Vision Tree Ventures Pvt. Ltd. ( Formerly known as Vision Tree Consultancy Pvt. Ltd.), Ahmedabad V. The Income Tax Officer, Ward-4(1)(4), Ahmedabad

CO 7/AHD/2016

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2290 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 19-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KHANJAN CHHAYA
• Keywords: Services rendered outside India

Judgement Text

CO NO. 7/AHD/2016 I.T.A. NO.3322/AHD/15 ASSESSMENT YEAR: 2011 - 12 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S S GODARA JM ] I.T.A. NO. 3322/AHD/15 ASSESSMENT YEAR: 2011 - 12 INCOME TAX OFFICER WARD 4(1)(4), AHMEDABAD ............. .APPELLANT VS. VISION TREE CO NSULTANCY PVT LTD .. . . RESPONDENT 1005, PINNACLE BUSINESS PARK, CORPORATE ROAD NEAR S G HIGHWAY, AHMEDABAD 380055 [PAN: AACCV3373N] CO NO. 7/AHD/2016 ARISING OUT OF I.T.A. NO. 3322/AHD/15 ASSESSMENT YEAR: 2011 - 12 VISION TREE CONSULTANCY PVT LTD .CROSS - OBJECTOR 1005, PINNACLE BUSINESS PARK, CORPORATE ROAD NEAR S G HIGHWAY, AHMEDABAD 380055 [PAN: AACCV3373N] VS. INCOME TAX OFFICER WARD 4(1)(4), AHMEDABAD .. . . RESPONDENT APPEARANCES BY: K MADHUSUDAN , FOR THE APPELLANT KHANJAN CH HAYA , FOR RESPONDENT AND CROSS - OBJECTOR DATE OF CONCLUDING THE HEARING : JANUARY 28 , 2016 DATE OF PRONOUNC ING THE ORDER : APRIL 22 ND , 2016 O R D E R PER PRAMOD KUMAR , AM : 1. THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 30 TH SEPTEMBER 2015 PASSED BY THE CIT(A) IN THE MATTER OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2011 - 12. GRIEVANCE OF THE ASSESSING OFFICER, IN SHORT, CO NO. 7/AHD/2016 I.T.A. NO.3322/AHD/15 ASSESSMENT YEAR: 2011 - 12 PAGE 2 OF 4 IS THAT THE CIT(A) ERRED IN DELETING THE IMPUGNED PENALTY OF RS 10,16,400 IMPOSED ON THE ASSESSEE UNDER SECTION 271(1)(C) FOR THIS ASSESSMENT YEAR. 2. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RESOURCE MANAGEMENT IN INFORMATION TECHNOLOGY CENTRE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS MADE SUB CONTRACT PAYMENTS FOR DEVELOPMENT OF SOFTWARE , AGGREGATING TO RS 32,89,327, WITHOUT ANY DEDUCTION OF TAX AT SOURCE . THE CONTENTION OF THE ASSESSEE WAS THAT SINC E THESE PAYMENTS ARE RENDERED FOR THE SERVICES RENDERED OUTSIDE INDIA, ARE UTILIZED IN BUSINESS OUTSIDE INDIA AND THE SERVICE PROVIDER DOES NOT HAVE ANY BUSINESS CONNECTION IN INDIA, THESE SERVICES CANNOT BE BROUGHT TO TAX IN INDIA, AND SINCE THESE SERVICE S ARE NOT TAXABLE IN INDIA, TAX WAS NOT REQUIRED TO BE DEDUCTED AT SOURCE. IT WAS FURTHER CONTENDED THAT SINCE THE INCOME EMBEDDED IN THESE PAYMENTS WAS NOT TAXABLE IN INDIA, IN VIEW OF HON BLE SUPREME COURT S JUDGMENT IN THE CASE OF G E INDIA TECHNOLOGY C ENTRE PVT LTD VS CIT [(2010) 327 ITR 436 (SC)], THE ASSESSEE DID NOT HAVE ANY TAX WITHHOLDING OBLIGATIONS. THE ASSESSEE, IN HIS WRITTEN SUBMISSIONS, ALSO STATED THAT THE COMPANY EXPERIENCED SHORTFALL OF ADEQUATE MANPOWER AND OTHER NECESSARY RESOURCES TO PROVIDE SAP CONSULTANCY SERVICES AND SERVICES PERTAINING TO SAP IMPLEMENTATION AND CUSTOMIZATION TO ITS FOREIGN CUSTOMERS WHEREAS ADEQUATE MANPOWER SUPPLY AND RESOURCES WERE AVAILABLE WITH OTHER PARTIES AT THE ASSIGNMENT AT THE ENGAGEMENT LOCATION AND THA T IT WAS IN THIS BACKGROUND THAT THE WORK WAS SUBCONTRACTED AT THE OVERSEAS LOCATIONS. THE ASSESSING OFFICER, HOWEVER, DISALLOWED RS 32,89,327 UNDER SECTION 40(A)(I). THE MATTER DID NOT REST AT THAT. THE ASSESSING OFFICER ALSO DISREGARDED SOMEWHAT SIMILAR SUBMISSIONS AND IMPOSED THE PENALTY FOR CONCEALMENT OF INCOME, UNDER SECTION 271(1)(C). AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO ACCEPTED EXPLANATION OF THE ASSESSEE AS A REASONABLE EXPLANATION AND DELETED THE IMPUGNED PENALT Y OF RS 10,16,400. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL ON RECORD AND DUL Y CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. CO NO. 7/AHD/2016 I.T.A. NO.3322/AHD/15 ASSESSMENT YEAR: 2011 - 12 PAGE 3 OF 4 4. WE HAVE NOTED THAT THE ASSESSEE DID NOT CHALLENGE THE QUANTUM DISALLOWANCE UNDER SECTION 40(A)(I) AS IT WAS, POST EFFECT OF FOREIGN TAX CREDITS UNDER SECTION 90, REVENUE NEUTRAL. AS AGAINST THE GROSS TAX OF RS 11,13,996, THE TAX RELIEF UNDER SECTION 90 WAS RS 16,06,745. GIVEN THIS FACTUAL SCENARIO, THE MERE FACT THAT THE ASSESSEE DID NOT PURSUE THE MATTER IN APPEAL CANNOT BE PUT AGAINST THE ASSESSEE. WE HAVE CONSIDERED THE EXPLANATION OF THE ASSESSEE, AND WHILE WE REFRAIN FROM EXAMINING ITS CORRECTNESS ON MERITS, WE ARE OF THE CONSIDERED VIEW THAT IT IS AN ACCEPTABLE EXPLANATION OF THE ASSESSEE SO FAR AS PENALTY PROCEEDINGS ARE CONCERNED. AS THE CORE BUSINESS ACTIVITY WAS PERFORMED OUTSIDE INDIA, THE ASSESSEE HAD A REASONABLE BASIS, WHETHER ACCEPTABLE IN LAW OR NOT, FOR M AKING A CLAIM THAT SINCE THE BUSINESS WAS CARRIED OUT OUTSIDE INDIA, THE SERVICES PROVIDED IN THE COURSE OF SUCH A BUSINESS DID NOT LEAD TO TAXABILITY IN INDIA. UNDER THESE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, IT WAS INDEED NOT A FIT CASE FOR CONCEALMENT PENALTY UNDER SECTION 271(1)(C). LEARNED CIT(A) WAS QUITE JUSTIFIED IN GRANTING RELIEF ON THAT POINT, AND WE APPROVE HIS ACTION. WE, THEREFORE, CONFIRM THE RELIEF GRANTED BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 5. THE APPEAL OF THE ASSESSIN G OFFICER IS THUS DISMISSED. 6. AS REGARDS THE CO FILED BY THE ASSESSEE, IT MERELY SUPPORTS THE ORDER OF THE CIT(A) AND DOES NOT CALL FOR ANY ADJUDICATION ON MERITS. IT IS THUS DISMISSED AS INFRUCTUOUS. 7. IN THE RESULT, THE APPEAL AS ALSO THE CROSS OBJ ECTION ARE DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 22 ND DAY OF APRIL, 2016. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 22 ND DAY OF APRIL , 2016. CO NO. 7/AHD/2016 I.T.A. NO.3322/AHD/15 ASSESSMENT YEAR: 2011 - 12 PAGE 4 OF 4 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD