OTHER PARTIES NAMLY ONGC AND TATA. SINCE THE PRICE PAID TO EACH OPERATO R WAS SAME THERE WAS NO NEED TO MAKE ADJUSTMENT. ON A CAREFUL CONSIDERATION OF ENTIRE FACTS OF THE C ASE, IT IS NOTED THAT THOUGH THE AE OF THE APPELLAN T, 5GEH, NEGOTIATED THE SALE OF GAS WITH CAIRN TO ITS INDIAN ENTITY, THERE WAS NO FORMAL AGREEMENT BETWEEN THE TWO. THE AGREEMENT WAS ENTERED BETWEEN THE SELLER AND TH E BUYER WHICH ARE LOCATED IN INDIA. THE RATES AND O THER TERMS AND CONDITIONS WERE NEGOTIATED BY BGEH IN LON DON. IT IS NOT A CASE WHERE BGEH HAS ENTERED INTO A N AGREEMENT WITH CAIRN AND THE APPELLANT COMPANY WAS MADE A PARTY TO THAT AGREEMENT. THE PAYMENTS FOR NEGOTIATION AND CORPORATE GUARANTEE COMMISSION HAVE SEPARATELY BEEN MADE BY THE APPELLANT TO ITS AE. T HE NEGOTIATION WAS FOR A LONG TERM CONTRACT OF 22 YEAR S WHICH HAS BENEFITED THE APPELLANT AS THE PRICE OF GAS KEEPS ON VARYING. THIS HAS ENSURED GUARANTEED SUPPL Y OF GAS TO THE APPELLANT AND ALSO STABILITY IN THE PURCHASE PRICE. THE APPELLANT HAS RIGHTLY SUBMITTED THAT THE PROVISIONS OF SECTION 92 B(2) ARE NOT AP PLICABLE. THE SECTION CLEARLY SPECIFIES THAT THERE SHOULD BE A PRIOR AGREEMENT IN RELATION TO THE RELEVANT TRANS ACTION BETWEEN SUCH OTHER PERSON AND THE AE. IT IS AN UNDI SPUTED FACT THAT THERE WAS NO AGREEMENT BETWEEN THE BGEH AND CAIRN GROUP. THE BGEH WAS NEGOTIATING ON BEHALF OF THE INDIAN COMPANIES. THE AGREEMENT WAS ENTERED BETWEEN THE INDIAN ENTITY OF CAIRN GROU P AND THE APPELLANT GROUP COMPANY, WHICH IS INCORPORATED IN INDIA. THE CONTRACT OR THE AGREEMEN T HAS SUBSEQUENTLY BEEN ASSIGNED TO THE APPELLANT. THEREFORE, I AM OF THE CONSIDERED OPINION THAT THE PROVISIONS OF SECTION 92B(2) ARE NOT APPLICABLE. TH E AO WAS ACCORDINGLY NOT JUSTIFIED TO TREAT THE TRANSACT ION OF PURCHASE OF GAS FROM CAIRN GROUP AS INTERNAT IONAL TRANSACTION. WITHOUT PREJUDICE TO THE ABOVE OBSERVATION S IF THE PROCESS OF COMPARISON ADOPTED BY TH E AO IN MAKING THE ADJUSTMENT TO THE PURCHASE PRICE, IS EX AMINED IT IS NOTED THAT HE HAS COMPARED THE PRICES OF THE GAS AT THE WELLHEAD IN UNITED STATES. IT IS A KNOWN FACT T HAT THE TRANSPORTATION OF GAS IS A COSTLY AFFAIR AN D SUBSTANTIAL AMOUNT IS TO BE SPENT BY PURCHASING THE GAS AND TRANSPORTING IT TO THE REQUIRED DESTINATIO N. THE PRICES WHICH HAVE BEEN PAID BY THE APPELLANT IS THE DELIVERY PRICE IN INDIA. THE GAS WHICH IS BEING BO UGHT IS PRODUCED IN INDIA. IT HAS ALSO TO BE NOTED THAT THE GAS AT THE SAME RATE IS ALSO BEING BOUGHT BY THE A PPELLANT FROM OTHER PARTIES, WHO ARE NOT PART OF THE CONTRAC T, FROM THE SAME GAS FIELD AT THE SAME PRICE. THIS ITSELF IS SUFFICIENT AND LOGICAL COMPARABLE INSTANCE. FURTHER , IT HAS ALSO OBSERVED THAT THE PRICE PAID BY THE A PPELLANT IN SUBSEQUENT CONTRACT WAS HIGHER THAN THE PRICES W HICH HAVE BEEN TAKEN FOR INTERNATIONAL TRANSACTION. THE CONTRACT THROUGH WHICH THE GAS HAS BEEN PURCHASED I S A LONG TERM CONTRACT AND THEREFORE, IT WOULD BE APPROPRIATE TO AGGREGATE THE TRANSACTIONS AND MAKE THE COMPARISON. THEREFORE, EVEN IF IT IS ASSUMED TH AT THE TRANSACTIONS OF GAS PURCHASE WERE 'INTERNATIONAL TR ANSACTION' THE SAME WERE AT ARM'S-LENGTH PRICE ON A CCOUNT OF ABOVE MENTIONED FACTS. I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 7 IN VIEW OF THE ABOVE DISCUSSION, THE ADDITION MADE BY THE AO AMOUNTING TO RS. 4,73,06,676/- IS DIRECTE D TO BE DELETED. THE GROUND OF APPEAL IS ACCORDINGLY, ALLOWED. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E US, THE LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL HAS REFERRED PAGE NO . 35 OF THE ORDER OF CIT(A) PERTAINING TO PART OF THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE LD. CIT(A) DURING THE COURSE OF APPELLATE PROCEEDIN GS. THE LD. CIT(A) HAS REPRODUCED THE SUBMISSION OF THE ASSESSEE STATING T HAT ITS ASSOCIATED CONCERN BGEH HAD NO AGREEMENT WITH CAIRN FOR THE PURCHASE O F GAS FROM LAKHMI FIELD AND IT HAS PROVIDED ONLY NEGOTIATION SERVICES . THE LD. COUNSEL ALSO SUBMITTED THAT AS PER CIRCULAR NO. 14/2001 OF THE C BDT, THERE HAS TO BE A PRIOR AGREEMENT BETWEEN THE ASSOCIATED ENTERPRISE A ND THE UNRELATED PARTY IN RELATION TO THE TRANSACTION BETWEEN THE ASSESSEE AN D THE THIRD PARTY AND IF THERE IS NO PRIOR AGREEMENT AS ENVISAGED U/S. 92B(2 ) THEN THAT SECTION DOES NOT HAVE ANY APPLICATION. THE LD. COUNSEL HAS ALSO REFERRED PAGE NO. 3 OF THE PAPER BOOK PERTAINING TO THE COPY OF AGREEMENT BET WEEN ONGC, WORLD TATA PETRODYNE LTD., CAIRN ENERGY GROUP OF COMPAN IES AND GUJARAT GAS LIMITED. THE LD. COUNSEL HAS REFERRED PAGE NO. 5 O F AGREEMENT PERTAINING TO THE VARIOUS CLAUSES OF SALE AND PURCHASE OF GAS BY THE SELLERS AND THE BUYERS. AS PER CLAUSE 6, IT IS STATED THAT EACH OF THE SEL LERS HAS AGREED TO SELL GAS TO THE BUYERS AND THE BUYER HAS AGREED TO PURCHASE GAS FROM THE SELLERS AS PER THE TERMS AND CONDITIONS OF THE CONTRACTS. THE LD. COUNSEL HAS ALSO REFERRED PAGE NO. 14 OF THIS AGREEMENT AND ARTICLE 14.1 OF T HE AGREEMENT STATING THAT THE PURCHASE PRICE PAYABLE BY THE BUYER TO THE SELL ER WILL BE AS PER ARTICLE 14 WHICH INCLUDES VARIOUS CLAUSES SUCH AS PRICE, PRIC E CALCULATION, CEILING AND FLOOR PRICE ETC. THE LD. COUNSEL HAS ALSO CONTENDE D THAT THE PRICE IS NEGOTIATED BETWEEN THE PARTIES TO THE AGREEMENT AND THERE IS NO ROLE OF THE I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 8 ASSOCIATED ENTERPRISE TO NEGOTIATE THE PRICE OF THE GAS PURCHASED BY THE ASSESSEE AND THE ASSESSING OFFICER HAS WRONGLY MADE THE ADDITION. 6. HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS ENTERED INTO THE FOLLOWING INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTE RPRISES. SL. NO. NAME & ADDRESS OF THE ASSOCIATE ENTERPRISE DESCRIPTION OF TRANSACTION AMOUNT (RS.) 1 BRITISH GAS ENERGY HOLDING LTD PAYMENT FOR CORPOR ATE GUARANTEE COMMISSION 38,70,000 2 BRITISH GAS ENERGY HOLDING LTD PAYMENT FOR CORPOR ATE GUARANTEE COMMISSION 63,10,000 THE ASSESSEE HAS FURNISHED THE INFORMATION IN RESPE CT OF THE AFORESAID INTERNATIONAL TRANSACTION AS PER THE PROVISION OF S ECTION 92E OF THE ACT. THE ASSESSEE HAS STATED THAT ALL THE ABOVE INTERNATIONA L TRANSACTION WAS AT ARMS LENGTH PRICE. THE BGEH IS THE ASSOCIATED COMPANY O F THE ASSESSEE INCORPORATED IN THE UNITED KINGDOM AND IT HAS NEGOT IATED WITH THE CAIRN GROUP FOR PURCHASING OF GAS FROM LAXMI FIELD WHICH WAS LOCATED IN INDIA. ANOTHER COMPANY BGIPL INCORPORATED IN INDIA HAD ENT ERED INTO AN AGREEMENT FOR PURCHASE OF GAS FROM CAIRN. HOWEVER, THE GUJARAT GAS COMPANY LTD. WANTED TO PURCHASE THE GAS ON A LONG T ERM BASIS FOR ITS EXPANSION PLANT, THEREFORE, BGIPL HAD NOMINATED GGC L TO ENTER INTO LONG TERM GAS SUPPLY WITH CAIRN. SUBSEQUENTLY, THE SAI D CONTRACT WAS ASSIGNED BY GUJARAT GAS COMPANY LTD. SINCE THE ASSESSEE COM PANY WOULD BE THE BENEFICIARY OF THE LONG TERM AGREEMENT THEREFORE IT HAD PAID COMMISSION TO THE BGEH FOR CARRYING OUT NEGOTIATION WITH THE CAIR N. THE BGEH HAS ALSO EXTENDED GUARANTEE FOR THE PERFORMANCE OF THE CONTR ACT THEREFORE THE I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 9 ASSESSEE COMPANY HAD PAID ANNUAL COMMISSION EQUIVAL ENT TO 1% OF THE GUARANTEED AMOUNT EQUIVALENT TO THE COMPARATIVE RAT E OF 1% QUOTED BY THE ICICI LIMITED. THE AVERAGE PRICE OF NATURAL GAS IN THE INTERNATIONAL MARKET WAS AT USD DOLLAR 3.9975 PER GIGA JOULE WHEREAS THE PRICE PAID AS PER THE AGREEMENT BY THE ASSESSEE COMPANY WAS AT USD 3.941 4 PER GIGA JOULE INCLUDING 1% COMMISSION PAID TO ITS ASSOCIATE COMPA NY. IT IS ALSO DEMONSTRATED FROM THE COPIES OF AGREEMENT PLACED IN THE PAPER BOOK THAT ASSOCIATE CONCERN OF THE ASSESSEE COMPANY BGEH HAD NO AGREEMENT WITH CAIRN FOR THE PURCHASE OF GAS FROM LAXMI FILED AND BGEH HAS PROVIDED ONLY NEGOTIATION SERVICES. THE ASSESSEE HAS PURCHASED THE GAS FROM CAIRN AND FROM OTHER OPERATORS FROM LAXMI FIELD, ONGC, WORLD TATA PETRODYNE LTD ON THE SAME PRICE THEREFORE IT CANNOT BE SAID THAT ASSESSEE HAS NOT MADE TRANSACTION ACCORDING TO ARMS LENGTH PRINCIPLES. IN THE LIGHT OF THE ABOVE FACTS AND FINDINGS, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LD. CIT(A) AS ELABORATED SUPRA IN THIS ORDER. THEREFOR E WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF REVENUE, ACCORDINGLY, T HIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. GROUND NO. 2(DELETING RS. 1,01,80,000/- U/S. 40(A)( IA) R.W. 195 OF THE ACT) 7. DURING THE COURSE OF ASSESSMENT, ON VERIFICATION OF P & L ACCOUNT , THE ASSESSING OFFICER OBSERVED THAT PROVISION OF SE CTION 195 OF THE ACT WERE APPLICABLE ON THE PAYMENT OF PURCHASE COMMISSION AN D GUARANTEE COMMISSION OF RS. 1,01,80,000/- BY THE ASSESSEE COM PANY TO BRITISH GAS ENERGY HOLDING LTD. A GROUP HOLDING COMPANY SITUATE D IN UNITED KINGDOM. I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 10 THE DETAIL OF PURCHASE COMMISSION AND GUARANTEE COM MISSION ELABORATED IN GROUND NO. 1 OF THE REVENUE IS AS UNDER:- PAYMENT OF CORPORATE GUARANTEE COMMISSION 38,70,00 0 PAYMENT FOR COMMISSION ON PURCHASES 63,10,000 TOTAL RS. 1,01,80,000/- THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PAYM ENT MADE AS COMMISSION WAS NOTHING BUT THE TECHNICAL SERVICES R ENDERED IN INDIA AND PROVISION OF SECTION 