Sherla v. Ita.702.2017_25.Doc

IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J. INCOME TAX APPEAL NO.702 OF 2017 Pr. Commissioner of Income Tax - 8 … Appellant VsM/s.Reliance Communications Infrastructure … RespondentLtd. Mr.Suresh Kumar for the Appellant Mr.R.Murlidharan with Mr.B.G. Yewale I/b M/s.Rajesh Shah & Co.for the Respondent CORAM: AKIL KURESHI & S.J. KATHAWALLA, JJ. DATED: JULY 22, 2019 P.C.: 1.This appeal is filed challenging the judgment of the IncomeTax Appellate Tribunal dated 23.3.2016. The following questionsare presented for our consideration : i)Whether on the facts and circumstances of the caseand in law the ITAT was justified in deleting the disallowancemade by the AO of Rs.1,96,91,62,889/- under section.40a(ia) of the Act, without appreciating the fact that thediscount allowed by the assessee to the distributors inrespect of starter packs and recharge coupons for its prepaid Whether on the facts and circumstances of the case services amounted to payment by the assessee ofcommission or brokerage within the meaning of Section194H of the Act as the distributors are acting as agents of theassessee? ii)Whether on the facts and in the circumstances of thecase and in law, the Tribunal was justified in confirming theCIT(A)’s decision wherein deleting the disallowance ofRs.8,65,06,770/- u/s. 14A read with Rule 8D relying on thedecision of Bombay High Court in the case of Godrej andBoyce Manufacturing Co. Ltd. Vs. DCIT (328 ITR 81) whichhas been challenged by the revenue before the Hon’bleSupreme Court? iii) Whether on the facts and in the circumstances of thecase and in law, the Tribunal erred in deleting thedisallowance of Rs.8,65,06,770/- u/s. 14A for the purpose ofcomputing book profit u/s 115JB of the Act, ignoring the factthat the decision of disallowance has not been accepted bythe department? 2.The respondent assessee is a company registered under theCompanies Act. The issues arise in relation to the Assessment Year 2007-2008. The first question pertains to disallowance undersection 40a(i) of the Income Tax Act, 1961 (for short, ‘the act’) onthe ground that according to the Assessing Officer, the assesseehad deducted tax at source in terms of section 194H of the Actwhile making certain payments. The Tribunal in the impugnedjudgment allowed the assessee’s appeal on two grounds. Firstly,that the order under section 201 of the Act was passed holding theassessment to be in default of deduction of tax at source. Inappeal, the Commissioner had allowed the assessee’s appealagainst which the Revenue had not carried the issue further. Evenon merits, the Tribunal was of the view that the payment was madeon principal to principal basis and was not a payment of a principalto the agent. 3.Having heard the learned Counsel for the parties and havingperused the documents on record, we do not find any error in theview of the Tribunal. The Tribunal, as noted, besides holding thatthe Commissioner’s order setting aside the order passed u/s 201was not carried in appeal, had also independently examined thenature of the transaction and come to the conclusion that when thetransaction was between two persons on principal to principal basis, deduction of tax at source as per section 194H of the Act,would not be made since the payment was not for commission orbrokerage. 4.Coming to second and third questions, the same emanatesfrom the disallowance sought to be made by Revenue undersection 14A of the Act. The Tribunal in the impugned judgement,came to the conclusion that the assessee had not earned anyexempt income and there is, therefore, no question ofdisallowance under section 14A that would arise. The Tribunal hadrelied on the decision of the Delhi High Court in the case ofCheminvest Ltd. vs. CIT, reported in 378 ITR 33 (Delhi). basis, deduction of tax at source as per section 194H of the Act,would not be made since the payment was not for commission orbrokerage. 4.Coming to second and third questions, the same emanatesfrom the disallowance sought to be made by Revenue undersection 14A of the Act. The Tribunal in the impugned judgement,came to the conclusion that the assessee had not earned anyexempt income and there is, therefore, no question ofdisallowance under section 14A that would arise. The Tribunal hadrelied on the decision of the Delhi High Court in the case ofCheminvest Ltd. vs. CIT, reported in 378 ITR 33 (Delhi). 5.In view of such facts, we find no error in the view of theTribunal. The decision of the Delhi High Court in the case ofCheminvest (supra) has been followed by this Court onnumerous occasions. 6.In the result, no question of law arises. Income Tax Appeal isdismissed. (S.J. KATHAWALLA, J.) (AKIL KURESHI, J.)