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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI. B. R. BASKARAN & SMT. BEENA PILLAI
ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal has been filed by assessee against order dated 21/03/2019 passed by Ld. CIT (A), Bangalore for assessment year 2015-60 on following grounds of appeal
1. The order of the Commissioner of Income Tax(Appeals)-5, Bangalore, is opposed to the law and not on the facts and circumstances of the case.
2. Whether on the facts and circumstances of the cases and in law, CIT(A) was correct in not deciding the issue of deduction of tax at source on the management fee himself and directing AO to approach TDS wing for this purpose.
Page 2 of 6 ITA 1294/Bang/2019 A. Y : 2015 – 16 3. For these and other grounds that may be urged upon, the order of the CIT(A) may be reversed and that assessment order be restored.
The appellant craves leave to add, alter, amend or delete any other grounds on or before hearing of the appeal. Brief facts of the case are as under: 2. Assessee filed its return of income for year under consideration on 28/11/2015 declaring total income of Rs.1,43,63,340/-. Assessment was completed under section 143 (3) on 29/12/2070 by making certain additions/disallowance of expenses amounting to Rs.1,72,12,515/-.
Aggrieved by additions made by Ld.AO assessee preferred appeal before Ld. CIT (A). 3.1. During the proceedings before Ld.CIT(A) assessee filed certain additional evidences which was remanded to Ld.AO calling for a remand report. Ld.AO filed remand report on 20/11/2018, wherein Ld.AO considered applicability of TDS on certain payments made by assessee towards management fees paid to the parent company for providing technical services. Ld.CIT(A) after considering reply filed by assessee allowed assessee’s claim by observing as under: “9. The observations of the AO, the remand-report and assessee's rejoinder have been perused. In light of the facts & circumstances emerging on the issue, I do not find myself in agreement with the AO's action for the reasons summarized as under: (i) The AO made a summary disallowance of ‘Other expenses' of Rs.1,72,12,515/- without elaborating any specific reasons or findings, to arrive at such a decision. It is apparent that, the disallowance is not supported by any corroborative findings based on financial statements available during the assessment- proceedings. (ii) The AO in its remand-report dated 27.12.2018 has accepted the assessee’s contentions in respect of the which are the genuineness of the impugned – expenditures, subject-matter of the present appeal, as emanating from the Page 3 of 6 ITA 1294/Bang/2019 A. Y : 2015 – 16 impugned- assessment order. It is stated in the remand-report that "Further on verification of the agreements and invoices it is understood that the major amounts have been expended towards fees paid to parent company and appear genuine. It is clear therefore that there is no prima-facie material, to uphold the AO's action. The Assessee's grounds of appeal
in respect of the allowability of the expenditures cannot therefore be summarily rejected. (iii) The AO, in the remand-report has made certain general remarks regarding the attraction of TDS provisions in respect of payment made to M/s Oakwood Asia Pacific Limited Singapore. It is seen that this issue does not directly emanate from the contents of the AO's order. The Assessee however, in its detailed rejoinder has made elaborate submission that, these being non- technical service based payments (of a business nature) did not attract section 195 of the I.T. Act. It is further argued by the appellant that, the AO even in the remand-report has not brought any specific fact on record to conclude that the impugned payments represent FTS or Royalty or any other reason to invoke the section 40a(ia) of the I.T. Act. (iv) It is further submitted by the assessee in the rejoinder dated 27.12.2018 (at para-2) that, the issue of applicability of TDS to the impugned sums were examined by the AO during the assessment-proceedings for AY's: 2012-13 and 20i3-14. In this regard it is submitted as under:
2. it is submitted that the applicability of TDS of above expenses were examined by the learned assessing officer during the assessment proceedings for assessment years 2012-13 and 2013-14. However, the appellant could not furnish any details for the current year since no notice was served on the appellant. Therefore, the appellant is making the submissions on applicability of TDS on the payment of management fee. It is further submitted that for assessment years 2013-13 & 2013 – 14, the same issue was considered and accepted by the ld. AO and no disallowance was made u/s 40(a)(ia) of the Act.” With regard to the issue of TDS, it may be placed on record that, the AG remains at Iibe;1.y to take up the issue with the TDS wing, for determining the question of attraction of TDS on the impugned payments. On the other hand the assessee also remains duty bound to approach the TDS wing to obtain a non- deduction or lower deduction certificate u/s 195 of the LT. Act., so as to crystallize the position on the issue at hand. In background of the above discussion and facts & circumstances, 1 do not find sufficient evidenciary justification to uphold the disallowance of expenditures made by the AO in the impugned order. The Assessee’s grounds of appeal are therefore allowed. subject to the above observations.
Page 4 of 6 ITA 1294/Bang/2019 A. Y : 2015 – 16 4. Revenue is challenging relief granted by Ld.CIT(A) before us. We have heard both sides on the basis of records placed before us.
From the view expressed by Ld.CIT(A), reproduced hereinabove, we note that original disallowance made by Ld.AO in assessment order, alleged by assessee before Ld.CIT(A) was accepted to be genuine in remand report by Ld.AO, based upon additional evidences. 5.1. Subsequently, Ld.AO made disallowance u/s 40(a)(ia) in remand proceedings, without following due process of law. Ld.CIT(A) categorically notes that the disallowance made by Ld.AO in remand report does not eminate from assessment order. Further, Ld.CIT(A) relied on view taken by Ld.AO on similar issue in Asst. Year 2012-13, against which revenue authorities have not filed anything on record. 5.2. We are of the view that if at all a new issues not forming part of assessment order is to be considered, only recourse is to initiate proceedings u/s.263 in accordance with law. Under such circumstances, we do not find any infirmity in order passed by Ld.CIT(A). Accordingly grounds raised by revenue stands dismissed. In the result appeal filed by revenue stands dismissed. Order pronounced in the open court on 19th March, 2020.