M/s Walker Chandiok Grant Thornton Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 506/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3620 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 11-07-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 28-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Keywords: Opportunity of being heard; Principle of natural justice; TDS
• Section: 40(a)(ia); 143(1); 195; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I NEW DELHI DELHI BENCH: I NEW DELHI DELHI BENCH: I NEW DELHI DELHI BENCH: I NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER SHRI B.C. MEENA, ACCOUNTANT MEMBER SHRI B.C. MEENA, ACCOUNTANT MEMBER SHRI B.C. MEENA, ACCOUNTANT MEMBER I.T.A NO. 4703/DEL/10 I.T.A NO. 4703/DEL/10 I.T.A NO. 4703/DEL/10 I.T.A NO. 4703/DEL/10 ASSTT. YEAR 2006 ASSTT. YEAR 2006 ASSTT. YEAR 2006 ASSTT. YEAR 2006- -- -07 0707 07 AND AND AND AND ITA NO. 506/DEL/2011 ITA NO. 506/DEL/2011 ITA NO. 506/DEL/2011 ITA NO. 506/DEL/2011 ASSTT. YEAR 2007 ASSTT. YEAR 2007 ASSTT. YEAR 2007 ASSTT. YEAR 2007- -- -08 0808 08 M/S. WALKER M/S. WALKER M/S. WALKER M/S. WALKER CHANDIOK GRANT CHANDIOK GRANT CHANDIOK GRANT CHANDIOK GRANT THORNTON PVT. LTD. THORNTON PVT. LTD. THORNTON PVT. LTD. THORNTON PVT. LTD. L LL L- -- -41, CONNAUGHT CIRCUS 41, CONNAUGHT CIRCUS 41, CONNAUGHT CIRCUS 41, CONNAUGHT CIRCUS NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. DCIT, DCIT, DCIT, DCIT, CIRCLE 18 (1) CIRCLE 18 (1) CIRCLE 18 (1) CIRCLE 18 (1) NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VINOD KUMAR BINDAL, MRS. SWEET Y KOTHARI, CA RESPONDENT BY: SHRI A.K. MONGA, SR. DR ORDER ORDER ORDER ORDER PER DIVA SIN PER DIVA SIN PER DIVA SIN PER DIVA SINGH, JM: GH, JM: GH, JM: GH, JM: BOTH THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) XXI, NEW DELHI PERTAINING TO 2006-07 AND 2007-08 ASSTT. YEARS DATED 20 TH AUGUST, 2010 AND 22 ND NOVEMBER 2010 RESPECTIVELY. SINCE BOTH WERE ARGUED TOGETHER AND T HE SOLE GROUND RAISED IN IT NO. 4703/DEL/2010 IS IDENTICAL TO GROUND NO. 1 IN ITA NO. 506/DEL/2011. THEY ARE BEING DECIDED BY A COMMON OR DER. ITA NO. 4703/DEL/10 A SSTT. YEAR 2006-07 & ITA NO. 506/DEL/11 ASSTT. YEAR 2007- 08 2 2. IN ITA NO. 4703/DEL/2010, THE ASSESSEE HAS RAISE D FOLLOWING GROUNDS :- THE CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 3,56,919/- PAID ON ACCOUNT OF REFERRAL FEES TO M/S. GRANT THORNTON UK THOUGH THE SAID AMOUNT WAS NOT LIABLE T O TAX DEDUCTION AS PER EVIDENCES AND FACTS PLACED ON RECORD. THUS, THE ADDITION SO MADE SHOULD BE DELETED. THE CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN INVOKING THE PROVISIONS OF SEC TION 9 OF THE ACT THOUGH THE SAME ARE NOT APPLICABLE TO THE REFERRAL FEES PAID TO M/S. GRANT THORNTON UK AS THE SAME WAS NOT EARNED OR ACC RUED IN INDIA. THUS, THE ADDITION SO MADE SHOULD BE DELETED. 3. RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE DECLARED AN INCOME OF RS. 11,41,103/-. ASSESSEES RETURN WAS PROCESSED U/S 143(1) AND SUBSEQUENTLY SELECTED FOR SCRUTINY. AS SUCH NOTICES U/S 143(2) AND U/S 115WE(2) WAS ISSUED. THEREAFTER QUESTIONNAIRE DATE D 4.8.2008 WAS ISSUED ALONGWITH NOTICE U/S 142(1). 4. THE AO OBSERVED THAT THE ASSESSEE IS A SUBSIDIAR Y COMPANY OF SAWAN INVESTMENT COMPANY AND ENGAGED IN THE BUSINES S OF ADVISORY SERVICES INCLUDING CHARTERED ACCOUNTANCY TO VARIOUS CLIENTS. THE ASSESSEE WAS PUT TO NOTICE BY THE AO AS WHY NO TDS WAS DEDUC TED ON REFERRAL FEE OF RS. 3,56,919/-. THE AO WAS OF THE OPINION THAT T HE ASSESSEE WAS SUPPOSED TO OBTAIN NO TDS CERTIFICATE FROM THE AO U /S 195 OF THE INCOME TAX ACT. THE ASSESSEE WAS ALSO PUT TO NOTICE AS TO WHY THE PROVISIONS OF SECTION 40(A)(I) SHOULD NOT BE APPLIED. ITA NO. 4703/DEL/10 A SSTT. YEAR 2006-07 & ITA NO. 506/DEL/11 ASSTT. YEAR 2007- 08 3 5. THE ASSESSEE REPLIED THROUGH ITS LETTER DATED 30 TH OCTOBER, 2008. THE SAME IS REPRODUCED BY THE AO AT PAGE 2. FOR R EADY REFERENCE THE SAME IS REPRODUCED HEREUNDER:- 1. REFERRAL FEE OF RS. 3,56,919/- HAS BEEN PAID TO M/S. GRANT THORNTON, UK FOR PROVIDING INFORMATION ABOUT PROSPE CTIVE CLIENTS ABROAD AND REFERRING OUT NAME TO THE SAID C LIENTS. NO TAX WAS DEDUCTED ON THE SAID FEES DURING THE YEAR U NDER CONSIDERATION IN VIEW OF THE CIRCULAR NO. 786 DATED 7/2/2000. A COPY OF THE SAID CIRCULAR IS ENCLOSED. THE CIRCUL AR READS THAT THE EXPORT COMMISSION PAID TO A NON-RESIDENT FOR RE NDERING SERVICES ABROAD IS NOT TAXABLE IN INDIA AS THE NON- RESIDENT AGENT OPERATES OUTSIDE THE COUNTRY, AND THEREFORE, NO PART OF HIS INCOME ARISES IN INDIA. FURTHER, SINCE THE PAYM ENT IS USUALLY REMITTED DIRECTLY ABROAD, IT CANNOT BE HELD TO HAVE BEEN RECEIVED BY OR ON BEHALF OF THE AGENT IN INDIA AND THEREFORE, NO TAX IS DEDUCTIBLE UNDER SECTION 195. SIMILAR IS THE CASE TO REFERRAL FEE PAID TO THE SAID PARTY BY THE ASSESSEE. ADMITTEDLY, THE SAID PARTY IS A NON-RESID ENT WHO HAS PROVIDED SERVICES ABROAD AND PAYMENT HA ALSO BEEN D IRECTLY REMITTED TO IT AND THEREFORE NO TDS IS REQUIRED TO BE DEDUCTED ON THE SAME. FURTHER IT WAS STATED THAT CIRCULARS ARE BINDING ON THE DEPARTMENT. IN THIS REGARD ASSESSEE RELIED ON THE C ASES OF COMMISSIONER OF CUSTOMS VS INDIAN OIL CORPORATION L TD. (2004) 267 ITR 272 (SC) AND UCO BANK VS. CIT (1999) 237 ITR 889 (SC). WHEN FURTHER ASKED FOR BASIS OF PAYMENT. ASSESSEE V IDE ITS LETTER DATED 30.10.2008 SUBMITTED REPLY ALOGNWI TH COPY OF AGREEMENT SIGNED WITH GRANT THORNTON INTERNATIONAL. IN THE REPLY ASSESSEE HAS STATED AS UNDER : GRANT THORNTON IS AN ASSOCIATION OF ACCOUNTANCY AN D ASSURANCE FIRMS OF WHICH THE ASSESSEE IS A MEMBER. THE ASSESSEE PAYS MEMBERSHIP FEES TO THE SAID ASSOCIATI ON AS PER BILLS RAISED BY IT. THE BILL IS RAISED BY THE SAID ASSOCIATION BY ALLOCATING ITS OVERALL EXPENSES AMONG VARIOUS MEMBE RS ON THE BASIS OF REFERRALS FOR WORK MADE BY THE SAID ASSOCI ATION ON NO PROFIT NO LOSS BASIS. THE ASSESSEE IS ENT ITLED TO USE THE NAME OF GRANT THORNTON ON PAYMENT OF SUC H FEES ITA NO. 4703/DEL/10 A SSTT. YEAR 2006-07 & ITA NO. 506/DEL/11 ASSTT. YEAR 2007- 08 4 WHICH BUILDS INTERNATIONAL REPUTATION OF THE ASSESS EE AND HELPS IN GETTING NON REFERRED CLIENTS IN INDIA AS W ELL AS OVERSEAS. THE SAID EXPENDITURE WAS WHOLLY AND EXCLU SIVELY INCURRED FOR BUSINESS PURPOSES AND BECAUSE OF PAYME NTS OF SUCH FEES ONLY, THE ASSESSEE WAS ABLE TO GET THE BU SINESS OF RS. 23.76 LACS ..NO TDS IS REQUIRED TO BE DEDUCTED ON MEMBERSHIP / REFERRAL FEES PAID TO THE SAID ASSOCIATION AS IT RENDERED THE SAID SERVICES OUTSID E THE COUNTRY AND PAYMENT HAS ALSO BEEN REMITTED TO IT OV ERSEAS. 6. CONSIDERING THE REPLY OF THE ASSESSEE, THE AO WA S OF THE VIEW THAT CIRCULAR NO. 786 DATED 7.2.2000 WAS IN RESPECT OF E XPORT PAYMENTS AND DID NOT COVER TECHNICAL SERVICES AND SITUATIONS WHE RE THERE WAS A BUSINESS CONNECTION BETWEEN THE PAYER AND PAYEE. IN REGARD TO THE PAYMENTS THE AO WAS OF THE VIEW THAT ASSESSEE HAS A DMITTED THAT THE PAYMENT WAS FOR REFERRAL SERVICES. HE WAS FURTHER O F THE VIEW THAT THE ASSESSEE WAS PART OF A NETWORK OF GRANT THORNTON IN TERNATIONAL, UK AND ALL THE COMPANIES USE THE NAME OF THE UK COMPANY. HE WA S ALSO OF THE VIEW THAT AS EXPLAINED BY THE ASSESSEE COMPANY VIDE LETT ERS DATED 29.8.2008 AND 30.10.2008, THE ASSESSEE IS ENGAGED IN THE BUSI NESS OF ADVISORY SERVICES INCLUDING MANAGEMENT CONSULTANT, CHARTERED ACCOUNTANCY ETC. THEREFORE THE ACTUAL SERVICES RENDERED WERE CONSIDE RED TO BE TECHNICAL IN NATURE AND WERE GIVEN BY THE ASSESSEE TO VARIOUS C LIENTS REFERRED TO IT BY THE GRANT THORNTON INTERNATIONAL, UK. HE ALSO TOOK INTO CONSIDERATION THAT IN THE INVOICE RAISED IT HAS BEEN NARRATED BY THE A SSESSEE THAT THE PAYMENT IS FOR SECOND HALF OF 2005 FOR REFERRAL CRE DITS THE AO FURTHER EXAMINING THE PROVISIONS OF SECTION 195 HELD THE SA ME TO BE APPLICABLE IN ITA NO. 4703/DEL/10 A SSTT. YEAR 2006-07 & ITA NO. 506/DEL/11 ASSTT. YEAR 2007- 08 5 THE CASE. FURTHER CONSIDERING THE APPLICABILITY OF THE PROVISION OF SECTION 9(1)(VII)(B), SECTION 195(1) AND SECTION 40(A)(I) A ND ALSO CONSIDERING THE FOLLOWING JUDICIAL PRONOUNCEMENTS :- A) WALLACE PHARMACEUTICALS P. LTD. 278 ITR 97 ; B) DANFOSS INDUSTRIES P. LTD. 268 ITR 1 (AAR) ; C) TIMKEN INDIAN LTD. (2005) 273 ITR 67 (A AR) ; D) ABC IN RE 223 ITR 416 (AAR) ; E) RAJIV MALHOTRA 284 ITR 564 ; F) CHEMINORE DRUGS LTD. VS. ITO (2001) 70 TTJ 936 / 76 ITD 37 ; AND G) TRANSMISSION CORPORATION 239 ITR 587 HE DID NOT ACCEPT THE ASSESSEES CONTENTIONS. IN VIEW OF THE ABOVE HE CON CLUDED AS UNDER :- AFTER DISCUSSION IN THE LIGHT OF CASE LAWS CITED A BOVE THE FOLLOWING POINTS ARE NOTEWORTHY (I) THIS IS A BUSINESS CONNECTION BETWEEN ASSESSEE AND GRANT THORNTON INTERNATIONAL, UK (HEREINAFTER REFERRED AS GTUK) BY WAY OF AN AGREEMENT DATED 17.3.1998 PLACED ON RECORD BY ASSESSEE WHICH CONTEMPLATES THAT ASSESSEE IS TO PAY CERTAIN AMOUNT ON REGULAR BASIS FOR CLIENTS REFERRED TO IT FROM ABROAD BY GTUK (II) ASSESSEE RENDERS CHARTERED ACCOUNTANCY AND CONSULTANCY SERVICES WHICH ARE TECHNICAL SERVICES REGULARLY REFERRED AS MANAGERIAL TECHNICAL & CONSULTANCY IN SECTION 9 (I) VII EXPLANATION 2 OF I T ACT. THEREFORE THE PROVISIONS OF SECTION 9 COME INTO PLAY AS THE PAYMENT MADE BY ASSESSEE IS ITA NO. 4703/DEL/10 A SSTT. YEAR 2006-07 & ITA NO. 506/DEL/11 ASSTT. YEAR 2007- 08 6 BECAUSE OF BUSINESS CONNECTION GOVERNED BY AN AGREEMENT DATED 17.3.1998 AND THE ASSESSEE IS RENDERING TECHNICAL SERVICES TO THE CLIENTS REFERRED TO IT BY THE NON-RESIDENT I.E., GTUK. HENCE, THE ASSESSEE WAS REQUIRED TO DEDUCT WITHHOLDING TAX ON THE PAYMENT MADE . THEREFORE BY INVOKING PROVISIONS OF SECTION 9, SECTION 195 AND SECTION 40(A)(I) OF THE INCOME TAX ACT, I DISALLOW A SUM OF RS. 3,56,919/- ON ACCOUNT OF REFERRAL FEE OF RS. 3,56,919/- PAID TO M/S. GRAN T THORNTON, UK. (ADDITION : RS. 3,56,919/-) 7. AGGRIEVED BY THIS, THE ASSESSEE WENT IN APPEAL B EFORE THE CIT(A). 8 THE ARGUMENTS PUT FORTH BY THE ASSESSEE ARE REPRO DUCED BY THE CIT(A) AT PAGE 3 FOR READY REFERENCE. THE SAME IS REPRODUCED HEREUNDER :- THUS THE ABOVE JUDGMENT CLARIFIES THE POSITION THA T THE INCOME-TAX IS TO BE DEDUCTED AT SOURCE U/S 195 ONLY WHEN THE SUM PAYABLE IS CHARGEABLE TO INCOME-TAX. IT ALSO CL ARIFIES THAT THE JUDGMENT OF TRANSMISSION CORPORATION (SUPRA) IS WITH REGARD TO THE AMOUNT WHICH IS CHARGEABLE TO TAX AND THEREFORE LIABLE TO DEDUCTION OF TAX U/S 195 AND NOT WITH REF ERENCE TO THE AMOUNTS WHICH ARE NOT TAXABLE AT ALL. IN THE CASE O F THE ASSESSEE, AS EXPLAINED IN THE ABOVE MENTIONED PARAG RAPHS, IT IS CLEAR THAT THE SUM PAID BY IT TO GTI IS NOT CHAR GEABLE TO TAX UNDER SECTION 9(1) (I) OR 9(1)(VII) OF THE ACT AS ALLEGED BY THE ASSESSING OFFICER NOR UNDER ANY OTHER PROVISIONS OF THE ACT. IN VIEW OF THE ABOVE JUDGMENT OF VAN OORD (SUPRA), THE PAYMENT OF THE SAID SUM WOULD NOT BE LIABLE FOR DEDUCTION O F TAX AS THE SAME IS NOT CHARGEABLE TO TAX UNDER ANY PROVISIONS OF THE ACT. SINCE THE AMOUNT IS NOT LIABLE TO DEDUCTION OF TAX AS PER THE PROVISIONS OF SECTION 195, SECTION 40(A)(I) IS NOT APPLICATION AND NO DISALLOWANCE UNDER THE SAID SECTION IS CALLE D FOR. 9. CONSIDERING THE ABOVE SUBMISSION THE CIT(A) CONF IRMED THE ORDER OF THE AO FOR THE FOLLOWING REASONS :- ITA NO. 4703/DEL/10 A SSTT. YEAR 2006-07 & ITA NO. 506/DEL/11 ASSTT. YEAR 2007- 08 7 AFTER CONSIDERING THE AOS FINDING AND ASSESSEES SUBMISSION, IT IS HELD THAT AO HAD RIGHTLY INVOKED THE PROVISIO NS OF SECTION 9, SECTION 195 AND SECTION 40(A)(I) OF THE IT ACT. THEREFORE, ADDITION OF RS. 3,56,919/- IS CONFIRMED. 10. STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFO RE THE TRIBUNAL. 11. LD. AR INVITED THE ATTENTION OF THE BENCH TO PA GE 117 TO 138 OF THE PAPER BOOK WHICH CONTAINS A PHOTOCOPY OF THE AGREEM ENT DATED 17.3.1998 ENTERED IN TO BY THE ASSESSEE WITH GRANT THORNTON INTERNATIONAL. INVITING SPECIFIC ATTENTION TO THE P AGE 119 OF THE SAME, IT WAS SUBMITTED THAT GRANT THORNTON INTERNATIONAL IS A NON-PRACTICING, NON- TRADING INTERNATIONAL UMBRELLA ORGANIZATION AND IS NOT A BUSINESS ENTITY. INVITING ATTENTION TO PAGE 128 SPECIFIC REFERENCE W AS MADE TO CLAUSE 8 OF THE AGREEMENT. IT WAS SUBMITTED THAT THE BASIS OF THE CALCULATION OF THE PAYMENTS ARE SPELT OUT HEREIN AND IT IS NOT ONLY A REIMBURSEMENT OF THE EXPENSES INCURRED. IT WAS HIS SUBMISSION THAT THE A O HAS WRONGLY APPLIED THE VARIOUS JUDGMENTS ON THE BASIS OF WHICH THE ISS UE HAS BEEN DECIDED AGAINST THE ASSESSEE. IT WAS ALSO HIS SUBMISSION TH AT THE CIT(A) HAS NOT CONSIDERED THE SPECIFIC OBJECTIONS OF THE ASSESSEE ADDRESSED IN THE DETAILED WRITTEN SUBMISSIONS PAGE 139 TO 157. FURTH ER THE JUDGMENTS RELIED UPON BY THE ASSESSEE BEFORE THE CIT(A) QUA T HE FACTS OF THE ASSESSEES CASE HAVE ALSO NOT BEEN CONSIDERED. INV ITING ATTENTION TO PAGE 5 OF THE ASSTT. ORDER IT WAS SUBMITTED THAT THE AO HAS APPLIED THE PRINCIPLE AS LAID DOWN IN DANFOSS INDUSTRIES PVT. LTD. WHICH HAS BEEN RENDERED IN THE BACKGROUND WHERE SERVICES CONSISTED OF ADVICE AND ASSISTANCE IN ITA NO. 4703/DEL/10 A SSTT. YEAR 2006-07 & ITA NO. 506/DEL/11 ASSTT. YEAR 2007- 08 8 MARKET RESEARCH, SURVEYS AND STRATEGIES, REVIEW AND RECOMMENDATIONS ETC. WHICH IS NOT THE NATURE OF SERVICES RENDERED B Y THE ASSESSEE TO ITS CLIENTS AS SUCH THE ASSESSEE HAS SPECIFICALLY AGITA TED THIS FACT BEFORE THE CIT(A). IT WAS FURTHER CONTENDED THAT SIMILARLY THE JUDGMENT IN THE CASE OF TIMKEN INDIA LTD. WHICH HAS BEEN APPLIED BY THE AO HAS NO RELEVANCE TO THE FACTS OF THE ASSESSEES CASE. IT WAS HIS VEHEME NT STAND THAT NONE OF THE OBJECTIONS OF THE ASSESSEE HAS BEEN SPECIFICALL Y DISCUSSED IN BY THE CIT(A) AND THE ISSUE HAS BEEN CONCLUDED AGAINST HIM IN A CURSORY MANNER. 12. IN THE AFOREMENTIONED PECULIAR FACTS AFTER HEAR ING THE LD. DR WE ARE OF THE VIEW THAT IT IS APPROPRIATE TO RESTORE THE I SSUE BACK TO THE FILE OF LD. CIT(A) WITH THE DIRECTION TO DECIDE THE SAME BY WAY OF A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE REASO NABLE OPPORTUNITY OF BEING HEARD. IT IS SEEN THAT THE IMPUGNED ORDER IS NOT AN ORDER MEETING THE REQUIREMENTS OF THE INCOME TAX ACT. SECTION 250 OF THE ACT SPECIFICALLY MANDATES THAT THE FIRST APPELLATE AUTH ORITY WHILE DISPOSING OF THE APPEAL SHALL PASS THE ORDER IN WRITING AND WHI LE DOING SO SHALL FIRST STATE THE POINTS FOR DETERMINATION, AND THEREAFTER SHALL ARRIVE AT A DECISION SPECIFICALLY SETTING OUT THE REASONS FOR T HE DECISION TAKEN. THE PROCEDURE LAID DOWN BY THE LEGISLATURE IN ITS WISDO M IS IN LINE WITH THE CANONS OF NATURAL JUSTICE AND THE SETTLED LEGAL PR INCIPLES LAID DOWN TO ENSURE FAIRPLAY AND ENSURE AGAINST ARBITRARINESS A ND WHIMSICAL ADMINISTRATIVE AND QUASI ADMINISTRATIVE ACTIONS. IT IS SEEN THE LEGISLATIVE ITA NO. 4703/DEL/10 A SSTT. YEAR 2006-07 & ITA NO. 506/DEL/11 ASSTT. YEAR 2007- 08 9 MANDATE HAS NOT BEEN FOLLOWED AND BY NOT ADHERING TO THE REQUIREMENTS OF THE ACT, THE ASSESSEE HAS BEEN DEPRIVED OF HIS R IGHTS TO ASSAIL THE ORDER IN AN EFFECTIVE MANNER. THE SAID ACT CANNOT BE UPH ELD BY US. ACCORDINGLY IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND THE POSITION OF LAW WE DEEM IT FIT TO RESTORE THE ISSUE BACK TO THE FILE OF LD. CIT(A) WITH THE ABOVE DIRECTION. 13. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSE E IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 506/DEL/2011 14. IN THE ITA 506/DEL/11 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRM ING THE DISALLOWANCE U/S 40(A)(IA) OF AN AMOUNT OF RS. 10,2 0,331/-PAID TO GRANT THORNTON INTERNATIONAL FOR NON-DEDUCTION O F TAXES THEREON WITHOUT APPRECIATING THE NATURE OF SAID PAY MENTS BEING MEMBERSHIP FEES AND CONTRIBUTION IN EXPENSES ON WHICH NO TDS WAS REQUIRED TO BE DEDUCTED. THUS THE ADDITI ON SO MADE IGNORING THE FACTS OF THE CASE SHOULD BE DELET ED. 2. THE CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG DISALLOWNCE U/S 40(A)(IA) OF AN AMOUNT OF RS. 12,42,433/- PAID TO GRANT THORNTON UK AS CONTRIBUTION IN THE EXPENSES INCURRE D ON PARMALAT LITIGATION TO DEFEND THE INTEREST OF THE G RANT THORNTON INTERNATIONAL, AN ASSOCIATION OF WHICH ASS ESSEE IS A MEMBER WITHOUT APPRECIATING THE FACTS OF THE CASE T HAT NO TDS WAS REQUIRED TO BE DEDUCTED ON THE SAME. THUS T HE ADDITION SO MADE SHOULD BE DELETED. 15. LD. AR IN REGARD TO GROUND NO. 1 CONTENDED THAT SINCE IN THE EARLIER YEAR THE IDENTICAL ISSUE HAS BEEN RESTORED TO THE FILE OF LD. CIT(A) ITA NO. 4703/DEL/10 A SSTT. YEAR 2006-07 & ITA NO. 506/DEL/11 ASSTT. YEAR 2007- 08 10 THIS YEAR TOO MAY IN LINE WITH THE EARLIER YEAR BE RESTORED BACK WITH AN IDENTICAL DIRECTION. AFTER CONSIDERING THE SUBMISSI ONS OF THE LD. DR WE ARE OF THE VIEW THAT AS FAR AS GROUND NO. 1 IS CONCERNE D IT IS APPROPRIATE TO RESTORE THE ISSUE. IT IS SEEN THAT HEREIN ALSO THE OBJECTIONS OF THE ASSESSEE ON THE INAPPLICABILITY OF THE DECISION RELIED UPON BY THE AO QUA THE SPECIFIC FACTS OF THE ASSESSEES CASE HAS NOT BEEN CONSIDERED. IT IS SEEN THAT HEREIN ALSO THE IMPUGNED ORDER HAS BEEN PASSE D UPHOLDING THE ORDER WITHOUT FOLLOWING THE PROCEDURE LAID DOWN IN SECTIO N 250 OF THE ACT. ACCORDINGLY IN LINE WITH THE VIEW TAKEN IN THE EARL IER APPEAL THE SAID ISSUE IS ALSO RESTORED BACK TO THE FILE OF THE AO WITH TH E DIRECTION TO DECIDE THE SAME IN ACCORDANCE WITH LAW GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 16. VIDE GROUND NO. 2 THE ASSESSEE HAS AGITATED AGA INST THE ACTION OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY T HE AO U/S 40(A)(IA) HOLDING THE ASSESSEE LIABLE FOR NON-DEDUCTION OF TA X. THE COMMON STAND OF THE PARTIES BEFORE THE BENCH QUA THE SAID GROUND WA S THAT SINCE THE MAIN ISSUE HAS BEEN RESTORED TO THE CIT(A) ON THE REASON ING THAT THERE IS NO DISCUSSION BY THE CIT(A) ON THE SPECIFIC OBJECTIONS OF THE ASSESSEE AS SUCH THE SAID ISSUE MAY ALSO BE RESTORED. ACCORDINGLY IN LINE WITH THE COMMON STAND OF THE PARTIES BEFORE THE BENCH WE RESTORE TH E ISSUE ALSO TO THE FILE OF THE CIT(A) WITH THE DIRECTION TO DECIDE THE SAM E IN ACCORDANCE WITH LAW ITA NO. 4703/DEL/10 A SSTT. YEAR 2006-07 & ITA NO. 506/DEL/11 ASSTT. YEAR 2007- 08 11 BY WAY OF SPEAKING ORDER. NEEDLESS TO SAY THAT THE ASSESSEE SHALL BE AFFORDED A REASONABLE OPPORTUNITY OF BEING HEARD. 17. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES AS PER THE PRONOUNCEMENT MADE IN THE OPEN COURT ON THE DAY OF HEARING I.E. 11.7.2011. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [B.C. MEENA] [B.C. MEENA] [B.C. MEENA] [B.C. MEENA] [DIVA SINGH] [DIVA SINGH] [DIVA SINGH] [DIVA SINGH] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED: 11.7.2011 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT