Control Risks India Pvt. Ltd., New Delhi V. ACIT, Circle- 6(2), New Delhi

ITA 3811/DEL/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3719 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 21-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Double taxation relief; Additional evidence; Non-deduction of tax
• Section: 143(3); 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘B’: NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.3811/DEL/2018 [Assessment Year: 2013-14] Control Risks India Pvt. Ltd. 604, Copia Corporate Suite, Jasola complex, New Delhi-110025 Vs Asst. Commissioner of Income Tax, Circle-6(2), Room No.390, C.R. Building, New Delhi-110092 PAN-AADCC3008J Assessee Revenue Assessee by None Revenue by Sh. Vivek Vardhan, Sr. DR Date of Hearing 27.04.2022 Date of Pronouncement 27.04.2022 ORDER PER R.K. PANDA, AM, This appeal filed by the assessee is directed against the order dated 19.03.2018 of the learned CIT(A)-2, New Delhi, relating to AY 2013-14. 2. The assessee in the grounds of appeal has challenged the ex-parte order of the Ld. CIT(A) in dismissing the appeal for want of prosecution and thereby sustaining the various additions made by the AO. 2.1. None appeared on behalf of the assessee at the time of hearing when the name of assessee was called. No 2 ITA No.3811/Del/2018 application seeking adjournment of the case has been filed. A perusal of the order-sheet entries shows that the assessee was not appearing in the earlier occasions also. The notices issued by the Registry through RPAD were returned unserved by the postal authorities with postal remark ‘left’. The assessee has also not intimated the change of address, if any. Under these circumstances, we deem it proper to decide the issue on the basis of material available on record and after hearing the ld. DR. 3. Facts of the case, in brief, are that the assessee company is engaged in the business of risk management, risk analysis & mitigation consultant and to provide solutions related to crisis management. It filed its return of income on 29.11.2013 declaring loss of Rs.-1,79,51,014/-. The AO completed the assessment u/s 143(3) of the Act on 29.03.2016 determining the total income of the assessee at Rs.1,59,62,193/-, wherein he made addition of Rs.3,39,13,207 by disallowing the expenses paid to non-resident for non- deduction of tax u/s 195 of the Act. 4. In appeal, the ld. CIT(A), upheld the action of the AO. 3 ITA No.3811/Del/2018 5. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:- “1. That on the facts and circumstances of the case, the CIT(A) erred in law in upholding the assessment made by the assessing officer (“AO”) under section 143(3) of the Income-tax Act, 1961 (“the Act”) at an income of Rs.1,59,62,193 as against loss of Rs. 1,79,51,014 returned by the Appellant. 2. That on the facts and circumstances of the case, the CIT(A) erred in law in allegedly holding that the documents furnished by the Appellant, viz., (1) Agreements entered into by the Appellant with the non-resident group companies, and (2) No Permanent Establishment Certificates were additional evidences and in absence of application under Rule 46A of the Income-tax Rules, 1962 (“the Rules”), the same could not be admitted for adjudication of the issues involved. 2.1 Without prejudice, that on the facts and circumstances of the case, the CIT(A) erred in law in not granting an opportunity to the Appellant to furnish the aforesaid additional documents by way of application under Rule 46A of the Rules. 3. That on the facts and circumstances of the case, the CIT(A) erred in law in confirming the disallowance made by the AO under section 40(a)(i) of the Act in respect of inter-company fees and international commission payments of Rs. 1,96,82,063 and Rs.1,42,31,144 respectively, made by the Appellant to its group companies located outside India on the ground that tax has not been withheld therefrom under section 195 of the Act. 3.1 That on the facts and circumstances of the case, the CIT(A) erred in law in confirming the action of the assessing officer allegedly on the ground that in absence of Agreement (which was not admitted for want of application under Rule 46A of the Rules), the nature of services for which payments have been remitted remained unverified. 3.2 That on the facts and circumstances of the case, the CIT(A) erred in law in confirming the aforesaid disallowance made by the AO under section 40(a)(i) of the Act without returning any finding of its own regarding the nature of services received by the Appellant and taxability of income arising from such services in India.” 6. We have heard the ld. DR and perused the records. We find the AO in the instant case made addition of 4 ITA No.3811/Del/2018 Rs.3,39,13,207/- on account of disallowance of expenses paid to non-resident for non-deduction of Tax u/s 195 of the Act. We find the ld. CIT(A) sustained the addition made by the AO by observing as under:- “7. Decision 7.1 From the facts discussed in the assessment order and the submissions made on behalf of the appellant before me, I find that the issue involved in the present appeal is non deduction of tax as required under 195(1) of the Act on the payments made to non-resident entities and consequent action of the AO to make addition u/s 40(a)(i) of the Act of the aggregate amounts of Rs.3,39,13,207/-. The AO has taken the above information from the observations of the Tax Auditor of the appellant in his Tax Audit Report where the fact of non deduction of tax on these remittances has been specifically mentioned. Copy of the tax audit report is not submitted but the fact is not disputed by the appellant in the appeal before me. 7.2 From the details available I find that the appellant had made payments to the non-residents under following heads Name of Vendor Country Amount in INR Control Risks Group (S) Pte Limited Singapore 41,93,553 Control Risks Group Limited London, IJK 34,43,276 Control Risks Group LLC USA 1,04,48,660 Total 1,80,85,489 Name of Vendor Address Amount in INR Control Risks Services Limited Dubai, UAE 12,40,437 Control Risks (Middle East) Limited Dubai, UAE 1,47,803 Control Risks Deutschland Gmbh Germany 2,08,333 Total 15,96,574 b) International Commission Paid Name of Vendor Address Amount in INR Control Risks Group (S) Pte. Ltd Singapore 24,88,216 Control Risks Group Ltd London, UK 34,58,749 Control Risks Group LLC USA 47,24,594 Total 1,06,71,559 5 ITA No.3811/Del/2018 Name of Vendor Address Amount in INR Control Risks (Middle East) Limited Dubai, UAE 16,83,743 Control Risks Deutschland Gmbh Germany 2,75,209 Control Risks Group KK Japan 1,29,200 Control Risks Group Pty. Ltd Australia 6,32,749 Control Risks- Benelux B.V Netherland 5,16,267 Control Risks Services Limited Dubai UAE 2,22,411 Total 34,59,585 7.3 During assessment proceedings, the appellant had placed reliance on the provisions of sec 195 of the Act to canvass the contention that the payments in question related to the services rendered by the payee’s parties outside India and each of them are non-resident with no place of business in India, the income, is not taxable in India and therefore there was no obligation on the appellant to deduct tax thereon. The provisions of sec 9(l)(vii) is also cited to support the view that the payments in question fall in the exception provided in sub clause (b) of sec 9(l)(vii). The appellant has also claimed the benefit of DTAA provisions with the countries namely UAE, Australia, Germany, UK, Japan and Singapore, the countries of which payees were the residents. 7.4 The AO has rejected the explanation of the appellant on the ground that sec 9(l)(vii) r.w.s 195(1) cannot come to the rescue of the appellant in the absence of no PE certificate submitted by the appellant. In the absence of no PE certificate, the tax jurisdiction of the payees in the India cannot be ruled out. The benefit of DTAA provisions has also not been allowed by the AO on the ground that in the absence of any agreement of inter-company fees or detailed description of such payments and also on the comments of the tax auditor in the tax audit report that the payments are in the nature of technical services, the contention of the appellant remained untested with reference to the evidences submitted. 7.5 Before me, the appellant has submitted agreements in paper book at page 33-38 and the “No PE certificate” for the three entities namely M/s Control Risk Services Ltd Dubai, M/s Control Risk (Middle East) Ltd, Dubai, M/s Control Risk Deutschland GMBH Germany only in the paper book at pages 21,19 and 26 respectively. These NO PE certificates were not filed before the AO during the assessment proceedings and in case of other entities, similar certificates have not been filed even in the present appeal proceedings. The PE certificates filed before me are additional evidences and the appellant has not moved any application under rule 46A explaining the reasons 6 ITA No.3811/Del/2018 why these evidences were not submitted during assessment proceedings, these fresh evidences cannot be admitted for adjudication of the issue involved. In the absence of any PE certificate before the AO, the AO was justified in making additions u/s 40(a)(i) for non deduction of tax on the payments to the non residents. 7.6 Coining to the benefit of DTAA provisions with respective companies, the agreement filed in paper book at pages 33-38 is a general agreement executed between the appellant company and various subsidiary/associate companies where the nature of services are explained. Since the AO has rejected the claim of the appellant justifying non deduction of tax on the payments involved on the ground that the agreements were not submitted during assessment proceedings ; so as to appreciate the nature of services provided by the payees, the agreement now submitted is therefore a fresh evidence and no application for admission of fresh evidence under rule 46A has been submitted before me. In the absence of any such application, the agreement in question cannot be admitted in the present appeal proceedings. I am therefore, constrained to hold that the nature of services for which payments have been remitted have remained unverified and, therefore, the claim of the appellant cannot be accepted and the action of the AO deserves to be upheld on this count too. 7.7 Finally, I uphold in view of the reasons given above for invoking the provisions of section 40(a)(i) on the payments of Rs.3,39,17,207/- and consequent addition to the returned income. 7. We do not find any infirmity in the order of the Ld. CIT(A). We find the ld. CIT(A) after considering the entire facts and submission made by the assessee has decided the issue and sustained the addition made by the AO by passing a detailed order. Nothing has been brought before us to take a contrary view than the view taken by the Ld. CIT(A) on this issue. Accordingly, the order of the ld. CIT(A) is upheld and the grounds raised by the assessee are dismissed. 7 ITA No.3811/Del/2018 8. In the result, the appeal filed by the assessee is dismissed. This Order was pronounced in the open court at the time of hearing itself i.e. on 27.04.2022. Sd/- Sd/- [ANUBHAV SHARMA] [R.K.PANDA] JUDICIAL MEMBER ACCOUNTANT MEMBER Delhi; Dated: 27.04.2022. f{x~{tÜ? f{x~{tÜ?f{x~{tÜ? f{x~{tÜ? fÜA fÜA fÜA fÜA P.S P.SP.S P.S Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi