FRACTAL ANALYTICS P.LTD, MUMBAI V. DCIT 8(1), MUMBAI

ITA 3511/MUM/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0085 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 08-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURUSR
• Assessee Lawyers: KIRTI DADLANI
• Keywords: Business income; Business expenditure; Double taxation relief; Retrospective amendment; Wholly owned subsidiary; Reassessment proceedings
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUM BAI , ,, , , ,, , BEFORE S/SHRI RAJENDRA, A.M. AND SANDEEP GOSAIN,J.M . ./ ././ ./ ITA NO. 3511/MUM/2015 / ASSESSMENT YEAR: 2008-09 FRACTAL ANALYTICS PVT.LTD. (FORMERLY KNOWN AS FRACTAL ANALYTICS LTD.) UNIT NO.701/702, 7TH FLOOR, SILVER METROPOLIS,WESTERN EXPRESS HIGHWAY, GOREGAON (E), MUMBAI-400 063. PAN: AAACF 4502 D VS. THE DCIT (OSD)-8(1) AAYAKAR BHAVAN, M.K. MARG MUMBAI-400 020. ( / // / APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI M.V. RAJGURU-SR.DR ASSESSEE BY: S/SHRI NEERAJ SHETH/PRASHANT MAHESHWARI & MS.KIRTI DADLANI / // / DATE OF HEARING: 07/12/2017 / DATE OF PRONOUNCEMENT: 01.3.2018 , ,, , 1961 254(1) ORDER U/S.254(1)OF THE INCOME-T AX ACT,1961(ACT) , ,, , -PER RAJENDRA,AM: CHALLENGING THE ORDER DATED 27/02/2015 OF THE CIT(A )-16, MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUSI NESS OF PROVIDING OF PREDICTIVE ANALYTICS FOR THE RETAIL FINANCIAL SERVICES,INSURAN CE, CONSUMER PACKAGED GOODS AND TELECOM, FILED ITS RETURN OF INCOME ON 30/09/2008, DECLARING TOTAL INCOME AT RS.15.80 LAKHS.THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT ON 31/01/2014 U/S. 143(3) R.W.S. 147 OF THE ACT, DETERMINING ITS TOTAL INCOME AT RS.1.33 CRORES .THE ASSESSEE HAS RAISED JURISDICTIONAL ISSUE I.E.JUSTIFICATION OF ISSUE OF NOTICE U/S.148 OF THE ACT AND THE CONSEQUENT COMPLETION OF REASSESSMENT PROCEEDINGS.IT HAS ALSO CHALLENGED THE ORDER ON MERITS. 2. DURING THE YEAR UNDER CONSIDERATION,THE ASSESSEE EN GAGED FRACTAL SINGAPORE(FS),ITS WHOLLY OWNED SUBSIDIARY,FOR PROVIDING MARKETING AND BUSINE SS DEVELOPMENT SERVICES TO IT.THE AO FOUND THAT THE ASSESSEE HAD ENTERED IN TO AN AGREEM ENT WITH FS FOR PROVIDING CUSTOMER CO- ORDINATION SERVICES ON ITS BEHALF,THAT THE SINGAPOR E ENTITY DID NOT HAVE THE AUTHORITY TO CONCLUDE ANY AGREEMENTS OR MAKE ANY COMMITMENTS ON BEHALF OF THE ASSESSEE.HE CALLED FOR FURTHER DETAILS IN THAT REGARD AND HELD THAT INCOME HAD ESCAPED ASSESSMENT,THAT THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT WERE APPLICABLE IN THE INSTANT CASE,THAT PAYMENTS MADE TO FS WERE TAXABLE UNDER THE HEAD FEES FOR TECHNICAL SERV ICES(FTS),THAT IT WAS CONSIDERATION FOR THE SERVICES IN THE NATURE OF MANAGERIAL, TECHNICAL , OR CONSULTANCY,AND THAT SAME WOULD BE SUBJECT TO TAX UNDER INDIA-SINGAPORE TAX TREATY PRO VISIONS. 3511/M/15 FRACTAL ANALYTICS PVT.LTD. 2 3 .AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITH(FAA)AND MADE ELABORATE SUBMISSI ONS ABOUT THE REOPENING OF THE CASE AS WELL AS ON MERITS OF THE CASE.IT ALSO RELIED UPON C ERTAIN CASE LAWS.AFTER CONSIDERING THE AVAILABLE MATERIAL,HE HELD THAT THE SERVICES PROVIDED BY FS TO THE ASSESS EE COMPANY FELL WITHIN THE DEFINITION OF FTS AS PROVIDED U/S. 9(L) (VII) OF THE ACT AND THE EXPLANATION 2 INSERTED IN THE ABOVE SAID SECTION W.E.F. 01.06.197 6 MADE IT CATEGORIC IN SUCH CASES THAT IT WOULD NOT BE NECESSARY FOR THE NON-RESIDENT TO HAVE RESIDENCE OR PLACE OF BUSINESS OR BUSINESS CONNECTION IN INDIA,THAT THE AO RIGHTLY REOPENED TH E ASSESSMENT.HE REFERRED TO THE ORDER OF ITAT DELIVERED IN THE CASE OF EVOLV CLOTHING COMPAN Y PVT.LTD.(ITA/2100/MDS/ 2012)WHEREIN IT WAS HELD THAT THE ASSESSES WAS LIAB LE TO DEDUCT TDS AS PER THE PROVISIONS OF THE ACT,THAT FAILURE OF WHICH WOULD ENTAIL DISALLOW ANCE UNDER SECTION 40(A)(IA)OF THE ACT.FINALLY,HE UPHELD THE ORDER OF THE AO. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE (AR) ARGUED THAT NO FRESH MATERIAL WAS AVAILABLE WITH THE AO THAT COULD JUSTIFY REOPENING,THAT EVEN IN THE AY.2007-08 THERE WAS NO NEW MATERIAL IN THAT REGARD,THAT THERE WAS NO BASE TO B ELIEVE THAT INCOME HAD ESCAPED ASSESSMENT.HE REFERRED TO PAGE 60 OF THE PAPER BOOK AND RELIED UPON THE CASES OF ORIENT CRAFT LTD.(354 ITR 536), . 4.1. ON MERITS OF THE CASE,HE CONTENDED THAT THE SCOPE O F SERVICES REVEALED THAT THE SERVICES PROVIDED BY FS TO THE ASSESSEE WERE IN THE NATURE O F MARKETING,BUSINESS DEVELOPMENT AND CUSTOMER CO-ORDINATION SUPPORT SERVICES,THAT SERVIC ES WERE PROVIDED BY FS OUTSIDE INDIA THROUGH ITS EMPLOYEES WHO WOULD PROVIDE ASSISTANCE TO THE ASSESSEE IN IDENTIFYING THE POTENTIAL CUSTOMERS THROUGH MARKET STUDIES AND ESTA BLISHING COMMUNICATION WITH SUCH PROSPECTS BY CONDUCTING MEETINGS AND HOLDING DISCUS SIONS WITH POTENTIAL CUSTOMERS,AS PER THE REQUIREMENTS BY THE ASSESSEE,THAT THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT WERE NOT APPLICABLE TO THE FACTS OF THE CASE,THAT THE EXCEPT ION ENVISAGED IN CLAUSE (B) OF SECTION 9(1) (VII)OF THE ACT WAS SQUARELY COVERING THE SITUATIO N OF THE ASSESSEE,THAT THE FEES PAID TO FS WERE FOR THE PURPOSE OF EARNING INCOME FROM ANY OTH ER SOURCE OUTSIDE INDIA,THAT THE SERVICES PROVIDED BY FS WERE NOT FTS,AS SAME WERE NOT IN THE NATURE OF MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES,THAT FS WAS NEITHER ENGAGED IN CONTROLLING,DIRECTING,MANAGING OR ADMINISTRATING THE BUSINESS OF THE ASSESSEE IN ANY MANNER,THAT ANY PORTION OF RENDERING OF MARKETING AND SUPPORT SERVICES BY FS DID NOT INVOLV E THE APPLICATION OF INDUSTRIAL OR OTHER SERVICES, THAT THE ASSESSEE DID NOT SEEK ANY SORT OF ADVICE FROM FS, 3511/M/15 FRACTAL ANALYTICS PVT.LTD. 3 4.2. WITH REGARD TO THE EXPLANATION INSERTED BY FINANCE ACT 2007 W.R.E.F 1.06.1976, HE CONTENDED THAT IT WOULD HAVE NO IMPACT ON THE TAXAB ILITY OF THE DISPUTED AMOUNT,THAT THE EXPLANATION COVERED ONLY SUCH INCOME OF NON-RESIDEN T WHICH WAS EARNED BY RENDERING SERVICES IN INDIA IRRESPECTIVE OF WHETHER SUCH NON- RESIDENT HAD A RESIDENCE OR PLACE OF BUSINESS CONNECTION IN INDIA,THAT IT DID NOT COVER THE INCOME OF NON-RESIDENT WHERE THE SERVICES WERE RENDERED BY SUCH NON-RESIDENT OUTSIDE INDIA,THAT AN AMENDMENT MADE RETROSPECTIVELY WAS TO BE REGARDED AS IN EXISTENCE FROM THE SPECIFIED DATE,THAT IN JUDGING THE CONSEQUENCES OF DISALLOWANCES POSITION AS ACTUALLY EXISTED AT THE RELEVANT TIME HAD TO BE CONSIDERED,THAT HOLDING A BONAFIDE TAX PAYER IN DEF AULT-FOR HIS INABILITY TO ADHERE TO PROVISIONS WHEN SUCH PROVISIONS DID NOT EXIST AT TH E TIME WHEN PAYMENT WAS MADE-WOULD AKIN TO EXPECTING THE IMPOSSIBLE FROM AN ASSESSEE, THAT WITHHOLDING LIABILITIES OF THE ASSESSEE ON PAYMENTS MADE BY IT TO FS SHOULD BE DETERMINED O NLY ON THE BASIS OF LAW PREVALENT AT THE TIME WHEN LIABILITY TO DEDUCT TAX ON SUCH PAYMENT A ROSE I.E. ON PAYMENT OR CREDIT, WHICHEVER IS EARLIER, THAT NO SUM WAS CHARGEABLE TO TAX,THAT DURING THE PREVIOUS YEAR RELEVANT TO THE AY UNDER CONSIDERATION THE ASSESSEE HAD BONAFIDE REASO NS TO BELIEVE THAT NO INCOME WAS CHARGEABLE TO TAX IN INDIA,THAT THE PROVISIONS OF S ECTION 195 WERE NOT TRIGGERED AND HENCE IT HAD NOT DEFAULTED IN NOT DEDUCTING TAXES ON THE PAY MENTS MADE BY IT ,THAT IT WAS NOT LIABLE TO DEDUCT TAX AT SOURCE WHEN PAYMENT WAS CREDITED TO T HE ACCOUNT OF OR PAID TO THE NON-RESIDENT RENDERING SERVICES AS THE SERVICES WERE NEITHER REN DERED IN INDIA NOR UTILIZED IN INDIA,THAT AN AMENDMENT MADE RETROSPECTIVELY IS TO BE REGARDED AS IN EXISTENCE FROM THE SPECIFIED DATE,THAT DURING THE PREVIOUS YEAR RELEVANT TO THE AY UNDER C ONSIDERATION THE ASSESSEE HAD BONAFIDE REASONS TO BELIEVE THAT NO INCOME WAS CHARGEABLE TO TAX IN INDIA,THAT THE PROVISIONS OF SECTION 195 FOR WITHHOLDING OF TAXES ON SUCH REMITTANCE WER E NOT APPLICABLE,THAT THE PAYMENTS MADE TO FS WERE NOT SUBJECT TO TAX IN INDIA, THAT HOLDIN G THE ASSESSEE IN DEFAULT FOR ITS INABILITY TO ADHERE TO PROVISIONS TO DEDUCT TAXES WHEN SUCH PROV ISIONS DID NOT EXIST AT THE TIME WHEN THE PAYMENT WAS MADE BY THE TAXPAYER WOULD BE AKIN TO E XPECTING THE IMPOSSIBLE FROM AN ASSESSEE. 4.3. HE FURTHER STATED THAT SERVICES RENDERED BY THE ASS ESSEE DID NOT PASS THE 'MAKE AVAILABLE' TEST AS EXPOUNDED IN CLAUSE 4(B) OF ARTICLE 12 OF T HE INDIA SINGAPORE DTAA. REFERRING TO THE PROVISIONS OF SECTION 90(2) OF THE ACT,HE STATED TH AT A NON-RESIDENT HAD THE OPTION TO BE GOVERNED EITHER BY THE PROVISIONS OF THE ACT OR THE TREATY WHICHEVER WAS MORE BENEFICIAL,THAT FS WAS A TAX RESIDENT OF SINGAPORE, THAT IT WAS ELI GIBLE TO CLAIM THE BENEFIT UNDER INDIA- SINGAPORE TAX TREATY.HE ALSO STATED THAT FACTS OF T HE CASE RELIED UPON BY THE FAA WERE TOTALLY 3511/M/15 FRACTAL ANALYTICS PVT.LTD. 4 DIFFERENT FROM THE FACTS OF THE CASE UNDER CONSIDER ATION,THAT THE ASSESSEE WAS RENDERING SERVICES AS PER THE AGREEMENT. HE RELIED UPON THE CASES OF HALDOR TOPSOE (59 ITD 3 13),TUV BAYERN (INDIA) LIMITED (ITA/4944/ MUM/2002),DE BEERS INDIA MINERAL PVT. LI MITED(115 ITD 191);SKYCELL COMMUNICATION LTD.(119 TAXMAN 496); LEHMAN BROTHERS (67 TAXMANN.COM.225),JINDAL THERMAL POWER CO.LTD.(321ITR31);SUN MICROSYSTEMS IN DIA PVT.LTD. (125ITD196);VIROLA INTERNATIONAL(147 ITD 519)AND ISHIKAWAJIMA -HARIMA HEAVY INDUSTRIES LTD.(158 TAXMAN 259). 4.4. THE DR HEAVILY RELIED UPON THE CASES OF THE FAA AND STATED THAT NO REGULAR ASSESSMENT WAS PASSED,THAT THE AO HAD ISSUED INTIMATION U/S.14 3(1)OF THE ACT,THAT REASSESSMENT PROCEEDINGS WERE INITIATED AS PER THE PROVISIONS OF THE ACT,THAT REASONS FOR REOPENING WERE RECORDED,THAT THE SERVICES AVAILED BY THE ASSESSEE WERE FTS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT BASIC ISSUE TO BE DECIDED IS AS TO WHETHER THE SERVICES R ENDERED BY FS AND AVAILED BY THE ASSESSEE WOULD FALL UNDER THE CATEGORY FTS. AS PER THE AGREEMENT (PG. 97-98 OF THE PB)FS HAD AG REED TO PROVIDE FI VARIOUS SERVICES TO THE ASSESSEE NAMELY PROVIDING GENERAL MARKET INFORM ATION;CONDUCTING MARKET STUDIES AND RESEARCH, PREPARING MARKET REPORTS;PROVIDING ASSIST ANCE TO FI IN IDENTIFYING THE POTENTIAL CUSTOMERS AND ESTABLISHING COMMUNICATION WITH THEM , ASSISTING FI IN DEVELOPING MARKETING COLLATERAL SUCH AS BROCHURES, CDS, PRESENTATIONS FO R POTENTIAL CUSTOMERS,CONDUCING MEETING AND HOLDING DISCUSSIONS WITH POTENTIAL CUSTOMERS BA SED ON THE INSTRUCTIONS PROVIDED BY FI AND ASSISTING FI IN FINALIZATION OF THE COMMERCIAL TERMS WITH THE PROSPECTIVE CUSTOMERS.A PERUSAL OF SERVICES REVEAL THAT FS WAS HELPING FI I N THE AREAS OF BUSINESS DEVELOPMENT,THAT THE SERVICES WERE BEING PROVIDED FROM SINGAPORE.IT IS A FACT THAT FS HAD NO PE IN INDIA AND IT HAD NO AUTHORITY TO CONCLUDE ANY CONTRACT ON BEHALF OF THE ASSESSEE. WE FIND THAT THE FAA HELD THAT SAME WERE FTS,AS SAM E WOULD FALL IN THE CATEGORY OF MANAGERIAL,TECHNICAL OR CONSULTANCY.WE FIND THAT TH E TERMS MANAGERIAL/TECHNICAL/ CONSULTANCY HAVE NOT BEEN DEFINED EITHER UNDER THE INDIA-SINGAP ORE TAX TREATY OR UNDER THE ACT,SO INTERPRETATION BASED ON DICTIONARY MEANING AND JUDI CIAL PRONOUNCEMENT HAD TO BE APPLIED,THAT THE DEFINITION OF THE TERM FTS CONNOTED THAT THE SE RVICES ENVISAGED MUST INVOLVE A DEGREE OF SKILL AND EXPERTISE ON THE PART OF THE SERVICE PROV IDER AND COMPRISE ADMINISTRATIVE, TECHNICAL OR ADVISORY WORK.WE ARE OF THE OPINION THAT THE MAR KETING SERVICES ARE AN ART RATHER THAN A SCIENCE,THAT SAME ARE WHOLLY DEPENDENT ON THE SKILL OF THE EMPLOYEES AND OTHER PERSONNEL 3511/M/15 FRACTAL ANALYTICS PVT.LTD. 5 ENGAGED IN MARKETING ACTIVITY.IN THIS BACKGROUND IF WE ANALYSE THE TERMS OF THE AGREEMENT ENTERED IN TO BY THE ASSESSEE WITH FS,IT BECOMES CL EAR THAT THAT THE SERVICES RENDERED BY FS COULD NOT BE SAID TO HAVE APPLIED METHODS WHICH WER E USED IN A PARTICULAR ACTIVITY,THAT MARKETING SERVICES WOULD NOT FOLLOW A COMMON SET OF METHODS BUT WERE RENDERED USING VARIOUS TACTICS AND NEGOTIATION STRATEGIES,THAT THE SAME WERE PERSONAL IN NATURE AND NOT TECHNICAL,THAT THE SERVICES PROVIDED BY THE EMPLOYE ES OF FS TO THE ASSESSEE DO NOT FALL UNDER THE CATEGORY OF MANAGERIAL SERVICES IN NATURE,THAT THE SERVICES PROVIDED BY THE EMPLOYEES OF FS TO FRACTAL INDIA (FI) DID NOT ALSO FALL UNDER TH E CATEGORY OF TECHNICAL SERVICES, THAT THE EXPRESSION CONSULTANCY SERVICE INVOLVED GIVING OF A N ADVICE OR ADVISORY SERVICES BY A PROFESSIONAL, THAT THE ASSESSEE DID NOT SEEK ANY SO RT OF ADVICE FROM FS AND HENCE THE SERVICES PROVIDED BY THE EMPLOYEES OF FS TO FI WOULD NOT FAL L UNDER THE CATEGORY OF CONSULTANCY ALSO.IN SHORT,THE SERVICES PROVIDED BY FS DID NOT F ALL UNDER THE CATEGORY OF 'MANAGERIAL', 'TECHNICAL' OR 'CONSULTANCY' IN NATURE. 5.1. WE ALSO HOLD THAT REQUIREMENT OF ARTICLE 12 OF INDI A-SINGAPORE TAX TREATY-I.E. MAKING AVAILABLE OF SERVICES IN THE NATURE OF MANAGERIAL,T ECHNICAL OR CONSULTANCY-WAS NOT SATISFIED. FOR A SERVICE TO BE MADE AVAILABLE, THE SERVICE REC IPIENT SHOULD BE ABLE TO MAKE USE OF THE KNOWLEDGE, BY ITSELF IN ITS BUSINESS FOR ITS BENEFI T AND WITHOUT THE RECOURSE TO THE SERVICE PROVIDER IN FUTURE AND FOR THIS PURPOSE A TRANSMISS ION OF THE SKILL FROM THE SERVICE PROVIDER TO THE SERVICE RECIPIENT IS NECESSARY.WE FIND THAT IN THE CASE BEFORE US,THE SERVICES AVAILED BY THE ASSESSEE WERE IN THE NATURE OF MARKETING,BUSINESS D EVELOPMENT AND CUSTOMER CO-ORDINATION SUPPORT SERVICES PROVIDED BY FS AND THOSE SERVICES WERE RENDERED BY EMPLOYEES OF FS OUTSIDE INDIA,THAT THE ASSESSEE WAS NOT ENABLED TO INDEPENDENTLY PERFORM SUCH FUNCTIONS AND HAD ONLY CONSUMED THE SERVICES OF FS,THAT THE EXPER TISE AND KNOWLEDGE WOULD STILL REMAIN WITH FS.SO,IT CAN SAFELY BE SAID THAT THE ASSESSEE WAS ONLY REAPING THE REWARDS OF THE FUNCTIONS CARRIED OUT BY FS AND WAS MAKING PAYMENT FOR AVAILING SUCH SERVICES AND NOT TOWARDS THE SKILL OF BUSINESS DEVELOPMENT OR MARKET ING AS SUCH SKILLS HAD NOT BEEN MADE AVAILABLE TO THE ASSESSEE BY THE NON-RESIDENT ENTIT Y.SO,WE HOLD THAT PAYMENT MADE BY IT TO FS WAS BUSINESS INCOME OF FS,THAT FS DID NOT HAVE PE I N INDIA,THAT SERVICES WERE RENDERED OUTSIDE INDIA,THAT PAYMENT RECEIVED BY THE FS WAS N OT TAXABLE IN INDIA. 5.2. WE FURTHER HOLD THAT AS PER THE LAW PREVAILING AT T HE TIME IN FORCE NO INCOME WAS ARISING IN INDIA BY VIRTUE OF THESE SERVICES,SO,THE PROVISI ONS OF SECTION 195 FOR WITHHOLDING OF TAXES ON SUCH REMITTANCE WERE NOT APPLICABLE.IN THE CASE OF VIROLA INTERNATIONAL (147 ITD 519),THE TRIBUNAL HAS HELD THAT A RETROSPECTIVE AMENDMENT IN LAW WOULD NOT CHANGE THE TAX WITHHOLD - 3511/M/15 FRACTAL ANALYTICS PVT.LTD. 6 ING LIABILITIES WITH A RETROSPECTIVE EFFECT,THAT TH E WITHHOLDING OBLIGATIONS FROM PAYMENTS MADE TO NON-RESIDENTS WOULD DEPEND ON THE LAW AS IT STOO D ON THE DATE OBLIGATION TO WITHHOLD TAX AROSE. CONSIDERING THE ABOVE,WE HOLD THAT SG BUSINESS DEVE LOPMENT EXPENSES PAID TO FS, AMOUNT - ING TO RS. 1.18 CRORES,WAS NEITHER TAXABLE IN INDIA AS FTS UNDER ARTICLE 12 OF INDIA-SINGAPORE TAX TREATY NOR WAS IT TAXABLE AS BUSINESS INCOME UN DER ARTICLE 7 OF INDIA-SINGAPORE DTAA, THAT THERE WAS NO LIABILITY OF THE ASSESSEE TO WIT HHOLD TAXES ON SUCH PAYMENTS MADE TO FS AND IT WAS NOT A DISALLOWABLE EXPENDITURE U/S. 40(A)(I) R.W.S.195 OF THE ACT.FIRST TWO GROUNDS OF APPEAL ARE DECIDED IN FAVOUR OF THE ASSESSEE. 6 .THIRD GROUND OF APPEAL DEALS WITH DISALLOWANCE OF BUSINESS EXPENSES IGNORING THE CIRCULAR 23 OF 1969 DATED 23/07/1969. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE REFERRED TO THE CIRCULAR WHEREIN VARIOUS CLARIFICATIONS WERE ISSUED BY THE BOARD ON THE APPLICABILITY OF SECTION 9 OF THE ACT. THE ASSESSEE ARGUED THAT SERV ICES RENDERED BY FS WERE SIMILAR TO THE SERVICES RENDERED BY A COMMISSION AGENT, THAT THE A O HAD ALSO HELD THAT PAYMENT WAS OF THE NATURE OF COMMISSION PAYMENT. HOWEVER, THE AO HELD THAT THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE ITS PLEA THAT THE PAYMENT OF RS. 1.18 CRORE ON ACCOUNT OF OMISSION WAS NOT LIABLE FOR TDS AS REQUIRED UNDER SECTION 195 OF THE ACT, T HAT THE COMMISSION PAID TO FS WAS NOTHING BUT WAS FTS, THAT THE CIRCULAR WAS WITHDRAWN BY THE BOARD ON 22/10/2009. THE FAA DISMISSED THE GROUND WITHOUT DELIBERATING UPON IT. 6.1. BEFORE US,THE AR ARGUED THAT THE CIRCULAR WAS EFFEC TIVE DURING THE YEAR UNDER CONSIDERA - TION,THAT WITHDRAWAL OF THE CIRCULAR AT A LATER DAT E COULD NOT BE HELD TO BE RETROSPECTIVE, THAT THE BENEFIT OF THE PROVISIONS LAID DOWN BY THE CIRC ULAR WERE AVAILABLE TO THE ASSESSEE, THAT THE INCOME OF FS WAS NOT TAXABLE IN INDIA, THAT NO TAX WAS REQUIRED TO BE DEDUCTED ON THE PAYMENT MADE BY THE ASSESSEE. HE RELIED UPON THE CA SE OF ARMAYESH GLOBAL(51 SOT 564) AND ANGELIQUE INTERNATIONAL LTD.(219 TAXMAN 104). T HE DR LEFT ISSUE TO THE DISCRETION OF THE BENCH. 6.2. WE FIND THAT IDENTICAL ISSUE WAS DELIBERATED UPON A ND DECIDED BY THE HONORABLE DELHI HIGH COURT IN THE CASE OF ANGELIQUE INTERNATIONAL L TD.(SUPRA) WHEREIN IT WAS HELD THAT WITHDRAWAL OF THE CIRCULAR AND 2009 COULD NOT BE HE LD TO BE RETROSPECTIVE AND COULD NOT BE CLASSIFIED AS EXPLAINING OR CLARIFYING THE EARLIER CIRCULAR ISSUED IN 1969, THAT THE CIRCULAR WAS IN FORCE TILL IT WAS WITHDRAWN. RESPECTFULLY FOLLOW ING THE ABOVE JUDGMENT, WE DECIDE GOA 3 IN FAVOUR OF THE ASSESSEE. 3511/M/15 FRACTAL ANALYTICS PVT.LTD. 7 7 .LAST GROUND OF APPEAL, DEALING WITH LEVY OF INTERE ST UNDER SECTION 234 D IS NOT ARISING OUT OF THE ORDER OF THE FAA, SO, WE ARE NOT ADJUDICATING I T. 8. AS WE HAVE DECIDED THE ISSUE ON MERITS IN FAVOUR OF THE ASSESSEE,SO,WE ARE ADJUDICATING THE JURISDICTIONAL ISSUE I.E.VALIDITY OF REASSESSMENT P ROCEEDI NGS. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST MARCH,2018. 01 2018 SD/- SD/- ( /SANDEEP GOSAIN) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED :01.03.2018. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR L BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.