ITO 2(1)(2), MUMBAI V. CITY CAT OVERSEAS CHEMICALS LTD, MUMBAI

ITA 1096/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5285 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 16-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HIMANSHU SHARMA
• Assessee Lawyers: ANIL PRABHU
• Keywords: Business income; Permanent establishment; Advance ruling

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAM LAL NEGI, JM I.T.A. NO. 1096/MUM/2017 ( ASSESSMENT YEAR: 2013 - 14 ) THE ITO - 2(1)(2), 543, AAYAKAR BHAVAN, 5 TH FLOOR, M. K. MARG, MUMBAI - 400 020 VS. M/S. CITY CAT OVERSE AS CHEMICALS LTD. CITY CAT HOUSE, 29, POLICE COURT, LANE, FORT, MUMBAI - 400 001 PAN/GIR NO. AAACC 8123 B ( REVENUE ) : ( ASSESSEE ) C.O NO. 224/MUM/2018 (ARISING OUT OF ITA NO. 1096/MUM/2017) (ASSESSMENT YEAR: 2013 - 14 ) M/S. CITY CAT OVERSE AS CHEMICALS LTD. MUMBAI - 400 001 VS. THE ITO - 2(1)(2), MUMBAI - 400 020 ( ASSESSEE ) : ( REVENUE ) REVENUE BY : SHRI HIMANSHU SHARMA ASSESSEE BY : SHRI ANIL PRABHU DATE OF HEARING : 13.08.2018 DATE OF PRONOUNCEMENT : 23.10 .2018 O R D E R PER S HAMIM YAHY A, A. M.: THIS A PPEAL BY THE REVENUE AND THE CROSS OBJECTION (CO FOR SHORT) BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER OF THE LEAR N ED COMMISSIONER OF INCOME TAX (APPEALS) - 3, MUMBAI (LD.CIT(A) FOR SHORT) DATED 15.11.2016 AND PERTAINS TO THE A SSESSMENT YEAR (A.Y.) 2013 - 14. 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE MADE U/S. 40(A)(I) OF THE I. T. 2 ITA NO. 1096/M/2017 & CO NO. 224/M/2018 INCOME TAX ACT, 1961 OF RS.67,19,913/ - MAD E ON ACCOUNT OF FOREIGN AGENT COMMISSION WITHOUT APPRECIATING THAT THE INCOME HAS ACCRUED AND ARISEN IN INDIA AND WAS LIABLE FOR TDS. 2. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR THE ASSESSEE HAS CLAIMED EXPENSES TOWARDS FOREIGN AGENT COMMISSION OF RS.67,19,913/ - . ON ASSESSING OFFICERS (A.O.) QUERY AS TO WHY TDS HAS NOT BEEN DEDUCTED, THE ASSESSEE STATED THAT THE COMMISSION IS NOT FEE FOR TECHNICAL SERVICE U/S. 9(1)(VII) OF THE ACT AND THE SAME BEING IN THE NATURE OF THE BUSINESS INCOME OF THE RECIPIENT IS ALSO NOT TAXABLE IN INDIA VIDE SECTION 9(1) IN CASE OF ABSENCE OF BUSINESS COMMUNICATION IN IN DIA. FURTHERMORE, IT WAS SUBMITTED THAT THE ITAT IN ASSESSEES OWN CASE HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. HOWEVER, THE A.O. REJECTED THIS CONTENTION ON THE GROUND THAT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION AND THE MATTER IS BEFORE THE HON'BLE BOMBAY HIGH COURT. 4. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) NOTED THAT FOR A.YS. 2010 - 11 AND 2011 - 12, THE LD. CIT(A)S ORDER WAS UPHELD BY THE ITAT AND IT WAS HELD THAT NO TDS WAS REQUIRED TO BE DEDUCTED ON COMMISSION PAID TO THE AGENT. ACC ORDINGLY , THE LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 5. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) PLAC ED RELIANCE UPON THE DECISION OF THE AUTHORITY 3 ITA NO. 1096/M/2017 & CO NO. 224/M/2018 FOR ADVANCE RULINGS (INCOME TAX), NEW DELHI (IN AAR NO. 983 - 984 OF 2010 VIDE ORDER DATED 22.02.2012). 7. UPON CAREFUL CONSIDERATION, WE NOTE THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE I TAT IN ASSESSEES OWN CASE FOR EARLIER YEARS IN ITA NO. 5854/MUM/2013 FOR A.Y. 2010 - 11 VIDE ORDER DATED 07.08.2015, THE TRIBUNAL HAS OBSERVED AS UNDER: 6. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, WE FIND THAT THE A.O . HAS ACCEPTED THAT THE PAYMENT MADE BY THE ASSESSEE IS ON ACCOUNT OF COMMISSION AND COMPENSATION TOT EH FOREIGN AGENT AND THEREFORE IT IS NOT THE CASE OF THE A.O. THAT THE PAYMENT IN QUESTION IS EITHER FEE FOR TECHNICAL SERVICE OR ROYALTY WHICH COULD BE T AXED IN INDIA AS PER PROVISIONS OF SEC. 9(1) OF THE INCOME TAX ACT, 1961. WE FURTHER NOTE THAT THE A.O. HAS SUPPORTED HIS FINDING BY CITING THE REASON THAT COMMISSION INCOME ARISES IN INDIA BECAUSE RIGHT TO RECEIVE COMMISSION ARISES WHEN THE ORDER IS EXECU TED BY THE ASSESSEE IN INDIA. IN OUR VIEW, THIS LOGIC AND CONTENTION OF THE A.O. IS ABSOLUTELY ERRONEOUS AND BASED ON MISINTERPRETATION OF THE TERM ACCRUE OR ARISE IN INDIA AS PER THE PROVISIONS OF SEC. 9(1) OF THE ACT. THE COMMISSION IS PAID TO FOREIGN AGENT FOR SERVICES RENDERED BY THE AGENT OUTSIDE INDIA AND THE AGENT HAS NO BUSINESS LINK OR SOURCE OF INCOME IN INDIA. THEREFORE, IN ABSENCE OF ANY BUSINESS CONNECTION OR SOURCE OF INCOME AND CONSEQUENTLY ANY PERMANENT ESTABLISHMENT IN INDIA, THE SAID IN COME IN THE HANDS OF THE FOREIGN AGENT IS NOT TAXABLE IN INDIA. 8. THEREAFTER, THE TRIBUNAL HAS REFERRED TO THE ITAT DECISION IN THE CASE OF ACIT VS. VILAS N. TAMHANKAR (IN ITA NO. 4522/MUM/2013 VIDE ORDER DATED 21.11.2014) AND REPRODUCED THE ORDER THERE IN AND HAD CONCLUDED THAT FOLLOWING THE ABOVE DECISION OF THE CO - ORDINATE BENCH, NO IN FIRMITY W AS FOUND IN THE ORDER OF THE LD. CIT(A). WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE HAD ALSO FOLLOWED THE SAME IN OTHER YEARS. IT IS NOT THE CASE THAT THE HON'BLE JURISDICTIONAL HIGH COURT HAS REVERSED THE 4 ITA NO. 1096/M/2017 & CO NO. 224/M/2018 ITAT DECISION. IN VIEW OF THE ITAT DECISION IN ASSESSEES OWN CASE WHICH HAS NOT BEEN REVERSED BY THE HON'BLE BOMBAY HIGH COURT YET, THE DECISION OF AAR REFERRED BY THE LD. DR IS NOT APPLICABLE. ACCORDINGL Y, FOLLOWING THE PRECEDENT IN ASSESSEES OWN CASE, WE UPHOLD THE ORDER OF THE LD. CIT(A). 9. THE ASSESSEES CROSS OBJECTION IS ONLY SUPPORTIVE OF THE ORDER OF THE LD. CIT(A). SINCE WE HAVE ALREADY UPHELD THE ORDER OF THE LD. CIT(A) IN REVENUES APPEAL, T HIS C.O. HAS BECOME INFRUCTUOUS AND HENCE THE SAME IS DISMISSED AS INFRUCTUOUS. 10. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED AND THE ASSESSEES CROSS OBJECTION IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 23.10.2018 SD/ - SD/ - ( RAM LAL NEGI ) (S HAMIM YAHYA) J UDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI ; DATED : 23.10.2018 ROSHANI , SR. PS COPY OF THE ORDE R FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD F ILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI