DCIT, New Delhi V. M/s. ACL Wireless Ltd. (Now known as ACL Mobile Ltd.), New Delhi

ITA 4420/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3284 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 12-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMIT JAIN SENIOR
• Keywords: Deemed to accrue or arise in india; Retrospective amendment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.4420/DEL./2014 (ASSESSMENT YEAR : 2010-11) DCIT, CIRCLE 1 (1), VS. M/S. ACL WIRELESS LTD., NEW DELHI. (NOW KNOWN AS ACL MOBILE LTD.), 104 107, HEMKUNT TOWER, 98, NEHRU PLACE, NEW DELHI 110 019. (PAN : AACCA7370G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. SINGHVI, ADVOCATE REVENUE BY : SHRI AMIT JAIN, SENIOR DR DATE OF HEARING : 20.02.2018 DATE OF ORDER : 06.03.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, DEPUTY COMMISSIONER OF INCOME-TAX, C IRCLE 1 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE R EVENUE) BY FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 08.05.2014 PASSED BY LD. CIT(APPEALS)-IV, NEW DELHI QUA THE ASSESSMENT YEAR 2010-11 ON THE GROUNDS INTER AL IA THAT :- ITA NO.4420/DEL./2014 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. (IT (A) HAS ERRED IN DELETING THE ADDITION OF RS.6,99,64,946/- MADE BY DISALLOWING U/S 40(A)(IA) FOR NON DEDUCTION OF TDS BY IGNORING THE FACT THAT DISALLOWANCE IS MANDATORY IN THE YEAR WHEN TDS WAS DEDUCTIBLE BUT NOT DEDUCTED. 2. DELETING THE ADDITION OF RS.28,06,345/- MADE BY DISALLOWANCE OF COMMISSION PAID TO NON-RESIDENTS WITHOUT DEDUCTION OF TDS WHEN BY VIRTUE OF SECTION 9 OF THE I.T. ACT, 1961, THE PAYMENT MADE TO NON-RESIDEN T IS AN INCOME DEEMED TO ACCRUE OR ARISE IN INDIA AND TH E ASSESSEE COMPANY IS LIABLE TO DEDUCT TAX ON THE SAM E. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : THE ASSESSING OFFICER MAD E ADDITION OF RS.699,64,946/- BY MAKING DISALLOWANCE UNDER SECTIO N 40(A)(IA) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) BY I NVOKING CIRCULAR NO.5 OF 2005 DATED 15.07.2005 ON THE GROUND THAT TA X DEDUCTED AT SOURCE (TDS) WAS NOT DEDUCTED ON THE PAYMENT OF COS T OF CONTENT AMOUNTING TO RS.790,02,058/-. AO ALSO MADE ADDITIO N OF RS.28,06,345/- BY DISALLOWING COMMISSION PAYMENT MA DE BY THE ASSESSEE COMPANY TO NON-RESIDENT INDIAN WITHOUT DED UCTION OF TDS ON THE GROUND THAT THE COMMISSION PAID TO NON-RESID ENT IS AN INCOME DEEMED TO ACCRUE OR ARISE IN INDIA WITHIN TH E MEANING OF SECTION 9 OF THE ACT. 3. ASSESSEE COMPANY CARRIED THE MATTER BY WAY OF FI LING APPEAL BEFORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION BY ALLOWING THE ITA NO.4420/DEL./2014 3 APPEAL. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 5. UNDISPUTEDLY, THE ASSESSEE COMPANY HAS NOT DEDUC TED TDS ON EXPENSES OF RS.699,64,946/- TOWARDS COST OF CONT ENT. AO MADE AN ADDITION ON THE GROUND THAT PROVISIONS CONTAINED U/S 40(A)(IA) OF THE ACT ARE ATTRACTED ON THE EXPENSES TOWARDS COST OF CONTENT. HOWEVER, ISSUE IN CONTROVERSY HAS ALREADY BEEN DEAL T WITH BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2009-10 VIDE ITA NO.1135/DEL/2013 ORDER DATED 31.01 .2014 . THE LD. CIT (A) BY RELYING UPON THE DECISION RENDERED B Y THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE COMPAN YS OWN CASE DELETED THE ADDITION. BEFORE THE TRIBUNAL, LD. AR FOR THE ASSESSEE COMPANY CONTENDED THAT THE ASSESSEE COMPANY HAS DED UCTED TDS AND DEPOSITED THE SAME WITH STATE EXCHEQUER BEFORE THE DUE DATE OF FILING THE RETURN. SO, WE REMAND THE CASE BACK TO THE AO DIRECTING HIM TO EXAMINE IF THE ASSESSEE COMPANY HAS ALREADY DEDUCTED THE TAX AND PAID TO THE STATE EXCHEQUER BEFORE THE DUE DATE OF FILING THE ITA NO.4420/DEL./2014 4 RETURN. IF THE CONTENTION OF THE ASSESSEE COMPANY PROVES TO BE CORRECT THEN THE ADDITION IS NOT SUSTAINABLE AND HA S BEEN RIGHTLY DELETED BY THE CIT (A), OTHERWISE AO TO PROCEED ACC ORDINGLY AS PER PROVISIONS CONTAINED U/S 40(A)(IA) OF THE ACT. SO, GROUND NO.1 IS DETERMINED IN FAVOUR OF THE REVENUE FOR STATISTI CAL PURPOSES. GROUND NO.2 6. THE LD. CIT (A) DELETED THE ADDITION OF RS.28,06 ,345/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF COMMISSION PAID TO NON- RESIDENT INDIAN WITHOUT DEDUCTION OF TDS. THIS ISS UE WAS ALSO DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE COMPANYS OWN CASE FOR AY 2009-10 (SUPRA). THE LD. CIT (A) RELIED UPON THE AFORESAID DECISION OF THE COORDINAT E BENCH OF THE TRIBUNAL. THE COORDINATE BENCH OF THE TRIBUNAL BY RELYING UPON THE DECISION RENDERED BY THE HONBLE HIGH COURT IN CASE CITED AS CIT VS. ANGELIQUE INTERNATIONAL LTD. (2013) 359 ITR 9 (DELHI) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE COMPANY BY RETURNING THE FOLLOWING FINDINGS :- 13. THE ASSESSING OFFICER HAS DISALLOWED THE SAME ON THE GROUND THAT THE ASSESSEE FAILED TO DEDUCT THE T AX AT SOURCE ON THE COMMISSION PAID TO NON-RESIDENTS. TH E LEARNED CIT(A) DECIDED THESE ISSUES FOLLOWING THE DECISION OF ITAT IN THE CASE OF DCIT VS. ANGELIQUE INTERNATIONAL LTD. AT THE TIME OF HEARING BEFORE U S, IT WAS POINTED OUT BY THE LEARNED COUNSEL THAT THE ABO VE DECISION OF ITAT HAS BEEN UPHELD BY THE HON'BLE ITA NO.4420/DEL./2014 5 JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ANGELIQUE INTERNATIONAL LTD. [ 2013] 359 ITR 9 (DELHI), WHEREIN THEIR LORDSHIPS HELD AS UNDER:- HELD, DISMISSING THE APPEAL, THAT BY CIRCULARS NOS .23, DATED JULY 23, 1969, 163, DATED MAY 29, 1975, AND 786, DATED FEBRUARY 7, 2000, IT WAS CLARIFIED THAT PAYMENTS IN THE FORM OF A COMMISSION OR DISCOUNT TO THE FOREIGN PARTY WERE NOT CHARGEABLE TO TAX IN INDIA UNDER SECTION 9(1)(VII) OF THE ACT. THESE CIRCULARS WERE WITHDRAWN BY CIRCULAR NO.7 OF 2009. CIRCULAR NO.7 OF 2009 CANNOT BE CLASSIFIED AS EXPLAINING OR CLARIFYING THE EARLIER CIRCULARS ISSUED IN 1969 AND 2000. HENCE, IT DID NOT HAVE RETROSPECTIVE EFFECT. HENCE, IN THE RELEVANT ACCOUNTING YEAR TAX DID NOT HAVE TO BE DEDUCTED. THE DELETION OF DISALLOWANCE UNDER SECTION 40(A)(I) WAS JUSTIFIED. 14. THAT THE ASSESSMENT YEAR INVOLVED IN THE ABOVE CASE WAS ALSO AY 2009-10 WHICH IS THE ASSESSMENT YE AR IN THE CASE OF THE ASSESSEE UNDER APPEAL BEFORE US. THEREFORE, THE RATIO OF THE ABOVE DECISION WOULD BE SQUARELY APPLICABLE TO THE ASSESSEES CASE. WE, THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISIO N OF HON'BLE JURISDICTIONAL HIGH COURT, UPHOLD THE ORDER OF LEARNED CIT(A) IN THIS REGARD AND REJECT GROUND NOS .4 & 5 OF THE REVENUES APPEAL. 7. KEEPING IN VIEW THE FACT THAT THE FACTS DURING T HE YEAR UNDER ASSESSMENT QUA GROUND NO.2 ARE IDENTICAL AND BY FOL LOWING THE DECISION RENDERED BY THE COORDINATE BENCH OF THE TR IBUNAL WHICH IS ON THE BASIS OF DECISION RENDERED BY HONBLE HIGH C OURT, WE ARE OF THE CONSIDERED VIEW THAT THE PAYMENT MADE TO A FORE IGN NATIONAL / PARTY ON ACCOUNT OF COMMISSION FOR THE SERVICES REN DERED IN A FOREIGN COUNTRY ARE NOT CHARGEABLE TO TAX U/S 9 OF THE ACT, HENCE ITA NO.4420/DEL./2014 6 GROUND NO.2 IS DETERMINED AGAINST THE REVENUE HAVIN G BEEN RIGHTLY DECIDED BY THE LD. CIT (A) IN FAVOUR OF THE ASSESSE E COMPANY. 8. RESULTANTLY, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 6 TH DAY OF MARCH, 2018. SD/- SD/- (B.P. JAIN) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 6 TH DAY OF MARCH, 2018 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-IV, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.