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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY & SHRI DUVVURU RL REDDY
आदेश / O R D E R
Per A. Mohan Alankamony, AM:-
This appeal by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals)-11, Chennai dated 29.06.2017 in for the assessment year 2012-13 passed U/s.250(6) r.w.s. 143(3) of the Act.
The assessee has raised several grounds in its appeal however the cruxes of the issues are that:- (i) The Ld.CIT(A) has erred in confirming the addition of Rs.8,91,300/- U/s.40(a)(ia) of the Act towards non-deduction of tax at source for the following payments:- a) Payment to Dubai World Trade Centre towards stall rent – Rs.5,68,960/- b) Payment to Exhibit World towards stall installation & dismantling - Rs.3,22,340/- (ii) The Ld.CIT(A) has erred in confirming the addition of Rs.60,000/- by invoking the provisions of Section 14A r.w.R. 8D of the Rules.
The brief facts of the case are that the assessee is a private limited company engaged in the business of manufacturing food flavours & viscose capsules, filed its return of income for the assessment year 2012-13 on 29.09.2012 admitting loss of Rs.62,72,364/-. Initially the return was processed U/s.143(1) of the Act and subsequently the case was selected for scrutiny under CASS and notice U/s.142(1) of the Act was issued on 12.06.2014 & 29.12.2014. Finally assessment order was passed U/s.143(3) of the Act on 20.03.2015 wherein the Ld.AO made addition of Rs.89,845/- by invoking the provisions of Section14A r.w.r. 8D of the Rules, Rs.14,26,998/- towards disallowance U/s.40(a)(ia) of the Act and Rs.80,027/- towards purchase of capital assets.
Ground No. 2(i) : Sustaining the addition of Rs.5,68,960/- & Rs.3,22,340/- towards payment made to Dubai World Trade Centre and Exhibit World respectively:- The Ld.AO as well as the Ld.CIT(A) were of the opinion that the payment made to Dubai World Trade Centre towards stall rent for Rs.5,68,960/- and payment made to Exhibit World towards stall installation and dismantling for Rs.3,22,340/- are in the nature of fee for technical services, etc., whereby the assessee is bound to deduct tax deducted at source. Therefore the Ld.AO as well as the Ld.CIT(A) opined that the provisions of Section 40(a)(ia) of the Act would be applicable and accordingly disallowed the expenditure aggregating to Rs.8,91,300/-.
4.1 At the outset we do not find any merit in the orders of the Ld.Revenue Authorities on this issue. Payment made to Dubai World Trade Centre towards stall rent is nothing but fee paid for participation in the exhibition organized by the World Trade Centre in Dubai and allocation of a space in the exhibition area. Similarly payment made to M/s.Exhibit World towards stall installation and dismantling is an amount paid by the assessee abroad, for services rendered abroad. Therefore for both these above expenditures, the provisions of tax deducted at source will not apply because the income attributable to the amount received by the recipient abroad is not taxable in India. Therefore we hereby direct the Ld.AO to delete the addition made by invoking the provisions of Section 40a(ia) of the Act for Rs.5,68,960/- and Rs.3,22,340/- being the amount paid to Dubai World Trade Centre and Exhibit World respectively. It is ordered accordingly.
Ground No.2(ii) : Disallowance U/s.14A r.w.r. 8D of the Rules:- The Ld.AO disallowed an amount of Rs.89,845/- invoking the provisions of Section 14A r.w.r.8D of the Rules because the assessee had invested an amount of Rs.9,25,000/- in partnership firm earning agricultural income of Rs.60,000/- which is exempt from tax. On appeal, the Ld.CIT(A) restricted the disallowance to Rs.60,000/- by following the decision of the Jurisdictional High Court wherein it was held that the disallowance U/s.14A of the Act cannot exceed the exempt income.
5.1 At the outset we do not agree with the finding of the Ld.AO because he has not made any finding from the statement of accounts submitted by the assessee that the assessee had incurred expenditure towards earning exempt income specifically when the assessee had claimed before the Ld.Revenue Authorities that he had not incurred any expenditure for earning agricultural income and any such expenditure was absorbed while arriving at the agricultural income. Further the Ld.Revenue Authorities had not made any contrary finding. Hence the order of the Ld.CIT(A) in sustaining the addition of Rs.60,000/- is also erroneous. Therefore we hereby direct the Ld.AO to delete the addition made by invoking the provisions of Section 14A r.w.r. 8D of the Rules.
In the result, the appeal of the assessee is allowed.
Order pronounced on 17th July, 2018 at Chennai.