Anjani Synthetics Ltd., Ahmedabad V. The Dy.CIT, Circle-1, Ahmedabad

ITA 914/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8579 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 15-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: GAURAV NOHTA
• Keywords: Double taxation relief; Earning of tax free income

Judgement Text

, MH MHMH MH IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , EKUHK CKSJM EKUHK CKSJM EKUHK CKSJM EKUHK CKSJM , BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI, MANISH BORAD, ACCOUNTANT MEMBER ITA NO. 914 / AHD/201 5 ( / ASSESSMENT YEAR: 2011-12) ANJANI SYNTHETICS LTD., 1, NEW CLOTH MARKET, O/S. RAIPUR GATE, AHMEDABAD 380 002 / VS. DCIT, CIRCLE 1, AHMEDABAD. ./ ./ PAN/GIR NO. : AABCA 2789 E ( !' / APPELLANT ) .. ( #' / RESPONDENT ) !' $ / APPELLANT BY : SHRI GAURAV NOHTA, A.R. #' % $ / RESPONDENT BY : SHRI V. K. SINGH, SR. D.R. & '( % )* / DATE OF HEARING 03/04/2018 +,-. % )* / DATE OF PRONOUNCEMENT 09/04/2018 / / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER : THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE APPELLATE ORDER OF THE COMMISS IONER OF INCOME TAX(APPEALS)-6, AHMEDABAD [CIT(A) IN SHORT] VIDE A PPEAL NO.CIT(A)-6/DCIT.CIR.1/164/13-14 DATED 09/03/2015 A RISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') DATED 27/02 /2014 RELEVANT TO ASSESSMENT YEAR (AY) 2011-12. 2. THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE READS AS UNDER:- ITA NO.914/AHD/15 ANJANI SYNTHETICS LTD. VS. DCIT ASST.YEAR 2011-12 - 2 - 1. THE LD. CIT(A)-6, AHMEDABAD HAS ERRED IN LAW AN D ON FACTS IN PASSING APPELLATE ORDER DATED 09/03/2015 FOR A.Y .2011- 12 IN THE CASE OF APPELLANT BY CONFIRMING PART DISA LLOWANCE MADE BY THE AO. 2. THE LD. CIT APPEALS ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.7,46,337/- FOR TESTING EXPENSES. 3. THE LD.CIT APPEALS ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.76,300/- U/S.40(A)(IA) FOR TESTI NG CHARGES. 4. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONF IRMING DISALLOWANCE MADE OF RS.3,03,570/- ON ACCOUNT OF LA TE PAYMENT OF PF AND RS.86,535/- ON ACCOUNT OF LATE PA YMENT OF ESI. 5. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE U/S.14A OF RS.25,000/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE AO DISA LLOWED A SUM OF RS.7,46,337/- ON ACCOUNT OF TESTING EXPENSES. IT WA S STATED THAT ENTIRE EXPENSES AS CLAIMED IN THE RETURN OF INCOME WERE IN CURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND RELATED SERVICES WERE RENDERED OUTSIDE INDIA AND AS PER APPELLANT TDS PRO VISION WAS NOT APPLICABLE. FURTHER THE AO DISALLOWED A SUM OF RS.7 6,380/- U/S.40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TDS. IN THIS MATTER IT IS STATED THAT TDS WAS NOT DEDUCTED AS AFTER REDUCING THE SERVICES TAX THE SUM PAYABLE IS BELOW OF RS.75,000/-. THE AO FURTHER MADE AN ADDITI ON OF RS.3,90,105/- TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF T HE LATE PAYMENT OF PF AND ESI DUES OF ITS EMPLOYEES. THE AO STATED THAT D UE DATE U/S.36(1)(VA) REFERS TO THE DUE DATE UNDER THE RELEVANT ACT AND I F PAYMENT IS NOT MADE ON OR BEFORE THE SAID DUE DATE, THE AMOUNT IS TREAT ED AS INCOME AND NO DEDUCTION CAN BE ALLOWED. AO MADE ADDITION U/S.14A AMOUNTING TO RS.2,86,248/-. IN THIS CONNECTION, IT IS STATED THA T HE HAD MADE INVESTMENT OF RS.1,00,00,000/- DURING THE LAST TWO MONTH OF TH E YEAR. OUT OF THE TOTAL INVESTMENT, RS.60,00,000/- WAS MADE FROM THE CURREN T ACCOUNT. IT WAS ITA NO.914/AHD/15 ANJANI SYNTHETICS LTD. VS. DCIT ASST.YEAR 2011-12 - 3 - SUBMITTED THAT COMPANY IS HAVING SUFFICIENT RESERVE S AND SURPLUS AND SHARE CAPITAL TO MAKE THE INVESTMENTS. IT IS FURTHE R STATED THAT NO DIVIDEND INCOME HAS BEEN RECEIVED DURING THE YEAR. THE INVES TMENTS WERE MADE OUT OF OWN FUNDS AND NO BORROWED FUNDS WAS USED. IN SUPPORT OF THE CONTENTION APPELLANT HAD PLACED ON RECORD BALANCE S HEET AND OTHER DOCUMENTARY EVIDENCE BUT WERE NOT CONSIDERED BY THE AO AND MADE AN ADDITION OF RS.2,86,248/-. 4. AGAINST THE SAID ADDITION APPELLANT PREFERRED FI RST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO PARTLY ALLOWED THE APPELL ANT OF THE APPELLANT. 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. WE HAVE BEEN CONSIDERED GROUNDS OF APPEAL, ASSESSME NT ORDER AND ORDER OF THE LD. CIT(A). SO FAR DISALLOWANCE OF TESTING E XPENSES OF RS.7,46,337/- IS CONCERNED. APPELLANT HAS SUBMITTED THAT IT IS FOR CERTIFICATION CHARGES AND HAS BEEN PAID OUTSIDE IND IA AND PARTY DOES NOT HAVE ANY PE IN INDIA AND RELIANCE WAS PLACED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF DIAMOND SERVICES INTERNATIONAL PVT. LTD. VS. UNION OF INDIA AND ORS , WHICH HAS HELD AS UNDER: DOUBLE TAXATION RELIEF AGREEMENT BETWEEN INDIA AN D SINGAPORE PAYMENT FOR GRADING AND CERTIFICATION OF DIAMONDS GEMOLOGICAL INSTITUTE OF AMERICA (GIA) IS ENGAGED IN THE ACTIVI TY OF GRADING AND CERTIFICATION OF DIAMONDS WHICH ARE SHIPPED TO ITS LABORATORY THROUGH AN INTERNATIONAL NETWORK OF PARTICIPANTS GRADING R EPORT ISSUED BY GIA IS A STATEMENT OF FACT AS TO THE CHARACTERISTIC S OF THE DIAMOND IT INCLUDES AN ANALYSIS OF THE DIAMOND'S DIMENSIONS, C LARITY, COLOUR, POLISH, SYMMETRY AND OTHER CHARACTERISTICS GIA DOE S NOT ASSIGN OR TRANSFER ANY INDUSTRIAL OR COMMERCIAL EXPERIENCE TO ITS CUSTOMERS THERE IS NO TRANSFER OF ANY SKILL OR KNOWLEDGE OF G IA TO THE CUSTOMERS IN THE ISSUANCE OF GRADING REPORTS PAYMENT RECEIVED I S NOT FOR THE USE OR THE RIGHT TO USE THE INDUSTRIAL, COMMERCIAL OR SCIE NTIFIC EXPERIENCE BUT FOR THE APPLICATION OF EXPERIENCE TO A CERTAIN FACT UAL SITUATION I.E. GIA APPLIES ITS EXPERTISE TO DETERMINE THE TRUE FEATURE S OF THE DIAMONDS OF ITS CLIENTS WHICH ARE OFFERED FOR CERTIFICATION OR GRAD ING GIA IS NOT IMPARTING ITS TECHNICAL KNOWLEDGE, EXPERIENCE, SKIL L, ETC. TO ITS ITA NO.914/AHD/15 ANJANI SYNTHETICS LTD. VS. DCIT ASST.YEAR 2011-12 - 4 - CUSTOMERS WHEN THERE IS NO TRANSFER OF RIGHT TO US E, PAYMENT CANNOT BE TREATED AS ROYALTY WITHIN THE MEANING OF ART, 12 OF THE DTAA THEREFORE, PAYMENT RECEIVED BY THE PETITIONER A SIN GAPOREAN COMPANY, AS A SUB-PARTICIPANT OF GIA'S NETWORK FROM INDIAN C LIENTS FOR COLLECTING AND SHIPPING DIAMONDS AND CERTIFICATION THEREOF BY GIA DOES NOT FALL WITHIN THE EXPRESSION 'ROYALTY' AND THE RESPONDENTS WERE NOT JUSTIFIED IN REFUSING TO ISSUE CERTIFICATE UNDER S. 195/S. 197 RESPONDENT NO. 2 IS DIRECTED TO ISSUE CERTIFICATE AS APPLIED FOR BY THE PETITIONER. 5.1 WE FIND THAT FACTS OF THE CASE ARE SQUARELY APP LICABLE TO THE CASE IN HAND THEREFORE WE DIRECT THE AO TO DELETE THE ADDIT ION OF RS.7,46,337/-. 6. SO FAR NEXT GROUND RELATED TO DISALLOWANCE OF RS .76,300/- IS CONCERNED. APPELLANT HAS SUBMITTED THAT GROSS AMOUN T OF APPELLANT IS BELOW THE TAXABLE LIMIT ON WHICH SERVICE TAX COMPON ENT IS NOT TO BE CONSIDERED FOR THE PURPOSE OF DEDUCTION OF TDS. 6.1 LD. AR ALSO RELIED ON BOARD CIRCULAR NO.01/2014 DATED 13/01/2014 IN WHICH CONTENTION OF THE APPELLANT ON THE BASIS OF BOARD CIRCULAR DIRECT TO DELETE RS.76,300/-. 7. SO FAR GROUND WITH REGARD TO DISALLOWANCE OF RS. 3,03,570/- ON ACCOUNT OF LATE PAYMENT OF PF AND RS.86,535/- ON AC COUNT OF LATE PAYMENT OF ESI ARE CONCERNED. SAME IS COVERED AGAI NST THE ASSESSEE BY THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION. HENCE, THIS GROUND OF APPEAL IS DISMISSED. 8. SO FAR DISALLOWANCE U/S.14A OF RS.25,000/- IS CO NCERNED. LD. AR RELIED ON THE DECISION OF JIVRAJ TEA LIMITED VS. DE PUTY COMMISSIONER OF INCOME TAX IN ITA NO.866/AHD/2012, WHEREIN, IT HAS BEEN HELD THAT THERE IS NO EXEMPT INCOME THEN NO FACT THEREFORE RE LYING ON THE DECISION, ITA NO.914/AHD/15 ANJANI SYNTHETICS LTD. VS. DCIT ASST.YEAR 2011-12 - 5 - WE AND FACTS OF THE CASE IN HAND. WE DELETE THE DIS ALLOWANCE MADE BY THE LOWER AUTHORITIES. 9. IN THE RESULT, APPEAL FILED BY THE APPELLANT IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 09/04/2018 SD/- SD/- EKUHK CKSJM EKUHK CKSJM EKUHK CKSJM EKUHK CKSJM EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN YS[KK LNL; U;KF;D LNL; YS[KK LNL; U ;KF;D LNL; YS[KK LNL; U ;KF;D LNL; YS[KK LNL; U ;KF;D LNL; ( MANISH BORAD ) (MAHAVIR PRASA D) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 09/04/2018 PRITI YADAV, SR. PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #' / THE RESPONDENT. 3. 012) & 3) / CONCERNED CIT 4. & 3) ( !) / THE CIT(A)-6, AHMEDABAD. 5. 678 )'12 , !* 12. , 0 / DR, ITAT, AHMEDABAD 6. 89 :( / GUARD FILE. % & / BY ORDER, TRUE COPY '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 06/04/2018 (DICTATION-PAD 5 PA GES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 09/02/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER