Appeal details
Counselvise Citation
[2023] 101 COUNSELVISE.COM (IT) 9388 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 month(s) 29 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-12-2023
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
D
Next Hearing Date
11-12-2023
Assessment Year
2016-2017
Appeal Filed On
22-03-2023
Judgement Text
1 | Page IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “D” BENCH: NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI KUL BHARAT, JUDICIAL MEMBER ITA No.804/Del/2023 [Assessment Year : 2016-17] Adobe Systems Software Ireland Ltd., 406, Riverwalk, Citywest Business Campus, Saggart, Dublin 24, Ireland PAN-AAHCA7203M vs ACIT, Circle-1(1)(1), International Taxation, New Delhi. APPELLANT RESPONDENT Appellant by Shri Ravi Sharma, Adv. & Ms. Shruti Khimta, AR Respondent by Shri Vizay B.Vasanta, CIT DR Date of Hearing 12.12.2023 Date of Pronouncement 22.12.2023 ORDER PER KUL BHARAT, JM : The present appeal filed by the assessee is directed against the order passed by Ld.ACIT, Circle-International Taxation 1(1)(1), Delhi dated 24.01.2023 for the assessment year 2016-17. 2. The assessee has raised following grounds of appeal:- 1.1. “That on the facts and circumstance of the case and in law, the Ld. Assistant Commissioner of Income-tax, Circle 1(1)(1), International Taxation, New Delhi ("Ld. AO") as well as the Hon'ble Dispute Resolution Panel I, New Delhi (DRP) erred in holding that the Appellant has a dependent agent permanent establishment ("PE") in India in terms of Article 5(6) of the Double Taxation Avoidance Agreement between India and Ireland. 1.2. That the Ld. AO and Hon'ble DRP grossly erred in completely disregarding the fact that Adobe Systems India Private Limited ("Adobe India") is not an agent of the Appellant and is a legally and economically independent entity. 2 | Page 1.3. That the Ld. AO and Hon'ble DRP grossly erred on the facts by concluding that Adobe India is a Dependent Agent PE of the Appellant and the agent is actively involved in sales and supply of software distributed by the Appellant, without appreciating that the sales and supply of software were done by independent third-party distributors. 1.4. That the Ld. AO and Hon'ble DRP erred in law in holding Adobe India to be a Dependent Agent PE of the Appellant without bringing any cogent documentary evidence on record to substantiate the above statement. 1.5. That the Ld. AO erred in law by not acting in accordance with the directions of the Hon'ble DRP wherein it had directed the Ld. AO to pass the final assessment order after considering the orders passed by the Hon'ble Income Tax Appellate Tribunal ("ITAT") in the Appellant's own cases for earlier years wherein based on similar facts, it has been held that the Appellant does not have at Dependent Agent PE in India. 2.1. That on the facts and circumstances of the case and in law, the Ld. AO erred in attributing a sum of INR 71,90,98,265/- as business profits to the alleged Dependent Agent PE of the Appellant in India. 2.2. Without prejudice to the above grounds, the Ld. AO and Hon'ble DRP failed to appreciate that attribution of profits to the alleged PE is a transfer pricing issue and grossly erred on facts and in law in disregarding established judicial pronouncements in India, including the orders of the Hon'ble ITAT in the Appellant's own cases for earlier years, on the issue that once the associated enterprise, that also allegedly constitutes a PE, (Adobe India in the present case) has been renumerated on an arm's length basis after taking into account its functions, assets and risk ("FAR") profile, nothing further can be attributed to the said PE. 2.3. Without prejudice to the above grounds, the Ld. AO and Hon'ble DRP grossly erred in disregarding the fact that the amount paid by the Appellant to Adobe India on account of marketing support services has been found to be at an arm's length during the assessment proceedings of Adobe India. Therefore, the Ld. AO and Hon'ble DRP erred in further attributing profits to 3 | Page the Appellant's alleged PE in India, without bringing any material on record to suggest that the alleged PE had been carrying out any other activity on behalf of the Appellant, apart from marketing support services. 2.4. Without prejudice to the above grounds, the ld. AO and Hon'ble DRP failed to appreciate that even if any profits for additional functions were required to be attributed, then the same should have been done in the hands of Adobe India. 2.5. Without prejudice to the above grounds, the Ld. AO and Hon'ble DRP grossly erred in attributing revenue (instead of profits) to the alleged AE and thereby, erroneously arriving at a profitability of 70.74% whilst Appellant's global profit during the year under consideration were 2.39% as corroborated by global audited accounts furnished by the Appellant. 3. On the facts and circumstances of the case & in law, the Ld. AO grossly erred in levying tax on interest on the income-tax refund received by the Appellant during the year under consideration @40% (plus applicable surcharge and cess), as per the provisions of the Act, as opposed to applying the beneficial tax rate of 10% provided under Article 11 of the India-Ireland Double Taxation Avoidance Agreement ("DTAA" or "Tax treaty"). 4. That on the facts and in circumstances in law, the Ld. AO erred in not allowing credit of taxes deducted at source ("TDS") amounting to INR 73,97,849/- whilst computing the tax liability of the Appellant for the year under consideration. 5. That on the facts and in circumstances of the case and in law, the Ld. AO has grossly erred in levying interest under section 234A of the Act whilst computing the tax liability of the Appellate for the year under consideration. 6. That on the facts and in circumstances in law, the Ld. AO erred in mechanically initiating proceedings under section 271(1)(c) of the Act. 7. The above grounds of appeal are mutually exclusive and without prejudice to each other. The Appellant craves leave to add, alter, amend and/or modify any of the grounds of appeal at or before the hearing of the appeal.” 4 | Page 3. Facts giving rise to the present appeal are that the assessee company filed its return of income for the Assessment Year under consideration on 14.10.2016, declaring total income of INR 16,20,68,861/- claimed to be taxed at special rate. The Assessing Officer (“AO”) noted that during the assessment proceedings, it was noticed that the assessee has a Dependent Agent PE in India in the form of Adobe India and the agent is actively involved in the sales and supply of software distributed by the assessee and especially carrying out promotion activity of application products of the assessee. Therefore, it was held that premises of Adobe India form a fixed place PE for the assessee company. The AO therefore, passed a draft assessment order u/s 144C of the Income Tax Act, 1961 (“the Act”). The assessee field its objection before Ld. Dispute Resolution Panel (“DRP”) who disposed off the objections vide direction dated 14.11.2022. Thereafter, the AO passed a final assessment order dated 24.01.2023 thereby, he assessed the income of the assessee company at INR 73,71,80,436/-. Aggrieved against this the assessee in appeal. 4. Ground Nos. 1 & 2 raised by the assessee relate to existence of dependent agent PE. 5. Ld. Counsel for the assessee submitted that identical grounds were raised in earlier and subsequent years and Tribunal had decided the issue, in favour of the assessee. 6. Ld.Sr.DR for the Revenue fairly conceded that the issue is covered by the order of the Tribunal in earlier and subsequent years. The issue in question in AY 2017-18, the Co-ordinate Bench of the Tribunal in ITA No.774/Del/2022 in 5 | Page assessee’s own case for AY 2017-18 order dated 21.10.2022 had decided the issue by observing as under:- 9. “Undisputedly, in the transfer pricing proceedings, the TPO, in order dated 18.02.2022, has observed that the international transaction between the assessee and the Indian AE are at arm’s length and has not proposed any further adjustment, in so far as, it relates to transaction of business support services. Therefore, the question which arises for consideration is, whether in such a scenario, still, profit can be attributed to the PE in India. As we find, while deciding identical issue in assessee’s own case in preceding assessment years, the Tribunal in the order, referred to above, has held as under: “10. Upon careful consideration, we find that the issue of attribution to profit when the transaction has been found to at Arm's Length between foreign party and the Indian AE, then no further attribution is required has already been decided by the decision of the Hon'ble Supreme Court in the case of DIT v. Morgan Stanley & Co. Inc [2007] 292 ITR 416 (SC). This aspect was very much before the Ld. CIT(A) and he has dealt with the same as under:- "As regards determination of profits attributable to a PE in India (MSAS) is concerned on the basis of arm's length principle Article 7(2) is relevant. According to the AAR where there is an international transaction under which a non- resident compensates a PE at arm's length price, no further profits would be attributable in India. In this connection, the AAR has relied upon Circular No. 23 of 1969 issued by CBDT as well as Circular No. 5 of 2004 also issued by CBDT. [Para 29] Article 7 of the U.N. Model Convention inter alia provides that only that portion of business profits is taxable in the source country which is attributable to the PE. It specifies how such business 6 | Page profits should be ascertained. Under the said Article, a PE is treated as if it is an independent enterprise (profit centre) dehors the head office and which deals with the head office at arm's length. Therefore, its profits are determined on the basis as if it is an independent enterprise. The profits of the PE are determined on the basis of what an independent enterprise under similar circumstances might be expected to derive on its own. Article 7(2) of the U.N. Model Convention advocates the arm's length approach for attribution of profits to a PE. [Para 31] The object behind enactment of transfer pricing regulations is to prevent shifting of profits outside India. Under article 7(2) not all profits of MSCo would be taxable in India but only those which have economic nexus with PE in India. A foreign enterprise is liable to be taxed in India on so much of its business profit as is attributable to the PE in India. The quantum of taxable income is to be determined in accordance with the provisions of Act. All provisions of Act are applicable, including provisions relating to depreciation, investment losses, deductible expenses, carry forward and set-off losses, etc. However, deviations are made by DTAA in cases of royalty, interest etc. Such deviations are also made under the Act for example: Sections 44BB, 44BBA etc.). Under the impugned riding delivered by the AAR, remuneration to MSAS was justified by a transfer pricing analysis and, therefore, no further income could be attributed to the PE (MSAS). In other words, the said ruling equates an arm's length analysis (ALA) with attribution of profits. It holds that once a transfer pricing analysis is undertaken; there is no further need to attribute profits to a PE. The impugned ruling is correct in principle insofar as an associated enterprise, that also constitutes a PE, has 7 | Page been remunerated on an arm's length basis taking into account all the risk-taking functions of the enterprise. In such cases nothing further would be left to be attributed to the PE. The situation would be different if transfer pricing analysis does not adequately reflect the functions performed and the risks assumed by the enterprise. In such a situation, there would be a need to attribute profits to the PE for those functions/risks that have not been considered. Therefore, in each case the data placed by the taxpayer has to be examined as to whether the transfer pricing analysis placed by the taxpayer is exhaustive of attribution of profits and that would depend on the functional and factual analysis to be undertaken in each case." 11. The Ld. CIT(A) in this regard held that the argument of the appellant is that if the international transactions between the parent entity (HO) and associated entity (AE) stand accepted at an Arm's length based on FAR analysis, in that case, the question of appropriation of profit to DAPE does not arise. That his argument sans the concept of separate entity approach as provided in article 7 of India Ireland DTAA to distinguish between PE and parent entity (HO). That if the international transactions between India AE and HO have been accepted at an arm's length by TPO, it does not automatically mean that FAR of DAPE stands subsumed in the same. That it is important to distinguish between the benchmarking analysis for the transactions between HO and associated enterprise (AE) vis-avis that of HO and its PE. That it may be important to make a distinction between the FAR of the parent entity (Head Office (HO) in Ireland) and AR of the DAPE (India). Further, it is also important to note that 8 | Page FAR of the DAPE is distinct from FAR of the associate enterprise (AE) in India. That so, practically, it is a interplay of FAR amongst three entities i.e. parent entity (HO) in Ireland, DAPE in India and Associated Entity (AE) in India. 12. We find the above view of the Ld. CIT(A) is not sustainable in the light of the decision of the Hon'ble Supreme Court as above in the case of DIT vs Morgain Stanley & Co.(supra). To the same effect is the order of the ADIT v. EFunds IT Solution Inc.[2017] 399 ITR 34(SC), Honda Motor Co. Ltd vs. ADIT (301 CTR 601)(SC) and of the Hon'ble Delhi High Court in the case of Adobe Systems Inc. v. ADIT [WP(C) 2384, 2385, 2390 of 2013] and DIT v.BBC Worldwide Ltd.[2011] 203 Taxman 554(Delhi), once a transfer pricing analysis has been undertaken in respect of the Indian AE, nothing further would be left to be attributed to it as the alleged PE of Adobe Ireland and that, accordingly, would automatically extinguish the need for attribution of any additional profits to the alleged PE. 13. In all these cases, it has found that the transactions have been found to be at Arm's Length by the Transfer Pricing Officer in the Transfer pricing order of the AE i.e. Adobe India. This is not disputed by the Revenue. In such a situation, the decision of the Hon'ble Apex Court as above applies on all fours in these cases. The Revenue has tried to distinguish the order of the Hon'ble Supreme Court decision by firstly referring by submitting that the Adobe India is performing functions which are wider in scope of the agreement entered with the assessee and in the TP study report of Adobe India. For this purpose, reliance has been placed on the order of the Ld. CIT(A) in this case 9 | Page for AY 2010-11. We find that the above submission by no stretch of imagination can be said to be distinguishing the decision of the Hon'ble Apex Court from being applicable from the facts of the present case. Very well understanding this proposition, the Revenue itself urged that without prejudice to the above, the judicial decision of the attribution of profit by applying FAR analysis has not been accepted by the Indian Government and the profit has to be determined by apply of provisions of DTAA r.w.s.10A of the Income Tax Rules, 1962. In view of the above, we are of the opinion that the decision of the Hon'ble Apex Court as above squarely applies in this case. Hence holding that since the transactions between the assessee and its Indian AE has been found to be at Arm's Length in the transfer pricing adjustment, no further attribution can be made to the PE of the appellant as claimed. Hence, this issue needs to be decided in favour of the assessee. 14. We further find the above view of the Ld. CIT(A) is not sustainable in the light of the Hon'ble Supreme Court decision as above. The Ld. CIT(A) has opined that Adobe India while discharging the functions as assigned by Adobe Ireland has the right to use the intangible asset in the form of "brand, trademark and logo" but there is cost paid for the same to the assessee. Further he observed that there is persistent risk of violation of copyright of software product and unauthorized use of copies of the software product in Indian market. In this regard, he has referred to case against the particular person filed by Adobe Systems, Inc. & Ors. The Ld. CIT(A) hypothesized that Adobe Systems, Inc. & Ors. would come to know about the instances of infringement of copyright only 10 | Page through the local presence of Adobe India Resources. The Ld.CIT(A) further opined that the function of the India AE of identification of potential customers and continuous engagement of registered customers goes into development of market of intangibles and no compensation has been made to the Indian AE for all such functions to develop market intangible asset. From this, the ld. CIT(A) opines that Adobe India is responsible for protecting, development & maintenance of the intangible assets (copyright, brand, patent & confidential data of customers) of Adobe group in India. Further, the Ld. CIT(A) opined that risk of receivables from distributors also exist in India but there is no compensation made for such functions. Keeping the above in view, the Ld. CIT(A) held that Adobe India is dependent PE of the assessee company and in order to compensate for the FAR assigned to DAPE, he has no reason to defer from the view of the Assessing Officer to attribute 35% of the total Revenue pertaining to India for this year. 15. Further, functions attributed to the Adobe India by the Revenue is also based upon the observations of the Ld. CIT(A) for Assessment Year 2010-11 primarily. The allegation of the Revenue is that the assessee was asked to produce dump of the emails correspondence between Adobe India and Adobe Ireland to deep dive to the activities so as to ascertain the clear cut facts to decide about PE. However, it was noted by the Ld. CIT(A) that after couple of months of gap, the assessee produced only sample certain e-mails. On the basis of these e-mails of few instances, the Ld. CIT(A) inferred that quotes offered by the distributors to channel partners are after discussion with Adobe India. The reasoning was that 11 | Page orders are delivered after seeking confirmation from Adobe India resources. Further, one of the emails is said to be demonstrating, the control and monitoring by Adobe India of distributors in meeting assigned targets. Basing upon such few e-mails, the Revenue has concluded that activities actually performed by Adobe India are wider in nature as against the activities pointed out in the contract and transfer pricing report. We find that the above observations have been cogently rebutted by the ld. counsel for the assessee. As regards the few e-mails that have been referred they are only also marked to the Adobe India personnel which has been said to be done only for the sake of keeping the Adobe India in the loop. In none of the e-mail referred Adobe India has actually provided guidance and directions regarding the quotes. This is a fiction of imagination by the Revenue. Hence, the functions attributed on the basis of these e-mails are not at all enlarging the scope of actual functions performed by the AE than as per the agreement and the transfer pricing report. The plea that the email dump has not been provided is a peculiar plea. In Adobe India T.P. adjustment no such issue has been recorded. It is common knowledge e-mail correspondence is a two way process. So when everything was found in order in Adobe India T.P. Adjustment, hence, it cannot be said that Revenue did not have complete access to all the e-mails between Adobe India and Adobe Ireland. The Ld. CIT(A) is also of view that the assets client list gives rise to in intangible assets has also no basis. No cogent case has been made out that Adobe India was provided with right to any intangible asset belonging to the assessee i.e. Adobe Ireland. The issue raised by the Ld.CIT(A) by relying upon legal dispute infringement of copy right in 12 | Page India being looked after by Adobe India/Adobe Ireland is also without any basis as it is Adobe USA, the IP owner which handles the legal matters relating to infringement of brand, copy right matters and other related actions to be undertaken in all jurisdiction in which the Adobe operates including India. Adobe USA is authorised in monitoring to Indian operations and their legal counsels handles the matters there from. 16. As regards the risk recoverable from distributors, the hypothesis that the risk is borne by Adobe India has also no basis. The documents clearly show that the collection from the customers is managed by the team Adobe Ireland. Thus, from the above, it is apparent that only on hypothesis and guess work and assigning of all sorts of imaginary motives by a few e-mails, the Ld. CIT(A) and therefore the Revenue is contending that the functions performed by Adobe India are much wider than the that as per the agreement and the transfer pricing analysis. We find that as discussed by us hereinabove these submissions are not at all cogent enough to warrant a view that the transfer pricing analysing done in the case of Adobe India does not adequately reflects functions performed and the risk assumed by the enterprise. In such a situation as held by Hon'ble Apex Court as above, there is no need to attribute any further profit as all functions and risk have been considered in the computation of Arm's Length Price in the case of Adobe India. 17. As such, it follows that the finding of PE is also without cogent basis. Be that as it may issue of PE becomes academic and we are not engaging further into it. We have already found that functions performed by Adobe 13 | Page India are actually not different than the agreement and transfer pricing documentation.” 10. There is no gainsaying that factually the issue stands on identical footing in relation to preceding assessment years, as, both the Assessing Officer and learned DRP have decided the issue following their earlier decisions. That being the case, respectfully following the decision of the coordinate Bench, as referred to above, we hold that the amount received by the assessee from supply of software and automated services, are not taxable in India. The Assessing Officer is directed to delete the additions.” 7. The Revenue has not pointed any change into facts and circumstances of the case in the year under appeal. Hence, we do not see any reason to deviate from the decision taken by coordinate bench in ITA No. 774/Del/2022 . We therefore respectfully following the same hereby direct the AO to delete the impugned addition. 8. Ground no. 1 & 2 are allowed in terms indicate above. Ground No. 3 On the facts and circumstances of the case & in law, the Ld. AO grossly erred in levying tax on interest on the income-tax refund received by the Appellant during the year under consideration @40% (plus applicable surcharge and cess), as per the provisions of the Act, as opposed to applying the beneficial tax rate of 10% provided under Article 11 of the India-Ireland Double Taxation Avoidance Agreement ("DTAA" or "Tax treaty"). 9. Apropos to Ground No.3 raised by the assessee, the assessee has filed a brief note. For the sake of clarity, the relevant contents of the brief note are reproduced as under:- 14 | Page “Brief note on Ground Nos. 3, 4 and 5. It is humbly requested that the remaining grounds of objection should not be treated as withdrawn/not pressed. Ground No. 3: On the facts and circumstances of the case & in law, the Ld. AO grossly erred in levying tax on interest on the income-tax refund received by the Appellant during the year under consideration @40% (plus applicable surcharge and cess), as per the provisions of the Act, as opposed to applying the beneficial tax rate of 10% provided under Article 11 of the India-Ireland Double Taxation Avoidance Agreement ("DTAA" or "Tax treaty"). 1. It is humbly submitted that the taxability of interest income earned by a tax resident of Ireland is dealt with by Article 11 of the India-Ireland tax treaty (please refer to page nos. 87 to 98 of the paperbook-II) which inter alia provides that interest arising in India and paid to a resident of Ireland may be taxed in India, but the tax so charged shall not exceed 10% of the gross amount of the interest. 2. Furthermore, the term "interest" used in the said Article has been defined in paragraph 4 as "income from debt claims of every kind. 3. In the present case, the Assessee, upon determination of its tax liability for AY 2008-09 and AY 2010-11 (the period to which the refund relates), was entitled to a refund of the excess taxes paid by it. Furthermore, since these taxes had been collected in excess of the Assessee's actual tax liability, the income-tax authorities were liable or obligated by the provisions of the Act to refund the excess taxes collected by them. Accordingly, the amount of refund due to the Assessee was in the nature of a 'debt owed' to it by the income-tax authorities. 4. With regard to the above, it may be noted that in the case of Union of India v. Tata Chemicals [2014] 363 ITR 658 (SC), the Hon'ble Supreme Court has held that income-tax refund payable to the 15 | Page assessee is a 'debt owed' and payable by the Government (please refer to page nos. 99 to 110 of the paperbook-11). 5. The aforesaid observation of the Hon'ble Supreme Court has also been acknowledged by the Central Board of Direct Taxes ("CBDT") in its Circular No. 11/2016 dated April 26, 2016, wherein it has been clarified that a resident deductor shall be entitled to interest under section 244A of the Act on refund of taxes deposited under section 195 of the Act (please refer to page no 111 of the paperbook- II). 6. Furthermore, in the case of Ansaldo Energia SPA vs. CIT [2016] 384 IT 312 (Madras), the Hon'ble Madras High Court has as upheld the contentions of the assessee that the income- tax refund receivable from the Income-tax Department as well as the interest due thereon is in the nature of a debt claim within the meaning of Article 12 of the India-Italy tax treaty. The Court further clarified that the above- observation of Hon'ble Supreme Court in Tata Chemicals (supra) is not merely in the nature of a stray observation and is actually a statement of law. A copy of the judgement has been enclosed on page nos. 112 to 118 of the paperbook-II. 7. Moreover, the Ld. Commissioner of Income Tax (Appeals) ["CIT(A)"] in the Appellant's own case for AY 2020-21 [appeal filed against the intimation passed under Section 143(1) of the Act] had also explicitly mentioned that the interest income earned on the income-tax refunds are governed by Article 11 of the India-Ireland Tax treaty, prescribing a rate of 10%. This order has now attained finality since no appeal has been filed by the Revenue. 8. It is further submitted that the aforesaid order of the Hon'ble CIT(A) has also been upheld by this Hon'ble Bench in the Appellant's own case for AY 2020-21 [ITA No. 913/Del/2023]. 16 | Page Accordingly, the action of the Ld. AO of taxing the interest on refund at the rate of 40% is required to be set aside and the same should be brought to tax at 10% as prescribed in the India-Ireland tax treaty. 10. On the other hand, ld. DR supported the orders of the authorities below. We have heard the rival submissions perused material on record. The identical issue came up for consideration of the coordinate bench of this Tribunal in the AY 2020-21 in ITA No. 913/Del/2023, wherein the coordinate bench decided the issue by observing as under:- 17. We are in agreement with the findings of the Ld. CIT(A). However, in our humble opinion, claim of the treaty benefit made by the assessee is not in dispute at all at this stage and hence no verification is required by the Ld. AO with respect to the same. In the light of the above legal position and factual matrix of the case, we set aside the order of the Ld. AO on the impugned issue and direct him to apply the tax rate of 10% on interest on income tax refund as per the provisions of Article 11 of the India-Ireland DTAA. Accordingly, ground No. 3 is decided in favour of the assessee. 11. We do not see any reason to deviate from the finding of the coordinate bench as the facts and circumstances are identical, the Revenue has not brought to our notice any other binding precedent on this issue. Therefore, the Assessing Officer is directed to tax the interest @10% as prescribed in the Indo-Ireland Tax Treaty. 12. This ground of the assessee appeal is allowed in terms indicate above. Ground No. 4: That on the facts and in circumstances in law, the Ld. AO erred in not allowing credit of taxes deducted at source ("TDS") amounting to INR 73,97,849/- whilst computing the tax liability of the Appellant for the year under consideration. 9. It is humbly prayed that this Hon'ble Bench may kindly direct the Ld. AO to verify the claim of the Appellant and grant the short 17 | Page credit of Taxes Deducted at Source (TDS) amounting to INR 73,97,849/-. 13. Apropos ground no. 4 is a prayer for allowing credit of taxes deducted at source amounting to INR 73,97,849/- considering the submissions and material placed before us. We hereby direct the Assessing Officer verify the claim and grant the credit of taxes deducted at source in accordance with law. 14. This ground of the assessee appeal is allowed in terms indicate above. Ground No. 5: That on the facts and in circumstances of the case and in law, the Ld. AO has grossly erred in levying interest under section 234A of the Act whilst computing the tax liability of the Appellate for the year under consideration. 10. It is humbly submitted that the Assessee had furnished its return of income under the provisions of section 139(1) of the Act on October 14, 2016. However, the Ld. Deputy Commissioner of Income Tax, Centralized Processing Center, Bangalore had treated the return of income filed by the Assessee for the year under consideration as invalid under section 139(9) of the Act since the gross receipts shown in Form 26AS for which credit of TDS credit had been claimed by the Assessee in its return of income were higher than the total receipts shown in the return of income. 11. Aggrieved by the aforementioned order, the Assessee had filed an application under section 264 of the Act with the Ld. Commissioner of Income Tax (IT), Delhi-1 ("CIT"). After considering the contentions of the Assessee, the Ld. CIT had passed an order dated March 23, 2020 under section 264 of the Act, quashing the abovementioned order passed by the Ld. AO CPC and giving a direction to treat the return of income filed by the Assessee as valid (please refer to page nos. 119 to 135 of the paperbook-II). 12. Thereafter, the Appellant filed letters with the Ld. AO requesting to give effect to the order of the Hon'ble CIT. However, in complete 18 | Page disregard of the requests, the Ld. AO initiated the re- assessment proceedings under section 148 of the Act and levied interest under section 234A of the Act whilst assessing the income for the year under consideration. It is humbly prayed that this Hon'ble Bench may kindly direct the Ld. AO to consider the return furnished under section 139(1) of the Act as valid.” 15. It is stated that the interest was levied treating the return of income as invalid however by the order of Commissioner of Income Tax, Delhi -1 who has quashed the order passed by the CPC and directed the return of income file by the assessee be treated as valid. Therefore, it is prayed that the interest levied by the Assessing Officer u/s. 234A may be deleted. On the other hand, the ld. DR supported the orders of the authorities below. But he could not controvert the fact that ld. CIT(A) has decided the issue in favour of the Assessee. 16. We have considered the rival submissions; we find merit into the contention of the learned counsel for the assessee. When the return of the income has been held to be validly filed then all consequent action related to levy of interest u/s. 234A would follow as prescribed under the law. We therefore direct the Assessing Officer to verify and levy the interest u/s. 234A as per the provisions of the Act as if it is a valid return. 17. This ground of the assessee appeal is allowed in terms indicate above. 18. The appeal of the assessee is partly allowed in terms indicate above. Order pronounced in the open Court on 22 nd December, 2023. Sd/- Sd/- (SHAMIM YAHYA) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER * Amit Kumar * 19 | Page Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI
