M/s. Noida Software Technology Park Ltd., New Delhi V. DCIT, New Delhi

ITA 5548/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3459 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 13-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVRAJ SINGH
• Keywords: Opportunity of being heard; Rule of consistency; Earning of tax free income; Retrospective amendment; Non-deduction of tax
• Section: 143(3); 14A; 6; 28

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH E, NEW DELHI BEFORE : SHRI BHANESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 5548/DEL./2014 ASSESSMENT YEAR: 2010-11 NOIDA SOFTWARE TECHNOLOGY PARK LTD., SCINDIA VILLA, RING ROAD, SAROJINI NAGAR NEW DELHI. (PAN-AABCN0137F) (APPELLANT) VS. D.C.I.T., CIRCLE 13(1), NEW DELHI. (RESPONDENT) ASSESSEE BY SHRI KAPIL GOEL, ADVOCATE REVENUE BY SH. SHIV RAJ SINGH, SR. DR ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A)-XVI, NEW DELHI DATED 18.07.2014 FOR THE ASSE SSMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS : 1. THAT THE COMMISSIONER OF INCOME TAX (APPEA LS) ['CIT(A)'] ERRED ON FACTS AND IN LAW IN SUSTAINING DISALLOWANCE OF PAYM ENT FOR DOWNLINKING CHARGES, TRANSPONDER RENT AND TELEPORT CHARGES AMOUNT ING TO RS. 9,19,93,631 UNDER SECTION 40(A)(IA) OF THE INCOME-T AX ACT, 1961 ('ACT') ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE BY THE AP PELLANT UNDER SECTION 194J OF THE ACT. 1.1 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN HOLDING THAT IN VIEW OF EXPLANATION 6 TO SECTION 9(1)(VI) OF THE ACT INSERT ED BY THE FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT FROM 1.6.1976, THE A PPELLANT WAS LIABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 194J AND FAILURE TO DO SO NECESSITATED DISALLOWANCE OF THE EXPENDITURE UNDER SECTION 40(A) (IA) OF THE ACT. DATE OF HEARING 21.11.2017 DATE OF PRONOUNCEMENT 09 .02.2018 ITA NO. 5548/DEL./2014 2 1.2 THAT THE CIT(A) ERRED ON FACTS AND IN LAW I N FAILING TO APPRECIATE THAT BY VIRTUE OF SUBSEQUENT RETROSPECTIVE AMENDMEN T TO THE DEFINITION OF ROYALTY UNDER SECTION 9(1)(VI), THE APPELLANT COULD NOT BE FASTENED WITH THE LIABILITY TO WITHHOLD TAX AT SOURCE IN THE YEAR UNDER APPEAL AND VISITED WITH THE DISALLOWANCE OF THE EXPENDITURE FROM NEXT YEAR UNDER SECTION 40(A)(IA) OF THE ACT. WITHOUT PREJUDICE, 1.3 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT IN ANY CASE DEDUCTION IN RESPECT OF THE DOWNLINKING CH ARGES, TRANSPONDER RENT AND TELEPORT CHARGES ON WHICH TAX HAD ULTIMATEL Y BEEN PAID BY THE PAYEE, A GOVERNMENT COMPANY, EITHER IN THE YEAR UND ER CONSIDERATION OR IN THE YEAR OF FILING RETURN OF INCOME OUGHT TO HAV E BEEN ALLOWED IN VIEW OF AMENDMENT TO SECTION 40(A)(IA) OF THE ACT. 1.4 THAT THE CIT(A) ERRED ON FACTS AND IN LAW I N FAILING TO APPRECIATE THAT THE AFORESAID DISALLOWANCE UNDER SECTION 40(A) (IA) OF THE ACT WAS, IN ANY CASE, NOT WARRANTED, SINCE NON-DEDUCTION OF TAX AT SOURCE WAS ON ACCOUNT OF BONAFIDE VIEW TAKEN BY THE APPELLANT. 1.5 THAT THE CIT(A) ERRED ON FACTS AND IN LAW I N NOT APPRECIATING THAT DISALLOWANCE IF ANY, UNDER SECTION 40(A)(IA) OF THE ACT HAD TO BE RESTRICTED TO AMOUNT OUTSTANDING FOR PAYMENT AT THE YEAR END. 2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN UPH OLDING THE DISALLOWANCE OF RS. 10,20,287/- MADE BY THE ASSESSI NG OFFICER UNDER SECTION 14A OF THE ACT, INVOKING THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES, 1962. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME OF RS.98,88,858/-. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE. THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF TELEPORT EARTH STATION PROVIDING UPLINK ING SERVICES, DSNG ASSEMBLING AND TRADING IN SOFTWARE PRODUCTS. DURING THE COURSE OF ASSESSMENT ITA NO. 5548/DEL./2014 3 PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE A SSESSEE HAS CLAIMED EXPENDITURE OF RS.6,97,24,721/- UNDER THE HEAD TRAN SPONDER RENT AND TELEPORT CHARGES AND OF RS.2,23,78,992/- UNDER THE HEAD DOWN LINKING CHARGES. IN THIS REGARD THE ASSESSEE HAD SUBMITTED THE DETAI LS OF PAYMENT AS UNDER : STATEMENT OF DOWNLINKING EXPENSES SL. NO. DATE PARTICULARS AMOUNT (RS.) REMARKS 1. 6.06.2009 RELIANCE BIG TV 5,000,000 CARRIAGE FEES OF KBS WORLD TV ON BIG TV DIRECT DTH PLATFORM 2. 6.10.2009 A.O. (CASH) O/O CGM (NTR) BSNL EASTERN COURT, JANPATH 6,742 FOR TESTING FEES OF NEO ANTENA MPLT TEST 3 1.2010 RELIANCE BIG TV 2,068,125 CARRIAGE FEES OF KBS WORLD TV ON BIG TV DIRECT DTH PLATFORM 4 1.02.2010 RELIANCE BIG TV 2,068,125 CARRIAGE FEES OF KBS WORLD TV ON BIG TV DIRECT DTH PLATFORM 5 1.03.2010 PRASAR BHARTI 13,236,000 DOWNLINKING CHARGES OF NHK WORLD TV THROUGH DD DIRECT DTH PLATFORM TOTAL 22,378,992 STATEMENT OF TRANSPONDER RENT CHARGES FOR THE FINAN CIAL YEAR 2009-10 SL. NO. DATE PARTICULARS AMOUNT (RS.) REMARKS 1 30.04.2009 ANTRIX CORPORATION LTD 68,692,454 SPACE SEGMENT CHARGES FOR PROVIDING 36MHZ OF NORMAL C BANK ON INSAT 4A SATELLITE 2 07.01.2010 SINGAPORE TELECOMMUNICATION LIMITED. 1,10,088 TRANSPONDER CHARGES FOR USD 24000@ RS.45-87 1,10,088 AFTER DEDUCTING TDS @ 10% OF 2400 (240 X45.87 = 11,009/-) 3 31.03.2010 BROADCAST SERVICES 50,000 BROADCAST SERVICES ON MUMBAI ON 24.04.2009 AND 03.05.2009 4 31.03.2010 BROADLINK TECHNOLOG 2,25,000 FOR REALTY SHOW AT GOA 5 31.03.2010 INFORMATION TV PVT. LTD. 6,47,179/ - TWDS. CHARGES FOR 2 MONTH KU BANK BANKWITH 3. THE ASSESSING OFFICER FURTHER NOTICED THAT EXCEPT P AYMENT OF RS.1,10,088/- TO SINGAPORE TELECOMMUNICATION LTD., THE ASSESSEE HAS NOT DEDUCTED TDS ON ANY PAYMENT MADE FOR TRANSPONDER RE NT AND DOWN LINKING ITA NO. 5548/DEL./2014 4 EXPENSES. IN THIS REGARD, THE ASSESSEE MADE DETAILE D WRITTEN SUBMISSIONS BEFORE THE ASSESSING OFFICER VIDE REPLY DATED 05.03 .2013 AND 13.03.2013. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER OBSERVED THAT THE DEFINITION OF ROYALTY HAS BEEN PR OVIDED IN EXPLANATION (2) TO SECTION 91(6) OF THE IT ACT, WHICH HAS BEEN AMENDED BY INSERTION OF EXPLANATION (6) TO SECTION 91(6) BY THE FINANCE ACT , 2012 WITH RETROSPECTIVE EFFECT FROM 01.06.1976. THE ASSESSEE WAS ALSO UNABL E TO REPRODUCE ANY EVIDENCE THAT IT HAS RECEIVED A CERTIFICATE FOR NON -DEDUCTION OF TDS OR SHORT DEDUCTION OF TDS FROM THE DEPARTMENT U/S. 197. IN V IEW OF THIS, THE ASSESSING OFFICER DISALLOWED THE EXPENSES CLAIMED IN THE PROF IT AND LOSS ACCOUNT U/S. 40(A)(IA) READ WITH EXPLANATION (2) TO SECTION 91(6 ) OF THE IT ACT AND MADE DISALLOWANCE OF RS.9,19,93,625/-. 4. FURTHER ON SCRUTINY OF ACCOUNTS, THE ASSESSING O FFICER OBSERVED THAT THE ASSESSEE HAS RECEIVED CERTAIN EXEMPTED INCOME AND N O ANY EXPENDITURE HAS BEEN DISALLOWED U/S. 14A BY THE ASSESSEE. THEREFORE , THE ASSESSING OFFICER APPLYING RULE 8D CALCULATED THE DISALLOWANCE U/S. 1 4A AND DISALLOWED RS.17,81,630/- U/S. 14A. ITA NO. 5548/DEL./2014 5 5. IN APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE MA DE DETAILED WRITTEN SUBMISSIONS AND THE LD. CIT(A) AFTER CONSIDERING TH E SUBMISSIONS OF THE ASSESSEE, CONFIRMED THE DISALLOWANCE U/S. 40(A)(IA) OF THE ACT AND GAVE PART RELIEF U/S. 14A. AGGRIEVED, THE ASSESSEE IS IN APPE AL BEFORE THE TRIBUNAL. 6. THE LEARNED AR MADE DETAILED WRITTEN SUBMISSIONS , WHICH READ AS UNDER : 2. RE: DISALLOWANCE AMOUNTING TO RUPEES 9,19,93,62 5 MADE UNDER SECTION 40(A)(IA) FOR PURPORTED VIOLATION AND INFRACTION OF SECTION 194J AND SECTION 9(L)(VI) READ WITH EXPLANATION 6 THERETO, ASSESSEE IN ITS GROUNDS OF A PPEAL FILED BEFORE THE HON'BLE TRIBUNAL HAS RAISED FOLLOWING SETS OF CONTENTIONS: 2.1 FIRSTLY IT IS ARGUED ON BASIS OF CHAIN OF DE CISIONS THAT ANY RETROSPECTIVE AMENDMENT CANNOT BE THE BASIS FOR MAKING DISALLOWANCE UNDER S ECTION 40(A)(IA) FOR WANT OF TAX DEDUCTION AT SOURCE AS TAX HAS TO BE DEDUCTED ON BA SIS OF APPLICABLE LEGAL POSITION ON DATE OF PAYMENT/CREDIT WHEN THE BOOKS WERE WRITTEN DURIN G THE FINANCIAL YEAR 2009-10 . THIS IS BASED ON PLEA OF LAW CANNOT ASK A PERSON TO DO AN I MPOSSIBILITY. CASE LAW COMPILATION RUNNING INTO 240 PAGES IS ALREADY PLACED ON RECORD TO SUPPORT THIS LEGAL PROPOSITION. LIST OF THE DECISIONS RELIED IS GIVEN BELOW: S.NO. NAME OF THE CASE ORDER DATED PAGE NO. 1. HONBLE PUNE ITAT A BENCH DECISION IN CASE OF I GATE COMPUTER SYSTEMS LTD., (ITA NO. 1172 TO 1174/PN/2013 10.04.2015 1-8 2 HONBLE ITAT AGRA BENCH DECISION IN CASE OF VIROLA INTERNATIONAL 14.02.2014 (147 ITD 519 9-15 3 HONBLE MUMBAI ITAT K BENCH DECISION IN CASE OF M/S. NGC NETWORKS (I) LTD. (ITA NO. 1382/MUM/2014 (A.Y. 2009-10) 09.07.2014 16-24 4 HONBLE MUMBAI ITAT D BENCH DECISION IN CASE OF RICH GRAVISS PRODUCTS PVT. LTD. (ITA NO. 7772/MUM/2011 (AY 2007-08) 28.08.2014 25-40 5 HONBLE MUMBAI ITAT L BENCH DECISION IN CASE OF TATA CHEMICALS LIMITED (ITA NO. 283/MUM/2012)(AY 2008-09) 13.06.2016 41-53 6. HONBLE KOLKATA ITAT A BENCH DECISION IN CASE OF M/S. RELIANCE INDUSTRIES LTD. (ITA NO. 01.06.2016 54-94 ITA NO. 5548/DEL./2014 6 314/KOL/2011)(AY 2006-07) 7 HONBLE MUMBAI ITAT L BENCH DECISION IN CASE OF TATA CHEMICALS LIMITED (ITA NO. (ITA NO. 1980 1982, 1984, 1986, 2523, 2529/M/2008) 18.05.2016 95-144 8. HONBLE KOLKATA ITAT B BENCH DECISION IN CASE OF M/S. ABHOY CHARAN BAKSHI (ITA NO. 1492/KOL/2015)(AY 2012-13) 06.04.2016 145-156 9 HONBLE MUMBAI ITAT L BENCH DECISION IN CASE OF KPMG (ITA NO. 6286/MUM/2012) 18.03.2016 159-190 10. HONBLE DELHI HIGH COURT DECISION IN CASE OF NE W SIES SATELLITE BV (ITA NO. 473/2012) 08.02.2016 191-240 2.2 SECONDLY IT IS HIGHLIGHTED THAT HON'BLE HIGH COURT OF DELHI WHICH HAS BINDING EFFECT IN DELHI JURISDICTION, IN ITS DECISION IN CASE OF ASIA SATELLITE REPORTED AT 332 ITR 340 AFTER CONSIDERING THE ENTIRE GAMUT/CONSPECTUS OF THE LAW HAS HELD THAT EXTANT AND SUBJECT PAYMENTS ARE NOT IN THE NATURE OF ROYALTY UNDER SEC TION 9(L)(VI) OF THE ACT PRIOR TO AMENDMENT BY FINANCE 2012. THEREFORE WHEN THE BOOKS WERE WRITTEN BY THE ASSESSEE DURING FINANCIAL YEAR 2009-2010 SAID DECISION OF HO N'BLE DELHI HIGH COURT WAS MADE AS BASIS OF NON-DEDUCTION OF TAX AT SOURCE. THIS LINE OF CONTENTION HAS NEVER BEEN DISPUTED AND CONTROVERTED BY LOWER AUTHORITIES. FURTHER WHEN AME NDMENT WAS MADE BY FINANCE ACT 2012, MEMORANDUM EXPLAINING SAID FINANCE BILL REPOR TED IN 342 ITR 234 STATUTES IN CONTEXT OF EXPLANATION 6 INSERTED IN SECTION 9(1 )( VI) IN ROYALTY DEFINITION HAS CLEARLY OBSERVED THAT 'DOUBTS HAVE BEEN RAISED REGARDING TH E MEANING OF THE TERM PROCESS' IN ROYALTY DEFINITION. THIS DOUBT IS FIRSTLY CLEARED B Y AMENDMENT MADE IN FINANCE 2012 ALTHOUGH WITH RETROSPECTIVE EFFECT FROM 01/06/1976. SO SAID AMENDMENT MADE IN SECTION 9(1) (VI) HAS NO ROLE TO PLAY DURING FINANCIAL YEAR 2009-2010 WHEN BOOKS WERE WRITTEN BY THE ASSESSEE AS AT THAT TIME ASSESSEE WAS GUIDED BY DECISION OF THE HON'BLE HIGH COURT OF DELHI IN CASE OF ASIA SATELLITE. HON'BLE COCHIN BEN CH OF ITAT IN DECISION IN CASE OF KERALA VISION LTD REPORTED AT 64 SOT 328 HAS APPROVED SIMI LAR LINE OF CONTENTION AFTER CONSIDERING HON'BLE DELHI HIGH COURT DECISION IN CASE OF ASIA S ATELLITE AND RETROSPECTIVE AMENDMENT MADE IN DEFINITION OF ROYALTY UNDER EXPLANATION 6 T O SECTION 9(L)(VI), HOLDING THAT AT PARA 7 OF THE ORDER 'IN THE INSTANT CASE, THE VIEW ENTERTA INED BY THE ASSESSEE THAT THE PAY CHANNEL CHARGES CANNOT BE CONSIDERED AS ROYALTY IS IN FACT GET SUPPORT FROM THE DECISION RENDERED BY HON'BLE DELHI HIGH COURT IN CASE OF ASIA SATELLI TE TELECOMMUNICATIONS. THOUGH THE EXPLANATION 6 TO SECTION 9(L)(VI) INSERTED BY FINAN CE ACT 2012 IS CLARIFICATORY IN NATURE, YET IN VIEW OF THE FACT THAT THE VIEW ENTERTAINED BY TH E ASSESSEE GET SUPPORT FROM THE DECISION OF DELHI HIGH COURT REFERRED ABOVE WE ARE OF THE VI EW THAT ASSESSEE CANNOT BE HELD LIABLE TO DEDUCT TAX AT SOURCE FROM PAGE CHANNEL CHARGES. HEN CE WE ARE OF THE VIEW THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE PAY CHANNEL CHARGES BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT.' THIS I S SQUARELY APPLICABLE TO PRESENT FACTS AND THEREFORE DISALLOWANCE MADE IS OUTRIGHTLY BAD. WE A RE FILING THE COPY OF MEMORANDUM NOTES EXPLAINING AMENDMENT IN SECTION 9(L)(VI) INSE RTING AND INCORPORATING EXPLANATION 6, AND COPY OF DECISION OF COCHIN BENCH OF IT AT IN CA SE OF KERALA VISION REPORTED IN 64 SOT 328. 2.3 THIRDLY ,THAT PLEA OF CONSISTENCY AND B ONA FIDES BELIEF WHICH IS RECOGNISED AND ACKNOWLEDGED IN SERIES OF DECISIONS BY HON'BLE SUPR EME COURT AND HIGH COURTS IS SQUARELY APPLICABLE TO PRESENT FACTS IN AS MUCH AS, IN CONSE CUTIVE 4 ASSESSMENT YEARS FROM ASSESSMENT YEAR 2006-07 TO ASSESSMENT YEAR 2009-201 0 IN ORDERS PASSED UNDER SECTION ITA NO. 5548/DEL./2014 7 143(3) ON SIMILAR EXPENDITURE INCURRED UNDER THE HE AD TRANSPONDER/TELEPORT CHARGES NO DISALLOWANCE UNDER SECTION 40(A)(IA) FOR PURPORTED VIOLATION OF SECTION 194J HAS BEEN EVER MADE TREATING SAID PAYMENTS TO BE ROYALTY. HOW CAN AN ASSESSEE WHEN GIVEN A CLEAN CHIT IN CONSECUTIVE 4 ASSESSMENTS ON SIMILAR PAYMENTS IN EA RLIER YEARS CAN BE PRESUMED TO FORM A BELIEF THAT SAID PAYMENTS REQUIRES TEXT DEDUCTION A T SOURCE IS THE MOOT POINT WHICH IS REQUESTED AND PRAYED TO BE ANSWERED IN FAVOUR OF TA XPAYER. THEREFORE BOTH ON THE PRINCIPLE OF CONSISTENCY AND GENUINE BELIEF FORMED ON BASIS OF PRIOR CONSTITUTIVE 4 ASSESSMENTS PRESENT DISALLOWANCE IS OUTRIGHTLY BAD. THE COMPILATION OF 4 ASSESSMENTS AS SUBMITTED BEFORE 1ST APPELLATE AUTHORITY (REFER PAR A 3.1.3) IS ENCLOSED HEREWITH FOR SAKE OF READY REFERENCE, HON'BLE SUPREME COURT DECISIONS ON PLEA OF CONSISTENCY' I) RADHA SWAMI SATSANG 193 ITR321 II) PARSHURAM POTTERIES 106 ITR 1 III) EXCEL INDUSTRIES 358 ITR 295 IV) GODREJ & BOYCE 394 ITR 449 V) SASHUN CHEMICALS 388 ITR 1 DECISIONS ON BONA FIDES BELIEF SIGNIFICANCE AND IMP ORTANCE U/S 40(A)(IA) DISALLOWANCE: I) THE HON'BLE DELHI HIGH COURT IN JDS APPAREL S REPORTED AT 370 ITR 454 PARAGRAPH 17 AND 18; COPY ENCLOSED FOR SAKE OF READY REFERENCE; II) HON'BLE BOMBAY HIGH COURT IN KOTAK CASE REP ORTED AT 340 ITR 333; 2.4 THAT FOURTHLY SINCE EXPLANATION 6 WHICH IS T HE BASIS OF SUBJECT DISALLOWANCE UNDER SECTION 40(A)(IA) READ WITH SECTION 194J AND SECTIO N 9(1)(VI), HAS NOT BEEN REFERRED AT ALL IN SECTION 40(A)(IA), AS ONLY EXPLANATION 2 IS LIMITED LY REFERRED IN SECTION 40(A)(IA), ON THIS COUNT ALSO THE PRESENT DISALLOWANCE IS BAD REFERENC E CAN BE MADE TO DECISIONS ENCLOSED IN PAPER BOOK/CASE LAW COMPILATION, SPECIALLY TO DECIS ION OF BOMBAY ITAT IN CASE OF NGC NETWORKS ORDER DATED 09/07/2014 RELEVANT PAGE 21 OF PAPER BOOK/CASE LAW COMPILATION, PARA 5.2 5.3, HAS CLEARLY HELD THAT 'WE FIND FORCE IN THE CONTENTION OF LD. SENIOR COUN SEL THAT PAYMENT IN QUESTION DOES NOT FALL UNDER THE TERM RO YALTY AS DEFINED IN EXPLANATION 2 OF SECTION 9(1) (VI) AND EXPLANATION 6 CANNOT BE PRESSED INTO S ERVICE AS THE DEFINITION OF ROYALTY FOR PURPOSE OF SECTION 40 IS TAKEN ONLY UNDER EXPLANATI ON 2 TO SECTION 9(1) (VI) ' IS SQUARELY APPLICABLE TO PRESENT CASE. 2.5 THAT FIFTHLY SINCE SUBJECT PAYMENTS RELATING TO TRANSPONDER RENT AND TELEPORT CHARGES ARE DIRECT COSTS BEING INEXTRICABLY CONNECTED WITH BUSINESS OF ASSESSEE ENGAGED IN PROVIDING UPLINKING SERVICES AND TELEPORT EARTH STA TION, WHICH ARE ALLOWABLE UNDER SECTION 28 ITSELF SO APPLICABILITY OF PROVISIONS OF SECTION 40(A)(IA) WHICH LIMITEDLY OVERRIDES PROVISIONS OF SECTION 30 TO 38 AND DO NOT INCLUDE P ROVISIONS OF SECTION 28, IS RULED OUT ON SUBJECT PAYMENTS BEING DIRECT COSTS. THAT IS ONLY I NDIRECT COSTS CAN BE DISALLOWED UNDER SECTION 40(A)(IA) AND NOT DIRECT COSTS. 2.6 THAT SIXTHLY ON MERITS SINCE NONE OF THE LOW ER AUTHORITIES HAVE DOUBTED THE CONTENTION OF ASSESSEE REGARDING RECIPIENTS OF PAYM ENTS HAVING MADE DUE PAYMENT OF TAXES ITA NO. 5548/DEL./2014 8 ON THE SUBJECT PAYMENTS IN THEIR HANDS AS PER AMEND MENT MADE BY FINANCE 2012 IN SECTION 40(A)(IA) ADDING PROVISO HELD TO BE RETROSPECTIVE B Y HON'BLE DELHI HIGH COURT IN CASE OF ANSAL LANDMARK REPORTED AT [2015] 377 ITR 635 (DELH I) CLEARLY INSULATES THE ASSESSEE FROM RIGOURS OF DISALLOWANCE UNDER PROVISIONS OF SECTION 40(A)(IA) WHICH CAN BE VERIFIED FROM SUPPLEMENTARY PAPER BOOK PLACED ON RECORDS BEFORE T HIS HON'BLE TRIBUNAL RUNNING INTO 22 PAGES RELEVANT PAGES BEING 4 TO 13. NO CONTRARY MAT ERIAL IS BROUGHT ON RECORD BY LOWER AUTHORITIES. 3. RE: DISALLOWANCE SUSTAINED UNDER SECTION 14 A AM OUNTING TO RS. 1 0,20,287 ASSESSEE PLACES RELIANCE ON RECENT HON'BLE DELHI HIGH COURT DECISION IN CASE OF 1L&FS ENERGY DEVELOPMENT COMPANY LIMITED REPORTED AT 84 TAXMANN. COM 16 RELIED BY HON'BLE DELHI BENCH OF TRIBUNAL IN CASE OF RAGLAN INFRASTRUCTURE LIMITED ORDER DATED 01/09/2017 ENCLOSED IN SUPPLEMENTARY PAPER BOOK FROM PAGES 14 TO 22 THA T SANS TAX-FREE INCOME NO DISALLOWANCE UNDER SECTION 14A CAN BE SUSTAINED IS SQUARELY APPLICABLE TO PRESENT FACTS WHERE IT IS UNDISPUTED AND ADMITTED FACT THAT NO TA X-FREE INCOME IS EARNED BY THE ASSESSEE DURING THE PERIOD UNDER CONSIDERATION. TO VOUCH AND VERIFY THIS CONTENTION REFERENCE CAN BE MADE TO SUPPLEMENTARY PAPER BOOK PAGE 3 BEING CO MPUTATION OF TOTAL INCOME FOR SUBJECT PERIOD FROM WHERE IT CAN BE SEEN THAT NO TA X-FREE INCOME IS EARNED BY THE ASSESSEE DURING SUBJECT PERIOD. 4. IN VIEW OF ABOVE WE PRAY FOR DELETION OF BOTH TH E ADDITIONS. 7. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER O F THE LOWER AUTHORITIES AND SUBMITTED THAT THE LAW HAS BEEN AMENDED WITH RE TROSPECTIVE EFFECT FROM 01.06.1996. IN VIEW OF THIS AMENDMENT, THE ASSESSEE IS LIABLE FOR TDS ON THE PAYMENTS OF ROYALTY AS PER SECTION 91(6). THEREFORE , THE LD. CIT(A) HAS RIGHTLY DISMISSED THE APPEAL IN RESPECT OF PAYMENT OF ROYAL TY. 8. AFTER HEARING BOTH THE SIDES AND PERUSING THE MA TERIALS AVAILABLE ON RECORD, WE OBSERVE THAT THE ASSESSEE HAS MADE PAYME NT FOR TRANSPONDER RENT AND DOWN LINKING CHARGES, ON WHICH NO TDS HAS BEEN MADE FOR THE IMPUGNED ASSESSMENT ORDER. THE LAW HAS BEEN AMENDED BY THE F INANCE ACT 2012 WITH RETROSPECTIVE EFFECT. AS PER THE AMENDED PROVISIONS , THE ASSESSEE IS LIABLE FOR ITA NO. 5548/DEL./2014 9 TDS ON THE ABOVE PAYMENTS. THE ASSESSEE HAS ALSO SU BMITTED FORM NO. 26A DULY CERTIFIED BY MS. SETHIA & ASSOCIATES VIDE CERT IFICATE DATED 24.06.2013, BY HNS RAO & CO. DATED 20.05.2013 AND GIRI & BANSAL DA TED 22.05.2013, THAT THE PAYEE HAS DULY INCORPORATED THE AMOUNTS RECEIVED FR OM THE ASSESSEE AS PER PROVISIONS OF SECTION 201(1). THE ASSESSMENT ORDER HAS BEEN FRAMED ON 22.03.2013. THE AR OF THE ASSESSEE HAS GIVEN CERTIF ICATE THAT THESE CERTIFICATES HAVE BEEN PRODUCED BEFORE THE ASSESSING OFFICER AND CIT(A). THE RECORD REVEALS THAT THE ABOVE CERTIFICATES BY RESPECTIVE C AS HAVE BEEN ISSUED IN THE MONTH OF MAY & JUNE, 2013 WHEREAS THE ASSESSMENT OR DER HAS BEEN PASSED ON 22.03.2013. THEREFORE, IT CANNOT BE BELIEVED THAT T HE SAID CERTIFICATES WERE SUBMITTED BEFORE THE ASSESSING OFFICER. HOWEVER, ON PERUSAL OF THE IMPUGNED ORDER IT REVEALS THAT THE LD. CIT(A) HAS ALSO NOT M ADE ANY COMMENTS, REFERENCE OR FINDINGS ON THESE CERTIFICATES IN THE IMPUGNED O RDER. THE CONTENTION OF THE ASSESSEE BASED ON THESE CERTIFICATES IS THAT ONCE T HE RECIPIENT PAYEE HAD INCORPORATED THE PAYMENTS RECEIVED FROM THE ASSESSE E IN ITS TOTAL INCOME, THEN THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT AND THEREFORE, THE IMPUGNED ADDITION CANNOT BE SUSTAINED. HOWEVER, IN ABSENCE OF ANY SUCH FACT PUT FORTH BEFORE THE ASSESSING OFFICER, WE DEE M IT EXPEDIENT IN THE INTEREST OF JUSTICE TO RESTORE THIS MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR DECIDING THE ISSUE AFRESH AFTER DUE VERIFICATION FR OM THE PAYEE SO AS TO FIND OUT ITA NO. 5548/DEL./2014 10 THE CORRECTNESS OF ASSESSEES VERSION. IN CASE THE CONTENTION OF THE ASSESSEE IS FOUND CORRECT, THE ASSESSING OFFICER SHALL DECIDE T HE ISSUE IN THE LIGHT OF DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P) LTD., 377 ITR 635 (DEL.) AND SHAL L ALSO TAKE APPROPRIATE ACTION IN ACCORDANCE WITH LAW. NEEDLESS TO SAY, THE ASSESSEE SHALL BE GIVEN REASONABLE OPPORTUNITY OF BEING HEARD. THE ASSESSEE IS DIRECTED TO COOPERATE WITH THE ASSESSING OFFICER AND SHALL NOT SEEK UNNEC ESSARY ADJOURNMENTS. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED FOR S TATISTICAL PURPOSES. 9. AS FAR AS THE NEXT ISSUE IS CONCERNED, A PERUSAL OF THE IMPUGNED ORDER REVEALS THAT THE LD. CIT(A) HAS SUSTAINED THE ADDIT ION OF RS.10,20,287/- MADE BY THE ASSESSING OFFICER AFTER INVOKING THE PROVISI ONS OF RULE 8D(2)(III) OF THE IT RULES. AFTER GOING THROUGH THE ORDER OF THE LD. CIT(A), WE FIND THAT THE ASSESSEE HAS MADE FRESH INVESTMENT IN PNB MUTUAL FU NDS OF RS.10 LACS AND HE HAS ALSO CONCLUDED THAT OWN FUNDS HAVE BEEN UTILIZE D FOR THE PURPOSE OF MAKING INVESTMENT. HE ALSO OBSERVED THAT SOME ADMIN ISTRATIVE AND MANAGERIAL EXPENSES HAVE BEEN INCURRED BY THE ASSES SEE AND THE ASSESSEE HAS HIMSELF NOT DISALLOWED ANY EXPENSE U/S. 14A. THE LD . AR SUBMITTED THAT NO EXEMPT INCOME HAS BEEN RECEIVED DURING THE YEAR UND ER CONSIDERATION. HE DREW OUR ATTENTION AT SUPPLEMENTARY PAPER BOOK PAGE 3 WHICH IS COMPUTATION ITA NO. 5548/DEL./2014 11 OF INCOME. WE DO NOT FIND ANY EXEMPTED INCOME CLAIM ED BY THE ASSESSEE. THEREFORE, THE DECISION RELIED BY THE ASSESSEE AND THE DECISION IN THE CASE OF DCIT VS. RAGLAN INFRASTRUCTURE LTD. DATED 01.09.201 7 (ITA NO. 4720/DEL./2014) HELP THE ASSESSEE. RESPECTFULLY FOL LOWING THE DECISION, THERE IS NO JUSTIFICATION TO SUSTAIN THIS ADDITION. ACCOR DINGLY, THE ORDER OF THE LD. CIT(A) DESERVES TO BE SET ASIDE ON THIS GROUND. THE REFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH FEBRUARY, 2018. SD/- SD/- (BHAVNESH SAINI) ( L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 09.02.2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI