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Income Tax Appellate Tribunal, DELHI BENCH ‘D’ DELHI
Before: SHRI G.S. PANNU, HON’BLE & SHRI SUDHANSHU SRIVASTAVA
This appeal has been preferred by the assessee against the order of the ACIT, Circle 6(1), Delhi dated 5.8.2019 and pertains to assessment year 2015- 16.
The Grounds of appeal raised by the assessee are as under:-
“Appeal under section 253(1)(d) of the Income Tax Act, 1961 (hereinafter referred to as the "Act”), against the order dated August 5, 2019 (received on August 6, 2019), passed by the Stay No.899/D/2019 Assessment year 2015-16 Assistant Commissioner of Income Tax, Circle 6(1), Delhi (“AO”) under section 143(3) read with section 144C( 13) of the Act, pursuant to directions issued by the Dispute Resolution Panel (“DRP”) dated June 14, 2019.
That on facts and circumstances of the case and in law, the Assessing Officer (“AO”) erred in completing the assessment of the Appellant at an income of INR 11,49,95,100 as against returned income of INR 8,91,68,050.
2. That on facts and in circumstances of the case and in law, the AO/ DRP have grossly erred in making disallowance of technical on-call assistance charges amounting to INR 2,58,27,018 paid by the Appellant invoking provisions of section 40(a)(i) of the Act by holding the same to be fee for technical services and alleging that tax on source was liable to be deducted from such payments. 2.1 That on facts and in circumstances of the case and in law, the AO / DRP have erred in holding that the charges paid by the Appellant were on account of services which were ‘technical’ in nature. 2.2 That on facts and in circumstances of the case and in law, the AO / DRP have erred in upholding that the charges paid by the Appellant were on account of services which ‘made available’ technical knowledge, experience, skill, know-how or processes.
That the AO / DRP erred in not following the decision of the Delhi Benches of the Hon’ble Tribunal in the Appellant’s own case for AYs 2012-13, 2013-14 and 2014-15 wherein such disallowance made under section 40(a)(i) of the Act has been deleted. 4. Notwithstanding and without prejudice to the above grounds, the disallowance relating to technical on-call charges should have been restricted to 30% of the sum payable in view of amendment to section 40(a)(ia) of the Act, read with ‘Article 26 - Non Discrimination’ of India -US Double Taxation Avoidance Agreement.
5. That on facts and circumstances of the case and in law the Assessing Officer has erred in charging interest under sections 234B and 234C of the Act.”
Stay No.899/D/2019 Assessment year 2015-16 3. In this appeal, although the assessee has raised multiple Grounds of appeal but in sum and substance, the only grievance is against the action of the income tax authorities in sustaining an addition of Rs. 2,58,27,018/- representing Technical on-call assistance charges paid to Ciena Communications Inc. (in short ‘Ciena US’).
4. The only reason advanced by the Assessing Officer to make the disallowance is on account of the fact that tax was not deducted at source and, therefore, the provisions of section 40(a)(i) of the Act have been invoked.
Before us, the short point raised by the learned representative is that the impugned dispute is no longer res integra inasmuch as in the earlier assessment years of 2012-13 to 2014-15, similar issue had come up before the Tribunal and the same has been adjudicated in favour of the assessee, whereby it has been held that impugned sums were not chargeable to tax in India and, thus, no tax was required to be deducted at source. In this context, a copy of the decision of the Tribunal in the case of Ciena Communications India (P) Ltd. vs A.C.I.T., Circle - 6(1), New Delhi reported in (2018) 98 taxmann.com 458(Delhi) dated 27th September, 2018 has been placed on record.
It has also been pointed out that in the instant year, neither the Assessing Officer and nor the DRP has given any independent finding, inasmuch as, it has been merely noted that the decision of the Tribunal dated 27.9.2018 (supra) has Stay No.899/D/2019 Assessment year 2015-16 not been accepted by the Revenue, as an appeal was filed before the Hon’ble Delhi High Court. The learned representative pointed out that the appeal of the Revenue before the Hon’ble High Court is still pending.
Per contra, the aforesaid factual matrix has not been disputed by the ld. DR , but the disallowance is sought to be justified for the reason that the matter is pending before the Hon’ble high Court.
Having considered the rival stands, we do not find any justifiable ground to sustain the addition in view of the subsisting precedent by way of the order of the Tribunal dated 27th September 2018 (supra). The fact that the appeal of the Revenue against the aforesaid order is still pending before the Hon’ble High Court, does not distract from the fact that the said precedent continues to hold the field as there is no stay on its operation. In view thereof, we set aside the order of the Assessing Officer with the direction to delete the impugned addition and allow relief to the assessee. Accordingly, the appeal of the assessee is allowed as above.
The corresponding Stay Application No. 899/Del/2019 has since become infructous and is hereby dismissed.
Stay No.899/D/2019 Assessment year 2015-16 This order was dictated and pronounced in the open court at the conclusion of the hearing in the presence of both the parties on 19.02.2020.