Case Number: ITA 5803/DEL/2019
Appellant: JCIT(OSD) Circle-12(2), New Delhi
Respondent: Intertek India Pvt. Ltd., New Delhi
Assessment Year: 2013-14
Result: Appeal dismissed
Case Filed on: 2019-07-03
Order Type: Final Tribunal Order
Date of Order: 2022-09-29
Pronounced on: 2022-09-29
This appeal by the Revenue pertains to the assessment year 2013-14 and is directed against the order dated 30.04.2019, passed by the Commissioner of Income-tax (Appeals)-22, New Delhi, in the case of Intertek India Pvt. Ltd. The appeal was heard on 3rd August 2022 and pronounced on 29th September 2022 before the Income Tax Appellate Tribunal (ITAT), Delhi Bench “D”, New Delhi.
The appellant, JCIT(OSD) Circle-12(2), New Delhi, challenged the deletion of the penalty under Section 271E imposed on Intertek India Pvt. Ltd. The penalty was initially imposed for non-deduction of TDS on payments made for management services under Section 40(a)(i) of the Income Tax Act, 1961. Additionally, disallowances were made under Section 37 for the same payments and for delayed payment of employee contributions to PF and ESI.
The Revenue raised the following grounds of appeal:
The first ground relates to the disallowance of payments made for management services under Section 40(a)(i). The AO noted that the assessee had paid Rs. 4,00,78,616/- to its group entities outside India for management charges, of which Rs. 1,94,48,969/- was paid to Intertek Testing Services Hong Kong Limited with TDS deducted. However, TDS was not deducted for other payments.
The assessee contended that these payments were not subject to TDS under the DTAA with the respective countries (UK, USA, Singapore) as the services did not qualify as Fees for Technical Services (FTS) under the treaties. The CIT(A) agreed with the assessee, noting that the payments did not qualify as FTS under the applicable DTAA and thus were not liable for TDS under Section 195.
The tribunal upheld the CIT(A)’s decision, noting that the Revenue did not challenge similar decisions for other assessment years (2010-11, 2014-15). The tribunal found no valid reason to interfere with the CIT(A)’s findings that the payments for management services were not liable for TDS under Section 195.
The second ground pertains to the disallowance of management charges under Section 37. The CIT(A) had called for a remand report and additional evidence during the appellate proceedings to verify the expenses incurred by the assessee. The CIT(A) concluded that the expenses were for business purposes and were routine and recurring in nature, thus qualifying as revenue expenditure.
The tribunal upheld the CIT(A)’s decision, noting that the AO did not disallow these expenses in earlier or subsequent assessment years. The tribunal found no infirmity in the CIT(A)’s order, confirming that the expenses were rightly allowed as revenue expenditure.
The third ground concerns the disallowance for delayed payment of employee contributions to PF and ESI. The CIT(A) observed that these payments were made within the due date for filing the return of income under Section 139 and, following the Delhi High Court’s decision in CIT vs. AIMIL Ltd., held that there was no justification for the disallowance.
The tribunal found no reason to interfere with the CIT(A)’s order and dismissed this ground of appeal as well.
The tribunal dismissed the appeal filed by the Revenue, upholding the CIT(A)’s decision to delete the disallowances and penalty imposed under Sections 40(a)(i), 37, and for delayed payment of PF/ESI contributions.
Order Pronounced in Open Court on 29th September, 2022.
Signed:
G. S. Pannu, President
C. N. Prasad, Judicial Member
Dated: 29th September, 2022
Mehta
Copy Forwarded to:
Assistant Registrar, ITAT, New Delhi
JCIT(OSD) Circle-12(2) vs Intertek India Pvt. Ltd.: Penalty under Section 271E
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