DCIT, New Delhi v. M/s Holtec Consulting Pvt. Ltd, New Delhi

1 ITA NO. 2148/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SH. N. K. BILLAIYA ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE JUDICIAL MEMBER I.T.A. NO. 2148/DEL/20 15 (A.Y. 2011-12) DCIT CIRCLE 11(1) NEW DELHI. (APPELLANT) VS M/S. HOLTEE CONSULTING PVT. LTD. C-BLOCK 01-03 IMPERIAL TOWER COMMUNITY CENTRE NARAINA VIHAR NEW DELHI (AABCG 1201 H) ( RESPONDENT) APPELLANT BY SH. S. N. MEENA SR. D.R. RESPONDENT BY --NONE-- ORDER PER SUCHITRA KAMBLE JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX [APPEALS]-4 NEW DELHI D ATED 21.01.2015 FOR ASSESSMENT YEAR 2011-12. 2. THE GROUNDS OF APPEAL ARE AS UNDER :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE & IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 3 35 72 1 84/- MADE ON ACCOUNT OF COMMISSION PAID TO ITS TWO DIRECTORS. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE & IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 72 69 505 /- MADE ON ACCOUNT OF DISALLOWANCE U/S 14A R.W.R. 8D. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE & IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 84 22 535 /- U/S 40(A)(IA) FOR NON- DEDUCTION OF TDS. DATE OF HEARING 25.11.2019 DATE OF PRONOUNCEMENT 25.11.2019 2 ITA NO. 2148/DEL/2015 4. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 3. DURING THE HEARING DESPITE GIVING NOTICE NONE A PPEARED FOR THE ASSESSEE THEREFORE WE ARE PROCEEDING ON THE BASIS OF ASSESS MENT ORDER AND THE ORDER OF THE CIT(A). THE SUBMISSIONS OF THE ASSESSEE BEFORE THESE AUTHORITIES ARE TAKEN AS THE SUBMISSION BEFORE US. 4. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING TECHNICAL AND MANAGEMENT CONSULTANCY SERVICES. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PAID COMMISSION TO TWO OF ITS DIRE CTORS SH. UMESH SRIVASTAVA SH. SUMANT SRIVASTAVA TO THE TUNE OF R S.1 19 25 068/- AND RS.1 98 75 114/- RESPECTIVELY. THE ABOVE TWO DIRECT ORS HELD 19.8% AND 12.8% SHARES RESPECTIVELY IN THE ASSESSEE COMPANY AND SUC H COMMISSION EXPENSES WERE PAID OVER AND ABOVE THE SALARY PAID TO THEM. T HE ASSESSING OFFICER HELD THAT SUCH PAYMENTS WERE COVERED WITHIN THE AMBIT OF SECTION 36(1)(II) WHICH PROVIDES THAT ANY SUM PAID TO ANY EMPLOYEE AS BOGUS OR COMMISSION FOR SERVICES RENDERED WITH THE AN ALLOWABLE DEDUCTION W HERE SUCH SUM WOULD NOT HAVE BEEN PAYABLE TO HIM AS PROFITS OR DIVIDENDS. T HE ASSESSING OFFICER HELD THAT COMMISSION PAID TO ALL FOUR DIRECTORS WERE COV ERED U/S 40A(2)(B) AND ACCORDINGLY AN AMOUNT OF RS.3 35 72 104/- WAS DISA LLOWED. THE ASSESSING OFFICER FURTHER DISALLOWED RS.72 69 505/- U/S 14A R .W.R. 8D AS ASSESSEE HAD MADE INVESTMENT FOR EARNING DIVIDEND INCOME OF RS.3 57 17 899/-. THE ASSESSING OFFICER ALSO MADE DISALLOWANCE OF RS.84 2 2 535/- IN RESPECT OF PAYMENTS MADE TO CERTAIN FOREIGN PARTIES BY NOT DED UCTING TDS ON SUCH PAYMENT. 5. BEING AGGRIEVED BY THE ASSESSMENT ORDER THE ASSE SSEE FILED APPEAL BEFORE THE CIT(A) THE CIT(A) ALLOWED THE APPEAL OF THE ASS ESSEE. 6. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED EXCESSIVE COMMISSION PAID TO TWO OF ITS DIRECTORS A S PER SECTION 36(1)(II) OF THE ACT AS COMPANIES SHOULD NOT AVOID TAX BY DISTRIBUTI NG THEIR PROFITS TO THEIR 3 ITA NO. 2148/DEL/2015 MEMBERS/SHAREHOLDERS AS BONUS OR COMMISSION INSTEAD OF DIVIDEND. THE LD. DR FURTHER SUBMITTED THAT IN THE INSTANT CASE IT I S CLEAR THAT THE PROFIT WHICH WOULD HAVE BEEN PAID OTHERWISE TO THE DIRECTORS AS DIVIDEND HAS BEEN DIVERTED IN THE FORM OF COMMISSION. THUS COMMISSION PAID TO DIRECTORS SHAREHOLDERS IS NOT ALLOWABLE U/S 36(1)(II) OF THE ACT. AS REGARDS GROUND NO.2 THE LD. DR SUBMITTED THAT DISALLOWANCE U/S 14A IS JUSTIFIED AS THE ASSESSEE HAS TOTAL TURNOVER OF RS.100 CRORE AND TOTAL INVESTMENT OF TH E ASSESSEE COMPANY ARE OF RS.146.67 CRORES. THE ASSESSING OFFICER HAS GIVEN A PROPER CALCULATION AS PER RULE 8D. THEREFORE THE CIT(A) WAS NOT RIGHT IN DEL ETING THE SAID ADDITION. AS REGARDS GROUND NO.3 THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER RIGHTLY MADE DISALLOWANCE ON ACCOUNT OF NON-DEDUCTION OF TD S OF PAYMENT MADE TO FOREIGN PARTIES AS THE ASSESSEE HAS ENGAGED THE ACU MEN AND EXPERTISE OF THE OUTSIDERS/NON-RESIDENT THE CONSIDERATION FOR WHICH AMOUNTS TO TECHNICAL AND SUPPORT SERVICES. THUS THE PAYMENT BY THE RESIDENT ASSESSEE IN CONNECTION WITH HIS BUSINESS IN INDIA TO A PERSON OUTSIDE INDI A MAKING USE OF HIS EXPERTISE IN SALE OF GOODS IN A PARTICULAR COUNTRY IS NOTHING BUT A FEE WHICH HAS BEEN PAID BY THE RESIDENT ASSESSEE TO THE OUTSIDERS/NON- RESIDENT FOR THE SERVICES RENDERED BY HIM AND CAN BE CONSTRUED AS FEES FOR T ECHNICAL SERVICES. 7. WE HAVE HEARD LD. DR AND PERUSED THE SUBMISSIONS OF THE ASSESSEE BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A). WE HAVE ALSO PERUSED ALL THE RELEVANT MATERIALS AVAILABLE ON RECORD. AS REGARDS GROUND NO.1 THE CIT(A) HELD AS UNDER: 6.2 THE GROUND NO.1 OF THE APPEAL IS GENERAL. REGA RDING THE GROUND NO.2 OF THE APPEAL RELATING TO DISALLOWANCE OF COMM ISSION PAID TO THE TWO EXECUTIVE DIRECTORS UNDER SECTION 36(1)(II) I FIND THAT THE ISSUE IS DIRECTLY COVERED BY THE DECISION OF THE HON'BLE ITAT OF DELH I IN THE CASE OF APPELLANT FOR A.Y.2005-06 2006-07 2008-09 AND 2009-10. ON C AREFUL CONSIDERATION OF THE FACTS OF THE CASE I FIND THAT THERE IS NO D IFFERENCE IN THE FACTS FOR THE CURRENT YEAR. MOREOVER I FIND THAT THE VERY ALLEGA TION THAT THE APPELLANT HAS PAID DIVIDEND IN THE GARB OF COMMISSION IS FAC TUALLY INCORRECT AS THE APPELLANT HAD IN ADDITION PAID DIVIDEND WHICH IS AS HIGH AS 375% TO ITS SHARE HOLDERS (INCLUDING TO THE TWO EXECUTIVE DIREC TORS HOLDING SHARES) AND HENCE THE VERY OBSERVATION OF THE LD. AO THAT THE APPELLANT HAD PAID COMMISSION INSTEAD OF DIVIDEND THE TWO EXECUTIVE DI RECTORS IN VIOLATION OF 4 ITA NO. 2148/DEL/2015 PROVISION OF SECTION 36(1)(II) IS NOT SUPPORTED BY THE FACTS. THE TWO EXECUTIVE DIRECTORS HAD TREMENDOUS TECHNICAL AND MA NAGERIAL EXPERIENCE AND HAVE CONTRIBUTED A GREAT DEAL TO THE GROWTH OF THE BUSINESS/PRODUCTIVITY OF THE COMPANY WHICH IS IN TH E NATURE OF PROVIDING TECHNICAL CONSULTANCY. THE SAID PAYMENT OF COMMISSI ON WAS IN PURSUANCE OF AN AGREEMENT WITH THEM. KEEPING IN VIEW THE ABOV E FACTS I HOLD THAT THE CLAIM OF THE APPELLANT IN RESPECT OF THE COMMISSION PAID TO THE TWO DIRECTORS SATISFIES ALL THE NECESSARY CONDITIONS ST IPULATED UNDER SECTION 37(1) AND IS THEREFORE FOLLOWING THE AFORESAID ORD ER OF ITAT IS HELD TO BE ALLOWABLE. THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YS. 2005 -06 & 2006-07 BEING ITA NOS.3878/DEL/2010 & 796/DEL/2011 DATED 25.01.20 12 HELD AS UNDER: 17.3 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT ASSESSEE HAS PAID COMMISSION TO THE DIRECTORS AS PART OF THE REMUNERATION. IN THE AGREEMENT IT WAS CLEARLY SPECIFIED THAT COMMISSION IS PAYABLE AT 5% OF THE NET PROFITS OF T HE COMPANY. THUS THE PAYMENT WAS DULY APPROVED BY THE BOARD OF DIRECTORS . FURTHER WE FIND THAT COMMISSION WAS PAID IN EARLIER YEARS ALSO AND THE SAME WAS ACCEPTED BY THE REVENUE AND HENCE NO DISALLOWANCE WAS MADE. 17.4 WE FURTHER FIND THAT HONBLE JURISDICTIONAL H IGH COURT IN THE CASE CIT VS. DALMIA PROMOTERS DEVELOPERS (P) LTD. 281 IT R 346 HAS HELD THAT FOR REJECTING THE VIEW TAKEN IN EARLIER ASSESSMENT YEAR S THERE MUST BE MATERIAL CHANGE IN THE FACT SITUATION OR IN LAW. I N THIS CASE CLEARLY THERE IS NEITHER ANY CHANGE IN THE FACT SITUATION OR IN LAW . WE AGREE WITH THE CONTENTION OF THE ASSESSEE THAT THE COMPENSATION FO R BOTH THE DIRECTORS WERE STRUCTURED IN SUCH A WAY THAT APART FROM GETTI NG A FIXED REMUNERATION FOR THEIR SERVICES RENDERED THEY WOUL D ALSO BE ENTITLED TO RECEIVE COMMISSION BASED ON THE PROFITABILITY OF TH E COMPANY. WE ALSO FIND THAT ASSESSEE HAS PAID TAXES AT MAXIMUM MARGINAL RA TE. BOTH THE DIRECTORS HAVE ADMITTED THE PAYMENT OF COMMISSION R ECEIVED AND OFFERED THE SAME IN THEIR INCOME TAX RETURNS AND HAD PAID A T A MAXIMUM MARGINAL RATE. THIS CLEARLY ESTABLISHES THE FACT THAT THERE HAS BEEN NO TAX AVOIDANCE MOTIVE BEHIND THE PAYMENT OF COMMISSION TO THE DIRE CTORS BY THE ASSESSEE COMPANY. WE FURTHER FIND THAT THE CASE LAW REFERRED BY THE LD. COUNSEL OF THE ASSESSEE ARE ALSO GERMANE AND SUPPORT THE CASE OF THE ASSESSEE. 17.5 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS IN OUR CONSIDERED OPINION THE PAYMENT OF COMMISSION WAS J USTIFIED AND NOT DISALLOWABLE U/S 36(1)(II) OF THE IT ACT. THE ISSUE IS IDENTICAL IN THE PRESENT YEAR AS WELL. IN THIS YEAR ALSO BOTH THE DIRECTORS ADMITTED THE PAYMENT OF COMMISSION RECEIV ED AND OFFERED THE SAME 5 ITA NO. 2148/DEL/2015 IN THEIR INCOME TAX RETURNS AND HAD PAID AT A MAXIM UM MARGINAL RATE. THIS CLEARLY ESTABLISHES THE FACT THAT THERE HAS BEEN NO TAX AVOIDANCE MOTIVE BEHIND THE PAYMENT OF COMMISSION TO THE DIRECTORS BY THE A SSESSEE COMPANY. THE CIT(A) HAS TAKEN PROPER COGNIZANCE OF THESE FACT. T HERE IS NO NEED TO INTERFERE WITH THE FINDING OF THE CIT(A). THUS GROUND NO.1 OF THE REVENUES APPEAL IS DISMISSED. 8. AS REGARDS GROUND NO.2 THE CIT(A) HELD AS UNDER : 6.3.2 WITHOUT PREJUDICE I FIND THAT THE APPELLANT HAD MADE INVESTMENT IN GROUP COMPANIES AMOUNTING TO RS.10 16 60 000/- IN T HE PREVIOUS YEAR RELATING TO AY 2010-11. SUCH AN INVESTMENT WAS FOR THE BUSINESS PURPOSE OF COMMERCIAL EXPEDIENCY. THEREFORE IN THE LIGHT O F THE DECISION OF HON'BLE ITAT BANGALORE IN THE CASE OF GARWARE WALL ROPES LT D VS. ACIT (ITA NO.5408/MUM/2012) IT COULD NOT HAVE BEEN CONSIDERE D FOR DISALLOWANCE U/S 14A. SECONDLY INVESTMENTS IN BOND S/ FMPS RS.93.62 CRORES WERE MADE THE INTEREST INCOME FROM WHICH IS FULLY TAXABLE IN THE HANDS OF THE APPELLANT COMPANY. THEREFORE SUCH INV ESTMENTS SHOULD HAVE BEEN EXCLUDED FROM THE PURVIEW OF SECTION 14A. THIR DLY THE INVESTMENT IN PMS MAY YIELD BOTH TAXABLE AND NONTAXABLE INCOMES. FOURTHLY IT IS ALSO SEEN THAT THE INVESTMENT IN EQUITY SHARES MADE BY T HE APPELLANT IN THE EARLIER YEARS AMOUNTING TO RS.6 00 690/- REMAINED T HE SAME AND NO FURTHER EXPENSES WERE INCURRED DURING THE YEAR IN R ESPECT THEREOF. SIMILARLY REGARDING THE INVESTMENT IN MUTUAL FUND IT IS SEEN THAT THE APPELLANT HAD CONTINUED WITH THE SAME INVESTMENTS B ASED ON THE DECISION TAKEN IN THE EARLIER YEARS. 6.6.3 IN VIEW OF THE ABOVE FACTS IT IS EVIDENT THA T THE LD. AO HAS NOT EXAMINED THE CORRECTNESS OF THE CLAIM OF THE APPELL ANT REGARDING AMOUNT OF EXPENSES DISALLOWED BY THE APPELLANT U/S 14A. UNDER THE CIRCUMSTANCES KEEPING IN VIEW THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. MAXOPP INVESTMENT 64 DTR 322 (DELHI) IN TERMS OF THE PROVISION OF SECTION 14A(2) THE LD. AO WAS NOT EMPOWERED TO INVOKE THE PROVISION OF RULE 8D WITHOUT REJECTING THE CORRECTNESS OF THE CL AIM OF APPELLANT. I FIND THAT UNDER THE CIRCUMSTANCES THE HON'BLE ITAT DELH I HAS ALLOWED THE APPEAL ON THIS ISSUE IN FAVOUR OF APPELLANT FOR AY 2009-10. KEEPING IN VIEW THE ABOVE AND RESPECTFULLY FOLLOWING THE SAID DECIS ION OF THE ITAT DELHI THE DISALLOWANCE MADE BY THE LD. AO UNDER SECTION 1 4A READ WITH RULE 8D IS DELETED. 6 ITA NO. 2148/DEL/2015 THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2008- 09 & 2009-10 HELD AS UNDER: 12. AS REGARDS GROUND NO.1 IN I.T.A.NO. 4563/DEL/2 012 AND GROUND NO.2 IN I.T.A.NO. 4706/DEL/2012 WITH REGARD TO UPHO LDING OF PARTIAL DISALLOWANCE U/S 14A WE FIND THAT LD. CIT(A) HAS N OT CONSIDERED THE SUBMISSIONS OF THE ASSESSEE REGARDING BREAK-UP OF I NVESTMENT WHICH INCLUDED INVESTMENT IN GROUP COMPANIES AND ALSO HAS NOT CONSIDERED THAT A MAJOR PART OF INVESTMENT IN MUTUAL FUNDS WAS IN D EBT RELATED INVESTMENTS WHERE THE INVESTMENTS GENERALLY EARN FI XED INCOME BUT DISTRIBUTION OF INCOME IS IN THE FORM OF DIVIDENDS. WE ARE OF THE OPINION THAT FIXED MATURITY PLANS OFFERED BY MUTUAL FUNDS D EFINITELY REQUIRE MUCH LESS PROFESSIONAL EXPERTISE AS COMPARED FOR MAKING INVESTMENTS IN EQUITY RELATED SCHEMES AND THEREFORE LESS EXPENDITURE IS INVOLVED IN MANAGING SUCH SCHEMES. MOREOVER BEFORE UPHOLDING PARTIAL DIS ALLOWANCE U/S 14A LD. CIT(A) SHOULD HAVE CONSIDERED THE SUBMISSIONS O F ASSESSEE THAT A PART OF INVESTMENTS WERE NOT FOR EARNING DIVIDENDS BUT W ERE STRATEGIC INVESTMENTS. IN VIEW OF THE ABOVE WE ARE OF THE OP INION THAT THE ISSUE OF DISALLOWANCE BE READJUDICATED BY THE ASSESSING OFFI CER AND THE ASSESSING OFFICER SHOULD DECIDE THE DISALLOWANCE ON THE BASIS OF HIS OBJECTIVE FINDINGS AFTER GIVING A REASONABLE OPPORTUNITY TO T HE ASSESSEE OF BEING HEARD. IN VIEW OF THE ABOVE THE APPEAL OF THE ASSE SSEE IN I.T.A.NO.4563/DEL/2012 IS ALLOWED FOR STATISTICAL P URPOSES AND THE REVENUES APPEAL IN I.T.A.NO. 4706/DEL/2012 IS PART LY ALLOWED FOR STATISTICAL PURPOSES. SINCE THE A.Y. 2011-12 AND THERE IS AN ADMINISTRAT IVE EXPENSES AS WELL THEREFORE MATTER IS REMANDED BACK TO THE FILE OF T HE ASSESSING OFFICER FOR SUCH A HUGE INVESTMENT TO BE VERIFIED. NEEDLESS TO SAY T HE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLE OF NA TURAL JUSTICE. GROUND NO.2 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9. AS REGARD GROUND NO.3 THE CIT(A) HELD AS UNDER: 6.4 THE GROUND NO.4 OF THE APPEAL RELATES TO DISALL OWANCE OF CERTAIN PAYMENTS MADE BY THE APPELLANT TO VARIOUS PARTIES P RESUMABLY U/S 40(A)(I). I FIND THAT THE APPELLANT HAD MADE PAYMEN T TO THE FOLLOWING PARTIES: PARTICULARS AMOUNT GIA NAM INVESTMENT CONSULTING JOINT STOCK 1 029 170 BAGAZA PIUS 6 668 080 EL GHERANI 343 907 7 ITA NO. 2148/DEL/2015 TRADING ENGINEERING GROUP 381 378 TOTAL 8 422 535 OUT OF THIS THE PAYMENT MADE TO M/S GIA NAM INVEST MENT CONSULTING JOINT STOCK VIETNAM WAS MADE IN TERMS O F CONTRACT WITH THAT COMPANY TO ASSIST THAT COMPANY IN EXECUTION OF CONTRACTS IN VIETNAM. THE SAID COMPANY IS A FOREIGN COMPANY REGISTERED OU TSIDE INDIA AND THE TECHNICAL SERVICES (DESIGNING SERVICES) PROVIDED BY IT WERE RENDERED OUTSIDE INDIA IN CONNECTION WITH THE 2 MINING PROJE CTS OF APPELLANT. AS PER EXPLANATION-2 BELOW SECTION 9(L)(VII) THE TERM 'FE E FOR TECHNICAL SERVICES' DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION ASSEMBLY MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT. IN THE CA SE OF THE APPELLANT BOTH THE PROJECTS IN VIETNAM WERE IN CONNECTION WITH THE MINING PROJECTS. THEREFORE SUCH PAYMENT GETS EXCLUDED FROM THE SCOP E OF FTS. FURTHER AS THE SERVICES BY THAT COMPANY WERE PROVIDED OUTSIDE INDIA THEREFORE THERE WAS NO LIABILITY ON THE APPELLANT TO DEDUCT TDS THE REON AS UNDISPUTEDLY M/S GIA NAM INVESTMENT DOES NOT HAVE PERMANENT ESTA BLISHMENT IN INDIA. THE APPELLANT HAD ALSO FILED FORM 15CB/15CA BEFORE THE AO. KEEPING IN VIEW THE ABOVE FACTS AND RELYING UPON THE DECISION IN THE CASE OF AQUA OMEGA SERVICES (P) LTD. VS. ACIT (2013) 31 TAXMANN. COM 179 (CHENNAI-TRIB.) AND M/S AJAPPA INTEGRATED PROJECT M ANAGEMENT CONSULTANTS (P) LTD. VS. ACIT 24 TAXMANN.COM 116 AN D FOLLOWING THE CBDT CIRCULAR NO.3 DATED 2008 IT IS HELD THAT PAYMENT MADE TO M/S GIA NAM INVESTMENT CONSULTING JOINT STOCK WAS N OT COVERED BY THE PROVISION OF SECTION U/S 195. 6.4.2 REGARDING THE PAYMENT MADE TO M/S BAGAZA PIUS UGANDA UAE IN TERMS OF THE MEMORANDUM OF UNDERTAKING SIGNE D WITH THAT PARTY THE APPELLANT WAS REQUIRED TO EXECUTE CIMERWA CEMEN T PROJECT IN RWANDA BY PROVIDING TECHNICAL AND MARKETING SUPPORT SERVIC ES FOR WHICH PURPOSE M/S BAGAZA PIUS WAS TO PROVIDE MARKET SUPPORT SERVI CE TO THE APPELLANT. UNDISPUTEDLY SUCH SERVICES WERE PROVIDED OUTSIDE I NDIA AND KEEPING IN VIEW THE ARTICLE-7 RELATING TO BUSINESS PROFIT TO T HE DTAA BETWEEN INDIA AND UGANDA SUCH PAYMENT WAS NOT COVERED U/S 195 IN THE ABSENCE OF ANY ADVERSE FINDING ON RECORDS TO HOLD THAT SUCH PA RTY HAD ITS PE IN INDIA AS IT DID NOT HAVE ANY OFFICE/BRANCH IN INDIA AND T HE SERVICES WERE RENDERED TO THE APPELLANT OUTSIDE INDIA. AS PER ART ICLE 12 OF INDO-UGANDA DTAA THE SERVICES PROVIDED BY THE FOREIGN PARTY CA NNOT BE HELD AS SERVICES IN THE NATURE OF PROVIDING MANAGEMENT TEC HNICAL AND CONSULTANCY SERVICES BEING FOR THE PURPOSE OF PROVIDING MARKET SUPPORT SERVICES TO THE APPELLANT HENCE FOLLOWING THE DECISION OF HON'BLE ITAT DELHI IN THE CASE OF MRO (INDIA) (P) LTD. VS. DCIT (SUPRA) SUCH PAYMENT CANNOT BE HELD AS FTS EITHER. 6.4.3 ON CAREFUL CONSIDERATION OF THE FACTS I FIND THAT THE APPELLANT HAS MADE PAYMENT TO M/S TEG (EGYPT) AND M/S ELTIGAN (GE RMANY) FOR 8 ITA NO. 2148/DEL/2015 EXPLORING BUSINESS OPPORTUNITIES FOR THE APPELLANT IN EGYPT AND TANZANIA RESPECTIVELY. NONE OF THESE COMPANIES CAN BE HELD T O HAVE PE IN INDIA AND IT IS NOT THE CASE OF THE AO. FURTHER SUCH SERVICE S CANNOT BE HELD AS MANAGEMENT TECHNICAL AND CONSULTANCY IN NATURE HEN CE CANNOT BE TREATED AS FTS EITHER. KEEPING IN VIEW THE ABOVE THERE WAS NO OBLIGATION ON THE APPELLANT TO DEDUCT TDS THEREON U/S 195. IN VIEW OF THE ABOVE NO DISALLOWANCE U/S 40(A)(I) CAN BE MADE IN RESPECT TH EREOF. ACCORDINGLY THIS GROUND IS ALSO ALLOWED. THE TRIBUNAL IN A.Y. 2005-06 & 2006-07 HELD AS UNDE R: 17.6 AS REGARDS THE CONTENTION OF THE LD. COMMISSI ONER OF INCOME TAX (APPEALS) THAT AMOUNT IS ALSO TO BE DISALLOWED U/S 40A(2)(A) BECAUSE THE PAYMENT TO THE ASSESSEE WAS UNREASONABLE. WE FIND T HAT THE SAME IS NOT SUPPORTED BY ANY COMPARABLE INSTANCE. IN WHAT ITA N OS. 3878/DEL/2010 & 796/DEL/2011 12 CONTEXT IT WAS UNREASONABLE HAS N OT BEEN BROUGHT ON RECORD HENCE THIS POINT OF VIEW IS ALSO NOT SUSTA INABLE. FROM THE PERUSAL OF THE ORDER OF THE CIT(A) IT CA N BE SEEN THAT THE COMPANIES DID NOT HAVE ANY PE IN INDIA AND IT IS NO T THE CASE OF THE ASSESSING OFFICER THAT THESE COMPANIES HAVE PE IN INDIA. FURT HER SUCH SERVICES ARE NOT IN THE NATURE OF MANAGEMENT TECHNICAL AND CONSULTA NCY THEREFORE THE SAME CANNOT BE TREATED AS FTS. THUS THERE WAS NO OBLIGA TION ON THE ASSESSEE TO DEDUCT TDS THEREON U/S 195. THUS THE CIT(A) RIGHTL Y HELD THAT NO DISALLOWANCE U/S 40(A)(I) CAN BE MADE. THE CIT(A) HAS GIVEN A DETAILED FINDING AND THIS ISSUE IS ALSO DECIDED IN FAVOUR OF THE ASS ESSEE IN PREVIOUS YEARS THEREFORE GROUND NO.3 IS DISMISSED. 10. IN RESULT APPEAL OF THE REVENUE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25TH DAY OF N OVEMBER 2019 . SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 25/11/2019 PRITI YADAV SR. PS * 9 ITA NO. 2148/DEL/2015 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 25.11.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25 .11.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 25 .11.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS 25 .11.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 25 .11.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 25 .11.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 25 .11.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25 .11.2019 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK