Ferromatik Milacron India Pvt. Ltd., Ahmedabad V. The Dy. CIT, Circle-2(1)(1), Ahmedabad

ITA 462/AHD/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3882 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 23-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AHD
• Keywords: Capital asset; Depreciation; Transfer pricing; International transaction; Services rendered outside India; Deemed to accrue or arise in india; Permanent establishment; Advance ruling; Revenue expenditure; Capital expenditure
• Section: 37(1); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT & MS. MADHUMITA ROY, JUDICIAL MEMBER SL. NO. ITA NO(S) ASSESS- MENT YEAR(S) APPEAL(S) BY APPELLANT VS. RESPONDENT 1. 462/AHD/2017 2012-13 FERROMATIC MILACRON INDIA PVT.LTD. 53, MADHUBAN NR.MADALPUR UNDERBRIDGE ELLISBRIDGE AHMEDABAD-380 006 PAN: AABCC 0881 D (ASSESSEE) THE DCIT/ACIT CIRCLE-2(1)(1) AHMEDABAD (REVENUE) 2. 584/AHD/2017 2012-13 BY REVENUE BY ASSESSEE 3. 463/AHD/2017 2013-14 BY ASSESSEE BY REVENUE 4. 841/AHD/2017 2013-14 BY REVENUE BY ASSESSEE ASSESSEE BY : SHRI S.N.SOPARKAR & SHRI PARIN SHAH, ARS REVENUE BY : SHRI LALIT P.JAIN, SR.DR DATE OF HEARING : 01/08/2018 DATE OF PRONOUNCEMENT : 26/ 10 /2018 O R D E R PER MS. MADHUMITA ROY - JM: THE FOUR CROSS-APPEALS FILED BY THE ASSESSEE AND T HE REVENUE ARE AGAINST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, AHMEDABAD [LD. CIT(A) IN SHORT] DATED 13.12.2016 & 16.01.2017 ARISING OUT OF THE ASSESSMENT ORDERS UNDER S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS 'THE ACT') DATED 19.02.2016 AND DATED 09.03.2016 RELEVANT TO ASSESSMENT YEARS (AY S) 2012-13 & 2013-14 RESPECTIVELY. ITA NO.462/AHD/2017 AY 2012-13 ASSESSEES APPEA L 2. THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF DISALLOWANCE TO THE EXTENT OF RS.18,98,539/- OUT OF THE COMMISSION PAID TO NON-RE SIDENT AGENTS TO THE SERVICES RENDERED - 2 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 OUTSIDE INDIA. FURTHER THAT, THE CONFIRMATION OF A DDITION OF RS.67,83,650/- TOWARDS SUPPRESSION OF SALES IN TRANSIT WAS ALSO BEEN CHALL ENGED IN THE INSTANT CASE BY THE ASSESSEE. 3. GROUND NO.1 : THE ASSESSEE HAS FILED ITS RETURN OF INCOME O N 27.11.2012 DECLARING TOTAL INCOME OF RS.43,80,17,520/-. UPON SCRUTINY, NOTICE U/S.143(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') WAS ISS UED ON 08.08.2013 FOLLOWED BY NOTICE U/S.142(1) OF THE ACT DATED 21.08.2014 FOLLOWED BY NOTICE U/S.143(2) R.W.S. 129 OF THE ACT DATED 21.08.2015 AND 22.12.2015 DUE TO CHANGE OF IN CUMBENT. IT APPEARS FROM THE RECORD THAT THE ASSESSEE-COMPANY DURING THE AY 2012-13 HAD ENTE RED INTO SEVERAL INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES. THE ASSESSING OFFICER (AO) NOTICED THAT THE ASSESSEE-COMPANY HAD PAID TOTAL COMMISSION OF RS.1, 04,41,126/- OUT OF WHICH NO TDS WAS DEDUCTED ON THE COMMISSION OF RS.80,68,921/- PAID T O NON-RESIDENT. SINCE IN THE PREVIOUS ASSESSMENT YEAR, THE AO HAD DISALLOWED THE PAYMENT OF FOREIGN COMMISSION U/S.40(A)(IA) OF THE ACT, ON THAT PREMISE THE ASSESSEE WAS ASKED TO FURNISH EXPLANATION AS TO WHY SIMILAR ADDITIONS/DISALLOWANCES SHOULD NOT BE MADE. THE AS SESSEE WAS FURTHER DIRECTED TO EXPLAIN AS TO WHY THE COMMISSION PAID TO NON-RESIDENT SHOULD N OT BE DISALLOWED IN VIEW OF THE PROVISION OF SECTION 40(A)(IA) OF THE ACT. IN REP LY THEREOF, THE ASSESSEE CONTENDED THAT COMMISSION PAID TO RESIDENT WAS RS.23,72,205/- AND COMMISSION PAID TO NON-RESIDENT WAS RS.80,68,921/- TOTALLING TO RS.1,04,41,126/-. TH E ASSESSEE, CATEGORICALLY MENTIONED THAT THE AGENTS ARE ALL NON-RESIDENTS AND ALL THE SERVICES W ERE RENDERED OUTSIDE INDIA. THEREFORE, BEING NON-RESIDENT NO INCOME ACCRUES OR ARISES OR IS DEEM ED TO ACCRUE OR ARISE IN INDIA. IN SUPPORT OF HIS CASE THE ASSESSEE PLACED RELIANCE ON THE JU DGEMENT OF HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE P.LTD. VS. CIT , [2010] 327 ITR 456 (SC). FURTHER THAT, IN TERMS OF THE RATIO LAID DOWN BY THE HONBLE AP EX COURT IN THE CASE OF CIT VS. TOSHOKU LTD. 125 ITR 525, THE COMMISSION AMOUNTS WHICH WERE EARNED BY THE NON-RESIDENT ASSESSEE FOR SERVICES RENDERED OUTSIDE INDIA CANNOT BE DEEME D TO BE INCOMES WHICH HAVE EITHER ACCRUED OR ARISEN IN INDIA. THE CIRCULAR NO.786 DATED 07.02.2000 ISSUED BY THE CBDT RELATING TO DEDUCTION OF TAX UNDER SECTION 195 OF T HE ACT WAS ALSO RELIED UPON BY THE ASSESSEE - 3 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 BEFORE THE LD. ASSESSING OFFICER. HOWEVER, THE AO WAS OF THE CONSIDERED OPINION THAT THE ASSESSEE WAS UNDER OBLIGATION TO DEDUCT TAX AT SOUR CE AS ENVISAGED U/S.195 OF THE ACT FROM THE PAYMENT OF COMMISSION MADE TO NON-RESIDENT AGEN TS TOWARDS SERVICES RENDERED BY THEM. AS SUCH THE ASSESSEE FAILED TO DISCHARGE THE OBLIGA TION AND THEREFORE THE EXPENDITURE CLAIMED UNDER THE HEAD COMMISSION EXPENSES PAID TO NON-RESI DENTS WAS DISALLOWED BY THE LD. ASSESSING OFFICER AND ADDED BACK TO THE TOTAL INCO ME OF THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE LD. CIT(A) P ARTLY ALLOWED THE APPEAL PREFERRED BY THE ASSESSEE. THE COMMISSION PAID TO THE NON-RESIDENTS TO THE TUNE OF RS.18,68,921/- ON WHICH TDS WAS NOT DEDUCTED WAS DISALLOWED BY THE LD. CIT( A) IN THE ABSENCE OF THE DETAILS/EVIDENCES WITH THE FOLLOWING OBSERVATIONS:- 3.3. DECISION : I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. THE AO HAS MADE THE DISALLOWANCE OF EXPORT COMMISSI ON EXPENSES PAID TO FOREIGN AGENTS AT RS.80,68,921/- INVOKING THE PROVISIONS OF SECTION 4 0(A)(IA) OF THE ACT DUE TO NON-DEDUCTION OF THE TDS UPON SUCH COMMISSION PAYMENTS. IT HAS BEEN NOT ICED THAT THE APPELLANT HAS MADE THE COMMISSION PAYMENT TO VARIOUS COMMISSION AGENTS OF WHICH DETAILS ARE NOTED AS UNDER:- SL. NO. AGENTS NAME AND ADDRESS COMMISSION US $ COMMISSION AMOUNT RS. 1. AI SANABEEK TRADING CORPORATION P.O.BOX 10474, JEDDAH-21433, SAUDI ARABIA C.R. 4030086374 $ 7500 341,250 2. AI SANABEAK TRADING CORPORATION P.O. BOX 10474, JEDDAH -21433, SAUDI ARABIA C.R.4030086374 $20,000 1,001,000 3. AI SANABEAK TRADING CORPORATION P.O. BOX 10474, JEDDAH -21433, SAUDI ARABIA C.R.4030086374 $5,885 294,544 4. AI SANABEAK TRADING CORPORATION P.O. BOX 10474, JEDDAH -21433, SAUDI ARABIA C.R.4030086374 $8,335 417,617 5. AI SANABEAK TRADING CORPORATION P.O. BOX 10474, JEDDAH -21433, SAUDI ARABIA $4,000 200,200 - 4 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 C.R.4030086374 6. AI SANABEEK TRADING CORPORATION P.O. BOX 10474, JEDDAH-21433, SAUDI ARABIA C.R. 4030086374 $5,000 272,200 7. AI SANABEAK TRADING CORPORATION P.O. BOX 10474, JEDDAH -21433, SAUDI ARABIA C.R.4030086374 $17,850 971,754 8. AI SANABEAK TRADING CORPORATION P.O. BOX 10474, JEDDAH -21433, SAUDI ARABIA C.R.4030086374 $14,700 800,268 9. BARINDERJIT SINGH SANNI P.O. BOX 13300 DUBAI $6,180 336,439 10. BECKFORD INDUSTRIES LTD., N-510 CHAI HSIN BLDG. ANNEX 96, CHUNG SHAH, TAIPEI $6,800 370.192 11. BECKFORD INDUSTRIES LTD., N-510 CHIA HSIN BLDG. ANNEX 96, CHUNG SHAH, TAIPEI $2,125 115,685 12. HOMEED RAMANI 8, GASAIL CLOSE, OFF. MASALASI ALAGBADO, LAGOS, NIGERIA $2,000 195,200 13. CAPT.KAMAL R.KESWANI HANS CRESCENT KNIGHT BRIDGE, LONDON $12,000 624,840 14. AI SANABEAK TRADING CORPORATION P.O. BOX 10474, JEDDAH -21433, SAUDI ARABIA C.R.4030086374 $24,600 1,280,922 15. PLASTECH INTERNATIONAL P6-63, PO BOX 121696 SHARJAH $15,000 781,050 16. ALIASGAR TAILOR P.O. BOX 30126, AHMAN $3,000 156.120 TOTAL $154,975 8,068.921 IT HAS BEEN NOTICED THAT IN RESPECT TO THE COMMISSI ON AGENTS AT SR. NO. 1 TO 8, 10, 11, 12 & 14, NOTED IN THE ABOVE TABLE, THE APPELLANT HAS ALSO PAID THE COMMISSION IN A.Y. 2011-12 AND EARLIER YEARS AND THE SIMILAR DISALLOWANCE U/S.40(A)(IA) OF THE ACT H AVE BEEN MADE BY THE AO IN THE RESPECTIVE ASSESSMENT YEARS. HOWEVER, THE AFORESAID DISALLOWAN CES U/S.40(A)(IA) OF THE ACT HAVE BEEN DELETED BY THE FIRST APPELLATE AUTHORITY I.E. CIT(A) WHILE DEC IDING THE APPEAL OF THE RESPECTIVE ASSESSMENT YEARS . FOR READY REFERENCE THE DECISION OF THE CIT(A)-2, A HMEDABAD IN APPEAL NO.CIT(AJ-2/457/DCIT - 5 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 CIR.2(1)(1)/2014-15 DTD. 12.6.2015 IN APPELLANT'S O WN CASE FOR A.Y. 2011-12 HAS DECIDED THE ISSUE BY DELETING THE DISALLOWANCE IN RESPECT OF THE COMMISS ION AGENTS TO WHOM COMMISSION WERE PAID IN 2011-12 WITH THE FOLLOWING OBSERVATIONS:- '2.3. DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MADE A DISALLOWANCE U/S. 40(A)(IA) BY HOLDING THAT THE APPELLANT WAS LIABLE TO DEDUCT TAX ON THE COMMISSION PAID TO NON- RESIDENT AGENTS. IT HAS BEEN HELD BY THE AO THAT PROVISIONS OF SECTION 195 WERE APPLICABLE IN THE CA SE OF THE APPELLANT. THE APPELLANT, ON THE OTHER HAND, HAS SUBMITTED THAT IT WAS NOT LIABLE TO DEDUC T ANY TAX AS THE COMMISSION PAID TO ALL THE NON- RESIDENT AGENTS WAS NOT LIABLE TO TAX IN INDIA AS I T HAD NEITHER ACCRUED OR AROSE IN INDIA. THE SERVIC ES HAVE BEEN RENDERED OUTSIDE INDIA. THE PROVISIONS OF SECTION 195 WERE NOT APPLICABLE IN THE CASE OF THE APPELLANT. ON CAREFUL EXAMINATION OF THE RELEVANT FACTS, IT IS NOTED THAT THE SIMILAR ISSUE HAS BEEN DECIDED BY M E IN THE CASE OF THE APPELLANT WHILE DECIDING THE APP EAL FOR A.Y 2009 - 10 VIDE APPEAL NO.CIT(A)- VIII/JC1T/R.4/141/12-13 ORDER DATED 31/12/2013, THE FACTS OF THE PRESENT CASE ARE ALSO IDENTICAL TO THE EARLIER YEAR. THE COMMISSION HAS BEEN PAID TO N ON-RESIDENT AGENTS WHO HAVE RENDERED THE SERVICES ABROAD, THE AGENTS DOES NOT HAVE ANY PE OR ANY OTHER ESTABLISHMENT IN INDIA. FOR THE SAKE OF CLARITY THE DECISION GIVEN BY ME IN THAT APPEAL IS REPRODUCED AS UNDER: - 'I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS DISALLOWED THE COMMISSION PAID TO FOREIGN AGENTS BY HOLDING THAT THE INCOME ARISING ON ACCOUNT OF COMMISSION PAYABLE TO OVERSEAS AGENTS WAS DEEMED TO ACCRUE OR ARISE IN INDIA AND WAS ACCORDINGLY TAXABLE UNDER THE PROV ISIONS OF SECTION 5 (2J(BJ READ WITH SECTION 9 (1)(I) OF INCOME TAX ACT. IT HAS FURTHER BEEN OBSER VED BY THE AO THAT THE APPELLANT COMPANY HAD FAILED TO COMPLY WITH THE PROVISIONS OF SECTION 195 (2). THE APPELLANT ON THE OTHER HAND, IN ITS DETAILED WR ITTEN SUBMISSION, HAS CLAIMED THAT THE PROVISIONS O F SECTION 5 (2)(B) READ WITH SECTION 9 (1)9I) OF INCO ME TAX ACT WERE NOT APPLICABLE IN ITS CASE. THE INCOME HAS BEEN EARNED ABROAD AND IS THEREFORE, NOT TAXABLE IN INDIA. THE ISSUES WHICH ARE TO BE EXAMINED AND DECIDED ARE : - 1. WHETHER THE COMMISSION PAID TO FOREIGN AGENTS I S TAXABLE IN INDIA BY VIRTUE OF THE PROVISIONS OF SECTIONS (2)(B) READ WITH SECTION 9 ( 1) (I) OF INCOME TAX ACT. 2. WHETHER THE PROVISIONS OF SECTION 195(2) WERE A PPLICABLE ON THE APPELLANT AND HE SHOULD HAVE DEDUCTED TAX AND IN CASE OF NO DEDUCTION HE SH OULD HAVE OBTAINED A NO DEDUCTION CERTIFICATE FROM THE AO. 4.3.1 REGARDING THE FIRST ISSUE IT IS NOTED FROM THE EVIDENCES GIVEN BY THE APPELLANT AS WELL AS NOT ED BY THE AO IN HIS ORDER THAT THE SERVICES HAVE BEEN RENDERED BY THE FOREIGN AGENTS OUTSIDE INDIA. THE - 6 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 SALES WERE BOOKED BY THEM IN THEIR COUNTRY OR FOR T HE COUNTRY FOR WHICH THEY HAVE BEEN APPOINTED AS COMMISSION AGENTS. NONE OF THE ACTIVITY OF SOLICITI NG THE CLIENTS AND PROCURING THE ORDERS IS IN INDIA . THE GOODS ARE BEING DELIVERED BY THE APPELLANT COMP ANY IN THE OTHER COUNTRY. THE ACTIVITIES OF PROCURING THE PAYMENT ON BEHALF OF THE APPELLANT CO MPANY ARE ALSO DONE ABROAD. THE AO WAS THEREFORE, INCORRECT TO HOLD THAT THE SOURCE OF INC OME LIES IN INDIA AS THE SALES HAVE BEEN MADE FROM INDIA. THE PROVISIONS OF INCOME TAX ACT CLEARLY PRO VIDE THAT THE TAX WOULD BE DEDUCTED ON THE INCOME WHICH IS TAXABLE IN INDIA. THE ACTIVITY OF E ARNING THE INCOME IS NOT THE SALE BUT SOLICITING TH E SALES BY COMMISSION AGENTS. THOUGH THIS ACTIVITY IS LINKED TO THE SALES OF THE COMPANY BUT IT CANNOT B E SAID THAT THE INCOME HAS BEEN DERIVED FROM SALES WH ICH HAS BEEN MADE FROM INDIA. THE INCOME HAS BEEN DERIVED FROM THE ACTIVITY OF SOLICITING THE SA LES ON BEHALF OF THE APPELLANT COMPANY. THE AGENTS HAVE CARRIED OUT ALL THE ACTIVITY ON THE FOREIGN SO IL AND NONE OF THEIR ACTIVITY IS IN INDIA THEREFORE , IF CANNOT BE SAID THAT THE INCOME HAS ACCRUED OR ARISE N IN INDIA AND THE SOURCE OF INCOME WAS IN INDIA. THERE IS NO FACT BROUGHT OUT BY THE AO IN THE ORDER AS WELL AS OBSERVED BY ME DURING THE COURSE OF APPELLATE PROCEEDINGS TO INDICATE THAT THE SERVICES HAVE BEEN RENDERED IN INDIA. THE APPELLANT HAS RIGHTLY RELIED ON THE JUDGEMENT O F HONOURABLE SUPREME COURT IN THE CASE OF TOSHOKU (SUPRA) WHEREIN IT HAS BEEN HELD THAT COMMI SSION EARNED BY THE NON-RESIDENT FOR ACTING AS THE SELLING AGENT FOR THE INDIAN EXPORTER, WHEREIN SUCH NON-RESIDENT WAS RENDERING SERVICES FROM OUTSIDE INDIA DOES NOT ACCRUE IN INDIA. IN THE PRES ENT CASE BEFORE ME ALSO, THE FOREIGN SELLING COMMISSION AGENT IS RESIDENT OF FOREIGN COUNTRY, FR OM WHERE THE PROCUREMENT SERVICE HAS BEEN PROVIDED FOR WHICH THE COMMISSION HAS BEEN PAID, AN D THEREFORE, THE ISSUE IS DIRECTLY AND SQUARELY COVERED BY THE APEX COURT DECISION. REGARDING THE OBSERVATION OF THE AO THAT THE INCOME IS DEEMED TO ACCRUE OR ARISE IN INDIA BY APPLYING THE PROVISIONS OF SECTION 9 (1)(I) IT IS S EEN THAT THERE IS NO FACT ON RECORD TO INDICATE THA T ANY OF THE AGENTS HAD ANY PERMANENT ESTABLISHMENT IN IN DIA. ALL THE AGENTS HAD THEIR OFFICES ON THE FOREIGN SOIL AND THE CORRESPONDENCE WHICH HAS BEEN PLACED BEFORE ME INDICATE THAT THEY HAD NO PE IN INDIA. FURTHER THE ASSESSING OFFICER HAS ALSO NOT P OINTED OUT ANY SUCH FACT IN ITS ORDER WHICH INDICAT E THAT THERE WERE ANY SUCH OFFICES WHICH ATTRACT THE DEEMING PROVISIONS. FURTHER THE OBSERVATION THAT THE SOURCE OF INCOME WAS IN INDIA IS ALSO NOT PROPE R AS IT HAS CLEARLY BEEN DISCUSSED IN THE PRECEDING PARAGRAPHS THAT NONE OF THE SERVICES HAVE BEEN REND ERED IN INDIA AND SOURCE OF INCOME CANNOT BE SAID TO BE IN INDIA AS THE SOURCE OF INCOME IS THE SERVICES RENDERED AND NOT THE SALES. THERE IS NO BUSINESS CONNECTION IN INDIA FROM WHICH THE INCOME HAS BEEN EARNED, THERE IS NO PROPERTY THROUGH OR FROM WHICH THE INCOME HAS BEEN EARNED. THEREFORE, T HE PROVISIONS OF SECTION 9 (1)(I) ALSO CANNOT BE APPLIED. THE APPELLANT HAS RIGHTLY PLACED RELIANCE ON THE JUDGEMENT OF HONOURABLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE PRIVATE LIMI TED 327ITR 456. THEREFORE, IN VIEW OF THE PRECEDING DISCUSSION THE AO WAS NOT JUSTIFIED TO HOLD THAT THE COMMISSION PAYABLE TO THE OVERSEAS AGENTS WAS DEEMED TO ACCRUE OR ARISE IN INDIA AND IS TAXABLE UNDER THE ACT IN VIEW OF THE SPECIFIC PROVISIONS OF SECTIONS 5 (2) ( B) READ WITH SECTION 9(1)(I) OF INCOME TAX ACT. 4.3.2 REGARDING THE ISSUE OF OBTAINING NO DEDUCTIO N CERTIFICATE UNDER SECTION 195 IT IS SEEN THAT FOR THE APPLICABILITY OF THE PROVISIONS OF THIS SECTION , THE SUM MUST BE CHARGEABLE UNDER THE PROVISIONS O F THE INCOME TAX ACT. SECTION 195 PROVIDES FOR DEDUCT ION OF TAX BY THE PERSON RESPONSIBLE FOR PAYING TO A NON-RESIDENT ANY INTEREST OR ANY OTHER SUM CHARGE ABLE UNDER THE PROVISIONS OF THE ACT. IF IS CLEAR - 7 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 THAT THE PAYMENT WAS NOT THE INTEREST. IT HAS TO BE SEEN WHETHER THE PAYMENT IS COVERED UNDER THE TERM 'ANY OTHER SUM CHARGEABLE UNDER THE PROVISION OF THIS ACT'. IT HAS BEEN OBSERVED IN THE PRECEDING DISCUSSION THAT INCOME WAS NOT CHARGEABLE TO TAX AS IT HAS NOT BEEN RECEIVED IN INDIA NOR IT HAS ACCRUED OR ARISEN IN INDIA DIRECTLY OR INDIRECT LY. . THEREFORE, ONCE THE INCOME IS NOT TAXABLE THE RE IS NO LIABILITY TO DEDUCT TAX AND THEREFORE, IT WAS NOT OBLIGATORY FOR THE APPELLANT TO DEDUCT TAX IN VIEW OF THIS THERE WAS NO VIOLATION OF THE PROVISIONS OF SECTION 195. AND THE APPELLANT ALSO WAS NOT REQUIRED TO PAY NO DEDUCTION CERTIFICATE FROM THE A O. THE ISSUE WHETHER THE PAYER HAS TO APPLY FOR A CERT IFICATE UNDER SECTION 195 IF SOME PAYMENT HAS BEEN MADE, HAS BEEN CONSIDERED BY VARIOUS COURTS. T HE SPECIAL BENCH OF CHENNAI ITAT IN THE CASE OF PRASAD PRODUCTIONS REPORTED IN 125 ITD 263 HAS H ELD IN PARA-35 OF THE ORDER THAT IF THE ASSESSEE HAS NOT APPLIED TO THE ASSESSING OFFICER UNDER SECT ION 195(2) FOR DEDUCTION OF TAX AT A LOWER OR NIT RATE OF TAX UNDER A BONA FIDE BELIEF THAT NO PART O F THE PAYMENT MADE TO THE NON-RESIDENT IS CHARGEABLE TO TAX, THEN HE IS NOT UNDER ANY STATUTO RY OBLIGATION TO DEDUCT TAX AT SOURCE ON ANY PART O F THEREOF. WHILE DECIDING THE CASE THE HONOURABLE BEN CH HAS CONSIDERED SEVERAL CASES WHICH WERE RELEVANT TO THE ISSUE. IN THE PRESENT CASE THE APPE LLANT DID NOT DEDUCT THE TAX OR APPROACHED THE AO FOR LOW/NO DEDUCTION OF TAX CERTIFICATE AS THERE AR E SEVERAL JUDICIAL PRONOUNCEMENTS IN SUPPORT OF THE APPELLANT WHICH HAVE BEEN RELIED BY IT IN THE WRITT EN SUBMISSION. IT HAS SUBMITTED THAT THE COMMISSION PAID TO NON-RESIDENT AGENT WAS NOT LIABLE TO TAX UN DER* THE PROVISIONS OF THE ACT WHEN THE SERVICES WERE RENDERED OUTSIDE INDIA, SERVICES WERE USED OUT SIDE INDIA, PAYMENTS WERE MADE OUTSIDE INDIA AND THERE WAS NO PERMANENT ESTABLISHMENT OR BUSINES S CONNECTION IN INDIA. THE SUBMISSION GIVEN BY THE APPELLANT DEARLY DEMONSTRATES ITS BONA FIDE BEL IEF. THEREFORE, CONSIDERING THE ABOVE DISCUSSION THERE W AS NO LIABILITY ON THE PART OF THE APPELLANT TO DEDUCT TAX UNDER SECTION 195 OR APPROACH THE IT. AU THORITIES FOR A NO DEDUCTION TAX CERTIFICATE. THE AO HAS ALSO PLACED RELIANCE ON THE DECISION OF HON'BLE AUTHORITY OF ADVANCE RULINGS IN THE CASE OF SKF BOILERS AND DRIERS (P) LTD. (2012) 18 TAXMAN N 325 AND RAJIVE MALHOTRA (2006) 284 1TR 564 (DELHI). THE JUDGEMENTS ARE NOT APPLICABLE TO THE P RESENT FACTS AS THERE ARE SEVERAL OTHER DECISIONS WHICH HOLD THAT SUCH KIND OF COMMISSION IS NOT TAXA BLE IN INDIA AND ACCORDINGLY NO LIABILITY TO DEDUCT FAX WAS THERE. FURTHER THE DECISION OF HONOURABLE S UPREME COURT OF INDIA IN THE CASE OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. TOSHOKU LIMITE D 125 ITR 525, STILL PREVAILS AS ON DATE AND IS THE LAW OF THE LAND AS REGARDS APPLICABILITY OF IDS PROVISIONS TO COMMISSION PAID TO OVERSEAS/NON- RESIDENT AGENTS BY INDIAN EXPORTERS. IN VIEW OF THE PRECEDING DISCUSSION IT IS CLEAR THA T THE APPELLANT WAS NOT LIABLE TO DEDUCT TAX ON THE COMMISSION PAID FOREIGN AGENTS. THEREFORE, THE DISA LLOWANCE OF RS.1,20,22,460/- UNDER SECTION 40(A)(IA) MADE BY THE AO IS DIRECTED TO BE DELETED.' THE FACT OF THE PRESENT YEAR ARE ALMOST IDENTICAL T O THE A. Y. 2009 -10 EXCEPT FOR CERTAIN COMMISSION THAT HAS BEEN PAID TO NONRESIDENT AGENTS IN RESPECT OF SALES MADE IN INDIA. IT HAS BEEN SUBMITTED BY THE APPELLANT THAT COMMISSION OF RS.1880876 HAS BEE N PAID TOWARDS MACHINES SOLD IN INDIA. IT HAS BEEN SUBMITTED THAT ALL SERVICES WERE RENDERED BY N ON-RESIDENT ENTITIES OUTSIDE INDIA AND THE AGENTS DO NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA. I T HAS THEREFORE BEEN SUBMITTED THAT THE AMOUNT WAS NOT TAXABLE. THE SUBMISSION OF THE APPELLANT RE GARDING COMMISSION PAID IN RESPECT OF MACHINES - 8 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 SOLD IN INDIA IS NOT ACCEPTABLE AS THE ACTIVITY OF SALE HAS TAKEN PLACE IN INDIA. THE LOGIC TAKEN BY T HE AO THAT THERE IS A CONNECTION OF THE INCOME EARNED BY THE AGENT IN INDIA IS APPLICABLE HERE. THE ORDER HAS BEEN EXECUTED IN INDIA AS THE MACHINES HA VE BEEN SUPPLIED IN INDIA AND THEREFORE, INCOME HAS ACCRUED IN INDIA. THE PROVISIONS OF SECTION 9(1 )(I) WOULD THEREFORE BE APPLICABLE. ACCORDINGLY THE DISALLOWANCE OF RS.1880876 IS UPHELD. REGARDING THE REMAINING AMOUNT OF COMMISSION PAID T O FOREIGN AGENTS THE FACTS ARE SIMILAR TO THE DECISION GIVEN BY ME IN A.Y. 2009 - 10. ACCORDINGLY , THE DISALLOWANCE OF THE COMMISSIONS PAID TO NON-RESIDENT FOREIGN AGENT MADE BY THE AO UNDER SEC TION 40(A)(IA) DIRECTED TO BE DELETED EXCEPT THE DISALLOWANCE OF RS. 1880876 AS DISCUSSED ABOVE. REL IANCE IS ALSO PLACED ON THE RECENT DECISION OF HYDERABAD ITAT IN THE CASE OF IVAX PAPER CHEMICALS LTD 44 TAXMANN.COM 173(2014) WHEREIN SIMILAR ISSUE HAS BEEN DECIDED IN THE MANNER INDICA TED ABOVE. THE GROUND OF APPEAL IS ACCORDINGLY, PARTLY ALLOWED.' 3.4. IN VIEW OF THE AFORESAID DISCUSSION, THE DISAL LOWANCE OF COMMISSION PAYMENT TO THE AFORESAID FOREIGN AGENTS AT SI. NO. 1 TO 8 AND 10, 11, 12 & 1 4 OF THE ABOVE TABLE IS FOUND NOT CORRECT AND HENCE THE SAME IS DELETED FOLLOWING THE DECISION OF CIT(A) IN APPELLANT'S OWN CASE FOR A.YRS. 2011-12, 2010-11 AND 2009-10-SUBJECT TO THE FOLLOWING OBSERV ATIONS. IT IS WORTH HERE TO MENTION THAT ALTHOUGH THERE ARE NO DETAILS AVAILABLE ON RECORD WITH REGARD TO THE FOREIGN COMMISSION PAYMENTS IN RESPECT OF SALES MAD E BY THE AGENTS NOTED AT SI. NO. 1 TO 8 AND 10, 11, 12 & 14 OF THE ABOVE TABLE IN INDIA DURING THE YEAR UNDER CONSIDERATION OF WHICH COMMISSION INCOME HAS BEEN ACCRUED IN INDIA, THEREFORE, ON SUC H COMMISSION PAYMENTS THE ASSESSEE WAS LIABLE TO MAKE THE IDS AND IN ABSENCE OF SUCH NON-DEDUCTION O F IDS SUCH COMMISSION PAYMENTS ARE LIABLE FOR DISALLOWANCE. THE AO IS DIRECTED TO VERIFY THIS ASP ECT IN LINE OF THE DIRECTIONS GIVEN BY THE CIT(A) I N HIS ORDER FOR A.Y. 2011-12 AT PAGE NO. 12 & 13 OF H IS ORDER AND DISALLOWANCE OF COMMISSION TO THAT EXTENT, IF ANY, IS LIABLE FOR DISALLOWANCE. 3.5. NOW WITH REGARD TO THE FOREIGN COMMISSION AGEN TS AT SR. NO. 9, 13, 15, 16 OF THE ABOVE TABLE, IT HAS BEEN NOTICED THAT DURING THE COURSE OF ASSESSME NT PROCEEDINGS THE APPELLANT HAS NOT SUBMITTED ANY DETAILS AND EVIDENCES TO PROVE THAT THE AFORESA ID COMMISSION AGENTS HAVE NOT PROVIDED THE SERVICES IN INDIA AND THEY DID NOT HAVE ANY BUSINES S CONNECTION OR PERMANENT ESTABLISHMENT IN INDIA. THE ONUS WAS ON THE APPELLANT TO JUSTIFY THE CLAIM OF APPELLANT BY ADDUCING NECESSARY EVIDENCES IN FORM OF COPIES OF INVOICES OF SALES, WORKING OF COM MISSION, COPY OF FORM NO.L5CA & 15CB, BANK REMITTANCE ADVISORY NOTES OR ANY OTHER EVIDENCES. H OWEVER, THE APPELLANT HAS FAILED TO PROVIDE THE AFORESAID DETAILS AND COPIES OF THE SAID DOCUMENTS. SO, THERE IS NOTHING ONRECORD SUBMITTED BY THE APPELLANT THAT THE AGENTS TO WHOM COMMISSION WAS PA ID IN THE YEAR UNDER CONSIDERATION FOR SERVICES HAVING RENDERED, IF ANY, OUTSIDE INDIA WERE ALSO PA ID IN THE PRECEDING YEARS. 3.6. IN VIEW OF THE AFORESAID DISCUSSION, IT IS NOT ICED THAT IN THIS CASE, THE APPELLANT HAS FAILED TO PROVE THE NO BUSINESS CONNECTION OF SUCH PAYMENT IN INDIA , AND IN ABSENCE OF THE SAME, THE ALLOWABILITY OF THE SAME REMAINED UNSUBSTANTIATED. THEREFORE, FOR T HE REASONS DISCUSSED BY THE AO, THE DISALLOWANCE MADE IN RESPECT OF THE FOREIGN COMMISSION AGENTS AT SR.NO, 9, 13, 15 & 16 AMOUNTING TO RS. - 9 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 18,98,539/- IS CONFIRMED. IN OTHER WORDS, THE DISALLOWANCE OF COMMISSION IN R ESPECT OF FOLLOWING COMMISSION AGENTS IS CONFIRMED. 1) SHRI BARINDERJIT SINGH SAHNI - RS.336439/- 2) CAPTAIN KOMAL R. KESWANI - RS .624840/- 3) PLASTECH INTERNATIONAL - RS.781050/- 4) AIIASGAR TAILOR - RS.156210/- TOTAL - RS.1898539/- 3.7. THE GROUND OF APPEAL IS ACCORDINGLY PARTLY ALLOWED. 4. AT THE VERY OUTSET OF THE PROCEEDING BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE HAS BEEN DECIDED IN ASSESSEES OWN C ASE BY THE CO-ORDINATE BENCH FOR THE AY 2009-10 WHICH WAS SUBSEQUENTLY FOLLOWED BY THE LD. TRIBUNAL FOR THE AY 2011-12 IN THE CASE OF THE ASSESSEE ITSELF. 4.1. ON THE CONTRARY, THE LD.DR RELIES UPON THE ORD ER PASSED BY THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RESPECTIVE PARTIES AND PERUSED THE MATERIALS ON RECORD. THE JUDGMENT PASSED BY THE LD. TRIBUNAL FOLLOWING THE D ECISIONS IN RESPECT OF AY 2009-10 IN ASSESSEES OWN CASE OBSERVED AS FOLLOWS: 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD CAREFULLY. WE HAVE NOTICED THAT THE IDENTICAL ISSUE HAS BEEN DECIDED I N THE CASE OF THE ASSESSEE BY THE COORDINATE BENCH OF THE ITAT FOR THE ASSESSMENT YEAR 2009- 10 IN FAVOUR OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER:- 22. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE RECORD CAREFULLY. AS FAR AS GENUINENESS OF THE TRANSACTIONS IS CONCERNED, THE A O HAS NOT RAISED ANY DISPUTE. THE DETAILS OF COMMISSION PAYMENTS WERE PRODUCED BEFORE THE AO. H E COMPILED ALL THESE DETAILS IN ANNEXURE-A ATTACHED WITH THE ASSESSMENT ORDER. THE DISPUTE BE TWEEN THE PARTIES RELATES TO WHETHER THE TDS WAS TO BE DEDUCTED ON COMMISSION PAYMENT OR NOT. THE A O WAS OF THE VIEW THAT INCOME ARISEN ON ACCOUNT OF COMMISSION PAYABLE TO OVERSEAS AGENTS WAS DEEMED TO ACCRUE OR ARISE IN INDIA, AND IS ACCORDINGLY TAXABLE UNDER SECTION 5(2)(B) R.W.S 9(1)(I) OF THE INCOME TAX ACT. ON THE OTHER HAND, THE LD.CIT(A) WAS OF THE VIEW THAT INCOME HAS BEEN DERIVED FROM T HE ACTIVITIES OF SOLICITING SALES ON BEHALF OF THE ASSESSEE-COMPANY BY THE AGENT; THEY ARE NON-RESIDEN TS, AND DO NOT HAVE ANY ESTABLISHMENT IN INDIA AND NO ACTIVITIES WAS CARRIED OUT IN INDIA. THIS A SPECT HAS BEEN EXAMINED LUCIDLY BY THE TRIBUNAL IN THE CASE OF WELSPUN CORPORATION LTD. (SUPRA), WHERE IN ONE OF US (ACCOUNTANT MEMBER) WAS AUTHOR OF THE ORDER. THE DISCUSSION MADE BY THE TRIBUNAL REA DS AS UNDER: - 10 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 7. WE FIND THAT ONCE THE AGREEMENTS AND RELATED IN VOICES HAVE BEEN FURNISHED BY THE ASSESSEE AT THE ASSESSMENT AS ALSO AT THE APPELLATE STAGE, AND NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN THE SAME, IT CANNOT BE OPEN TO THE REVENUE TO CONTEND T HAT GENUINENESS OF COMMISSION PAYMENTS IS NOT ESTABLISHED. THE COMMISSION PAYMENTS ARE MADE WITH REGULATORY APPROVALS AND THROUGH BANKING CHANNELS, AND ALL THE REQUISITE DOCUMENTATION IS FU RNISHED FOR PERUSAL. IN THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) WAS INDEED J USTIFIED IN HIS WELL REASONED CONCLUSIONS ON THIS ASPECT OF THE MATTER. WE APPROVE THE SAME. AS REGAR DS THE QUESTION AS TO WHETHER THE ASSESSEE HAD ANY OBLIGATIONS TO DEDUCT TAX AT SOURCE FROM THESE PAYM ENTS OF COMMISSION TO NON RESIDENT AGENTS, AS LEARNED REPRESENTATIVES FAIRLY AGREE, THE ISSUE IS NOW COVERED, IN FAVOUR OF THE ASSESSEE, BY A COORDINATE BENCH DECISION IN THE CASE OF DCIT VS WELSPUN CORPORATION LTD [(2017) 77TAXMAN.16 5 (AHD)], SPEAKING THROUGH ONE OF US, HAS OBSERVED AS FOLLOW S: 31. THE SCHEME OF TAXABILITY IN INDIA, SO FAR AS TH E NON RESIDENTS, ARE CONCERNED, IS LIKE THIS. SECTION 5 (2), WHICH DEALS WITH THE TAXABILITY OF I NCOME IN THE HANDS OF A NON-RESIDENT, PROVIDES THAT THE TOTAL INCOME OF ANY PREVIOUS YEAR OF A PERSON W HO IS A NON-RESIDENT INCLUDES ALL INCOME FROM WHATEVER SOURCE DERIVED WHICH (A) IS RECEIVED OR I S DEEMED TO BE RECEIVED IN INDIA IN SUCH YEAR BY OR ON BEHALF OF SUCH PERSON; OR (B) ACCRUES OR ARIS ES OR IS DEEMED TO ACCRUE OR ARISE TO HIM IN INDIA DURING SUCH YEAR . THERE IS NO DISPUTE THAT SINCE NO PART OF THE OP ERATIONS OF THE RECIPIENT NON- RESIDENTS IS CARRIED OUT IN INDIA, NO INCOME ACCRUE S TO THESE NON-RESIDENTS IN INDIA. THE CASE OF THE REVENUE HINGES ON INCOME WHICH IS DEEMED TO ACCRUE OR ARISE IN INDIA. COMING TO THE DEEMING PROVISIONS, WHICH ARE SET OUT IN SECTION 9, WE FIND THAT THE FOLLOWING STATUTORY PROVISIONS ARE RELEVA NT IN THIS CONTEXT: SECTION 9- INCOMES DEEMED TO ACCRUE OR ARISE IN IN DIA (1) THE FOLLOWING INCOMES WILL BE DEEMED TO ACCRUE OR ARISE IN INDIA: (I) ALL INCOME ACCRUING OR ARISING, WHETHER DIRECTL Y OR INDIRECTLY, THROUGH OR FROM ANY BUSINESS CONNECTION IN INDIA, OR THROUGH OR FROM AN Y PROPERTY IN INDIA, OR THROUGH OR FROM ANY ASSET OR SOURCE OF INCOME IN INDIA, EXPLANATION: FOR THE PURPOSE OF THIS CLAUSE [I.E. 9 (1)(I)], (A) IN THE CASE OF A BUSINESS OF WHICH ALL THE OPE RATIONS ARE NOT CARRIED OUT IN INDIA, THE INCOME OF THE BUSINESS DEEMED UNDER THIS CLAUSE TO ACCRUE OR ARISE IN INDIA SHALL BE ONLY SUCH PART OF THE INCOME AS IS REASONA BLY ATTRIBUTABLE TO THE OPERATIONS CARRIED OUT IN INDIA; (B) (C) (D)..* (VII) INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE BY- (A) ..* (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FE ES ARE PAYABLE IN RESPECT OF SERVICES UTILISED IN A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY S OURCE OUTSIDE INDIA; OR - 11 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 (C) * EXPLANATION 1-.* EXPLANATION 2.- FOR THE PURPOSES OF THIS CLAUSE,' F EES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERA TION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCL UDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER T HE HEAD' SALARIES'. * NOT RELEVANT FOR OUR PURPOSES 32. SO FAR AS DEEMING FICTION UNDER SECTION 9(1)(I) IS CONCERNED, IT CANNOT BE INVOKED IN THE PRESENT CASE SINCE NO PART OF THE OPERATIONS OF THE RECIPIENTS BUSINESS, AS COMMISSION AGENT, WAS CARRIED OUT IN INDIA. EVEN THOUGH DEEMING FICTION U NDER SECTION 9(1)(I) IS TRIGGERED ON THE FACTS OF T HIS CASE, ON ACCOUNT OF COMMISSION AGENTS BUSINESS CON NECTION IN INDIA, IT HAS NO IMPACT ON TAXABILITY IN THE HANDS OF COMMISSION AGENT BECAUSE ADMITTEDLY NO BUSINESS OPERATIONS WERE CARRIED OUT IN INDIA, AND, THEREFORE EXPLANATION 1 TO SECTION 9(1)(I) COM ES INTO PLAY. 33. THERE ARE A COUPLE OF RULINGS BY THE AUTHORITY FOR ADVANCE RULING, WHICH SUPPORT TAXABILITY OF COMMISSION PAID TO NON-RESIDENTS UNDER SECTION 9(!) (I), BUT, NEITHER THESE RULINGS ARE BINDING PRECEDENTS FOR US NOR ARE WE PERSUADED BY THE LINE OF REASONING ADOPTED IN THESE RULINGS. AS FOR THE AAR RULING IN THE CASE OF SKF BOILERS & DRIERS PVT LTD [(2012) 343 ITR 385 (AAR)], WE FIND THAT THIS DECISION MERELY FOLLOWS THE EARLIER RULING IN THE C ASE OF RAJIV MALHOTRA [(2006) 284 ITR 564] WHICH, IN OUR CONSIDERED VIEW, DOES NOT TAKE INTO ACCOUNT THE IMPACT OF EXPLANATION 1 TO SECTION 9(1)(I) PROPERLY. THAT WAS A CASE IN WHICH THE NON-RESIDEN T COMMISSION AGENT WORKED FOR PROCURING PARTICIPATION BY OTHER NON-RESIDENT ENTITIES IN A FOOD AND WINE SHOW IN INDIA, AND THE CLAIM OF THE ASSESSEE WAS THAT SINCE THE AGENT HAS NOT CARRIED O UT ANY BUSINESS OPERATIONS IN INDIA, THE COMMISSION AGENT WAS NOT CHARGEABLE TO TAX IN INDIA, AND, ACCO RDINGLY, THE ASSESSEE HAD NO OBLIGATION TO DEDUCT TAX AT SOURCE FROM SUCH COMMISSION PAYMENTS TO THE NON-RESIDENT AGENT. ON THESE FACTS, THE AUTHORITY FOR ADVANCE RULING, INTER ALIA, OPINED THAT NO DOU BT THE AGENT RENDERS SERVICES ABROAD AND PURSUES AND SOLICITS EXHIBITORS THERE IN THE TERRITORY ALLO TTED TO HIM, BUT THE RIGHT TO RECEIVE THE COMMISSIO N ARISES IN INDIA ONLY WHEN EXHIBITOR PARTICIPATES IN THE INDIA INTERNATIONAL FOOD & WINE SHOW (TO BE HELD IN INDIA), AND MAKES FULL AND FINAL PAYMENT TO THE APPLICANT IN INDIA AND THAT THE COMMISSION INCOME WOULD, THEREFORE, BE TAXABLE UNDER SECTION 5 (2)(B) READ WITH SECTION 9(1)(I) OF THE ACT. THE AUTHORITY FOR ADVANCE RULING ALSO HELD THAT THE FA CT THAT THE AGENT RENDERS SERVICES ABROAD IN THE FORM OF PURSUING AND SOLICITING PARTICIPANTS AND TH AT THE COMMISSION IS REMITTED TO HIM ABROAD ARE WHOLLY IRRELEVANT FOR THE PURPOSE OF DETERMINING SI TUS OF HIS INCOME. WE DO NOT CONSIDER THIS APPROACH TO BE CORRECT. WHEN NO OPERATIONS OF THE B USINESS OF COMMISSION AGENT IS CARRIED ON IN INDIA, THE EXPLANATION 1 TO SECTION 9(1)(I) TAKES T HE ENTIRE COMMISSION INCOME FROM OUTSIDE THE AMBIT OF DEEMING FICTION UNDER SECTION 9(1)(I), AND, IN E FFECT, OUTSIDE THE AMBIT OF INCOME DEEMED TO ACCRU E OR ARISE IN INDIA FOR THE PURPOSE OF SECTION 5(2)( B). THE POINT OF TIME WHEN COMMISSION AGENTS RIGH T TO RECEIVE THE COMMISSION FRUCTIFIES IS IRRELEVANT TO DECIDE THE SCOPE OF EXPLANATION 1 TO SECTION 9(1)(I), WHICH IS WHAT IS MATERIAL IN THE CONTEXT O F THE SITUATION THAT WE ARE IN SEISIN OF. THE REVEN UES CASE BEFORE US HINGES ON THE APPLICABILITY OF SECTI ON 9(1)(I) AND, IT IS, THEREFORE. IMPORTANT TO ASCE RTAIN AS TO WHAT EXTENT WOULD THE RIGOUR OF SECTION 9(1)( I) BE RELAXED BY EXPLANATION 1 TO SECTION 9(1)(I). WHEN WE EXAMINE THINGS FROM THIS PERSPECTIVE, THE I NEVITABLE CONCLUSION IS THAT SINCE NO PART OF THE - 12 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 OPERATIONS OF THE BUSINESS OF THE COMMISSION AGENT IS CARRIED OUT IN INDIA, NO PART OF THE INCOME OF T HE COMMISSION AGENT CAN BE BROUGHT TO TAX IN INDIA. IN THIS VIEW OF THE MATTER, VIEWS EXPRESSED BY THE HONBLE AAR, WHICH DO NOT FETTER OUR INDEPENDENT OP INION ANYWAY IN VIEW OF ITS LIMITED BINDING FORCE UNDER S. 245S OF THE ACT, DO NOT IMPRESS US, AND WE DECLINE TO BE GUIDED BY THE SAME. THE STAND OF TH E REVENUE, HOWEVER, IS THAT THESE RULINGS, BEING FROM SUCH A HIGH QUASI-JUDICIAL FORUM, EVEN IF NOT BINDING, CANNOT SIMPLY BE BRUSHED ASIDE EITHER, AND THAT THESE RULINGS AT LEAST HAVE PERSUASIVE VALUE. WE HAVE NO QUARREL WITH THIS PROPOSITION. WE HAVE, WITH UTMOST CARE AND DEEPEST RESPECT, PERUSED THE ABOVE RULINGS RENDERED BY THE HONBLE AUTHORITY FOR ADVANCE RULING. WITH GREATEST RESPECT, BUT WITHOUT SLIGHTEST HESITATION, WE HUMBLY COME TO THE CONCLUSION THAT WE ARE NOT PERSUADED BY THESE RULING . ONCE WE COME TO THE CONCLUSION THAT THE INC OME EMBEDDED IN THESE PAYMENTS DID NOT HAVE ANY TAX IMPLICATIONS IN INDIA, NO FAULT CAN BE FOUND IN NOT DEDUCTING TAX AT SOURCE FROM THESE PAYMENTS OR, FOR THAT PURPOSE, EVEN NOT APPROACHING THE ASSESSING OFFICER FOR ORDER UNDER SECTION 195. IN OUR CONSIDERED VIEW, THE ASSESSEE, FOR THE DETAILED REASONS SET OUR ABOVE, DID NOT HAVE TAX WITHHOLDING LIABILITY FROM THESE PAYMENTS. AS HELD BY HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE PVT LTD VS CIT [(2010) 327 ITR 45 6 (SC)], PAYER IS BOUND TO WITHHOLD TAX FROM THE FOREIGN REMITTANCE ONLY IF THE SUM PAID IS ASSE SSABLE TO TAX IN INDIA. THE ASSESSEE CANNOT, THEREFORE, BE FAULTED FOR NOT APPROACHING THE ASSES SING OFFICER UNDER SECTION 195 EITHER. AS REGARDS THE WITHDRAWAL OF THE CBDT CIRCULAR HOLDING THAT TH E COMMISSION PAYMENTS TO NON RESIDENT AGENTS ARE NOT TAXABLE IN INDIA, NOTHING REALLY TURNS ON THE C IRCULAR, AS DE HORS THE AFORESAID CIRCULAR, WE HAVE ADJUDICATED UPON THE TAXABILITY OF THE COMMISSION A GENTS INCOME IN INDIA IN TERMS OF THE PROVISIONS O F THE INCOME TAX ACT AS ALSO THE RELEVANT TAX TREATY PROVISIONS. 8. LEARNED DEPARTMENTAL REPRESENTATIVE NEVERTHELESS RELIES UPON THE STAND OF THE ASSESSING OFFICER. FOR THE DETAILED REASONS SET OUT ABOVE IN THESE EXTRACTS FROM WELSPUN ORDER (SUPRA), HIS ARGUMENT CANNOT BE ACCEPTED. IN ANY EVENT, WE SEE N O REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY US ABOVE. RESPECTFULLY FO LLOWING THE SAME, WE UPHOLD THE RELIEF GRANTED BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 9. GROUND NO. 1 IN REVENUES APPEAL IS THUS DISMISS ED. RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE B ENCH, WE ALLOW THE APPEAL OF THE ASSESSEE AND APPEAL OF THE REVENUE IS DISMISSED. 5.1. WE THEREFORE DO NOT HESITATE TO OBSERVE THAT T HE ASSESSEE IS NOT LIABLE TO DEDUCT TAX ON THE COMMISSION PAID TO THE NON-RESIDENT. HOWEVER , IT APPEARS THAT NO DETAILS AND EVIDENCES HAVE BEEN PROVIDED BEFORE THE AUTHORITIES BELOW BY THE ASSESSEE IN RESPECT OF PAYMENT MENTIONED IN SL.NO.9, 13, 15 & 16 IN ORDER TO ESTAB LISH THAT THE SAID AGENTS HAVE NOT PROVIDED SERVICES IN INDIA OR THEY HAVE NO BUSINESS CONNECTI ON OR PERMANENT ESTABLISHMENT IN INDIA. WE, THEREFORE, FOR THE ENDS OF JUSTICE SET ASIDE TH IS PART OF THE ORDER TO THE FILE OF THE LD.AO TO VERIFY THE SAID ASPECT CONSIDERING THE EVIDENCES TO BE ADDUCED BY THE ASSESSEE IN THIS RESPECT. - 13 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 WE MAKE IT CLEAR THAT THE ASSESSEE BE GIVEN A REASO NABLE OPPORTUNITY OF HEARING POSITIVELY BY THE LD. ASSESSING OFFICER WHILE ADJUDICATING THE MA TTER AND TO PASS ORDERS IN ACCORDANCE WITH LAW. 6. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.462 /AHD/2017 FOR AY 2012-13 IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO.2 : 7. THE ASSESSEE HAS FURTHER CHALLENGED THE CONFIR MATION OF ADDITION MADE BY THE LD. ASSESSING OFFICER OF RS.67,83,650/- TOWARDS AN AL LEGED SUPPRESSED SALES OF SALES IN TRANSIT; THE SAME WAS CONFIRMED BY THE LD. CIT(A) FOLLOWING THE ORDERS PASSED BY HIS PREDECESSORS. 8. THE ASSESSEE HAS SHOWN FOUR MACHINES DISPATCHE D ON ACCOUNT OF CIF CELLS OF RS.2,07,23,040/- AS MACHINE IN TRANSIT AT CLOSING STOCK VALUE OF RS.1,39,39,390/-. AS AGAINST THE SALE VALUE OF RS.2,07,23,040/-INCLUSIVE OF PROF IT OF RS.67,83,650/-THE ASSESSEE HAD SHOWN THE VALUE OF MACHINES IN TRANSIT AT RS.1,39,39,390 /-. IN FACT, THOSE MACHINES THOUGH DISPATCHED FOR EXPORT FROM THE FACTORY THE SAME COU LD NOT BE SHIPPED BEFORE 31ST OF MARCH, 2012. THE SAID MACHINES WERE PENDING AT PORT FOR FU RTHER SHIPMENT AND THERE WERE ULTIMATELY SHIPPED IN THE NEXT FINANCIAL YEAR WITH THE BILL OF LANDING DATES RANGING FROM 01.04.2012 TO 14.04.2012. THE MACHINES WERE TREATED AS PART OF CL OSING STOCK WITH VALUE OF RS.1,39,39,390/- AS ON 31ST OF MARCH 2012. THE CASE OF THE ASSESSEE IS THIS THAT THE ASSESSEE REMAINED THE OWNER OF THE GOODS TILL SAILING OF SHI P. THEREFORE THE COMPANY REMAINED THE OWNER OF THE GOODS TILL THE DATE OF ISSUE OF BILL O F LADING ON SAILING OF SHIPS. THOSE GOODS WERE TREATED AS INVENTORY AND THE SALE IS RECOGNIZE D WHEN THE BILL OF LADING IS ISSUED BY THE SHIPPING COMPANY. THEREFORE, THE MACHINES ARE RECO GNIZED AS SALES IN THE FINANCIAL YEAR 2012-13 RELEVANT TO THE ASSESSMENT YEAR 2013-14. H OWEVER, THE SAID EXPLANATION MADE BY THE ASSESSEE WAS NOT ACCEPTED BY THE LEARNED AO. ACCORD ING TO HIM AS AGAINST THE SALE VALUE OF RS. 2,07,23,040/- INCLUSIVE OF PROFIT OF RS.67,83, 650/- THE ASSESSEE HAD SHOWN THE VALUE OF - 14 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 MACHINE IN TRANSIT AT RS.1,39,39,390/-. THE INCOME TO THE EXTENT OF RS.67,83,650/- AS MENTIONED HEREINABOVE WAS NOT ACCOUNTED FOR BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION ACCORDING TO THE OBSERVATION MADE BY THE LD. AO WHICH WAS THUS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE LEARNED CIT(A) IN APPEAL CONFIRMED THE SAME ON THE BASIS OF THE ORDER PASSED BY HIS PREDECESSOR. HENCE, THE APPEAL PREFERRED BY THE ASSESSEE BEFORE US. 9. AT THE TIME OF HEARING OF THE INSTANT APPEAL TH E LD. REPRESENTATIVE OF THE ASSESSEE DULY SUBMITTED BEFORE US THAT THE SAID ISSUE HAS ALREADY BEEN DEALT WITH AND DECIDED IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCH IN ITA NO. 245 1/A/2015 FOR AY 2011-12 IN ASSESSEE'S OWN CASE. ON THE OTHER HAND, THE LD. REPRESENTATI VE OF THE REVENUE RELIED UPON THE ORDERS PASSED BY THE AUTHORITIES BELOW. 10. WE HAVE HEARD THE LEARNED COUNSEL APPEARING FOR THE PARTIES, PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO GONE TH ROUGH THE ORDER PASSED BY THE COORDINATE BENCH FOLLOWING THE ORDER PASSED BY THE LD. ITAT IN ASSESSEES OWN CASE FOR THE AY 2004-05 TO AY 2010-11 AS RELIED UPON BY THE LD.REPRESENTATI VE OF THE ASSESSEE THE RELEVANT PORTION WHEREOF IS AS FOLLOWS: 8. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD CAREFULLY. WE HAVE NOTICED THAT THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE COORDINATE BENCH OF THE ITAT IN THE CASE OF ASSESSEE ITSELF FOR THE ASSESSMENT YEAR 200 4-05 TO A.Y.2010-11 AND THE DECISION VIDE ITA NO. 337/AHD/2008 FOR A.Y.2004-05 IS REPRODUCED AS UNDER:- 14. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON RECORD. WE HAVE PERUSED THE JUDGMENT OF THE HONBLE SUPREME COURT WHEREIN IT WA S HELD THAT THE GOODS REMAINS THE SELLERS PROPERTY TILL THOSE HAVE BEEN BROUGHT AND LOADED ON BOARD THE SHIP AND SO THE SALES WERE EXEMPTED BEFORE TAX UNDER ART 286(1) OF THE CONSTITUTION. WE NOTICED THAT WHERE THE SALES WERE MADE UNDER FOB CONTRACTS THE SELLER CONTINUED TO BE OWNER OF THE GOODS TILL THOSE CROSSED THE CUSTOM BARRIER AND ENTERED THE EXPORT STREAM. IN THE CASE OF B.K.WADEYAR VS. M/S DAULATRAM RAMESH WARLAL ON 27 TH SEPTEMBER, 1961: 1961 AIR 311, 1961 SCR (1) 924 IT WAS STATED AS UNDER :- WE HAVE THEREFORE COME TO THE CONCLUSION THAT THER E IS NO CIRCUMSTANCE WHICH WOULD JUSTIFY A CONCLUSI ON THAT THE PARTIES CAME TO A SPECIAL AGREEMENT THAT THOUGH THE SALES WERE ON FOB CONTRACTS PROPERTY IN THE GO ODS WOULD PASS TO THE BUYER AT SOME POINT OF TIME BEFOR E SHIPMENT. WE THINK THAT THE LEARNED JUDGES WHO HE ARD THE APPEAL IN THE BOMBAY HIGH COURT WERE RIGHT IN THEIR CONCLUSION THAT THE GOODS REMAINED THE SELLERS' PR OPERTY TILL - 15 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 THE GOODS HAD BEEN BROUGHT AND LOADED ON BOARD THE SHIP AND SO THE SALES WERE EXEMPTED FROM TAX UNDER ART. 286(I)FB) OF THE CONSTITUTION. 15. WE HAVE PERUSED THIS JUDGMENT IN THE CASE OF CO NTSHIP CONTAINER LINES LTD. VS. D. K. LALL & ORS. ON 16 MARCH, 2010 CIVIL APPEAL NO.3245 OF 2005 , IN WHICH IT WAS STATED THAT THE PROVISIONS OF SALES OF GOODS ACT 1930 RELEVANT TO THE TRANSFER OF THE PROPERTY IN GOODS TO THE PURCHASER SPECIALLY I N FOB TRANSACTION IS TRANSFERRED TO THE BUYER AT SUCH TIME AS THE PARTIES TO CONTRACT INTEND IT TO BE TRANSFERRED. SECTION 26 OF THE ACT PROVIDES THAT UN LESS OTHERWISE AGREED, THE GOODS REMAIN AT THE SELLER RISK. IN CASE OF FOB CONTRACTS THE GOODS ARE DELIVERED FREE ON BOARD THE SHIP ONCE THE SELLER H AS PLACED THE GOODS SAFELY ON BOARD AT HIS COST AND TH EREBY HANDED OVER THE POSSESSION OF THE GOODS TO THE SHIP IN TRANSFER OF THE BILL OF LANDING OR OTHE R DOCUMENT, THE RESPONSIBILITY OF THE SELLER CEASES ON THE DELIVERY OF THE GOODS TO THE BUYER IS COMPLETE. AFTER CONSIDERING THE ABOVE FACTS AND LEGAL FINDIN GS WE CONSIDERED THAT SALE WAS EXECUTED UNDER FOB AS P ER WHICH THE RISK WAS TRANSFERRED FROM THE SELLER TO THE BUYER WHEN THE GOODS PUT ON SHIP OR RAIL. IN VIEW OF ABOVE, WE ARE NOT INCLINED WITH THE DECIS ION OF THE LD. CIT(A) AND WE ARE OF THE VIEW THAT WHEN THE SALE WAS EXECUTED UNDER FOB, CIF TERMS AS PER WHICH THE RISK WAS TRANSFERRED FROM THE SELLER TO THE BUYER WHEN THE GOODS PUT ON SHIP OR RAIL. THEREFORE, THE APPEAL OF THE ASSESSEE IS ALLOWED ON THIS ISSUE. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH OF THE ITAT AS SUPRA, THE APPEAL OF THE ASSESSEE IS ALLOWED. ACCORDINGLY, THE APPEA L OF THE ASSESSEE IS ALLOWED. 11. WE FIND THAT THE ISSUE IS ENTIRELY COVERED BY T HE JUDGMENT AS CITED HEREIN BEFORE AND RESPECTFULLY FOLLOWING THE SAME DELETE THE ADDITION TO THE TUNE OF RS.67,83,650/- MADE BY THE AUTHORITIES BELOW. IN THE RESULT, THE GROUNDS OF A PPEAL FILED BY THE ASSESSEE IS ALLOWED. 12. GROUND NS.3 & 4 ARE GENERAL IN NATURE AND DO NO T REQUIRE ANY ADJUDICATION. 13. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.4 62/AHD/2017 FOR AY 202-13 IS ALLOWED. ITA NO. 584/AHD/2017 FOR ASSESSMENT YEAR 2012-13 14. GROUND NO.1 : THE REVENUE HAS COME UP IN APPEAL CHALLENGING T HE ORDER PASSED BY THE LEARNED CIT(A) IN RESTRICTING DISALLOWANCE UNDER SE CTION 40(A)(IA) OF RS.18,98,539/-AS AGAINST RS. 80,68,921/-MADE BY THE AO ON ACCOUNT O F COMMISSION PAID TO THE NON-RESIDENT. THE ISSUE HAS ALREADY BEEN DISCUSSED IN ASSESSEES APPEAL BEING ITA NO.462/AHD/2017 FOR THE ASSESSMENT YEAR 2012-13. THE SAME HAS BEEN DECI DED BY US HEREINBEFORE IN FAVOUR OF THE ASSESSEE. IN THAT, VIEW OF THE MATTER THE GROUND PR EFERRED BY THE REVENUE IN THIS APPEAL IS DISMISSED. - 16 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 GROUND NO.2 15. THE REVENUE HAS FURTHER CHALLENGED THE ORDER PASSED BY THE LEARNED CITA IN DELETING THE DISALLOWANCE OF DEPRECIATION ON NO COMPETE FEES AMOUNTING RS. 2,24,64,750/-. 16. THE BRIEF FACTS LEADING TO THE ISSUE IS THIS TH AT UPON SCRUTINY THE LD.ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS ENTERED INTO SERVICES P ROVIDED AND NON-COMPETITION AGREEMENT ON 28 TH AUGUST 2010. IN TERMS OF THE SAID AGREEMENT NON-C OMPETENT FEES TO THE TUNE OF RS.10.96 CRORE WAS PAYABLE TO ONE MN PATEL. THE SAID NON-COM PETE FEES HAS BEEN CLAIMED BY THE ASSESSEE AS DEPRECIATION BY TREATING THE SAME AS INTANGIBLE ASSET. THE SAID CLAIM, ACCORDING TO THE ASSESSING OFFICER, WAS NOT JUSTIFIED IN VIEW OF THE FACT THAT THE PAYMENT OF NON-COMPETE FEES DID NOT MERELY FACILITATE CONDUCT OF BUSINESS AS WOULD BE A CAPITAL EXPENDITURE BY MERELY BECAUSE OF CAPITAL EXPENDITURE IT WOULD NOT BE NECE SSARY THAT IT IS ELIGIBLE FOR DEPRECIATION. ACCORDING TO HIM IN TERMS OF SECTION 32(1)(II) OF T HE ACT DEPRECIATION CAN BE CLAIMED IN RESPECT OF KNOW-HOW, PATENTS, COPYRIGHT, TRADEMARKS , LICENSE, FRANCHISE OR ANY OTHER BUSINESS, COMMERCE RIGHT OF SIMILAR NATURE. SINCE T HE NON-COMPETE FEES DOESN'T COME UNDER THE PURVIEW OF THE ABOVE INTANGIBLE ASSETS OR BUSI NESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE IN RESPECT OF THOSE INTANGIBLE ASSETS, THE CLAIM OF DEPRECIATION OF THE ASSESSEE WAS REJECTED BY THE LEARNED AO. IN APPEAL THE LEARNED CITA ALLOWED SUCH CLAIM FOLLOWING THE JUDGMENTS PASSED BY DIFFERENT HIGH COURT'S ON THIS ISSUE. HEN CE THE APPEAL BEFORE US FILED BY THE REVENUE. 17. AT THE TIME OF THE HEARING THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ISSUE HAS ALREADY BEEN DEALT WIT H AND DECIDED IN FAVOUR OF THE ASSESSEE BY THE COORDINATE BENCH IN ITA NO. 2616/AHD/2016 FOR THE ASSESSMENT YEAR 2011-12. 18. A COPY OF THE ORDER PASSED IN ITA NO. 2616/AHD/ 2016 HAS BEEN HANDED OVER TO US BY THE LD. COUNSEL APPEARING FOR THE ASSESSEE. THE LD. REPRESENTATIVE OF THE DEPARTMENT, HOWEVER, RELIED ON THE ORDER PASSED BY THE LD. ASSE SSING OFFICER. - 17 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 19. WE HAVE PERUSED THE SAID ORDER, RELEVANT POR TION WHEREOF IS AS FOLLOWS: 11. THE BRIEF FACT TO THE ISSUE UNDER APPEAL IS TH AT ON SCRUTINY THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS ENTERED INTO SERVICES PROVIDED AN D NON-COMPETITION AGREEMENT ON 28 TH AUGUST, 2010. AS PER AGREEMENT A NON-COMPETE FEES OF RS. 1 0.96 CRORE WAS PAYABLE TO M.N. PATEL. THE ASSESSEE HAS CLAIMED DEPRECIATION OF THIS NON-COMPE TE FEES BY TREATING THE SAME AS INTANGIBLE ASSETS. THE ASSESSING OFFICER WAS OF THE VIEW THAT CLAIM OF DEPRECIATION ON NON-COMPETE FEES IS NOT JUSTIFIED BECAUSE THE PAYMENT OF NON-COMPETE FEES DID NOT MER ELY FACILITATE CONDUCT OF BUSINESS AS IT WOULD BE A CAPITAL EXPENDITURE BY MERELY BECAUSE OF CAPITAL EXPENDITURE IT WOULD NOT BE NECESSARY THAT IT IS ELIGIBLE FOR DEPRECIATION. THE ASSESSING OFFICER HAS FURTHER STATED THAT AS PER PROVISION OF SECTION 32(1)(II) DEPRECIATION CAN BE CLAIMED IN RESPECT OF KNOW-HOW, PATENTS, COPY RIGHT TRADE-MARKS, LICENSE, FRANCHISE OR ANY OTHER BUSINESS, COMMERCE RIGHTS OF SIMILAR NATURE. SO FAR AS THE NATURE OF NON-COMPETE FEES IS CONCERNED, IT IS CLEARLY EVIDEN T THAT IT DOES NOT FALL WITHIN THE AMBIT OF ANY OF THE ABOVE INTANGIBLE ASSETS OR BUSINESS OR COMMERCIAL R IGHTS OF SIMILAR NATURE PERTAINING TO THE ABOVE INTANGIBLE ASSETS. THEREFORE, THE CLAM OF DEPRECIA TION OF THE ASSESSEE BY TREATING NON-COMPETE FEES A S INTANGIBLE ASSETS WAS REJECTED BY THE ASSESSING OFF ICER. 12. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER:- 4.3. DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE APPELLANT HAS MADE PAYMENT OF NO N-COMPETE FEE OF RS. 10.29 CRORES TO SHRI M. N. PATEL TO PROTECT ITS BUSINESS INTEREST AND WARD OFF POTENTIAL COMPETITION FROM HIM. IT HAS BEEN HELD B Y THE AO THAT THE CLAIM OF DEPRECIATION ON NON-COMPET E FEE WAS NOT JUSTIFIED BECAUSE PAYMENT OF THE SAME DID NOT MERELY FACILITATE THE CONDUCT OF BUSIN ESS BUT IN FACT ENSURED THAT THE ASSESSEE'S MARKET POSITION AND THE CUSTOMER BASE WAS NOT THREATENED B Y THE COMPLETION FROM THE ERSTWHILE PARTNER. THEREFORE, THE SAME SHOULD BE TAKEN AS CAPITAL EXPE NDITURE. THE NON-COMPETE FEE DOES NOT FALL WITHIN THE AMBIT OF THE ASSETS MENTIONED IN SECTION 32(1)( II) OF THE ACT AND ACCORDINGLY, HE DISALLOWED THE CLAIM OF DEPRECIATION. THE APPELLANT ON THE OTHER HAND HAS SUBMITTED THAT SHRI PATEL IS ONE OF THE FOUNDER OF THE COMPANY AND IS WIDELY KNOWN IN PLASTIC INDUSTRY. ON TERMINATION OF HIS ASSOCIATION AS PROMOTER AND SHAREHOLDER THE APPELLANT COMPANY WANTED TO PROTECT ITS BUSINESS INTEREST. MR. PATEL HAS AGREED TO VARIOUS TERMS OF THE CONTRACT IN WHICH HE HAS AGREE D TO NOT DO ANY ACTIVITY WHICH WOULD HARM THE INTEREST OF THE APPELLANT COMPANY. HE HAS AGREED FO R NON-COMPETITION, NON-SOLICITATION OF BUSINESS, NON-SOLICITATION OF EMPLOYEES AND NON-DISCLOSURE CL AUSES. ACCORDINGLY, THE APPELLANT HAS SUBMITTED THAT THIS WOULD ULTIMATELY RESULT IN GROWTH IN BUSI NESS REVENUE AND PROFIT. THE APPELLANT HAS FURTHER PLACED RELIANCE ON CERTAIN DECISIONS IN WHICH NON-C OMPETE FEE HAS BEEN HELD TO BE AN INTANGIBLE ASSET AND THE DEPRECIATION HAS BEEN ALLOWED. THE APPELLAN T HAS ALSO RAISED AN ALTERNATIVE PLEA IN WHICH IT HAS BEEN CLAIMED THAT IN CASE THE CLAIM OF DEPRECIA TION IS NOT CONSIDERED TO BE ALLOWABLE THE ENTIRE NON-COMPETE FEE SHOULD BE ALLOWED AS DEDUCTION UNDE R SECTION 37(1) OF THE ACT. ON A CAREFUL CONSIDERATION OF ENTIRE FACTS OF THE C ASE, IT IS NOTED THAT THE SALIENT FEATURES OF THE AGREEMENT BETWEEN THE APPELLANT AND SHRI PATEL, TO WHOM NON-COMPETE FEE HAS BEEN PAID ARE AS UNDER: - A. HE SHALL NOT, DIRECTLY OR INDIRECTLY SEEK OR ACC EPT EMPLOYMENT OR OTHER WORK, IN ANY CAPACITY (INCLUDING, WITHOUT LIMITATION, AS AGENT), WITH ANY PERSON, ENTITY OR BUSINESS SIMILAR TO, OR WHICH DIRECTLY OR INDIRECTLY IS COMPETITIVE WITH FMIL'S E XISTING BUSINESS WITHIN INDIA, AFRICA OR THE MIDDLE EAST, (THE 'RESTRICTED TERRITORY'). - 18 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 B. HE SHALL NOT CONSPIRE, PLAN OR OTHERWISE AGREE W ITH ANY PERSON, ENTITY OR BUSINESS TO ORGANIZE OR DEVELOP ANY BUSINESS OR ENTITY THAT DIR ECTLY OR INDIRECTLY IS COMPETITIVE WITH OR ENGAGES IN BUSINESS SIMILAR TO, THE FMIL'S EXISTING BUSINESS WITHIN THE RESTRICTED TERRITORY. C. HE SHALL NOT DIRECTLY OR INDIRECTLY OWN, MANAGE, OPERATE, CONTROL BE EMPLOYED BY, OR PARTICIPATE IN THE OWNERSHIP, MANAGEMENT, OPERATION OR CONTROL OF ANY PERSON, ENTITY OR BUSINESS SIMILAR TO, OR WHICH DIRECTLY OR INDIRECTL Y IS COMPETITIVE WITH, FMIL'S EXISTING BUSINESS WITHIN THE RESTRICTED TERRITORY. D. HE SHALL NOT DIVERT OR ATTEMPT TO DIVERT OR SEEK TO CAUSE ANY PARTY TO REFRAIN FROM DOING ANY BUSINESS WITH FMIL, WITHIN THE RESTRICTED TERRITORY . E. HE SHALL NOT DURING THE TERM, DIRECTLY OR INDIRE CTLY, SOLICIT, SEEK BUSINESS FROM, ENTICE, PERSUADE OR INDUCE ANY PERSON OR ENTITY WHICH HAS A BUSINESS RELATIONSHIP WITH FMIL AS TO THE EXISTING BUSINESS WITHIN THE RESTRICTED TERRITORY T O DIRECT OR TRANSFER AWAY ANY BUSINESS, PATRONAGE OR SOURCE OF SUPPLY FROM FMIL. F. HE SHALL NOT, DURING THE TERM, HIRE, IDENTIFY FOR SOLICITATION OR SOLICIT, DIRECTLY OR INDIRECTLY , ANY EMPLOYEE OF FMIL FOR EMPLOYMENT BY ANY PERSON OR EN TITY OTHER THAN FMIL (ASSESSEE) AND G. HE SHALL NOT DISCLOSE ANY CONFIDENTIAL INFORMATI ON. THE CONFIDENTIAL INFORMATION MEANS WITH RESPECT TO OR CONCERNING FMIL AND THE PAST, CURRENT OR PLANNED OPERATION OF THE EXISTING BUSINESS: (I) ANY AND ALL TRADE SECRETS (II) CUSTOM ER LISTS, CUSTOMER LOCATIONS, CURRENT AND ANTICIPATED CUSTOMER REQUIREMENTS, CUSTOMER PREFERE NCES, PRICING INFORMATION, CUSTOMER CONTACTS, PRICE LISTS, MARKET STUDIES, SERVICE RECO RDS, BUSINESS PLANS, MARKETING PLANS AND ADVERTISING MATERIALS, (III) ANY AND ALL OTHER CONF IDENTIAL AND/OR PROPRIETARY INFORMATION CONCERNING THE COMPANY (FMIL) AND THE EXISTING BUSI NESS, INCLUDING WITHOUT LIMITATION FINANCIAL STATEMENTS, FINANCIAL PROJECTIONS, BUDGET S AND HISTORICAL AND PROJECTED SALES AND (IV) ANY AND ALL NOTES, ANALYSIS, COMPILATIONS, STUDIES, SUMMARIES AND OTHER MATERIAL PREPARED BY OR FOR FMIL IN CONNECTION WITH THE EXISTING BUSINES S. IT IS FURTHER NOTED THAT THE CONTRACT WAS FOR A PER IOD OF THREE YEARS AND SHALL LAPSE AFTER THAT PERIOD. IT IS CLEAR FROM THE TERMS AND CONDITIONS O F THE CONTRACT THAT AGREEMENT IS FOR PREVENTING SHR I PATEL FROM DOING SIMILAR NATURE OF BUSINESS OR PROM OTING SIMILAR NATURE OF BUSINESS IN SOME OTHER COMPANY. ACCORDINGLY, THIS PAYMENT HAS RIGHTLY BEEN CLAIMED BY THE APPELLANT AS NON-COMPETE FEE. THE QUESTION WHICH IS NOW TO BE DECIDED IS THAT WHE THER THIS NON-COMPETE FEE IS A CAPITAL ASSET OR REVENUE EXPENDITURE AND IN CASE IT IS TREA TED AS CAPITAL EXPENDITURE, WHETHER THE SAME CAN BE TREATED AS INTANGIBLE ASSET AND DEPRECIATION BE ALLOWED ON IT. THE APPELLANT HAS QUOTED NUMBER OF CASE LAWS IN SUPPORT OF ITS CLAIM. A PERUSAL OF VAR IOUS JUDGMENTS SHOW THAT NON-COMPETE FEE IS A CAPITAL ASSET AND SAME CAN BE CONSIDERED AS AN INTA NGIBLE ASSET AND DEPRECIATION CAN BE ALLOWED ON THE SAME. IN SOME CASES, IT HAS EVEN BEEN HELD THAT IT WAS A REVENUE EXPENDITURE. THE PERUSAL OF VARIOUS JUDGMENTS RELIED BY THE APPELLANT CLEARLY S HOW THAT THE RIGHTS WHICH HAS BEEN ACQUIRED BY THE APPELLANT BY RESTRICTING SHRI PATEL, DIRECTLY OR IN DIRECTLY, PARTICIPATING IN A BUSINESS WHICH ARE SIM ILAR TO THAT OF APPELLANT, FROM DIRECTLY OR INDIRECTLY SOLI CITING OR INFLUENCING CLIENTS, THE CUSTOMERS AND OT HER SIMILAR ACTIVITY WHICH CAN CREATE COMPETITION FOR T HE APPELLANT IN THE BUSINESS. THE FEE HAD BEEN PAID BY THE APPELLANT TO CARRY ON THE BUSINESS WITHOUT C OMPETITION AND INDIRECTLY CONFER A RIGHT TO CARRY O N BUSINESS SMOOTHLY. THIS RIGHT IS CAPITAL IN NATURE AND WOULD ALSO FALL WITHIN THE AMBIT OF SECTION 32( 1)(II) OF THE ACT AND CONSEQUENTLY DEPRECIATION WOULD BE A LLOWABLE. IT IS TO BE NOTED THAT AGREEMENT IS ONLY FOR THREE YEARS. THE APPELLANT HAS RIGHTLY PLACED RELIANCE ON THE FO LLOWING JUDGEMENTS AND THE RELEVANT EXTRACTS FROM THOSE JUDGEMENTS ARE QUOTED AS UNDER: - 1. IN CASE OF CIT VS INGERSOLL RAND INTERNATIONAL IND. LTD. 227 T AXMANN 176 (KARNATAKA), IT HAS BEEN HELD BY THE HONOURABLE COU RT THAT NON-COMPETE FEE IS AN INTANGIBLE ASSET ENTITLED FOR DEPRECIATION. THE HEAD NOTE OF THE JUD GEMENT IS REPRODUCED HEREUNDER. - 'SECTION 32, READ WITH SECTION 28(VAJ, OF THE INCOM E-TAX ACT,, 196] -DEPRECIATION - ALLOWANCE/RATE OF (INTANGIBLE ASSETS] - ASSESSMENT YEAR 2006-07 - WHETHER RIGHT TO CARRY ON BUSINESS WITHOUT COMPETITION HAS AN ECONOMIC INTERE ST AND MONEY VALUE - HELD, YES - WHETHER WHENEVER ASSESSEE MAKES PAYMENT FOR NON-COM PETE FEE, COMMERCIAL RIGHT COMES INTO EXISTENCE AND, THEREFORE, THAT RIGHT WHICH ASS ESSEE ACQUIRES ON PAYMENT OF NON-COMPETE - 19 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 FEE CONFERS IN HIM A COMMERCIAL OR A BUSINESS RIGHT WHICH IS HELD TO BE SIMILAR IN NATURE TO KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICENCE S, FRANCHISES - HELD, YES - WHETHER COMMERCIAL RIGHT SO ACQUIRED BY ASSESSEE UNAMBIGUOU SLY FALLS IN CATEGORY OF AN 'INTANGIBLE ASSET' AND, CONSEQUENTLY, DEPRECIATION PROVIDED UND ER SECTION 32(1 )(II) IS TO BE ALLOWED - HELD, YES' WHILE DECIDING THE CASE HONOURABLE HIGH COURT REFER RED TO DECISION OF THE DELHI HIGH COURT IN THE CASE OF AREVA T. & D. INDIA LTD. V. DY. C/T [20121 345 ITR 421/208 TAXMAN 252/20 TAXMANN.COM 29 EXPLAINING THE PRINCIPLES OF EJUSDEM GENERIS WITH REFERENCE TO SECTION 32(1) (II) OF THE INCOME TAX ACT, 1961. IN PARA 13 OF THE ORDER T HE HONOURABLE DELHI HIGH COURT HAS HELD THAT - 'IN THE PRESENT CASE, APPLYING THE PRINCIPLE OF EJU SDEM GENERIS, WHICH PROVIDES THAT WHERE THERE ARE GENERAL WORDS FOLLOWING PARTICULAR AND SP ECIFIC WORDS, THE MEANING OF THE LATTER WORDS SHALL BE CONFINED TO THINGS OF THE SAME KIND, AS SPECIFIED FOR INTERPRETING THE EXPRESSION 'BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' S PECIFIED IN SECTION 32(1)(II) OF THE ACT. IT IS SEEN THAT SUCH RIGHTS NEED NOT ANSWER THE DESCRIPTI ON OF 'KNOW-HOW, PATENTS, TRADEMARKS, LICENCES OR FRANCHISES' BUT MUST BE OF SIMILAR NATU RE AS THE SPECIFIED ASSETS. ON A PERUSAL OF THE MEANING OF THE CATEGORIES OF SPECIFIC INTANGIBL E ASSETS REFERRED TO IN SECTION 32(1)(II) OF THE ACT PRECEDING THE TERM 'BUSINESS, 'OR COMMERCIAL RI GHTS OF SIMILAR NATURE', IT IS SEEN THAT THE AFORESAID INTANGIBLE ASSETS ARE NOT OF THE SAME KIN D AND ARE CLEARLY DISTINCT FROM ONE ANOTHER. THE FACT THAT AFTER THE SPECIFIED INTANGIBLE ASSETS THE WORDS 'BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' HAVE BEEN ADDITIONALLY USED, CLEARL Y DEMONSTRATES THAT THE LEGISLATURE DID NOT INTEND TO PROVIDE FOR DEPRECIATION ONLY IN RESPECT OF SPECIFIED INTANGIBLE ASSETS BUT ALSO TO OTHER CATEGORIES OF INTANGIBLE ASSETS, WHICH WERE N EITHER FEASIBLE NOR POSSIBLE TO EXHAUSTIVELY ENUMERATE. IN THE CIRCUMSTANCES, THE NATURE OF 'BUSINESS OR CO MMERCIAL RIGHTS' CANNOT BE RESTRICTED TO ONLY THE AFORESAID SIX CATEGORIES OF ASSETS, VIZ., KNOW-HOW, PATENTS, TRADE-MARKS, COPYRIGHTS, LICENCES &R FRANCHISES. TH E NATURE OF 'BUSINESS OR COMMERCIAL RIGHTS' CAN BE OF THE SAME GENUS IN WHICH ALL THE A FORESAID SIX ASSETS FALL. ALL THE ABOVE FALL IN THE GENUS OF INTANGIBLE ASSETS THAT FORM PA RT OF THE TOOL OF TRADE OF AN ASSESSEE FACILITATING SMOOTH CARRYING ON OF THE BUSINESS. IN THE CIRCUMSTANCES, IT IS OBSERVED THAT IN THE CASE OF THE ASSESSEE, INTANGIBLE ASSETS, VIZ., BUSINESS CLAIMS; BUSINESS INFORMATION; BUSINESS RECORDS; CONTRACTS; EMPLOYEES; AND KNOW-HO W, ARE ALL ASSETS, WHICH ARE INVALUABLE AND RESULT IN CARRYING ON THE TRANSMISSION AND DIST RIBUTION BUSINESS BY THE ASSESSEE, WHICH WAS HITHERTO BEING CARRIED OUT BY THE TRANSFEROR, W ITHOUT ANY INTERRUPTION. THE AFORESAID INTANGIBLE ASSETS ARE, THEREFORE, COMPARABLE TO A L ICENCE TO CARRY OUT THE EXISTING TRANSMISSION AND DISTRIBUTION BUSINESS OF THE TRANSFEROR. IN THE ABSENCE OF THE AFORESAID INTANGIBLE ASSETS, THE ASSESSEE WOULD HAVE HAD TO COMMENCE BUSINESS FR OM SCRATCH AND GO THROUGH THE GESTATION PERIOD WHEREAS BY ACQUIRING THE AFORESAID BUSINESS RIGHTS ALONG WITH THE TANGIBLE ASSETS, THE ASSESSEE GOT AN UP AND RUNNING BUSINESS . THIS VIEW IS FORTIFIED BY THE RATIO OF THE DECISION OF THE SUPREME COURT IN TECHNO SHARES AND STOCKS LTD. 12010} 327/TR 323 ISO WHEREIN IT WAS HELD THAT INTANGIBLE ASSETS OWNED BY THE ASSESSEE AND USED FOR THE BUSINESS PURPOSE WHICH ENABLES THE ASSESSEE TO ACCESS THE MA RKET AND HAS AN ECONOMIC AND MONEY VALUE IS A 'LICENCE' OR 'AKIN TO A LICENCE' WHICH I S ONE OF THE ITEMS FALLING IN SECTION 32(1) (II) OF THE ACT.' THE HIGH COURT HAS FURTHER HELD THAT:- 'A NON-COMPETE RIGHT ENCOMPASSES A RIGHT UNDER WHIC H ONE PERSON IS PROHIBITED FROM COMPETING IN BUSINESS WITH ANOTHER FOR A \ STIPULAT ED PERIOD. IT WOULD BE THE RIGHT OF THE PERSON TO CARRY ON A BUSINESS IN COMPETITION BUT FOR SUCH AGREEMENT OF NON-COMPETE. THEREFORE THE RIGHT ACQUIRED UNDER A NON-COMPETE AGREEMENT IS A R IGHT FOR WHICH A VALUABLE CONSIDERATION IS PAID. THIS RIGHT IS ACQUIRED SO AS TO ENSURE THAT T HE RECIPIENT OF THE NON-COMPETE FEE DOES NOT COMPETE IN ANY MANNER WITH THE BUSINESS IN WHICH HE WAS EARLIER ASSOCIATED. THE OBJECT OF ACQUIRING A KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MA RKS, LICENCES, FRANCHISES IS TO CARRY ON BUSINESS AGAINST RIVALS IN THE SAME BUSINESS IN A M ORE EFFICIENT MANNER OR TO PUT IT DIFFERENTLY IN A BEST POSSIBLE MANNER. THE OBJECT OF ENTERING I NTO A NON-COMPETE AGREEMENT IS ALSO THE SAME IE., TO CARRY ON BUSINESS IN A MORE EFFICIENT MANNER BY AVOIDING COMPETITION, ATLEAST FOR A LIMITED PERIOD OF TIME. ON PAYMENT OF NON-COMPETE, THE PAYER ACQUIRES A BUNDLE OF RIGHTS SUCH - 20 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 AS RESTRICTING RECEIVER DIRECTLY OR INDIRECTLY PART ICIPATING IN A BUSINESS WHICH IS SIMILAR TO THE BUSINESS BEING ACQUIRED, FROM DIRECTLY OR INDIRECTL Y SOLICITING OR INFLUENCING CLIENTS OR CUSTOMERS OF THE EXISTING BUSINESS OR ANY OTHER PERSON EITHER NOT TO DO BUSINESS WITH THE PERSON WHO HAS ACQUIRED THE BUSINESS AND PAID THE NON-COMPETE FEE OR TO DO BUSINESS WITH THE PERSON RECEIVING THE NON-COMPETE FEE TO DO BUSINESS WITH A PERSON WHO IS DIRECTLY OR INDIRECTLY IN COMPETITION WITH THE BUSINESS WHICH IS BEING ACQUIR ED. THE RIGHT IS ACQUIRED FOR CARRYING ON THE BUSINESS AND THEREFORE IT IS A BUSINESS RIGHT.' THE REFORE THAT RIGHT WHICH THE ASSESSES ACQUIRES ON PAYMENT OF NON-COMPETE FEE CONFERS IN HIM A COMM ERCIAL OR A BUSINESS RIGHT WHICH IS HELD TO BE SIMILAR IN NATURE TO KNOW-HOW, PATENTS, COPYR IGHTS, TRADE MARKS, LICENCES, FRANCHISES. THEREFORE THE COMMERCIAL RIGHT THUS ACQUIRED BY THE ASSESSEE UNAMBIGUOUSLY FALLS IN THE CATEGORY OF AN 'INTANGIBLE ASSET'. THEIR RIGHT TO C ARRY ON BUSINESS WITHOUT COMPETITION HAS AN ECONOMIC INTEREST AND MONEY VALUE. THE TERM 'OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' HAS TO BE INTERPRETED IN SUCH A WAY THAT IT WOULD HAVE SOME SIMILARITIES AS OTHER ASSETS MENTIONED IN CL.(B) OF EXPLN.3. HERE THE DOC TRINE OF EJUSDEM GENERIS WOULD COME INTO OPERATION AND THEREFORE THE NON-COMPETE FEE VESTS A RIGHT IN THE ASSESSEE TO CARRY ON BUSINESS WITHOUT COMPETITION WHICH IN TURN CONFERS A COMMERCIAL RIGHT TO CARRY ON BUSINESS SMOOTHLY. WHEN ONCE THE EXPENDITURE INCURRED FOR AC QUIRING THE SAID RIGHT IS HELD TO BE CAPITAL IN NATURE, CONSEQUENTLY THE DEPRECIATION PROVIDED U NDER SEC.32(1)(II) IS ATTRACTED AND THE ASSESSEE WOULD BE ENTITLED TO THE DEDUCTION AS PROV IDED IN THE SAID PROVISION'. 2. IN THE CASE OF ACIT VS REAL IMAGE TECH (P) LTD. 120 TTJ 0983, HON'BLE CHENNAI ITAT, NOTED THAT:- 'WHEN A BUS/NESS MAN PAYS MONEY TO ANOTHER BUSINESS MAN FOR RESTRAINING THE OTHER BUSINESS MAN FROM COMPETING WITH THE ASSESSEE, HE G ETS A VESTED RIGHT WHICH CAN BE ENFORCED UNDER LAW AND WITHOUT THAT THE OTHER BUSIN ESS MAN CAN COMPETE WITH THE FIRST BUSINESS MAN. WHEN BY PAYMENT OF NON-COMPETE FEE, T HE BUSINESS MAN GETS HIS RIGHT WHAT HE IS PRACTICALLY GETTING IS KIND OF MONOPOLY TO RU N HIS BUSINESS WITHOUT BOTHERING ABOUT THE COMPETITION. IT IS JUST LIKE SEPARATING BIG PLANT F ROM OTHER PLANTS AFFECTING THE GROWTH OF THE BIG I PLANT. GENERALLY, NON-COMPETE FEE IS PAID FOR A DEF INITE PERIOD WHICH IN THIS CASE IS FIVE YEARS. THE IDEA IS THAT BY THAT TIME, THE BUSINESS WOULD S TAND FIRMLY ON ITS OWN FOOTING AND CAN SUSTAIN LATER ON. THIS CLEARLY SHOWS THAT THE COMME RCIAL RIGHT COMES INTO EXISTENCE WHENEVER THE ASSESSEE MAKES PAYMENT FOR NON-COMPETE FEE.' TH E HON'BLE TRIBUNAL HAS FURTHER OBSERVED THAT- 'NOW, THE SECOND QUESTION IS WHETHER SUCH RIGHT CAN BE TERMED AS 'OR ANY OTHER BUSINESS OF COMMERCIAL RIGHTS OF SIMILAR NATURE FOR CONSTRUING THE SAME AS INTANGIBLE ASSET'. HERE, THE DOCTRINE OF EJUSDEM GENERIS WOULD COME INTO OPERATI ON. THE TERM 'OR ANY OTHER BUSINESS OF COMMERCIAL RIGHTS OF SIMILAR NATURE' HAS TO BE INTE RPRETED IN SUCH A WAY THAT IT WOULD HAVE SAME SIMILARITIES AS OTHER ASSETS MENTIONED IN CLAU SE (B) OF EXPLANATION 3. THE OTHER ASSETS MENTIONED ARE KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICENCES, FRANCHISES, LICENCE ETC. IN ALL THESE CASES NO PHYSICAL ASSET COMES INTO POS SESSION OF THE ASSESSEE. WHAT COMES IN IS ONLY A RIGHT TO CARRY ON THE BUSINESS SMOOTHLY AND SUCCESSFULLY, AND IN OUR VIEW EVEN THE RIGHT OBTAINED BY WAY OF NON-COMPETE FEE WOULD ALSO BE CO VERED BY THE TERM 'OR ANY OTHER BUSINESS OF COMMERCIAL RIGHTS OF SIMILAR NATURE' BE CAUSE AFTER OBTAINING NON-COMPETE RIGHT, THE ASSESSEE CAN DEVELOP AND RUN HIS BUSINESS WITHO UT BOTHERING ABOUT THE COMPETITION' THE HON'BLE TRIBUNAL HAS FURTHER MENTIONED THAT :- 'IN THE CASE OF RADAAJ MEDIA WORKS INDIA LTD., WE H AD ALSO REFERRED TO THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF TECHNO SHARES & STOCKS LTD. V. ITO [2006] 101 TTJ 349A WHEREBY STOCK EXCHANGE CARD WAS HELD TO BE INTANGIBLE ASSET. IF A STOCK EXCHANGE CARD IS CONSTRUED AS INTANGIBLE ASSET, WE ARE OF TH E VIEW THAT THE RIGHT ACQUIRED BY PAYMENT OF NON-COMPETE FEE IS DEFINITELY INTANGIBLE ASSET. MOR EOVER, THIS RIGHT (ASSET) WILL EVAPORATE OVER A PERIOD OF TIME OF FIVE YEARS IN THIS CASE BECAUSE AFTER THAT THE PROTECTION OF NON-COMPETITION WILL NOT BE AVAILABLE TO THE ASSESSEE. THIS MEANS, THIS RIGHT IS SUBJECT TO WEAR AND TEAR BY THE PASSAGE OF TIME, IN THE SENSE, THAT AFTER THE LAPSE OF A DEFINITE PERIOD OF FIVE YEARS, THIS ASSET WILL NOT BE AVAILABLE TO THE ASSESSEE AND, THEREFOR E, THIS ASSET MUST BE HELD TO BE SUBJECT TO DEPRECIATION.' - 21 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 3. IN CASE OF ITO VS MEDICORP TECHNOLOGIES INDIA LTD. 122 TTJ 039 4, HON'BLE CHENNAI ITAT HAS OBSERVED THAT 'IF THE BUSINESS/COMMERCIAL RIGHT OF A PATENT, COPY RIGHT TRADE MARK, I/CENSE, AND FRANCHISE, FULFILS THE CONDITIONS OF 'BEING INTANGIBLE ASSET', THEN SURELY THE IMPUGNED BUSINESS/COMMERCIAL RIGHT ACQUIRED BY THE ASSESSEE ALSO FULFILS THAT CO NDITION, BY WAY OF A LOGICAL COROLLARY'. THE ITAJ HAS HELD THAT 'THE IMPUGNED 'NON-COMPETE RIGHT ' ACQUIRED BY THE ASSESSEE-COMPANY, WAS ELIGIBLE FOR DEPRECIATION UNDER CLAUSE (II) OF SECTION 32(1) OF THE ACT.' 4. IN CASE OF BUNGE AGRI BUSINESS (INDIA) P. LTD. VS DCIT 132 ITD 0549, HON'BLE MUMBAI ITAT HAS HELD THAT 'WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY AND FIND THAT IN THE CASE OF REAL IMAGE TECH (?) LTD. [SUPRA], AFTER ANALYZING THE PROVISIO NS OF SEC.32[1][II] IF WAS HELD THAT NON COMPETE FEE WOULD CONSTITUTE CAPITAL ASSET AND DEPR ECIATION WAS ULTIMATELY HELD TO BE ALLOWABLE. HOWEVER, WE FIND THAT THE AO VIDE PARA-8 OF HIS ORDER HAS OBSERVED THAT NON COMPETE FEE WAS NOT MENTIONED IN THE AGREEMENT AS A SEPARATE PAYMENT. THEREFORE, HE SHOULD FIND OUT THE AMOUNT OF NON COMPETE FEE DETER MINED BY THE ASSESSEE AND ACCORDINGLY ALLOW DEPRECIATION IN VIEW OF THE DECISION THE CHEN NAI TRIBUNAL IN THE CASE OF REAL IMAGE TECH (P) LTD.' 5. IN CASE OF SERUM INSTITUTE OF INDIA LTD. VS ACIT 147 TTJ 594 ( PUNE), 135 ITD 69, HON'BLE PUNE ITAT HAS HELD THAT:- 'IT IS IF IS EVIDENT SO LONG AS THE 'NON COMPETE FE E' IN QUESTION IS A 'CAPITAL EXPENDITURE, THE SAME IS ENTITLED FOR DEPRECIATION AS HELD BY THE AP EX COURT IN THE CASE OF TECHNO SHARES & STOCK LTD. V. C/T [2010] 193 TAXMAN 248.' THE /TAT FURTHER OBSERVED THAT 'THE LIMITED DISPUTED FOR ADJUDICATION BEFORE US RELATES TO IF T HE CAPITAL EXPENDITURE BY WAY OF 'NON COMPETE FEE' IN QUESTION IS AN 'INTANGIBLE ASSET AND IF THE SAME IS DEPRECIABLE ASSET FOR THE BENEFITS U/S 32 OF THE ACT. THERE IS NO DISPUTE ON THE CAPITAL N ATURE OF THE IMPUGNED 'NON COMPETE FEE' IN VIEW OF THE REPORTED JUDGMENT OF THE SUPREME COURT IN CASE OF GUFFIC CHEM (P) LTD. V. CIT [2011] 332 ITR 602 / 198 TAXMAN 781 10 FAXMANN.COM 105, WHICH IS ADOPTED IN THE JUDGMENT IN THE CASE OF /-FAR/ SHANKAR BHARTIA V. CIT (2011] 203 TAXMAN 6 (MAG.)/ 15 TAXMANN.COM 113 (CAL.).' IF FURTHER HELD THAT 'THE, BY PAYMENT OF N ON COMPETE FEE TO ANOTHER PERSON TO REDUCE THE BUSINESS OR COMMERCIAL COMPETITION FOR A PERIOD , THE ASSESSEE ACQUIRES A RIGHT AND IT IS A CAPITAL ASSET, WHICH IS A BUSINESS OR A COMMERCIAL RIGHT...' AND FURTHER HELD THAT IT IS A SETTLED ISSUE THAT THE NON COMPETE FEE IS INTANGIBLE AND DE PRECIABLE ASSET AS HELD BY THE CITED SUPREME COURT'S JUDGMENTS'. 6. IN CASE OF PENTASOFT TECHNOLOGIES LTD. VS DY.CIT 264 CTR 187, HON'BLE MADRAS HIGH COURT OBSERVED THAT :- 'THE ONLY ISSUE IS WHETHER NON-COMPETE AGREEMENT/AR RANGEMENT WOULD FALL WITHIN THE AMBIT OF CLAUSE (II) OF SECTION 32(1) OF THE ACT'. IT FURTHE R OBSERVED THAT 'LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE NON-COMPETE IS IN EFFEC T AN INDIRECT LICENCE. HOWEVER, WE ARE NOT INCLINED TO AGREE WITH THE SAID SUBMISSION SINCE NO N COMPETE, AT BEST COULD BE A COMMERCIAL RIGHT BECAUSE THAT RIGHT IS RELATABLE TO THE TRANSF ER OF TRADE MARK, COPY RIGHTS AND PATENTS AND FURTHER HELD THAT THE EARLIER TRANSFER OF THE TRADE MARK, PATENTS AND OTHER RIGHTS IN FAVOUR OF THE ASSESSEE WAS UNDOUBTEDLY THE TRANSFER OF INTANGIBLE ASSETS, WHICH IN TERMS OF SECTION 32(1 )(II) OF THE ACT WOULD BE A CAPITAL ASSET ENTITLED TO DEP RECIATION. 7. IN CASE OF DCIT VS WEIZMANN FOREX LTD. 51 SOT 0525, HON'BLE MUMJPAI ITAT NOTED THAT - 'THE ID DR HAS SUBMITTED THAT THE ENTIRE CONSIDERAT ION FOR ACQUIRING THE NETWORK ALSO INCLUDES THE PAYMENT FOR NON-COMPETE FEE. HOWEVER, THE ASSES SEE HAS NOT SHOWN ANY BIFURCATION OF THE CONSIDERATION PAID FOR NON-COMPETE FEE TO AFL' THE ITAT FURTHER OBSERVED THAT 'THE HON'BLE DELHI HIGH COURT IN THE CASE OF HINDUSTAN C OCA COLA BEVERAGES (P.) LTD. (SUPRA) HAS HELD IN PARA 24 AS UNDER: '25.LT IS WORTH NOTING THAT THE MEANING OF BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE HAS TO BE UNDERSTOOD IN THE BACKDROP OF SECTION 32(1)(I I) OF THE ACT. COMMERCIAL RIGHTS ARE SUCH RIGHTS WHICH ARE OBTAINED FOR EFFECTIVELY CARRYING ON THE BUSINESS AND COMMERCE, AND COMMERCE, AS IS UNDERSTOOD, IS A WIDER TERM WHICH E NCOMPASSES IN ITS FOLD MANY A FACET. - 22 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 STUDIED IN THIS BACKGROUND, ANY RIGHT WHICH IS OBTA INED FOR CARRYING ON THE BUSINESS WITH EFFECTIVENESS IS LIKELY TO FALL OR COME WITHIN THE SWEEP OF MEANING OF INTANGIBLE ASSET.' THE DICTIONARY CLAUSE CLEARLY STIPULATES THAT BUSINESS OR COMMERCIAL RIGHTS SHOULD BE OF SIMILAR NATURE AS KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS , LICENCES, FRANCHISES, ETC. AND ALL THESE ASSETS WHICH ARE NOT MANUFACTURED OR PRODUCED OVERN IGHT BUT ARE BROUGHT INTO EXISTENCE BY EXPERIENCE AND REPUTATION. THEY GAIN SIGNIFICANCE I N THE COMMERCIAL WORLD AS THEY REPRESENT A PARTICULAR BENEFIT OR ADVANTAGE OR REPUTATION BUILT OVER A CERTAIN SPAN OF TIME AND THE CUSTOMERS ASSOCIATE WITH SUCH ASSETS AND HELD THAT 'ASSESSEE'S CLAIM OF DEPRECIATION IS ALLOWABLE.' 8. IN THE CASE OF ACIT VS GE PLASTICS INDIA LTD. 13 7 ITD 309, THE ITAT (AHMEDABAD) HAS ALSO HELD THAT THE DEPRECIATION OF NON - COMPETE FEE PAID BY THE ASSESSEE WAS ALLOWABLE. IN VIEW OF THE ABOVE DISCUSSION, VARIOUS JUDGMENTS MENTIONED ABOVE AND PREPONDERANT JUDICIAL OPINION, I AM OF THE CONSIDERED OPINION TH AT THE NON-COMPETE FEE PAID BY THE APPELLANT TO MR. PATEL IS A CAPITAL EXPENDITURE AND THE APPELLANT HA S ACQUIRED AN INTANGIBLE RIGHT WHICH IS DEPRECIABLE AND DEPRECIATION CLAIMED IS ALLOWABLE UNDER SECTION 32(1)(II) OF THE ACT. THE ASSET IS DEPRECIABLE AS THE CONTRACT IS ENFORCEABLE ONLY FOR THREE YEARS AN D IT IS NOT FOREVER. THE DISALLOWANCE MADE BY THE A O IS THEREFORE, DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 13. WE HAVE HEARD THE RIVAL CONTENTION ON THIS ISSU E AND PERUSED THE MATERIAL ON RECORD. AFTER CONSIDERING THE FACTS AND THE DETAILED FINDIN GS ALONG WITH VARIOUS JUDICIAL PRONOUNCEMENTS ELABORATED IN THE ORDER OF THE LD. C IT(A), WE CONSIDER THAT THE NON- COMPETE FEE PAID BY THE ASSESSEE TO MR. PATEL IS A CAPITAL EXPENDITURE AND THE ASSESSEE HAS ACQUIRED AN INTANGIBLE RIGHT WHICH IS DEPRECIABLE A ND DEPRECIATION CLAIMED IS ALLOWABLE UNDER SECTION 32(1)(II) OF THE ACT. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE I N THE DECISION OF THE LD. CIT(A). ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED . 14. IN THE RESULT, THE GROUNDS OF APPEAL 1 TO 3 OF THE ASSESSEE ARE ALLOWED AND GROUND OF APPEAL 1 TO 2 OF THE REVENUE ARE DISMISSE D. THE GROUNDS OF APPEAL NO. 3 TO 5 OF THE REVENUE ARE GENERAL WHICH DO NOT REQUIRE ANY ADJUDICATION. 20. HAVING HEARD THE LEARNED COUNSEL APPEARING F OR THE PARTIES, HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE JUDGMENTS CIT ED BY THE LD. COUNSEL APPEARING FOR THE ASSESSEE, WE ARE OF THE CONSIDERED OPINION THAT TH E IDENTICAL ISSUE OF ASSESSEE HAS ALREADY BEEN SETTLED BY THE CO-ORDINATE BENCH IN THE SAID ORDER. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND FOLLOWING T HE SAID ORDER WE CONFIRM THE SAME. IN THE RESULT, REVENUES APPEAL ON THIS GROUND STANDS DISM ISSED. 21. GROUND NOS. 3 5O 5 ARE GENERAL IN NATURE AND D O NOT REQUIRE ANY ADJUDICATION. - 23 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 ITA NO. 463 /AHD/2017 AY 2013-14 22. THE ASSESSEE HAS CHALLENGED THE ORDER PASSED BY THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.1,31,40,243/- OUT OF THE COMMISSION PAID TO NON- RESIDENT AGENTS TOWARDS SERVICES RENDERED OUTSIDE I NDIA UNDER SECTION 40 (A)(IA) OF THE ACT MADE BY THE LD. ASSESSING OFFICER. FURTHER THA T CONFIRMATION OF ADDITION MADE BY THE LD.AO TO THE TUNE OF RS.39,97,669/- TOWARDS AL LEGED SUPPRESSED SALES OF SALES IN TRANSIT HAS ALSO BEEN CHALLENGED IN THE INSTANT CAS E BY THE ASSESSEE. 23. GROUND NO.1 : THE ISSUE INVOLVED IN THIS PARTICULAR GROUND IS IDENTICAL TO THAT OF GROUND IN APPEAL PREFERRED BY THE ASSESSEE IN ITA N O. 462/AHD/2017 FOR AY 2012-13. THE SAME HAS ALREADY BEEN DECIDED BY US IN FAVOUR O F THE ASSESSEE HEREINBEFORE. 24. FOLLOWING THE SAME, WE OBSERVE THAT THE ASSESSE E IS NOT LIABLE TO DEDUCT TAX ON THE COMMISSION PAID TO THE NON-RESIDENT. HOWEVER, IT APPEARS THAT NO DETAILS AND EVIDENCES HAVE BEEN PROVIDED BEFORE THE AUTHORITIES BELOW BY THE ASSESSEE IN RESPECT OF PAYMENT MENTIONED IN SL.NOS.2,6,7,9,10,15,16,21 TO 24 28 AN D 31 IN ORDER TO ESTABLISH THAT THE SAID AGENTS HAVE NOT PROVIDED SERVICES IN INDIA OR THEY HAVE NO BUSINESS CONNECTION OR PERMANENT ESTABLISHMENT IN INDIA. WE, THEREFORE, FOR THE END S OF JUSTICE SET ASIDE THIS PART OF THE ORDER TO THE FILE OF THE LD.AO TO VERIFY THE SAID ASPECT CON SIDERING THE EVIDENCES TO BE ADDUCED BY THE ASSESSEE IN THIS RESPECT. WE MAKE IT CLEAR THAT T HE ASSESSEE BE GIVEN A REASONABLE OPPORTUNITY OF HEARING POSITIVELY BY THE LD. ASSESSING OFFICER WHILE ADJUDICATING THE MATTER AND TO PASS ORDERS IN ACCORDANCE WITH LAW. IN THE RESULT, TH IS GROUND OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 25. THE ASSESSEE HAS FURTHER CHALLENGED THE CONFIR MATION OF ADDITION MADE BY THE LD. ASSESSING OFFICER TO THE TUNE OF RS.39,97,669/- TOW ARDS ALLEGED SUPPRESSED SALES OF SALES IN - 24 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 TRANSIT; THE SAID WAS CONFIRMED BY THE LEARNED CIT( A) FOLLOWING THE ORDERS PASSED BY HIS PREDECESSORS. 26. THIS PARTICULAR ISSUE HAS ALREADY BEEN DECIDED BY THE US IN ITA NO.462 /AHD/2017 FOR THE ASSESSMENT YEAR 2012-13 AS ABOVE IN FAVOR OF TH E ASSESSEE. 27. FOLLOWING THE SAME WE DELETE THE ADDITION TO THE TUNE OF RS.39,97,669/- MADE BY THE AUTHORITIES BELOW. IN THE RESULT, THE GROUNDS OF AP PEAL FILED BY THE ASSESSEE IS ALLOWED. 28. GROUND NOS. 3 & 4 ARE GENERAL IN NATURE AN D DO NOT REQUIRE ANY ADJUDICATION. ITA NO. 841/AHD/2017 FOR AY 2013-14 29. GROUND NO.1 THE REVENUE HAS COME UP IN APPEAL CHALLENGING THE ORDER PASSED BY THE LD. CIT(A) IN RESTRICTING DISALLOWANCE UNDER SECTIO N 40(A)(IA) OF RS.1,31,40,243/- AS AGAINST RS.2,69,60,118/-MADE BY THE AO ON ACCOUNT OF COMMIS SION PAID TO THE NON-RESIDENT. THE ISSUE HAS ALREADY BEEN DISCUSSED IN ASSESSEES APPE AL BEING ITA NO.463/AHD/2017 FOR THE ASSESSMENT YEAR 2013-14 (SUPRA) FOLLOWING THE ORDER PASSED BY US IN ASSESSEE'S APPEAL BEING ITA NO. 462/AHD/2017 FOR THE ASSESSMENT YEAR 2012-1 3. THE SAME HAS BEEN DECIDED BY THE US HEREIN BEFORE IN FAVOUR OF THE ASSESSEE. IN THAT VIEW OF THE MATTER, THE GROUND PREFERRED BY THE REVENUE IN THIS APPEAL IS DISMISSED. GROUND NO.2 30. THE REVENUE HAS FURTHER CHALLENGED THE ORDER PASSED BY THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF DEPRECIATION ON NO COMPETE FEES AMOUNTING RS.1,68,48,562/-. 31. THE IDENTICAL ISSUE HAS ALREADY BEEN DEALT W ITH BY US AND DECIDED IN FAVOUR OF THE ASSESSEE IN REVENUES APPEAL BEING ITA NO.584/AHD/20 17 FOR ASSESSMENT YEAR 2012-13. WE, THEREFORE, FOLLOWING THE SAME CONFIRM THE ORDER PAS SED BY THE LD. CIT(A) IN THE ABSENCE OF - 25 - ITA NOS. 462&463AHD/2017 (ASSESSEE) ITA NOS.584 & 841/AHD/2017 (REVENUE) FERROMATIK MILACRON INDIA PVT.LTD. VS. DCIT/ACIT ASST.YEARS 2012-13 & 2013-14 ANY INFIRMITY FOUND IN THE SAID ORDER. IN THE RESU LT REVENUES APPEAL ON THIS GROUND STANDS DISMISSED. 32. GROUND NOS.3 & 5 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 33. IN THE COMBINED RESULT, ASSESSEES APPEAL IN IT A NOS.462 & 463/AHD/2017 FOR AYS 2012-13 & 2013-14 ARE ALLOWED FOR STATISTICAL PURPO SES AND REVENUES APPEAL IN ITA NOS.584 AND 841/AHD/2017 FOR AYS 2012-13 & 2013-14 ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 26/ 10/2018 SD/- SD /- ( PRAMOD KUMAR ) ( MS. MADHUMITA ROY ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 26/ 10 /2018 .., . ../ T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-2, AHMEDABAD 5. !'# , $ , / DR, ITAT, AHMEDABAD 6. #() *+ / GUARD FILE. / BY ORDER, ! //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !, / ITAT, AHMEDABAD