ITO, Gurgaon V. Platrormone (I)Pvt Ltd, Gurgaon

ITA 541/DEL/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6751 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 2
• Next Hearing Date: 01-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 28-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-II, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 541 /DEL/201 5 A.Y. : 20 09 - 1 0 INCOME TAX OFFICER, WARD 3(2), GURGAON VS. M/S PLATFORMONE INDIA PVT. LTD., A-55, BELVEDERE PARK, DLF PHASE-3, GURGAON (PAN:AADCP4686K) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. S.K. JAIN, SR. DR ASSESSEE BY : SH. ANIL BHALLA, CA ORDER THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 26/11/2014 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-1, GURGAON ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN FACT AND IN LAW IN ACCEPTING THA T THE INCOME EARNED BY THE ASSESSEE, IF ANY, FROM ITS HOLDI NG COMPANY IN USA WOULD BE EXEMPT U/S. 10A OF THE I.T. ACT, 1961 EVEN IF IT WOULD HAVE BEEN SHOWN IN THE ACCOUNTS IGNORING THE FACT THAT DEDUCTION U/S. 10A WO ULD NOT BE AVAILABLE IF THE FOREIGN EXCHANGE IS NOT BROUGH T INTO INDIA IN CONVERTIBLE FOREIGN EXCHANGE WITHIN THE SPECIFIED DATE. 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN FACT AND IN LAW IN NOT APPRECIATI NG THE FACT THAT THE ASSESSEE HAS NOT JUSTIFIED OR EXPLAI NED HIS CLAIM THAT THE EMPLOYEES HAD GONE TO US FOR TRAI NING. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN FACT AND IN LAW IN IGNORING THE FACT THAT FOUR EMPLOYEES WHO HAD UNDERGONE TRAINING IN U S DID NOT CONTINUE IN SERVICE OF THE ASSESSEE COMPANY BY THE END OF THE FINANCIAL YEAR. 4. THAT THE APPELLANT CRAVES FOR THE PERMISSION TO ADD, DELETE OR AMEND GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY F ILED ITS RETURN OF INCOME OF RS. 2,81,980/- ON 22.9.2009. THIS RETU RN WAS PROCESSED U/S. 143(1) OF THE I.T. ACT, 1961 ON 31.1.2 011 AT THE SAME INCOME. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY THROUGH CASS SYSTEM. LATER, NOTICE U/S. 143(2) WAS ISS UED BY THE AICT, CIRCLE-I, GURGAON ON 25.8.2010 AND THEREAFTER THE CASE WAS ASSIGNED TO CIT, FARIDABAD, WHO ISSUED THE NOTICES U /S. 143(2) & 142(1) OF THE I.T. ACT TO THE ASSESSEE. IN RESPONSE TO T HE SAME, ASSESSEES A.R. ATTENDED THE PROCEEDINGS ON BEHALF O F THE ASSESSEE COMPANY FROM TIME TO TIME AND FILED THE INFORMATION. TH EREAFTER THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 36,13,060/ - VIDE HIS ORDER DATED 16.12.2011 PASSED U/S. 143(3) OF THE I.T . ACT, 1961, BY MAKING THE ADDITION OF RS. 34,26,566/- DUE TO THE REASO N THAT THE 3 ASSESSEE COMPANYS PERSONNEL INSTEAD OF UNDERGOING TRAINING IN THE PARENT COMPANYS OFFICE, M/S PLATFORMONE INC. USA, W ERE RENDERING SERVICES TO IT. AFTER HOLDING THIS, THE AO CALCULATED THE REMUNERATION OF ITS EMPLOYEES CONSIDERING NUMBER O F WEEK DAYS THEY WERE AT THE PREMISES OF THE PARENT COMPANY. 3. AGGRIEVED WITH THE ASSESSMENT ORDER, ASSESSEE PREF ERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 26.11.2014 HAS DELETED THE ADDITION AND ALLOWED THE APPEAL OF THE ASSESSEE. 