M.Muthukumaran, CHENNAI V. ACIT, Tambaram

CO 136/CHNY/2015

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 1899 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 20-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 22-12-2015
• Court: TRIBUNAL
• Department Lawyers: A B KOLIJCITD R; K VISWANATHANC A
• Keywords: Permanent establishment

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHE NNAI , ! ' #! ' $ . %& ' () BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NOS.2117 & 2118/MDS./2015 ( / ASSESSMENT YEARS :2009-10 & 2012-13) & C.O NOS.136,137/MDS./2015 (ITA NOS.2117 & 2118/MDS./2015) ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-22, TAMBARAM,CHENNAI. VS. MR.M.MUTHUKUMARAN , 122, THIRUNEERMALAI ROAD, NAGALKENI, CHROMPET, CHENNAI 600 044. PAN AASPM 8467 D ( *+ / APPELLANT ) ( ,-*+ / RESPONDENT / CROSS OBJECTOR ) / APPELLANT BY : MR.A.B.KOLI,JCIT,D.R / RESPONDENT BY : MR.K.VISWANATHAN,C.A / DATE OF HEARING : 20.01.2016 /DATE OF PRONOUNCEMENT : .01.2016 . / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE REVENUE AND THE TWO CROSS OBJECTIONS BY THE ASSESSEE ARE DIRECTED AGAIN ST COMMON ITA NOS. 2117,2118/MDS/15 CO NOS.136,137/MDS./15 MR.M.MUTHUKUMARAN 2 ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 0, CHENNAI, DATED 10.09.2015 RELEVANT TO THE ASSESSMENT YEARS 2 009-10 AND 2012-13. 2.1 THE ONLY ISSUE RAISED BY THE REVENUE IN BOTH T HE APPEALS IS WITH REGARD TO DELETION OF ADDITION ON ACCOUNT OF COMMISSION PAID TO FOREIGN AGENT AT RS.10,69,985/- & RS.48,78,959/- FO R THE ASSESSMENT YEARS 2009-10 AND 2012-13 RESPECTIVELY. 2.2 THE ASSESSEE HAS FILED CROSS-OBJECTIONS IN SUP PORT OF THE IMPUGNED ORDER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE CLAIMED ABOVE PAYMENTS AS COMMISSION ON EXPORT SALES PAID TO M/S. BLUE OASIS INTL, HONG KONG FOR THE ABOVE ASSESSMENT YEARS. THESE AR E DISALLOWED BY THE ASSESSING OFFICER ON THE REASON THAT ASSESSE E HAD NOT DEDUCTED THE TDS AS ENVISAGED IN SEC.40(A)(I) OF TH E ACT READ WITH SECTION 195 OF THE ACT. ON APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT THE FOREIGN AGENT NOT CARRIED OUT HOST OF MARKETING AND REFERRAL SERVICE WHEREAS FOREIGN AGENT CARRIED ON ONLY REFERRAL SERVICE AND HE HAS GONE THROUGH THE T ERMS OF ITA NOS. 2117,2118/MDS/15 CO NOS.136,137/MDS./15 MR.M.MUTHUKUMARAN 3 AGREEMENTS WITH THE FOREIGN AGENTS AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. AGAINST THIS, THE REVENUE IS IN A PPEALS BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. BEFORE THE LD. CIT(A), THE ASSESSEE HAS FI LED A LETTER OF ENGAGEMENT WITH FOREIGN AGENTS WAS NOT MADE AVAILAB LE TO ASSESSING OFFICER FOR HIS COMMENTS. IN OUR OPINIO N, IT IS APPROPRIATE TO REMIT THE ISSUE BACK TO THE FILE OF ASSESSING OF FICER TO CONSIDER ALL THE DOCUMENTS WHATEVER ASSESSEE HAS FILED BEFORE TH E LD.CIT(A) FOR AFRESH EXAMINATION. ACCORDINGLY, WE ARE INCLINED TO REMIT THE ISSUE TO THE FILE OF THE LD. ASSESSING OFFICER WITH A DIRECT ION TO RE-CONSIDER THE ISSUE IN THE LIGHT OF ORDER OF THE TRIBUNAL IN THE CASE OF M/S.EURO LEDER FASHIONS LTD., IN ITA NO.1797/MDS./2015 VIDE ORDER DATED 16.10.2015 WHEREIN IT HAS BEEN HELD THAT:- 6. WE HAVE HEARD THE PARTIES AND PERUSED THE RECOR D. AT THE OUTSET, CERTAIN PROVISIONS OF THE ACT NEEDS TO BE LOOKED IN TO SECTION 40(A)(I) WHICH READS AS UNDER:- 40 NOT WITHSTANDING ............. (A) IN THE CASE OF ANY ASSESSEE ITA NOS. 2117,2118/MDS/15 CO NOS.136,137/MDS./15 MR.M.MUTHUKUMARAN 4 (I) ANY INTEREST (NOT BEING INTEREST ON A LOAN ISSU ED FOR PUBLIC SUBSCRIPTION BEFORE THE 1ST DAY OF APRIL, 1938) ROY ALTY, FEES FOR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER TH IS ACT, WHICH IS PAYABLE A. OUTSIDE INDIA B. IN INDIA TO A NON-RESIDENT, NOT BEING A COMPANY OR TO A FOREIGN COMPANY, ON WHICH TAX IS DEDUCTIBLE AT SOUR CE UNDER CHAPTER VIIB AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YE AR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESC RIBED UNDER SUB-SECTION (1) OF SECTION 200: 7. THE AFORESAID CLAUSE MAKES IT CLEAR THAT THE DI SALLOWANCE SHALL BE MADE IN CASE OF ANY PAYMENT MADE WHICH IS CHARGEABL E UNDER THIS ACT AND IS PAYABLE OUTSIDE INDIA OR IN INDIA TO A NON- RESI DENT NOT BEING A COMPANY OR TO A FOREIGN COMPANY ON WHICH TAX IS DEDUCTIBLE AT SOURCE. THEREFORE, THE FIRST CONDITION REQUIRED TO BE FULFILLED IS THE PAY MENT MUST BE CHARGEABLE UNDER THE ACT, THEREAFTER THE QUESTION OF DEDUCTION OF TAX WILL ARISE. SECTION 195 (1) OF THE ACT ALSO PRESCRIBES THAT TAX HAS TO BE DEDUCTED WHILE MAKING PAYMENT TO NON-RESIDENT WHICH IS CHARGEABLE UNDER T HE PROVISIONS OF THE ACT. THEREFORE, THE CONDITION PRECEDENT FOR DEDUCTI ON OF TAX IS THE INCOME MUST BE CHARGEABLE UNDER THE PROVISIONS OF THE ACT. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAS NOT PRODUCED THE AGR EEMENT ENTERED INTO BY THE ASSESSEE WITH FOREIGN AGENTS TO SHOW THAT TH EY WERE APPOINTED TO ACT AS COMMISSION AGENTS OUTSIDE INDIA IN THEIR RESPECT IVE COUNTRIES. THE AO HAS DISALLOWED COMMISSION PAYMENT U/S 40(A)(I) OF T HE ACT, SINCE, THERE WAS NO AGREEMENT TO SUGGEST THE PAYMENT OF SALES COMMIS SION. ITA NOS. 2117,2118/MDS/15 CO NOS.136,137/MDS./15 MR.M.MUTHUKUMARAN 5 8. AS SEEN FROM THE ORDER S OF THE LOWER AUTHORITIE S, THE ASSESSEE HAS NOT DISCHARGED THE BURDEN CAST UPON IT TO SHOW THE NATURE OF SERVICES RENDERED BY NON-RESIDENT AGENT. IF THERE ARE SERVI CES RENDERED BY NON- RESIDENTS, WHO HAVE NO PERMANENT ESTABLISHMENT IN I NDIA OR HAVE ANY BUSINESS CONNECTION IN INDIA, BY VIRTUE OF WHICH TH E PAYMENT OF COMMISSION ACCRUED OR AROSE IN INDIA THEN, IT IS EXEMPTED, IF THE ASSESSEE IS ABLE TO PROVE THAT THE SERVICES WERE RENDERED BY THOSE NON- RESIDENTS AT ABROAD. IN THE PRESENT CASE, THE ASSESSEE HAS NOT ESTABLISHED THE FACTS ON RECORD THAT THE NON-RESIDENT HAS RENDERED SERVICES AT ABROAD AN D THERE IS NO BUSINESS CONNECTION IN INDIA BY PRODUCING RELEVANT RECORDS, VIZ., EITHER AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THEM OR CORRESPON DENCE TOOK BETWEEN THE PARTIES. WITHOUT EXAMINING THESE DETAILS, WE A RE NOT IN A POSITION TO DECIDE THE NATURE OF SERVICES RENDERED BY THE NON-R ESIDENT AGENT. THEREFORE, IT IS APPROPRIATE TO REMIT THE ENTIRE IS SUE BACK TO THE FILE OF THE AO WITH DIRECTION TO THE ASSESSEE TO PROVE THAT IT WAS SALES COMMISSION TOWARDS PROCUREMENT OF ORDERS FROM ABROAD. ACCOR DINGLY, THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE AO FOR FRESH CO NSIDERATION AND THE AO IS DIRECTED TO MAKE NECESSARY ENQUIRY REGARDING THE NA TURE OF SERVICES RENDERED BY THE NON-RESIDENT AGENT AND THE PAYMENTS MADE THEREOF. WITH THESE OBSERVATIONS, THE APPEAL IS ALLOWED FOR STATI STICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. ACCORDINGLY, BOTH THE APPEALS FILED BY THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NOS. 2117,2118/MDS/15 CO NOS.136,137/MDS./15 MR.M.MUTHUKUMARAN 6 5. SINCE WE HAVE REMITTED THE ISSUE TO THE FILE OF THE A.O IN REVENUES APPEALS, THE CROSS OBJECTIONS FILED BY AS SESSEE HAVE BECOME INFRUCTUOUS AND ACCORDINGLY DISMISSED. 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND BOTH THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 29 TH OF JANUARY,2016 AT CHENNAI. SD/- SD /- ( ' #! ' $ . %& ) ( DUVVURU RL REDDY ) ) ( ( !' # $ ) ) %&'()*+(,-../(+01, JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 29 TH JANUARY,2016 . K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE