OSB India Private Limited, Bangalore V. ITO, Bangalore

ITA 1453/BANG/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8546 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 14-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAVALI S NARAYAN
• Assessee Lawyers: SWAPNA DAS J
• Keywords: Non-deduction of tax

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NOS. 1453 & 1454/BANG/2015 ASSESSMENT YEARS : 2009-10 & 2010-11 THE INCOME-TAX OFFICER, WARD 11(1), BANGALORE. VS. M/S. OSB INDIA PRIVATE LIMITED, (FORMERLY KNOWN AS M/S. EASIPROCESS PRIVATE LIMITED) NO. 134/1, 134/2, B-BLOCK, 7 TH FLOOR, BRIGADE TECH PARK, PATTANDUR AGRAHARA, VILLAGE, WHITEFIELD ROAD, BANGALORE 560 066. PAN: AABCE 4049B APPELLANT RESPONDENT APPELLANT BY : SMT. SWAPNA DAS, JCIT(DR) RESPONDENT BY : SHRI CHAVALI S. NARAYAN, CA DATE OF HEARING : 14.02.2017 DATE OF PRONOUNCEMENT : 22.02.2017 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER THE PRESENT APPEALS ARE ARISING OUT OF THE ORDER PA SSED BY THE CIT(A) ON 24/09/2015 ON THE FOLLOWING GROUNDS. 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS BY CONFIRMING THE ORDER OF THE LEARNED AO IN CONSIDERING PAYMENT TOWARDS OUTSOURCED CONTRACT FEE AND NETWORK MAINTENANCE AMO UNTING TO RS. 4,93,699 AND RS. 35,52,698 RESPECTIVELY TO BE I N THE NATURE OF FEES FOR TECHNICAL SERVICES; ITA NOS. 1453 & 1454/BANG/2015 PAGE 2 OF 4 2. THE LEARNED CIT(A) / AO HAS FAILED TO APPRECIATE THAT THE PAYEES IN THE INSTANT CASE ARE RESIDENTS OF UNITED KINGDOM AND HENCE ENTITLED TO AVAIL TREATY BENEFITS UNDER INDIA UNITE D KINGDOM DOUBLE TAX AVOIDANCE AGREEMENT; 3. THE LEARNED CIT(A) / AO HAS FAILED TO APPRECIAT E THAT THE SERVICES RENDERED BY THE PAYEES DOES NOT MAKE AVAIL ABLE ITS SERVICES TO THE APPELLANT UNDER INDIA UNITED KINGDO M DOUBLE TAX AVOIDANCE AGREEMENT AND THEREFORE THE LEARNED CIT(A ) HAS ERRED IN CONCLUDING THAT THE PAYMENT IS TAXABLE AND SUBJE CT DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT; 4. THE LEARNED CIT(A)/AO HAS FAILED TO APPRECIATE THAT THE PAYEE(S) HAS NO PRESENCE IN INDIA AND THEREFORE THE PAYMENTS MADE BY THE APPELLANT WOULD FALL WITHIN THE PURVIEW OF THE BUSINESS PROFITS AS DEFINED UNDER INDIA UNITED KINGDOM DOUBL E TAX AVOIDANCE AGREEMENT AND THEREFORE NOT TAXABLE SINCE THE PAYEE(S) HAS NO PRESENCE IN INDIA; 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACT IN STATING THAT THE APPELLANT SHOULD APPROACH TAX AUTHORITIES UNDER SECTION 195(2) FOR NON-DEDUCTION OF TAX WITHOUT APPRECIATING THE F ACT THAT THE SUM IS NOT CHARGEABLE TO TAX AT ALL; 6. THE LEARNED CIT(A) / AO HAS NOT CONSIDERED THE JUDICIAL PRECEDENTS RELIED UPON BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS; 7. WHETHER PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) HAS ERRED IN LAW AND IN FACT BY NOT CONSIDERING THAT, IF ANY DIS ALLOWANCE IS MADE UNDER SECTION 40(A)(IA) OF THE ACT, THE SAME SHOULD BE CONSIDERED AS ELIGIBLE PROFITS OF THE UNDERTAKING IN COMPUTI NG DEDUCTION UNDER SECTION 10A OF THE ACT. 2. IT IS POINTED OUT BY THE LD. AR FOR THE ASSESSEE TH AT THE ASSESSEE HAS RAISED GROUND NO. 6 BEFORE THE CIT TO THE FOLLOWING EFFECT. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED ASSESSI NG OFFICER HAS ERRED IN LAW BY NOT CONSIDERING THAT, I F ANY DISALLOWANCE IS MADE UNDER SECTION 40(A)(I) OF THE ACT, THE SAME SHOULD BE CONSIDERED TOWARDS PROFITS OF THE UNDERTAKING IN COMPUTING THE ELIGIBLE DEDUCTION UN DER SECTION 10A OF THE ACT. ITA NOS. 1453 & 1454/BANG/2015 PAGE 3 OF 4 3. IT WAS SUBMITTED BY THE LD AR FOR THE ASSESSEE THAT THE LD. CIT WHILE PASSING THE ORDER HAS NOT DECIDED THIS GROUND . HOWEVER, THE CIT(A) HAS DEALT WITH THE DISALLOWANCES U/S 40(A) ( IA) IN PARA 4 OF THE ASSESSMENT ORDER. 4. THE LD. DR FOR THE REVENUE HAS SUBMITTED THAT THOUG H FROM THE BARE PERUSAL OF THE ORDER, IT IS CLEAR THAT THE LD. CIT HAS NOT DECIDED THE GROUND BUT CONSIDERING THE PROPOSITION OF LAW THAT SECTION 40 (A) (IA) PROVIDES THAT IF ANY SUCH SUM ON WHICH TAX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED THEN SUCH AMOUNT SHALL NOT BE DEDUCTIBLE IN COMPUTING THE INCOME CHARGEABL E UNDER PROFIT AND GAINS OF BUSINESS OR PROFESSION, THEREFORE IT W AS SUBMITTED THAT THIS ISSUE IS NOT REQUIRED TO BE SEPARATELY DECIDED BY THE CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTION OF THE PARTIES AND GONE THROUGH THE RECORD. PERUSAL OF THE RECORD AND ORDER PASSED BY THE CIT (A) CLEARLY SHOWS THAT THE CIT(A) HAS FAILED TO EXERCIS E HIS JURISDICTION VESTED IN HIM AND HAS NOT DECIDED THE ISSUE RAISE D BY THE ASSESSEE IN GROUND 6 TO REFERRED HEREIN ABOVE , IN THE GROUN DS OF APPEAL. IT IS THE INCUMBENT DUTY OF THE CIT(A) TO DECIDE THE G ROUNDS RAISED BY THE ASSESSE ON MERIT, IN ACCORDANCE WITH THE LAW . THEREFORE WE DEEM IT APPROPRIATE TO REMAND THESE APPEALS, TO THE FILE OF CIT(A) ITA NOS. 1453 & 1454/BANG/2015 PAGE 4 OF 4 FOR DECIDING THE ISSUE REFERRED HEREIN ABOVE IN AC CORDANCE WITH LAW AFTER GIVING THE NOTICE OF AN OPPORTUNITY OF HE ARING TO THE ASSESSEE. WE ARE NOT DECIDING THE OBJECTIONS RAISE D BY THE LD. DR FOR THE REVENUE AND LEAVING IT OPEN TO BE ADJUDICAT ED BY THE CIT(A) AT THE TIME OF PASSING OF THE ORDER. 6. IN THE LIGHT OF THE ABOVE, THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF FEBRUARY, 2017. SD/- SD/- ( A.K. GARODIA ) (LALIE T KUMAR) ACCOUNTANT MEMBER JUD ICIAL MEMBER BANGALORE, DATED, THE 22 ND FEBRUARY, 2017. / MS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.