M/s. Corbus (India) Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 5723/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7786 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 07-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB SENIOR
• Assessee Lawyers: M K JUNEJA
• Keywords: Rule 8D; Set aside
• Section: 14A; 40(a)(ia); 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5723 /DEL./2016 (ASSESSMENT YEAR : 2011-12) M/S. CORBUS (INDIA) PVT. LTD., VS. DCIT, CIRCLE 6 (2), (NOW CORBUS (INDIA) LLP), NEW DELHI. 164, KAILASH HILLS, NEW DELHI. (PAN : AAACM2026B) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.K. JUNEJA, ADVOCATE REVENUE BY : MS. ASHIMA NEB, SENIOR DR DATE OF HEARING : 11.07.2019 DATE OF ORDER : 17.07.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. CORBUS (INDIA) LLP (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 30.09.2016 PASSED BY THE COMMI SSIONER OF INCOME-TAX (APPEALS)-35, NEW DELHI QUA THE ASSESSME NT YEAR 2012-13 ON THE GROUNDS INTER ALIA THAT :- 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX IS WRONG AND ERRONEOUS BOTH IN FACT AND IN LAW. ITA NO.5723 /DEL./2016 2 2. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GROSSLY ERRED BOTH IN FACT AND IN LAW IN CONFIRMING THE ADDITION OF RS.20,857/- UNDER SECTION 14A OF THE IN COME TAX ACT, 1961 READ WITH RULE 80 OF INCOME TAX RULES 1962 AS AGAINST NIL DISALLOWANCE BY THE APPELLANT. 3. WITHOUT PREJUDICE TO ABOVE GROUNDS, COMMISSIONER OF INCOME TAX (APPEALS) HAS GROSSLY ERRED BOTH IN FACT AND IN LAW IN CONFIRMING THE ADD ITION OF RS.5,78,078 U/S 40(A)(IA) OF INCOME TAX ACT, 196 1. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN FACT AND IN LAW IN UPHOLDING THE INIT IATION OF PENALTY PROCEEDINGS UNDER SECTION 271 (1)(C) OF THE ACT BY THE ASSESSING OFFICER. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE IS INTO THE BUSI NESS OF OUTSOURCING OFFERING A RANGE OF SERVICES IN INFORMATION TECHNOL OGY (IT) AND THE SUPPLY CHAIN MANAGEMENT. ASSESSEE CLAIMED DIVIDEND INCOME OF RS.1,97,979/-. ASSESSING OFFICER (AO) BY INVOKING THE PROVISIONS CONTAINED UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) READ WITH RULE 8D OF THE INCOME-TAX RULES, 196 2 (FOR SHORT THE RULES) MADE A DISALLOWANCE OF RS.20,857/- AS IS EX PENSES INCURRED IN EARNING DIVIDEND INCOME. 3. AO ALSO MADE DISALLOWANCE OF RS.5,78,078/- ON AC COUNT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT AS THE ASSESS EE HAS FAILED TO DEDUCT THE TAX U/S 195 OF THE ACT ON THE PAYMENT MADE TO A MR RESEARCH INC., BOSTON (A GARTNER COMPANY) (HEREINAFTER REFERRED TO AMR RESEARCH INC.). ITA NO.5723 /DEL./2016 3 4. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS CONFIRMED THE ADDITIONS BY DISMISSI NG THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS RELIED UP ON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF TH E FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 6. GROUND NO.1 IS GENERAL IN NATURE, HENCE DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. GROUND NO.2 7. LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNED ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF RS.20,857/- CONTENDED THAT SINCE THE ASSESSEE HAS NOT INCURRED ANY EXPENSES DURING THE Y EAR UNDER ASSESSMENT, THE ADDITION IS NOT SUSTAINABLE BECAUSE THE ASSESSEE HAS EARNED INCOME BY WAY OF DIVIDEND ON INVESTMENT IN M UTUAL FUNDS INVESTED IN EARLIER YEARS IN WHICH DIVIDEND RECEIVE D GOT AUTOMATICALLY REINVESTED AS PER STANDING INSTRUCTIONS GIVEN BY TH E ASSESSEE AT THE TIME OF INITIAL INVESTMENT. HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVENUE RELYING UPON THE ORDER PASSED BY THE AO AS WELL AS LD. CIT (A) CONTENDED THAT TO EARN THE DIVIDEND, INDIRECT EXPEN SES CANNOT BE RULED OUT. ITA NO.5723 /DEL./2016 4 8. PERUSAL OF THE ASSESSMENT ORDER AS WELL AS THE I MPUGNED ORDER PASSED BY THE LD. CIT (A) GOES TO PROVE THAT THERE IS NOT AN IOTA OF EVIDENCE ON RECORD TO WORK OUT IF THE ASSESSEE HAS INCURRED ANY DIRECT OR INDIRECT EXPENSES IN EARNING THE DIVIDEND. WHEN DI VIDEND HAS BEEN UNDISPUTEDLY EARNED ON THE BASIS OF EARLIER INVESTM ENT MADE IN THE EARLIER YEARS IN WHICH THE ASSESSEE HAS GIVEN STAND ING INSTRUCTIONS TO REINVEST THE DIVIDEND EARNED, NO EXPENSES DIRECTLY OR INDIRECTLY CAN BE ATTRIBUTED TO HAVE BEEN INCURRED BY THE ASSESSEE. 9. NO DOUBT, AT THE TIME OF MAKING INITIAL INVESTME NT, ASSESSEE MUST HAVE INCURRED EXPENSES BUT WHEN IT IS UNDISPUTED FA CT THAT NO INVESTMENT HAS BEEN MADE DURING THE YEAR UNDER INVESTMENT AND ONLY DIVIDEND HAS BEEN EARNED ON THE REINVESTMENT OF DIVIDEND EARNED IN THE EARLIER YEARS AND THERE WAS NO INTERVENTION OF HUMAN LABOUR AND M IND, SECTION 14A IS NOT ATTRACTED. SO, WE ARE OF THE CONSIDERED VIEW T HAT AO WITHOUT BRINGING ON RECORD ANY EVIDENCE AS TO HOW AND UNDER WHAT CIRCUMSTANCES THE EXPENSES HAVE BEEN INCURRED IN TH E GIVEN CIRCUMSTANCES APPLIED RULE 8D MECHANICALLY WHICH IS NOT SUSTAINABLE IN THE EYES OF LAW. THE LD. CIT (A) HAS ALSO ERRED IN CONFIRMING THE ADDITION MADE U/S 14A OF THE ACT. SO, DISALLOWANCE MADE U/S 14A IS ORDERED TO BE DELETED. CONSEQUENTLY, GROUND NO.2 I S DETERMINED IN FAVOUR OF THE ASSESSEE. ITA NO.5723 /DEL./2016 5 GROUND NO.3 10. AO MADE DISALLOWANCE OF RS.5,78,078/- U/S 40(A) (IA) OF THE ACT ON THE GROUND THAT ASSESSEE HAS MADE FOREIGN REMITT ANCE TO AMR RESEARCH INC. WITHOUT DEDUCTING THE TAX U/S 195 OF THE ACT. LD. AR FOR THE ASSESSEE CONTENDED THAT AS PER ADVICE RENDERED BY THE TAX AUDITOR, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT THE TAX AT SOUR CE IN VIEW OF THE JUDGMENT RENDERED BY THE TRIBUNAL IN CASE OF M/S. WIPRO LTD. VS. ITO (2005) 94 ITD 9 (BANG.) . HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVENUE IN ORDER TO REPEL THE ARGUMENTS ADDRESSED B Y THE LD. AR FOR THE ASSESSEE CONTENDED THAT THE SAID DECISION RENDERED BY THE TRIBUNAL HAS BEEN OVERRULED BY THE HONBLE KARNATAKA HIGH COURT CITED AS CIT VS. M/S. WIPRO LTD. (2011) 16 TAXMANN.COM AND AS SUCH, THIS GROUND IS LIABLE TO DISMISSED. 11. UNDISPUTEDLY, ASSESSEE HAS NOT DEDUCTED THE TAX AT SOURCE BY RELYING UPON THE DECISION RENDERED BY THE TRIBUNAL IN CASE OF M/S. WIPRO LTD. VS. ITO (SUPRA). IT IS ALSO NOT IN DISPUTE THAT THE AFORE SAID CASE OF M/S. WIPRO LTD. DECIDED BY THE TRIBUNAL HAS BEEN OVERRULED BY HONBLE KARNATAKA HIGH COURT WHEREIN IT IS HELD THA T ANY PAYMENT MADE BY THE ASSESSEE TO A NON-RESIDENT IN ORDER TO OBTAI N LICENCE TO USE THE DATABASE MAINTAINED BY IT IS TO BE TREATED AS ROYAL TY. 12. WHEN THE CASE OF WIPRO LTD. IS UNDISPUTEDLY APP LICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE AS CONTENDED BY THE LD. AR FOR THE ASSESSEE, THERE CANNOT BE A SECOND VIEW THAT THE AS SESSEE WAS REQUIRED TO ITA NO.5723 /DEL./2016 6 DEDUCT THE TAX AT SOURCE WHILE MAKING THE PAYMENT T O AMR RESEARCH INC. SO, AO HAS RIGHTLY DISALLOWED THE AMOUNT OF R S.5,78,078/- U/S 40(A)(IA) OF THE ACT AND IS REQUIRED TO BE ADDED TO THE INCOME OF THE ASSESSEE. SO, WE FIND NO ILLEGALITY OR PERVERSITY IN THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A), HENCE GROU ND NO.3 IS DETERMINED AGAINST THE ASSESSEE. GROUND NO.4 12. GROUND NO.4 BEING PREMATURE NEEDS NO SPECIFIC FINDI NGS. 13. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 17 TH DAY OF JULY, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 17 TH DAY OF JULY, 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-35, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.