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TMI Blog2017 (12) TMI 1669X X X X Extracts X X X X X X X X Extracts X X X X ..... .40(a)(i) will not be applicable. - Decided against revenue Addition on account of Bogus Purchase - HELD THAT:- As before the CIT(A}, the assessee has filed details like Receipt Notes, Payment Vouchers, Retail Invoice and bank statement in which the payment of ₹ 3,17,126 was cleared. Still the Revenue has raised a ground that 'the assessee did not furnish any material evidence to prove that the transaction took place in the earlier A.Y.2011-12.- Decided against revenue Disallowance of PF & ESI - employees contribution & ESI as remitted to Government before the due date and filed return u/s. 139(1) - HELD THAT:- As placing reliance on the Delhi High Court's decision in the case of Aimil Ltd [2009 (12) TMI 38 - DELHI HIGH COURT] that if the assessee had deposited employees contribution towards PF and ESI after the due date as prescribed under the relevant Act, but before the due date of filing of the return under the Income Tax Act, no disallowance could be made in view of the provisions u/s.43B as amended by Finance Act 2003. Respectfully following the ratio laid down by the Hon'ble High Court, the plea of the appellant is allowed. This ground of appeal is allowed - I.T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio in the context of commission agent laid down by the jurisdictional Court in the case of CIT v. Faizan Shoes P Ltd 367 ITR 155 applies mutatis mutandis. 10. The non-residents to whom payments were made were for 'services which cannot be classified as constituting either managerial or services which are technical in nature within the meaning of s.9(1)(vii) of the Act. The Board's circular NO.715 also clarified that payment to clearing and forwarding agents for carriage of goods is subject to deduction of tax at source u/s 194C while s.194J stipulates deduction of tax at source in respect of professional and technical services. In s.194J the expression tee for technical services has been given the same meaning as laid down in Explanation 2 to s.9(1 )(vii). 11. In Leaap International P Ltd the ITAT Chennai in ITA NO.356/Mds/2009 for AY. 2005-06 in its order dated 27.5.2011 have held similarly that the payments to foreign company for services rendered outside India and foreign company having no branches or permanent establishment in India, the payments mad~ to it were , not liable for deduction at source u/s 195. In the case of India Carriers P Ltd the ITAT Delhi B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to have appreciated that the services rendered by the foreign service providers in the instant case were more in the nature of technical/managerial nature and therefore, the facts of this case is clearly distinguishable from the facts arising in case of CIT vs. Faizaan Shoes P Ltd 367 ITR 155 wherein the Hon'ble jurisdictional High Court has held that commission paid to non-resident Indian will not fall within the meaning of 'fees for technical services'. 4.2 The DR assailed the order of the CIT(A) on the basis of the grounds of appeal and the assessment order. Per contra, the AR submitted that as per the decision of the Supreme Court in the case of Kotak Securities, a payment can be treated as FTS only if the payee renders a special, exclusive or customized service ; however , the assessee has not received any such service from any of the Payees . Further, as per the DTAAs between India and USA,UK and Canada there are Make available Clauses' ; however the Payees have not made available any technical knowledge, know-how etc to the assessee and therefore the alternate submission is thatthe payments to entities in USA, UK and Canada should be allowed . The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) Though it was a custom made software, since the following entities are of USA origin with which India has a DTAA with Make available clause and since these entities have not made available the know how, the following payments are not FTS Sl.No Name of the foreign country Country Amount paid by the assessee Nature of service provided 1. Constant Contact USA 1,29,344 Publicity Material-Content writers 2. Crazy Egg.com USA 1,35,484 Analysis of customer behaviour on website 3. MVI Marketing Ltd USA 18,43,021 US market research (c) In respect of the paymentsmade to Handup Ltd the AR submitted that Israel entered into following protocolon 29.01.1996, which , interalia, contained the following: 2. The competent authorities of the Contracting States shall initiate the proper procedure to review the provisions of Articles 12 and 13 (Royalties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es who have rendered the impugned services admittedly have no presence in India by way of permanent establishment and no business connection in as much as that the services were rendered outside India. It would suffice to hold that the basic ingredients to trigger the operation of Sec.9(1)(i) are conspicuous in their absence in the above services as explained by the assessee, supra. The payment(s) made to them would not be exigible to tax unless and until a case has been made out that they are in the nature of the services within the meaning of Sec. 9(1 )(vi) or 9(1)(vii) being royalty or technical services . The Revenue could not assail the assessee s above contentions . Since the abovepayments are not chargeable to tax in India u/s 9(1)(vii) r.w.s. 195, the provisions of s.40(a)(i) will not be applicable. The corresponding grounds of the Revenue are dismissed. 6. On the addition on account of Bogus Purchase: The AO received information from the CIT-I, Chennai vide C.No.1278/CIT- 1/2014-15 dated 14.8.2014 that the assessee company has made some bogus purchase entries for AY 2011-12 to the extent of ₹ 3,17,126/-. When the AR was asked to clarify their transactions w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Diamonds at the first place. The disallowance made by the AO cannot be upheld and hence the plea of the appellant succeeds. This ground of appeal is allowed. 6.2 The Revenue s relevant grounds of appeal are as under: 3. The learned CIT(A) erred in deleting the disallowance made in respect of bogus purchases of ₹ 3,17,126/-. 3.1 The learned C!T(A) failed to appreciate that the addition was made based on the findings of the Investigation Wing that the purchases were bogus in nature. 3.2 The learned CIT(A) failed to appreciate that the assessee did not furnish any material evidence to prove that the transaction took place in the earlier A.Y.2011-12. 6.3 The DR assailed the order of the CIT(A) based on the assessment order and on the above grounds of appeal. Per contra, the AR submitted during the assessment proceedings, the assessee has informed the AO by its letter dated 23.03.2015 that the purchase of ₹ 3,17,126 was in respect of A.Y. 2011-12 and in the impugned assessment year viz A.Y. 2012-13, there were 'No Transactions' . By its letter dated 24.03.2015, theassessee has enclosed a copy of the purchase bill dated 21.10.2010 which pertains to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the plea of the appellant is allowed. This ground of appeal is allowed. 8.1 The Revenue s relevant grounds of appeal are as under: 4. The learned C!T(A) has erred in deleting the addition made in respect of employees contribution towards PF ESI of ₹ 7,83,910/- which was remitted beyond the prescribed due dates 4.1 The learned CIT(A) erred in deleting the addition made in respect of delayed remittance of its employees contribution of Provident Fund despite the fact that Circular No.22/2015 dated 17.12.2015 clearly applies to claim of deduction relating employers' contribution and not for employees contribution to welfare funds. 4.2 The learned CIT(A) failed to appreciate that any received sum received on account of employees' contribution to Provident Fund ESI not remitted within the due date is to be treated as the income of the assessee and taxed in his hands as per provisions of Sec.2(24)(x) of the LT. Act, 1961. 8.2 The DR assailed the order of the CIT(A) based on the assessment order and on the above grounds of appeal. Per contra, the AR submitted that the return was filed on 28.09.2012 and the remittances were made before the due date on f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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