CST Valinox Limited (presently known as Neotiss Limited), Hyderabad, Medak V. DCIT, Circle-8(1), Hyderabad, Hyderabad

ITA 388/HYD/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2388 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 06-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S SRINIVAS
• Assessee Lawyers: P MURALI
• Keywords: Related party transaction; Double taxation relief; Opportunity of being heard; Principle of natural justice
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 388/HYD/2017 ASSESSMENT YEAR: 2012-13 CST VALINOZ LTD. (PRESENTLY KNOWN AS NEOTISS LTD.), HYDERABAD. PAN AAACC 8221 G VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 8(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P. MURALI REVENUE BY : SHRI S. SRINIVAS DATE OF HEARING 26-10-2017 DATE OF PRONOUNCEMENT 22-11-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: 1. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25/11/2016 OF CIT(A) 2, HYDERABAD RELATING TO AY 2012-13. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF WELDED ST AINLESS STEEL TUBES. FOR THE AY 2012-13, THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME DECLARING LOSS OF RS. 8,76,79,636/- ON 29 /09/2012. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTIC ES U/S 142(1) AND 143(2) WERE ISSUED AND IN RESPONSE TO WHICH, TH E AR OF THE ASSESSEE APPEARED AND FURNISHED THE INFORMATION CAL LED FOR. THE AO COMPLETED THE ASSESSMENT U/S 143(3) DETERMINING THE TOTAL INCOME OF 2 ITA NO. 388 /HYD/2017 CST VALINOX LTD. THE ASSESSEE AT RS. (-) 6,74,86,024/- BY MAKING DIS ALLOWANCE OF PAYMENTS MADE WITHOUT TDS U/S 40(A)(IA). 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A). 4. THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING THAT DESPITE SUFFICIENT OPPORTUNITIES PROVIDED, NEI THER THE ASSESSEE NOR ITS AR FURNISHED ANY EVIDENCE DURING APPELLATE PROCEEDINGS ALSO REBUTTING THE CONCLUSIONS DRAWN BY THE AO, THEREFOR E, HE CAME TO THE CONCLUSION THAT THE AO IS JUSTIFIED IN DISALLOWING THE EXPENDITURE OF RS. 2,01,93,612/- ON PAYMENT OF ROYALTY FOR TECHNIC AL SERVICES AND SAP MAINTENANCE EXPENSES U/S 40(A)(IA) AS THE ASSES SEE FAILED TO DEDUCT TAX U/S 195 OF THE ACT. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE APPELLATE ORDER PASSED BY THE HON'BLE CIT (A PPEALS)-II IS HIGHLY BIASED, UNJUST, ARBITRARY AND AGAINST THE ACCEPTED PRINCIPLES OF NATURAL JUSTICE. 2. THE HON'BLE CIT (APPEALS) ERRED IN NOT APPLYING HIS MIND TO THE STATEMENT OF FACTS AND GROUNDS OF APPEAL AND TH US FAILED TO ADJUDICATE THE APPEAL ON MERIT. 3. THE HON'BLE CIT (APPEALS) FAILED TO APPRECIATE T HAT NO ADEQUATE OPPORTUNITY WAS ALLOWED TO THE ASSESSEE CO MPANY AS THE NOTICE DATED 31.08.2016 WAS NOT RECEIVED BY APP ELLANT. HOWEVER THE APPELLANT WAS IN RECEIPT OF THE NOTICE DATED 21.10.2016 AND THE AUTHORISED REPRESENTATIVE OF THE APPELLANT REQUESTED FOR ADJOURNMENT AND THE CASE WAS ADJOURNE D TO 24.11.2016. THE AUTHORISED REPRESENTATIVE OF THE AP PELLANT WAS PRESENT ON 24.11.2016 AND SUBMITTED REPLY ALONG WIT H NECESSARY SUPPORTING DOCUMENTS. 4. THE HON'BLE CIT (A)-II HAS FAILED TO APPRECIATE THE FACT THAT THE APPEAL WAS MADE AGAINST THE ORDER PASSED BY THE DY. COMMISSIONER OF INCOME-TAX TAX MAKING THE TOTAL ADD ITION OF RS. 2,01,93,612/. THESE ADDITIONS WERE NOT AS PER T HE LAW. 3 ITA NO. 388 /HYD/2017 CST VALINOX LTD. 5. THAT HON'BLE CIT (A)-II HAS FURTHER FAILED TO AP PRECIATE THE FACT THAT THE LEARNED DY. COMMISSIONER OF INCOME TA X MADE ADDITION OF RS. 2,01,93,612/- ON ACCOUNT OF ROYALTY AND SAP MAINTENANCE EXPENSES WITHOUT LOOKING INTO THE FACT THAT AS PER THE PROVISIONS OF ARTICLE 13 OF DTAA WITH FRANCE, R OYALTIES AND FEES FOR TECHNICAL SERVICES ARE LIABLE FOR TAX IN I NDIA ONLY WHEN IT IS PAID 6. THE FINDING, OBSERVATIONS AND CONCLUSION OF THE HON'BLE CIT (APPEALS) THAT THE APPELLANT WAS NOT INTERESTED ON PROSECUTION OF HIS CASE ARE OBVIOUSLY WRONG AND MOST UNFORTUNAT E; THE HON'BLE AUTHORITY HAD DEALT WITH THE HIGH DEMAND TA X APPEAL WITH CLOSED MIND AND IN A CASUAL MANNER. 7. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LEAR NED CIT (APPEALS) GROSSLY ERRED IN ASSUMING THAT THE APPELL ANT HAS NOT DISCLOSED THE RELATED PARTY TRANSACTIONS WHERE IN T HE CORE DISALLOWANCE MADE BASED ON SUCH RELATED PARTY TRANS ACTIONS. THE LEARNED CIT(APPEALS) APPROACHED THE CASE WITH A CLOSED MINDSET AND DENIED THE NATURAL JUSTICE TO THE APPEL LANT. 8. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR M ODIFY THE ABOVE GROUND(S) OF APPEAL EITHER BEFORE OR AT THE T IME OF HEARING THE APPEAL. 6. IN THE PRELIMINARY GROUND, THE ASSESSEE CONTENDE D THAT THE CIT(A) PASSED EX-PARTE ORDER IN BREACH OF PRINCIPLE S OF NATURAL JUSTICE AND HENCE THE SAME MAY BE QUASHED AND SET ASIDE. 7. IN THE COURSE OF HEARING, IT WAS POINTED OUT BY THE LEARNED COUNSEL OF THE ASSESSEE THAT THE LEARNED CIT(A) HAD DECIDED THE MATTER EX-PARTE. HE CONTENDED THAT NO ADEQUATE OPP ORTUNITY WAS ALLOWED TO THE ASSESSEE AS THE NOTICE DATED 31/08/2 016 WAS NOT RECEIVED BY THE ASSESSEE. HOWEVER, THE ASSESSEE WAS IN RECEIPT OF THE NOTICE DATED 21/10/2016 AND THE AR OF THE ASSES SEE REQUESTED FOR ADJOURNMENT AND THE CASE WAS ADJOURNED TO 24/11 /2016. LD. COUNSEL SUBMITTED THAT THE AR OF THE ASSESSEE WAS P RESENT ON 24/11/2016 AND SUBMITTED REPLY ALONG WITH NECESSARY SUPPORTING DOCUMENTS BUT, THE CIT(A) FAILED TO APPRECIATE THE SAME AND PASSED EX-PARTE ORDER. HE, THEREFORE, SUBMITTED THAT IT W OULD BE IN THE INTEREST OF JUSTICE, THE MATTER MAY BE RESTORED TO THE FILE OF CIT(A) FOR 4 ITA NO. 388 /HYD/2017 CST VALINOX LTD. DECIDING VARIOUS GROUNDS OF APPEAL ON MERITS. THE L EARNED DR AGREED WITH THE AFORESAID STATEMENT OF THE LEARNED AR. 8. WE HAVE CONSIDERED THE FACTS OF THE CASE AND THE REQUEST MADE BY THE LEARNED AR. LD. AR HAS SUBMITTED THE COPY OF WRITTEN SUBMISSIONS FILED BY THE ASSESSEE ON 24/11/2016 WIT H ACKNOWLEDGMENT FROM THE OFFICE OF CIT(A). IN OUR C ONSIDERED VIEW, LD. CIT(A) HAS NOT CONSIDERED THE SUBMISSIONS OF THE AS SESSEE, MAY BE, FOR THE REASON THAT HIS OFFICE WOULD NOT HAVE BROUG HT ON RECORD OF SUCH SUBMISSION. FOR THE SAKE OF JUSTICE, WE REMIT THIS CASE BACK TO THE FILE OF CIT(A) WITH A DIRECTION TO ADJUDICATE T HE APPEAL AFRESH AFTER GIVING PROPER OPPORTUNITY OF BEING HEARD TO THE ASS ESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER, 2017. SD/- SD/- (D. MANMOHAN) (S. RIFAUR RAHMAN) VICE PRESIDENT A CCOUNTANT MEMBER HYDERABAD, DATED: 22 ND NOVEMBER, 2017 KV COPY TO:- 1) CST VALINOZ LTD., 9-14, ISNAPUR, PATANCHERU MAN DAL, MEDAK DIST., TELENGANA 502 307 2) DCIT, CIRCLE 8(1), HYDERABAD 3) CIT(A) 2I, HYD. 4) PR. CIT 2, HYD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE