M/s. Mira Exim Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 3713/DEL/2015

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4794 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 08-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ANIL KUMAR CHOPRA
• Keywords: Gift; Business income; Double taxation relief; Principle of natural justice; Retrospective amendment; Permanent establishment; Question of law; Notional interest; Commercial expediency; TDS
• Section: 40A(3); 244A; 234B; 40(a)(ia); 251; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI D BENCH: NEW DELHI (THROUGH VIDEO CONFERENCING ) BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & DR.B.R.R.KUMAR, ACCOUNTANT MEMBER ITA NOS.3713 & 3714/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 M/S. MIRA EXIM LTD., 523-524, WORLD TRADE CENTRE, CONNAUGHT PLACE, NEW DELHI PAN-AAACM2066M VS ADDL. CIT, RANGE-6, C. R. BUILDING, NEW DELHI. APPELLANT RESPONDENT APPELLANT BY SH. ANIL KUMAR CHOPRA, CA & SH. PRAVEEN KUMAR, CA RESPONDENT BY SH.UMESH TAKYAR, SR. DR DATE OF HEARING 20.09.2021 DATE OF PRONOUNCEMENT 30 .09.2021 ORDER PER KUL BHARAT, JM : BOTH APPEALS FILED BY THE ASSESSEE PERTAINING TO A SSESSMENT YEARS 2010- 11 & 2011-12 ARE DIRECTED AGAINST THE ORDERS OF LD. CIT(A)-6, DELHI DATED 30.03.2015 & 31.03.2015. FOR THE SAKE OF CONVENIEN CE, BOTH APPEALS WERE TAKEN UP TOGETHER BEING DISPOSED OFF BY WAY OF A CO NSOLIDATED ORDER. 2. FIRST WE TAKE UP ITA NO.3713/DEL/2015 [ASSESSMENT YEAR 2010-11] WHEREIN THE ASSESSEE HAS RAISED FOLLOWING GROUNDS O F APPEAL:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) [LD. CIT(A)] HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,30,609 /- TOWARDS ALLEGED PERSONAL USE OUT OF EXPENDITURE ON FESTIVAL AND GIF TS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE APP ELLANT. THE DISALLOWANCE IS ARBITRARY, ADHOC WITHOUT POINTING OUT ANY SPECIF IC ITEMS. THE DISALLOWANCE AS MADE BY THE ASSESSING OFFICER AND C ONFIRMED BY THE LD. CIT(A) BEING BASED ON ERRONEOUS VIEWS AND / OR NON- APPRECIATION OF THE FACTS AND LAW DESERVES TO BE DELETED. ITA NOS.3713 & 3714/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 2 | P A GE 2. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.55,14,741/- OUT OF LEGAL AND PROFESSIONAL EXPENS ES MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SEC TION 40(A)(I). THE LD. CIT(A) HAS WRONGLY TREATED THE SAID PAYMENTS AS FEE FOR TECHNICAL SERVICES. AS PER THE RESPECTIVE DTAA, THE PAYMENTS INVOLVED ARE EITHER BUSINESS INCOME OF PAYEE OR ARE INDEPENDENT PERSONA L SERVICES. IN ABSENCE OF ANY PE OR FIXED PLACE OF BUSINESS IN IND IA OF THE PAYEE, AS PER THE RESPECTIVE DTAA, THE SAID PAYMENTS ARE NOT CHAR GEABLE TO TAX IN INDIA AND AS SUCH NO TDS IS APPLICABLE THEREON. THE DISAL LOWANCE AS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT( A) IS BASED ON ERRONEOUS VIEWS AND / OR NON-APPRECIATION OF THE FA CTS AND LAW. 3. NO TDS WAS DEDUCTIBLE OUT OF LEGAL AND PROFESSIO NAL EXPENSES EITHER UNDER THE ACT OR UNDER CERTAIN RELEVANT PROVISIONS OF THE DTAA. AS SUCH, SECTION 40(A)(I) IS NOT APPLICABLE AND THE DISALLOW ANCE OF RS.55,14,741/- IS LIABLE TO BE DELETED. 4. THAT LD CIT(A) HAS ERRED IN CONFIRMING THE DISAL LOWANCE OF RS.87,18,393/- OUT OF INTEREST PAID ON ACCOUNT OF N OTIONAL INTEREST ON INTEREST FREE ADVANCES GIVEN TO RELATED PARTY AGAIN ST PURCHASE OF GUEST HOUSE PROPERTY. THE ADVANCE WAS GIVEN IN THE COURSE OF BUSINESS FOR COMMERCIAL EXPEDIENCY AND AS SUCH NO DISALLOWANCE I S CALLED FOR. THE DISALLOWANCE AS SUSTAINED BY THE LD. CIT(A) IS BASE D ON ERRONEOUS VIEWS AND NON-APPRECIATION OF FACTS AND LAW INVOLVED AND IS ALSO AGAINST THE CONSISTENCY PRINCIPLE. SIMILAR INTEREST DISALLOWANC E WAS DELETED LAST YEAR BY LD. CIT(A). 3.1 THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE APPELLANT HAD LARGE AMOUNT OF OWN NONINTER EST BEARING FUNDS IN THE FORM OF CAPITAL, RESERVES AND OTHER INTEREST FR EE FUNDS. AS SUCH TOO THE DISALLOWANCE AS MADE BY THE ASSESSING OFFICER AND C ONFIRMED BY THE LD. CIT(A) IS BASED ON ERRONEOUS VIEWS AND / OR NON-APP RECIATION OF THE FACTS AND LAW. THE SAID DISALLOWANCE OUT OF INTEREST PAID DESERVES TO BE DELETED INTOTO. ITA NOS.3713 & 3714/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 3 | P A GE 3.2 THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE COMPUTATION OF DEEMED INTEREST @14.5% AS AGAINST TH E ACTUAL INTEREST RATE BEING PAID BY THE APPELLANT ON BORROWINGS FROM THE BANK WHICH IS MUCH LESS. 3.3 THAT THE LD. CIT(A) HAS ERRED IN COMPUTING NOT IONAL INTEREST OF RS. 87,18,393/- AND IN DISALLOWING THE SAME. NO DEEMED HYPOTHETICAL OR FICTIONAL INCOME IS CAPABLE OF BEING TAXED AS PER S ETTLED CASE LAW OF THE HON'BLE APEX COURT AND AS SUCH TOO THE SAID DISALLO WANCE OF RS. 87,18,393/- IS LIABLE TO BE DELETED. 5. THAT THE DISALLOWANCES HAVE BEEN MADE AND CERTAI N ADVERSE COMMENTS MADE WITHOUT PROPER LAWFUL OPPORTUNITY AND WITHOUT COMPLIANCE OF PRINCIPLES OF NATURAL JUSTICE. AS SUCH TOO, THE DISALLOWANCES AS APPEALED AGAINST IN GROUNDS ABOVE ARE LIABLE TO BE DELETED I NTOTO. 6. THAT THE INTEREST U/S 2348, 234C, 234D AND 244A IS INCORRECT AND EXCESSIVE. 7. THAT THE GROUNDS OF APPEAL AS HEREIN ARE WITHOUT PREJUDICE TO EACH OTHER. 8. THAT THE APPELLANT RESPECTFULLY CRAVES LEAVE TO ADD, AMEND, ALTER AND/OR FOREGO ANY GROUND(S) AT OR BEFORE THE TIME O F HEARING. 3. GROUND NO.1 RAISED BY THE ASSESSEE IS AGAINST TH E CONFIRMING THE DISALLOWANCE OF RS.1,30,609/- TOWARDS ALLEGED PERS ONAL USE OUT OF EXPENDITURE ON FESTIVAL AND GIFTS INCURRED WHOLLY AND EXCLUSIVE LY. 4. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ADDITIONS HAVE BEEN MADE PURELY ON ADHOC BASIS. 5. ON THE CONTRARY, LD. SR. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. ITA NOS.3713 & 3714/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 4 | P A GE 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND MERIT IN THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ADDITION HAS BEEN MADE PURELY ON ADHOC BAS IS. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC ITEM RELATED TO TH E PERSONAL USES. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER AND SUST AINED BY LD.CIT(A) IS NOT JUSTIFIED HENCE, DELETED. 7. GROUND NOS.2 & 3 RAISED BY THE ASSESSEE ARE AGAI NST THE DISALLOWANCE OF RS.55,14,741/- OUT OF LEGAL AND PROFESSIONAL EXPENS ES BY INVOKING SECTION 40(A)(I) OF THE ACT. 8. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT UNDE R THE IDENTICAL FACTS, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER FOR ASSE SSMENT YEAR 2009-10 DELETED BY THE TRIBUNAL AND CONFIRMED BY THE HONBL E DELHI HIGH COURT. 9. ON THE CONTRARY, LD. SR. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HOWEVER, HE CONCEDED THE FACT THAT THE ISSU E HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL AND THE SAM E HAS BEEN CONFIRMED BY THE HONBLE DELHI HIGH COURT. 10. THEREFORE, WE DO NOT SEE ANY JUSTIFICATION TO SUSTAIN THE ADDITION AS MADE BY THE ASSESSING OFFICER. LD.CIT(A) HAS CATEG ORICALLY STATED THAT THE RETROSPECTIVE AMENDMENT HAS BEEN CLARIFIED THAT EV EN IF NON-RESIDENT HAS NO BUSINESS COMMUNICATION TO INDIA AND NOT RENDERED AN Y SERVICES IN INDIA THEN ALSO THE PAYMENT RECEIVED DEEM TO ACCRUE OR ARISE I N INDIA. THE ASSESSING OFFICER HAS RELIED UPON THE ARTICLE 12 OF DTAA BETW EEN INDIA AND GERMANY IN ITA NOS.3713 & 3714/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 5 | P A GE THIS REGARD. FURTHER, THE HONBLE HIGH COURT IN IT A NO.1084/2017 HAS HELD AS UNDER:- SO FAR AS THE FIRST QUESTION, I.E. DELETION OF RS. 7,27,532/- IS CONCERNED, THIS COURT IS OF THE OPINION THAT SINCE THE ITAT HA S RENDERED FINDINGS THAT THE AMOUNTS PAID WERE NOT FEE FOR TECHNICAL SERVICE S (FTS) UNDER EXPLANATION 7 TO SECTION 9(2), SIMILAR TREATMENT WO ULD ARISE. AS FAR AS THIS IS CONCERNED, THE COURT NOTICES THAT THE ITAT RELIE D UPON THE INTERPRETATION GIVEN TO SIMILAR PROVISIONS OF VARIOUS DTAAS IN CUS HMAN & WAKEFIELD PTE. LTD. IN RE.305 ITR 208; DIETER EBERHARD GUSTAV V CI T 235 ITR 698 ETC. AND HELD THAT SINCE THESE WERE NOT IN THE NATURE OF FTS ., THE DEDUCTION UNDER SECTION 40(A)(IA) WAS NOT WARRANTED. RELIANCE BY T HE REVENUE UPON THE RETROSPECTIVE AMENDMENT, IN THE OPINIONS OF THIS CO URT, IS NOT JUSTIFIED, GIVEN THE RULING IN DIRECTOR OF INCOME TAX VS NEW S KIES SATELLITE BVV (2016) 382 ITR 114 (DEL.). NO QUESTION OF LAW, THEREFORE, ARISES. 11. RESPECTFULLY FOLLOWING THE JUDGEMENT OF THE HON BLE DELHI HIGH COURT, WE HEREBY DIRECT THE ASSESSING OFFICER TO DELETE THE A DDITION. 12. GROUND NO.4 AND ITS SUB-GROUNDS WHICH ARE NUMBE RED WRONGLY I.E. 3.1, 3.2 & 3.3 ARE AGAINST THE CONFIRMING THE DISALLOWAN CE OF RS.87,18,393/- OUT OF INTEREST PAID ON ACCOUNT OF NOTIONAL INTEREST ON IN TEREST FREE ADVANCES GIVEN TO THE RELATED PARTY AGAINST THE PURCHASE OF GUEST HOU SE PROPERTY. 13. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIM ILAR ADDITION WAS MADE IN ASSESSMENT YEAR 2009-10 AND THE MATTER TRAVELLED TO THE HONBLE HIGH COURT. HE SUBMITTED THAT THE TRIBUNAL DELETED THE ADDITION AND DELETION WAS UPHELD BY THE HONBLE HIGH COURT. THEREFORE, HE REQUESTED THAT IN THIS YEAR ALSO, THE ADDITION MAY BE DELETED. ITA NOS.3713 & 3714/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 6 | P A GE 14. ON THE CONTRARY, LD. SR. DR SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. HE FAIRLY CONCEDED THE FACT THAT SIMILAR AD DITION WAS MADE IN THE EARLIER YEAR WHICH HAS BEEN DELETED BY THE TRIBUNAL. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IS IDENTICAL TO THE ISSUE INV OLVED IN THE EARLIER YEAR. THE MATTER TRAVELLED TO HONBLE HIGH COURT. HONBLE HI GH COURT HAS CONFIRMED THE DELETION MADE BY THE TRIBUNAL BY OBSERVING AS UNDER :- SO FAR AS THE SECOND ISSUE, I.E. THE DISALLOWANCE UNDER SECTION 36(1)(III) IS CONCERNED, THE ADDITION WAS MADE PURELY ON THE BASI S THAT THE FUNDS WERE BORROWED BY A DIRECTOR AND THAT INTEREST NEEDED TO BE CHARGED. THIS WAS WHOLLY ERRONEOUS PREMISE BECAUSE THE AMOUNTS WERE G IVEN TO THE DIRECTOR FOR PURELY BUSINESS PURPOSE OF THE ENTITY, I.E. TO ACQUIRE GUEST HOUSE. THE PROPOSAL DID NOT MATERIALIZE AND EVENTUALLY THE MON EY WAS RETURNED. IT IS NOT REVENUES CASE THAT THE AMOUNTS WERE UTILIZED B Y THE DIRECTOR FOR HER OWN PURPOSE. IN THESE CIRCUMSTANCES, THE ITAT APPR OPRIATELY RELIED UNDER CIT VS BHARTI TELEVENTURES LTD. (2011) 331 ITR 502 (DEL.). THE FINDING WITH RESPECT TO COMMERCIAL EXPEDIENCY, IN THE CIRCUMSTAN CES, DOES NOT CALL FOR INTERFERENCE. 16. RESPECTFULLY FOLLOWING THE BINDING PRECEDENTS, WE HEREBY DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION. 17. GROUND NO.5 IS NOT PROVIDING THE SUFFICIENT OPP ORTUNITY. 18. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASS ESSEE DID NOT POINT OUT AS TO HOW THE SUFFICIENT OPPORTUNITY WAS GIVEN. 19. LD. SR. DR SUPPORTED THE ORDERS OF THE AUTHORIT IES BELOW. ITA NOS.3713 & 3714/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 7 | P A GE 20. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAS GIVEN SUF FICIENT OPPORTUNITY BY THE AUTHORITIES BELOW. THEREFORE, THIS GROUND OF THE A SSESSEES APPEAL IS REJECTED. 21. GROUND NO.6 RAISED BY THE ASSESSEE IS AGAINST T HE CHARGING OF INTEREST U/S 234B, 234C, 234D AND 244A OF THE ACT. 22. THE ASSESSEE HAS NOT RAISED ANY ARGUMENTS AS TO HOW THIS INTEREST IS NOT CHARGEABLE. IN THE ABSENCE OF THE SAME, THIS GROUN D NO.6 RAISED BY THE ASSESSEE IS REJECTED. 23. GROUND NO.7 RAISED BY THE ASSESSEE IS GENERAL I N NATURE, NEEDS NO SEPARATE ADJUDICATION. 24. GROUND NO.8 RAISED BY THE ASSESSEE IS IN THE FO RM OF PRAYER, NO SUCH PRAYED HAS BEEN MADE HENCE, DISMISSED AS REJECTED. 25. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. 26. NOW, WE TAKE UP ITA NO.3714/DEL/2015 [ASSESSMENT YEAR 2011-12] WHEREIN THE ASSESSEE HAS RAISED FOLLOWING GROUNDS O F APPEAL:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEA LS) [LD. CIT(A)] HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,10,593 /- TOWARDS ALLEGED PERSONAL USE OUT OF EXPENDITURE ON FESTIVAL AND GIF TS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE APP ELLANT. THE DISALLOWANCE IS ARBITRARY, ADHOC WITHOUT POINTING OUT ANY SPECIF IC ITEMS. THE DISALLOWANCE AS MADE BY THE ASSESSING OFFICER AND C ONFIRMED BY THE LD. CIT(A) BEING BASED ON ERRONEOUS VIEWS AND / OR NON- APPRECIATION OF THE FACTS AND LAW DESERVES TO BE DELETED. ITA NOS.3713 & 3714/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 8 | P A GE 2. THAT ON THE FACTS AND LAW INVOLVED THE LD. CIT(A ) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO DISALLOW AN AMOU NT OF RS.1,14,612/- U/S 40A(3) AFTER VERIFICATION AS PER RULE 6DD. 3. THAT THE SAID DIRECTION OF THE LD. CIT(A) TO DIS ALLOW THE ABOVE AMOUNT OF RS.1,14,612/- U/S 40A(3) HAS RESULTED IN ENHANCEMENT OF ASSESSMENT WHICH IS IN VIOLATION OF THE PROVISIONS OF SECTION 251 (2) OF THE ACT. THIS ENHANCEMENT OF THE APPELLANT'S INCOME IS WITHOUT SPECIFIC REQUISITE OPPORTUNITY TO THE APPELLANT. AS SUCH TOO THE DISALLOWANCE AS DIRECTED IS UNLAWFUL. 4. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.25,88,314/- OUT OF THE TOTAL DISALLOWANCE OF RS 34,99,078/- IN RESPECT OF LEGAL AND PROFESSIONAL EXPENSES BY INVOKING THE PROVISIONS OF SECTION 40(A)(I). THE LD. CIT(A) HAS WRONGLY TREATED THE SA ID PAYMENTS AS FEE FOR TECHNICAL SERVICES. EITHER UNDER THE ACT OR UNDER T HE RESPECTIVE DTAA, THE PAYMENTS INVOLVED ARE EITHER BUSINESS INCOME OF PAY EE OR ARE INDEPENDENT PERSONAL SERVICES. IN ABSENCE OF ANY BUSINESS CONNE CTION/PE OR FIXED PLACE OF BUSINESS IN INDIA OF THE PAYEE, THE SAID PAYMENT S ARE NOT CHARGEABLE TO TAX IN INDIA AND AS SUCH NO TDS IS APPLICABLE THERE ON. THE DISALLOWANCE AS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY T HE LD. CIT(A) BEING BASED ON ERRONEOUS VIEWS AND /OR NON-APPRECIATION O F THE FACTS AND LAW DESERVES TO BE DELETED. 5. NO TDS WAS DEDUCTIBLE OUT OF LEGAL AND PROFESSIO NAL EXPENSES EITHER UNDER THE ACT OR UNDER CERTAIN RELEVANT PROVISIONS OF THE DTAA. AS SUCH, SECTION 40(A)(I) IS NOT APPLICABLE AND THE DISALLOW ANCE OF RS.25,88,314/- OUT OF RS 34,99,078/- IS LIABLE TO BE DELETED. 6. THAT THE DISALLOWANCES HAVE BEEN MADE AND CERTAI N ADVERSE COMMENTS MADE WITHOUT PROPER LAWFUL OPPORTUNITY AND WITHOUT COMPLIANCE OF PRINCIPLES OF NATURAL JUSTICE. AS SUCH TOO, THE DISALLOWANCES AS APPEALED AGAINST IN GROUNDS ABOVE ARE LIABLE TO BE DELETED I N TOTO. 7. THAT THE INTEREST U/S 2348 AND 234C IS INCORREC T AND EXCESSIVE. 8. THAT THE GROUNDS OF APPEAL AS HEREIN ARE WITHOUT PREJUDICE TO EACH ITA NOS.3713 & 3714/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 9 | P A GE OTHER. 9. THAT THE APPELLANT RESPECTFULLY CRAVES LEAVE TO ADD, AMEND, ALTER AND /OR FOREGO ANY GROUND(S) AT OR BEFORE THE TIME OF HEARING. 27. GROUND NO.1 RAISED BY THE ASSESSEE IN THIS APPE AL IS AGAINST THE DISALLOWANCE OF RS.1,10,593/- TOWARDS ALLEGED PERSO NAL USE. 28. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL IN EARLIER YEARS. 29. LD. SR. DR COULD NOT CONTROVERT THESE FACTS. 30. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SIMILAR ISSUE WAS DECIDED IN ITA NO.37 13/DEL/2015 PERTAINING TO ASSESSMENT YEAR 2011-12 WHEREIN THE ADDITION MADE B Y THE ASSESSING OFFICER AND SUSTAINED BY LD.CIT(A) WAS NOT FOUND JUSTIFIED HENCE, DELETED. FOR THE SAME REASONING, GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED. 31. GROUND NOS. 2 & 3 IN RESPECT OF ADDITION OF RS. 1,14,612/- DIRECTED BY LD.CIT(A) BY INVOKING THE PROVISION OF SECTION 40A( 3) OF THE ACT. 32. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO INVOKE THE PROVI SIONS OF RULE 6DD OF THE INCOME TAX RULES, 1962. HE SUBMITTED THAT SUCH DIR ECTION, ENHANCEMENT OF ASSESSMENT SINCE LD.CIT(A) HAS NOT COMPLIED WITH TH E PROVISION OF SECTION 251(2) OF THE ACT. HENCE, THE ENHANCEMENT AS MADE BY LD.CIT(A) IS CONTRARY TO THE PROVISION OF LAW. ITA NOS.3713 & 3714/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 10 | P A GE 33. HOWEVER, LD. SR. DR SUPPORTED THE ORDERS OF THE LD.CIT(A). 34. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IT IS THE GRIEVANCE OF THE ASSESSEE THAT LD.CIT(A) GAVE DIRE CTION FOR ENHANCEMENT WITHOUT COMPLYING THE PROVISION OF SECTION 251(2) O F THE ACT. FOR THE SAKE OF CLARITY, PROVISION 251(2) OF THE ACT IS REPRODUCED HEREUNDER:- 251(2). THE COMMISSIONER (APPEALS) SHALL NOT ENHAN CE AN ASSESSMENT OR A PENALTY OR REDUCE THE AMOUNT OF REFUND UNLESS THE APPELLANT HAS HAD A REASONABLE OPPORTUNITY OF SHOWING CAUSE AGAINST SUC H ENHANCEMENT OR REDUCTION. 34.1. WE FIND THAT LD.CIT(A) HAD ISSUED DIRECTION B Y OBSERVING AS UNDER:- 4.1.2. FROM THE LEDGER ACCOUNT IT IS EVIDENT THAT LARGE NUMBER OF ABOVE PAYMENTS ARE CASH PAYMENT. TOTAL CASH PAYMENT IS RS 1,39,963/ WHICH INCLUDE SEVERAL PAYMENTS THAT HAVE BEEN MADE TO A P ERSON IN A DAY EXCEEDING RS.20,000/- WHICH IS NOT ALLOWABLE U/S 40 A(3) OF THE I.T.ACT, AS UNDER:- DATE AMOUNT (RS.) REMARK 01.11.2010 23,860/- BEING CASH PAID TO MR. NAVEEN GARG. 12.11.2010 27,775/- BEING CASH PAID FOR STAFF. 24.11.2010 39,477/- BEING CASH PAID TO MR. S N PANDEY. 26.11.2010 23,500/- BEING CASH PAID TO MR.S N PANDEY. TOTAL 1,14,612/- IN VIEW OF CASH PAYMENTS WITHOUT ANY DETAIL THE DIS ALLOWANCE MADE BY THE AO IS FULLY JUSTIFIED. FURTHER, CONSIDERING THE PROVISIONS OF SEC. 40A(3) IF THE CIRCUMSTANCES AS PRESCRIBED IN RULE 6DD ARE NOT FULFILLED IN THE CASE OF THE ASSESSEE, THE DISALLOWANCE IS TO BE ENHANCED TO RS 1,14,612/-. AO IS DIRECTED TO VERIFY WHETHER THE CIRCUMSTANCES AS PRE SCRIBED IN RULE 6DD ARE ITA NOS.3713 & 3714/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 11 | P A GE FULFILLED BY THE ASSESSEE, BEFORE ENHANCING THE DIS ALLOWANCE. THEREFORE, APPEAL FAILS IN THIS GROUND WITH DIRECTION TO THE A SSESSING OFFICER. 34.2. WE FIND THAT LD.CIT(A) DID NOT COMPLY WITH TH E PROVISION OF SECTION 251(2) OF THE ACT. THEREFORE, THE DIRECTION OF LD.CIT(A) IS HEREBY, QUASHED BEING ILLEGAL. GROUND NOS.2 & 3 RAISED BY THE ASSESSEE A RE ALLOWED. 35. GROUND NOS.4 & 5 RAISED BY THE ASSESSEE ARE IN RESPECT OF SUSTAINING THE DISALLOWANCE OF RS.25,88,314/- BY INVOKING THE PRO VISIONS OF SECTION 40(A)(I) OF THE ACT. 36. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SE GROUNDS RELATED TO DISALLOWANCE OF RS.25,88,314/- OUT OF LEGAL AND PRO FESSIONAL CHARGES BY INVOKING THE PROVISION OF SECTION 40(A)(I) OF THE ACT ON ACCOUNT OF ALLEGED NON- DEDUCTION OF TAX ON PAYMENT TO FOREIGN PARTIES. AL L THE PARTIES WERE NON- RESIDENTS OF INDIA AND TAX RESIDENTS OF OTHER COUNT RIES HAVING RESPECTIVE DTAA WITH INDIA. IT IS FURTHER SUBMITTED THAT THE ISSU E HAS ALREADY BEEN DECIDED BY TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 AND THE JUDGEMENT OF HONBLE DELHI HIGH COURT AS SUCH IT IS A COVERED MATTER. 37. LD. SR. DR OPPOSED THESE SUBMISSIONS AND SUPPOR TED THE ORDERS OF THE AUTHORITIES BELOW. THE SAME ISSUE WAS RAISED BEFOR E THIS TRIBUNAL AND THE TRIBUNAL BY FOLLOWING EARLIER ORDERS AS DECIDED IN PARAS 10 & 11 OF THIS ORDER BY OBSERVING AS UNDER:- 10. THEREFORE, WE DO NOT SEE ANY JUSTIFICATION TO SUSTAIN THE ADDITION AS MADE BY THE ASSESSING OFFICER. LD.CIT(A) HAS CA TEGORICALLY STATED THAT THE RETROSPECTIVE AMENDMENT HAS BEEN CLARIFIED THA T EVEN IF NON-RESIDENT HAS NO BUSINESS COMMUNICATION TO INDIA AND NOT REND ERED ANY SERVICES IN ITA NOS.3713 & 3714/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 12 | P A GE INDIA THEN ALSO THE PAYMENT RECEIVED DEEM TO ACCRUE OR ARISE IN INDIA. THE ASSESSING OFFICER HAS RELIED UPON THE ARTICLE 12 OF DTAA BETWEEN INDIA AND GERMANY IN THIS REGARD. FURTHER, THE HONBLE H IGH COURT IN ITA NO.1084/2017 HAS HELD AS UNDER:- SO FAR AS THE FIRST QUESTION, I.E. DELETION OF RS. 7,27,532/- IS CONCERNED, THIS COURT IS OF THE OPINION THAT SINCE THE ITAT HAS RENDERED FINDINGS THAT THE AMOUNTS PAID WERE NOT FE E FOR TECHNICAL SERVICES (FTS) UNDER EXPLANATION 7 TO SECTION 9(2), SIMILAR TREATMENT WOULD ARISE. AS FAR AS THIS IS CONCERNED, THE COUR T NOTICES THAT THE ITAT RELIED UPON THE INTERPRETATION GIVEN TO SIMILA R PROVISIONS OF VARIOUS DTAAS IN CUSHMAN & WAKEFIELD PTE. LTD. IN R E.305 ITR 208; DIETER EBERHARD GUSTAV V CIT 235 ITR 698 ETC. AND H ELD THAT SINCE THESE WERE NOT IN THE NATURE OF FTS., THE DEDUCTION UNDER SECTION 40(A)(IA) WAS NOT WARRANTED. RELIANCE BY THE REVEN UE UPON THE RETROSPECTIVE AMENDMENT, IN THE OPINIONS OF THIS CO URT, IS NOT JUSTIFIED, GIVEN THE RULING IN DIRECTOR OF INCOME T AX VS NEW SKIES SATELLITE BVV (2016) 382 ITR 114 (DEL.). NO QUESTIO N OF LAW, THEREFORE, ARISES. 11. RESPECTFULLY FOLLOWING THE JUDGEMENT OF THE HON BLE DELHI HIGH COURT, WE HEREBY DIRECT THE ASSESSING OFFICER TO DE LETE THE ADDITION. 38. THEREFORE, TAKING THE CONSISTENT VIEW, GROUND N OS. 4 & 5 ARE ALLOWED WITH A DIRECTION TO THE ASSESSING OFFICER TO DELETE THE ADDITION. 39. GROUND NO.6 RAISED BY THE ASSESSEE IS NOT PROVI DING THE SUFFICIENT OPPORTUNITY. 40. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASS ESSEE DID NOT POINT OUT AS TO HOW THE SUFFICIENT OPPORTUNITY WAS GIVEN. 41. LD. SR. DR SUPPORTED THE ORDERS OF THE AUTHORIT IES BELOW. ITA NOS.3713 & 3714/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 13 | P A GE 42. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAS GIVEN SUF FICIENT OPPORTUNITY BY THE AUTHORITIES BELOW. THEREFORE, THIS GROUND OF THE A SSESSEES APPEAL IS REJECTED. 43. GROUND NO.7 RAISED BY THE ASSESSEE IS AGAINST T HE CHARGING OF INTEREST U/S 234B & 234C OF THE ACT. 44. THE ASSESSEE HAS NOT RAISED ANY ARGUMENTS AS TO HOW THIS INTEREST IS NOT CHARGEABLE. IN THE ABSENCE OF THE SAME, THIS GROUN D NO.7 RAISED BY THE ASSESSEE IS REJECTED. 45. GROUND NO.8 RAISED BY THE ASSESSEE IS GENERAL I N NATURE, NEEDS NO SEPARATE ADJUDICATION. 46. GROUND NO.9 RAISED BY THE ASSESSEE IS IN THE FO RM OF PRAYER, NO SUCH PRAYED HAS BEEN MADE HENCE, DISMISSED AS REJECTED. 47. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. 48. IN THE FINAL RESULT, BOTH APPEALS OF THE ASSESS EE ARE PARTLY ALLOWED. ABOVE DECISION WAS PRONOUNCED ON CONCLUSION OF VIRT UAL HEARING IN THE PRESENCE OF BOTH THE PARTIES ON 30 TH SEPTEMBER, 2021. SD/- SD/- (DR. B.R.R.KUMAR) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIA L MEMBER *AMIT KUMAR* ITA NOS.3713 & 3714/DEL/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 14 | P A GE COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI