ACIT, CHENNAI V. M/s. MPS Ltd. (formerly Macmillan India Ltd.), CHENNAI

ITA 105/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77235 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 09-04-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 10-01-2014
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHE NNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 105/MDS/2014 / ASSESSMENT YEAR : 2005-06 ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-IV(3), CHENNAI ( !% /APPELLANT) VS M/S.MPS LTD., FORMERLY KNOWN AS MACMILLAN INDIA LIMITED, RR TOWER-4, SUPER-A, 16 & 17, TVK INDUSTRIAL ESTATE, GUINDY, CHENNAI-600 032 [PAN: AAACM 2423 L] ( &'!% /RESPONDENT) / APPELLANT BY : SHRI T.N.BETGERI, JCIT / RESPONDENT BY : SHRI S.P.CHIDAMBARAM, CA., / DATE OF HEARING : 09-04-2014 ! / DATE OF PRONOUNCEMENT : 23-04-2014 #( / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-IV, CHEN NAI DATED 30-09-2013 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 5-06. THE I.T.A. NO. 105/MDS/2014 2 ONLY ISSUE RAISED IN THE APPEAL BY THE REVENUE IS N ON-DEDUCTION OF TAX AT SOURCE BY THE ASSESSEE ON PAYMENT OF OVERSEA S COMMISSION. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF PRINTING, PUBLISHING AND SALE OF BOOKS PHOTO TYPESE TTING, INFORMATION PROCESSING ETC. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY.2005-06 ON 31-10-2005 DECLARING ITS TOTA L INCOME AS ` 3,71,77,758/-. THE CASE OF THE ASSESSEE WAS SELECT ED FOR SCRUTINY AND NOTICE U/S.143(2) OF THE INCOME TAX AC T, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) WAS ISSUED TO THE A SSESSEE. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DT.31-12-20 08 MADE CERTAIN ADDITIONS/DIS-ALLOWANCES AND ASSESSED THE I NCOME AT ` 4,32,03,721/-. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE U/S.148 TO THE ASSESSEE ON 30-03-2012 ON THE GROUND THAT THE ASSESSEE HAS NOT DEDUCTED TAX ON PAYMENT OF COMMISS ION TO FOREIGN AGENTS. THE ASSESSEE FILED OBJECTIONS ON T HE RE-OPENING OF THE ASSESSMENT BEYOND THE PERIOD OF SIX YEARS. HOW EVER, ASSESSING OFFICER REJECTED THE OBJECTIONS RAISED BY THE ASSESSEE ON THE ISSUE OF RE-OPENING AND DIS-ALLOWED THE COMM ISSION PAID TO THE FOREIGN AGENTS WITHOUT DEDUCTION OF TAX AT SOUR CE U/S.40(A)(I) OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT THE A SSESSEE HAD I.T.A. NO. 105/MDS/2014 3 CLAIMED EXPENSES OF ` 5,77,90,724/- TOWARDS COMMISSION TO FOREIGN AGENTS WITHOUT DEDUCTION OF TAX AT SOURCE. THE ASS ESSING OFFICER WAS OF THE VIEW THAT THE SAID PAYMENTS FALL WITHIN THE PROVISIONS OF SECTION 9(1)(VII) THEREFORE, THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE. THE ASSESSING OFFICER FURTHER HELD THAT THE ASSESSEE SHOULD HAVE OBTAINED CERTIFICATE U/S.195(2 ) FOR NON- DEDUCTION OF TAX ON PAYMENT OF OVERSEAS COMMISSION. AGGRIEVED AGAINST THE ASSESSMENT ORDER DATED 01-03- 2013 PASSED U/S.143(3) R.W.S.147 OF THE ACT, THE ASSESSE E PREFERRED AN APPEAL BEFORE THE CIT(APPEALS). THE CIT(APPEALS) V IDE IMPUGNED ORDER UPHELD THE VALIDITY OF RE-ASSESSMENT PROCEEDI NGS BUT ALLOWED THE APPEAL OF THE ASSESSEE ON MERITS. THE CIT(APPE ALS) FOLLOWED THE JUDGMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF GE TECHNOLOGY CENTRE P. LTD. VS. CIT REPORTED AS 327 ITR 456 AND DELETED THE ADDITION MADE U/S.40(A)(IA) OF THE ACT. NOW, THE REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL ASSA ILING THE FINDINGS OF CIT(APPEALS). 3. SHRI T.N.BETGERI, APPEARING ON BEHALF OF THE DEP ARTMENT REITERATED THE GROUNDS RAISED IN THE APPEAL AND PRA YED FOR SETTING ASIDE THE FINDINGS OF CIT(APPEALS) ON THE ISSUE OF DELETING I.T.A. NO. 105/MDS/2014 4 DIS-ALLOWANCE MADE U/S.40(A)(I) OF THE ACT. THE LD .DR SUPPORTED THE ORDER OF ASSESSING OFFICER. 4. ON THE OTHER HAND, SHRI S.P.CHIDAMBARAM, APPEARI NG ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE PAYMENTS WERE MADE TO NON-RESIDENT AGENTS FOR PROCURING ORDERS FROM THE O VERSEAS CUSTOMERS AND WAREHOUSING OF THE GOODS SENT ABROAD BY THE ASSESSEE. THE OVERSEAS AGENTS WERE DELIVERING THE GOODS TO THE CUSTOMERS AND ENSURED THE COLLECTION OF PAYMENTS FR OM THE CUSTOMERS OUTSIDE INDIA. THE NON-RESIDENT AGENTS W ERE NOT PROVIDING ANY TECHNICAL SERVICES AND THEY HAVE NO P ERMANENT ESTABLISHMENT [PE] IN INDIA. THE LD.AR FURTHER SUB MITTED THAT THE ISSUE IN HAND HAD COME UP BEFORE THE CO-ORDINATE BE NCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AYS.2005-06 & 2006-07 IN ITA NOS.425 & 426/MDS/2011 DECIDED ON 31-01-2012. THE TRIBUNAL HAD ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE LD.AR PLACED ON RECORD A COPY OF THE ORDER OF THE C O-ORDINATE BENCH OF THE TRIBUNAL IN ITA NOS.425 & 426/MDS/2011 (SUPRA). 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BEL OW AS WELL AS THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA NOS.425 & I.T.A. NO. 105/MDS/2014 5 426/MDS/2011 (SUPRA) PERUSED. THE CIT(APPEALS) IN THE IMPUGNED ORDER HAS CATEGORICALLY OBSERVED: I. THE AGENT IS NON-RESIDENT; II. THE NON-RESIDENT AGENT IS OPERATING ITS BUSINES S ACTIVITIES OUTSIDE INDIA; III. THE COMMISSION PAID RELATE TO MOSTLY MARKETING AND BUSINESS PROMOTION SERVICES PROVIDED OUTSIDE INDIA BESIDES FOLLOW UP ON PAYMENTS WITH CLIENTS ABROAD; IV. THE NON-RESIDENT AGENT DO NOT HAVE ANY PERMANEN T ESTABLISHMENT OR PERMANENT BUSINESS PLACE IN INDIA; V. THE COMMISSION WAS REMITTED TO THE NON-RESIDENT DIRECTLY OUTSIDE INDIA. THE LD.DR REPRESENTING THE DEPARTMENT HAS NOT BEEN ABLE TO CONTROVERT THE ABOVE FINDINGS OF THE CIT(APPEALS). A PERUSAL OF THE ORDER OF CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA N OS.425 & 426/MDS/2011 TITLED DCIT VS. M/S.MACMILLAN INDIA LTD., DECIDED ON 31-01-2012 (SUPRA) SHOWS THAT THE IDENTICAL ISSUE IN THE CASE OF THE ASSESSEE HAS BEEN DECIDED BY THE TRIBUNAL IN FA VOUR OF THE ASSESSEE. MOREOVER, THE HONBLE SUPREME COURT OF I NDIA IN THE CASE OF GE TECHNOLOGY CENTRE P. LTD. VS. CIT (SUPRA) HAS HELD THAT MERE REMITTANCE TO NON-RESIDENTS DOES NOT AUTO MATICALLY MAKE I.T.A. NO. 105/MDS/2014 6 THE PERSON LIABLE TO DEDUCT TAX AT SOURCE. THE DUT Y TO DEDUCT TAX AT SOURCE ARISES ONLY IF REMITTANCE CONTAINS WHOLLY OR PARTLY TAXABLE INCOME IN INDIA. IN VIEW OF THE WELL SETTLED LAW A ND THE FACTS OF THE CASE, THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED ON WEDNESDAY, THE 23 RD APRIL, 2014 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VIKAS AWAS THY) ( . . . ) ( ! ) '#$ / VICE PRESIDENT % &' / JUDICIAL MEMBER (% /CHENNAI, )& /DATED: 23 RD APRIL, 2014 TNMM &* +,-, /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. ./0 /CIT(A) 4. . /CIT 5. ,12 3 /DR 6. 245 /GF