ACIT, Noida V. M/s. Ningbo Bird Sales Company Ltd., Noida

ITA 5404/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52500 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 03-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 01-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Section: 142(1); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.D. RANJAN ITA NO. 5404/DEL/2010 ASSESSMENT YEAR: 2005-06 ASSISTANT COMMISSIONER OF IT, VS. M/S.NINGBO BIRD SALES CORPN. CIRCLE NOIDA. LTD., C-56/40, 3 RD FLOOR, NOIDA. AMRAPALI TOWERS, SEC. 62, NOIDA. (PAN: AACCN0592K) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RS NEGI , SR.DR RESPONDENT BY: NONE (NOTICE RET URNED) ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 10.09.2010 PASSED FOR ASSESSMENT YEAR 2005-06. THE SUBSTANTIAL GROUND OF THE APPEAL PROJECTING THE GRI EVANCE OF REVENUE READS AS UNDER: 1. THAT THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS BY DELETING THE ADDITION OF RS.18,35,768 IGNORING PROV ISIONS OF SECTION 2(24) SUB-CLAUSE (XII) READ WITH SECTION 28(VA) OF THE INCOME-TAX ACT, 1961. 2. THE NOTICE OF HEARING WAS SENT TO THE ASSESSEE B Y REGISTERED POST. IT HAS BEEN RETURNED BY THE POSTAL AUTHORITIES WITH A REMARK THAT NO ONE IS AVAILABLE AT THE GIVEN ADDRESS OF THIS NAME. THEREA FTER, NOTICE WAS SENT 2 THROUGH THE DEPARTMENT. LEARNED DR HAS INFORMED THA T ASSESSEE HAS LEFT THE PREMISES AND ITS WHEREABOUTS ARE NOT TRACEABLE. WE PROCEED TO DISPOSE OF THIS APPEAL EX PARTE QUA THE ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED ITS RETURN OF INCOME ON 30.3.2006 DECLARING NIL INCOME. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SEC. 143(2) ALONG WITH QUESTIONNAIRE UNDER SEC. 142(1) WERE ISSUED AND SER VED UPON THE ASSESSEE. SHRI RAJIV NIGAM, CA APPEARED AND FILED THE DETAILS BEFORE THE ASSESSING OFFICER. IT REVEALED TO THE ASSESSING OFFICER THAT ASSESSEE COMPANY RUNS A LIAISON OFFICE FOR THE PURPOSE OF COMMUNICATION CHA NNEL BETWEEN THE HEAD OFFICE AND THE PARTIES IN INDIA. THE RESPONDENTS PARENT COMPANY IS ENGAGED IN THE SALE OF ELECTRONICS AND COMMUNICATION PRODUC TS ON WHOLESALE BASIS AS WELL AS RETAIL BASIS. THE HEAD OFFICE HAS REMITTED A SUM OF RS.66,72,912 TOWARDS EXPENDITURE. THE SUM OF RS.48,37,768 HAS BE EN INCURRED UNDER DIFFERENT HEADS. THE BALANCE I.E. SURPLUS OVER EXPE NDITURE AMOUNTING TO RS.18,35,768 HAS BEEN CONSIDERED BY THE ASSESSING O FFICER AS INCOME OF THE ASSESSEE UNDER SEC. 2(24)(XII) READ WITH SECTION 28 (VA) OF THE ACT. ASSESSING OFFICER HAS JUST PASSED ONE AND HALF PAGE ORDER. HE DID NOT DISCUSS THE NATURE 3 OF THE INCOME AND HOW IT CAN BE CONSTRUED AS AN INC OME IN THE HANDS OF THE ASSESSEE. ASSESSING OFFICER HAS MADE AN ADDITION OF RS.18,35,768. 4. DISSATISFIED WITH THE ADDITION, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(APPEALS). IT POINTED OUT THA T ASSESSING OFFICER HAS MISERABLY FAILED TO CONSTRUE THE PROVISIONS OF SEC. 2(24)(XII) AND SECTION 28(VA) OF THE ACT. IT WAS POINTED OUT THAT IN SECTI ON 2(24)(XII), DEFINITION OF INCOME HAS BEEN GIVEN WHICH FURTHER CONTEMPLATES TH AT ANY SUM REFERRED TO IN CLAUSE (VA) OF SECTION 28 WOULD BE CONSIDERED AS INCOME. SECTION 28 SUB- CLAUSE (VA) FURTHER PROVIDES THAT ANY SUM WHETHER RECEIVED OR RECEIVABLE IN CASH OR KIND UNDER AN AGREEMENT FOR, NOT CARRYING O UT ANY ACTIVITY IN RELATION TO ANY BUSINESS, WOULD THUS BE EQUATED AS INCOME. ASSESSING OFFICER DID NOT APPLY OTHER CLAUSES OF 28(VA). HE CONFINED THE CASE OF THE ASSESSEE WITHIN SECTION 28(VA) SUB-CLAUSE (A) OF THE ACT. AS SESSEE HAD NOT RECEIVED MONEY FROM THE HEAD OFFICE FOR NOT CARRYING OUT ANY ACTIVITY IN RELATION TO ANY BUSINESS. IT IS JUST A LIAISON OFFICE WHICH WAS OPERATING UNDER THE PERMISSION OF RBI. IT WAS ALSO SUBMITTED THAT IT IS QUITE RIDICULOUS TO SUGGEST THAT RBI HAS GIVEN PERMISSION TO CHINA OFFICE AT IN DIA TO OPEN A COMMERCIAL PLACE OF BUSINESS WHICH WILL NOT CARRY ON BUSINESS IN INDIA AS PER HIDDEN AGREEMENT AND THE REMITTANCE FROM HEADQUARTER TO IN DIA OFFICE WILL BE FOR 4 NOT DOING ANY BUSINESS IN INDIA INSTEAD OF MEETING INDIANS LIAISON OFFICE EXPENSES. LEARNED FIRST APPELLATE AUTHORITY HAS REP RODUCED THE DETAILED WRITTEN SUBMISSIONS FILED BY THE ASSESSEE THROUGH V ARIOUS LETTERS AS WELL AS FINDING RECORDED BY THE ASSESSING OFFICER. ON AN AN ALYSIS OF ALL THESE DETAILS, LEARNED CIT(APPEALS) HAS HELD THAT ASSESSE E HAS A STATUS OF LIAISON OFFICE, WHICH HAS BEEN ACCEPTED BY THE ASSESSING OF FICER HIMSELF IN NEXT YEARS ASSESSMENT ORDER. THE EXPENSES REMITTED BY T HE HEAD OFFICE AND REMAINED UNUTILIZED WOULD NOT BE A PROFIT ASSESSABL E IN THE HANDS OF THE ASSESSEE. IN THIS WAY, LEARNED CIT(APPEALS) HAS DEL ETED THE ADDITION. 5. WITH THE ASSISTANCE OF LEARNED DR, WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE ARE OF THE OPINION THAT ASSESSING OF FICER HAS MISERABLY FAILED TO CONSTRUE THE TRUE IMPORT OF SECTION 28(VA). IT I S BASICALLY APPLICABLE IN THOSE CASES WHEREIN NON COMPETE FEES ETC. HAS BEEN RECEIVED BY ANY ASSESSEE. WHY THE HEAD OFFICE WOULD PAY SUCH TYPE O F MONEY TO A LIAISON OFFICE. THE LIAISON OFFICE IS NOT CARRYING OUT ANY BUSINESS ACTIVITIES INDEPENDENTLY. ASSESSING OFFICER HAS NOT BROUGHT OU T ANY FACTS TO THIS EFFECT. HE HAS SIMPLY CONSIDERED THE SURPLUS OVER EXPENDITU RE, AS A FEE PAID BY THE HEAD OFFICE FOR ELIMINATING THE COMPETITION WITH TH E ASSESSEE IN INDIAN MARKET. THERE ARE NO SUCH FACTS ON THE RECORD. LEAR NED FIRST APPELLATE 5 AUTHORITY HAS APPRECIATED THE FACTS AND CIRCUMSTANC ES IN RIGHT PERSPECTIVE AND DELETED THE ADDITION. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED CIT(APPEALS). HENCE, THE APPEAL OF THE REVE NUE IS REJECTED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 03.08.201 1 SD/- SD/- ( K.D. RANJAN ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 03/08/2011 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR