DCIT, BIKANER V. M/s. Mott MacDonald Ltd. U.K., JHANSI

ITA 43/JODH/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5203 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 1998-1999
• Appeal Filed On: 13-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L MOURYA
• Keywords: Tax effect
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 4 3 / JODH /201 5 (ASST. YEAR : 199 8 - 99 ) DC IT, CIRCLE - 2 , BIKANER . VS. M/S. MOTT MACDONALD LTD., U . K . , C/O SKA & ASSOCIATES, 352, SADAR, JHANSI. (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE . DEPARTMENT BY : S HRI S.L. MOURYA - DR DATE OF HEARING : 1 4 / 0 3 /201 6 . DATE OF PRONOUNCEMENT : 1 4 / 03 /201 6 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , BIKANER , DATED 2 9 / 12 /201 4 . 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - THE ASSESSEE COMPANY IS A FOREIGN COMPANY AND ENTERED INTO A CONTRACT WITH THE CAD DEPARTMENT FOR PROVIDING TECHNICAL CONSULTATION FOR THE MAINTENANCE OF IGNP. FOR THESE SERVICES THE COMPANY WAS PAID CERTAIN AMOUNT IN FOREIGN CURRENCY AND THE BALANCE IN IN DIAN CURRENCY. THE COMPANY CLAIMED THAT THE FOREIGN CURRENCY PAYMENT WAS TAXABLE INCOME AND THE AMOUNT PAID IN INDIAN CURRENCY WAS SIMPLY THE REIMBURSEMENT OF ITS ADMINISTRATIVE EXPENSES, HOWEVER THE THEN AO TAXED THE ENTIRE AMOUNT OF R S. 1,44,65,567/ - AFT ER GROSSING UP THE INCOME RECEIVED IN THE FORM OF FOREIGN AND INDIAN CURRENCY. THE LD. CIT (A) RELIGIOUSLY FOLLOWED THE DECISION OF HONBLE ITAT, JODHPUR IN THE APPELLANT OWN CASE FOR A.Y. 1996 - 97 AND 1997 - 98, SIMILAR/IDENTICAL TO THE PRESENT CIRCUMSTANCES /FACTS OF THE CASE AND GAVE DECISION IN FAVOR OF THE ASSESSEE. 2 ITA NO. 4 3 / JODH /201 5 IN MY VIEWS THE ORDER PASSED BY LD. CIT (A) IS NOT ACCEPTABLE BECAUSE BOTH THE PAYMENTS MADE IN FOREIGN AS WELL AS INDIAN CURRENCY WERE TAXABLE INCOME OF THE ASSESSEE. KEEPING IN VIEW THE FAC TS & CIRCUMSTANCES OF THE CASE AND THE TOTAL TAX EFFECT IS ABOVE THE PRESCRIBED MONETARY LIMIT, THEREFORE, APPEAL BEFORE HONBLE ITAT IS RECOMMENDED IN THIS CASE. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENTERED INTO A CONTRACT WITH COMMON AREA DEVELOPMENT (CAD) DEPARTMENT FOR PROVIDING TECHNICAL CONSULTATION FOR THE MAINTENANCE OF IGNP. FOR THESE SERVICES, THE ASSESSEE COMPANY WAS PAID RS. 97,49,384/ - IN FOREIGN CURRENCY AND THE BALANCE AMOUNT OF RS. 47,16,183 / - IN INDIAN CURRENCY . IN THE RETURN OF INCOME, THE ASSESSEE COMPANY CLAI MED THAT ONLY FOREIGN CURRENCY PAYMENT WAS TAXABLE INCOME AND THE AMOUNT PAID IN INDIAN CURRENCY WAS SIMPLY THE REIMBURSEMENT OF ITS ADMINISTRATIVE EXPENSES . HOWEVER, THE ASSESSING OFFICER HELD THAT THE ENTIRE AMOUNT WAS TAXABLE INCOME AND ACCORDINGLY BROUGHT THE RECEIPTS OF RS. 97,49,384/ - AND RS. 47,16,183/ - TO TAX. 4 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSION MADE. THE CONTENTION MADE BY THE A/R FOR THE APPELLANT IS CORRECT. THE DECISION OF HON'BLE ITAT, JODHPUR BENCH, JODHPUR IN THE APPELLANT OWN CASE FOR A.Y. 1996 - 1997 AND 1997 - 1998 IN ITA NO. 04/JODH/2009 AND ITA NO. 635/ JODH/2007 DATED 26.02.2014 AND 13.06.2014 IN THE HON'BLE ITAT STATED THAT 'WE HAVE FOUND THAT THE AGREEMENT BETWEEN CAD AND THE ASSES SEE WAS EXECUTED IN THE YEAR 1995 AND SEPARATE AGREEMENT WAS EXECUTED BETWEE N , CAD AND M/S DALAI CONSULTANTS & ENGINEERS L TD. ON 01.06.2010. BUT, TILL THE DATE OF EXECUTION OF SEPARATE AGREEMENT BETWEEN CAD AND M/S DALAI CONSULTANTS & ENGINEERS LTD. ANY PAYMENT WAS MADE TO M/S DALAI CONSULTANTS & ENGIN E ERS LTD. IT WAS MADE THROUGH THIS ASSESSEE COMPANY. THE TRIBUNAL HAS DISCU SSED THIS ISSUE IN FIRST ROUND AT PAGES 11 AND 12 OF ITS ORDER. AS PER CLAUSE 1.1(B) OF THE AGREEMENT, THE DEFINITION OF 'ASSOCIATED CONSULTANTS' HAS BEEN PROVIDED WHERE THE NAME OF M/S DALAI CONSULTANTS & ENGIN E ERS LTD. IS MENTIONED. ONE CAN EASILY INFER THE INTENTION OF THE CAD THAT BEFORE EXECUTION OF SEPARATE AGREEMENT, THE STATUS OF M/S DALAI CONSULTANTS & ENGINEERS LTD. 3 ITA NO. 4 3 / JODH /201 5 WAS THAT OF 'ASSOCIATED CONSULTANTS' AND AFTER ITS EXECUTION, ITS STATUS IS CHANGED TO SUB CONSULTANTS OUT OF THE PAYMENTS @ 5 % AND AGAIN ASSESSEE COMPANY DEDUCED TAX WHEN THE SAME PAYM ENT WAS MADE TO THE M/S DALAI CO NSULTANTS & ENGIN E ERS LTD. TO ANSWER SUCH A SITUATION, A SEPARATE AGREEMENT WAS EXECUTED ON 01.06.2000 AND CAD STARTED MAKING PAYMENT DIRECTLY TO M/S DALAI CONSULTANTS & E NGINEERS LTD. THESE FACTS ARE FOUND TO BE NOT CONTESTED BY THE REVENUE. THE ASSOCIATE CONSULTANTS WERE ALSO PARTY TO THIS AGREEMENT. IT BECOMES VERY CLEAR THAT BEFORE EXECUTION OF THIS AGREEMENT ALL THE PAYMENT MADE TO M/S DALAI CONSULTANTS & ENGIN E ERS LTD . WERE MADE THROUGH THE ASSESSEE AS PER CLAUSE 1.9 OF THE AGREEMENT, WHICH IS REPRODUCED AS UNDER : - 'THE CLIENT WARRANTS THAT THE CLIENT SHALL PAY ON BEHALF OF THE CONSULTANTS AND THE PERSONNEL ANY TAXES, DUTIES, FEES, LEVIES AND OTHER IMPOSITIONS IMPOSED ,, UNDER THE APPLICABLE LAW, ON THE CONSULTANTS AND THE PERSONNEL IN RESPECT OF: (A) ANY PAYMENT WHATSOEVER MADE TO CONSULTANTS, ASSOCIATED CONSULTANTS, SUB CONSULTANTS AND THE PERSONAL OF ANY OF THEM (OTHER THAN NATIONALS OF THE GOVT . , OR PERMANENT RESIDENTS OF THE GOVERNMENT'S COUNTRY), IN CONN E CTION WITH THE CARRYING OUT OF THE SERVICE.' IT IS ALSO FOUND FROM THE RECORD THAT ALL THE PAYMENTS MADE TOWARDS THE CIVIL WORKS WERE MADE THROUGH THE ASSESSEE AND THE SAME CANNOT BE ADDED TO THE ASSESSEE'S I NCOME. SINCE WE HAVE ALREADY HELD THAT THE APPELLANT COMPANY DOES NOT HAVE ITS PE, THEREFORE, GROUNDS NO. 2 & 3 HAVE TO BE ANSWERED IN FAVOUR OF THE ASSESSEE.' HENCE, IN VIEW OF THE DECISION OF HON'BLE ITAT IT IS CLEAR THAT THE MATTER WILL BE COVERED BY TH E DECISION OF HON'BLE BENCH IN EARLIER YEARS AND THE ADDITION MADE BY THE AO IS HEREBY DELETED. THE APPELLANT SUCCEEDS ON THIS GROUND. THE LAST GROUND OF APPEAL IS AGAINST THE CHARGING OF INTEREST U/S 234B & 234C. THIS BEING CONSEQUENTIAL IN NATURE, THE AO IS DIRECTED TO RECALCULATE THE SAME WHILE GIVING EFFECT TO THIS ORDER. 5. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER , WHEREAS NONE APPEARED ON BEHALF OF THE ASSESSEE IN SPITE OF NOTICE OF HEARING WAS SENT TO THE ASSESSEE. 6 . WE FIND THAT DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS) BY BRINING ANY COGENT AND RELEVANT MATERIAL ON RECORD. HE COULD NOT POINT OUT ANY GOOD AND JUSTIFIABLE REASON TO NOT TO F A LLOW THE OR DER OF THE TRIBUNAL IN ASSESSEES OWN CASE PASSED IN ASSESSMENT YEARS 1996 - 97 & 1997 - 98 IN ITA NOS. 04/JODH/2009 AND ITA NO. 635/JODH/2007 , DATED 26/02/2014 4 ITA NO. 4 3 / JODH /201 5 AND 13/06/2014 . HENCE, WE FIND NO GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS CONFIRMED AND THE GR O UND OF APPEAL OF THE REVENUE IS DISMISSED. 7. I N THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON MONDAY , THE 1 4 TH DAY OF MARCH , 201 6 AT JODHPUR . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER D ATED : 1 4 TH MARCH , 201 6 . VR/ - COPY TO: 1. THE ASSESS E E. 2. THE REVENUE. 3. THE CIT 4. THE CIT(A) 5. THE D.R . 6. GUARD FILE. BY ORDER .