Consultancy charges paid for introduction of client is not FTS

Hemera India Pvt. Ltd Vs DCIT (ITAT Delhi)

ITAT held that once the revenue admitted that they were consultancy charges paid for introduction of client then that would fall in the definition of payments made to intermediary or liaison agents for channelizing, arranging or soliciting work order. There is no finding whatsoever that any inquiry was made by the Ld. Tax Authorities below as to what was the nature of agreement between the assessee and the foreign entity in terms to find out if the foreign entity was extending any technical know-how or expertise in the field of procurement of business or any other purpose, on a permanent basis. Thus, the finding arrived by the Ld. CIT(A) are liable to be reversed and it is held that the nature of transaction between the assessee and the foreign entity was not of providing any technical service but was a payment in the nature of a normal business payment to a intermediary.

FULL TEXT OF THE ORDER OF ITAT DELHI

The assessee has come in appeal against order dated 29.01.2019 in appeal no. 120/18-19/CIT(A)-22, New Delhi for the assessment year 2012­13 passed by Commissioner of Income Tax (Appeals)-22, New Delhi (hereinafter referred to as the ‘First Appellate Authority’ or in short ‘Ld. F.A.A.’) in appeal before it against order dated 23.12.2016 u/s 143(3) of the Income Tax Act, 1961 passed by DCIT, Circle 11(1), New Delhi ( herein after referred to as ‘Ld. Assessing officer or in short Ld. AO’).

2. The facts in brief are the assessee the appellant had filed his Income Tax Return for the year under reference declaring total income at Rs. 44,57,430/- on 30.11.2012. Assessee claims that during the assessment proceedings, all the relevant information and documents called from time to time by the learned AO were filed with the department. However, learned AO observed that assessee had debited Rs. 32,02,446/- under the head Consultancy fee in P & L Account on which no TDS was deducted at the time of making payment. In response thereto, assessee had submitted the reply, however AO did not accept the contention of the assessee and made addition of Rs. 32,02,446/- u/s 40(a)(ia) of the Act treating the same in the nature of “ Fee for technical services”. Further, learned AO had given credit of TDS of only Rs. 23,04,688/- instead of Rs. 37,09,355/ claimed by the assessee in ITR form without giving any reason or basis for doing the same.

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