TMI Blog2019 (3) TMI 1882X X X X Extracts X X X X X X X X Extracts X X X X ..... es State Insurance as is discernible from the assessment order, were deposited by the assessee prior to the 'due date' of filing of its return of income for the year under consideration, therefore, the same was not liable to be disallowed. We thus in terms of our aforesaid observations vacate the disallowance sustained by the CIT(A). The Ground of appeal No. 1 raised by the assessee is allowed. TDS u/s 194C - disallowance u/s 40(a)(ia) - payments of advertisement and sales promotion expenses - HELD THAT:- We find that though the supplier party i.e. M/s. Iktek Communication had provided the designed art-work and printed leaflets as per the specifications and requirements of the assessee, however, there is nothing borne from the records or had been averred before us, which would prove that the aforementioned party had supplied the product by using any material that was purchased from the assessee. Admittedly, the assessee had not provided any material to the said supplier party. Rather, the Invoices‟ against which the aforesaid designed art-work was supplied on CD‟s to the assessee clearly reveals that the supplier had charged VAT on the full value of the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TDS shown in the its return of income, as against that reflected in its Form 26AS. MAT computation u/s 115JB - working of the book profit by the A.O/CIT(A) for computing its tax liability under the MAT provisions envisaged u/s. 115JB - HELD THAT:- As per Explanation 1(i) to section 115JB, the amount or amounts set aside as provision for diminution in the value of the any asset if debited in the profit and loss account has to be added to the net profit‟ shown in the profit loss account for the year for the purposes of computing the book profit u/s. 115JB of the Act. As the provision for bad and doubtful debts debited by the assessee in its profit loss account is in the nature of a provision leading to diminution in the value of an asset, therefore, the same has to be added to the net profit‟ while computing the book profit‟ u/s 115JB of the I.T Act. As pursuant to the amendment to Explanation 1(i) to Sec. 115JB by the Finance (no. 2) Act, 2009 with w.r.e.f. 01.04.2001 any provision leading to diminution in the value of any asset, has to be added to the book profit‟. We thus finding no infirmity in the order of the CIT(A) who has rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of business incomes in the hands of the foreign payees or in the nature of reimbursement of the expenses, therefore, no liability was cast upon the assessee to deduct tax at source in respect of the said amount. We are persuaded to subscribe to the aforesaid view taken by the CIT(A). As nothing has been canvassed before us by the Ld. D.R which could persuade us to conclude that the observations arrived at by the CIT(A) in context of the issue under consideration was either perverse or suffered from any infirmity, therefore, we uphold the view taken by him that no obligation was cast upon the assessee to deduct at source in the respect of aforementioned payments made to the foreign payees. - I.T.A. No.5349, 5778/Mum/2016 - - - Dated:- 13-3-2019 - SHRI G.S PANNU AND SHRI RAVISH SOOD, JJ Appellant by: S/shri. M.K Patel K.S Chokshi Respondent by : Shri. Abdul Hakeem Shri. S.K Mishra ORDER RAVISH SOOD, J. The present cross appeals filed by the assessee and the revenue are directed against the order passed by the CIT(A)-58, Mumbai, dated 26.06.2016, which in turn arises from the order passed by the A.O u/s. 143(3) of the Income Tax Act, 1961 (for sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of ₹ 10,63,137/- on account of Interest income not accounted in financials on the basis of Form 26AS. The same be considered and the addition be deleted. 5) The Learned CIT(A) has erred in confirming the addition to the Book Profit for computing MAT u/s 115JB of the Income Tax Act 1961, ₹ 9,45,010 towards disallowance u/s 14A of the Income Tax Act, 1961 and ₹ 43,61,278/- towards provision for doubtful debts without considering the facts and circumstances of the case. The same be deleted. 6) The appellant craves leave to add, alter or delete to the ground of appeal of the time of or before hearing. 2. Briefly stated, the assessee which is a public limited company engaged in the business of manufacturing and export of sulphur products and agro chemicals had filed it return of income for A.Y 2011-12 on 29.09.2011, declaring total income of ₹ 28,71,63,851/-. The return of income filed by the assessee was processed as such u/s. 143(1) of the I.T Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s. 143(2). 3. The A.O while framing the assessment inter alia made the following additions/disallowances:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was submitted by the Ld. A.R that as the said respective amounts were deposited before the due date of filing of the return of income by the assessee, therefore, the same were not liable to be disallowed. It was further submitted by the ld. A.R that a similar addition/disallowance made in the assesses own case for the preceding years viz. A.Y 2007-08 and A.Y 2009-10 had been deleted by the Tribunal, vide a consolidate order passed while disposing off the assesses appeals in ITA no. 4631/Mum/2011 and ITA No. 107/Mum/2014; dated 05.05.2017. It was further submitted by the Ld. A.R that the issue involved in the present appeal was squarely covered by the judgment of the Hon‟ble High Court of Bombay in the case of CIT vs. Ghatge Patil Transport Ltd. (2014) 368 ITR 749 (Bom). It was thus the contention of the Ld. A.R that no disallowance in respect of the aforesaid amounts was liable to be made in the hands of the assessee. Insofar the addition of ₹ 1,67,252/- made by the A.O u/s. 40(a)(ia) in respect of the advertisement and sales promotion expenses was concerned, it was submitted by the Ld. A.R that the said payment was made to the supplier party i.e M/s. Iktek Communic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right, therefore, no obligation was cast upon the assessee to deduct tax at source under Sec. 195 by treating the same as a payment towards royalty to a non-resident party. Further, it was submitted by the Ld. AR that the lower authorities had erred in disallowing under Sec. 40(a)(i) the payment of ₹ 1,29,840/-made by the assessee to TSGE-DOO, Slovenia. It was submitted by the Ld. A.R that as the aforesaid payment was made for project work expenses for submission of plant protection details in Slovenia, therefore, the same could not be held as Fees for technical services‟ (for short FTS‟), therein rendering it obligatory for the assessee to deduct tax at source on the said amount u/s. 195 of the I.T Act. Rather, it was the contention of the Ld. A.R that the aforesaid payment was in the nature of business income of the non-resident recipient, which in absence of the latters Permanent Establishment (for short PE‟) in India could not be subjected to tax as per Article 7 of the India-Slovenia DTAA in India. The Ld. A.R further averred that insofar the amount of ₹ 4,91,920/- paid to M/s Liteam Corporate Image Planning Design, Shanghai was concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards the disallowance u/s. 40(a)(ia) of the advertisements and sales promotion expenses of ₹ 1,67,252/- the Ld. D.R took support of the observations of the lower authorities. Insofar the disallowance of the payments made in respect of royalty/FTS to various parties was concerned, the Ld. D.R again took support of the order of the CIT(A) and submitted that the latter had rightly upheld the same. 7. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. Insofar the disallowance u/s 36(1)(va) r.w.s 2(24)(x) of ₹ 9,74,625/- on account of late payment by the assessee of the employees share of contribution to PF/ESI u/s. 36 (i)(va) of the I.T Act is concerned, we find that though said payments were not made within the stipulated time period as envisaged in the respective acts, however, the same were admittedly deposited before the due date of filing of the return of income of the assessee for the year under consideration viz. A.Y 2011-12. We have deliberated on the issue before us and are of the considered view that as held by the Hon'ble High Court of Bombay in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed from the assessee had neither been rebutted by the lower authorities, nor any material proving to the contrary has been placed on our record. In sum and substance, it is the claim of the assessee that as the simpliciter supply of the designed art-work and printed leaflets could not be brought within the meaning of work as defined in Sec. 194C, therefore, in the absence of any obligation cast on the assessee to deduct tax at source in respect of the said transaction, no disallowance could have been made u/s 40(a)(ia) of the I.T Act. 9. We have given a thoughtful consideration to the issue before us and are persuaded to accept the contention advanced by the ld. A.R that no obligation was cast upon the assessee to deduct tax at source u/s. 194C while crediting/making the payments in respect of the aforesaid transaction. We find that though the supplier party i.e. M/s. Iktek Communication had provided the designed art-work and printed leaflets as per the specifications and requirements of the assessee, however, there is nothing borne from the records or had been averred before us, which would prove that the aforementioned party had supplied the product by using any material th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven a thoughtful consideration to the issue before us and are of the considered view that a payment made for access to database which is publicly available to any person interested in availing such information is not in the nature of royalty . The ITAT Ahmedabad in the case of Cadila Healthcare limited (ITA No. 486/Ahd/2016; dated 03.01.2017) had observed that the payment made by the assessee to Chemical Abstract Service, USA, for online access to database system SciFinder‟ was simply a payment made towards copyrighted material and the same could not be treated as royalty . The Tribunal while concluding as hereinabove had relied on the judgments of the Hon‟ble High Court of Bombay in the case of DIT Vs. Dun and Bradstreet Information Services India Pvt. Ltd. (2011) 318 ITR 95 (Bom) and the Hon‟ble High Court of Delhi in the case of DIT Vs. Nokia Networks OY (2013) 358 ITR 259 (Del). We thus respectfully following the aforesaid view of the coordinate bench of the Tribunal, therein conclude that as the payment made by the assessee to Chemical Abstract Services, USA, for online access to database system SciFinder‟ was simply a payment made towards copyright ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty had provided services towards assistance in documentation, guidance and liaison with various departments for assisting the assessee in registration of its product in Slovenia. In our considered view, the consideration paid by the assessee in lieu of the aforesaid liaison services of the foreign entity cannot be characterised as managerial, technical or consultancy services within the meaning of FTS under Explanation 2 to Sec. 9(1)(vii) of the I.T Act. Our aforesaid view that services rendered by a foreign entity towards assistance in documentation, guidance and liaison with various departments for assisting the assessee in its work abroad would not fall within the realm of FTS is supported by the judgment of the Hon‟ble High Court of Delhi in the case of CIT-IV, Delhi Vs. M/s GRUP ISM P. Ltd (ITA No.325/2014 (Del); dt. 29.07.2015. In the aforementioned case, it was observed by the Hon‟ble High Court that the foreign entity was rendering guidance to the assessee about the procedural aspect of obtaining the payments and checking the format and documents of the invoices that were to be submitted for approval to the works department, Abu dhabi; to receive and periodicall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.40(a)(i) of the I.T Act. b). We find that the assessee had admittedly made the payment to the aforementioned foreign entity for the services rendered by the latter for designing of seminar related material for an exhibition at Shanghai. In our considered view, the said payment clearly falls within sweep of FTS u/s. 9(i)(vii) of the I.T Act and Article 13 of the India-China DTAA. We thus are of the considered view that as the assessee who was liable for deduction of tax at source u/s. 195 on the aforementioned payment made to the foreign entity, had failed to do so, therefore, the said amount was rightly disallowed by the lower authorities u/s. 40(a)(i) of the I.T Act. We thus not finding any infirmity in the order of the CIT(A) who had sustained the disallowance made by the A.O u/s. 40(a)(i) of the I.T Act, uphold his order to the said extent. The Ground of appeal no. 3(C) raised by the assessee is dismissed. 11. We shall now advert to the contention of the Ld. AR that the CIT(A) has erred in confirming the addition of ₹ 1,63,137/- on account of interest income not accounted in the financials of the assessee on the basis of Form 26AS. Succinctly stated, as per Form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties had erred in adding the provision for doubtful debts of ₹ 43,61,278/- while computing the book profit u/s. 115JB is concerned, we are unable to accept the same. In our considered view, as per Explanation 1(i) to section 115JB, the amount or amounts set aside as provision for diminution in the value of the any asset if debited in the profit and loss account has to be added to the net profit‟ shown in the profit loss account for the year for the purposes of computing the book profit u/s. 115JB of the Act. As the provision for bad and doubtful debts debited by the assessee in its profit loss account is in the nature of a provision leading to diminution in the value of an asset, therefore, the same has to be added to the net profit‟ while computing the book profit‟ u/s 115JB of the I.T Act. Insofar the judgment of the Hon‟ble High Court of Bombay in the case of CIT Vs. Salgaonkar Mining Industries (P) Ltd. (2015) 235 Taxman 96 (Bom) is concerned, we are of the considered view that the same being distinguishable on facts would thus, not assist the case of the assessee as it was rendered in context of clause (c) of Explanation to Sec. 115JA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t entities in various countries in order to facilitate the registration of the chemical products of the assessee. The CIT(A) was of the view that as the services rendered by the respective concerns were in the nature of independent personal services and not in the nature FTS as contemplated under the various DTAA‟s, therefore, the consideration paid by the assessee in lieu of such services in absence of any PE of the aforementioned concerns in India were not liable to be taxed in India. In sum and substance, the CIT(A) finding favour with the contention advanced by the assessee that it was not obligatory on its part to deduct tax at source in respect of the payments made towards legal and professional fees to the various foreign concerns which had rendered their services in relation to registration of its products in the said respective countries concluded that the said amounts could not be disallowed u/s. 40(a)(i) of the I.T Act. 17. We have given thoughtful consideration to the issue before us and have perused the observations of the CIT(A) in context thereto. We are persuaded to subscribe to the view taken by the CIT(A) that as the payments made by the assessee for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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