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2021 (3) TMI 403 - AT - Income TaxWithholding Tax / TDS - Royalty - Adjustment on account of payment for IT license maintenance cost - finding of the Ld. CIT(A) that no tax has been deducted on payment by the assessee for IT license maintenance cost, whereas it is the contentions of the Ld. counsel that the assessee has deducted tax @ 21.115% u/s 206AA of the Act - HELD THAT - We set aside the order of the Ld. CIT(A) on the above matter and restore the matter to the file of the TPO/AO to make an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the TPO/AO. Adjustment on account of payment of interest on trade credits - Admission of additional evidence - HELD THAT - The supporting evidence as filed by the Ld. counsel is nothing but additional evidence. We are of the considered view that admission of the additional evidence filed by the assessee on the above ground of appeal by us would facilitate to render substantial justice between the parties. We are aware of the position of law that where an additional evidence has been allowed to be adduced, the interests of justice demand that the other side must be given an opportunity to explain or rebut such additional evidence as held in the case of Smt. Urmial Ratilal v. CIT, 1981 (6) TMI 25 - GUJARAT HIGH COURT - we set aside the order of the Ld. CIT(A) on the above grounds of appeal and restore the matter to the file of the TPO/AO to make an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the TPO/AO.
Issues Involved:
1. Timeliness of the appeal filing. 2. Adjustment on account of payment for IT license maintenance cost. 3. Adjustment on account of payment of interest on trade credits. 4. Adjustment on account of fees on corporate guarantee. 5. Levy of interest and penalty proceedings. Detailed Analysis: 1. Timeliness of the Appeal Filing: The assessee filed Form No. 36 (ITA No. 3181/M/2019) on 13.05.2019 and another Form No. 36 (ITA No. 4608/M/2019) on 22.05.2019 for AY 2012-13. A defect notice dated 11.11.2020 indicated that the appeal was time-barred by 55 days. The delay was attributed to the Managing Director's travel and the foreign Director's unavailability in India. To avoid delay, the appeal documents were initially signed by an authorized signatory. The revised memorandum of appeal, signed by the Managing Director, was filed on 22.05.2019. The Tribunal held that the appeal was filed within the 60-day limit, making ITA No. 3181/M/2019 and ITA No. 3182/M/2019 for AY 2013-14 infructuous. 2. Adjustment on Account of Payment for IT License Maintenance Cost: The assessee reported a payment of ?5,89,732/- for IT license maintenance as an international transaction. The AO added this amount, following the TPO's order, due to the assessee's failure to justify the price and benefit derived. The CIT(A) upheld this disallowance, treating it as royalty under Explanation 2(i) to section 9(1)(vi) of the Act due to non-deduction of tax. The Tribunal noted the assessee's contention that tax was deducted at 21.115% under section 206AA and set aside the CIT(A)'s order, remanding the matter to the TPO/AO for fresh adjudication after providing the assessee a reasonable opportunity to present evidence. 3. Adjustment on Account of Payment of Interest on Trade Credits: The assessee paid ?29,79,359/- as interest on outstanding trade credits to its AEs. The TPO adjusted this amount, noting that no interest was paid to non-AEs and questioning the credit period allowed. The CIT(A) upheld this adjustment, citing a lack of documentary evidence and benchmarking. The Tribunal admitted additional evidence provided by the assessee, which included a circular from the parent company regarding interest charges. The matter was remanded to the TPO/AO for fresh adjudication, allowing the assessee to present relevant documents. 4. Adjustment on Account of Fees on Corporate Guarantee: For AY 2013-14, the assessee paid ?7,23,100/- as corporate guarantee fees to its parent company, Peri Gmbh, at 2%. The TPO determined the ALP of the guarantee fees as NIL, considering it a shareholder activity. The CIT(A) confirmed this adjustment. The Tribunal admitted additional evidence from the assessee, including the parent company's policy on guarantee fees. The matter was remanded to the TPO/AO for fresh adjudication, with instructions to provide the assessee a reasonable opportunity to present evidence. 5. Levy of Interest and Penalty Proceedings: The grounds of appeal regarding the levy of interest were deemed consequential. The ground relating to penalty proceedings was considered premature and dismissed. Conclusion: The appeals ITA No. 3181/M/2019 for AY 2012-13 and ITA No. 3182/M/2019 for AY 2013-14 were deemed infructuous. The appeals bearing No. 4608/M/2019 for AY 2012-13 and 4607/M/2019 for AY 2013-14 were partly allowed, with specific issues remanded to the TPO/AO for fresh adjudication. The order was pronounced in the open Court on 05/03/2021.
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