ACIT, New Delhi V. M/s Noida Software Technology Park Ltd., New Delhi

ITA 3178/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6457 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 19-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV PUNDIR
• Keywords: Earning of tax free income; Non-deduction of tax; TDS; Rule 8D
• Section: 14A; 195; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.3178/DEL/2017 ASSESSMENT YEAR: 2012-13 ACIT, CIRCLE 18(2), NEW DELHI VS NOIDA SOFTWARE TECHNOLOGY PARK LTD., SCINDIA VILLA, SAROJINI NAGAR, RING ROAD, NEW DELHI AABCN0137F ASSESSEE BY NONE REVENUE BY SHRI GAURAV PUNDIR, SR. DR ORDER PER K. NARASIMHA CHARY, JM: CHALLENGING THE ORDER DATED 15/02/2017 PASSED BY TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-38, NEW DELHI (LD. CIT(A)), IN THE CASE OF M/S NOIDA SOFTWARE TECHNOLOGY PARK LTD (TH E ASSESSEE), FOR THE ASSESSMENT YEAR 2012-13, REVENUE PREFERRED THIS APP EAL. 2. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF TELEPORT EARTH STATION PROVIDING UP-LINKING SERVICES, DSNG ASSEMBL ING INTEGRATION AND TRADING IN SOFTWARE AND OTHER PRODUCTS. FOR THE ASS ESSMENT YEAR 2012-13 DATE OF HEARING 08-09-2021 DATE OF PRONOUNCEMENT 08-09-2021 2 THEY HAVE FILED THEIR RETURN OF INCOME ON 27/9/2012 DECLARING AN INCOME OF RS. 81, 96, 620/-. BY ORDER DATED 31/3/2015, LEARNE D ASSESSING OFFICER ASSESSED INCOME OF THE ASSESSEE AT RS. 3, 34, 20, 8 94/-BY MAKING CERTAIN ADDITIONS. INSOFAR AS THIS APPEAL, WE ARE CONCERNED WITH THE ADDITION OF RS. 2,43,04,731/- UNDER SECTION 40(A)(I) OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE ON THE PAYMENT OF TRANSPONDER CHAR GES UNDER SECTION 195 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) O N THE TRANSPONDER CHARGES PAID/PAYABLE TO M/S INTELSAT GLOBAL SALES & MARKETING LTD AND M/S SINGAPORE TELECOMMUNICATIONS LTD., AND RS.8,91,305/ -BY INVOKING SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES. 3. AGGRIEVED BY SUCH ADDITIONS, ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) BY WAY OF IMPUGNED OR DER DELETED BOTH THE ADDITIONS. REVENUE IS, THEREFORE, BEFORE US IN THIS APPEAL. 4. WHEN THE MATTER IS CALLED, NEITHER THE ASSESSEE NOR ANY AUTHORISED REPRESENTATIVE ENTERED APPEARANCE. IT COULD BE SEEN FROM THE RECORD THAT THE NOTICE SENT TO THE ADDRESS GIVEN IN FORM NO. 36 IS RETURNED WITH THE ENDORSEMENT OF THE POSTAL SERVANT THAT THE ADDRESSE E LEFT. IF THE ASSESSEE IS AVAILABLE IN SUCH ADDRESS, SUCH NOTICE SHOULD HA VE BEEN SERVED ON THE ASSESSEE. IF FOR ANY REASON, THE ASSESSEE IS NOT AV AILABLE THERE, IT IS FOR THE ASSESSEE TO MAKE ARRANGEMENTS FOR SERVICE OF SUCH N OTICE BY FURNISHING THE ADDRESS WHERE THE ASSESSEE WOULD BE AVAILABLE, OR T O DELIVER IT TO SOME AUTHORISED PERSON, OR BY MAKING REQUEST TO THE POST AL DEPARTMENT TO DETAIN THE MAIL TILL THE ASSESSEE CLAIMS THE SAME. SINCE THE ASSESSEE DOES NOT SEEM TO HAVE ADOPTED ANY OF THESE METHODS, WE A RE THE CONSIDERED OPINION THAT NO TIME COULD BE GRANTED. BASING ON TH E RECORD WE PROCEED TO HEAR THE COUNSEL FOR REVENUE AND DECIDE THE MATTER ON MERITS. 3 5. IT IS THE SUBMISSION ON BEHALF OF THE REVENUE TH E TRANSPONDER CHARGES ARE IN THE NATURE OF ROYALTY AND IN VIEW OF THE RETROSPECTIVE INSERTION OF EXPLANATION 6 TO CLAUSE (VI) TO SUBSEC TION (1) OF SECTION 9 OF THE ACT W.E.F. 1/6/1976 THE ASSESSEE IS LIABLE TO DEDUC T THE TAX AT SOURCE. 6. IT COULD BE SEEN FROM THE RECORD THAT BEFORE THE LD. CIT(A) ASSESSEE CONTENDED THAT THE DEFINITION OF ROYALTY WAS CHAN GED BY FINANCE ACT, 2012 BY ADDING EXPLANATION 4, 5 & 6 TO SECTION 9 (1 ) OF THE ACT WITH RETROSPECTIVE FROM 1/6/1976 AND THEREFORE, WHILE TH E ASSESSEE WAS WRITING THE BOOKS OF ACCOUNTS FOR THE FINANCIAL YEAR 2011-1 2, THE AMENDED PROVISION WAS NOT THERE IN THE ACT AND THEREFORE, I T WAS NOT POSSIBLE FOR THE ASSESSEE TO COMPLY WITH SUCH RETROSPECTIVE AMENDMEN T. 7. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. LEARNED ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE WAS REQUIRED TO DEDUCT THE TAX AT SOURCE O N THE PAYMENT OF TRANSPONDER CHARGES AND TDS COMPLIANCE UNDER SECTIO N 195 OF THE ACT THEREON; AND THAT SINCE THE ASSESSEE FAILED TO DEDU CT THE TAX UNDER SECTION 195 OF THE ACT READ WITH SECTION 9 OF THE ACT ON TR ANSPONDER CHARGES PAID/PAYABLE TO M/S INTELSAT GLOBAL SALES AND MARKE TING COMPANY AND M/S SINGAPORE TELECOMMUNICATIONS LTD, THE AMOUNTS OF RS . 2,37,95,163/-AND RS. 5,09,568/-RESPECTIVELY WERE DISALLOWED UNDER SE CTION 40(A)(I) OF THE ACT. 8. IT IS NOT IN DISPUTE THAT AS ON THE DATE OF THE ASSESSEE WRITING THEIR BOOKS OF ACCOUNTS FOR THE FINANCIAL YEAR 2011-12, T HE AMENDED PROVISION OF SECTION 9 WAS NOT THERE IN THE STATUTE BOOK. IT IS ONLY BY FINANCE ACT, 2012 AND AMENDMENT IS BROUGHT IN SECTION 9 (1) BY INSERT ING EXPLANATIONS 4, 5 4 AND 6 TO SECTION 9 (1) OF THE ACT WITH RETROSPECTIV E EFFECT FROM 1/6/1976. AS HAS BEEN HELD BY THE MUMBAI BENCH OF THE TRIBUNAL I N THE CASE OF CIT VS. DA JHAVERI BY ORDER DATED 30/11/2016 THE TAXABILITY OF A SUM IN THE HANDS OF THE PAYER ON ACCOUNT OF A SUBSEQUENT RETROSPECTI VE AMENDMENT WOULD EXPOSE THE PAYER OF MONEY TO AN IMPOSSIBLE SITUATIO N OF REQUIRING DEDUCTION OF TAX AT SOURCE ON THE ANTERIOR DATE OF PAYMENT OF SUCH INCOME, WHEREAS IT WOULD NOT BE SO IN CASE OF THE RECIPIENT OF SUCH AN AMOUNT. LAW DOES NOT REQUIRE THE PERFORMANCE OF AN IMPOSSIBLE T ASK. IT REMAINS AN UNDISPUTED FACT THAT IN THE ABSENCE OF THIS AMENDME NT, THE IMPUGNED INCOME WAS NOT SUBJECT TO TAX DEDUCTION IN INDIA AS PER THE PREVAILING LEGAL POSITION WHEN THE PAYMENTS WERE MADE. 9. LD. CIT(A) IN HER ORDER FOLLOWED THE DECISION RE NDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF D.A. JH AVERI (SUPRA) WHILE GRANTING RELIEF TO THE ASSESSEE. IN THESE CIRCUMSTA NCES, WE ARE ALSO OF THE CONSIDERED OPINION THAT SINCE LAW DOES NOT REQUIRE THE PERFORMANCE OF AN IMPOSSIBLE TASK, THE IMPUGNED ORDER DOES NOT SUFFER ANY ILLEGALITY OR IRREGULARITY AND IN OUR PRACTICAL REALIZATION OF TH E DIFFICULTY OF THE ASSESSEE, WE UPHOLD THE FINDINGS OF THE LD. CIT(A). GROUNDS N O. 1 AND 2 OF THE REVENUES APPEAL ARE, THEREFORE, DIVOID OF ANY MERI T AND ACCORDINGLY DISMISSED. 10. NOW COMING TO THE ADDITION OF RS. 8, 91, 305/- UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES, THE ASSESSE E HAS BEEN PLEADING CONSISTENTLY BEFORE THE AUTHORITIES BELOW THAT FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE DID NOT EARN ANY INCOME FROM THE INVESTMENTS MADE, AND THEREFORE, NO DISALLOWANCE COULD BE MADE. ASSESSEE ALSO PLACED 5 RELIANCE ON A CATENA OF DECISIONS INCLUDING THE ADD ITION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HO LCIM INDIA PRIVATE LIMITED. 11. IN THE OPINION OF THE LEARNED ASSESSING OFFICER IRRESPECTIVE OF THE FACT OF ASSESSEE EARNING ANY EXEMPT INCOME, INASMUC H AS THE ASSESSEE HAS BEEN TAKING COMMERCIAL DECISIONS WHICH REQUIRE NECE SSARILY SOME AMOUNT OF EXPENDITURE, IN THE BEST UNDERSTANDING OF THE LE GISLATIVE INTENT, PROVISIONS UNDER SECTION 14A OF THE ACT READ WITH R ULE 8D OF THE RULES HAVE TO BE INVOKED. LD. CIT(A) FOLLOWED THE DECISIO N OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHEMINVEST LTD VS. CIT BY ORDER DATED 2/9/2015 WHEREIN IT WAS HELD THAT SECTION 14A WILL NOT APPLY IF NO INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVAN T PREVIOUS YEAR. 12. SO LONG AS THERE IS NO DISPUTE OF FACT IN RESPE CT OF THE ASSESSEE NOT EARNING ANY EXEMPT INCOME DURING THE YEAR UNDER CON SIDERATION, THE DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASES OF CHEMINVEST (SUPRA) AND CIT VS. HOLCIM INDIA PVT. LT D. 90 CCH 81 (DEL) (HC) ARE APPLICABLE AND IT WAS HELD IN THESE DECISIONS T HAT SECTION 14A CANNOT BE INVOKED WHEN NO EXEMPT INCOME WAS EARNED. FURTHER, IN THE CASE OF JOINT INVESTMENTS P. LTD. VS. CIT (2015) 372 ITR 694 THE HONBLE COURT HELD THAT THE DISALLOWANCE OF EXPENDITURE U/S 14A OF THE ACT CANNOT EXCEED THE AMOUNT OF TAX EXEMPT INCOME. 13. IN VIEW OF THESE UNDISPUTED FACTS AND THE SETTL ED POSITION OF LAW, WE DO NOT FIND ANY PENALTY CITY IN THE FINDINGS OF THE LD. CIT(A) AND UPHOLD THE SAME. CONSEQUENTLY WE DISMISS GROUNDS NO. 3 AND 4 O F REVENUES APPEAL. 6 14. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 08-09-2021. SD/- SD/- (B.R.R. KUMAR) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 08-09-2021