2021 (7) TMI 1450 - AT - Income Tax

TDS u/s 195 - Disallowance u/s. 40(a)(i) - payment towards communication and connectivity charges in Form 3CEB - CIT(A) deleting the disallowance made holding that the expenses involved therein as reimbursement cost - HELD THAT - We note that the assessee made its contentions before the CIT(A) vide its submissions wherein the CIT(A) reproduced the relevant part of such submissions in his impugned order but however the CIT(A) did not discuss the same in detail while recording reasons for holding such payment cannot be considered as fees for technical services. He simply held the said payment was in the nature of reimbursement of cost allocation made by the BBPLC in respect of providing IT support services to assessee i.e. BSS so therefore as rightly contended by the ld. DR as agreed by the ld. AR we find no reasons recorded by the CIT(A) in support of his finding in deleting the disallowance made by the AO u/s. 40(a)(i) of the Act is not justified. Thus we deem it proper to remand the matter to the file of CIT(A) for its fresh adjudication. The assessee is liberty is file evidences if any in support of its claim. Thus the grounds raised by the Revenue are allowed for statistical purpose. Cross objection of assessee - As contended that if at all the disallowance u/s. 40(a)(i) is sustained without prejudice to such disallowance the assessee contended that it is entitled for enhanced deduction to the extent of disallowance u/s. 10A - HELD THAT - Since we have taken our view in the aforementioned paragraphs in remanding the matter to the file of CIT(A) for its fresh adjudication in respect of the issue u/s. 40(a)(i) of the Act in our opinion the issue raised in cross objection does not survive before this Tribunal but however the liberty is afforded to the assessee to raise the same before the CIT(A). The CIT(A) shall take up the issue while deciding the issue u/s. 40(a)(i) of the Act and pass order in accordance with law. Cross objection filed by the assessee is dismissed.

Summary

Issues:
Appeal and cross objection against CIT(A)'s order for AY 2009-10.

Analysis:
1. The appeal by the Revenue focused on the deletion of disallowance u/s. 40(a)(i) of the Act by CIT(A). The payment in question was made by the assessee for IT support services to BBPLC, London. The AO disallowed the sum for failure to deduct TDS u/s. 195 of the Act, amounting to Rs. 11,16,25,424. The CIT(A) held that the payment was reimbursement cost towards communication and connectivity charges, not subject to tax in India under DTAA between India and UK/Ireland.

2. The Revenue contended that the payment was for availing IT support services, not reimbursement. The CIT(A) did not provide detailed reasons for deleting the disallowance. The Revenue argued that the CIT(A) failed to discuss the issue thoroughly. The assessee claimed that the payment was not for intellectual property but for IT support services. The CIT(A) did not record detailed reasons for considering the payment as cost allocation, leading to a lack of justification for the deletion of the disallowance.

3. The Tribunal found that the CIT(A) did not adequately support the deletion of the disallowance. As a result, the matter was remanded to the CIT(A) for fresh adjudication, allowing the assessee to submit additional evidence. The Tribunal allowed the Revenue's grounds for statistical purposes due to the lack of justification in the CIT(A)'s order.

4. Regarding the cross objection by the assessee, it was contended that if the disallowance u/s. 40(a)(i) is sustained, enhanced deduction u/s. 10A should be allowed. However, since the matter was remanded to the CIT(A) for fresh adjudication on the issue u/s. 40(a)(i), the cross objection did not survive before the Tribunal. The assessee was granted the liberty to raise the issue before the CIT(A) for consideration during the fresh adjudication.

5. In conclusion, the appeal of the Revenue was allowed for statistical purposes, and the cross objection of the assessee was dismissed. The Tribunal emphasized the need for detailed justifications in the CIT(A)'s orders and granted the assessee an opportunity to present further evidence during the fresh adjudication.