4. NOW THE REVENUE IS AGGRIEVED AGAINST THE IMPUGNED ORDER AND FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING LD. DR RELIED UPON THE ORDER OF THE AO AND REITERATED THE CONTENTIONS RAISED BY THE REVENUE IN THE GROUNDS AND REQUESTED THAT APPEAL OF THE REVENUE MAY BE ALLOW ED. 6. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT LD. CIT(A) HAS PASSED A WELL REASONED ORDER WHICH NEEDS TO BE UPHELD AND AC CORDINGLY, THE APPEAL OF THE REVENUE MAY BE DISMISSED. 7. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE REC ORDS, ESPECIALLY THE IMPUGNED ORDER PASSED BY THE LD. CIT( A). I FIND THAT LD. CIT(A) HAS ELABORATELY ADJUDICATED THE ISSUE RAISE D IN GROUND 4 NO. 1 TO 3 IN DISPUTE VIDE PARA NO. 4.2 TO 4.3 FROM PAGES 5 TO 8 OF THE IMPUGNED ORDER AS UNDER:- 4.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND GO NE THROUGH THE SUBMISSIONS OF THE APPELLANT. THE AO HELD THAT THE 11 EMPLOYEES OF THE APPELLANT COMPANY HAD RENDERED SERVICES TO THE HOLDING COMPANY RATHER THAN UNDER-GOING ANY TRAINING IN THE US. AFTER HOLDING THE SAME, THE AO WENT AHEAD WITH THE COMPUTATION OF INCOME OF THESE 11 EMPLOYEES AT RS.34,26,566/-, WHICH WAS ADDED TO THE INCOME OF THE APPELLANT COMPANY IN THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT GAVE DETAILED SUBMISSIONS ALONG WITH DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE FACT THAT ALL THE 11 EMPLOYEES HAD UNDER-GONE TRAINING AT THE PREMISES OF ITS HOLDING COMPANY IN THE US AND DURING THE PERIOD THEY WERE WITH THE HOLDING COMPANY, NO SERVICES WERE RENDERED BY THEM. ON THIS BASIS, THE APPELLANT COMPANY SUBMITTED THAT THE QUESTION OF ADDING ANY NOTIONAL REMUNERATION OF THESE 11 EMPLOYEES TO THE INCOME OF THE APPELLANT COMPANY WAS WITHOUT ANY BASIS AND THUS DESERVED TO BE DELETED. AFTER GOING THROUGH THE SUBMISSIONS OF THE APPELLANT IN THE LIGHT OF THE FACTS OF THE CASE THE FOLLOWING OBSERVATIONS ARE MADE: I. THE APPELLANT COMPANY WAS A REGISTERED UNIT OF SOFTWARE TECHNOLOGY PARK OF INDIA AND HAD BEEN 5 PROVIDING HUMAN RESOURCES RELATED TO ITES SERVICES TO ITS HOLDING COMPANY IN THE US AND CLAIMING EXEMPTION U/S 1OA OF THE ACT. IN SUPPORT OF ITS ENTITLEMENT TO EXEMPTION U/S 1OA OF THE INCOME TAX ACT, THE APPELLANT SUBMITTED A COPY OF ITS REGISTRATION, WHICH WAS ALSO GIVEN AT THE TIME OF ASSESSMENT PROCEEDINGS. FURTHERMORE THE APPELLANT COMPANY POINTED OUT THAT THE AO ERRED IN HOLDING THAT THE INCOME DERIVED FROM SUPPLY OF MANPOWER WILL NOT QUALIFY FOR EXEMPTION U/S 1OA. IN ORDER TO SUBSTANTIATE THE FACT THAT THE SAID SERVICES QUALIFY FOR EXEMPTION U/S 1OA OF THE INCOME TAX ACT, THE APPELLANT ENCLOSED NOTIFICATION NO. 890E DATED 26.09.2000 ISSUED BY THE CBDT, AS PER WHICH HUMAN RESOURCES SERVICES UNDER INFORMATION TECHNOLOGY ENABLED PRODUCTS ARE ELIGIBLE FOR THE SAID EXEMPTION. HENCE THESE FACTS MAKE IT CLEAR THAT THE APPELLANT WAS ENTITLED TO EXEMPTION UNDER SECTION 1OA OF THE ACT. ONCE IT IS ESTABLISHED THAT THE APPELLANT COMPANY WAS ENTITLED TO EXEMPTION U/S 1OA OF THE INCOME TAX ACT, THERE IS VERY LITTLE FORCE LEFT IN THE AO'S POSITION THAT THE APPELLANT COMPANY HAD CONCEALED INCOME DERIVED BY ITS EMPLOYEES ON THEIR VISIT TO USA. IF THE EMPLOYEES HAD EARNED ANY INCOME DURING THEIR VISIT TO THE HOLDING COMPANY IN USA, THE APPELLANT COMPANY COULD HAVE SHOWN THE SAME AND CLAIMED EXEMPTION U/S 1OA OF THE INCOME TAX ACT. THUS, ANY ATTEMPT BY THE APPELLANT COMPANY TO UNDER-STATE ITS INCOME 6 BY RESORTING TO THE PRACTICES MENTIONED ABOVE DEFIES LOGIC AND COMMON SENSE. II. THE AO MADE THE ADDITION IN VIEW OF THE FACT THAT FULL DETAILS WERE NOT SUBMITTED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 'HOWEVER, ON A PERUSAL OF THE DETAILS FILED BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS, IT WAS REVEALED THAT A NUMBER OF DETAILS SUBMITTED AT THE TIME OF ASSESSMENT PROCEEDINGS WERE NOT ACKNOWLEDGED BY THE AO IN HIS ASSESSMENT ORDER. THESE INCLUDE NOTE ON EXPENSES ON TRAVELLING AND EXPENDITURE ON FOREIGN TRAINING, COPIES OF PASSPORTS OF DIRECTORS AND SOME OF THE EMPLOYEES, ADDRESSES AND E-MAILS IDS OF EMPLOYEES SENT ABROAD, BUSINESS WORK FLOW CHART, ETC. IN ADDITION DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT SUBMITTED SOME MORE INFORMATION WHICH GOES TO ESTABLISH THE FACT THAT THE EMPLOYEES HAD GONE ON TRAINING RATHER THAN FOR RENDERING SERVICES ABROAD. THIS INCLUDES A NOTE ON THE NATURE OF TRAINING GIVEN, SAMPLE COPY OF TRAININ G LETTERS OF EMPLOYEES SELECTED FOR TRAINING, COPY OF PASSPORT AND VISA OF THE EMPLOYEES ETC. ALONG WITH THIS, THE APPELLANT ALSO GAVE NECESSARY DOCUMENTS TO SUBSTANTIATE THE FACT THAT IT IS ELIGIBLE FOR EXEMPTION U/S 1OA OF THE INCOME TAX ACT. ALL THESE DOCUMENTS TOGETHER WITH THE APPELLANT'S SUBMISSIONS GO TO ESTABLISH THE POINT THAT THE 11 7 EMPLOYEES OF THE APPELLANT COMPANY HAD GONE FOR TRAINING TO ITS HOLDING COMPANY IN THE US. III. THE APPELLANT HAS EXPLAINED THE RATIONALE FOR UNDERTAKING SUCH TRAINING FOR ITS EMPLOYEES. IT HAS ALSO PLACED RELIANCE ON THE HON'BLE DELHI HIGH COURT JUDGEMENT IN THE CASE OF CIT VS SAMSUNG INDIA ELECTRONICS LTD. (2013) 38 TAXMANN.COM 151 (DELHI), AS PER WHICH EXPENDITURE INCURRED ON TRAINING WAS HELD TO BE ALLOWABLE FOR THE PURPOSE OF ASSESSEE'S BUSINESS. 4.3 HENCE, AFTER A CAREFUL CONSIDERATION OF THE FACTS OF THE CASE AND THE APPELLANT'S SUBMISSIONS, I HOLD THAT THE AO ERRED IN MAKING AN ADDITION OF RS.34,26,566/- TO THE INCOME OF THE APPELLANT. THE DOCUMENTS GIVEN DURING THE TIME OF ASSESSMENT AS WELL AS APPELLATE PROCEEDINGS TOGETHER WITH THE FACT THAT THE APPELLANT IS ENTITLED TO EXEMPTION U/S 10A OF THE INCOME TAX ACT MAKE IT AMPLY CLEAR THAT THE APPELLANT HAD SENT ITS 11 EMPLOYEES FOR TRAINING AN D THE AO BY ADDING A NOTIONAL AMOUNT OF RS.34,26,566/- TO THE APPELLANT'S INCOME DID NOT APPRECIATE THE FACTS OF THE CASE. HENCE, THE ADDITION OF RS.34,26,566/- MADE BY THE AO IS UNLAWFUL, UNJUSTIFIED AND IS HEREBY DELETED. ACCORDINGLY, GROUND NO.4 OF THE APPEAL IS ALLOWED. 7.1 AFTER GOING THROUGH THE FINDINGS OF THE LD. CIT(A ), AS AFORESAID, I FIND THAT THE ASSESSEE COMPANY WAS A REGISTERED UNIT OF SOFTWARE TECHNOLOGY PARK OF INDIA AND HAD BEEN PROV IDING HUMAN 8 RESOURCES RELATED TO ITES SERVICES TO ITS HOLDING CO MPANY IN THE US AND CLAIMING EXEMPTION U/S 1OA OF THE ACT. IN SUPPORT OF ITS ENTITLEMENT TO EXEMPTION U/S 1OA OF THE INCOME TAX ACT, THE ASSESSEE SUBMITTED A COPY OF ITS REGISTRATION AT THE ASS ESSMENT AS WELL AS APPELLATE STAGE. FURTHERMORE THE ASSESSEE COM PANY POINTED OUT THAT THE AO ERRED IN HOLDING THAT THE INCOME DERIVE D FROM SUPPLY OF MANPOWER WILL NOT QUALIFY FOR EXEMPTION U/S 1OA. IN ORDER TO SUBSTANTIATE THE FACT THAT THE SAID SERVICES QUALIFY F OR EXEMPTION U/S 1OA OF THE INCOME TAX ACT, THE ASSESSEE ENCLOSED NOTIFICATION NO. 890E DATED 26.09.2000 ISSUED BY THE CBDT, AS PER WHICH HUMAN RESOURCES SERVICES UNDER INFORMATION TECHNOLO GY ENABLED PRODUCTS ARE ELIGIBLE FOR THE SAID EXEMPTION. HENCE TH ESE FACTS MAKE IT CLEAR THAT THE ASSESSEE WAS ENTITLED TO EXEMPTION UN DER SECTION 1OA OF THE ACT. IT IS ALSO ESTABLISHED THAT THE ASSESSE E COMPANY WAS ENTITLED TO EXEMPTION U/S 1OA OF THE INCOME TAX A CT, THERE IS VERY LITTLE FORCE LEFT IN THE AO'S POSITION THAT THE ASSESSEE COMPANY HAD CONCEALED INCOME DERIVED BY ITS EMPLOYEES ON THEI R VISIT TO USA. IF THE EMPLOYEES HAD EARNED ANY INCOME DURING THEIR VISIT TO THE HOLDING COMPANY IN USA, THE ASSESSE COMPANY COULD HAVE SHOWN THE SAME AND CLAIMED EXEMPTION U/S 1OA OF THE I NCOME TAX ACT. THUS, ANY ATTEMPT BY THE ASSESSEE COMPANY TO UND ER-STATE ITS INCOME BY RESORTING TO THE PRACTICES MENTIONED ABOVE DEFIES LOGIC 9 AND COMMON SENSE. I FURTHER NOTE THAT THE AO MADE TH E ADDITION IN VIEW OF THE FACT THAT FULL DETAILS WERE NOT SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER , LD. CIT(A) HAS OBSERVED THAT DURING THE COURSE OF APPELLATE PROC EEDINGS, IT WAS REVEALED THAT A NUMBER OF DETAILS SUBMITTED AT THE TIME OF ASSESSMENT PROCEEDINGS WERE NOT ACKNOWLEDGED BY THE A O IN HIS ASSESSMENT ORDER. THESE INCLUDE NOTE ON EXPENSES ON TR AVELLING AND EXPENDITURE ON FOREIGN TRAINING, COPIES OF PASSPORTS OF DIRECTORS AND SOME OF THE EMPLOYEES, ADDRESSES AND E-MAILS IDS OF EMPLOYEES SENT ABROAD, BUSINESS WORK FLOW CHART, ETC. IN ADDITI ON DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTE D SOME MORE INFORMATION WHICH GOES TO ESTABLISH THE FACT THAT THE E MPLOYEES HAD GONE ON TRAINING RATHER THAN FOR RENDERING SERVICES ABROAD. THIS INCLUDES A NOTE ON THE NATURE OF TRAINING GIVEN, SA MPLE COPY OF TRAINING LETTERS OF EMPLOYEES SELECTED FOR TRAINING, COPY OF PASSPORT AND VISA OF THE EMPLOYEES ETC. ALONG WITH THIS, THE ASSESSEE ALSO GAVE NECESSARY DOCUMENTS TO SUBSTANTIATE THE FACT TH AT IT IS ELIGIBLE FOR EXEMPTION U/S 1OA OF THE INCOME TAX ACT. ALL THESE DOCUMENTS TOGETHER WITH THE ASSESSEE'S SUBMISSIONS ESTABLISHES TH E POINT THAT THE 11 EMPLOYEES OF THE ASSESSEE COMPANY HAD GONE FO R TRAINING TO ITS HOLDING COMPANY IN THE US. THE ASSESSEE HAS EXPL AINED THE RATIONALE FOR UNDERTAKING SUCH TRAINING FOR ITS EMPLO YEES. THE CASE 10 LAW REFERRED BY THE LD. CIT(A) I.E. HON'BLE DELHI HI GH COURT JUDGEMENT IN THE CASE OF CIT VS SAMSUNG INDIA ELECTRON ICS LTD. (2013) 38 TAXMANN.COM 151 (DELHI), MENTIONED IN HI S IMPUGNED ORDER IN WHICH THE HONBLE HIGH COURT HAS SPECIFICAL LY HELD THAT EXPENDITURE INCURRED ON TRAINING IS ALLOWABLE FOR THE PURPOSE OF ASSESSEE'S BUSINESS. THEREFORE, IN MY CONSIDERED OPINION THE ADDITION IN DISPUTE WAS RIGHTLY DELETED BY THE LD. CIT (A) WHICH DOES NOT NEED ANY INTERFERENCE ON MY PART, HENCE, I UPHOLD THE SAME AND DISMISS THE GROUNDS RAISED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/02/2017. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE 02/02/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES