ACIT Central circle 1(3), CHENNAI V. Shri Ramachandra Educational and Health Trust, CHENNAI

ITA 1061/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2815 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 28-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AR V SREENIVASANJCITD R
• Assessee Lawyers: S VIDYAC A
• Keywords: Charitable institution; Non-deduction of tax; TDS; Set aside
• Section: 143(3); 260A; 195; 201

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & S HRI S.JAYARAMAN , ACCOUNTANT MEMBER ./ I.T.A.NO.1061/CHNY/2018 / ASSESSMENT YEAR : 2009-10 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -1(3), CHENNAI-34. VS. M/S .SRI RAMACHNADRA EDUCTIONAL & HEALTH TRUST , 24,SIR CV RAMAN ROAD, ALWARPET,CHENNAI 600 018. [PAN AAATS 2283 D ] ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.AR.V.SREENIVASAN,JCIT,D.R !' /RESPONDENT BY : MS.S.VIDYA,C.A & / DATE OF HEARING : 03 - 09 - 201 9 & / DATE OF PRONOUNCEMENT : 03 - 09 - 201 9 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-18, CHENN AI IN ITA NO.93/15-16 DATED 10.12.2017 FOR THE ASSESSMEN T YEAR 2009-10. 2. MR.AR.V.SREENIVASAN REPRESENTED ON BEHALF OF THE REVENUE AND MS.S.VIDYA REPRESENTED ON BEHALF OF THE ASSESSEE. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS FO R ADJUDICATION. ITA NO.1061/CHNY/2018 :- 2 -: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS ON FACTS OF THE CASE AND IN LAW. . 2. THE ID. CIT(A) HAS ERRED IN DIRECTING THE ASSES SING OFFICER(AO) TO DELETE THE ADDITION OF RS.93,55,477/-MADE TOWARDS N ON DEDUCTION OF TAX FROM THE PAYMENT MADE FOR TECHNICAL KNOW-HOW TO M/S HARWARD MEDICAL INTERNATIONAL INC., IN THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 254 OF THE IT ACT IN THE ASSESSEE'S CASE FOR THE AY 2009- 10. 2.1 HAVING REGARD TO HIS OBSERVATION THAT INVOCATI ON OF THE PROVISIONS OF SEC.40(A)(IA) OF THE IT ACT IN THE ASSESSEE'S CASE IS NOT CORRECT, SINCE THE ASSESSEE IS ONLY A CHARITABLE TRUST, THE ID.CIT(A) OUGHT TO HAVE APPRECIATED THAT THE AO HAS NOT DISALLOWED THE PAYMENT OF RS.9 3,55,477/- MADE TO M/S HARWARD MEDICAL INTERNATIONAL INC., U/S.40(A)(IA) OF THE IT ACT BUT HAS ONLY HELD THAT THE SAID PAYMENT CANNOT BE TREATED AS APP LICATION OF INCOME FOR THE AY 2009-10 AS THE ASSESSEE HAD NOT FULFILLED I TS RESPONSIBILITIES AS REQUIRED UNDER SECTION 195 OF THE IT ACT. 2.2 THE ID. CIT(A) HAVING RELIED ON THE DECISION O F THE HON'BLE TRIBUNAL IN ITA NO. 914/MDS/2016 DT. 21.09.2016 FOR AY 2010-11 IN THE ASSESSEE'S OWN CASE, WHEREIN THE HON'BLE TRIBUNAL FOLLOWED THE DE CISION OF THE HON'BLE ITAT, MUMBAI IN JDIT(IT)- 3(1), MUMBAI VS WOCKHARDT HOSPITALS LTD IN ITA NO. 3610/MUM/2005 DATED 18.11.2011 ,OUGHT TO HAVE A PPRECIATED THAT THE BOTH THE SAID DECISIONS WERE NOT ACCEPTED AND THE A PPEALS FILED BY THE REVENUE U/S 260A OF THE IT ACT ARE PENDING BEFORE T HE RESPECTIVE HON 'BLE HIGH COURT. 2.3 THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT F OR THE A.Y 2009-10,THE HON'BLE ITAT, VIDE ITS ORDER IN ITA NO. 2281/MDS/2 012 DATED 11.07.2013, HAD ONLY DIRECTED THE AO TO EXAMINE THE MEMORANDUM OF AGREEMENT[MOA] ENTERED INTO BY THE ASSESSEE WITH M/S HARVARD MEDI CAL INTERNATIONAL INC [HMII] AND THE SERVICES RENDERED BY [HMII] AND PAYM ENTS MADE BY ASSESSEE AND TO DECIDE THE ISSUE AFRESH IN ACCORDAN CE WITH LAW AND HAS NOT HELD THAT THE ASSESSEE BEING A CHARITABLE TRUST, TH E TDS PROVISIONS ARE NOT APPLICABLE TO THE ASSESSEE'S CASE. ITA NO.1061/CHNY/2018 :- 3 -: 2.4 HAVING REGARD TO THE FACT THAT THE AO FOLLOWED THE DIRECTIONS OF THE HON'BLE ITAT FOR A.Y 2009-10 AND CONCLUDED THAT DE DUCTION OF TAX AS PER SEC.195 R.W.S 9(1)(VI) READ WITH THE EXPLANATION A PPEARING BELOW SUB SECTION (2) RAISE ON THE PAYMENT MADE BY THE ASSESS EE TRUST TO M/S HARVARD MEDICAL INTERNATIONAL INC AS PER MOA AND SINCE THE ASSESSEE HAD VIOLATED THE SAID PROVISIONS, SUCH PAYMENT CANNOT BE TREATED AS APPLICATION OF INCOME OF THE TRUST, THE LD.CIT(A) OUGHT TO HAVE UP HELD THE ACTION OF THE AO IN THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 254 OF THE IT ACT IN THE ASSESSEE'S CASE FOR THE AY 2009-10. 3. FOR THESE GROUNDS AND ANY OTHER GROUND INCLUDING AMENDMENT OF GROUNDS THAT MAY BE RAISED DURING THE COURSE OF THE APPEAL PROCEEDINGS, THE ORDER OF LEARNED CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. AT THE TIME OF HEARING, THE LD.AR SUBMITTED THA T ISSUE RAISED IN THIS APPEAL OF REVENUE WAS SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11 IN ITA NO.914/CHNY/2016 VIDE ORDER DATED 2 1.09.2016 WHEREIN IT HAS BEEN HELD BY THE TRIBUNAL FOLLOWING THE PRINCIP LES LAID DOWN BY THE MUMBAI TRIBUNAL IN THE CASE OF JDIT(IT)-3(1), MUMB AI VAS. WOCKHARDT HOSPITALS LTD IN ITA NO.3610/MUM/2005 DATED 18.11.2 011 WHEREIN IT HAS BEEN HELD THAT:- 5.5 WE FIND MERIT IN THE SUBMISSIONS OF THE LEA RNED AUTHORIZED REPRESENTATIVE. ON THE IDENTICAL SITUATION, AS POIN TED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE, THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE JDIT VS. WOCHHARDT HOSPITALS LTD., IN I TA NO.3610/MUM/2005 HAS HELD THE ISSUE IN FAVOUR OF T HE ASSESSEE. ITA NO.1061/CHNY/2018 :- 4 -: THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HER EIN BELOW FOR REFERENCE:- 29. THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 4/2/2005 OF CIT(A)-31, MUMBAI PASSED I N AN APPEAL AGAINST THE ORDER UNDER SECTION 195(2) OF THE ACT. WE HAVE ALREADY SEEN THAT WHL MADE PAYMENTS TO HARVARD MEDICAL INTERNATIONAL IN THE CASE OF. IN CONNECTION WITH THE SERVICES RENDERED BY THE LATER IN INDIA. M/ S. WHL APPLIED FOR ISSUE OF NIL DEDUCTION OF TAX AT SOURCE U/ S.195 OF THE ACT, ON THE GROUND THAT HARVARD MEDICAL INTERNATIONAL INC. WAS A NON- RESIDENT AND THAT PAYMENT BY M/S. WHL TO HARVARD ME DICAL INTERNATIONAL INC. WAS BUSINESS PROFITS AND SINCE H ARVARD MEDICAL INTERNATIONAL INC. DID NOT HAVE A PE IN IND IA THE RECEIPTS CANNOT BE BROUGHT TO TAX IN INDIA AND CONSEQUENTLY A CERTIFICATE OF NO DEDUCTION OF TAX A T SOURCE BEFORE MAKING PAYMENT TO HARVARD MEDICAL INTERNATIO NAL INC. SHOULD BE ISSUE. THE AO TREATED THE PAYMENT IN QUESTION AS ROYALTY AND FIS AND DIRECTED THE ASSESS EE TO DEDUCT TAX AT SOURCE TREATING 90%) OF THE PAYMENT A S ROYALTY AND 10% AS FIS. 30. ON APPEAL BY THE ASSESSEE THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER BUT HOWEVER HELD THAT ONLY 50% OF THE PAYMENT SHOULD BE TREATED AS FIS A ND TAX DEDUCTED AT SOURCE ACCORDINGLY. WE HAVE ALREADY SEE N WHILE DECIDING THE APPEAL ON HARVARD MEDICAL INTER NATIONAL INC. THAT THEY PAYMENTS BY M/S. WHL TO HARVARD MEDI CAL INTERNATIONAL INC. ARE BUSINESS PROFITS AND SINCE HARVARD MEDICAL INTERNATIONAL INC. DOES NOT HAVE A PE IN IN DIA THE SAME CANNOT BE BROUGHT TO TAX IN INDIA FOR THE REAS ONS STATED THEREIN. WE HOLD THAT M/S. WHL HAS NO OBLIG ATION TO DEDUCT TAX AT SOURCE ON THE PAYMENT MADE TO HARV ARD MEDICAL INTERNATIONAL INC. ACCORDINGLY, THIS APPEAL IS DISMISSED. IT IS FURTHER SUBMITTED THAT IT IS NOT DISPUTED ABO UT THE FACT THAT AS M/S HARVARD MEDICAL INTERNATIONAL INC., DID NOT HAVE PE RMANENT ESTABLISHMENT (P.E) IN INDIA, THERE WAS NO QUESTION OF ADDITION MADE TOWARDS NON-DEDUCTION OF TAX FROM THE PAYMENT MADE FOR TECHNICAL KNOW-HOW TO M/S HARVARD MEDICAL INTERNATIONAL INC. IT WAS SUBMITTED THAT LD.CIT(A) HAD FOLLOWED THE DECISION OF CO-ORDI NATE BENCH OF THIS ITA NO.1061/CHNY/2018 :- 5 -: TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.914/CHNY/2016 VIDE ORDER DATED 21.09.2016 REFERRED TO SUPRA WHEREIN HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. 5. IN REPLY, LD.DR STRONGLY RELIED ON THE ORDER OF ASSESSING OFFICER. IT WAS A PRAYER THAT THE ORDER OF LD.CIT(A) WAS LIA BLE TO BE REVERSED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS I T IS NOTICED THAT LD.CIT(A) HAS FOLLOWED THE DECISION OF CO-ORDI NATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.914/CHNY/2016 FOR ASSESSMENT YEAR 2010-11 REFERRED TO SUPRA AND NO DISTINGUISH F ACTS HAS BEEN BROUGHT OUT BY THE REVENUE FOR DISTINGUISHING THE SAID DECI SION, THE FINDINGS OF THE LD.CIT(A) STANDS CONFIRMED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 03 RD SEPTEMBER, 2019, AT CHENNAI. SD/- SD/- ( ) (S. JAYARAMAN) # /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) $ # / JUDICIAL MEMBER / CHENNAI * / DATED: 03 RD SEPTEMBER, 2019. K S SUNDARAM !,- .- / COPY TO: 1 . / APPELLANT 3. / () / CIT(A) 5. - !4 / DR 2. !' / RESPONDENT 4. / / CIT 6. / GF