Central Electronics Ltd., Uttar Pradesh V. ACIT, New Delhi

ITA 5788/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5254 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 29-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI R.S. SYAL, HONBLE VICE PRESID ENT & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-5788/DEL/2013 ( ASSESSMENT YEAR: 2009-10) CENTRAL ELECTRONICS LTD. 4, INDUSTRIAL AREA, SAHIBABAD, UTTAR PRADESH AAACC1261G VS ACIT CIRCLE 3(1) 3 RD FLOOR, C.R. BLDG., NEW DELHI. ASSESSEE BY SH. SATYAJEET GOEL, CA REVENUE BY SH. ANSHU PRAKASH, SR. DR ORDER PER SHRI K.N. CHARY, J.M. THIS IS AN APPEAL CHALLENGING THE ORDER DATED 21.0 8.2013 IN APPEAL NO. 165/2011-12 PASSED BY THE LD. COMMISSION ER OF INCOME TAX (APPEALS)-VI, NEW DELHI (FOR SHORT HEREI NAFTER CALLED LD. CIT(A)). 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A 100% OWNED GOVERNMENT COMPANY UNDER THE DEPARTMENT OF SCIENTIF IC AND INDUSTRIAL RESEARCH (DSIR) AND HAS BEEN DEVELOPING AND DATE OF HEARING 08.08.2017 DATE OF PRONOUNCEMENT 11.08.2017 2 ITA NO. 5788/DEL/2013 PRODUCING VARIOUS ELECTRONIC MATERIALS, COMPONENTS AND SOPHISTICATED SYSTEM FOR WHICH KNOW-HOW ON A LABORA TORY SCALE HAS BEEN GENERATED IN THE CSIR LABORATORIES. THE C OMPANY IS ENGAGED IN THE PRODUCTION OF SOLAR PHOTOVOLTAIC CEL LS, MODULES AND SYSTEMS, RAILWAY ELECTRONICS AND PIEZO ELECTRO MATE RIAL FOR RAILWAY, DEFENSE AND VARIOUS GOVERNMENT DEPARTMENTS , AGENCIES LIKE DOT, ONGC, MNES ETC. THE GOVERNMENT HAS CLASS IFIED THE COMPANY AS HIGH TECHNOLOGY COMPANY AND OF NATIONAL IMPORTANCE. FOR THE AY 2009-10 THEY HAVE FILED THE IR RETURN OF INCOME ON 30.09.2009 DECLARING AN INCOME OF RS. 2,2 8,15,790/-. DURING THE COURSE OF 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT HEREINAFTER CALLED THE ACT) PROCEEDINGS AO MADE C ERTAIN ADDITIONS, INTER-ALIA, MAKING AN ADDITION OF RS. 31 ,75,050/- BY MAKING DISALLOWANCE U/S 40(A)(IA) OF THE ACT IN RES PECT OF THE COMMISSION PAID TO NON RESIDENTS FOR THE SERVICES R ENDERED BY THEM IN SECURING THE SAME ORDERS OF THE ASSESSEES PRODUCTS, AND ANOTHER SUM OF RS. 95,521/- BY MAKING DISALLOWANCE U/S 36(1)(VA) OF THE ACT FOR THE LATE DEPOSIT OF RS. 44,384/- FOR ISI AND RS. 51,137/- IN PF. IN THE APPEAL PREFERRED BY THE ASS ESSEE, BY WAY OF IMPUGNED ORDER, THE LD. CIT (A) DELETED THE OTHER A DDITIONS, BUT 3 ITA NO. 5788/DEL/2013 CONFIRMED THE ABOVE TWO ADDITIONS. HENCE, THE ASSE SSEE IS BEFORE US IN THIS APPEAL ON THE FOLLOWING GROUNDS: 1. THAT THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE AOS ACTION OF DISALLOWING RS. 31,75,050/- U/S 40(A )(IA) OF THE ACT BY WRONGLY REJECTING THE ASSESSEES CONTENTION. 2. THAT THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN C ONFIRMING THE AOS ACTION OF DISALLOWING RS. 53,538/- U/S 36(1)(VA) OF THE ACT BY WRONGLY REJECTING THE ASSESSEES CONTENTION. 3. THAT THE LD. CIT (A) WRONGLY REJECTED THE ASSESSEE S SUBMISSIONS FILED DURING ASSESSMENT PROCEEDINGS AND APPEAL PROC EEDINGS IN SUPPORT OF THE CLAIMED DEDUCTION. 3. IT IS THE ARGUMENT OF THE LD. AR THAT NO BUSINES S OR PROFESSIONAL CONNECTION EXISTS IN INDIA BETWEEN THE ASSESSEE AND THE NON-RESIDENTS, SERVICES WERE RENDERED OUTSIDE I NDIA AS SUCH THE INCOME OF THE NON-RESIDENT IS NOT TAXABLE IN INDIA, AND CONSEQUENTLY NO TAX WAS REQUIRED TO BE DEDUCTED ON THE COMMISSION EXPENDITURE INCURRED FOR PROCURING EXPOR T ORDERS BY THE ASSESSEE THROUGH THE NON-RESIDENTS AND ON THAT SCORE NO DISALLOWANCE CAN BE SUSTAINED U/S 40(A)(IA) OF THE ACT. IN RESPECT OF DISALLOWANCE U/S 36(1)(VA) OF THE ACT, HE SUBMIT TED THAT THE AMOUNTS WERE PAID BY WAY OF CHEQUE WITH IN THE TIME STIPULATED UNDER THOSE ENACTMENTS, THOUGH THE ENCASHMENT TOOK PLACE A DAY LATER, BUT FOR ALL PRACTICAL PURPOSES, THE DATE OF DEPOSIT OF CHEQUE 4 ITA NO. 5788/DEL/2013 WITH THE CONCERNED AUTHORITIES HAS TO BE TAKEN TO B E THE DATE OF PAYMENT, AND ON THAT PREMISE THERE IS NO GROUND FOR DISALLOWANCE. HE FURTHER SUBMITTED THAT BOTH THE GROUNDS ARE DIRE CTLY COVERED IN ASSESSEES OWN CASE IN ITA NO. 207/DEL/2014 FOR THE AY 2010-11. PER CONTRA, IT IS THE ARGUMENT OF THE LD. DR THAT I RRESPECTIVE OF THE FACT AS TO WHETHER OR NOT NON-RESIDENT AGENTS MAINT AINED PE IN INDIA, OR THE SERVICES WERE RENDERED IN INDIA OR AB ROAD, OR THE COMMISSION WAS RECEIVED IN INDIA OR ABROAD, COMMISS ION COULD BE TAXABLE IN INDIA U/S 5(2)(B) READ WITH SECTION 9(1) (I) OF THE ACT AS SUCH TAX IS REQUIRED TO BE DEDUCTED AT SOURCE FROM PAYMENT U/S 195 OF THE ACT. IN RESPECT OF DISALLOWANCE U/S 36( 1)(VA) OF THE ACT HE SUBMITTED THAT THE DATE OF ENCASHMENT SHALL BE D ATE OF PAYMENT AND THERE IS LAPSE ON THE PART OF THE ASSESSEE IN T HIS RESPECT. HE PRAYED TO DISMISS THE APPEAL AND TO CONFIRM THE ORD ERS OF THE AUTHORITIES BELOW. 4. WE HAVE CAREFULLY GONE THROUGH THE RECORD. IN SO FAR AS THE FACTS ARE CONCERNED, FROM THE RECORD, WE FIND THAT THE FOREIGN COMMISSION AGENTS HAVE RENDERED THEIR SERVICES IN A FOREIGN COUNTRY FOR PROCURING THE EXPORT ORDERS AND NO PART OF THEIR INCOME 5 ITA NO. 5788/DEL/2013 ACCRUED OR AROSE IN INDIA, AND, THEREFORE, NO PART OF COMMISSION IS CHARGEABLE TO TAX IN INDIA. THERE IS NOTHING ON RE CORD TO ESTABLISH ANY BUSINESS OR PROFESSIONAL CONNECTION IN INDIA BE TWEEN THE ASSESSEE AND THE NON-RESIDENT OR THAT ANY INCOME TO THE NON- RESIDENT ACCRUED OR AROSE IN INDIA. A COORDINATE B ENCH OF THIS TRIBUNAL IN ITA NO. 207/DEL/2014, WHILE FOLLOWING T HE DECISION OF THE LUCKNOW BENCH IN CIT VS. M/S NORTHERN TANNERY I N ITA NO. 636/LUCK./2014 HELD THAT WHERE A NON-RESIDENT WAS A PPOINTED AS COMMISSION AGENT FOR SALE OF PRODUCTS AND THE ASSES SEE HAD SIMPLY PROCURED THE EXPORT ORDERS THROUGH THE COMMISSION A GENT FOR WHICH THE COMMISSION WAS PAID, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE ON THE COMMISSION PAID TO THE FOREIGN AGENT. ON FACTS, WHILE FOLLOWING THE DECISION OF JURISDICT IONAL HIGH COURT IN CIT VS. EON TECHNOLOGIES PVT. LTD. (2013) 343 IT R 366 (DEL.) THE COORDINATE BENCH FOUND THAT THE RATIO ON THE FACTS IN TRANSMISSION COOPERATION OF ANDHRA PRADESH VS. CIT (1999) 239 IT R 587 (SC) HAS NO APPLICATION TO THE FACTS OF THE CASE ON HAND. W HILE RESPECTFULLY FOLLOWING THE ABOVE DECISIONS WE REACH A CONCLUSION THAT NO TAX WAS REQUIRED TO BE DEDUCTED ON THE COMMISSION EXPEN DITURE TOWARDS PROCURING EXPORT ORDERS BY THE ASSESSEE AND CONSEQUENTLY 6 ITA NO. 5788/DEL/2013 NO DISALLOWANCE COULD BE SUSTAINED U/S 40(A)(IA) OF THE ACT. HENCE, WHILE ALLOWING THIS GROUND NO. 1, WE DIRECT THE AO TO DELETE THE ADDITION ON THIS SCORE. 5. NOW COMING TO GROUND NO. 2, ADDITION IS MADE IN RESPECT OF THE DELAYED PAYMENTS OF RS. 44,384/- TO ESI AND RS. 51,137/- FOR PF, CONTENTION OF THE ASSESSEE HAS BEEN THAT THEY H AD DEPOSITED THE RELEVANT CHALLANS IN THEIR BANK WITHIN DUE DATE BUT THE CHEQUES COULD BE GOT CLEARED BY THE CONCERNED BANK ONE DAY THEREAFTER. AO AND THE LD. CIT (A) ARE NOT SATISFIED WITH THIS EXP LANATION AND THE ADDITION MADE BY THE AO WAS SUSTAINED BY THE LD. CI T (A). A COORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 207/DE L/2014 IN ASSESSEES OWN CASE FOR THE AY 2010-11, WHILE FOLLO WING THE DECISIONS REPORTED IN CIT, CHENNAI VS. REPCO HOME F INANCE LTD. (2015) 53 TAXMANN.COM 47 (MADRAS) AND DIT (EXEMPTIO N) VS. RAUNAQ EDUCATION FOUNDATION (2013) 350 ITR 420 HELD THAT IN THE ABSENCE OF CHEQUE BEING DISHONOURED, DATE OF TENDER ING THE CHEQUE SHOULD BE TAKEN AS DATE OF PAYMENT OF TAX. IN THIS CASE ALSO ADMITTEDLY CHEQUES ARE NOT DISHONOURED. HENCE, THE DATE OF TENDERING OF CHEQUES TO THE ESI AND PF DEPARTMENTS SHOULD BE 7 ITA NO. 5788/DEL/2013 TAKEN AS DATE OF DEPOSIT. WE, THEREFORE, FIND THAT ANY ADDITION ON THIS ACCOUNT CANNOT BE SUSTAINED. HENCE, WHILE ALL OWING THE GROUND NO. 2 ALSO WE DIRECT THE AO TO DELETE THE AD DITIONS ON THIS COUNT. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.08.2017 SD/- SD/- (R.S. SYAL) (K. NARSIM HA CHARY) VICE PRESIDENT JUDICIAL MEMBER DATED: 11.08.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI DRAFT DICTATED ON 08.08.2017 DRAFT PLACED BEFORE AUTHOR 10.08.2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 11.8.17 APPROVED DRAFT COMES TO THE SR.PS/PS 11.8.17 KEPT FOR PRONOUNCEMENT ON 11.8.17 FILE SENT TO THE BENCH CLERK 11.8.17 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.