9(1)(VII) OF THE ACT WERE ATTR ACTED IN THE CASE OF THE ASSESSEE. THE ASSESSING OFFICER HAS REPRODUCED THE PROVISION OF THE STATED SECTION 9(1)(VII) AS UNDER:- 'FOR THE PURPOSES OF THIS CLAUSE, 'FEES FOR TECHNIC AL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGER IAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING T HE PROVISIONS OF SERVICES OF TECHNICAL OR OTHER PERSON NEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDE RTAKEN BY THE RECIPIENT OF CONSIDERATION WHICH WOUL D BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD ' SALARIES'. THE ASSESSING OFFICER HELD THAT AS PER THE PROVISIO N OF SECTION 9(1)(VII) AS ABOVE, THE ASSESSEE HAS FAILED TO DEDUCT TAX ON TH E PAYMENT OF RS. 1,01,80,000/- BEING THE FEES FOR TECHNICAL SERVICES , THEREFORE, THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S. 195 OF THE ACT. 8. THE ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT (A). THE LD. CIT(A) HAS DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE RELEVANT PART OF THE DECISION OF LD. CIT(A) IS AS UNDER:- 6.3 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE APPELLANT HAS MADE THE FOLLOW ING PAYMENTS TO ITS AE AS COMMISSION: - PAYMENT OF CORPORATE GUARANTEE COMMISSION RS. 3,870,000 PAYMENT FOR COMMISSION ON PURCHASE RS. 6,310,000 TOTAL RS. 10,180,000 2.4 THE LEARNED A.O. HAS STATED AT POINT NO. 9 .3 ON PAGE NO. 34 OF HIS ORDER AS UNDER: I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 11 '9.3 THUS IT IS SEEN THAT THIS PAYMENT, IN ESSE NCE, IS A PAYMENT TO COMPENSATE BGEH FOR 'THE SUBSTANTIAL COSTS, TIME AND KNOW HOW UTILIZED IN NE GOTIATING THE TRANSACTION WITH THE SELLERS. IN ITS SUBMISSIONS , THE ASSESSES HAS STATED THAT IT IS NOT OBLIGED TO D EDUCT TDS ON PAYMENTS REMITTED IN THE FORM OF COMMISSION TO BGEH AS THE COMPANY DOES NOT HAVE ANY PE IN INDIA AND NO SERVICE ARE RENDERED IN INDIA .IT HAS ALSO STATED THAT IT CANNOT BE SAID THAT THE COMMISSION HAS ACCRUED IN INDIA . FOLLOWING POINTS ARE NOTED IN RESPECT OF TH E ASSESSEE'S TRANSACTION WITH BGEH:' HOWEVER IN THIS REGARDS THE APPELLANT HUMBLY SUBMIT THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT HAS NEVER SAID THAT IT IS NOT OBLIGE D TO DEDUCT TDS ON PAYMENTS REMITTED IN THE FORM OF COMMISSION TO BGEH AS THE COMPANY DOES NOT HAVE ANY PE IN INDIA AND NO SERVICE ARE RENDERED IN INDIA IN ANY OF ITS SUBMISSIONS WITH TH E LEARNED A.O. FURTHER THE LEARNED A. O. HAS NEVER ASKED THE APPELLANT TO PROVIDE JUSTIFICATION NON DEDUCTION OF TDS ON PAYMENTS REMITTED IN THE FORM OF COMMISSION TO BGEH. HENCE THE LEARNED A .O. HAS FAILED TO PROVIDE THE OPPORTUNITY OF BEING HEARD TO THE APPELLANT BEFORE ARRIVING AT THE CONCLUSION REGARDING THE APPLICATION OF SECTION 9(1 )(VII) R.W.S. 195 OF THE ACT TO COMMISSION INCO ME OF BGEH, HENCE IT IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE. 2.5 THE APPELLANT HUMBLY SUBMITS THAT THE DISA LLOWANCE OF RS.1,01,80,000/-AS MADE BY THE LEARNED A.O. IS REQUIRED TO BE DELETED ON THE FOLLO WING GROUNDS. (A) THE LEARNED A. O. HAS GROSSLY ERRED IN LAW & ON FACTS OF THE CASE IN PROPOSING A DISALLOWANCE OF RS. 1,01,80,000/- BEING COMMISSION PAID TO BGEH A NONRESIDENT COMPANY BY INVOKING THE PROVISIONS OF SECTION 40(A)(I) R.W.S. 195 OF THE ACT. (B) THE LEARNED A. 0. HAS FAILED TO APPRECIATE T HAT THE PAYMENT TO BGEH FOR RENDERING SERVICES FOR PURCHASE OF GAS FROM CAIRN DOES NOT CONSTITUTE INCOME IN THE HANDS OF BGEH AS IT IS NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES WITHIN THE ME ANING AND SCOPE OF SECTION 9(1)(VII) OF THE INCOME THE AO HELD THAT THE APPELLANT WAS LIABLE TO DEDUCT TAX ON THIS PAYMENT BEING FEES FOR TECHNICAL SERVICES AS PER SECTION 9(1 )(VII) READ WITH SECTIO N 195 OF THE ACT. THE APPELLANT HAS SUBMITTED THAT THE COMMISSION WAS PAID TO A NON-RESIDENT COMPANY. THE SERVICES RENDERED BY BGEH WERE NOT IN THE NATURE OF FEE FOR TECHNICAL SERVICES WITHIN THE MEANING AND SCOPE OF SECTION 9 AND THEREFORE, NO WITHHOLDING TAX OBLIGATION WAS THERE ON THE APPELLA NT UNDER SECTION 195 OF THE ACT. THE COMPANY HAD NO PERMANENT ESTABLISHMENT IN INDIA AND THE PAY MENT MADE TO IT TOWARDS COMMISSION WAS NOT LIABLE TO TAX IN INDIA. IT IS ALSO BEEN SUBMITTED B Y THE APPELLANT THAT THE PAYMENT IS ALSO COVERED BY THE DTAA BETWEEN INDIA AND UK UNDER ARTICLE 7. ON A CAREFUL CONSIDERATION OF THE ENTIRE FACTS IT I S NOTED THAT THE SIMILAR ADDITIONS/DISALLOWANCES HAVE BEEN MADE IN EARLIER A SSESSMENT YEARS ALSO IN RESPECT OF THE SAME ISSUE. THE DISALLOWANCES HAVE BEEN DELETED BY IN A. Y 2009 - 10 AND EARLIER ASSESSMENT YEARS. 'I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER, THE FACTS OF THE CASE AND VARIOUS WRITTEN SUBMISSION GIVEN BY THE APPELLANT. THE A.O HAS TREATED THE COMMISSION PAID BY THE APPELLATE TO BG ENERGY HOLDINGS LTD (BGEH)AS P AYMENT-FOR TECHNICAL SERVICES (CONSULTANCY]- RENDERED IN INDIA . HE APPLIED THE PROVISIONS OF SECTION 9(1)(VII) REA D WITH SECTION 195 OF THE ACT AND HELD THAT SINCE THE FAX WAS NOT DEDUCTED THE EXPENDITURE CANNOT BE ALLOWED. THE APPELLANT HAS CONTESTED THE ADDITION ON THE GROUND THAT THE PAYMENT WAS NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES, IF WAS A COMMISSION WHICH HAS BEEN PAID OUTSIDE INDIA FOR SERVICES RENDERED O UTSIDE INDIA BY IN NON-RESIDENT AND THEREFORE, IF WAS NOT TAXABLE AND ACCORDINGLY, NO F AX IS DEDUCTED BY THE APPELLANT. NOW THE ISSUE IS WHETHER, FIRST OF ALL, THE SERVICE S OF BGEH ARE IN THE NATURE OF FTS AND SECONDLY, IN CASE IF WAS A COMMISSION WHETHER PROVI SIONS OF SECTION 195 WERE APPLICABLE AND THE APPELLANT WAS BOUND TO DEDUCT FAX ON THE SA ME. THE FACTS SHOW THAT THE APPELLANT HAS MADE FOLLOWING PAYMENT OF COMMISSION: - PURCHASE COMMISSION : RS . 38,45,000 PAYMENT GUARANTEE COMMISSION : RS. 79,79 ,000 TOTAL : RS. 1,,18,24,000 I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 12 THE PURCHASE COMMISSION HAS BEEN PAID AS BGEH NEGOT IATED A GAS PURCHASE AGREEMENT WITH CAIRN INDIA LTD FOR SUPPLY OF GAS TO THE APPELLANT. THE COMMISSION WAS PAID AT THE RATE OF 1% OF ITS ANNUAL GAS PURCHASES AT CEILING PRICE. THE PAYMENT GUARANTEE COMMISSION HAS BEEN PAID TO B GEH AS IT PROVIDED A CORPORATE GUARANTEE TO CAIRN ENERGY LTD ON BEHALF OF THE APPELLANT. BGE H WAS THE PRIMARY OBLIGOR TO THE SELLING PARTY FOR THE GAS PURCHASE CONTRACT. THE FACTS REGARDING THE QUANTUM OF PAYMENT ARE NOT DISPUTED AS IT IS EVIDENCE BY THE AGREEMENTS AND THE A.O HAS ALSO NOT DISPUTED THE SAME. AS PER EXPLANATION 2 BELOW CLAUSE (VII) OF SUB-SECT ION (1) OF SECTION 9 OF THE I.T. ACT 'FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUD ING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTAN CY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR PERSONNEL) BUT DOES NOT IN CLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION OR WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD ' SALARIES'. NOW IT WOULD ALSO BE USEFUL TO EXAMINE THE MEANING OF WORD 'COMMISSION'. THE TERM COMMISSION HAS NOT BEEN DEFINED IN THE INCOME TAX ACT IN SECTI ON 2 OF THE INCOME TAX ACT. HOWEVER, EXPLANATION BELOW SECTION 194H OF THE INCOME TAX AC T HAS DEFINED COMMISSION AS UNDER: 'COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECEI VED OR RECEIVABLE, OR INDIRECTLY, BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVI CES RENDERED (NOT BEING PROFESSIONAL SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYING OR SELL ING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING, N OT BEING SECURITIES.' SIMILARLY, CLAUSE 2 OF THE EXPLANATION DEFINES THE EXPRESSION PROFESSIONAL SERVICES AS UNDER: 'PROFESSIONAL SERVICES MEANS SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON A LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD FOR THE PURPOSE OF SUB SECTION 44AA THE ABOVE DEFINITIONS SHOW THAT THE COMMISSION MEAN S THE PAYMENT RECEIVED OR RECEIVABLE BY A PERSON ACTING ON THE HALF OF ANOTHE R PERSON FOR SOME SERVICES WHICH SHOULD NOT BE PROFESSIONAL SERVICES OR TECHNICAL SERVICES OR FOR SOME SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS, VALUABLE ARTICLE OR THING. AFTER EXAMININ G THE PAYMENT MADE BY THE APPELLANT TO BGEH IT IS APPARENT THAT THE COMMISSION HAS BEEN PAID FOR N EGOTIATING PURCHASE OF GAS ON BEHALF OF THE APPELLANT. THIS PAYMENT IS NOT IN THE MEANING OF TE CHNICAL SERVICES OR PROFESSIONAL SERVICES. A PERUSAL OF THE AGREEMENT WITH BGEH ALSO SHOW THAT I T WAS A PURE COMMISSION. THE SERVICES RENDERED DOES NOT FALL IN THE CATEGORY OF TECHNICAL SERVICES, MANAGERIAL SERVICES AS WELL AS CONSULTANCY SERVICES. IT WAS A SIMPLE ACT OF NEGOTI ATION CARRIED OUT BY A FOREIGN AGENT FOR AN INDIAN COMPANY. THE RELIANCE IS ALSO PLACED ON THE DECISIONS OF J.K .(BOMBAY) LTD. [118 ITR 312 (DEL)], LINDE AG (62 ITD 330) AND UPS SCS (ASIA) LTD. [50 SOT 268 (M UM.)] WHEREIN THE PROPOSITION LAID DOWN IS THAT MERELY BECAUSE THE FOREIGN SELLING AGENT HAS P ROVIDED PROCUREMENT SERVICES, IT WOULD NOT FALL UNDER THE CATEGORY OF 'MANAGERIAL SERVICES' SO AS T O APPLY THE PROVISIONS OF S.9(L)(VII) OF THE ACT. THE BOMBAY HIGH COURT IN THE CASE OF J.K. (BOMBAY) LTD.(SUPRA) HAS REFERRED AN ARTICLE ON 'MANAGEMENT SCIENCE' IN ENCYCLOPEDIA 747, WHEREIN I T IS STATED THAT THE MANAGEMENT IN ORGANIZATIONS INCLUDE AT LEAST THE FOLLOWING: (A) D ISCOVERING, DEVELOPING, DEFINING AND EVALUATING THE GOALS OF THE ORGANISATION AND THE ALTERNATIVE P OLICIES THAT WILL LEAD TOWARDS THE GOALS; (B) GETTING THE ORGANISATION TO ADOPT THE POLICIES; (C) SCRUTINIZING THE EFFECTIVENESS OF THE POLICIES THA T ARE ADOPTED AND (D) INITIATING STEPS TO _ CHANGEPO LICIES_WJIER2JHEYREJUDGED TO BE LESS EFFECTIVE THAN THEY OUGHT TO BE. MANAGEMENT THUS PERVADES ALL ORGANIZATIONS. FURTHER RELIANCE IS ALSO PLACED ON THE ORDERS OF AN GELIQUE INTERNATIONAL [55 SOT 226 (DEL)], ADIDAS SOURCING LTD. [21 ITR (TRIB.) 697 ( DEL.)] AND SUKANI ENTERPRISE ITA NO. 1330/M/2011, WHEREIN ALSO, THE PROPOSITION LAID DOW N IS THAT SERVICES PROVIDED BY THE FOREIGN SELLING COMMISSION AGENT CANNOT BE CATEGORIZED AS M ANAGERIAL SERVICES SO AS TO INVOKE PROVISIONS OF S.9(L)(VII) OF , THE ACT. THEREFORE, IN MY CONSIDERED OPINION AND IN VIEW OF THE PRECEDING DISCUSSION THE SERVICES RENDERED SHOULD BE CATEGORISED AS 'COMMISSION'. ACC ORDINGLY THE PAYMENT IS BEYOND THE SCOPE AND I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 13 MEANING OF SECTION 9( 1} (VII) AND EXPLANATION 2 TH EREOF. FURTHER BY FOLLOWING THE SIMILAR LOGIC IT CAN ALSO BE HELD THAT THE PAYMENT GUARANTEE COMMISS ION IS ALSO IN THE NATURE OF 'COMMISSION' AND NOT IN THE NATURE OF TECHNICAL SERVICES AND IS BEYO ND THE SCOPE AND MEANING OF SECTION 9(L)(VII) AND EXPLANATION 2 THEREOF. AFTER HAVING HELD THAT THE PAYMENT WAS IN THE NATUR E OF COMMISSION AND NOT A TECHNICAL SERVICES IT IS NOW LEFT TO BE DECIDED WHETHER THE C OMMISSION IS TAXABLE IN INDIA AND ACCORDINGLY THE APPELLANT SHOULD HAVE DEDUCTED TAX WHILE MAKING THE PAYMENT. AS PER PROVISION OF SECTION 195 OF I.J ACT, IT IS OBLIGATORY FOR EVERY PERSON TO DE DUCT THE TAX WHEN A PAYMENT IS MADE TO NON- RESIDENT IF THE INCOME IS CHARGEABLE UNDER PROVISIO N OF L.T ACT. THE CONTENTION OF THE APPELLANT IS THAT THE INCOME IS NEITHER LIABLE TO TAX IN INDIA U NDER PROVISION OF I.T ACT NOR UNDER THE DTAA BETWEEN INDIA AND UK. AS PER THE PROVISION OF SECTION 5(2) OF IT ACT, IN THE CASE OF NONRESIDENT, SCOPE OF TOTAL INCOME INCLUDES ALL INCOME FROM WHATEVER SOURCE WHI CH ARE RECEIVED OR DEEMED TO BE RECEIVED IN INDIA OR WHICH ACCRUES OR ARISES OR IS DEEMED TO AC CRUE OR ARISE TO SUCH NON-RESIDENT IN INDIA. IN THE PRESENT CASE THE PAYMENT IS MADE TO BGEH, WHICH IS SITUATED OUTSIDE INDIA AND THEREFORE, IT IS NECESSARY TO EXAMINE WHETHER SUCH INCOME CAN BE SAI D TO BE DEEMED TO ACCRUE OR ARISE IN INDIA. SINCE THE SERVICES ARE IN NOT THE NATURE OF 'FEES F OR TECHNICAL SERVICES' IT IS NOT NECESSARY TO EXAMINE PROVISION OF SECTION 9(1) (VII) OF IT ACT A LSO. IT IS SEEN THAT THE ENTIRE SERVICE IN RELATION TO P URCHASE AND SUPPLY OF GAS WAS RENDERED OUTSIDE INDIA. THEREFORE, THE COMMISSION HAS ACCRUE D OUTSIDE INDIA. SINCE THE PAYEE IS ALSO NOT LOCATED IN INDIA AND IS NON-RESIDENT NO PART OF INC OME HAS ARISEN IN INDIA. SINCE THERE IS NO TAXABLE INCOME WHICH CAN BE SUBJECT TO TAX UNDER IN COME TAX LAWS OF INDIA THE LIABILITY OF DEDUCTING OF TAX UNDER SECTION 195 WAS NOT THERE. T HE PAYMENT HAS DIRECTLY BEEN REMITTED ABROAD AND THEREFORE, IT ALSO CANNOT BE SAID THAT IT HAS B EEN RECEIVED BY SOME AGENT IN INDIA. THE HONOURABLE SUPREME COURT OF INDIA IN THE CASE O F TOSHOKU (SUPRA) HAS HELD THAT COMMISSION EARNED BY THE NON-RESIDENT FOR ACTING AS THE SELLING AGENT FOR THE INDIAN EXPORTER, WHEREIN SUCH NON-RESIDENT WAS RENDERING SERVICES FR OM OUTSIDE INDIA DOES NOT ACCRUE IN INDIA. IN THE PRESENT CASE BEFORE ME ALSO, THE FOREIGN AGENT IS A RESIDENT OF UK FROM YOUR THE NEGOTIATIONS HAVE BEEN CARRIED OUT FOR WHICH THE COMMISSION HAS BEEN PAID, AND THEREFORE, THE ISSUE BEFORE ME IS DIRECTLY AND SQUARELY COVERED BY THE APEX COURT DECISION. IN VIEW OF THE ABOVE MENTIONED FACTS AND CIRCUMSTAN CES, IT IS HELD THAT THE APPELLANT WAS NOT LIABLE TO DEDUCT TAX ON THE COMMISSION OF RS. 1 ,78,24,000/-. THE DISALLOWANCE MADE BY THE A.O IS ACCORDINGLY DIRECTED TO BE DELETED.' 9. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E US, THE LD. COUNSEL HAS BROUGHT TO OUR NOTICE THAT ON SIMILAR ISSUE ON IDENTICAL FACTS IN THE CASE OF THE ASSESSEE COMPANY ITSELF THE CO-ORDINATE BE NCH OF THE ITAT VIDE ITA NO. 467/AHD/2014 FOR ASSESSMENT YEAR 2007-08 ON 21 ST SEP, 2017 HAS ADJUDICATED THE MATTER IN FAVOUR OF THE ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE WAS FAIR ENOUGH NOT TO CONTROVERT TH ESE UNDISPUTED FACTS THAT THIS ISSUE IS COVERED BY THE ABOVE REFERRED DECISIO N IN FAVOUR OF THE ASSESSEE COMPANY. I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 14 10. HEARD BOTH THE SIDES AND PERUSED THE MATERIAL. WITH THE ASSISTANCE OF LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE DECIS ION OF THE CO-ORDINATE BENCH IN THE CASE OF THE ASSESSEE ITSELF FOR ASSESS MENT YEAR 2007-08 AS REFERRED ON THE SIMILAR ISSUE AND IDENTICAL FACT AN D RELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER:- 12. IN THE PRESENT CASE, THE COMMISSION PAYMENTS H AVE BEEN MADE TO AN ENTITY TAX RESIDENT IN UNITED KINGDOM. THE BENEFIT OF INDO UK DOUBLE TAXATION AVO IDANCE AGREEMENT [(1994) 206 ITR (ST) 235] IS THUS CLEARLY ADMISSIBLE TO THE RECIPIENT. COMING TO THE TREATY PROVISIONS, IT IS NOT EVEN THE CASE OF THE A SSESSING OFFICER THAT THE UK BASED ENTITY HAD A PERMANENT ES TABLISHMENT IN INDIA, AND THE COMMISSION PAID TO TH IS ENTITY, THEREFORE, CANNOT BE TAXED AS BUSINESS PROF ITS. IT IS ONLY ELEMENTARY THAT, IN THE ABSENCE OF A PE, ARTICLE 7 OF THE APPLICABLE DTAA DOES NOT ALLOW TAXATION OF BUSINESS PROFITS IN THE SOURCE COUNTRY. AS FOR THE TAXABILITY UNDER THE FEES FOR TECHNICAL SERVICE S CLAUSE, IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT THE INDO UK DTAA HAS A 'MAKE AVAILABLE' CLAUSE IN ITS ARTICL E DEALING WITH FEES FOR TECHNICAL SERVICES. AS FOR THE CONNOTATIONS OF MAKE AVAILABLE CLAUSE IN THE TREATY , THERE ARE AT LEAST TWO NON-JURISDICTIONAL HIGH CO URT DECISIONS, NAMELY HONBLE DELHI HIGH COURT IN THE CA SE OF DIT V. GUY CARPENTER & CO LTD. [2012] 346 ITR 504 AND HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. DE BEERS INDIA MINERALS (P .) LTD. [2012] 346 ITR 467 IN FAVOUR OF THE ASSESSEE, AND THERE IS NO CONTRARY DECISION BY HONBLE JURISDICTIONAL HIGH COU RT OR BY HONBLE SUPREME COURT. IN DE BEERS INDIA MINERALS (P.) LTD.'S CASE (SUPRA), THEIR LORDSHIPS POSED TH E QUESTION, AS TO 'WHAT IS MEANING OF MAKE AVAILABLE' , TO THEMSELVES, AND PROCEEDED TO DEAL WITH IT AS F OLLOWS: 'THE TECHNICAL OR CONSULTANCY SERVICE RENDERED SHOU LD BE OF SUCH A NATURE THAT IT 'MAKES AVAILABLE' TO THE RECIPIENT TECHNICAL KNOWLEDGE, KNOW-HOW AND THE LIK E. THE SERVICE SHOULD BE AIMED AT AND RESULT IN TRANSMITTING TECHNICAL ITA NOS. 2371& 2394/AHD/2013 , ITA NOS. 363, 364, 467 & 468/AHD/2014 ASSESSEE : GUJARAT GAS TRADING CO LTD ASSESSMENT YEAR : 2007-0 8 TO 2009-10 KNOWLEDGE, ETC., SO THAT THE PAYER OF THE SERVICE COULD DERIVE AN ENDURING BENEFIT AND UTILIZ E THE KNOWLEDGE OR KNOW-HOW ON HIS OWN IN FUTURE WI THOUT THE AID OF THE SERVICE PROVIDER. IN OTHER WORDS, TO FIT INTO THE TERMINOLOGY 'MAKING AVAILABLE', THE T ECHNICAL KNOWLEDGE, SKILL ETC., MUST REMAIN WITH THE PERSON RECEIVING THE SERVICES EVEN AFTER THE PARTICULAR CO NTRACT COMES TO AN END. IT IS NOT ENOUGH THAT THE SERVICES OFFERED ARE THE PRODUCT OF INTENSE TECHNOLOGICAL E FFORT AND A LOT OF TECHNICAL KNOWLEDGE AND EXPERIENCE OF THE SERVICE PROVIDER HAVE GONE INTO IT. THE TECHNICAL KNOWLEDGE OR SKILLS OF THE PROVIDER S HOULD BE IMPARTED TO AND ABSORBED BY THE RECEIVER S O THAT THE RECEIVER CAN DEPLOY SIMILAR TECHNOLOGY OR TECHN IQUES IN THE FUTURE WITHOUT DEPENDING UPON THE PROV IDER. TECHNOLOGY WILL BE CONSIDERED 'MADE AVAILABLE' WHEN THE PERSON ACQUIRING THE SERVICE IS ENABLED TO APP LY THE TECHNOLOGY. THE FACT THAT THE PROVISION OF THE SERVICE THAT MAY REQUIRE TECHNICAL KNOWLEDGE, SKILL S, ETC., DOES NOT MEAN THAT TECHNOLOGY IS MADE AVAILABLE TO THE PERSON PURCHASING THE SERVICE, WITHIN THE MEANI NG OF PARAGRAPH (4)(B). SIMILARLY, THE USE OF A PRODUCT W HICH EMBODIES TECHNOLOGY SHALL NOT PER SE BE CONSID ERED TO MAKE THE TECHNOLOGY AVAILABLE. IN OTHER WORDS, P AYMENT OF CONSIDERATION WOULD BE REGARDED AS 'FEE F OR TECHNICAL/INCLUDED SERVICES' ONLY IF THE TWIN TEST OF RENDERING SERVICES AND MAKING TECHNICAL KNOWLEDG E AVAILABLE AT THE SAME TIME IS SATISFIED.' 13. THE RENDITION OF SERVICES FOR EARNING COMMISSIO N CANNOT BE OF SUCH A NATURE THAT THERE IS A TRANSF ER OF TECHNOLOGY, IN THE SENSE IT IS REQUIRED TO FULFIL T HE 'MAKE AVAILABLE' CLAUSE IN THE INDO UK DTAA. IT IS ALSO ELEMENTARY THAT IN A CASE IN WHICH THE PROVISIONS O F THE DTAA ARE APPLICABLE, THE PROVISIONS OF THE IN COME TAX ACT APPLY ONLY TO THE EXTENT THE SAME ARE BENEFICIAL T O THE ASSESSEE. IN VIEW OF THESE DISCUSSIONS, QUITE CLEARLY, EVEN IF THE COMMISSION INCOME IN THE HANDS OF THE RECIPIENT IS TAXABLE UNDER THE PROVISIONS O F SECTION 9 , THE PROVISIONS OF THE INDO UK DTAA WILL COME TO T HE RESCUE OF THE ASSESSEE. WHICHEVER WAY ONE LOOKS AT IT, WHETHER IN THE LIGHT OF THE PROVISIONS OF THE ACT O R THE INDO UK DTAA, THE CONCLUSIONS OF THE CIT(A) D O NOT CALL FOR ANY INTERFERENCE. CONSIDERING THE DECISION OF THE CO-ORDINATE BENCH O N THE SIMILAR ISSUE AND IDENTICAL FACTS IN THE CASE OF THE ASSESS EE ITSELF AS SUPRA, WE DO NOT I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 15 FIND ANY ERROR IN THE DECISION OF LD. CIT(A), THERE FORE, THE APPEAL OF THE REVENUE ON THIS ISSUE IS DISMISSED. 11. IN THE RESULT, BOTH THE GROUNDS OF APPEAL OF TH E REVENUE ARE DISMISSED. ITA NO. 3069/AHD/2014 FOR ASSESSMENT YEAR BY ASSESS EE GROUND NO. 1 TO 1.7 (DISALLOWANCE U/S. 14A OF THE ACT OF RS. 6,18,456/-) ALL THE GROUNDS OF APPEALS FROM 1.1 TO 1.7 ARE INTE RCONNECTED TO THE COMMON ISSUE OF DISALLOWANCE OF EXPENSES U/S. 14A O F THE ACT, THEREFORE, FOR THE SAKE OF CONVENIENCE THESE GROUNDS OF APPEALS AR E ADJUDICATED TOGETHER AS UNDER. 12. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS RECEIVED EXEMPT INCOME AS DIVIDEND TO THE AMOUNT OF RS. 47,79,997/-. THE ASSESSING OFFICER OBSERVED THAT A SSESSEE HAS NOT COMPUTED THE DISALLOWANCE OF INCURRING EXPENSES IN EARNING E XEMPT INCOME AS PER PROVISION OF SECTION 14A R.W.R. 8D. THEREFORE, THE ASSESSING OFFICER HAS COMPUTED THE DISALLOWANCE AS PER RULE 8D OF THE I.T . RULE TO THE AMOUNT OF RS. 6,22,765/- AFTER REDUCING THE AMOUNT OF RS. 430 9/- ALREADY DISALLOWED BY THE ASSESSEE ITSELF. ACCORDINGLY, THE ASSESSING OF FICER HAS MADE ADDITION OF RS. 6,18,456/- AS DISALLOWANCE U/S. 14A TO THE TOTA L INCOME OF THE ASSESSEE. 13. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. THE RELEVANT PART OF THE ORDER OF THE LD. CIT(A) IS REPRODUCED AS UNDER:- 5.3 DECISION: I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 16 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MADE A DISALLOWANCE UN DER SECTION 14 A BY APPLYING THE PROVISIONS OF RULE 8D. IT WAS NOTED BY HIM THAT THE APPELLANT HAD MADE INVESTMENT IN TAX-EXEMPT ASSETS. THE APPELLANT HAS EARNED DIVIDEND INCOME FROM MUTUAL FU NDS OF RS.4780/-. THE AO MADE DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES BY APPL YING THE PROVISIONS OF RULE 8D. THE APPELLANT ON THE OTHER HAND HAS SUBMITTED THAT IT HAS ALREADY MADE A DISALLOWANCE OF RS.4309/- AS EXPENSES UNDER SECTION 14 A IN THE RET URN OF INCOME WHICH HAS BEEN MADE ON A SCIENTIFIC AND SYSTEMATIC MANNER AFTER CONSIDERING THE RATIO OF DIVIDEND INCOME AND THE TOTAL REVENUE AND ALLOCATING THE EXPENSES ON THAT PROPORT ION. . ON A CAREFUL CONSIDERATION OF THE ENTIRE FACTS RELA TED TO THE DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE MADE BY THE APPELLANT IT IS NOTED THAT THOUGH THE APPELLANT HAS TRIED TO CLAIM THAT IT HAS FOLLOWED A SYSTEMATIC METHOD IN M AKING THE DISALLOWANCE AND HAS ALSO GIVEN A WORKING TO SHOW THAT THE DISALLOWANCE OF RS. 4309/- AS EXPENDITURE UNDER SECTION 14A WAS WORKED OUT BY IT BY ALLOCATING THE EXPENSES IN PROPORTION TO THE RATIO OF EXEMPT INCOME AND TOTAL REVENUE. HOWEVER, THE BASIS FOLLOWED BY THE APPELLANT IS NOT SCIENTIFIC, AS CLAIMED BY IT. THE BASIS OF ALLOCATING THE EXPENSES IN PROPORTION TO THE INCOME CANNOT BE CONSIDERED A SCIENTIFIC OR SYSTEMATIC. THE EXPENSES CAN NEVER BE ALLOCATED IN THIS MANNER. THE APPELLANT HAS NOT MAINTAINED ANY RECORD TO SHOW THAT THE EXPENDITURE INCURRED AN D ESTIMATED BY IT FOR EARNING THE EXEMPT INCOME. AS INDICATED IN THE PRECEDING DISCUSSION THAT THE A PPELLANT HAS NOT MADE THE DISALLOWANCE OF EXPENDITURE FOR THE PURPOSE OF SECT ION!4A ON AN ACTUAL BASIS BUT HAS MADE THE DISALLOWANCE ON AN ESTIMATE WHICH IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE OR ACTUAL DATA TO SHOW THAT THE DISALLOWANCE MADE WAS CORRECT. THE REFORE, IN THESE CIRCUMSTANCES ALSO HAVING REGARD TO THE ACCOUNTS OF THE APPELLANT, I AM NOT S ATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE APPELLANT IN RESPECT OF THE ADMINISTRATIVE EXPENDIT URE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT THAT IS THE DIVIDEND INCOME AND INCOME FROM MUTUAL FUNDS SHOWN BY THE APPELLANT. THEREFORE, AFTER HAVING HELD THAT THE ACCOUNTS OF T HE APPELLANT IN RESPECT OF EXPENDITURE INCURRED FOR EARNING THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME ARE NOT CORRECT, THE EXPENDITURE INCURRED WILL HAVE TO BE WORKED OUT BY APPLYING THE PROVISIONS OF RULE 8D. IT HAS NOTED THAT THE AO HAS APPLIED RULE 8D FOR WORKING O UT THE DISALLOWANCE. ACCORDINGLY, THE APPLICATION OF RULE 8D BY THE AO FOR MAKING THE DIS ALLOWANCE UNDER SECTION 14 A IS UPHELD. THE APPELLANT HAS ALSO SUBMITTED THAT THE AO HAS IN CORRECTLY ADOPTED THE FIGURES OF INVESTMENT AT THE BEGINNING AND AT THE END OF THE Y EAR FOR WORKING OUT THE AVERAGE OF INVESTMENT FOR THE PURPOSE OF RULE 8D. THE AO IS DIRECTED TO V ERIFY THE CLAIM OF THE APPELLANT AND CORRECTLY WORK OUT THE DISALLOWANCE AFTER VERIFYING THE DETAI LS SUBMITTED BY THE APPELLANT. IN VIEW OF THE ABOVE DISCUSSION THE DISALLOWANCE MA DE BY THE AO UNDER SECTION 14A BY APPLYING THE PROVISIONS OF RULE 8D IS UPHELD IN RES PECT OF THE ADMINISTRATIVE EXPENDITURE WHICH HAS BEEN WORKED OUT BY APPLYING THE THIRD LIMB OF T HE RULE. THE GROUND OF APPEAL IS ACCORDINGLY, DISMISSED. 14. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. COUNSEL HAS SUBMITTED THAT IDENTICAL ISSUE ON SIMILAR FACTS IN THE CASE OF THE ASSESSEE ITSELF HAS BEEN ADJUDICATED BY THE CO-ORDINATE BENC H OF THE ITAT VIDE ITA NO. 364/AHD/2016 AGAINST THE ASSESSEE. THE RELEVAN T PART OF THE DECISION OF ITAT IS REPRODUCED AS UNDER:- 17. IN RESPECT OF ASSESSMENT YEAR 2008-09, IT IS I MPORTANT TO BEAR IN MIND THE FACT THAT THIS IS THE YEAR IN WHICH THE RULE 8D HAD ADMITTEDLY COME INTO FORCE AN D AS PER ASSESSEE'S CLAIM THAT IT HAD SUFFICIENT IN TEREST FREE FUNDS. NO DISALLOWANCE IS MADE BY THE ASSESSIN G OFFICER IN RESPECT OF INTEREST PAYMENTS. THE I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 17 DISALLOWANCE HAS ITA NOS. 2371& 2394/AHD/2013, ITA NOS. 363, 364, 467 & 468/AHD/2014 ASSESSEE : GUJARAT GAS TRADING CO LTD ASSESSMENT YEAR : 2007-0 8 TO 2009-10 BEEN MADE ON THE BASIS OF THE FORMULA SET OUT IN RULE 8D IN RESPECT OF ADMINISTRATIVE EXP ENSES AND WE SEE NO INFIRMITY IN THE ORDER OF CIT(A ) IN CONFIRMING THIS DISALLOWANCE. GROUND NO.2 IS THUS D ISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH , THE APPEAL OF THE ASSESSEE ON THIS ISSUE IS DISMISSED. 15. GROUND NO. 2. AGAINST INITIATION OF PENALTY U/ S. 271(1)(C). THIS GROUND OF APPEAL IS PREMATURE AT THIS STAGE THEREFO RE SAME STANDS DISMISSED. 16. AS THE FACTS AND ISSUES INVOLVED IN GROUNDS OF APPEAL NO. 1 AND 2 VIDE ITA NOS. 2407/AHD/2015 ASSESSMENT YEAR 2011-12, 2028/AHD/2016 ASSESSMENT YEAR 2012-13 & 1974/AHD/20 17 ASSESSMENT YEAR 2012-13 FILED BY REVENUE ARE SIMILA R AS IN ITA NO. 3397/AHD/2014 ASSESSMENT YEAR 2010-11 THEREFORE AFTER APPLYING THE DECISION ADJUDICATED VIDE ITA NO. 3397 /AHD2014 AS SUPRA IN THIS ORDER, ALL THESE APPEALS OF THE REVEN UE STAND DISMISSED. THE FACTS AND ISSUED INVOLVED IN ITA NO S. 2339/AHD/2015 ASSESSMENT YEAR 2011-12, 1887/AHD/201 6 ASSESSMENT YEAR 2012-13 AND 2006/AHD/2017 ASSESSMEN T YEAR 2013-14 FILED BY ASSESSEE ARE SIMILAR AS IN ITA NO. 3069/AHD/2014 FOR ASSESSMENT YEAR 2010-11 AS ADJUDI CATED ABOVE. THEREFORE, APPLYING THE FINDINGS OF ITA NO. 3069/AHD/2014 ALL THE GROUNDS OF APPEAL ON THE ISSU E OF DISALLOWANCE U/S. 14A AND INITIATING OF PENALTY U/S . 271(1)(C) STAND DISMISSED. I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 18 ITA NO. 2340/AHD/2015 FOR ASSESSMENT YEAR 2011-12 F ILED BY ASSESSEE 17. THIS APPEAL OF THE ASSESSEE IS FILED ON THE ISS UE OF SET OFF OF RS. 4,99,278/- TOWARDS BROUGHT FORWARD BUSINESS LOSS OF ASSESSMENT YEAR 2010- 11 AGAINST BUSINESS INCOME OF ASSESSMENT YEAR 2011- 12 AND NOT ALLOWING CARRY FORWARD OF RS. 68,98,675/- TOWARDS BUSINESS L OSS FOR ASSESSMENT YEAR 2010-11 18. ON THIS ISSUE THE LD. COUNSEL AT THE OUTSET HAS SUBMITTED THAT VIDE ORDER U/S. 154 OF THE ACT, THE ASSESSING OFFICER HAS DISA LLOWED SET OFF OF BROUGHT FORWARD BUSINESS LOSSES FOR ASSESSMENT YEAR 2010-11 AGAINST THE BUSINESS INCOME OF THE YEAR UNDER CONSIDERATION. THE LD. C IT(A) HAS CONFIRMED THE DECISION OF ASSESSING OFFICER STATING THAT ACTION OF THE ASSESSING OFFICER IN ASSESSING THE INCOME BY GIVING EFFECT TO THE INCOME DETERMINED IN REGULAR SCRUTINY FOR ASSESSMENT YEAR 2010-11 APPEARED TO BE CORRECT. THE LD. COUNSEL HAS SUBMITTED THAT THE LD. CIT(A) HAS RIGHTLY ADJUD ICATED THE ISSUE. THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE ST ANDS DISMISSED. 19. IN THE RESULT, APPEAL ITA NOS. 3397/AHD/2014, 2407/AHD/2015, 2028/AHD/2016 & 1974/AHD/2017 FILED BY REVENUE ARE DISMISSED AND APPEAL ITA NOS. 3069/AHD/2014, 2340/AHD/2015, 2339/ AHD/2015, 1887/AHD/2016 & 2006/AHD/2017 FILED BY ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-10-2020 SD/- SD/- (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 22/10/2020 I.T.A NOS. 3397, 3069/AHD/14, 2407, 2340, 2339/AHD/ 15, 2028, 1887/AHD/16, 1974 & 2006/AHD/2017 PAGE NO DY. CIT VS. GUJARAT GAS TRADING CO. LTD & GUJARAT GAS TRADING CO. LTD. VS. DCIT 19 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,