ACIT, DELHI vs. MATRIX CELLULAR (INTERNATIONAL) SERVICES PVT. LTD , DELHI

The appeal filed by Revenue is against the order dated 08.03.2024 of Learned Commissioner of Income Tax (Appeals)- NFAC, Delhi [hereinafter referred to as ‘Ld. CIT(A)’] under section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] arising out of assessment order dated 27.12.2019 passed by the Assistant Commissioner of Income Tax, Circle – 16(2), Delhi [hereinafter referred as ‘Ld. AO’] under section 143(3) of the Act for the Assessment Year 2017-18. -2- ITA No.2230/Del/2024 A.Y. 2017-18

Brief facts of the case are that assessee/appellant electronically filed return of income on 30.11.2017 declaring loss of Rs.1,23,79,675/-. The case was selected for complete scrutiny under CASS. Notice under section 143(2) of the Act dated 19.09.2018 was issued. Notice under section 142(1) of the Act along with questionnaire was issued. Assessee-company furnished relevant details/documents through e-filing portal. On completion of assessment proceedings, learned AO vide order dated 27.12.2019 made additions of Rs.1,27,43,326/- on account of disallowance of bad debts, Rs.15,09,061/- on account of disallowance of ESOP, Rs.1,93,33,194/- on account of disallowance of foreign payment under section 40(a)(i) of the Act and Rs.31,73,472/- on account of addition of interest on IT refund.

Against order dated 27.12.2019, appellant/assessee preferred appeal before learned CIT(A) which was allowed vide order dated 08.03.2024. 4. Being aggrieved, Departmental Representative for the Department of Revenue preferred present appeal.

Learned Departmental Representative for the Department of Revenue submitted that learned CIT(A) erred in deleting the addition of Rs.1,27,43,326/- on account of provision for doubtful advances. Learned CIT(A) erred in allowing the deduction of Rs.1,27,43,326/- on account of provision for doubtful advances as -3- ITA No.2230/Del/2024 A.Y. 2017-18

Learned Authorized Representative for the appellant/assessee submitted that learned CIT(A) with regard to write off disallowance referred the order of Hon’ble ITAT, Delhi in case of assessee- company for A.Y. 2015-16 and also relied upon the orders of Hon’ble Delhi High court in the matter of CIT vs. New Delhi Hotels Ltd. ITA No.1258/2010 and Mohan Meakin Ltd. vs. CIT. Learned CIT(A) with regard to ESOP disallowance relied upon the order of Special Bench of Hon’ble ITAT, Bangalore in case of M/s. Biocon Ltd. vs. DCIT and referred the order of Hon’ble ITAT, Delhi in case of assessee-company for A.Y. 2016-17. Learned CIT(A) with regard to disallowance under section 40(a)(i) referred the order of Hon’ble ITAT, Delhi in case of assessee-company for A.Y. 2016-17. Learned CIT(A) with regard to interest on refund relied upon the ICDS and deleted the addition made by the learned Assessing Officer on the ground that it was received and disclosed in the next assessment year.

From examination of record in light of aforesaid rival contentions, it is crystal clear that learned CIT(A) in para no. 5.1.6 has observed as under: “5.1.6 In view of the above, and respectfully following the case laws relied upon by the appellant especially the order of the Hon'ble juri ictional bench of the ITAT Delhi in the case of appellant for A.Y. 2016-17, it is held that the claim of advances written off is allowable as business loss. Accordingly, the disallowance of Rs.1,27,43,326/- under the head doubtful advances written off is hereby deleted.”

1 Learned CIT(A) in para no. 5.2.4 has observed as under :

2 Learned CIT(A) in para nos. 5.3.6 to 5.3.9 has observed as under : “5.3.6 Further, the appellant has submitted that in the case of the Assessee company for AY 2016-17 the Hon'ble Delhi ITAT in ITA No. 6916/Del/2019 ruled that the payment made by the Assessee Company to Doulah & Doulah is not taxable in India and deleted the addition made by the Assessing officer. The order of the Hon'ble ITAT is perused and it is observed that the Hon'ble ITAT has deleted the disallowances u/s 40(a)(ia) in respect of similar remittances to Malaysian entity and Bangladesh entity by holding that the appellant was not liable to deduction TDS on the remittances by virtue of Articles of DTAA entered into by the Government of India with respective countries.

3.7 In view of the aforesaid order of the hon'ble ITAT it is held that the Applicant was not liable to deduct TDS on the remittarices made to entities of Malesia and Bangladesh. Further, the ratio laid down by the Hon'ble ITAT is equally applicable to the payments made to -5- ITA No.2230/Del/2024 A.Y. 2017-18

3.8 In view of the above, it is held that the remittances made by the applicant involve the payments on which either there was no liability to deduct TDS on account of provisions of respective DTAA or were in nature of reimbursement or expenses. On payments made to entity in Singapore, the appellant had deducted the TDS.

3.9 Therefore, it is held that the appellant was not liable to deduct TDS on these remittances and the disallowance made u/s 40(a) (i) of Rs. 1,9333,194/-is hereby dismissed.”

3 Learned CIT(A) in para nos. 5.4.4 and 5.4.5 has observed as under : “5.4.4 During the appellate proceedings the appellate has reiterated the submissions made before the assessing officer. In respect of recognition of interest or refund of any tax both the ICDS IV and AS 9 has mentioned that this shall be deemed to be recognised in the year of receipt only. Further, the assessing officer has not doubted the submission of the appellant that the income tax refund including the interest has been received by the appellant in the month of April 2007. 5.4.5 Therefore, in terms of provisions of ICDS IV, it is held that the interest on income tax refund will be chargeable to tax only in the Assessment year 2018-19. Accordingly, the addition of Rs.31,73,472/- on account of interest on income tax refund is hereby deleted.”

Copy of ITAT order, Delhi Benches at pages 84 to 88 of the paper book has also submitted in the case of Matrix Cellular (International) Services Ltd. vs. ACIT in ITA No.1125/Del/2020 dated 15.11.2022. -6- ITA No.2230/Del/2024 A.Y. 2017-18

1 Copy of ITAT order, Delhi Benches at pages 106-113 of the paper book has also submitted in the case of Matrix Cellular International Services Ltd. vs. JCIT in ITA No.6916/Del/2019 dated 18.01.2023. 9. From perusal of the findings of learned CIT(A), it is evident that learned CIT(A) has followed the orders of ITAT in assessee’s own case for previous years 2015-16 & 2016-17. The findings of learned CIT(A) are well reasoned and cannot faulted. The arguments of learned Authorized Representative for Department of Revenue and grounds of appeal being devoid of merit are tenable. Grounds of appeal are dismissed.

In the result, appeal filed by Revenue is dismissed.