DCIT, CHENNAI V. M/s. Poompuhar Shipping Corpn. Ltd., CHENNAI

ITA 1613/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64506 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 17-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Permanent establishment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT ME MBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NOS.1612 & 1613/MDS/2012 (ASSESSMENT YEARS: 2004-05 & 2009-10 ) DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-V(2), 121, UTHAMAR GANDHI SALAI, CHENNAI-600 034. VS. M/S. POOMPUHAR SHIPPING CORPORATION LTD., 692, ANNA SALAI, 4 TH FLOOR, NANDANAM, CHENNAI-600 035. PAN:AAACP4383J (APPELLANT) (RESPONDENT) APPELLANT BY : DR. S.MOHARANA, CIT DR RESPONDENT BY : MR. R.VIJAYARAGHAVAN, ADVOCATE DATE OF HEARING : 1 ST NOVEMBER, 2012 DATE OF PRONOUNCEMENT : 9 TH NOVEMBER, 2012 O R D E R PER BENCH : THE PRESENT TWO APPEALS I.E. ITA NO.1612/MDS/2012 RELEVANT TO THE ASSESSMENT YEAR 2004-05 AND ITA NO.1613/MDS/2012 RELEVANT TO THE ASSESSMENT YEAR 20 09-10 HAVE BEEN FILED BY THE REVENUE IMPUGNING THE ORDERS OF THE CIT(A)V, CHENNAI BOTH DATED 28.5.2012 FOR THE RESP ECTIVE ASSESSMENT YEARS. SINCE THE ISSUE INVOLVED IN BOTH THE APPEALS IS COMMON, THEY ARE TAKEN UP TOGETHER FOR ADJUDICATION BY THIS SINGLE ORDER. ITA NOS. 1612 & 1613/MDS/2012 2 2. THE REVENUE HAS ASSAILED THE ORDER OF THE CIT(A ) ON THE GROUND THAT THE CIT(A) HAS ERRED IN HOLDING THA T THE ASSESSEE IS NOT OBLIGED TO DEDUCT TAX AT SOURCE ON DRY DOCK EXPENSES AS THE EXPENSE WAS NOT FOR TECHNICAL SERV ICES AND AS THE CHINESE CONCERN DID NOT HAVE A PERMANENT ESTABLISHMENT IN INDIA. 3. DURING THE COURSE OF ASSESSMENT , THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE ASSESSEE HAS NOT DE DUCTED TAX AT SOURCE FOR DRY DOCKING EXPENSES AND CHARTER HIRE PAYMENT ETC. THE EXPENSES CLAIMED TOWARDS DRY DOCK ING AND CHARTER HIRE PAYMENTS ARE TO THE TUNE OF ` 1020.41 LAKHS AND ` 5891 LAKHS RESPECTIVELY. THE SAID PAYMENTS HAVE BE EN MADE TO PERSONS OUTSIDE INDIA WITHOUT DEDUCTING TD S AS REQUIRED UNDER SECTION 40(A)(IA) OF THE ACT. SIMILA RLY, FOR THE ASSESSMENT YEAR 2009-10, THE ASSESSING OFFICER OBSE RVED THAT THE EXPENSES CLAIMED TOWARDS DRY DOCKING EXPEN SES AMOUNTING TO ` 19,71,17,138/- MADE TO PERSON OUTSIDE INDIA WITHOUT DEDUCTING TDS AS REQUIRED UNDER THE PROVISI ONS OF SECTION 40(A)(IA) OF THE ACT. ITA NOS. 1612 & 1613/MDS/2012 3 4. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) V IDE ORDER DATED 28.5.2012 DECIDED THE ISSUE IN APPEAL IN FAVO UR OF THE ASSESSEE. THE CIT(A) HELD THAT SIMILAR ISSUE HAS BE EN DECIDED IN FAVOUR OF THE ASSESSEE BY HIS PREDECESSO R IN APPEALS RELEVANT TO THE ASSESSMENT YEAR 2003-04, 20 05-06 AND 2008-09. THERE IS NO CHANGE IN THE FACTS IN THE PRESENT CASE, THEREFORE, THE APPEAL IS ALLOWED. 5. NOW, THE REVENUE HAS COME IN SECOND APPEAL BEF ORE THE TRIBUNAL IMPUGNING THE ORDER OF CIT(A). THE LEA RNED AR SUBMITTED AT THE OUTSET THAT AN IDENTICAL ISSUE IN CASE OF THE ASSESSEE ITSELF HAS BEEN DECIDED BY THE TRIBUNAL I N FAVOUR OF THE ASSESSEE IN ITA NO.1252 TO 1254/MDS/2011RELEVAN T TO THE ASSESSMENT YEAR 2003-04. THE DR CONCEDED TO THE FA CT THAT THE ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR O F THE ASSESSEE BY THE TRIBUNAL IN THE AFOREMENTIONED APPE ALS. THE RELEVANT EXTRACT OF THE ORDER OF THE TRIBUNAL IN IT A NOS.1252 TO 1254/MDS/2011TITLED ACIT VS. M/S. POOMPUHAR SHIPPIN G CORPORATION LTD., DECIDED ON 5.7.2012 IS REPRODUC ED HEREIN BELOW:- ITA NOS. 1612 & 1613/MDS/2012 4 8. WE HAVE HEARD RIVAL SUBMISSIONS MADE BY THE PARTIES AND HAVE GONE THROUGH THE ORDER OF THE CIT(A) AS WELL AS JUDGEMENTS RELIED ON BY THE COUNSEL FOR THE ASSESSEE. WE ARE OF THE CONSIDERED OPINION THAT DRY DOCK EXPENSES WERE PAID BY THE ASSESSEE TO THE CHINESE SHIP YARD FOR CARRYING OUT MAINTENANCE AND REPAIRS TO THE SHIP TO MAKE IT SEAWORTHY. THE CHINESE SHIP YARD DOES NOT HAVE PERMANENT ESTABLISHMENT IN INDIA, THEREFORE THE ENTIRE AMOUNT OF DRY DOCK EXPENSES PAID TO CHINESE SHIP YARD COMPANIES IS NOT TAXABLE IN INDIA. SINCE NO PART OF THE PAYMENT IS TAXABLE I N INDIA, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE ON SUCH PAYMENTS. OUR VIEW IS FURTHER FORTIFIED BY THE DECISION OF THE DELHI BENCH OF T HE TRIBUNAL IN THE CASE OF LUFTHANSA CARGO INDIA (P) LTD. VS. DCIT REPORTED AS 91 ITD 133, WHEREIN, IT HAS BEEN HELD THAT PAYMENT FOR REPAIRS MADE OUTSIDE INDIA, THEREFORE SUCH ITEMS WOULD FALL WITH IN THE PURVIEW OF EXCLUSIONARY CLAUSE OF SECTION 9(1)(VII)(B). THUS, EVEN ASSUMING THAT PAYMENT FOR SUCH MAINTENANCE REPAIRS WERE IN THE NATURE OF FEES FOR TECHNICAL SERVICES, IT WOULD NOT BE CHARGEABLE TO TAX. THE TRIBUNAL FURTHER HELD THAT THE PAYMENTS FOR REPAIRS OF AIRCRAFTS WERE MADE FOR EARNING INCOME FROM SOURCES OUTSIDE INDIA AND ITA NOS. 1612 & 1613/MDS/2012 5 WERE THEREFORE, TO BE EXCLUDED FROM FEES FOR TECHNICAL SERVICES UNDER SECTION 9(1)(VII)(B). THE CIT(A) IN THE IMPUGNED ORDER HAS OBSERVED THAT UNDER ARTICLE 7 OF DOUBLE TAXATION AVOIDANCE ACT AGREEMENT BETWEEN INDIA AND CHINA, THE BUSINESS PROFITS OF CHINESE RESIDENT IS TAXABLE ONLY IN CHINA UNLESS IT CARRIES ON BUSINESS THROUGH PERMANENT ESTABLISHMENT IN INDIA. THE CIT(A) RELIED ON THE ORDER OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF LUFTHANSA CARGO INDIA (P) LTD.(SUPRA) AND HAS DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION MADE TOWARDS DRY DOCK EXPENSES. WE FIND THAT IN THE INSTANT CASE SHIPS WERE SENT BY THE ASSESSEE OUTSIDE INDIA (I.E TO CHINESE SHIP YARDS) FOR MAINTENANCE AND REPAIRS ON WORK CONTRACT BASIS. SINCE THERE WAS NO PERMANENT ESTABLISHMENT OF CHINESE SHIP YARDS IN INDIA, THEREFORE, NO TAX AT SOURCE IS TO BE DEDUCTE D ON THE PAYMENTS MADE BY THE ASSESSEE TO CHINESE SHIP YARDS. WE, THEREFORE, UPHOLD THE FINDING OF TH E CIT(A) ON THIS ISSUE. ACCORDINGLY, THE APPEALS OF THE REVENUE ARE DISMISSED. 6. SINCE THE CONTROVERSY INVOLVED IN THE PRESENT AP PEALS IS IDENTICAL TO THE ONE ALREADY DECIDED BY THE CO-ORDI NATE BENCH OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE IN EARL IER ITA NOS. 1612 & 1613/MDS/2012 6 ASSESSMENT YEARS, WE RESPECTFULLY FOLLOW THE EARLIE R ORDER OF THE TRIBUNAL. ACCORDINGLY, WE UPHOLD THE FINDINGS O F THE CIT(A) ON THIS ISSUE AND DISMISS BOTH THE APPEALS FILED BY THE REVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, TH E 9 TH DAY OF NOVEMBER, 2012 AT CHENNAI. SD/- SD/- ( N.S. SAINI ) ( VIKAS AWASTHY ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 9 TH NOVEMBER, 2012. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.