MICROAD INDIA PRIVATE LIMITED,DELHI V. DCIT CIRCLE - 16(2), DELHI

ITA 4714/DEL/2024

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Microad India Pvt. Ltd. appealed against the penalty imposed by the National Faceless Assessment Centre (NFAC) for the Assessment Year 2016-17, which was based on an earlier addition/disallowance made during the assessment proceedings. The penalty was related to non-deduction of TDS on payments made to associated enterprises in Japan and Singapore for online advertisements. The Tribunal referenced a similar case (ITA No. 4715/Del/2024) where the penalty was quashed, noting that the facts were similar except for the figures and amounts involved. The Tribunal highlighted that the transactions in question were covered under Article 7 of the DTAAs and were not liable for TDS deduction, a view supported by Form 15CAs and 15CBs filed during the assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 716813 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2016-2017
• Appeal Filed On: 09-10-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIPUL KASHYAP
• Assessee Lawyers: NIKHIL KHANNA
• Keywords: Difference of opinion; Transfer pricing; TDS; Double taxation relief
• Section: 143(3); 271(1)(c); 2

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘E’: NEW DELHI) BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No:- 4714/Del/2024 Assessment Year: 2016-17 Microad India Pvt. Ltd, 29, Patparganj Industrial Area, Delhi-110092. Vs. DCIT, Circle-16(2), Delhi. PAN No:AAICM3667L APPELLANT RESPONDENT Assessee by : Sh. Nikhil Khanna, CA Revenue by : Sh. Vipul Kashyap, Sr. DR Date of Hearing : 05.08.2025 Date of Pronouncement : 20.08.2025 ORDER PER ANUBHAV SHARMA, JM: This appeal has been preferred by the Assessee against the order dated 14.08.2024 of Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi, [hereinafter referred to as ‘NFAC / CIT(A)’] in Appeal No. NFAC/2015-16/10150062 arising out of an appeal before it against the order dated 04.03.2022 Printed from counselvise.com ITA No.-4714/Del/2024 Microad India Pvt. Ltd. 2 passed u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the National Faceless Assessment Centre, Delhi (hereinafter referred to as the ld. AO) for Assessment Year 2016-17. 2. On hearing both the sides, we find that in regard to the impugned penalty u/s 271(1)(c) for AY 2015-16, the matter has been considered by this Bench itself in ITA No.4715/Del/2024, order dated 31.07.2025 and the penalty order has been quashed. The ld. AR pointed out that there is no distinction in facts except for the figures and the amounts involved. The ld. DR could not dispute the same. As for convenience, the findings in paras 2 and 3 of the order dated 31.07.2025 are reproduced below:- “2. Heard and perused the records. The appellant is an Indian Company engaged in the business of selling internet- based advertisement to its clients. The appellant is a fully owned Indian subsidiary of a Japanese conglomerate. During the course of the year, the appellant sourced the advertisements that it sold to its clients- from its Japan and Singapore based Associated Enterprises (AEs) that in turn procured them from third party platforms like Google. Facebook etc. During the course of 143(3) assessment, the learned Assessing Officer made the addition/disallowance of Rs. 94,84,079 u/s 40 (a) (i) on account of non-deduction of TDS u/s 195 for payments made by the appellant to its AE(s) for purchase of online advertisement on third party platforms after deeming them Fees for Technical services. The appellant Printed from counselvise.com ITA No.-4714/Del/2024 Microad India Pvt. Ltd. 3 submitted that the aforesaid transactions were in nature of purchase of online advertisements from AEs, and were covered under Article 7 of Business Profits of the respective DTAAs with Japan and Singapore, thus not liable to TDS deduction. The appellant preferred an appeal against this order of assessment to delete this addition. The learned CIT(A) after hearing the submissions of the appellant partially allowed the appeal and reduced the amount of disallowance from Rs. 94,84,079 to Rs. 50,19,782. It allowed all purchases of advertisements from Japan (with which the assessee had a signed agreement) but disallowed the Purchases from Singapore (with which there was no formal agreement) Both, the Assessee as well as the Department accepted the order of CIT(A) and did not appeal against the order of CIT(A). However, the department after 3 years, passed an order of penalty against the Assessee u/s 271(1)c for concealment of income/furnishing inaccurate details on the reduced amount of addition. 3. Now what we find is that as a matter of fact, during the course of assessment itself, relevant Form 15CAs were duly filed wherein assessee had explicitly mentioned relevant provisions of the Income Tax Act and relevant DTAAs as the reasons for non-deduction of TDS on the aforesaid expense amounts remitted from India. This considered view was further corroborated on the basis of Certificates in Form 15CBs issued by professionally qualified Chartered Accountants for making such remittances. These 15C as and 15CBs were filed for all transactions, be it from Japan or Singapore. No penal action was taken under TDS sections against the Asesssee nor were any steps taken by the department to tax the amounts received by Microad Singapore entity. The fact that online advertisements brought from abroad are not taxable under the provisions of the Income Tax act read with the relevant Double Taxation Avoidance Agreements is corroborated by introduction of Equalization Levy (popularly known as Google Tax) from April 1, 2016 as laid u/s 165 of the Finance Act 2016 (and not Income Tax Act) to tax such transactions explicitly. Thus we find that the addition pertains to an amount on which there was a difference of opinion, and attributing concealment or inaccurate furnishing of facts, is not justified. The fact that the learned CIT(A) allowed a quantum of transactions itself proves that there is a difference of opinion between the AO, Assessee Printed from counselvise.com ITA No.-4714/Del/2024 Microad India Pvt. Ltd. 4 and the Learned CIT(A) towards how to the aforesaid transactions ought to be treated from TDS perspective. The grounds are sustained and appeals is allowed. The impugned penalty is quashed.” 3. In the light of the aforesaid discussion, the grounds are sustained. The appeal is allowed. The impugned penalty order is quashed. Order pronounced in the Open Court on 20.08.2025 Sd/- Sd/- (S RIFAUR RAHMAN) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:20/08/2025. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Printed from counselvise.com "