Asst. Commissioner of Income tax, Cir-2(1), Panaji V. MR, Ajit R. Phatarpekar, Panaji

ITA 15/PAN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93556 (ITAT-PANAJI)
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHA DESAI
• Keywords: Business income; Deemed to accrue or arise in india
• Section: 5(2); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 15 /PNJ/201 3 (ASST. YEAR : 200 9 - 1 0 ) ACIT, CIRCLE - 2(1), PANAJI. VS. MR. AJIT R AMAKANT PHATARPEKAR, 601/602, 6 TH FLOOR, GERA IMPERIUM, PATTO, PANAJI PAN NO. AFJPP 5786 N (APPELLANT) (RESPONDENT) C.O.NO. 16/PNJ/2013 ( ITA NO. 15 /PNJ/201 3 ) (ASST. YEAR : 2009 - 10) MR. AJIT RAMAKANT PHATARPEKAR, 601/602, 6 TH FLOOR, GERA IMPERIUM, PATTO, PANAJI VS. ACIT, CIRCLE - 2(1), PANAJI. PAN NO. AFJPP 5786 N (APPELLANT) (RESPONDENT) ITA NO. 16 /PNJ/201 3 (ASST. YEAR : 2009 - 10) ACIT, CIRCLE - 2(1), PANAJI. VS. MR S . NEELAM A. PHATARPEKAR, 601/602, 6 TH FLOOR, GERA IMPERIUM, PATTO, PANAJI PAN NO. AFJPP 5785 R (APPELLANT) (RESPONDENT) C.O.NO. 1 7 /PNJ/2013 ( ITA NO. 16 /PNJ/201 3) (ASST. YEAR : 2009 - 10) MRS. NEELAM A. PHATARPEKAR, 601/602, 6 TH FLOOR, GERA IMPERIUM, PATTO, PANAJI VS. ACIT, CIRCLE - 2(1), PANAJI. PAN NO. AFJPP 5785 R (APPELLANT) (RESPONDENT) 2 ITA NO S . 15 & 16 /PNJ/2013 & C.O. NOS. 16 & 17/PNJ/2013 ASSESSEE BY : SHRI JITENDRA JAIN ADV. DEPARTMENT BY : SMT. ASHA DESAI - D.R. DATE OF HEARING : 0 8 / 0 7 /2015 . DATE OF PRONOUNCEMENT : 08 / 0 7 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER TH E APPEALS FILED BY THE REVENUE AND THE CROSS OBJECTIONS FILED BY BOTH THE ASSESSEES ARE AGAINST THE ORDER OF LD. CIT(A) , PANAJI DATED 18/12/2012 . 2. BOTH THE APPEALS OF THE REVENUE WERE DISPOSED OF BY THE TRIBUNAL VIDE CONSOLIDATED ORDER DATED 14/08/2013 PASSED IN I.T.A.NO. 15/PNJ/2013 FOR THE A.Y. 2009 - 10 & I.T.A.NO. 16/PNJ/2013 FOR THE A.Y. 2009 - 10 . 3. BEING NOT SATISFIED WITH THE ORDER OF THE TRIBUNAL , BOTH THE ASSESSEES FILED THE APPEALS BEFORE THE HONBLE HIGH COURT . THE HONBLE HIGH COURT VIDE ORDER DATED 23/04/2015 RESTORED THE MATTER BACK TO THE FILE OF THE TRIBUNAL FOR DECIDING THE ISSUE WITH REGARD TO SEC. 40(A)(I) OF THE INCOME TAX ACT, 1961 I N RESPECT OF DEMURRAGE AFRESH, AFTER HEARING THE PARTIES . THEREFORE, THESE APPEALS WERE FIXED FOR HEARING. 4 . BRIEF FACTS OF THE CASE ARE THAT IN THE CASE OF MR. AJIT RAMAKANT PHATARPEKAR, THE ASSESSING OFFICER DISALLOWED DEDUCTION OF RS. 61,91,043/ - BEING AMOUNT PAID FOR DEMURRAGE CHARGES TO THE SHIP OWNERS ON THE GROUND THAT IT WAS THE BUSINESS INCOME WHICH HAS ACCRUED/ARISEN IN INDIA TO THE BENEFICIARY AS PER SEC. 5(2) OF THE ACT AND 3 ITA NO S . 15 & 16 /PNJ/2013 & C.O. NOS. 16 & 17/PNJ/2013 THE ASSESSEE FAILED TO DEDUCT TDS FROM THE SAME AS PER THE PROVISIONS OF SEC. 195(1) OF THE ACT. 5. ON APPEAL, LD. CIT(A) HELD THAT THE AMOUNT OF RS. 61,91,043/ - PAID AS DEMURRAGE CHARGES BY THE ASSESSEE IS NOT COVERED BY ANY DOUBLE TAXATION AVOIDANCE AGREEMENT AND HENCE, THE ASSESSEE IS LIABLE TO DEDUCT TDS. IN THE CASE OF CIT VS . ORIENT GOA CO. (P) LTD. , THE PANAJI BENCH OF BOMBAY HIGH COURT HELD THAT THE ASSESSEE IS LIABLE TO DEDUCT TDS ON DEMURRAGE IF DOUBLE TAXATION AVOIDANCE AGREEMENT IS NOT EXISTING . 6. SIMILARLY, IN THE CASE OF SMT. NEELAM AJIT PHATARPEKAR , THE ASSESSING OFFICER DISALLOWED RS. 61,91,043/ - BEING AMOUNT PAID FOR DEMURRAGE CHARGES TO THE SHIP OWNERS ON THE GROUND THAT IT WAS THE BUSINESS INCOME WHICH ACCRUED/ ARISEN IN INDIA TO THE BENEFICIARY AS PER SEC. 5(2) OF THE ACT AND THE ASSESSEE FAILE D DEDUCT TDS FROM THE SAME AS PER THE PROVISIONS OF SEC. 195(1) OF THE ACT. 7. ON APPEAL, LD. CIT(A) HELD THAT THE AMOUNT OF RS. 61,91,043/ - PAID AS DEMURRAGE CHARGES BY THE ASSESSEE IS NOT COVERED BY ANY DOUBLE TAXATION AVOIDANCE AGREEMENT AND HENCE, TH E ASSESSEE IS LIABLE TO DEDUCT TDS. IN THE CASE OF CIT VS. ORIENT GOA CO. (P) LTD., THE PANAJI BENCH OF BOMBAY HIGH COURT HELD THAT THE ASSESSEE IS LIABLE TO DEDUCT TDS ON DEMURRAGE IF DOUBLE TAXATION AVOIDANCE AGREEMENT IS NOT EXISTING . 8. BOTH THE PARTIES AGREED BEFORE US THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE ORDER OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S. KARISHMA GOA MINERAL TRADING PVT. LTD. IN I.T.A.NO. 19/PNJ/2014 DATED 18/06 /2015 . WE FIND 4 ITA NO S . 15 & 16 /PNJ/2013 & C.O. NOS. 16 & 17/PNJ/2013 THAT THE TRIBUNAL IN THE CASE OF M/S. KARISHMA GOA MINERAL TRADING PVT. LTD. (SUPRA) HELD AS UNDER: - 2. IT WAS SUBMITTED BY THE LD. DR THAT THE AO HAD DISALLOWED DEMURRAGE PAYMENTS MADE BY THE ASSESSEE TO THE FOREIGN BUYER ON THE GROUND THAT THE ASSESSEE HAD NOT DEDUCTED TDS U/S 195 OF THE ACT. IT WAS THE SUBMISSION THAT THE LD. CIT(A) DELETED THE ADDITION BY HOLDING THAT TDS WAS NOT LIABLE TO BE DEDUCTED IN RESPECT OF DEMURRAGE PAYMENT MADE BY THE ASSESSEE TO THE FOREIGN BUYER. IT WAS THE SUBMISSION THAT THE ORDER OF THE LD. CIT(A) WAS LIABLE TO BE REVERSED. 3. IN REPLY, THE LD. AR SUBMITTED THAT THE ASSESSEE IS AN IRON ORE EXPORTER. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD SOLD GOODS REPRESENTING IRON ORE ON FOB BASIS TO CHINA BAS ED COMPANY. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD TO DELIVER THE GOODS AT GOA PORT. IT WAS THE FURTHER SUBMISSION THAT AS PER THE AGREEMENT, IF THERE WAS A DELAY IN LOADING OF THE GOODS ON THE SHIP HIRED BY THE PURCHASER, THE ASSESSEE WAS TO PAY TH E DEMURRAGE. AS THERE WAS A DELAY IN LOADING OF THE GOODS, THE ASSESSEE HAD PAID THE DEMURRAGE OF RS. 94,18,640/ - TO THE SAID CHINA BASED COMPANY. IT WAS THE SUBMISSION THAT THE AO HAS RECOGNISED THAT THE DEMURRAGE HAS BEEN PAID TO THE VARIOUS SUPPLIERS IN CHINA. THE LD. AR DREW OUR ATTENTION TO THE PROVISIONS OF SEC. 9(1)(I), EXPLANATION (1)(B) TO SUBMIT THAT WHEN THE PAYMENT IS MADE TO THE PURCHASER OF GOODS WHICH ARE EXPORTED AND THE PURCHASER IS A NON - RESIDENT, NO INCOME SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA IN THE HANDS OF THE SAID FOREIGN PURCHASER. IT WAS THE SUBMISSION THAT THE HON'BLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE P. LTD. REPORTED IN 327 ITR 456 HAS CATEGORICALLY HELD THAT TAX IS LIABLE TO BE WITHHELD ONLY IF THE SUM PAID RESULTS INTO ANY INCOME CHARGEABLE TO TAX IN INDIA. IT WAS THE SUBMISSION THAT THE INCOME OF THE FOREIGN PURCHASER WAS NOT LIABLE TO TAX IN INDIA AND CONSEQUENTLY, THERE WAS NO LIABILITY TO DEDUCT TDS U/S 195. THE LD. AR ALSO DREW OUR ATTENTION TO THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SESA GOA IN ITA NO. 72/PNJ/2012 DT.8.3.2013 WHEREIN THE SAID PROPOSITION HAS BEEN ACCEPTED BY THE COORDINATE BENCH OF THIS TRIBUNAL. IN THE SAID ORDER, THE COORDINATE BENCH HAS HELD TH AT AS PER EXPLANATION - (1)(B) TO SEC. 9(1)(I) IT IS PROVIDED THAT IN CASE OF A NON - RESIDENT NO INCOME SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA THROUGH OR FROM THE OPERATIONS WHICH ARE CONFINED TO THE 5 ITA NO S . 15 & 16 /PNJ/2013 & C.O. NOS. 16 & 17/PNJ/2013 PURCHASE OF GOODS IN INDIA FOR THE PURPOSE OF EXPORT . THE NON - RESIDENT BUYER HAD GOT COMPENSATION TOWARDS DEMURRAGE INCURRED THROUGH THE OPERATION WHICH ARE CONFINED TO THE PURCHASE OF GOODS AND CONSEQUENTLY, THE SAID DEMURRAGE CANNOT BE DEEMED TO BE INCOME WHICH HAS ACCRUED OR ARISEN IN THE HANDS OF THE F OREIGN BUYER IN INDIA AND THEREFORE, IS NOT TAXABLE IN INDIA AND IS NOT LIABLE TO TAX DEDUCTION AT SOURCE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SESA GOA REFERRED TO SUPRA AND THE LD. CIT(A) HAS FOLLOWED THE SAME, AS ALSO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF GE TECHNOLOGY REFERRED TO SUPRA, WE ARE OF THE VIEW THAT THERE IS NO ERRO R IN THE ORDER OF THE LD. CIT(A) WHICH CALLS FOR OUR INTERFERENCE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 9. THE FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING THE PRECEDENT, WE CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE GROUND S OF APPEAL OF THE REVENUE IN THE CASE OF BOTH THE ASSESSEES . 10. IN T HE CROSS OBJECTION S FILED BY BOTH THE ASSESSEE S , THE GROUNDS OF APPEAL READ AS UNDER: - IN THE CASE OF MR. AJIT RAMAKANT PHATARPEKAR. 1.1 THE LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.4,64,328/ - U/S. 40(A)(IA) OF THE ACT. 1.2 THE LD. CIT(A) FAILED TO APPRECIATE THAT THE SUM PAID ARE NOT CHARGEABLE TO TAX AND HENCE THE PROVISIONS OF SEC. 40(A)(I) ARE NOT APPLICABLE. IN THE CASE OF MRS. NEELAM A. PHATARPEKAR . 6 ITA NO S . 15 & 16 /PNJ/2013 & C.O. NOS. 16 & 17/PNJ/2013 1.1 THE LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.4,64,328/ - U/S. 40(A)(IA) OF THE ACT. 1.2 THE LD. CIT(A) FAILED TO APPRECIATE THAT THE SUM PAID ARE NOT CHARGEABLE TO TAX AND HENCE THE PROVISIONS OF SEC. 40(A)(I) ARE NOT APPLICABLE. 11. IN VIEW OF OUR DECISION IN THE APPEALS OF THE REVENUE WHERE WE HAVE HELD THAT IN CASE OF A NON - RESIDENT NO INCOME SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA THROUGH OR FROM THE OPERATIONS WHICH ARE CONFINED TO THE PURCHASE OF GOODS IN INDIA FOR THE PURPOS E OF EXPORT. THE NON - RESIDENT BUYER HAD GOT COMPENSATION TOWARDS DEMURRAGE INCURRED THROUGH THE OPERATION WHICH ARE CONFINED TO THE PURCHASE OF GOODS AND CONSEQUENTLY, THE SAID DEMURRAGE CANNOT BE DEEMED TO BE INCOME WHICH HAS ACCRUED OR ARISEN IN THE HAN DS OF THE FOREIGN BUYER IN INDIA AND THEREFORE, IS NOT TAXABLE IN INDIA AND IS NOT LIABLE TO TAX DEDUCTION AT SOURCE , THE CROSS OBJECTIONS FILED BY BOTH THE ASSESSEES HAVE BECOME INFRUCTUOUS AND HENCE ARE DISMISSED. 12. IN THE RESULT, APPEAL S OF THE REVENUE AS WELL AS CROSS OBJECTIONS OF BOTH THE ASSESSEES ARE DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON WEDNESDAY, THE 08 TH DAY OF JULY , 201 5 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 08 TH JU LY , 201 5 . VR/ - 7 ITA NO S . 15 & 16 /PNJ/2013 & C.O. NOS. 16 & 17/PNJ/2013 COPY TO: 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE LD.CIT 4 . THE CIT(A) 5 . THE D.R 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI 8 ITA NO S . 15 & 16 /PNJ/2013 & C.O. NOS. 16 & 17/PNJ/2013 DATE INITIAL ORIGINAL DICTATION PAD IS ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 0 9 .0 7 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 09 .07 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 09 /07 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 09 /0 7 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 09 /07 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 09 /0 7 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 0 9 /07 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER