ACIT, CIRCLE- 10(2), NEW DELHI V. GROZ ENGINEERING TOOLS PVT. LTD., NEW DELHI

ITA 5488/DEL/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 2464 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 29-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Assessee Lawyers: ASHISH GOEL
• Keywords: Capital expenditure; TDS
• Section: 143(3); 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 5488/DEL/2017 : ASSTT. YEAR : 2012-13 ACIT, CIRCLE-10(2), NEW DELHI-110002 VS GROZ ENGINEERING TOOLS PVT. LTD., C-717, NEW FRIENDS COLONY, NEW DELHI-110065 (APPELLANT) (RESPONDENT) PAN NO. AABCG4017H ASSESSEE BY : SH. VED JAIN, ADV. & SH. ASHISH GOEL, CA REVENUE BY : SH. PRAKASH DUBEY, SR. DR DATE OF HEARING: 19.01.2021 DATE OF PRONOUNCEMENT: 17.02.2021 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE A GAINST THE ORDER OF THE LD. CIT(A)-39, NEW DELHI DATED 26. 05.2017. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENU E: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 38,12,375/- MADE ON ACCOUNT OF DISALLOWANCE ON ACCOUNT OF PAYMENT OF ROYALTY VID E ORDER U/S 143(3) OF THE I.T. ACT 1961 PASSED BY THE DCIT, CIRCLE 10(2), IGNORING THE FACT THAT THE ASSESSEE COMPANY HAS FAILED TO PROVE ANY LEGAL BACKING TO THE AGREEMENT AND THERE IS NOTHING MENTIONED IN THE AGREEMENT REGARDING THE JUSTIFICATION FOR THESE PAYMENTS. ITA NO. 5488/DEL/2017 GROZ ENGINEERING TOOLS PVT. LTD. 2 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,04,15,947/- MADE ON ACCOUNT OF NON-DEDUCTION OF TDS ON COMMISSION PAYMENT MADE TO FOREIGN COMPANIES U/S 40(A)(IA) VIDE ORDER U/S 143(3) OF THE I.T. ACT 1961 PASSED BY THE DCIT, CIRCLE 10(2), IGNORING THE FACT THAT THOUGH THE PAYMENT HAS BEEN MADE FOR WORK DONE OUTSIDE INDIA BUT THE PROFIT IS ACTUALLY EARNED IN INDIA. 3. THE AO HAS DISALLOWED THE ROYALTY PAYMENT MADE B Y THE ASSESSEE TO M/S MACNAUGHT PVT. LTD. AUSTRALIA IN PU RSUANCE OF AGREEMENT DATED 01.06.2005 TREATING THE ROYALTY PAY MENT AS CAPITAL EXPENDITURE. THE AO FURTHER RELIED ON THE O RDERS OF THE LD. CIT (A) FOR THE EARLIER YEARS. THE DISALLOWANCE WAS AGITATED BEFORE THE LD. CIT (A) WHO HAS ALLOWED THE APPEAL O F THE ASSESSEE ON THE GROUNDS THAT THE SIMILAR DISALLOWAN CE MADE BY THE AO WAS ALLOWED IN FAVOUR OF THE ASSESSEE BY THE JURISDICTIONAL ITAT NEW DELHI IN ITA NOS. 637 & 638 /DEL/2013 FOR A.Y. 2005-06 DATED 01.10.2014, ITA NO. 4373/DEL /2013 FOR AY 2007-08 DATED 01.10.2014 AND IN ITA NO. 4776/DEL /2013 DATED 14.11.2014 AND FOR A.Y. 2011-12 AND 2013-14 I N ITA NO. 274/2016-17 AND 276/2016-17 RESPECTIVELY VIDE ORDER DATED 10.02.2017. 4. WE ALSO FIND THAT THE HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2008-0 9 IN ITA NO.475 & 476/2005 HAS DISMISSED THE APPEAL OF THE R EVENUE FILED AGAINST THE ORDER OF THE ITAT. THUS, THE ISSU E STANDS SETTLED IN FAVOUR OF THE ASSESSEE. HENCE, THE APPEA L OF THE REVENUE IS DISMISSED ON THIS GROUND. ITA NO. 5488/DEL/2017 GROZ ENGINEERING TOOLS PVT. LTD. 3 5. APROPOS GROUND NO. 2 DEALING WITH NON-DEDUCTION OF TDS ON COMMISSION PAID TO FOREIGN COMPANIES HAS ALSO BE EN DEALT BY THE CO-ORDINATE BENCH OF THE TRIBUNAL FOR THE A.Y. 2011-11 AS WELL AS FOR A.Y. 2013-14 WHEREIN IT WAS HELD THAT T HE COMMISSION HAS BEEN PAID TO FOREIGN AGENTS DECIDING OUTSIDE INDIA AND THEY HAVE NOT RENDERED ANY TECHNICAL SERV ICES AND HENCE DO NOT COME UNDER THE PROVISIONS OF SECTION 9 (1)(VII)(B) OF THE INCOME TAX ACT, 1961. IN THE ABSENCE OF ANY CHANGE IN THE POSITION OF THE FACTS AND PROPOSITION OF THE LA W, WE HOLD THAT THE DISALLOWANCE MADE BY THE AO U/S 40(A)(IA) IS NO T LEGALLY TENABLE. WE AFFIRM THE ORDER OF THE LD. CIT (A) ON THIS GROUND. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/02/2021. SD/- SD/- (BHAVNESH SAINI) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACCOUN TANT MEMBER DATED: 17/02/2021 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR