$ 01 *IN HIGH COURT OF DELHI AT NEW DELHI Date of decision: 16th October, 2014 + ITA 437/2014 COMMISSIONER OF INCOME TAX-IV ..... Appellant Through Mr. Kamal Sawhney, Sr. Standing Counsel. Versus M/S HIMALYA INTERNATIONAL LTD. ..... Respondent Through CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE JAYANT NATH SANJIV KHANNA, J. present appeal by Revenue relates to assessment year 2005-06 and challenge is to deletion of addition of Rs.4,07,92,581/- out of addition of Rs.4,33,78,000/- made by Assessing Officer. As findings recorded by Income Tax Appellate Tribunal ( Tribunal, for short), affirming decision of first appellate authority-Commissioner of Income Tax (Appeals) [C.I.T (Appeals)], are factual in nature, challenge is on ground that conclusion formed in impugned order dated 14th March, 2014, is ITA 437/2014 Page 1 of 8 perverse. 2. We have gone through assessment order. respondent- assessee was engaged in business of manufacture, food processing and infotech. respondent-assessee had exported processed vegetable products to United States of America (USA) and had entered into agreement with M/s. Global Reliance Inc., USA. Copy of said agreement was placed on record before Assessing Officer, who observed it to be self-serving document on ground that agreement was neither registered nor executed on stamp paper. M/s Global Reliance Inc., USA was closely associated with assessee. He also observed that assessee in return of income had shown business expenses amounting to USD 343347 equivalent to Rs.1,51,07,247/-, but in support of claim had only filed certificate of auditor from USA and had furnished and relied upon confirmations/certificates given by M/s. Global Reliance Inc. Assessing Officer, on examination of profit and loss account, noticed that assessee had claimed following amounts as USA office expenses :- (in Rs.) 1. Ocean freight 12881000 2. Duties 4385000 3. Warehousing expenses 1183000 4. Road freight USA 9822000 5. Selling and administrative expenses 15107000 Total 43378000 ITA 437/2014 Page 2 of 8 Assessing Officer held that these expenses were in nature of post sale expenses and, therefore, did not pertain to assessee. Evidence placed on record by assessee to show that expenses were actually incurred, were not satisfactory or substantive. Thus, aforesaid expenditure of Rs 4,33,78000/- was disallowed. 3. C.I.T (Appeals) substantially reversed said findings after noticing and recording factual matrix in detail. He observed that assessee had appointed M/s. Global Reliance Inc., New Jersy, USA, as consignee agent, who were dealing with exports made by assessee from India. He examined documentations placed on record and referred to remand report submitted by Assessing Officer. Name, address and other details of M/s Global Reliance Inc., company registered and incorporated in USA were placed on record. On question of ocean freight, it was stated that same was verified by APEDA, which had granted subsidy of Rs.3,60,7000/- towards ocean freight. custom duty, it was stated, was paid to custom department in USA and stood proved from documents. It is noticeable that C.I.T (Appeals) has referred to custom duty receipt, which was placed on record with name of payer as M/s. Global Reliance Inc . warehousing, selling and administrative expenses were actually incurred by consignee. In respect of selling, administrative and other incidental expenses, it was stated that ITA 437/2014 Page 3 of 8 M/s. Global Reliance Inc was paid at rate of 9.05% of total sales made in USA as per agreement. road transport receipts, in which carrier s name was recorded as M/s. Global Reliance Inc , were relied upon. With regard to warehousing expenses, C.I.T(Appeals) observed that some of invoices, were in name of M/s. Global Reliance Inc and some were in name of Transatlantic Marketing ( Associate of M/s Global Reliance Inc.). documents duly and affirmatively supported assessee s claim. 4. C.I.T(Appeals) elucidated that respondent-assessee had 100% export oriented factory at Paonta Sahib, Himachal Pradesh. entire production from said factory was exported to USA. Exports were made in sealed containers from factory. net realisable value, after deduction of all expenses incurred, was declared. In support of exports, Forms ARE-I, filed by assessee, with customs and excise authorities were placed on record. said forms mentioned notional value of goods, which was estimated realizable value after deduction of expenses relating to ocean freight, road transport, custom duty, warehousing expenses etc. Reference was made to remand report dated 28th October, 2010, regarding export sales. justification for entering into contract with M/s. Global Reliance Inc., as stated, was that latter ITA 437/2014 Page 4 of 8 was functioning and operating in USA and respondent-assessee had availed of their services. As per agreement, assessee had to pay 9.05% of total sales made by consignee. With regard to certificate of Certified Public Accountant (CPA), it was held that same was called for by assessing officer and on his insistence certificate of one Stanley Osur, CPA of USA was furnished to show expenses incurred by M/s. Global Reliance Inc. during relevant period. Break-up of said expenses were duly mentioned in certificate. 5. aforesaid findings have been accepted by Tribunal. 6. Keeping in view aforesaid position, this court vide order dated 1st September, 2014, brought to notice of Revenue that findings recorded by appellate authorities including Tribunal appeared to be factual in nature. It was highlighted that respondent-assessee had filed documents in form of invoices, bills etc., which were produced and accepted. Counsel for appellant- Revenue had taken time to examine matter. 7. We find that Revenue has not placed on record invoices, bills etc. It has not indicated and highlighted as to why and for what reason, factual finding is perverse. 8. Having examined reasons given in assessment order and factual position and detailed discussion by C.I.T(Appeals), ITA 437/2014 Page 5 of 8 affirmed by Tribunal, which has been noticed above, we do not think that findings recorded by appellate authorities can be treated and regarded as perverse. We also record that C.I.T(Appeals) had sustained addition of Rs.25,85,419/- out of addition of Rs.4,33,78,000/- made by assessing officer, noticing that assessee had not been able to produce bills and invoices for said amount. said addition has been sustained by Tribunal. C.I.T(Appeals) has also referred to fact that in preceding assessment years, assessing officer did not dispute identical agreements and had accepted them. 9. During course of hearing, learned counsel for appellant- revenue drew our attention to ground (b) raised in present appeal to effect that assessee had not deducted TDS on payments, which as per version of assessee, were contractual payments. In other words, learned counsel for appellant-Revenue submits that Section 40(a)(ia) of Act would be applicable. We notice that aforesaid section and provision was neither invoked by Assessing Officer nor by first appellate authority. However, we find that before Tribunal, Departmental Representative did raise contention that TDS provisions would be applicable. aforesaid contention was rejected by Tribunal, relying upon decision of Supreme Court in case of GE India Technology Centre P. Ltd. Vs. ITA 437/2014 Page 6 of 8 Commissioner of Income Tax, (2010) 327 ITR 456 (SC), on ground that M/s Global Reliance Inc. was not liable to pay tax under provisions of Act and, therefore, assessee was not liable to deduct tax at source. It appears that Departmental Representative had invoked and relied on Section 195 of Act. Before us revenue, as per grounds of appeal, seeks to rely upon Section 194C of Act. It is clear that application of Section 194C of Act was not pleaded before Tribunal. 10. As far as Section 195 is concerned, same would not be applicable as it is apparent that M/s. Global Reliance Inc. did not have any business operations in India and they were functioning and operating in USA. From order of Tribunal, it does not appear that Revenue had relied upon deeming provisions under Section 9 of Act to hold that M/s. Global Reliance Inc. was covered and should be taxed in India in respect of said income and, therefore, TDS under Section 195 of Act should have been deducted. Moreover, specific sub-section which could be applicable was not stated and adverted to. Possibly reliance was placed on sub- clause (i) to section 9(1), relating to business connection. Even in grounds of appeal before us, no reliance has been placed on provisions of Section 9 of Act. 11. In these circumstances, we are not inclined to issue notice in ITA 437/2014 Page 7 of 8 present appeal and same is dismissed. SANJIV KHANNA, J. JAYANT NATH, J. OCTOBER 16, 2014 NA ITA 437/2014 Page 8 of 8 Commissioner of Income Tax-IV v. M/s. Himalya International Ltd