CENTURY ENKA LTD. AS SUCCESSORS TO RAJASHREE POLYFIL LTD, MUMBAI V. ITO (TDS) CEN -I, MUMBAI

CO 52/MUM/2000

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6008 (ITAT-MUMBAI)
• Duration Of Justice: 10 year(s) 11 month(s) 30 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-05-2011
• Assessment Year: 1997-1998
• Appeal Filed On: 26-05-2000
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H G BUCH
• Keywords: Double taxation relief
• Section: 154; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH ( A.M ) CROSS-OBJECTION NO.52/MUM/2000 IN ITA NO.3091/MUM/1997 (ASSESSMENT YEAR: 1997-98) CENTURY ENKA LTD., AS SUCCESSORS TO RAJASHREE POLYFIL LTD., 7-C, BHAKTAWAR, 229, NARIMAN POINT, MUMBAI-400021 PAN: 35-106-CQ-3473 BMY/AC. C.C 1 INCOME TAX OFFICER (TDS) CENTRAL-I, 6 TH FLOOR, OLD CGO BUILDING ANNEXE, M.K.ROAD, MUMBAI-400020. APPELLANT V/S RESPONDENT CROSS-OBJECTOR BY : SHRI H.G.BUC H RESPONDENT BY : SHRI PAWAN V ED O R D E R PER D.K.AGARWAL (JM) THIS CROSS-OBJECTION FILED BY THE ASSESSEE IS DIRE CTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONE R OF INCOME TAX (A) DATED 18.2.1997 READ WITH ORDER DATE D 9.4.1997 PASSED UNDER SECTION 154 OF THE INCOME TAX ACT, 1961 (THE ACT). 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT I N THIS CASE, THE AO VIDE ORDER DATED 22.11.1996 PASSED U NDER SECTION 195(2) OF THE ACT AS UNDER : CO NO.52/MUM/2000 IN ITA NO.3091/MUM/1997 (ASSESSMENT YEAR: 1997-98) 2 ORDER U/S 195(2) OF THE IT ACT, 1961 THE ASSESSEE COMPANY VIDE LETTER DATED 21.11.1996 H AS STATED THAT THEY HAVE TO REMIT AN AMOUNT OF DM 8,01,082.71 TO M/S ZIMMER AG, GERMANY TOWARDS SUPERVISION & TECHNICAL ASSISTANCE FEE AS PER AGREEMENT DATED 25.2.94. THE ASSESSEE STATES THAT THIS REMITTANCE IS TAXABLE AT 20% AS PER DTAA WITH GERMANY. ANY INCIDENTAL EXPENSES TO BE PAYABLE BY T HE ASSESSEE VIZ. AIR TICKET FARE, BOARDING & LODGING, LOCAL TRAVEL ETC, IN CONNECTION WITH THE AGREEMENT ARE ALSO PART OF THE FEES PAYABLE FOR THE DETAILED REASONS MENTIONED IN MY ORDERS U/S 195(2) ON EARLIER OCCASI ONS IN THE ASSESSEES CASE. ACCORDINGLY, THE ASSESSEE COMPANY IS DIRECTED TO DEDUCT TAX ON THIS AMOUNT A LSO AND PAY THE SAME TO GOVT. A/C AS PROVIDED UNDER LA W. SD/ (MRS. A.A.DESHPANDE) ITO (TDS), CENT-I, MUMBAI 3. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME T AX (A) FOLLOWING THE APPELLATE ORDER DATED 31.12.1996 IN THE ASSESSEES OWN CASE EXAMINED THE DETAILS OF INCIDEN TAL EXPENSES AND OBSERVED THAT THE AMOUNT OF INCIDENTA L EXPENSES INCURRED BY THE APPELLANT COMPANY WHICH COULD BE TREATED AS PART OF TECHNICAL SERVICES FEES FOR DEDUCTION OF TAX AT SOURCE IS WORKED OUT AS UNDER : 1 THE AMOUNT SPENT ON FOREIGN TRAVEL OF TECHNICIANS AS PER DETAILS GIVEN ON PAGE 3 OF THE PAPER BOOK RS.1,09,598/- 2 OUT OF POCKET EXPENSES IN RESPECT OF ALL THE TECHNICIANS AS PER DETAILS GIVEN ON PAGE 3 OF THE PAPER BOOK RS.92,730/- RS.2,02,328/- CO NO.52/MUM/2000 IN ITA NO.3091/MUM/1997 (ASSESSMENT YEAR: 1997-98) 3 ACCORDINGLY HELD THAT THE AO WAS JUSTIFIED IN DI RECTING THE TDS ONLY IN RESPECT OF EXPENDITURE TO THE EXTENT O F RS.2,02,328/- AND DIRECTED THE AO TO COMPUTE THE RESULTANT RELIEF. SUBSEQUENTLY, THE LEARNED COMMISSIONER OF INCOME TAX (A) VIDE HIS ORDER DATED 9.4.1997 PASSED UNDER SECTION 154 OF THE ACT HAS REVISED THE AMOUNT OF EXPENSES AS UNDER:- AMOUNT SPENT ON FOREIGN RS.5,16 ,695/- TRAVEL OF TECHNICIANS OUT OF POCKET EXPENSES IN RS.1,8 6,780 /- RESPECT OF THE TECHNICIANS TOTAL RS.7,03,475/- 4. BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A) THE REVENUE HAS FIL ED APPEAL AND THE ASSESSEE HAS ALSO FILED CROSS-OBJECT ION BEFORE THE TRIBUNAL. HOWEVER, THE APPEAL FILED BY THE REVENUE IN THE ITO (TDS), CENTRAL-I V/S RAJASHREE POLYFIL LTD. IN ITA NO.3091/MUM/1997 (AY-1997-98) HAS BEEN DECIDED BY THE TRIBUNAL VIDE ORDER DATED 21.3.200 3 IN FAVOUR OF THE ASSESSEE FOLLOWING CONSISTENT VIEW OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.3401 TO 3403/MUM/1996 AND 4881, 4882 AND 4896/ MUM/1996 ORD ER DATED 9.1.2003. CO NO.52/MUM/2000 IN ITA NO.3091/MUM/1997 (ASSESSMENT YEAR: 1997-98) 4 5. IN THE PRESENT CROSS-OBJECTION, THE ASSESSEE HA S RAISED THE FOLLOWING GROUNDS : I.1 THE COMMISSIONER OF INCOME TAX (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN TREATING THE FOL LOWING AMOUNTS AS PART OF THE TECHNICAL SERVICES FEES FOR THE PURPOSES OF DEDUCTION OF TAX SOURCES: AMOUNT SPENT ON FOREIGN RS.5,16 ,695/ TRAVEL OF TECHNICIANS OUT OF POCKET EXPENSES IN RS.1,8 6,780 /- RESPECT OF THE TECHNICIANS T OTAL RS.7,03,475/- I.2 HE OUGHT TO HAVE HELD THAT THE AFORESAID AMOUNT S WERE NOT TECHNICAL SERVICES FEES AND WERE NOT LIABL E TO BE SUBJECTED TO DEDUCTION OF TAX AT SOURCE. I.3 THE CROSS-OBJECTOR PRAYS FOR A DIRECTION THAT THE AFORESAID AMOUNTS DO NOT FORM PART OF THE TECHNICAL SERVICES FEES AND ARE NOT LIABLE TO SUFFER DEDUCTIO N OF TAX AT SOURCE. 6. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE IS COVERED IN FAVO UR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE AS SESSEES OWN CASE IN M/S RAJASHREE POLYFIL LTD V/S THE ITO (TDS), CENTRAL-I IN ITA NO.1604,1605/MUM/1997 FOR THE ASSE SSMENT YEAR 1997-98 ORDER DATED 6.10.2003 WHEREIN ON THE SIMILAR ISSUE, THE TRIBUNAL FOLLOWING ITS EARLIER ORDER D ATED 9.1.2003 (SUPRA) HAS ALLOWED THE APPEAL OF THE ASSESSEE. H E FURTHER SUBMITS THAT THE TRIBUNAL AGAIN IN ASSESSEES OWN CASE IN RAJASHREE POLYFIL LTD V/S INCOME TAX OFFICER (TDS) , CENTRAL- I IN ITA NO.1491/MUM/1998 FOR THE ASSESSMENT YEAR 1998-99 CO NO.52/MUM/2000 IN ITA NO.3091/MUM/1997 (ASSESSMENT YEAR: 1997-98) 5 ORDER DATED 30.4.2003 HAS AGAIN FOLLOWED THE SIMIL AR ORDER OF THE TRIBUNAL DATED 9.1.2003 AND ALLOWED THE CLAI M OF THE ASSESSEE. HE ALSO PLACED ON RECORD THE COPY OF THE SAID ORDER OF THE TRIBUNAL. 7. ON THE OTHER HAND, THE LEARNED D.R. SUPPORTS TH E ORDER OF THE AO AND THE LEARNED COMMISSIONER OF IN COME TAX (A). 8. HAVING CAREFULLY HEARD THE SUBMISSIONS OF RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE F IND MERITS IN THE PLEA OF THE LEARNED COUNSEL FOR THE ASSESSEE . ON THE DISPUTE AS TO WHETHER OR NOT THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE FROM OUT OF THE PAYMENT MADE BY THE A SSESSEE TO THE FOREIGN TECHNICIANS IN INDIA FOR THE EXPENDI TURE INCURRED BY THEM IN RELATION OF THEIR TRAVEL AND OU T OF POCKET EXPENSES INCLUDING BOARDING EXPENSES IT HAS BEEN H ELD BY THE TRIBUNAL VIDE AFORESAID ORDERS THAT THE SAME SH OULD NOT BE CONSIDERED TO COMPUTE THE LIABILITY TO DEDUCT T AX AT SOURCE. RESPECTFULLY FOLLOWING THE CONSISTENT VIE W OF THE TRIBUNAL WE ALLOW THE GROUNDS RAISED BY THE ASSESSE E IN FAVOUR OF THE ASSESSEE. CO NO.52/MUM/2000 IN ITA NO.3091/MUM/1997 (ASSESSMENT YEAR: 1997-98) 6 9. IN THE RESULT, THE CROSS-OBJECTION FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25TH MAY,201 1. SD SD (RAJENDRA SINGH ) (D.K.A GARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 25 TH MAY, 2011 SRL:19511 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILED. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI