Itta/283/2012 Of The Commissioner Of Income Tax-Iv v. Pramati Technologies Pvt Ltd

HON'BLE SRI JUSTICE GODA RAGHURAMANDHON'BLE SRI JUSTICE M.S.RAMACHANDRA RAO I.T.T.A.No.283 of 2012 JUDGMENT: (Per. Hon’ble Sri Justice Goda Raghuram) This appeal by the Revenue under Section 260-A ofthe Income Tax Act, 1961, directed against the order ofthe Income Tax Appellate Tribunal, Bench ‘A’, Hyderabad,dated 20.11.2009 in I.T.A No.1170/H/07, pertaining to theassessment year 2003-04. The respondent-assessee is a company engaged inthe business of development of computer softwareproducts. For the assessment year in question, it filed thereturn of income on 01.11.2003 showing a loss ofRs.6,14,67,240/-. The case was taken up for scrutiny andeventually by the assessment order dated 25.01.2006,the Assessing Officer inter alia disallowed sales promotionexpenses amounting to Rs.38,34,905/- and added thisamount to the income of the assessee, under Section 40(a) (i) of the Income Tax Act, 1961 (the Act) on the groundthat the payments were authorized by the Central Officelocated in India; the receipts due to rendering of suchprofessional services were accounted for in the centraloffice in India; and the payments made through banks inIndia by way of Demand Drafts purchased from a bank inIndia. The assessee’s appeal was allowed by the Commissioner of Income Tax (Appeals). Addition of thesales promotion expenses to the assessee’s income wasdeleted on a finding that the payments were made directlyby the branch office situated outside India and not byremittance through any Demand Draft from an IndianBank as noted by the Assessing Officer, in the order ofassessment. The C.I.T (Appeals) also took note of thecontention of the assessee that the Personal Relationsfirm situated in USA had no permanent establishment orany business connection in India and the entire servicesrendered by the said foreign firm were rendered outsideIndia. The Revenue’s appeal to the Tribunal was rejectedconcurring with the findings recorded by the C.I.T.(Appeals) and the facts found by the C.I.T (Appeals) foundconcurrence in the Tribunal order. The Tribunal reiteratedthat there is nothing on record to show that foreign agentshave any permanent establishment in India and thepayments were made directly by the branch office situatedoutside India. The Tribunal further observed that it was noteven the Revenue’s case before it that payments weremade from any office situated in India. The Tribunalconcluded therefore that the assessee is not required todeduct tax under Section 195 (1) of the Act and in thecircumstances disallowance made by the AssessingOfficer was not justified. In the above circumstances, we find no question oflaw much less a substantial question of law arising for consideration in this appeal. The appeal is dismissed at the stage of admissionafter hearing the learned Standing Counsel for theRevenue Sri J.V.Prasad. No order as to costs however. _____________________________ JUSTICE GODA RAGHURAM 18.09.2012Gsn _____________________________________ JUSTICE M.S.RAMACHANDRA RAO