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Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद"य लेखा लेखा सद"य सद"य, राजे"" सद"य राजे"" राजे"" केकेकेके अनुसार राजे"" अनुसार अनुसार/ Per Rajendra, A.M.- अनुसार Challenging the order,dated 21/03/2013,of the CIT (A)-13,Mumbai the Assessing Officer(AO)has filed the present appeal.Assessee-company,engaged in the business of advertising,filed its return of income on 30/10/2007, declaring total income of Rs.7,37, 06, 944/-.The AO completed the assessment, u/s.143 (3) of the Act, on 11/11/2009, determining the income of the assessee at Rs.8,68,39,254/-. 2.First Ground of appeal is about Feng Sui Consultancy charges of Rs. 43.05 lakhs. During the assessment proceedings,the AO directed the assessee to file the details of legal and professional expenses.From the details,he found that it included payment of Rs. 43,05,087/- as Feng Sui consultancy charges of various branches of the assessee.He held that the charges related to the layout and location of the various items of its assets, that the payment made by the assessee would give advantage of enduring nature to it. He issued a show cause notice to the assessee asking it as to why the expenditure should not be disallowed as being capital nature.After considering the submission of the assessee, the AO held that expenditure incurred by it was a capital expenditure.He did not allow depreciation on the amount in question.
4660/M/13-Rediffusion DY&RPL 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA).After considering the submission of the assessee and the assessment order,he held that the assessee had incurred consultancy expenditure,that the AO had not doubted the genuineness of the expenditure, consultancy expenditure was incurred on relocation of existence assets,that expenditure in question did not bring into existence of any new asset,that it was a revenue expenditure.Finally,he allowed the appeal filed by the assessee in that regard.
4.Before us,the Departmental Representative (DR)supported the order of the AO. The Authorised Representative(AR) stated that consultancy charges paid by the assessee could not treated a capital expenditure,that the expenditure was incurred for not purchasing any capital asset. He referred to the order of the Tribunal in the case of Estel Technologies Pvt. Ltd. (ITA No.329(Del.)/2010 dated 08.11.2010 for AY :2007-08).
5.We have heard the rival submissions and perused the material available on record.We find the AO had treated the expenditure as capital expenditure because he was of the opinion that the expenditure was incurred in relation with the fixed capital assets,that the FAA has given a categorical finding of fact that the payment was made only on account of consultancy and it was for Re-allocation/re adjustment of furniture or certain other items.In our opinion, the FAA was justified in holding that expenditure did not bring into existence any asset. In the case of Estel Technologies Pvt. Ltd. (supra), the Tribunal has allowed the expenditure incurred by the assessee under the head Vastu-Puja as revenue expenditure.Respectfully following the above order and considering the facts of the case,we hold that the order of the FAA does not suffer from any legal infirmity.Confirming the same,we decide first ground of appeal against the AO.
6.Second ground deals with deleting the disallowance of professional charges of Rs. 43.60 lakhs u/s.40 (a)(i) of the Act. During the assessment proceedings,the AO found that the assessee had not deducted tax while making payments to non-resident companies. He held that the payments were in the nature of charges for technical services related to the advertising fields, that the claim made by the assessee was not allowable as per the provisions of section 40 (a) (i) of the Act, that fee for technical services was a specific category in itself. Finally,he added the disputed amount to the total income of the assessee.
4660/M/13-Rediffusion DY&RPL 7.During the appellate proceedings,before the FAA, the assessee argued that as per the provisions of the Act and applicable double taxation treaty no tax was detectable for the payments made by the assessee, that the payments were not in the nature of fees for technical services, that the amounts were paid outside India, that it was business income in the hands of non-resident parties to home payments were made, that the recipients had no case/PE in India, that the same were not taxable, that no tax was directed in accordance with the DTAA, that the payment made by the assessee was not technical fee. In support of its argument that no tax was required to be rejected on such payments, the assessee relied upon certain case laws. After considering the submission of the assessee, and the assessment order, the FAA held that the obligation to deduct tax at source would arise only excess payment was chargeable under the Act as per the provisions of section 4, 5 and 9 of the Act.He referred to the case of GE India Technology (327 ITR 456) and held that merely because a person had not deducted tax at source from remittance brought it could not be inferred that the person making remittances had committed a mistake in discharging his duties with regard to withholding of taxes, that such obligation would arise only when the recipient had a tax liability in India. After going through the tax invoices, selected by the assessee, the FAA held that the payments were made on account of cost film production, Courier cost, dubs/ cassettes,cost of dubbing job, production estimate, that the payments were not made for obtaining any technical or professional services from the non-residents, that there was no element for royalty/interest involved in the payment, that the payments were made abroad, that the non-resident recipients were not having any permanent establishment in India, that there was no income received by the non-resident entities in India, that the provisions of section 4,5 and 9 of the Act were not applicable.Finally,he deleted the disallowance made by the AO.
8.Before us, the DR supported the order of the AO. The AR stated that the non-resident parties had not rendered any technical services to the assessee, that payments were made to the parties who had no PE in India, that job was done by the non-residents outside India, that the assessee had paid the production cost only.He relied upon the case of IMG Media Limited(60 taxmann.com.432)
9.We have heard the rival submissions and perused the material before us. We find that the AO had invoked the provisions of section 40(a)(i) of the Act only on the ground that assessee had made payments to non-residents. In our opinion,all the payments made by an Indian- 3 4660/M/13-Rediffusion DY&RPL assessee does not attract the provisions of ChapterXVIIB. It is a fact that payments were made to the non-residents who had not rendered any services in India and the job was carried out outside India.There is nothing on record to prove that the non-resident entity had rendered any technical service to the assessee.The FAA had analysed the invoice issued by the non- resident and had found that payment was made only for job-work done and no royalty was paid by the assessee. The non-resident entity did not have any PE in India. Therefore, in our opinion,the FAA were justified in holding that the tax deducted at source provisions were not applicable for such remittances. We find that in the case of IMG Media Ltd. (supra), the Tribunal has dealt with the similar issue and has held that sum paid by an assessee for capturing and delivering live audio and visual coverage of IPL cricket matches was not fee for technical services, as BCCI had not acquired technical expertise from the assessee which would enable them to produce the live coverage feeds on their own after the conclusion of IPL. One of us(JM)was party to that order.The facts of the case were that in that matter the assessee, a UK-based company, was engaged by the BCCI for capturing and delivering live audio and visual coverage of cricket matches,that the BCCI made the payment to the assessee, that the AO held that amount received by the assessee was in the nature of fee for technical services/royalty, that the dispute resolution panel held that the services were nothing but technical services as per section 9(1)(vii) of the Act as well as Article 13, that the assessee submitted that it did not make available any technology /knowhow relating to the production of the live coverage and that it only supplied program content produced by it, that the amount received by it from BCCI could not fall under category of fee for technical services in term of Article 13 (4) (c) of the DTAA. The Tribunal, as stated earlier, had decided the issue in favour of the assessee.
Considering the peculiar facts of the case under consideration and respectfully following the order of IMG Media Ltd.(supra),we uphold the order of the FAA. Ground number two is decided against the AO. As a result, appeal filed by the AO stands dismissed. फलतः िनधा"रती अिधकारी "ारा दािखल क" गई अपील नामंजूर क" जाती है. Order pronounced in the open court on 20th,September, 2016. आदेश क" घोषणा खुले "यायालय म" "दनांक 20,िसतंबर, 2016 को क" गई । /- (अिमत शु"ल/ Amit Shukla ) (राजे"" / Rajendra) "याियक सद"य / JUDICIAL MEMBER लेखा लेखा लेखा सद"य लेखा सद"य सद"य / ACCOUNTANT MEMBER सद"य मुंबई Mumbai; "दनांकDated :20.09.2016. Jv.Sr.PS.