ACIT, Circle- 33(1), New Delhi V. High Tech Healthcare , New Delhi

ITA 7857/DEL/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0946 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-10-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 28-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DELETING DISALLOWANCE OF CONSULTANCY CHARGES PAID AMOUNTING
• Keywords: Additional evidence; Permanent establishment; TDS; Set aside
• Section: 143(3); 133(6); 9(1); 9(1); 9(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘C’ : NEW DELHI) BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.7857/Del/2017 (Assessment Year : 2011-12) Assistant Commissioner of Income Tax, Circle-33(1), New Delhi Vs. M/s. High Tech Healthcare A-21, 3 rd Floor, Aurobindo Marg, Green Park Main, New Delhi-110016 PAN : AACFH7334L Appellant Respondent Revenue by Sh. Hemant Gupta, Sr. DR Assessee by None Date of hearing: 06.10.2022 Date of Pronouncement: 13.10.2022 ORDER Per Anubhav Sharma, JM : The appeal has been filed by the Revenue against order dated 12.10.2017 in appeal no. 139/14-15, New Delhi in assessment year 2011-12 passed by Commissioner of Income Tax (Appeals)-11, New Delhi (hereinafter referred to as the First Appellate Authority or in short ‘Ld. F.A.A.’) in regard to the appeal before it arising out of assessment order dated 06/03/2014 u/s 143(3) of the 7857/Del/2017 M/s. Hitech Healthcare 2 Income Tax Act, 1961 passed by ACIT, Circle-24(1), New Delhi (hereinafter referred to as the Assessing Officer ‘AO’). 2. The facts in brief are the appellant is an export house engaged in exporting different kinds of goods & material to the diversified foreign customers. The main items of export relate to medicines, chemicals, lab equipment, computers, books, IT equipment including installation & distribution of the material in foreign countries. During the course of assessment proceedings, the AO noted that the appellant has made payments of Rs. 3,27,58,170/- to non-residents on account of commission, commissioning, distribution & installation charges, consultancy charges and rent paid for foreign branches and such payments have been made without deduction of TDS. The AO enquired the assessee to show cause why these expenses claimed by the appellant in the P&L account be not disallowed u/s 40(a) of the Act due to non- deduction of TDS. The AR filed a reply explaining the nature of payments and by stating that the appellant was not liable to deduct TDS on these payments. It was further stated that the overseas agents/parties to whom these payments have been made do not have any permanent establishment (PE) in India. It was further explained that no income can be deemed to arise or accrue to these non- residents in India as per the provisions of section 9(1) (i) of the Act. The AO was not satisfied with the reply filed by the AR and held that the appellant was liable to deduct TDS on these payments made to foreign parties and therefore, the AO disallowed these expenses amounting to Rs. 3,27,58,170/-. 2.1 Secondly, the assessee has shown sundry creditors amounting to Rs. 3,64,45,268/- in the balance sheet. The AO issued notices u/s 133(6) of the Act to eight creditors in order to verify the genuineness of these creditors. Out of these, only three parties responded. Two have confirmed the credit balances. However, M/s Blulux Laboratries Pvt. Ltd. has vide letter dated 11.01.2014 stated that the outstanding amount was Rs. 12,39,301/- as against Rs. 22,39,303/- shown by the appellant. Thus, there was a difference of 7857/Del/2017 M/s. Hitech Healthcare 3 Rs.10,00,002/-. The AO asked the AR to explain this difference and also prove the genuineness of the sundry creditors who have not responded. The AR furnished copies of ledger accounts and other documents related to transactions with these parties and was unable to explain as to why these parties have not responded to the notices issued by the AO. The AO was not satisfied with the reply filed by the AR and has made an addition of Rs. 1,94,66,530/- in respect of the five parties who have not responded to the notices issued by the AO and the difference of Rs.10,00,002/- in the case of M/s Blulux Laboratries Pvt. Ltd. 3. Thereafter, before Ld. CIT(A), additional evidence was admitted and Ld. CIT(A) had set aside the additions of Rs. 3,28,58,170/-. It’s relevant finding are at para no. 5.3.1, 5.3.2 whereby Ld. CIT(A) was of view that Ld. AO has not been able to place on record any material to prove that existence of any PE of the overseas agent in India. As the payments made to overseas parties were for procurement of export orders and providing services related to distribution and installation of computers etc. and upon the same, no tax is deductible. Assessee had placed tax resident certificates of some of these parties as the additional evidence and Ld.AO had not given any comments in the remand report. Ld. CIT(A) was of the view that these payments do not constitute fees for technical services as the payments were in the nature of commission and ld. AO on wrong presumption of consultancy assumed the payments to be for fees for technical services. Ld. CIT(A) also observed that in regard to assessment years 2008-09 to 2010-11 and 2013-14 the Ld.AO has not made any addition for similar payments. 4. In regard to sundry creditor’s addition, Ld. CIT(A) examined every entry in the para no. 6.3 of its order and considered the additional evidences to hold that sundry creditors disbelieved by the AO had normal transactions. There were running balances, transactions and closing balance which have been accepted in the subsequent years. 5. The revenue has challenged these findings by raising following grounds :- 7857/Del/2017 M/s. Hitech Healthcare 4 “1. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in alalowing the appeal of the assessee by deleting disallowance of commission expenses amounting to Rs. 34,77,775/- paid to foreign agents. 2. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the appeal of the assessee by deleting disallowance of commission expenses, distribution & installation charges amounting to Rs. 2,47,33,076/- paid to foreign agents. 3. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the appeal of the assessee by deleting disallowance of consultancy charges paid amounting to Rs. 6,68,549/- paid to foreign agents. 4. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the appeal of the assessee by deleting disallowance of rent paid amounting to Rs. 38,78,770/- paid to foreign agents. 5. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the appeal of the assessee by deleting addition of Rs. 1,94,66,530/- made on account of unexplained sundry creditors. 6. The appellant craves leave to add, alter or amend any of the grounds of appeal before or during the course of appellate proceedings before the Hon’ble ITAT.” 6. As the case was called for hearing, non-appeared for the assessee on 6.10.2022 and the notice is received back to the report that “assessee has left the address”. Ld. DR was heard and who submitted that Ld. CIT(A) has fallen in error in admitting additional evidence and Ld. AO had given detail reasons which were wrongly considered to be presumptions. 7. Giving thoughtful consideration to the matter on record the Bench is of considered opinion that Ld. AO had failed to appreciate the nature of work of the assessee and in the concluding para no. 11 had drawn a presumption of consultancy of technical and managerial services being provided by foreign entities. However, ld. CIT(A) has considered core business activity of the 7857/Del/2017 M/s. Hitech Healthcare 5 assessee and based upon that concluded that assessee was not liable to deduct TDS. Ld. CIT(A) has taken into consideration the agreement between parties which does not reflect any services of special nature. Thus, there is no substance in the ground no. 1 to 4. 8. As with regard to ground no. 5 it can be observed that on behalf of the assessee various documents like confirmations, copies of accounts, bank statements, invoices were tendered as additional evidence under Rule 46A and upon which remand report was also sought. Ld. CIT(A) has examined every entry of respective parties. The findings of Ld. CIT(A) require no interference, The appeal of revenue is dismissed. Order pronounced in the open court on 13 th October, 2022. Sd/- Sd/- (ANIL CHATURVEDI) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 13 th .10.2022 *Binita, SR.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI