DCIT, CHENNAI V. AVT Natural Products Ltd., CHENNAI

ITA 1105/CHNY/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8064 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 29-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS JT
• Assessee Lawyers: T BANUSEKAR
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI , ! ' # $' # % . &' , ( ! )* BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I T.A. NO. 1105/MDS/2014 / ASSESSMENT YEAR :2009-10 DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-1(1), CHENNAI. VS. AVT NATURAL PRODUCTS LTD. NO.64, RUKMANI LAKSHMIPATHY SALAI, EGMORE, CHENNAI 600 008 [PAN: AAACA 3171B] ( +, /APPELLANT ) ( -.+, / RESPONDENT ) / APPELLANT BY : SHRI SHIVA SRINIVAS, JT. CIT / RESPONDENT BY : SHRI T.BANUSEKAR, CA / DATE OF HEARING : 29.12.2016 /DATE OF PRONOUNCEMENT : 25.01.2017 / / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (A)(C)-II DATED 24.01.20 14 (CIT(A)(C) FOR SHORT) PASSED UNDER SECTION 143(3) OF THE INCOME TA X ACT, 1961 [ACT IN SHORT], FOR THE ASSESSMENT YEAR (AY) 2009-10 VIDE O RDER DATED 27.12.2011. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1105 1105 1105 1105/M /M/M /MDS DSDS DS/ // /2014 2014 2014 2014 2 2. THE REVENUE HAS RAISED TWO EFFECTIVE GROUNDS VIZ . 2.1) THE CIT(A) ERRED IN DELETING THE DISALLOWANCE U/S. 40(A)(I) IN RESPECT OF PAYMENT OF FOREIGN SALES COMMISSION WITH OUT DEDUCTION OF TAX AT SOURCE. 3.1) THE CIT(A)ERRED IN ALLOWING DEPRECIATION AT 6 0% AS AGAINST THE RESTRICTION OF THE SAME BY THE ASSESSING OFFICER AT 15%. 3. GROUND NO.2.1 IS THAT THE CIT(A) ERRED IN DELETI NG THE DISALLOWANCE U/S. 40(A)(I) IN RESPECT OF PAYMENT OF FOREIGN SALE S COMMISSION WITHOUT DEDUCTION OF TAX SOURCE. 4. FACTS OF CASE ARE THAT THE ASSESSEE MADE A PAYME NT OF RS. 51,55,493/- FOR THE SERVICE RENDERED OUTSIDE INDIA TO A PARTY WHICH IS NON RESIDENT. THE SAID PAYMENT TO BE MADE PARTIES FOR RUNNING THE SERVICES WITH REGARD TO THE MANAGING THE SALES AFFAIRS OF THE ASS ESSEE COMPANY OUTSIDE INDIA. ACCORDING TO ASSESSING OFFICER, THE PAYMENT MADE FOR THAT PURPOSE IS WITH REGARD TO RUNNING MANAGERIAL SERVICES OUTSIDE INDIA AND WHICH IS BUSINESS FOR TECHNICAL SERVICES, WHICH WOULD CLEARL Y FALL UNDER A EXPLANATION 2 OF S. 9(1)(VII) OF THE I.T ACT SINCE THE ASSESSEE HAS NOT DEDUCT TDS ON THE ABOVE PAYMENT MADE TO A VARIOUS PARTIES THE ASSESSI NG OFFICER DISALLOWED THE SAME BY INVOKING THE S. 40(A)(I) OF THE ACT. O N APPEAL THE CIT(A) DELETED THE SAID DECISION BY PLACING ON JUDGMENT OF SUPREME COURT IN THE CASE OF G.E. INDIA TECHNOLOGY CENTRE (P) LTD. V. CIT 327 ITR 456 (SC) AND ALSO THE CBDT CIRCULAR NOS. 23 DATED 23.07.1969, 16 3 DATED 29.05.1975 AND 786 DATED 07.02.2000 VIDE CIRCULAR NO.7/2009 DA TED 22.10.2009 AND I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1105 1105 1105 1105/M /M/M /MDS DSDS DS/ // /2014 2014 2014 2014 3 OBSERVING THAT THE PROVISION OF EXPLANATION 2 TO S. 9(1)(VII) IS NOT APPLICABLE. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY IDENTICAL ISSUE CAME FOR CONSIDERATION B EFORE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. FAIZAN SHOES (P) LTD. [2014] 367 ITR 155 (MAD) WHEREIN HELD THAT WHERE THE ASSESSEE SIMPLY PAID A COMMISSION SIMPLIFIER TO NON RESIDENT AGENT OUTSIDE INDIA FOR PROCURING EXPO RT ORDERS FROM OVERSEAS BUYERS AND THE NON RESIDENT AGENT DID NOT COVERED A NY TECHNICAL SERVICES FOR THE PURPOSES OF RUNNING BUSINESSES OF ASSESSEE IN I NDIA, ASSESSEE WERE NOT LIABLE TO DEDUCT TDS OF SUCH COMMISSION PAYMENT AND PROVISO TO S. 40(A)(I) CANNOT BE APPLIES. 6. SAME VIEW WAS TAKEN BY TRIBUNAL IN THE CASE OF ACIT V. SHIVA TEXYARN LTD. IN ITA NO.2231/MAD/2014 FOR THE AY 2010-11 DATED 11.12.2014. BEING SO IN OUR OPINION THE PAYMENT MA DE BY ASSESSEE TO NON RESIDENT FOR RENDERING SERVICES RELATING TO THE SAL ES AT OUTSIDE INDIA CANNOT BE SAID TO BE FEES FOR TECHNICAL SERVICES AND IT DO ES NOT FALLS UNDER THE PURVIEW OF EXPLANATION 2 OF S. 9(1)(VII) OF THE I.T . ACT. ACCORDINGLY WE ARE INCLINED TO CONFIRM THE ORDER OF CIT(A) ON THIS ISS UE. THIS GROUND OF THE APPEAL BY REVENUE IS REJECTED. 7. GROUND NO.3.1 IS THAT THE CIT(A) ERRED IN ALLOWI NG DEPRECIATION AT 60% AS AGAINST THE RESTRICTION OF THE SAME BY THE A.O A T 15%, IN OUR OPINION THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1105 1105 1105 1105/M /M/M /MDS DSDS DS/ // /2014 2014 2014 2014 4 ABOVE ISSUE SQUARELY COVERED BY THE JUDGMENT OF DEL HI HIGH COURT IN THE CASE OF CIT V. ORIENT CERAMICS & INDUSTRIES LTD. [2013] 358 ITR 49 (DEL) WHEREIN HELD THAT THE ASSESSEE ENTITLED FOR DEPRECI ATION OF UPSS 60 PER CENT INSTEAD OF 25 PER CENT ALLOWED BY ASSESSING OFFICER . 8. FURTHER IN THE CASE OF CIT V. BSES YAMUNA POWERS LTD. [2013] 358 ITR 47 (DEL) REITERATED THAT THE COMPUTER ACCESSORI ES AND PERIPHERALS CANNOT BE USED WITHOUT COMPUTER. AS THEY ARE PART OF COMPUTER SYSTEM, THEY ARE ENTITLE TO DEPRECIATION AT HIGHER RATE OF 60 PER CENT. IN VIEW OF THE ABOVE JUDGMENT OF DELHI HIGH COURT, WE ARE INCLINED TO HELD THAT UPS TO BE CONSIDERED AS INTEGRAL PART OF COMPUTER SYSTEM HENC E ENTITLE TO HIGHER RATE OF DEPRECIATION AT 60 PER CENT. ACCORDINGLY WE ARE INCLINED TO CONFIRM THE ORDER OF CIT(A) ON THIS APPEAL. THE GROUND OF THE REVENUE IS REJECTED. 9. THE REVENUE ALSO RAISED THE ADDITIONAL GROUND TH AT CIT(A) FAILED TO APPRECIATE THE NATURE OF SERVICES RENDERED VIZ. SAM PLE ANALYSIS FOR WHICH A SUM OF RS. 23,54,984/- WAS PAID WITH SQUARELY CONST ITUTE FEES FOR TECHNICAL SERVICES. THE CIT(A) ERRED IN GRANTING RELIEF FOR ALL THE PAYMENTS WITHOUT TDS BY INVOKING MAKE AVAILABLE CLAUSE WITHOUT EXA MINING EACH TRANSACTION. THE LD. DR PRAYED BEFORE US FOR ADMIS SION OF ADDITIONAL GROUND AND SUBMITTED THAT THE CIT(A) GIVEN A RELIEF TO THE ASSESSEE WITHOUT ANY DISCUSSION ON THE ISSUE AND HE PRAYED THAT THE ISSU E MAY BE REMITTED TO THE CIT(A) TO GIVE FINDINGS ON THE ABOVE ISSUE. THE LD . AR ALSO CONCEDED THAT THE ISSUE MAY BE REMITTED TO CIT(A) FOR FRESH. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1105 1105 1105 1105/M /M/M /MDS DSDS DS/ // /2014 2014 2014 2014 5 10. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE O PINION THAT SINCE THE CIT(A) NOT DEALT THE ISSUE IN PARTICULAR AND PASSED THE ORDER ON THE THIS ISSUE IN SUMMARY MANNER. HENCE, WE ARE INCLINED TO REMIT THE ISSUE IN DISPUTE RAISED IN ADDITION GROUND BY THE REVENUE TO THE FILE OF CIT(A) FOR HIS FRESH CONSIDERATION. IT IS NEEDLESS TO SAY THAT CI T(A) HAS TO DECIDE THE ISSUE AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE . THIS GROUND BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 25 TH JANUARY, 2017 AT CHENNAI. SD/ - SD/ - (DUVVURU RL REDDY) JUDICIAL MEMBER (CHANDRA POOJARI) ACCOUNTANT MEMBER CHENNAI, DATED, THE 25.01.2017 EDN !' #$ %$ /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. & ( ) /CIT(A), 4. & /CIT, 5. $'( ) /DR & 6. (* + /GF.