ACIT, CHENNAI V. Bonaventure Shoes (P) Ltd., CHENNAI

ITA 1459/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81113 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 28-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Services rendered outside India; Permanent establishment

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNALA BENCH, CHEN NAI . , ! '! ! #, $ % BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 1459/MDS/2014 / ASSESSMENT YEAR : 2008-09 THE ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(2), CHENNAI 34. ( #& /APPELLANT) VS M/S. BONAVENTURE SHOES (P) LTD., NO.55, EVK SAMPATH ROAD, VEPERY, CHENNAI 600 007 [PAN: AAACB 1370 R] ( '(#& /RESPONDENT) REVENUE BY : SHRI S.DAS GUPTA, JCIT ASSESSEE BY : SHRI R.VIJAYARAGHAVAN, ADVOCATE / DATE OF HEARING : 04-08-2014 / DATE OF PRONOUNCEMENT : 18-08-2014 ) / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE REVENUE ASSAILING THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, CHENNAI DATED 19-02-2014 RELEVANT TO THE ASSESSMENT YEAR (A Y) 2008-09. THE ONLY ISSUE RAISED IN THE APPEAL IS DELETING OF DIS-ALLOWANCE U/S.40(A)(I) OF INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) IN RESPECT OF PAYMENTS OF FOREIGN SALES COMMISSION AND PROFESSIONAL FEE TO FOREIGN AGENTS WITHOUT DEDUCTIO N OF TAX. ITA NO. 1459/MDS/2014 2 2. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY. 2008-09 ON 24-09-2008 CLAIMING LOSS OF ` 7,18,46,685/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) WAS ISSUED TO THE ASSESSEE ON 12-08-2009. THE ASSESSIN G OFFICER VIDE ORDER DT.16-12-2010 MADE DIS-ALLOWANCE INTER ALIA U/S.40(A)(I) FOR NOT DEDUCTING TAX AT SOURCE ON PAYMENT OF PROFE SSIONAL FEE AND SALES COMMISSION TO NON-RESIDENTS. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE CIT(APPEALS). THE CIT(APPEALS ) DELETED DIS-ALLOWANCE MADE U/S.40(A)(IA). THE REVENUE HAS C OME IN APPEAL ASSAILING THE FINDINGS OF CIT(APPEALS) ON TH E ISSUE. 3. SHRI S.DAS GUPTA, APPEARING ON BEHALF OF THE REV ENUE SUBMITTED THAT THE ASSESSEE HAD MADE PAYMENT OF ` 5,04,616/- TOWARDS PROFESSIONAL FEES AND ` 83,67,224/- TOWARDS SALES COMMISSION TO FOREIGN AGENTS. THE SAID PAYMENTS WE RE MADE WITHOUT DEDUCTION OF TAX AT SOURCE. 4. ON THE OTHER HAND, SHRI R.VIJAYARAGHAVAN, APPEAR ING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE PAYMENTS TO THE NON- RESIDENTS WERE MADE FOR THE SERVICES RENDERED OUTSI DE INDIA. THE NON-RESIDENTS HAVE NO PERMANENT ESTABLISHMENT [PE] IN INDIA AND THEREFORE, THE INCOME WAS NOT CHARGEABLE TO TAX IN INDIA. IN ORDER ITA NO. 1459/MDS/2014 3 TO SUPPORT HIS CONTENTIONS, THE LD.COUNSEL FOR THE ASSESSEE RELIED ON THE DECISIONS OF THE HONBLE MADRAS HIGH COURT I N THE CASE OF CIT VS. AKTIENGESELLSCHAFT KUHNLE KOPP AND KAUSCH REPORTED AS 262 ITR 513 (MAD) AND THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. M/S.FULIDTHERM TECHNOLOGY PVT. LTD., IN ITA NO.199/MDS/2014 DECIDED ON 22-05-2014. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES. WE HAVE ALSO PE RUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECI SIONS FROM WHICH THE LD. COUNSEL FOR THE ASSESSEE HAS DRAWN SUPPORT. THE CIT(APPEALS) IN THE IMPUGNED ORDER AFTER EXAMINING THE FACTS OF THE CASE HAS ACCEPTED THE CONTENTIONS OF THE ASSESS EE THAT PROFESSIONAL CHARGES AND SALES COMMISSION WERE PAID OUTSIDE INDIA FOR THE SERVICES RENDERED OUTSIDE INDIA. THE FIRST APPELLATE AUTHORITY ALSO ENDORSED THE CONTENTION OF THE ASSES SEE THAT THE NON-RESIDENT PARTIES HAVE NO PE IN INDIA AND THE PA YMENTS MADE TO THEM ARE NOT IN THE NATURE OF INTEREST, ROYALTY OR TECHNICAL FEE COVERED U/S.9(1) OF THE ACT. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF GE INDIA TECHNOLOGY CENTRE PVT. LTD., VS. CIT REPORTED AS 327 ITR 456 (SC) HAS HELD THAT IF NO TAX IS ASSESSABLE ON THE PAYME NTS, THERE IS ITA NO. 1459/MDS/2014 4 NO QUESTION OF DEDUCTION OF TAX AT SOURCE. SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. AKTIENGESELLSCHAFT KUHNLE KOPP AND KAUSCH (SUPRA) AND THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N THE CASE OF DCIT VS. M/S.FULIDTHERM TECHNOLOGY PVT. LTD., (SUPRA). IN VIEW OF THE WELL ESTABLISHED PRINCIPLE OF LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIR MITY IN THE IMPUGNED ORDER. THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOI D OF MERIT. ORDER PRONOUNCED ON MONDAY, THE 18 TH AUGUST, 2014 AT CHENNAI. SD/- SD/- ( . ) ('! ! #) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER (VIKAS AWASTHY) $ / JUDICIAL MEMBER /CHENNAI, /DATED: 18 TH AUGUST, 2014 TNMM ! ' #$ %$ /COPY TO: 1. &' /APPELLANT 2. '(&' /RESPONDENT 3. ) () /CIT(A) 4. ) /CIT 5. $,- ' . /DR 6. -/ 0 /GF