PREMIER INDUSTRIAL CORPORATION LIMITED,MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX - 14(1)(1), MUMBAI

ITA 999/MUM/2024

AI Insights

The case involves Premier Industrial Corporation Limited appealing against the order of the National Faceless Appeal Centre (NFAC), which upheld the disallowance of certain deductions and additions to the income assessed by the Assessing Officer. The primary issues revolved around the taxability of foreign remittances and the deductibility of expenses claimed under Sections 40(a)(i) and 80G of the Income Tax Act. The Tribunal examined the documentation and arguments presented by both parties, focusing on whether the remittances made to non-residents were liable for tax in India and whether the Assessee had substantiated its claims for deductions adequately.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33185 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2020-2021
• Other Referred Cases: Commissioner of Income Tax Vs. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASSESSEE
• Keywords: Permanent establishment
• Section: 143(3); 195; 37(1); 80G

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No.999/MUM/2024 (Assessment Year: 2020-2021) Premier Industrial Corporation Limited 501/506, Kailash Corporate Lounge Godrej-Hiranandani, Link Road, Vikroli (West), Mumbai-400079 [PAN:AAECP3518M] Deputy Commissioner of Income-Tax- 14(1)(1), Mumbai Aayakar Bhawan, Mumbai-400020 …………. Vs …………. Appellant Respondent Appearance For the Appellant /Department For the Respondent /Assessee : : Shri Dharan Gandhi Shri. Mahesh Pamnani Date Conclusion of hearing Pronouncement of order : : 29.01.2025 19.03.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal has been preferred by the Assessee against the order, dated 10/01/2024, passed by the National Faceless Appeal Centre, Delhi [hereinafter referred to as the ‘NFAC’], under Section 250 of the Income Tax Act, 1961[hereinafter referred to as ‘the Act’], whereby the Ld. CIT(A) had dismissed the appeal of the Assessee against the Assessment Order, dated 30/08/2022, passed under Section 143(3) read with Section 144B of the Act, for the Assessment Year 2020-2021. 2. The Revenue has raised following grounds of appeal : “1. The Ld. CIT(A) erred in affirming the action of the Ld. AO, NeAC in assessing the income of the Appellant at Rs. 17,57,91,040/- in place of Rs.15,68,34,310/- as returned by the Appellant. The additions made in this regard, are bad in law and without considering the facts of the case. ITA No.999/Mum/2024 Assessment Year 2020-2021 2 2. The Ld. CIT(A) has erred upholding the action of Ld. AO, NeAC in disallowing a sum of Rs.1,58,56,730/- u/s 40(a)(i) r.w.s. 195 of the Act. The reasons given in this regard are bad in law. 3. The Ld. AO has erred in disallowing a sum of Rs.31,00,000/- in respect of expenses incurred on account of Corporate Social Responsibility. The Ld. AO ought to have given deduction u/s 80G of the Act. 4. The Ld. AO, has erred in initiating penalty proceeding u/s 270A(1) read with section 270A(9)(a) of the Act.” 3. We have heard both the sides and have perused the material on record. Ground No.1 & 2 4. Ground No.1 & 2 raised by the Assessee pertain to disallowance made under Section 40(a)(i) of the Act. 4.1. According to the Assessing Officer and the CIT(A), the remittance made by the Assessee outside India were subject to deduction of tax at source in terms of Section 195 of the Act, and since the Assessee had failed to do so, the deduction for the aforesaid amounts aggregating to INR.15,68,34,310/- remitted outside India was disallowed. 4.2. The contention advanced by the Learned Authorized Representative for the Assessee before this Tribunal was that the payments made to non-residents were not liable to tax in India and therefore, the provisions contained in Section 195 of the Act and consequently, the provisions contained in Section 40(a)(i) of the Act were not attracted. It was submitted on behalf of the Assessee that the Assessee had placed before the Assessing Officer copy of the Ledger Account, invoices (giving details of remittances) and Advice of Remittance issued by the Authorised Dealer/Bank to show that remittances would not liable to tax in India. Reliance in this regard was placed upon paper-book containing reply letters dated 08/12/2021, 29/01/2022 and 29/07/2022 filed before the Assessing ITA No.999/Mum/2024 Assessment Year 2020-2021 3 Officer [at Page 1 to 49] and the submissions made before CIT(A) [at Page 50 to 213]. 4.3. Per contra, the stand taken by the Learned Departmental Representative that the Assessee had failed to place on record agreements pursuant to which the remittances were made and therefore, the nature of remittances could not be determined to arrive at a conclusion that the same were not liable to tax in India. 4.4. On perusal of record, it emerges that the Assessing Officer had invoked provisions contained in Section 40(a)(i) of the Act and disallowed aggregate remittance of INR.15,68,34,310/- made by the Assessee to non-residence outside India observing that the Assessee had failed to provide copy of agreement executed with the non- resident parties. 4.5. In appeal preferred by the Assessee challenging the above disallowance made by the Assessing Officer, the CIT(A) had declined to grant any relief. Concurring with the Assessing Officer, the CIT(A) concluded that in the absence of agreement the true nature of the remittances could not be determined, and therefore, the contention of the Assessee the remittances were not liable to tax in India was rejected. 4.6. Having given thoughtful consideration to the rival submissions and on perusal of record, we find merit in the contention advanced on behalf of the Assessee. We note that the Assessing Officer has, in Paragraph 2.1 to 2.6 of the Assessment Order, recorded that the Assessee had filed replies placing on record Forms 15CA with justification for remittances (being in the nature of Product Registration Fees, Exhibit Fee and Commission Charges) not liable to tax in India. In support of the same, the Assessee had also filed Debit Notes, Foreign Payment Advice along with copies of Bills ITA No.999/Mum/2024 Assessment Year 2020-2021 4 (regarding foreign commission/foreign exhibition/foreign product registration). However, since the Assessee had not furnished copy of the agreement executed by the Assessee with the foreign parties/payees, disallowance was made by the Assessing Officer by invoking provisions contained in Section 40(a)(i) of the Act. In appeal, the CIT(A) confirmed the aforesaid disallowance made by the Assessing Officer observing that the Assessee had failed to discharge the onus cast upon the Assessee to substantiate that the payments made to the foreign parties were not liable to tax in India. On perusal of the ledger account, bills, payment advice and details furnished by the Assessee we find that the remittance of INR.1,58,56,730/- consisted of the following: S.No. Particular Amount INR) 1. Foreign Exemption Expenses 9,74,026 2. Foreign Product Registration Expenses 62,48,921 3. Foreign Sales Commission 75,18,275 Total 1,58,56,730 4.7. The Assessee had provided following breakup of each of the aforesaid expenses during the assessment proceedings: Foreign Exhibition Amount (INR) ITE Eurasian Exhibitions FZ LLC 5,40,596/- Tomyshynets Serhit 83,527/- Kasikorn Bank Public Co. Ltd. 2,10,583/- Euromoney Global Ltd. GB 1,39,320/- Total 9,74,026/- Foreign Product Registration : Sustainability Support Services Europe (AB) Date Amount (INR) Currency (Euros) 20/05/2019 19,29,458/- 24,656 18/07/2019 8,14,018/- 10,532 18/07/2019 33,92,954/- 43,899 24/07/2019 72,377/- 917 29/02/2020 40,114/- 500 Total 62,48,921/- ITA No.999/Mum/2024 Assessment Year 2020-2021 5 Foreign Sales Commission S No. Party Name Amount (INR) 1. Industrial Materials Intnl Trading (PH) 7,59,170/- 2. Intan Dinaryati 1,86,106/- 3. Intan Dinaryati 1,46,983/- 4. Ahmed Salah Ahmed Gad Egypt 3,33,152/- 5. Industrial Materials Intnl Trading (PH) 10,69,588/- 6. Intan Dinaryati 2,23,633/- 7. Intan Dinaryati 1,98,239/- 8. Intan Dinaryati 1,51,704/- 9. Industrial Materials Intnl Trading (PH) 4,88,277/- 10. Intan Dinaryati 3,45,904/- 11. Ahmed Salah Ahmed Gad Egypt 3,64,909/- 12. Industrial Materials Intnl Trading (PH) 11,29,777/- 13. Intan Dinaryati 4,40,287/- 14. Industrial Materials Intnl Trading (PH) 5,33,486/- 15. Industrial Materials Intnl Trading (PH) 11,47,060/- Total 75,18,275/- 4.8. On perusal of the details and documents furnished by the Assessee, it becomes clear that the Foreign Exemption Expenses of INR.9,74,026/- were incurred for participation in exhibitions outside India. Similarly, the Foreign Product Registration Expenses of INR.62,48,921/- were incurred for registration of products of the Assessee outside India. Thus, the stand taken by the Assessee that the aforesaid remittances were not liable to tax in India was supported by the documents/details furnished by the Assessee. As regards Sales Commission Expenses of INR.75,18,275/- are concerned, we find that the Debit Notes and Remittance Advice issued by the Authorised Dealer/Bank support the contention of the Assessee that sales commission remittances were actually made to the non-resident parties. We note that the Revenue has not doubted the genuineness of the export transactions in respect of the aforesaid sales commission expenses. Perusal of Debit Note filed with the Assessing Officer shows that the same contained the following details in respect of the export order and sales commission (a) Export Invoice Number, (b) Export Date of Invoice (c) Export Invoice Value, (d) Foreign Commissions payable on CIF Value and ITA No.999/Mum/2024 Assessment Year 2020-2021 6 (e) Foreign Commission Value. Thus, the documents/details furnished by the Assessee support the contention of the Assessee that the remittances of INR.75,18,275/- made by the Assessee were in the nature of commission paid to foreign agent for securing export orders outside India. Therefore, in our view, the authorities below were not correct in disallowing deduction for the aforesaid expenses merely on the ground that the Assessee had failed to furnish an agreement executed by the Assessee with the foreign payees. Further, we note that the Assessee had contented the non-resident payees did not have any business connection or permanent Establishment in India, and in absence of the same, the remittances made to such non-resident payees could not be brought to tax India. The aforesaid contention of the Assessee was rejected by the Assessing Officer without returning any finding in relation to the same. No enquiry in this regard was conducted by the authorities below. There is nothing on record to suggest that the non-resident payees had any business connection or permanent Establishment in India. In view of the aforesaid, we hold that in the facts and circumstances of the present case the Assessee had discharged the burden to show that the foreign remittances were not chargeable to tax in India by furnishing the details/documents, and therefore, the provisions of Section 195 of the Act and consequently, the provisions of Section 40(a)(i) of the Act were not attracted. Accordingly, we overturn the decision of CIT(A) and direct the Assessing Officer to grant deduction of INR.1,58,56,730/- as claimed by the Assessee. Ground No.3 5. Ground No. 3 raised by the Assessee pertains to claim of deduction under Section 37(1) of the Act in respect of donation of INR.31,00,000/-. On perusal of the Assessment Order, we find that the Assessing Officer had denied the deduction claimed by the Assessee under Section 37(1) of the Act holding that the ITA No.999/Mum/2024 Assessment Year 2020-2021 7 expenditure of INR.31,00,000/- incurred by the Assessee was in the nature of Corporate Social Responsibility (CSR) Expenditure and Explanation 2 to Section 37(1) was attracted in the facts of the present case. The Assessing Officer also rejected the alternative submission of the Assessee that the deduction should be allowed to the Assessee under Section 80G of the Act since no such claim was made in the return of income filed by the Assessee. The aforesaid disallowance made by the Assessing Officer was not challenged by the Assessee in appeal before the CIT(A). However, in appeal preferred by the Assessee before the Tribunal against the order passed by CIT(A), the Assessee has raised the ground challenging aforesaid disallowance made by the Assessing Officer. 5.1. We have heard both the sides and have perused the material on record. In our view, the ground raised by the Assessee does not arise from the order passed by the CIT(A) since the Assessee had not raised any ground relating to disallowance of deduction of INR.31,00,000/- claimed by the Assessee under Section 37(1) of the Act in the return of income. Further, the ground raised also does not qualify as an additional ground raised for the first time before the Tribunal. The contention was raised before the Assessing Officer and rejected. Thereafter, the issue was not raised in appeal before the CIT(A) and therefore, in our view, the issue attained finality as the Assessee did not exercise the right to file statutory appeal on this issue and restricted the appeal to disallowance made under Section 40(a)(i) of the Act. In our view, an issue that was in contemplation between the Assessee and the Assessing Officer during the assessment proceedings cannot be treated at par with a fresh issue on which no view was taken during the assessment proceedings. The scheme of the Act prescribes time limit for filing of appeal or cross-objections. Though delay in meeting the aforesaid timelines can be condoned by the Appellate Authorities in case there is cause ITA No.999/Mum/2024 Assessment Year 2020-2021 8 which, to the satisfaction of such Appellate Authority, is sufficient. In the present case, no cause has been pleaded/established for not filing appeal on the issue of disallowance of INR.31,00,000/- before the CIT(A) and thereafter, for raising ground challenging the aforesaid disallowance in appeal before the Tribunal. In our view, the statutory right to file appeal on an issue has to be exercised as per the statutory framework only. In the present case the Assessee has taken an informed decision not to raise the issue under consideration in appeal before CIT(A), and therefore, order passed by the CIT(A) does not deal with this issue. Since the issue does not form part of subject matter of appeal before the CIT(A), it cannot be said that the Assessee is aggrieved by the order passed by the CIT(A). Accordingly, the question of raising such an issue in the appeal preferred by the Assessee against the order passed by the CIT(A) does not arise. During the course of hearing reliance placed by the Learned Authorised Representative for the Assessee upon the judgment of the Hon’ble Supreme Court in the case of Commissioner of Income Tax Vs. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 (SC) On perusal of the said judgment, we find that the same would not advance the cause of the Assessee. The issue before the Hon’ble Apex Court was restricted to additional plea having been raised before the Tribunal in relation to subject matter that was in appeal before the Tribunal. In the present case, while the ground has been raised by the Assessee, the same did not form the subject matter of appeal before the CIT(A) and consequently, could not have formed the subject matter of appeal before the Tribunal as the same does not arise from the order passed by the CIT(A). Accordingly, we dismiss Ground No. 3 raised by the Assessee as not maintainable. Ground No.4 6. Ground No. 4 raised by the Assessee pertaining to initiation of penalty proceeding under Section 270A(1) read with section ITA No.999/Mum/2024 Assessment Year 2020-2021 9 270A(9)(a) of the Act is dismissed as being premature. Penalty proceedings are separate and distinct from the assessment proceedings and the Assessee shall be at liberty to raise all rights and contentions in appeal against the penalty order. 7. In result appeal preferred by the Assessee is partly allowed. Order pronounced on 19.03.2025. (Amarjit Singh) Accountant Member (Rahul Chaudhary) Judicial Member म ुंबई Mumbai; दिन ुंक Dated :19.03.2025 Milan, LDC ITA No.999/Mum/2024 Assessment Year 2020-2021 10 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त/ The CIT 4. प्रध न आयकर आय क्त / Pr.CIT 5. दिभ गीय प्रदिदनदध ,आयकर अपीलीय अदधकरण ,म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file. आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदधकरण, म ुंबई / ITAT, Mumbai "