Case Law Details
DCIT Vs M/s. Teleradiology Solutions P. Ltd. (ITAT Bangalore)
The learned Counsel for the assessee has contended that it is a business arrangement between the assessee and the consultants/doctors. If the assessee does not pay the licence fee on behalf of the doctors, he has to compensate the doctors by making additional payment for the services. The arrangement made by the appellant and the consultant/doctors could not be examined by the AO keeping aside the business need. Therefore, the CIT(A) has rightly allowed the claim of the assessee.
Having carefully examined the order of the authorities below in the light of rival submissions, we find that it is an arrangement between the appellant and the consultant doctors with regard to remunerations and the licence fees to be paid. If the appellant takes the responsibilities of making the payment of licence fee on behalf of the Doctors and paid a lesser remuneration, this arrangement should not have been doubted by the Revenue authorities unless and until the arrangement is held to be in contravention to the provisions of law.
FULL TEXT OF THE ITAT JUDGMENT
These appeals are preferred by the Revenue against the respective orders of the CIT(A) on common grounds and for the sake of reference we extract the grounds raised in ITA No. 1867/Bang/20 17 as under:
1. The order of the learned CIT(A) is opposed to law and facts of the case. This being an “composite order” is covered under the exclusions mentioned in Para 5 of the CBDT Circular No. 21/2015 dtd, 10-12-2015, and hence the monetary limits provided in para 3 of the aforesaid circular are not applicable to this appeal.
2. “On the facts and in the circumstances of the case, the CIT(A) erred in directing the AO to exclude telecommunication and insurance charges only if they were recovered and included in the export turnover, when the provisions of the Act clearly stipulates that the export turnover does not include freight, telecommunication charges and insurance attributable to the delivery of computer software outside India.
3. “On the facts and in the circumstances of the case, the CIT(A) erred in directing the AO to factually verify and satisfy himself that the telecommunication charges and insurance were not recovered and included in the export turnover, while not appreciating the fact that the AO noticed from the replies submitted by the assessee that the assessee while computing income under section 1 0A, has adopted Export Turnover, which is inclusive of Telecommunication Expenses and Insurance expenses.
4. “On the facts and in the circumstances of the case, the CIT(A) erred in following the judgements of this Honourable Tribunal in the case of M/s Tata Elxsi Ltd. Vs CIT in ITA Nos.398, 1074 & 1410/B/2012 dtd.20-03-2015, and setting aside the issue back to the file of the Assessing Officer, when the same has not become final since the same has not been accepted by the Department and further appeals are pending before the Hon’ble Karnataka High Court”?
5. “On the facts and in the circumstances of the case, the CIT(A) erred in not appreciating the fact that, there being no contractual liability, and since the assessee remitted consultancy charges to consultant doctors abroad, there was no license fees to be paid to doctors and such expense to be claimed as expenditure by the assessee, which was rightly disallowed by the AO”.
6. “On the facts and circumstances of the case, the CIT(A) was not justified in law in holding that the expenditure incurred towards telecommunication and other expenses attributable to delivery of computer software for providing technical services outside India to be excluded both from export turnover and total turnover for the purpose of computation of deduction u/s 10A of the Act, whereas such exclusion is permitted to arrive at the export turnover only as per the definitions given in sec. 10A of the Act and total turnover has not been defined in the section.”
7. “On the facts and in the circumstances of the case, the CIT(A) has erred in law in following the judgments of jurisdictional High Court in the case of CIT Vs. Tata Elxsi Ltd., and setting aside the issue back to the file of the Assessing Officer, which has not become final since same has not been accepted by the Department and SEPs are pending before the Hon ‘ble Apex Court”?
8. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored.
9. The appellant craves leave to add, alter, amend and/or delete an),of the grounds mentioned above.
2. Except ground No. 5, all grounds relates to an issue of exclusion of telecommunication and insurance charges from the total turnover and the export turnover. The CIT(A) had adjudicated these issues following the judgment of the jurisdictional High Court in the case of Tata Elxsi Ltd., Vs. CIT 349 ITR 98 in which it has been categorically held that if any expenditure is excluded from the export turnover, the same should be excluded from the total turnover. Since the CIT(A) has adjudicated the issue in the light of the judgment of the Hon’ble High Court, we find no infirmity in the order of the CIT(A). Accordingly, we confirm the same.
3. Ground No. 5 in both the appeals relate to the disallowance of licence fees paid to Consultant/Doctors abroad. The facts borne out from the record in this regard are that the AO had disallowed licence fees paid by the assessee having observed that the licence fees paid and claimed as an expenditure by the appellant company ought to have been borne by the Consultant/Doctors abroad. Therefore, it was not necessary for the appellant to meet the expenditure on account of licence fees.
4. Assessee preferred an appeal before the CIT(A) with the submission that the criteria for allowing the deductions claimed was only whether the expenditure was laid out for the purpose of the appellant’s business. Section 37(1) of the Act allows the deduction of any residual business expenditure which was in the nature of a revenue expenditure, and was incurred not in contravention of the provisions of law and was laid out wholly and exclusively for the purpose of the assesee’s business. Therefore, the same may be allowed.
The CIT(A) re-examined the claim of the assessee and being convinced with the explanations of the assessee, deleted the addition. Now the Revenue is before us and placed heavy reliance upon the order of the AO with the submission that licence fee is a liability of the Doctors and not of the assessee, therefore the assessee cannot claim the licence fee as revenue expenditure.
5. The learned Counsel for the assessee has contended that it is a business arrangement between the assessee and the consultants/doctors. If the assessee does not pay the licence fee on behalf of the doctors, he has to compensate the doctors by making additional payment for the services. The arrangement made by the appellant and the consultant/doctors could not be examined by the AO keeping aside the business need. Therefore, the CIT(A) has rightly allowed the claim of the assessee.
6. Having carefully examined the order of the authorities below in the light of rival submissions, we find that it is an arrangement between the appellant and the consultant doctors with regard to remunerations and the licence fees to be paid. If the appellant takes the responsibilities of making the payment of licence fee on behalf of the Doctors and paid a lesser remuneration, this arrangement should not have been doubted by the Revenue authorities unless and until the arrangement is held to be in contravention to the provisions of law. We therefore find no infirmity in the order of the CIT(A) who has rightly allowed the claim of the assessee. Accordingly, we confirm the order of the CIT(A).
7. In the result, both the appeals of the Revenue are dismissed.
Pronounced in the open court on 20th July, 2018.
