ACIT, circle-12(2), New Delhi V. IQOR India Services Pvt. Ltd., New Delhi

ITA 9057/DEL/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9586 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2016-2017
• Appeal Filed On: 20-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Double taxation relief; Permanent establishment; TDS
• Section: 2; 40(a)(ia); 195

Judgement Text

Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “D” BENCH: NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI KUL BHARAT, JUDICIAL MEMBER ITA No.9057/Del/2019 [Assessment Year : 2016-17] ACIT, Circle-12(2), New Delhi. vs IQOR India Services Pvt.Ltd., P-24, Green Park Extension, New Delhi-110016. PAN-AABCI2835F APPELLANT RESPONDENT Appellant by Ms. Meenakshi Singh, CIT DR Respondent by Ms. Mansi Jain, CA Date of Hearing 22.09.2022 Date of Pronouncement 30.09.2022 ORDER PER KUL BHARAT, JM : The present appeal filed by the Revenue for the assessment year 2016- 17 is directed against the order of Ld. CIT(A)-44, New Delhi dated 17.09.2019. 2. The Revenue has raised following grounds of appeal- 1. Whether the CIT(A) has erred in holding the FTS as business income under Article-7 of the DTAA between India-Philippines? 2. Whether the CIT(A) has erred in deleting the additions of Rs. 10,52,02,775/- made by the AO on account of non-deduction of TDS on payment made for FTS?. 3. The appellant crave leave, to add, alter or amend any ground of appeal raised above at any time of the hearing.” BRIEF FACTS OF THE CASE 3. Brief facts of the case are that assessee company filed its return of income on 18.11.2016 declaring total income of Rs.18,64,90,530/-. The case of the assessee was taken up for scrutiny assessment and the assessment u/s Page | 2 143(3) of the Income Tax Act, 1961 (“the Act”) was framed vide order dated 09.12.2018. The Assessing Officer (“AO”) while framing the assessment, made disallowance u/s 40(a)(i) of the Act at Rs.10,64,18,541/- on the basis that the assessee had remitted amount of Rs.10,64,18,541/- to IQor Philippines and the same has been claimed as contractual cost in the financial statement but no tax was deducted and deposited with the Government account. Therefore, the AO made addition of Rs.10,64,18,541/- on account of disallowance of expenditure u/s 40(a)(i) of the Act and assessed the income at Rs.29,29,09,070/-. 4. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, partly allowed the appeal of the assessee and granted relief of Rs.9,22,52,255/- to the assessee. 5. Aggrieved against the order of Ld.CIT(A), the Revenue is in appeal before this Tribunal. 6. Ld. CIT DR supported the orders of the AO and submitted that Ld.CIT(A) was not justified in deleting the disallowance. 7. On the other hand, Ld. Counsel for the assessee submitted that the issue is squarely covered in favour of the assessee in assessee’s own case for Assessment Year 2015-16. Ld. Counsel for the assessee reiterated the submissions as made in the Synopsis. For the sake of clarity, the relevant contents of the synopsis are reproduced as under:- Page | 3 “The only issue in this appeal filed by the department is whether in the absence of FTS clause in the India- Phillipines DTAA, the income has to be charged as per domestic law or under Article 7 of the DTAA relating to ‘Business income’. The assessee’s case is squarely covered by its own case of the A.Y. 2015-16, ITA No. 7592/Del/2019, dt. 25.08.2022, wherein in the appeal filed by the department it was held that the CIT(A) was right in holding that the amount has to be charged under ‘business income’ as per DTAA and in the absence of any Permanent Establishment in India, tax is not to be charged. Hence no disallowance under section 40(a)(i) can be made in the hands of the assessee. Relevant findings read as under: “5. Having considered rival submissions and perused the material available on record, we find, the issue is settled in favour of assessee in a number of decisions of the co-ordinate Benches, with reference to India-Philippines DTAA itself. In case of Jynga Game Networks India (P) Ltd. vs. ACIT in ITA No.2139/Del/2017 dated 03.08.2018, the co-ordinate bench has held as under: “15 As far as the case of the assessee that the payment in question is in the nature of FTS’ and since the recipient of payment was a tax resident of Philippines and since there is no FTS clause in the said DTAA, the sum in question can be charged to tax only under Article 1 of DTAA as business profits and since Startpoint does not have a PE in India, even under Article 7, the sum in question cannot be brought to tax, is a correct argument and ought not to have been rejected by the CIT(Appeals). We find support for the above said conclusion from the decision of the Tribunal rendered in the case of ABB FZ LLC (supra) and the decision in the case of IBM India Pvt. Ltd. (supra). The facts of the assessee’s case and the facts in the decisions referred to above are identical. The ratio laid down in the aforesaid cases that a payment in the nature of FTS made to Philippines tax resident in the Page | 4 absence of a PE of such tax resident of Philippines in India, income is not chargeable to tax in India supports the plea of the assessee in this regard. We therefore hold that the sum in question cannot be taxed as FTS in India. Consequently, there was no obligation in the part of assessee to deduct tax at source u/s 195 of the Act. Consequently, there cannot be any disallowance u/s. 40(a)(ia) of the Act." 6. Similar view has been expressed by the Tribunal in the following cases: i) M/s. Paramma Earth Technologies Inc.. Philippines Vs. DCIT- (ITA No.539/Del/17 & 540//2017) dated 26.02.2020; & ii) DCIT vs IBM India (P) Ltd.[2018} 100 Taxmann.com 230 ( IT Appeal nos 1288 1291 1294 1297, 1300, 1303 & 1306 order dated 16th Nov. 16/2018. 7. No contrary decision has been brought to our notice by learned Departmental Representative. Therefore, respectfully following the ratio laid down in the decisions, referred to above, we uphold the decision of learned Commissioner (Appeals) on the issue. Grounds raised are dismissed" The issue in present case is squarely covered by this decision of hon’ble ITAT.” 8. We have heard Ld. Authorized Representatives of the parties and considered the material available on record and gone through the orders of the authorities below. We find that the identical issue was also before the Hon’ble Co-ordinate Bench of the Tribunal in assessee’s own case for Assessment Year 2015-16 and the Hon’ble Co-ordinate Bench of the Tribunal was pleased to decide the issue in favour of the assessee by observing as under:- 5. “Having considered rival submissions and perused the material available on record, we find, the issue is settled in favour of assessee in a Page | 5 number of decisions of the co-ordinate Benches, with reference to India- Philippines DTAA itself. In case of Jynga Game Networks India (P) Ltd. vs. ACIT in ITA No.2139/Del/2017 dated 03.08.2018, the co-ordinate bench has held as under: “15....As far as the case of the assessee that the payment in question is in the nature of ‘FTS’ and since the recipient of payment was a tax resident of Philippines and since there is no FTS clause in the said DTAA, the sum in question can be charged to tax only under Article 7 of DTAA as business profits and since Startpoint does not have a PE in India, even under Article 7, the sum in question cannot be brought to tax, is a correct argument and ought not to have been rejected by the CIT(Appeals). We find support for the above said conclusion from the decision of the Tribunal rendered in the case of ABB FZ LLC (supra) and the decision in the case of IBM India Pvt. Ltd. (supra). The facts of the assessee’s case and the facts in the decisions referred to above are identical. The ratio laid down in the aforesaid cases that a payment in the nature of FTS made to Philippines tax resident in the absence of a PE of such tax resident of Philippines in India, income is not chargeable to tax in India supports the plea of the assessee in this regard. We therefore hold that the sum in question cannot be taxed as FTS in India. Consequently, there was no obligation in the part of assessee to deduct tax at source u/s 195 of the Act. Consequently, there cannot be any disallowance u/s. 40(a)(ia) of the Act.” 6. Similar view has been expressed by the Tribunal in the following cases: i) M/s. Paramina Earth Technologies Inc., Philippines Vs. DCIT – (ITA No.539/Del/17 & 540/ /2017) dated 26.02.2020; & ii) DCIT vs. IBM India (P) Ltd.[2018] 100 Taxmann.com 230 ( IT Appeal nos.1288,1291, 1294, 1297, 1300, 1303, & 1306 order dated 16 th Nov. 16/2018. Page | 6 7. No contrary decision has been brought to our notice by learned Departmental Representative. Therefore, respectfully following the ratio laid down in the decisions, referred to above, we uphold the decision of learned Commissioner (Appeals) on the issue. Grounds raised are dismissed.” 9. Ld.CIT DR has not brought any other contrary decision to our notice. Therefore, we do not see any reason to disturb the finding of Ld.CIT(A), the same is hereby affirmed. Thus, grounds raised by the Revenue are rejected. 10. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 30 th September, 2022. Sd/- Sd/- (SHAMIM YAHYA) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI