M/s. Koshambh Multitred Pvt. Ltd., Baroda V. The ACIT, Circle-1(2), Baroda

ITA 1571/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8868 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 19-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Assessee Lawyers: M.G. PATEL
• Keywords: Double taxation relief; Permanent establishment; Non-deduction of tax; Assessment record; TDS; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 195

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.1571/AHD/2014 ( / ASSESSMENT YEAR : 2009-10) M/S.KOSHAMBH MULTITRED PVT.LTD. 301-302, GAMTHI COMPLEX OPP. PRODUCTIVITY ROAD BARODA 390 005 / VS. THE ACIT CIRCLE-1(2) BARODA # ./ ./ PAN/GIR NO. : AAACL 7744 A ( #& / APPELLANT ) .. ( '#& / RESPONDENT ) #&( / APPELLANT BY : SHRI M.G. PATEL, AR '#& )( / RESPONDENT BY : SHRI JAGDISH CIT, DR *+ ), / DATE OF HEARING 20/03/2017 -./0 ), / DATE OF PRONOUNCEMENT 24/03/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX-I, BARODA [CIT IN SHORT] DATED 21/03/2014 FOR THE ASSESSMENT YEAR (AY) 2009-10 PASSED UNDER S.263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS 'THE ACT'). ITA NO.1571/AHD /2014 M/S.KOSHAMBH MULTITRED PVT.LTD. VS. ACIT ASST.YEAR 2009-10 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE R EAD AS UNDER:- 1. THE LEARNED COMMISSIONER OF INCOME TAX-I, BAROD A HAS ERRED IN LAW AND ON FACTS OF THE CASE IN HOLDING TH E ORDER PASSED BY THE ASSESSING OFFICER AS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 2. THE LEARNED COMMISSIONER OF INCOME TAX-I, BAROD A HAS ERRED IN SETTING ASIDE THE ORDER OF ASSESSMENT FOR ASST.YEAR 2009-10 U/S.263 OF THE I.T.ACT AND DIRECTING TO MAK E DISALLOWANCE OF COMMISSION FOR NON-DEDUCTION OF TAX THOUGH THE COMMISSION OF RS.36,69,848/- WAS PAID TO THE COMMISSION AGENTS FOR RENDERING THE SERVICES OF SEC URING ORDERS FOR THE PROJECT OF THE COMPANY FROM PLACES O UTSIDE INDIA AND SUCH COMMISSION AGENTS ARE NEITHER RESIDE NTS OF INDIA NOR HAD ANY BUSINESS CONNECTION OR PERMANENT ESTABLISHMENT IN INDIA AND AS SUCH THE COMMISSION A GENTS WERE LIABLE TO TAX UNDER THE TAX LAWS OF THEIR RESP ECTIVE COUNTRIES AS PER DTAA AS PER THE PROVISIONS OF SECT ION 90(2) OF THE I.T.ACT. 3. THE LEARNED COMMISSIONER OF INCOME TAX-I, BAROD A HAS ERRED IN HOLDING THAT TAX WAS DEDUCTIBLE FROM THE COMMISSION PAID TO SAID COMMISSION AGENTS AND SINCE THE TAX WAS NOT DEDUCTED, RELEVANT COMMISSION PAYMENTS WERE NOT ALLOWABLE UNDER THE ACT. 3. BRIEFLY STATED, FOR THE RELEVANT AY 2009-10, THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME AT RS.5,35, 43,190/-. THE CASE WAS SUBJECTED TO SCRUTINY AND ASSESSMENT ORDER UNDE R S.143(3)OF THE ACT WAS PASSED VIDE ORDER DATED 03/11/2011. THE CASE RECORDS PERTAINING TO THE AFORESAID ASSESSMENT WAS CALLED FOR AND EXAMINE D BY THE ITA NO.1571/AHD /2014 M/S.KOSHAMBH MULTITRED PVT.LTD. VS. ACIT ASST.YEAR 2009-10 - 3 - COMMISSIONER OF INCOME-TAX IN EXERCISE OF POWERS VE STED UNDER S.263 OF THE ACT. ON PERUSAL OF THE ASSESSMENT RECORDS, IT WAS FOUND BY THE CIT THAT THE ASSESSEE HAS INTER ALIA PAID COMMISSION OF RS.36,69,848/- IN AGGREGATE TO CERTAIN FOREIGN ENTITIES FOR AVAILING CERTAIN SERVICES. AS PER THE CIT, ASSESSEE TOOK APLEA THAT THESE FOREIGN ENT ITIES DID NOT HAVE ESTABLISHMENT IN INDIA AND HENCE IN VIEW OF CBDT CI RCULAR NO.786 DATED 07/02/2000, TDS WAS NOT DEDUCTIBLE. THE CIT, HOWEV ER, DID NOT FIND MERIT IN THE OBJECTIONS OF THE ASSESSEE AND SET ASI DE THE ASSESSMENT ORDER WITH A DIRECTION TO REFRAME THE SAME AFTER PROPER E NQUIRIES ON THE ISSUE INVOLVED. 4. AGGRIEVED BY THE AFORESAID ORDER OF THE CIT PASS ED UNDER S.263 OF THE ACT DATED 21/03/2014, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. THE LD.AR FOR THE ASSESSEE MR.M.G.PATEL SUBMITTE D AT THE OUTSET THAT THE DETAILS OF THE AFORESAID COMMISSION EXPENS ES WERE SPECIFICALLY ENQUIRED BY THE ASSESSING OFFICER (AO) IN THE COURS E OF THE ASSESSMENT VIDE NOTICE DATED 28/06/2011 PLACED IN THE PAPER-BO OK. IN RESPONSE THERETO, THE ASSESSEE FILED A REPLY BEFORE AO VIDE LETTER DATED 05/08/2011, WHEREBY DETAILS OF COMMISSION PAID TO VARIOUS PARTI ES WERE PROVIDED. THE NATURE OF SERVICES RENDERED WAS GIVEN AND SIMUL TANEOUSLY IT WAS SPECIFICALLY POINTED OUT THAT TDS HAS EITHER BEEN D EDUCTED OR NOT DEDUCTED ON CASE TO CASE BASIS WITH REFERENCE TO EA CH COMMISSION ITA NO.1571/AHD /2014 M/S.KOSHAMBH MULTITRED PVT.LTD. VS. ACIT ASST.YEAR 2009-10 - 4 - PAYMENTS. IT WAS THUS CONTENDED THAT THE AO ACCEPT ED THE COMMISSION EXPENSES AFTER MAKING PROPER ENQUIRY ON THE ISSUE A ND THEREFORE THE ORDER OF THE AO CANNOT BE TERMED AS ERRONEOUS IN SO FAR A S PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 6. THE LD.DR RELIED UPON THE ORDER OF THE CIT. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND THE ORDER OF THE CIT WHICH IS SOUGHT TO BE IMPUGNED. 8. THE ASSESSEE IS IN THE PRESENT CASE HAS AGITATED THE ACTION OF THE CIT IN INVOKING REVISIONAL POWER VESTED UNDER S.263 OF THE ACT ON EXPENDITURE INCURRED TOWARDS COMMISSION PAYMENTS TO FOREIGN AGENTS. IT IS THE CASE OF THE ASSESSEE THAT THE COMMISSION EXPENDITURE WAS ALLOWED AFTER PROPER ENQUIRY. IT IS FURTHER CASE O F THE ASSESSEE THAT POWERS UNDER S.263 OF THE ACT CANNOT BE INVOKED FOR THE REASONS NARRATED IN THE OBJECTIONS MADE BEFORE THE CIT. IN THIS R EGARD, AT THE OUTSET, WE REFER TO THE REPLY FILED BY THE ASSESSEE DATED 05/0 8/2011 IN THE COURSE OF ASSESSMENT PROCEEDINGS. ON PERUSAL OF THE DETAILS OF COMMISSION EXPENSES AS TABULATED IN THE AFORESAID REPLY, WE OB SERVE THAT THE ASSESSEE HAS MERELY GIVEN THE ELEMENTARY DETAILS TOWARDS COM MISSION EXPENSES WITH REFERENCE TO EXPORT INVOICE NUMBER ETC. THE R EASONS ARISEN FOR NON- DEDUCTION OF TDS CITED IS THAT PAYMENT WAS MADE TO NON-RESIDENT. THUS, ITA NO.1571/AHD /2014 M/S.KOSHAMBH MULTITRED PVT.LTD. VS. ACIT ASST.YEAR 2009-10 - 5 - ON A BARE PERUSAL OF THE REPLY, IT IS MANIFEST THAT NO REPLY WAS FILED CITING REASONS FOR NON-APPLICABILITY OF SECTION 195 OF THE ACT TOWARDS REMITTANCE OF COMMISSION PAYMENTS TO A NON-RESIDENT OUTSIDE INDIA. IN THE ABSENCE OF ANY REASONS FOR NON-DEDUCTION OF TDS ON PAYMENT OF COMMISSION TO NON-RESIDENT, IT CANNOT BE SAID THAT THE AO HAD ANY OCCASION TO EXAMINE THE ISSUE TOWARDS THE APPLICABI LITY OF SECTION 195 OR OTHERWISE AND APPLY ITS MIND THEREON. THE APPLICAB ILITY OR OTHERWISE OF SECTION 195 TO SUCH PAYMENTS HAS A DIRECT BEARING O N THE ASSESSMENT OF THE ASSESSEE. THEREFORE, CLEARLY THE VITAL ASPECT TOWARDS LIABILITY OF COMMISSION EXPENSES HAS REMAINED UNTOUCHED IN THE A SSESSMENT PROCESS RENDERING THE RESULTANT ORDER PASSED AS ERRONEOUS A S WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN THE CIRCUMSTANCES , THE ORDER PASSED BY THE AO IN DISCHARGE OF QUASI-JUDICIAL FUNCTION IS C LEARLY ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AS NOTE D. THE ACTION OF CIT THUS CANNOT BE TERMED AS OUTSIDE THE BOUNDS OF LAW. CERTAIN EXPLANATIONS HAVE BEEN GIVEN BY THE ASSESSEE ON MER ITS TO JUSTIFY THAT THE ASSESSEE IS NOT UNDER STATUTORY OBLIGATION TO DEDUC T TDS ON SUCH COMMISSION PAYMENTS. HOWEVER, SUCH EXPLANATION WIL L BECOME RELEVANT ONLY AT THE STAGE OF MAKING ASSESSMENT THEREON AFTE R REQUISITE ENQUIRY IN THIS REGARD. THUS, AT THE THRESHOLD FOR INVOKING T HE JURISDICTION, THE CONCLUSION OF THE CIT THAT ASSESSMENT ORDER IS ERRO NEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE CANNOT BE FAULTED I N THE LIGHT OF EXPLANATIONS SOUGHT TO BE GIVEN ON MERITS AT LATER POINT OF TIME, THE ITA NO.1571/AHD /2014 M/S.KOSHAMBH MULTITRED PVT.LTD. VS. ACIT ASST.YEAR 2009-10 - 6 - CORRECTNESS OF WHICH IS YET TO BE TESTED. HENCE, A N OBJECTIVE ANALYSIS ON FACTS AND CIRCUMSTANCES OF THE CASE, THE CONCLUSION IS INESCAPABLE THAT THE ASSESSMENT ORDER PASSED IS ERRONEOUS AS WELL AS PRE JUDICIAL TO THE INTERESTS OF THE REVENUE AND THEREFORE RIGHTLY SET ASIDE BY THE CIT IN EXERCISE OF POWER CONFERRED UNDER S.263 OF THE ACT. HENCE, WE FIND THAT THE ACTION OF THE LD.CIT IS BACKED BY THE AUTHORITY OF LAW. WE THUS DECLINE TO INTERFERE WITH IT. HOWEVER, WE MAY HAST EN TO ADD AT THIS JUNCTURE THAT OUR OBSERVATIONS ARE LIMITED TO THE C ORRECTNESS OF ASSUMPTION JURISDICTION UNDER S.263 OF THE ACT AND SHOULD NOT IN ANY MANNER BE READ AS OUR EXPRESSION ON MERITS. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. THIS ORDER PRONOUNCED IN OPEN COURT ON 24/ 03 /2017 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 24/ 03 /2017 4..*,.*../ T.C. NAIR, SR. PS ITA NO.1571/AHD /2014 M/S.KOSHAMBH MULTITRED PVT.LTD. VS. ACIT ASST.YEAR 2009-10 - 7 - !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '#& / THE RESPONDENT. 3. 567, 8, / CONCERNED CIT 4. 8, ( ) / THE CIT(A)-I, BARODA 5. 9:;,*67 , 67 0 , 5 / DR, ITAT, AHMEDABAD 6. ;<+ / GUARD FILE. / BY ORDER, '9,, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 20.3.17 (DICTATION-PAD 14- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20.3.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.24.3.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 24.3.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER