DDIT, New Delhi V. M/s. Joint Stock Company, New Delhi

ITA 3563/DEL/2013

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4189 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-08-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 03-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S D KAPILA
• Keywords: Additional evidence; TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 3563/DEL/2013 : ASSTT. YEAR : 2005-06 ITA NO. 3564/DEL/2013 : ASSTT. YEAR : 2006-07 DEPUTY DIRECTOR OF INCOME TAX, CIRCLE-3(1), INTERNATIONAL TAXATION, NEW DELHI VS M/S JOINT STOCK COMPANY CENTRODORSTROY, EP-15, DIPLOMATIC ENCLAVE, CHANAKYAPURI, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AA A CJ9551G ASSESSEE BY : SH. S. D. KAPILA, ADV. REVENUE BY : SH. UMESH TAKYAR, SR. DR DATE OF HEAR ING: 08 . 0 7 .20 2 1 DATE OF PRONOUNCEMENT: 05 .10 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE ORDERS OF LD. CIT(A)-XXIX, NEW DELHI DA TED 05.03.2013. 2. SINCE, THE ISSUES INVOLVED IN BOTH THE APPEALS A RE IDENTICAL, WHICH WERE HEARD TOGETHER. 3. IN ITA NO. 3563/DEL/2013, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN ALLOWING PARTIALLY CLAI M OF EXPENSES INCURRED IN RUSSIA FOR REALIZATION OF CONT RACTS ITA NOS. 3563 & 3564/DEL/2013 JOINT STOCK COMPANY 2 IN INDIA ON THE GROUND OF ADDITIONAL EVIDENCES ADMITTED FOR THE ASSESSMENT YEAR 2006-07. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN ADMITTING THE CLAIM OF ASSESSEE ABOUT THE EXPENSES INCURRED IN RUSSIA FOR REALIZATION OF CONTRACTS IN INDIA WITHOUT ANY ADDIT IONAL EVIDENCES IN SUPPORT OF EXPENSES AND ALSO BY NOT ALLOWING ANY OPPORTUNITY TO THE AO FOR REBUTTAL OF THE HYPOTHETICAL GROUNDS OF THE ASSESSEE. 3. WITHOUT PREJUDICE TO THE ABOVE, WHETHER THE LD. CIT(A) HAS ERRED IN ALLOWING CLAIM OF EXPENSES INCURRED IN RUSSIA BY IGNORING THE FACT OF THE CASE THAT CLAIMED EXPENSES WERE NEVER ENTERED IN THE BOOKS OF ACCOUNTS MAINTAINED IN INDIA AND ALSO NEVER AUDITED BY ANY QUALIFIED AUDITOR IN INDIA. THE FACTS HAVE BEEN TAKEN FROM THE ORDER OF THE LD. CIT(A). 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A NON- RESIDENT COMPANY INCORPORATED IN RUSSIA AND ENGAGED IN CONSTRUCTION OF THE AIRPORT PAVEMENT, HIGHWAYS AND BRIDGES. 5. THE ASSESSEE COMPANY WAS AWARDED CONTRACTS BY NA TIONAL HIGHWAYS AUTHORITY OF INDIA (NHAI) FOR CONSTRUCTION OF HIGHWAYS IN STATE OF UTTAR PRADESH FOR FOUR LANING AND STREN GTHENING OF THE EXISTING TWO LANE SECTIONS ON NH-2. THE ASSESSE E SUB- CONTRACTED PART OF ITS CONTRACT TO M/S MUKUND LTD., THANE. THE ASSESSEE OPENED A PROJECT OFFICE IN INDIA AFTER OBT AINING REQUISITE APPROVALS FROM RBI. 6. THE ASSESSEE FILED ITS RETURN OF INCOME ON 22.09 .2005 DECLARING A LOSS OF RS.11,94,45,763/-. THE ASSESSEE HAS CLAIMED AN EXPENSE OF RS.8,41,52,121/- AS EXPENSES INCURRE D IN RUSSIA DURING THE PERIOD FROM APRIL 1, 2004 TO MARCH 31, 2 005 FOR ITA NOS. 3563 & 3564/DEL/2013 JOINT STOCK COMPANY 3 REALIZATION OF CONTRACTS IIC AND IIIC IN INDIA. THE ASSESSING OFFICER DISALLOWED THESE EXPENSES ON THE GROUNDS THAT, A. THE EXPENSES HAVE NOT BEEN ENTERED IN THE BOOKS OF A/C MAINTAINED BY THE ASSESSEE IN INDIA AND PRODUCED BE FORE HIM. B. NO TDS HAS BEEN MADE ON THE PAYMENTS REGARDING EXPENSES IN QUESTION. C. NO AUDIT HAS BEEN DONE BY THE AUDITOR IN INDIA. D. THE AR OF THE ASSESSEE COULD FURNISH RELIABLE DETAI LS REGARDING THESE EXPENSES. IN ABSENCE OF THE RELIABL E DETAILS, THE GENUINENESS OF THESE EXPENSES COULD NO T BE VERIFIED. 7. THE ONLY ISSUE INVOLVED IS DEDUCTIBILITY OF EXPE NSES AGAINST INCOME ATTRIBUTABLE TO INDIAN PE WHEN THESE EXPENSE S ARE CLAIMED TO HAVE BEEN ENTERED IN BOOKS OF ACCOUNTS O F HEAD OFFICE IN RUSSIA. THE APPELLANT CLAIMED BEFORE AO T HAT THESE EXPENSES WERE ACTUALLY INCURRED BY PARENT COMPANY I N RUSSIA IN RELATION TO PROJECTS IN INDIA. DEBIT NOTES WERE RAI SED AND SENT TO INDIA. THESE DEBIT NOTES WERE CERTIFIED BY RUSSI AN AUDITORS AND THESE WERE PASSED THROUGH BOOKS OF ACCOUNTS MAI NTAINED IN INDIA. THE AO DISALLOWED THESE EXPENSES ON THE GROU ND THAT NO DETAILS THEREOF WERE FURNISHED AND ALSO NO TDS WAS MADE AND THEREFORE THESE WERE NOT TO BE ALLOWED AS DEDUCTION U/S 40(A)(I). 8. DURING APPELLATE PROCEEDINGS BEFORE THE LD. CIT( A), THE ASSESSEE FURNISHED INVOICES / DOCUMENTS IN SUPPORT OF VARIOUS EXPENSES CLAIMED BY IT FOR AY 2006-07. SINCE THESE WERE NOT ITA NOS. 3563 & 3564/DEL/2013 JOINT STOCK COMPANY 4 FURNISHED BEFORE AO DURING ASSESSMENT STAGE, THESE WERE SENT TO AO FOR HIS REMAD REPORT U/S 46A, BEING ADDITIONA L EVIDENCES. 9. THE AO FURNISHED HIS REPORT VIDE LETTER DATED 10 .01.2013. A COPY OF THIS REMAND REPORT WAS LATER MADE AVAILAB LE TO COUNSEL OF THE APPELLANT WHO FURNISHED REJOINDER VI DE LETTER DATED 19.02.2013. IN HIS REMAND REPORT, THE AO HAS STATED THAT THE ASSESSEE DID NOT PRODUCE ANY INVOICES DURING AS SESSMENT STAGE DESPITE ADEQUATE OPPORTUNITY GIVEN FOR THE PU RPOSE. FURTHER, SINCE NO TDS HAD BEEN MADE ON THESE PAYMEN TS, THE CASE FALLS UNDER PROVISIONS OF SECTION 40(A)(I) OF THE ACT. THE APPELLANT HAS SUBMITTED IN REJOINDER THAT ALL THE B OOKS OF A/C AND VARIOUS VOUCHERS WERE MAINTAINED IN RUSSIA IN R USSIAN LANGUAGE AND GIVEN THE VOLUME AND COMPLEXITY OF THE RECORDS, IT WAS NOT POSSIBLE TO RECONCILE IT & PRODUCE IT BEFOR E AO WITHIN THE TIME ALLOWED BY HIM DURING THE ASSESSMENT PROCE EDINGS. IN VIEW OF THESE PECULIAR FACTS, THE LD. CIT(A) HELD T HAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRO DUCING THESE SUPPORTING DOCUMENTS AT ASSESSMENT STAGE WITH IN THE TIME ALLOWED FOR THE PURPOSE. SINCE THESE SUPPORTIN G DOCUMENTS ARE VITAL TO DECIDE THE ISSUE UNDER APPEAL, THE LD. CIT(A) ADMITTED THESE AS ADDITIONAL EVIDENCE U/R 46A IN VI EW OF THE SAID FACTS AND CIRCUMSTANCES OF THE CASE. 10. HAVING ADMITTED THE ADDITIONAL EVIDENCES, THE L D. CIT(A) FURTHER WENT AHEAD IN DETERMINING WHETHER THE EXPEN SES ARE ALLOWABLE UNDER THE PROVISIONS OF THE INCOME TAX AC T AND ALSO WITH SPECIFIC REFERENCE TO TDS AND SECTION 40(A)(IA ). THE LD. CIT(A) EXAMINED THE VARIOUS EXPENSES LIKE SALARY FO R RUSSIAN SPECIALISTS, COST OF EQUIPMENT TRANSPORTATION, DEPR ECIATION OF ITA NOS. 3563 & 3564/DEL/2013 JOINT STOCK COMPANY 5 EQUIPMENT DEPLOYED IN INDIA, SUPPLY OF SPARE PARTS, TAXES PAID FOR EQUIPMENT AND OTHER PROJECT EXPENSES. HAVING EX AMINED, THE LD. CIT(A) ALLOWED/DISALLOWED VARIOUS HEADS OF EXPENDITURE. 11. HENCE, THE GROUNDS TAKEN UP BY THE REVENUE THAT THE LD. CIT(A) ERRED IN ADMITTING THE ADDITIONAL EVIDENCES CANNOT BE HELD TO BE VALID ON FACTS OF THE CASE. FURTHER, THE GROUNDS OF THE REVENUE THAT THE LD. CIT(A) ERRED IN ALLOWING THE C LAIM OF THE EXPENSES CANNOT BE HELD TO BE VALID AS THE LD. CIT( A) HAS VERIFIED EACH AND EVERY EXPENSES CLAIMED BY THE ASS ESSEE BEFORE ALLOWING THE SAME. 12. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/10/2021. SD/- SD/- (AMIT SHUKLA) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED: 05/10/2021 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR