JCIT (OSD), CHENNAI V. Cargopalan International India P Ltd., CHENNAI

ITA 1542/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8074 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 27-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V NANDA KUMAR
• Assessee Lawyers: S SUNDARRAMAN
• Keywords: Double taxation relief; Services rendered outside India; Permanent establishment; Non-deduction of tax
• Section: 143(3); 5(2); 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . . . , . , & BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.1542/MDS/2016 ( / ASSESSMENT YEAR: 2011-12) THE JOINT COMMISSIONER OF INCOME TAX (OSD), CORPORATE CIRCLE-1(2) CHENNAI-34. VS M/S. CARGOPLAN INTERNATIONAL INDIA P.LTD., 11 & 114, MENA KAMPALA ARCADE, SIR TEAGARAYA ROAD, T.NAGAR, CHENNAI-600 017. PAN:AACCC5083E ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. V.NANDAKUMAR, JCIT /RESPONDENT BY : MR. S.SUNDARRAMAN, C.A. /DATE OF HEARING : 16 TH AUGUST,2016 /DATE OF PRONOUNCEMENT : 10 TH NOVEMBER , 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM: THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 1, CHENNAI DATED 15.02.2016 IN ITA NO.180/CIT (A) -1/2014- 15 PASSED UNDER SECTION 143(3) R.W.S 250(6) OF THE ACT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEALS, HOWEVER, THE CRUXES OF THE ISSUES ARE AS FOLLOWS:- I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DIRECTING THE LEARNED ASSESSING OFFICER TO DELETE THE ADDITION OF ` 6,40,36,989/- MADE UNDER SECTION 40(A)(I) OF THE 2 ITA NO.1542/MDS/2016 ACT BEING PAYMENTS MADE TO FOREIGN FREIGHT FORWARDERS WHEN SUCH PAYMENT WAS MADE TOWARDS TECHNICAL SERVICES. II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DIRECTING THE LEARNED ASSESSING OFFICER TO DELETE THE ADDITION OF ` 72,03,476/- WHICH WAS MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON DEDUCTION THE TAX AT SOURCE UNDER SECTION 194C OF THE ACT AGAINST PAYMENT MADE TO PSUS BEING WAREHOUSING CHARGES. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF PROVIDIN G LOGISTICS SUPPORT IN AIR/OCEAN TRANSPORT, WAREHOUSI NG & DISTRIBUTION, FILED ITS RETURN OF INCOME FOR THE A SSESSMENT YEAR 2011-12 ON 29.12.2011 DECLARING LOSS OF ` 14,82,175/-. SUBSEQUENTLY, THE CASE WAS TAKEN UP FOR SCRUTINY AN D NOTICE UNDER SECTION 143(2) WAS ISSUED TO THE ASSESSEE ON 02.08.2012 AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 17.03.2014 WHEREIN THE LEARNED ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTIO N 40(A)(I) & 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX TOWAR DS (I) EXPENSES INCURRED OUTSIDE INDIA FOR RS.6,40,36,989/ - AGAINST SERVICES RENDERED BY NON-RESIDENTS OUTSIDE INDIA IN REGARD TO 3 ITA NO.1542/MDS/2016 INTERNATIONAL FREIGHT FORWARDING AND LOGISTIC SERVI CES, BY TREATING IT AS FEES FOR TECHNICAL SERVICES AND (II ) PAYMENT OF RS. 72,03,476/- MADE TO PUBLIC SECTOR UNDERTAKINGS FOR PROVIDING WAREHOUSING SERVICES. HOWEVER, ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HELD B OTH THE ISSUES IN FAVOUR OF THE ASSESSEE AGGRIEVED BY WHICH THE REVENUE IS NOW IN APPEAL BEFORE US. GROUND NO.1: ADDITION OF ` `` ` 6,40,36,989/- MADE UNDER SECTION 40(A)(I) OF THE ACT BEING PAYMENTS MADE TO FOREIGN FREIGHT FORWARDERS. 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE HAD INCURRED EXPENSES TOWARDS TRANSPORT OF GOODS OU TSIDE INDIA BY NON-RESIDENT FREIGHT FORWARDERS FOR RS.6,4 0,36,989/-, AGAINST WHICH THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE. ON QUERY, IT WAS SUBMITTED BY THE ASSESSEE AS FOLLO WS:- I) THE FREIGHT FORWARDERS BELONG TO VARIOUS COUNTRI ES ABROAD, AMONGST WHICH ONE OF THE COMPANIES IS ASSESSEES PARENT COMPANY M/S.FREIGHT LINKS INTERNATIONAL (PTE) LTD., SRILANKA. 4 ITA NO.1542/MDS/2016 II) THERE WAS AGREEMENT ONLY BETWEEN THE ASSESSEE COMPANY AND THE ASSESSEES PARENT COMPANY. WITH RESPECT TO OTHER FOREIGN COMPANIES, THERE WERE NO AGREEMENTS; HOWEVER THE SCOPE OF SERVICES RENDERED WERE OF SIMILAR NATURE. III) THE SCOPE OF THE SERVICES DEFINED WITH THE PAR ENT COMPANY IS AS UNDER, WHICH IS SIMILAR TO THE ARRANGEMENT WITH THE OTHER FOREIGN COMPANIES:- A. BOTH COMPANIES WILL REPLY PROMPTLY TO ALL REQUES TS FOR PROOF OF DELIVERY AND ALL COMMUNICATIONS RECEIVED FROM THE OTHER. BOTH COMPANIES AGREE TO WORK WITH THE OTHER AND ENDEAVOR TO GENERATE FURTHER BUSINESS BY FURNISHING THE OTHER WITH SALES LEADS IDENTIFYING POTENTIAL SHIPPERS OR CONSIGNEES. BOTH COMPANIES WILL ALSO ENGAGE IN ACTIVE CANVASSING ON BEHALF OF THE OTHER AND WILL ADMINISTRATOR ANY ROUTING OTHER SERVED BY THE OTHER COMPANY. B. THE AGREEMENTS BETWEEN BOTH THE COMPANIES ARE MUTUAL. C. BOTH THE COMPANIES ENSURE THAT THE CARGO DELIVERED AT THE OFFSHORE REACHES ITS ULTIMATE CUSTOMER. D. THE AGREEMENT ALSO PROVIDED FOR IDENTIFYING POTENTIAL SHIPPERS AND CONSIGNEES AND TO ACTIVELY CANVAS ON BEHALF OF EACH OTHER. E. BOTH COMPANIES WHEN ACTING AS AGENT/REPRESENTATIVE FOR THE OTHER WILL RENDER PROMPT AND EFFICIENT ACTION IN CONDUCTING THE SERVICES REQUIRE IN ACCORDANCE WITH THE OTHER COMPANYS REASONABLE INSTRUCTIONS. THE COMPANIES AGREE TO PROVIDE ADEQUATE AND SUITABLE INFORMATION FOR SUCH PERFORMANCE SUCH AS 5 ITA NO.1542/MDS/2016 PRE-ADVICE TELEX OR FAX FOR ALL SHIPMENTS CONSIGNED TO EACH OTHER GIVING NAME OF VESSEL, DATE OF SAILING, BILL OF LADING NUMBER, NUMBER OF PACKAGES, GROSS WEIGHT AND VOLUME, SHIPPERS AND CONSIGNEES RELEVANT DETAILS AND SPECIAL INSTRUCTIONS IF ANY SUFFICIENT IN ADVANCE FOLLOWED BY FREIGHT MANIFEST. 4.2 FROM THE ABOVE, THE LEARNED ASSESSING OFFICER A RRIVED AT THE FOLLOWING CONCLUSION:- I) THE SERVICES RENDERED BY THE FOREIGN COMPANIES WERE NOT JUST PERTAINING TO CARGO HANDLING BUT ALSO IN THE NATURE OF MANAGERIAL AND TECHNICAL SERVICES. II) IN ORDER TO IDENTIFY POTENTIAL SHIPPERS OR CONSIGNEES THE NON-RESIDENT FREIGHT FORWARDERS HAVE TO NECESSARILY CARRY OUT EXTENSIVE MARKET AND ADVERTISING ACTIVITIES SUCH AS RELATIONSHIP MARKETING, INTERNAL MARKETING, INTEGRATED MARKETING, CAPTURING MARKET ETC. IN ORDER TO BUIL D A STRONG BRAND NAME FOR THE ASSESSEE COMPANY IN THE OFFSHORE MARKETS. III) SINCE THE ASSESSEE COMPANY DEPENDS ON THE TECHNICAL SUPPORT OF THE FOREIGN FREIGHT FORWARDERS LOCATED OFFSHORE, THE SERVICES RENDERED BY THE 6 ITA NO.1542/MDS/2016 OFFSHORE COMPANYS AMOUNTS TO BE IN THE NATURE OF CONSULTANCY SERVICES. IV) AS PER SECTION 9(2) OF THE ACT INSERTED BY THE FINANCE ACT W.R.EF 1.6.1976 BUSINESS CONNECTION (PLACE OF PERMANENT ESTABLISHMENT) IS NOT REQUIRED IN A CASE WHERE INCOME IS DEEMED TO ACCRUE AS PER SECTION 9(1)(VII). V) AS PER SECTION 5(2) R.W.S 9(1)(VII) OF THE ACT, THE PAYMENT MADE BY THE ASSESSEE TO NON-RESIDENT IS INCOME ACCRUED IN INDIA. VI) EXPLANATION 2 TO SECTION 195 OF THE ACT INSERTE D BY THE FINANCE ACT, 2012 W.R.EF 01.04.1962 STATES THAT FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT THE OBLIGATION TO COMPLY WITH SUB- SECTION (1) AND TO MAKE DEDUCTION THERE UNDER APPLIED AND SHALL BE DEEMED TO HAVE ALWAYS APPLIED AND EXTENDS AND SHALL BE DEEMED TO HAVE ALWAYS EXTENDED TO ALL PERSONS, RESIDENT OR NON- RESIDENT, WHETHER OR NOT THE NON-RESIDENT PERSON HAS 7 ITA NO.1542/MDS/2016 A) A RESIDENT OR PLACE OF BUSINESS OR BUSINESS CONNECTION IN INDIA OR B) ANY OTHER PRESENCE IN ANY MANNER WHATSOEVER IN INDIA. 4.3 BASED ON THE ABOVE CONCLUSION, THE LEARNED ASSE SSING OFFICER HELD THAT THE PAYMENT RECEIVED BY THE NON- RESIDENT FOREIGN FORWARDERS FROM THE ASSESSEE IS INCOME DER IVED FROM INDIA AS PER SECTION 9 R.W.S 5 OF THE ACT. THEREFOR E, SUCH INCOME IS TAXABLE IN INDIA AND FAILURE TO COMPLY WI TH SECTION 195 OF THE ACT WOULD ATTRACT THE PENAL PROVISIONS O F SECTION 40(A)(IA) OF THE ACT. WITH THE ABOVE FINDINGS, THE LEARNED ASSESSING OFFICER DISALLOWED THE ENTIRE SUM OF RS.6,40,36,989/- PAID TO NON-RESIDENT FREIGHT FORWA RDERS AS ALLOWABLE DEDUCTION IN THE HANDS OF THE ASSESSEE. 4.4 ON APPEAL, THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) HELD THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER:- 18. I HAVE GONE THROUGH THE FACTS IN ISSUE , ARGUMENTS ADVANCED BY THE APPELLANT AND MATERIAL ON RECORD TH E APPELLANT ADMITTEDLY IS A TH I RD PARTY LOGISTICS ENTITY WHICH 8 ITA NO.1542/MDS/2016 RENDERED SERVICES OF FACILITATING MOVEMENT OF GOODS FO R ITS CLIENTS ESTABLISHED IN INDIA AND OUTSIDE INDIA . IN ORDER T O MAKE AVAILABLE THE SERVICES, IT NEGOTIATED WITH HANDLING AGENTS : BO T H DOMESTIC AS ALSO IN FOREIGN COUNTRY BY WAY OF NEGOTIATION FOR GOODS TRANSPORTED FROM FOREIGN DESTINATION TO INDIA . 19. T HE DISPUTE IN THIS ASSESSMENT RELAT E S T O THE EX I GIBILITY OF TAX IN RELATION TO THE PAYMENT MADE BY THE APPELLANT TO THE FORE I GN ENTITIES FOR THE SERVICES RENDERED I N VARIOUS FOREIGN DESTINATI O NS . IT IS IN THIS CONTEXT THAT THE EXIGIBILITY OF TAX TO THE PAYMENT HAVE TO BE EX AMINED AS TO WHETHER THE T AX LIABIL I TY I S TRIGGERED IN TERMS OF SEC.9(1 )(I) R . W . S . 5 OF THE INCOME TAX A C T . 20. IT IS SETTLED LAW WHEN SERVICES ARE RENDERED BY A NON RESIDENT WHO HAS NO BUSINESS CONNECTION OR PRESENCE BY WAY OF PERMANENT ESTABLISHMENT IN INDIA, THE INC OME WOULD BE TRIGGERED IN THE COUNTRY OF RESIDENCE WHER E THE SERVICES WERE RENDERED . THE RATIO IN THE CONTEXT OF COMMISSION AGENT LAID DOWN BY THE JURISDICTIONAL CO URT IN THE CASE OF CIT V . FAIZAN SHOES P LTD 367 ITR 155 APPLIES MUTATIS MUTANDIS. 21. THE NON-RESIDENTS TO WHOM PAYMENTS WERE MADE WERE FOR A BOUQUET OF SERV I CES SUCH AS INLAND TRANSPORTATION , STORAGE OF GOODS IN TRANSIT, EXPORT DOCUMENTATION AND SHIPPING CHARGES, EXPORT DUTY IN THE PORT OF ORIGIN AND CLEARANCE CHARGES, INLAND TRANSPORTATION AND STORAGE CHARGES IN THE DESTINATI ON. THESE CANNOT BE CLASSIFIED AS CONSTITUTING EITHER MANAGERIAL OR SERVICES WHICH ARE TECHNICAL IN NATUR E WITHIN I THE MEANING OF S.9(1)(VII) OF THE ACT . THE BOARD'S CIRCULAR NO.715 RELIED UPON ALSO CLAR I FIED THAT PAYMENT TO C L EARING AND FORWARDING AGENTS FOR CARRIAGE OF GOODS I S SUBJECT TO DEDUCTION OF TAX AT SOURCE U/S 194C W HILE S. 194J - STIPULATES DEDUCTION ' OF TAX AT SOURCE IN RESPECT OF PROFESSIONAL AND TECHNICAL SERVICES . IN S.194J THE EXPRESSION 'FEE FOR TECHNICAL SERVICES' HAS BEEN GIVEN THE SAME MEANING AS LAID DOWN IN EXPLANATION 2 TO S.9(1)((VII). , 22. IN LEAAP INTERNATIONAL P LTD THE ITAT CHENNA I IN ITA NO.356/MDS/2009 FOR AY. 2 005 - 06 IN ITS ORDER DATED 27 . 5.2011 HAVE HELD SIMILARLY THAT THE PAYMENTS TO FOREIGN COMPANY FOR SERVICES RENDERED OUTSIDE INDIA AND FOREIGN COMPANY HAVING NO BRAN CHES OR PERMANENT 9 ITA NO.1542/MDS/2016 ESTABLISHMENT IN INDIA, PAYMENTS MADE TO IT WERE NO T LIABLE FOR DEDUCTION AT SOURCE U/S 195 . IN THE CASE OF INDIAR CARRIERS P LTD THE ITAT DELHI BENCH ALSO HEL D SIMILARLY I N RESPECT OF THE PAYMENTS MADE TO AN AGENT OUTSIDE INDIA FOR FREIGHT FORWARDING FUNCTIONS ON THE SAME LOGIC. 23. ON THE FACTS OF THE CASE, THESE ENTITIES WHO H AVE RENDERED SERVICES ADMITTEDLY HAVE NO PRESENCE IN IN DIA BY WAY OF PERMANENT ESTABLISHMENT AND NO BUSINESS CONNECTION INASMUCH AS THAT THE SERVICES WERE RENDE RED OUTSIDE INDIA. IT WOULD SUFFICE TO HOLD THAT THE BA SIC INGREDIENT TO TRIGGER THE OPERATION OF SEC.9(1)(I) ARE CONSPICUOUS IN THEIR ABSENCE IN SUCH SERVICES. IT W OULD THEREFORE MAKE NO DIFFERENCE W HETHER OR NOT ANY OF THE ENTITIES ARE RESIDENT IN THE JURISDICTION WHICH HAS DTAA WITH INDIA OR NOT . PAYMENT(S) MADE TO THEM WOULD NOT BE EXIGIBLE TO TAX UNLESS AND UNTIL A CASE H AS BEEN MADE OUT THAT THEY ARE IN THE NATURE OF THE SERVICES WIT HIN THE MEANING OF SEC 9(1 )(VI) OR 9(1 )(VII) BEING 'ROYALTY' OR 'TECHNICAL SERVICES'. AS SUCH THE SAME WOULD BE TAX ABLE AS BUSINESS PROFITS IN THE COUNT OF RESIDENCE. IT I S HELD THEREFORE THAT SINCE HE PAYMENTS ARE NOT ' CHARGEABLE TO TAX IN INDIA U/S 9(1) (VII) R . W.S. 195, THE PROVISIONS OF SECTION 40(A)(I) WILL BE APPLICABLE. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION MADE. 4.5 BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTAT IVE ARGUED IN SUPPORT OF THE ORDER OF THE LEARNED ASSES SING OFFICER WHILE AS THE LEARNED AUTHORIZED REPRESENTAT IVE REITERATED HIS SUBMISSIONS MADE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 10 ITA NO.1542/MDS/2016 4.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FREIGHT FORWARDING THROUGH ITS OFFICES IN INDIA AS WELL AS ABROAD. WITH REGARD TO EXPORT SHIPMENT FROM INDIA, THE ASSESSEE COLLECTS THE GOODS FROM THE EXPORTERS, CA RRIES OUT INLAND TRANSPORTATION, STORAGE OF GOODS IN TRANSIT, COMPLIES WITH EXPORT DOCUMENTATION AND SHIPPING REQUIREMENTS , CLEARS THE GOODS WITH CUSTOMERS, PAYS EXPORT DUTY, AND CO- ORDINANCE WITH AIRLINES / SHIPPING AGENCIES WITH RE SPECT TO TRANSPORTATION OF GOODS OUTSIDE INDIA ETC., AND THE OVERSEAS AGENTS OF THE ASSESSEE CLEARS THE GOODS AT DESTINAT ION, PAYS IMPORT TAX/DUTY, STORES THE GOODS IN TRANSIT, CARR IES OUT INLAND TRANSPORTATION AND DELIVERS SHIPMENT TO THE IMPORTE R OVERSEAS. IN THE CASE OF IMPORT SHIPMENTS IN INDIA , THE SAME ACTIVITIES ARE PERFORMED BY THE ASSESSEE AND THE FO REIGN FREIGHT FORWARDERS RESPECTIVELY IN THE REVERSE MANN ER. THEREFORE IT IS APPARENT THAT, THE PAYMENT MADE BY THE ASSESSEE COMPANY TO THE FOREIGN FREIGHT FORWARDERS ARE CONCERNED, IT IS FOR SERVICES RENDERED OUTSIDE INDI A. THE FOREIGN FREIGHT FORWARDERS WHO HAVE RECEIVED PAYMEN TS FROM 11 ITA NO.1542/MDS/2016 THE ASSESSEE ALSO DID NOT HAVE ANY PERMANENT ESTABL ISHMENT IN INDIA. IN THIS SITUATION IN THE CASE OF THE ASSE SSEE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS RI GHTLY RELIED IN THE DECISION OF THE HONBLE JURISDICTIONA L MADRAS HIGH COURT IN THE CASE OF CIT VS. FAIZAN SHOES P.LTD., R EPORTED IN 367 ITR 155, WHEREIN IT IS HELD AS FOLLOWS:- HELD, DISMISSING THE APPEAL, THAT ON A READING OF SECTION 9(1)(VII) , COMMISSION PAID BY THE ASSESSEE TO THE NON-RESIDENT AGENTS WOULD NOT COME UNDER THE TE RM FEES FOR TECHNICAL SERVICES. FOR PROCURING ORDERS FOR LEATHER BUSINESS FROM OVERSEAS BUYERS, WHOLESALERS OR RETAILERS, AS THE CASE MAY BE, THE NON-RESIDENT AGE NT WAS PAID 2.5 PER CENT. COMMISSION ON FREE ON BOARD BASIS. THIS WAS A COMMISSION SIMPLICITER. WHAT WAS THE NATURE OF TECHNICAL SERVICE THAT THE NON-RESIDENT A GENTS HAD PROVIDED ABROAD TO THE ASSESSEE WAS NOT CLEAR F ROM THE ORDER OF THE ASSESSING OFFICER. THE OPENING OF LETTERS OF CREDIT FOR THE PURPOSE OF COMPLETING THE EXPORT OBLIGATION WAS AN INCIDENT OF EXPORT AND, THEREFORE , THE NON-RESIDENT AGENT WAS UNDER AN OBLIGATION TO RENDE R SUCH SERVICES TO THE ASSESSEE, FOR WHICH COMMISSION WAS PAID. THE NON-RESIDENT AGENT DID NOT PROVIDE TECHNICAL SERVICES FOR THE PURPOSES OF RUNNING OF T HE BUSINESS OF THE ASSESSEE IN INDIA. THEREFORE, THE COMMISSION PAID TO THE NON-RESIDENT AGENTS WOULD NO T FALL WITHIN THE DEFINITION OF FEES FOR TECHNICAL S ERVICES AND THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SO URCE ON PAYMENT OF COMMISSION. 4.7 FURTHER, THE RELIANCE PLACED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THE DECISIO N OF THE CHENNAI BENCH OF THE TRIBUNAL IN LEAP INTERNATIONAL PVT.LTD. 12 ITA NO.1542/MDS/2016 IN ITA NO.356/MDS/2009 VIDE ORDER DATED 27.05.2011 IS ALSO JUSTIFIABLE BECAUSE IN THAT CASE IT WAS HELD THAT P AYMENT MADE TO FOREIGN COMPANIES, FOR SERVICES RENDERED OU TSIDE INDIA, WHICH DID NOT HAVE PERMANENT ESTABLISHMENT I N INDIA, TAX NEED NOT BE DEDUCTED AT SOURCE UNDER SECTION 19 5 OF THE ACT. FOR THE ABOVE STATED REASONS, WE DO NOT FIND I T NECESSARY TO INTERFERE WITH THE ORDER OF THE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. GROUND NO.2: ADDITION OF ` `` ` 72,03,476/- MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT TOWARDS NOT DEDUCTING THE TAX AT SOURCE UNDER SECTION 194C OF THE ACT: 5.1 THE ASSESSEE HAD MADE PAYMENT OF RS.72,03,476/- TOWARDS PROVIDING WAREHOUSE SERVICES TO PUBLIC SECT OR UNDERTAKINGS SUCH AS SHIPPING CORPORATION OF INDIA, CENTRAL WAREHOUSING CORPORATION, CENTURY PLY BOARDS INDIA L TD., AND CONTAINER CORPORATION OF INDIA WITHOUT DEDUCTING TA X AT SOURCE. THEREFORE, THE LEARNED ASSESSING OFFICER IN VOKED THE PENAL PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AN D DISALLOWED THE EXPENDITURE OF RS.72,03,476/-. 13 ITA NO.1542/MDS/2016 5.2 ON APPEAL, THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) DELETED THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER BECAUSE IT WAS REVEALED THAT THE PUBLIC SECTOR UNDERTAKINGS HAD RAISED THE BILLS IN THE NAM E OF THE CUSTOMERS OF THE APPELLANT, WHOSE GOODS HAVE BEEN S TORED IN THE WAREHOUSE AND THE ASSESSEE WAS ONLY ACTING AS A N AGENT FOR ITS CUSTOMERS AND THE PAYMENTS WERE MADE BY THE ASSESSEE ON BEHALF OF ITS CUSTOMERS WHICH WAS SUBSE QUENTLY REIMBURSED. THEREFORE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS OF THE VIEW THAT THE ASSESSEE WIL L NOT BE ELIGIBLE TO DEDUCT TAX AT SOURCE UNDER SECTION 194C OF THE ACT. 5.3 THE LEARNED DEPARTMENTAL REPRESENTATIVE ARGUED IN SUPPORT OF THE ORDER OF THE LEARNED ASSESSING OFFIC ER WHILE AS THE LEARNED AUTHORIZED REPRESENTATIVE ARGUED IN SUP PORT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND REITERATED THE SUBMISSIONS MADE BEFOR E THE REVENUE AUTHORITIES ON THE EARLIER OCCASIONS. 5.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS ON RECORD. PROVISIONS OF SECT ION 194C 14 ITA NO.1542/MDS/2016 MAKES IT CLEAR THAT ANY PERSON RESPONSIBLE FOR PAYI NG ANY SUM TO ANY RESIDENT FOR CARRYING OUT ANY WORK IN P URSUANCE OF ANY CONTRACT WILL BE LIABLE TO DEDUCT TAX AT SO URCE. FROM THE FACTS OF THE CASE, IT IS NOT CLEAR ABOUT THE RE LATIONSHIP OF THE ASSESSEE WITH THE PUBLIC SECTOR UNDERTAKINGS AN D THE NATURE OF CONTRACT BETWEEN THEM. IT IS ALSO NOT CLE AR WHETHER THE ASSESSEE IS MERELY ACTING AS AN AGENT OF ITS CL IENTS OR HAS UNDERTAKEN THE WAREHOUSING FACILITIES FOR ITS CLIEN TS. FURTHER IT IS NOT REVEALED WHETHER THE CLIENTS OF THE ASSESSEE HAVE DEDUCTED TAX AT SOURCE FOR THE PAYMENT MADE FOR PRO VIDING THE WAREHOUSING FACILITY. THEREFORE, WE REMIT THE M ATTER BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER TO EXA MINE ALL THE RELEVANT FACTS AND THEREAFTER DECIDE THE ISSUE AFRE SH IN ACCORDANCE WITH LAW & MERIT. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 10 TH NOVEMBER, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER 15 ITA NO.1542/MDS/2016 # /CHENNAI, ( /DATED 10 TH NOVEMBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF .