DIT, Hyderabad V. M/s Pramati Technologies P.Ltd., Hyderabad

ITA 1170/HYD/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1368 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2003-2004
• Appeal Filed On: 11-12-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H PHANI RAJU
• Keywords: Permanent establishment

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL HYDERABAD BENCH 'A' BEFORE SHRI N.R.S.GANESAN AND SHRI CHANDRA POOJARI I.T.A.NO.1170/HYD/2007 ASSESSMENT YEAR 2003-04 DY. CIT, CIRCLE 16(3), HYDERABAD. .. APPELLANT VERSUS PRAMATI TECHNOLOGIES PVT. LTD., HYDERABAD. ..RESPONDENT (PAN AACCP1967C) APPELLANT BY : SHRI H.PHANI RAJU RESPONDENT BY : SHRI C.SUBRAHMANYAM O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT (APPEALS) V, HYDERABAD, AND PERTAINS TO ASST. YEAR 2003-04. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS DISALLOW ANCE OF RS.38,34,905 ON THE GROUND THAT THE ASSESSEE FAILED TO DEDUCT TAX AT SO URCE WHILE MAKING PAYMENT OUTSIDE INDIA. 2. SHRI H.PHANI RAJU, LEARNED DEPARTMENTAL REPRESEN TATIVE, SUBMITTED THAT THE ASSESSEE CLAIMED EXPENDITURE OF RS.38,34,905 TO WARDS SALES PROMOTION EXPENSES PAID OUTSIDE THE COUNTRY. HOWEVER, TAX WAS NOT DEDUCTED AS REQUIRED UNDER SEC. 40(A)(I) OF THE INCOME-TAX ACT, 1961. TH E CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE PAYMENTS WER E MADE DIRECTLY BY THE BRANCH OFFICE SITUATED OUTSIDE INDIA. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, DURING THE RELEVANT PREVIOUS YEAR T HE ASSESSEE MADE REMITTANCES IN US DOLLARS TO SEVERAL FOREIGN AGENTS FOR SERVICES RENDERED BY 2 THEM IN THE FORM OF MEDIA RELATIONS. THEREFORE, ACC ORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, THE ASSESSEE IS BOUND TO DEDUCT TAX AT SOURCE WHILE MAKING THE PAYMENT. 3. ON THE CONTRARY, SHRI C.SUBRAHMANYAM, LEARNED RE PRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT NO PAYMENTS WERE MADE IN I NDIA. THE FOREIGN AGENTS HAVE NO PERMANENT ESTABLISHMENT IN INDIA. ACCORDING TO THE LEARNED REPRESENTATIVE, THE ENTIRE PAYMENTS WERE MADE IN US $ BY A BRANCH OFFICE SITUATED OUTSIDE INDIA. THE ENTIRE SERVICES WERE RE NDERED ONLY OUTSIDE INDIA. IN THOSE CIRCUMSTANCES, ACCORDING TO THE LEARNED REPRE SENTATIVE, THE PROVISIONS OF SEC. 195(1) OF THE INCOME-TAX ACT MAY NOT BE APPLIC ABLE. THEREFORE, THERE IS NO QUESTION OF DEDUCTION OF TAX AT SOURCE. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER S IDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CIT (A) AFTER VER IFYING THE BOOKS OF ACCOUNT FOUND THAT THE PAYMENTS WERE MADE BY THE ASSESSEE T HROUGH ITS BRANCH OFFICE SITUATED IN THE USA TO THE FOREIGN AGENTS. THE PAYM ENTS WERE MADE DIRECTLY BY THE BRANCH OFFICE SITUATED OUTSIDE INDIA. IT IS NOT THE CASE OF THE REVENUE THAT THE PAYMENTS WERE MADE FROM ANY OFFICE SITUATED IN INDIA. IT IS ALSO NOT ON RECORD THAT THE FOREIGN AGENTS HAVE ANY PERMANENT E STABLISHMENT IN INDIA. IN THIS FACTUAL SITUATION, THE PAYMENTS MADE BY THE BR ANCH OFFICE OF THE ASSESSEE SITUATED OUTSIDE INDIA TO AGENTS OUTSIDE THE COUNTR Y MAY NOT FALL WITHIN THE PROVISIONS OF SEC. 195(1). THEREFORE, THE ASSESSEE MAY NOT BE REQUIRED TO DEDUCT TAX UNDER SEC. 195(1). THEREFORE, IN OUR OPI NION, THE DISALLOWANCE MADE BY THE AO WAS NOT JUSTIFIED. THE CIT (A) HAS RIGHTL Y DELETED THE ADDITION. IN 3 VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED . 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 20-11-09. SD SD (CHANDRA POOJARI) (N.R.S.GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, 20TH NOVEMBER, 2009. RRRAO. COPY OF THE ORDER FORWARDED TO:- 1. PRAMATI TECHNOLOGIES PVT. LTD., 301, WHITE HOUSE, B EGUMPET, HYDERABAD. 2. DCIT, CIRCLE 16(3), HYDERABAD. 3. CIT IV, HYDERABAD. 4. CIT (A) V, HYDERABAD. 5. DR, ITAT, HYDERABAD. 1. DATE OF DICTATION : 4-11-2009 2. DATE ON WHICH TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER: 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER: 5-11-09 AND OTHER MEMBERS: 5. DATE ON WHICH THE FAIR ORDER GOES TO THE SR. P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR: 9. DATE OF DESPATCH OF THE TRIBUNAL ORDER: