Income Tax Officer, Ward-2(1) , Hyderabad V. Gaian Solutions India Private Limited, Hyderabad

ITA 569/Hyd/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0521 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 07-07-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 22-10-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRIKANTH S
• Assessee Lawyers: SVD VIJAY BHASKAR
• Keywords: Unexplained investment; Unexplained expenditure; Permanent establishment; Question of law; TDS
• Section: 144; 69C; 143(3); 40(a)(ia); 195; 201; 274; 246A; 20

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD SMC BENCH : HYDERABAD (THROUGH VIDEO CONFERENC E ) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 569 /HYD./20 20 ASSESSMENT YEAR: 20 15 - 16 I T O, WARD 2(1) V S. M/S GAIAN SOLUTIONS INDIA PVT. LTD. HYDERABAD HYDERA BAD [ PAN: AACCG5523H ] (APPELLANT) (RESPONDENT) FOR REVENUE : SRI SRIKANTH S, D.R. FOR ASSESSEE : SRI SVD VIJAY BHASKAR, ADV. DATE OF HEARING : 0 7 / 07 /202 1 DATE OF PRONOUNCEMENT 16/ 07 /202 1 O R D E R THIS IS REVENUES APPEAL FOR AY 201 5 - 16 AGAINST THE ORDER OF THE CIT(A) - 2 , HYDERABAD DATED 22.07.2020 . 2 . BRIEF FAC TS OF THE CASE ARE THAT THE ASSESSEE , A PRIVATE LIMITED COMPANY, FILED ITS RETURN OF INCOME FOR THE AY 2015 - 16 ON 28.09.2015 DECLARING INCOME AT NIL AFTER SETTING OFF OF BROUGHT FORWARD LOSSES OF RS.95,742/ - UNDER NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961 [THE ACT FOR SHORT] AND BOOK LOSS OF RS12,831/ - U/S 115 JB OF THE ACT. DURING ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT , THE ASSESSEE WAS REQUIRED TO SUBMIT VARIOUS DETAILS. HOWEVER, SINCE THE ASSESSEE DID NOT RESPOND, THE AO COMPLETED THE ASSESSMENT U/S 144 OF THE ACT BY TREA TING A SUM OF RS.12,88,022/ - AS UNEXPLAINED INVESTMENTS U/S 69C OF THE ACT AND ALSO BY DISALLOWING FOREIGN REMITTANCE OF RS. 2,61,17,450/ - U/S 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE. ITA NO 569/HYD/2020 AY : 2015 - 16 M.S GAIAN SOLUTIONS INDIA PVT.LTD. HYD. 2 2.1. AGGRIEVED , ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) STATING THAT THE FOREIGN REMITTANCES ARE NOTHING BUT REIMBURSEMENT OF EXPENSES AND, THEREFORE, TDS PROVISIONS ARE NOT APPLICABLE AND CONSEQUENTIAL DISALLOWANCE U/S 40(A)(IA) OF THE ACT IS NOT SUSTAINABLE . THE CIT(A) ACCEPTED ASSESSEES CONT ENTIONS AND DELETED THE ADDITION MADE U/S 40(A)(IA) OF THE ACT. 3. AGGRIEVED BY RELIEF GRANTED BY THE CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS OF APPEAL. 1. THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.2,61,17,450 / - MADE U/S. 40(A)(I A ). 2. THE LD. CIT(A) HAD ERRED IN ALLOWING RELIEF MERELY BASED ON THE OBSERVATIONS MADE BY THE AO IN THE REMAND REPORT WITHOUT APPRECIATING THE FACTS OF THE CASE AND THE POSITION OF LAW. 3. THE LD. CIT(A), HAVING POWERS CO - TERMINUS WITH THAT OF AO, OUGHT TO HAVE ADJUDICATED THE QUESTION OF LAW INDEPENDENTLY IN THE LIGHT OF THE FACTS OF THE CASE AND THE PROVISIONS OF THE INCOME TAX ACT, 1961. 4. THE LD. CIT(A) ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 195 ARE NOT ATTRACTED MERELY BECAUSE THE PAYMENTS ARE IN THE NATURE OF 'REIMBURSEMENT' OF EXPENSES. 5. THE LD. CIT(A) ERRED IN TREATING THE PAYMENTS ON 'REIMBURSEMENT' OF EXPENSES EVEN THOU GH THE BILLS WERE RAISED IN LUMPSUM FIGURES ON REGULAR INTERVALS INSTEAD OF EXACT AMOUNT OF EXPENDITURE INCURRED SHOWING THAT IT IS NOT MERE REIMBURSEMENT. 6. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT IN THE ABSENCE OF A NON - DEDUCTION OF TAX CERTIFICA TE U/S. 195(2) SOUGHT ON OBTAINED BY THE ASSESSING OFFICER, THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE TO A NON - RESIDENT U/S. 195 AND FAILURE TO DO SO ATTRACTS DISALLOWANCE U/S 40(A)(I). 7. ANY OTHER GROUNDS THAT MAY BE URGED AT T HE TIME OF HEARING. 4. LD.DR SUPPORTED THE ASSESSMENT ORDER WHILE LD.COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSEE HAS MADE DETAILED SUBMISSIONS BEFORE THE CIT(A) , ON WHICH THE CIT(A) HA D CALLED FOR A REMAND REPORT AND ON THE BASIS OF REMAND REPORT ONLY, THE CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE. THEREFORE, ACCORDING TO HIM , NO INTERFERENCE WITH THE ORDER OF CIT(A) IS CALLED FOR. ITA NO 569/HYD/2020 AY : 2015 - 16 M.S GAIAN SOLUTIONS INDIA PVT.LTD. HYD. 3 5. HAVING REGARD TO RIVAL CONT ENTIONS AND MATERIAL PLACED ON RECORD, I FIND THAT BEFORE THE CIT(A ) , THE ASSESSEE HAS SUBMITTED THE FOLLOWING ARGUMENTS. 5. SUBMISSIONS OF THE APPELLANT: THE APPELLANT IN ITS APPEAL PAPERS SUBMITTED FOLLOWING ARGUMENTS: THE ASSESSEE IS A RESIDENT DOME STIC COMPANY (PRIVATE LIMITED). THE MATTER UNDER APPEAL IS FOR AY 2015 - 16 UPON TAX LEVIED BY THE ASSESSING OFFICER OF RS. 6,84,620/ - ON ALLEGED UNEXPLAINED EXPENDITURE U/ S 69 OF THE INCOME TAX ACT, 1961 OF RS. 12,88,022 CONSISTING OF CUSTOMS DUTY PAID RS . 2,87,117 AND AMOUNT PAID ON ACCOUNT OF IMPORT OF MATERIAL OF RS. 10,00,905 AND DISALLOWANCE OF EXPENDITURE U/ S 40 (A) OF THE INCOME TAX ACT, 1961 OF RS.2,61,17,450 INCURRED ON ACCOUNT OF REIMBURSEMENT OF EXPENSES TO THEIR FOREIGN OFFICE DURING THE RELEV ANT PREVIOUS YEAR. THE APPELLANT FILED ORIGINAL RETURN ON 28.09.2015 DECLARING AN INCOME OF RS NIL AFTER SETTING OFF OF BROUGHT FORWARD LOSS. THE RELEVANT FACTS OF THE APPEAL ARE AS UNDER: 1. THE ASSESSE IS IN A SERVICE SECTOR BUSINESS OF SOFTWARE DEVELOPMENT. 2. THE APPELLANT FILED ORIGINAL RETURN ON 28.09.2015 DECLARING AN INCOME OF RS NIL AFTER SETTING OFF OF BROUGHT FORWARD LOSS FOR THE RELEVANT ASSESSMENT YEAR. 3. THE RETURN WAS SELECTED FOR SCRUTI NY THROUGH CASS AND THE ASSESSE OPTED FOR E PROCEEDINGS AS A REPLY TO THE NOTICE ISSUED ON 06. 10.201 7 AND S UBMITTED THE REPLY ON 30.11.2017. 4. FURTHER THERE IS NO QUERY RAISED UNDER E - PROCEEDINGS FROM LEARNED ASSESSING OFFICER. 5 . AS A PART OF TIME BA RRING ASSESSMENT FOR RELEVANT ASSESSMENT YEAR 2015 - 16, THE LEARNED ASSESSING OFFICER PASSED THE ASSESSMENT ORDER AS A BEST JUDGEMENT ASSESSMENT. 6. THE APPELLANT SUBMITS THAT AS STATED IN ASSESSMENT ORDER, THE ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS 2,74,05,472/ - TO THE RETURNED INCOME OF THE ASSESSEE. THEY ARE AS FOLLOWS: DISALLOWANCE OF MATERIAL IMPORTED AND: 10,00,905 CUSTOM DUTY PAID THEREON U /S 69C : 2,87,117 DISALLOWANCE OF PAYMENT/ REMITTANCES 2 , 61 , 17,450 TO FOREIGN AGENCIES/BRANCH 2 , 74,05,472 ITA NO 569/HYD/2020 AY : 2015 - 16 M.S GAIAN SOLUTIONS INDIA PVT.LTD. HYD. 4 7. FURTHER BASED ON THE ABOVE CITED DISALLOWANCES A CONSEQUENT DEMAND OF RS. 6,84,620 IS RAISED. 8. THE ASSESSING OFFICER HAD ALSO ATTACHED NOTICE UNDER SEC 271 (L)(C) READ WITH SECTION 274 OF THE INCOME TAX ACT, 1961 ALONG WITH THE ASSESSMENT ORDER DATED 28.12.2017 AND SERVED ON 03.01.2018. AGGRIEVED BY THE ASSESSMENT ORDER AND PENALTY LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1) (C ) APPEAL IS BEING PREFERRED UNDER SECTION 246A OF THE INCOME TAX ACT, 1961 AS PER THE GROUNDS OF APPEAL SEPARATELY ENCLOSED. DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPELLANT SUBMITTED THE FOLLOWING WRITTEN SUBMISSION AS UNDER: ' WITH RESPECT TO TH E ABOVE CITED SUBJECT, WE HEREBY SUBMIT YOU FOLLOWING INFORMATION ALONG WITH STATEMENT OF FACTS AND GROUNDS OF APPEAL, FOR YOUR KIND PERUSAL: 1. THE LEARNED ASSESSING OFFICER ERRED IN ADDING THE CUSTOM DUTY PAID OF RS. 2,87,11 7 ON MATERIALS IMPORTED AS UNEXPLAINED EXPENDITURE U/ S 69C OF THE INCOME TAX ACT, 1961. DURING THE RELEVANT PREVIOUS YEAR UNDER CONSIDERATION ASSESSEE INCURRED AN AMOUNT OF RS. 3,63,683 TOWARDS CUSTOM DUTY PAID ON IMPORT OF MATERIALS SENT TO COMPANY FOR TESTING PURPOSE AND THE SAM E IS ACCOUNTED IN THE BOOKS, OF ACCOUNT OF THE ASSESSEE AS IMPORT CUSTOM DUTY. FURTHER THE SAME IS REFLECTED IN THE AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE FOR THE RELEVANT FINANCIAL YEAR UNDER NOTE NO. 15 'OTHER EXPENSES' - SUB NOTE 'IMPORT AND EXPOR T EXPENSES' AMOUNTING OF RS.6,45,483.21. ACCOUNT COPY OF THE SAME IS ANNEXED HEREWITH (ANNEXURE - 1). 2. THE LEARNED ASSESSING OFFICER ERRED IN ADDING RS. 10,00,905 AS UNEXPLAINED EXPENDITURE U/ S 69C OF THE INCOME TAX ACT, 1961. WITH' RESPECT TO THIS AS PECT WE WOULD LIKE TO BRING YOUR KIND NOTICE THAT ASSESSSEE IMPORTED THE MATERIAL (BROADCASTING RECEIVER AND RELATED MATERIALS) FOR TESTING PURPOSE FROM CLIENT FOR TESTING PURPOSE, TOR WHICH ASSESSEE COMPANY INCURS ONLY IMPORT CUSTOMS EXPENSES LIKE' CUSTOM S DUTY, CUSTOMS EDI CHARGES, INSURANCE AND HANDLING CHARGES ETC/ THE SAME IS SHOWN AS EXPENSES IN PROFIT AND LOSS ACCOUNT AS NOTE NO. 15 'OTHER EXPENSES' - SUB NOTE 'IMPORT AND EXPORT EXPENSES' AMOUNTING OF RS.6,45,483.21. AUDITED FINANCIAL STATEMENTS IS A NNEXED HEREW ITH FOR YOUR KIND PERUSAL (ANNEXURE 1) FURTHER WE WOULD LIKE TO BRING YOUR KIND NOTICE THAT AS THE TESTING OF THE SAME IS FAILED AND MOST OF THE IMPORTED MATERIAL WAS RECEIVED TOWARDS SUCH IMPORT. RESIDUAL UNDAMAGED PRODUCTS (VERY LESS) ARE SOLD BY THE ASSESSEE COMPANY OVER THE PERIOD AND THE SAME IS ACCOUNTED FOR AND SHOWED AS INCOME. ITA NO 569/HYD/2020 AY : 2015 - 16 M.S GAIAN SOLUTIONS INDIA PVT.LTD. HYD. 5 3. THE LEARNED ASSESSING OFFICER ERRED IN DISALLOWING THE FOREIGN REMITTANCES OF RS. 2,61,17,450 AS PER THE FORM 1 5CA ISSUED AS PER THE INFORMATION AVAILABLE WITH THEM DURING THE RELEVANT PREVIOUS YEAR BY INVOKING THE PROVISIONS OF SECTION 40(A)(I) OF THE INCOME TAX ACT, 1961. HOWEVER WE WOULD LIKE TO BRING YOUR KIND NOTICE THAT DURING THE RELEVANT YEAR UNDER CONSIDER ATION ASSESSEE ISSUED FORM 15CA WITH RESPECT TO AMOUNT OF RS. 1,53,10,960 AS A PART D 'REIMBURSEMENT OF EXPENSES' INCURRED ON BEHALF OF THE COMPANY AT USA. DETAILED STATEMENT OF RECONCILIATION OF FORM 15CA ISSUED AND EXPENSES AS PER BOOKS OF ACCOUNTS IS AN NEXED HEREWITH FOR YOUR KIND PERUSAL ALONG WITH FORM 15CA ISSUED DURING THE YEAR (ANNEXURE - 3) FURTHER WE WOULD LIKE TO BRING YOUR KIND NOTICE THAT THE REQUIREMENT OF TDS IS NOT APPLICABLE WITH RESPECT TO REIMBURSEMENT OF EXPENSES. KINDLY CONSIDER THE S AME AND DO THE NEEDFUL.' 5.1 . ON THESE SUBMISSIONS, THE CIT(A) HAD CALLED FOR A REMAND REPORT FROM THE AO AND ON THE ISSUE OF SEC. 40(A)(IA), THE AO HAS SUBMITTED AS UNDER. 4. WITH REGARD TO THE ADDITION OF RS.2,61,17,450/ - TOWARDS DISALLOWANCE U /S 40(A)(IA), IT IS SUBMITTED THAT THE AO MADE THIS ADDITION HOLDING THAT AS PER ITS STATEMENT AND 15CA DATA, THE ASSESSEE MADE FOREIGN REMITTANCES WITHOUT TDS. THE ASSESSEE DURING THE COURSE OF REMAND PROCEEDINGS SUBMITTED THAT THESE ARE PAYMENTS MADE ABR OAD TOWARDS REIMBURSEMENT OF EXPENSES TO AK CONSULTING SERVICES USA. AND IT IS CONTENDED THAT SINCE THESE ARE REIMBURSEMENT OF EXPENSES NO TDS IS ATTRACTED. IT IS POINTED OUT THAT THE TOTAL AMOUNT IS RS. 1,53,10,960/ - ONLY; AND NOT RS. 2,61,17,450/ - AS STA TED BY THE AO. IT IS SUBMITTED THAT THE DIFFERENCE OF RS. 1,08,06,490/ - (RS. 2,61,17,450 _ RS. 1,53,10,960) IS MAINLY DUE TO REPETITION OF ONE PARTICULAR 15CA FOR THE MONTH OF NOVEMBER 2014. IT IS WRONGLY GENERATED; 7 TIMES ON 14.11.2014 BUT ONLY ONE 15CA WAS CORRECT FOR AN AMOUNT OF RS. 18,49,050/ - ONLY AND THE OTHER 6 TIMES WERE GENERATED DUE TO TECHNICAL ERROR FOR THE SAME AMOUNT AND THE REMITTANCE IS MADE ONLY ONCE. THE ASSESSEE FURNISHED COPY OF SCREEN SHOT OF E - FILING WEBSITE. THE ASSESSEE'S WRITTEN SUBMISSIONS IN THIS REGARD ARE REPRODUCED HEREUNDER: 'FURTHER WITH RESPECT TO POINT 3 CITED ABOVE , WE WOULD LIKE BRING YOUR KIND NOTICE THAT AS PER THE INDIVIDUAL TRANSACTION STATEMENT OF THE ASSESSEE AVAILABLE WITH ASSESSING OFFICER, ASSESSEE HAS REMITTED RS 2,61,17,450 FOR THE YEAR 2014 - 15 (I.E BASED ON FORM 15CA ISSUED), BUT IN FACT ASSESSEE REMITTE D ONLY RS. 1,53,10,960. SUCH DIFFERENCE IS DUE TO, IN THE MONTH OF NOVEMBER 2014 ASSESSEE ISSUED FORM 15CA ONLY ONCE FOR RS 1849050 ONLY (30000 USD) AND THE SAME AMOUNT REMITTED THROUGH BANK, BUT DUE TO TECHNICAL ERROR AT INCOME TAX SITE IT WAS RAISED AND ISSUED 7 TIMES FOR THE SAME AMOUNT (RS 1849050 ITA NO 569/HYD/2020 AY : 2015 - 16 M.S GAIAN SOLUTIONS INDIA PVT.LTD. HYD. 6 EACH). SUCH TECHNICAL ERROR IS APPARENT ON RECORD AS REFLECTED IN AST AVAILABLE WITH THE DEPARTMENT. COPY OF THE SCREEN SHOT OF FORM 15CA ISSUED ON 14.11.2014 ALONG WITH BANK ACCOUNT STATEMENT IS ENCLOSED HER EWITH (ANNEXURE IV). 4.1. THE ASSESSEE FURNISHED COPY OF LEDGER ACCOUNT EVIDENCING PAYMENTS MONTH WISE TO AK CONSULTING SERVICES USA AND FURNISHED COPIES OF USD FOREIGN BANK ACCOUNT EXTRACTS THROUGH WHICH THE PAYMENTS ARE MADE. IT IS VERIFIED FROM THE ICICI FOREIGN BANK ACCOUN T FURNISHED THAT $ 30,000 HAS BEEN REMITTED CORRESPONDING TO RS. 18,49,050/ - IN INR. THE ASSESSEE'S SUBMISSIONS IN THIS REGARD THAT AN AMOUNT OF RS. 18,49,050/ - ONLY REMITTED ABROAD IS VERIFIED AND FACTUALLY CORRECT AS THE PAYMENT IS MADE ONLY ONCE ON 17. 11.2014 AND RS. 1.08 CRS. IS NOT REMITTED. THEREFORE TOTAL REMITTANCE IS MADE AT RS. 1,53,10,960/ - ONLY AND NOT RS. 2,61,17,450/ - 4.2. THE ASSESSEE'S AR ARGUED THAT THE DISALLOWANCE MADE BY THE AO U/S 40(A)(IA) IS UNCALLED FOR, AS THESE FOREIGN PAYMENTS ARE TOWARDS REIMBURSEMENT OF EXPENSES ONLY WHICH IS NOT LIABLE FOR TDS. THE ASSESSEE'S AR FURNISHED COPIES OF INVOICES FROM AK CONSULTING SERVICES USA WITH RESPECT TO REIMBURSEMENT OF EXPENSES, THE ASSESSEE FURNISHED A COPY OF MASTER SERVICE AGREEMENT BET WEEN THE ASSESSEE AND AK CONSULTING INC., USA. IT IS SEEN IN THE AGREEMENT; UNDER EXPENSES CLAUSE, THE ASSESSEE COMPANY SHALL REIMBURSE THE TRAVELLING ACCOMMODATION, BUSINESS PROMOTION ETC. AND ADMINISTRATIVE EXPENSES AND OTHER OVER HEADS FOR MAINTAINING T HE DEVELOPMENT SET UP AT USA. THE ASSESSEE'S SUBMISSIONS AND EXPLANATION WITH REGARD TO REIMBURSEMENT OF EXPENSES ARE AS UNDER: DURING THE RELEVANT YEAR UNDER CONSIDERATION ASSESSEE ISSUED FORM 15 CA WITH RESPECT TO AMOUNT OF RS. 1,53,10,960 AS A PART D 'R EIMBURSEMENT OF EXPENSES' IE., EXPENSES INCURRED ON BEHALF OF THE COMPANY AT USA. DETAILED STATEMENT OF RECONCILIATION OF FORM 15 CA ISSUED AND EXPENSES AS PER BOOKS OF ACCOUNTS IS ANNEXED HEREWITH FOR YOUR LAND PERUSAL ALONG WITH FORM 15 CA ISSUED DURING THE YEAR (ANNEXURE II). ITA NO 569/HYD/2020 AY : 2015 - 16 M.S GAIAN SOLUTIONS INDIA PVT.LTD. HYD. 7 IN OUR CASE WE REIMBURSED ABOVE AMOUNT TOWARDS REIMBURSEMENT OF EXPENSES TO AK CONSULTING SERVICES (FOREIGN COMPANY) USA, COPY OF THE INVOICES ARE ANNEXED HEREWITH FOR YOUR KIND PERUSAL (ANNEXURE III). FURTHER AK CONSULTING SERVI CES, USA IS A FOREIGN COMPANY REGISTERED AT UNITED S TATES OF AMERICA AND DO NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA AND RENDERS THEIR SERVICES (INCURRING EXPENSES ON BEHALF OF THE ASSESSEE COMPANY) TO US OUTSIDE INDIA. AS PER SECTION 4 OF THE INCOM E TAX ACT, 1961 ANY INCOME OF NON - RESIDENT WHICH IS RECEIVED OR DEEMED TO BE RECEIVED IN INDIA OR ANY INCOME' WHICH IS ACCRUED OR DEEMED TO BE ACCRUED IN INDIA I: ONLY TAXABLE IN THE J HAND OF NON - RESIDENT AS PER IN COME TAX ACT 1961. BASED ON THE ABOVE PROVISION, AMOUNT SENT ON ACCOUNT OF REIMBURSEMENT OF EXPENSES TO A NON - RESIDENT COMPANY (IN OUR CASE AK CONSULTING, USA) WHICH IS NOT HAVING ANY PERMANENT ESTABLISHMENT IN INDIA DOES NOT ATTRACTS TDS PROVISIONS U/ S 195 OF THE INCOME TAX ACT, 1961. FURTHER WE WOULD LIKE TO BRING YOUR K IND NOTICE THAT THE REQUIREMENT OF TDS IS NOT APPLICABLE WITH RESPECT TO REIMBURSEMENT OF EXPENSES. IN ADDITION WE INVITED TO THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF TRANSMISSION CORPORATION OF AP. LTD. V S. CIT (1999) 239 ITR 587 (SC) WHEREIN IT WAS HELD THAT THE OBLIGATION OF THE DEDUCTOR TO DEDUCT TAX UNDER SECTION 195 OF THE ACT IS LIMITED ONLY TO THE APPROPRIATE PROPORTION OF INCOME CHARGEABLE UNDER THE ACT. IN THE CASE OF CIT - VS. - CREATIVE INFOCITY LTD. (2017) 397 ITR 165 (GUJ.) THE HON'BLE GUJARAT HIGH COURT HELD THAT THE TRIBUNAL HAD NOT COMMITTED ANY ERROR IN DECIDING THAT THE PAYMENT WAS MADE TO A NON - RESIDENT TOWARDS REIMBURSEMENT OF EXPENSES AND NOT REIMBURSEMENT OF SERVICE AND HENCE TDS WAS NO T TO BE DEDUCTED UNDER SECTION 195 OF THE ACT. 4.3. THE SUBMISSIONS OF THE ASSESSEE ARE VERIFIED WITH REFERENCE TO THE FORM 15CAS AND THE EVIDENCES FURNISHED AND BANK ACCOUNTS. IT IS VERIFIED FROM ITA NO 569/HYD/2020 AY : 2015 - 16 M.S GAIAN SOLUTIONS INDIA PVT.LTD. HYD. 8 15CAS AND BANK ACCOUNT, THAT THE TOTAL PAYMENTS REMITTED I N THIS CONNECTION AMOUNTED TO RS. 1,53,10,960 / - . 4.4. THE CASE LAWS RELIED ON BY THE ASSESSEE IN SUPPORT OF ITS CONTENTIONS THAT NO TDS TO BE MADE IN RESPECT OF REIMBURSEMENT OF EXPENSES HAVE BEEN CAREFULLY GONE THROUGH. ON PERUSAL OF THE INFORMATION AND THE COPY OF MASTER SERVICE AGREEMENT WITH AK CONSULTING INC AND IN VIEW OF THE FOREGOING FACTS AND CIRCUMSTANCES, THE ASSESSEE'S CLAIM THAT THE EXPENSES REMITTED TO FOREIGN COMPANY AK CONSULTING INC. USA ARE IN THE NATURE OF REIMBURSEMENT OF EXPENSES AND A RE NOT LIABLE TO TDS AND HENCE THESE EXPENSES NEED NO DISALLOWANCE U/ S 40(A)(IA). SUBMITTED FOR KIND CONSIDERATION OF THE COMMISSIONER OF INCOME TAX(APPEALS) - 2, HYD. THE MISC . RECORD IN ONE VOLUME FOR AY 2015 - 16 IS SUBMITTED HEREWITH FOR KIND PERUSAL. 5 .2. I FIND THAT ON THE BASIS OF THIS REMAND REPORT OF THE AO , THE CIT(A) HAS GRANTED RELIEF TO ASSESSEE. AS NO MATERIAL IS BROUGHT ON RECORD TO COUNTER THE FINDINGS OF THE AO IN THE REMAND REPORT, I SEE NO REASON TO INTERFERE IN THE ORDER OF CIT(A). REVENUES APPEAL IS ACCORDINGLY DISMISSED. 6 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON 16 /07/ 202 1 . SD - (P. MADHAVI DEVI) JUDICIAL MEMBER DATED: 16 TH JULY, 2021 GMV ITA NO 569/HYD/2020 AY : 2015 - 16 M.S GAIAN SOLUTIONS INDIA PVT.LTD. HYD. 9 COPY OF ORDER FORWARDED TO: 1. ITO, WARD 2(1), HYDERABAD. 2. M/S GAIAN |SOLUTIONS INDIA PRIVATE LTD, PLOT NO.502/B, 1 ST AND 2 ND FLOOR, AMARA JYOTHI APARTMENTS, JUBILEE HILLS, HYDERABAD 500 033 , TELANGANNA 3. ACIT, RANGE 2 , HYDERABAD 4. CIT(A) - 2 , HYDERABAD 5. PR.CIT - 2 , HYDERABAD . 6 . D.R. ITAT HYDERABAD 7 . GUARD FILE