DCIT, CHENNAI V. Velti India Pvt Ltd., CHENNAI

ITA 1651/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8238 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 30-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 17-07-2015
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: JHARNA B HARILAL
• Keywords: Double taxation relief; Condonation of delay
• Section: 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , ! ' # , $ %& BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ ITA NO. 1651/MDS/2015 & C.O.NO.111/MDS/2015 / ASSESSMENT YEAR : 2010-11 THE DEPUTY COMMISSIONER OF INCOME-TAX, CORPORATE CIRCLE-1(1), CHENNAI-34. ( /APPELLANT) VS M/S. VELTI INDIA PVT. LTD. (AIR2WEB INDIA P. LTD, UNIT NO.1 & 2, 1 ST FLOOR, PINNACLE BLDGS., INTL. TECH PARK, CSIR, TARAMANI. PAN AACCA8496P ( /RESPONDENT/CROSS-OBJECTOR) / APPELLANT BY : SHRI A.B.KOLI, JCIT / RESPONDENT BY : SMT. JHARNA B. HARILAL, CA / DATE OF HEARING : 30.12.2015 ! / DATE OF PRONOUNCEMENT : 06.01.2016 ' / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THE APPEAL BY THE REVENUE AND THE CROSS OBJECTIO N BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMM ISSIONER OF INCOME-TAX(APPEALS) DATED 23.3.2015 FOR THE ASSESSM ENT YEAR - - ITA 1651 & CO 111/15 2 2010-11. 2. THERE IS A DELAY OF 19 DAYS IN FILING THE CROSS- OBJECTION BEFORE THE TRIBUNAL. THE ASSESSEE HAS FILED AN AFF IDAVIT FOR CONDONATION OF DELAY STATING THAT DUE TO NON-AVAILA BILITY OF THE AUTHORIZED PERSON TO SIGN NECESSARY DOCUMENTS, THE CROSS OBJECTION WAS FILED BELATEDLY. WE HAVE GONE THROUG H THE AFFIDAVIT FILED BY THE ASSESSEE AND WE ARE OF THE OPINION THA T THERE IS GOOD AND SUFFICIENT REASON FOR FILING THE CROSS-OBJECTIO N BELATEDLY. ACCORDINGLY, THE DELAY IS CONDONED AND THE CROSS-OB JECTION IS ADMITTED FOR ADJUDICATION. 3. THE FIRST GROUND IN REVENUES APPEAL IS WITH REG ARD TO DELETING THE DISALLOWANCE MADE U/S.40(A)(I) IN RESP ECT OF CARRIER PAYMENTS MADE TO M/S. CLIKATEL, SOUTH AFRICA WITHOU T DEDUCTION OF TAX AT SOURCE. 4. WE HAVE HEARD BOTH THE PARTIES. IN OUR OPINION, THE SAME ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO.1030/MDS/2013 & CO NO.146/MDS/ DATED 27.12.2014, WHEREIN THIS TRIBUNAL HAS GIVEN THE FINDING AS FOLLOWS : 7. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES - - ITA 1651 & CO 111/15 3 AND THE DECISIONS RELIED ON. THE COMMISSIONER OF IN COME TAX (APPEALS) HAS ELABORATELY CONSIDERED THE FACTS, SUBMISSIONS OF THE ASSESSEE AND THE CONTENTIONS OF THE ASSESSING OFFICER AS TO WHETHER FEE PAID BY THE ASS ESSEE TO CLICKATEL, SOUTH AFRICA IS FOR TECHNICAL SERVICES O R NOT AND WHETHER ANY TDS IS REQUIRED TO BE MADE ON SUCH PAYM ENT OBSERVING AS UNDER:- 6.2 I HAVE PERUSED THE OBSERVATIONS OF THE AO . AN D THE WRITTEN SUBMISSIONS OF THE AR OF THE APPELLANT IN T HIS REGARD . I T I S S EE N F R OM THE FACTS O F THE CASE THAT THE NATURE OF SERVICES RENDERED BY THE NON-R ESIDEN T I . E. M/S. CLICKATEL, AS A CARRIER, IS ONLY TO TRANSM I T T HE B U L K SM S . THE NATURE OF SERVICE REQUIRE NO TECHNICAL KNOWLEDGE AND W H A T IS R E ND ERED I S JUST TRANSMISSION OF DATA,WHICH REQUIRES NO TECHN I CA L SKILL . T HE C A RR IER IS JUST A MEDIUM FOR SENDING THE BULK SMS AND A S SUCH CANNO T B E CONSIDERED T O BE R E NDERING ANY TECHN I CAL SERVICE . HOWEVER , TH E AO HAS CONS I D E R E D T H E PAYMENT MADE TO M/S . CLICKATEL, RESIDING IN SOUT H AF R I C A , AS T ECH N I C AL S E R VICE AND DISALLOWED A SUM OF ` 51,97,532 /- U /S 40 ( A )(I) F OR NO N- DEDUCT I ON OF TDS. WHEREAS THE APPE L LANT CON T E N D E D THA T T HE SE RVI CE RENDERED BY THE CARRIER IS NOT A TECHNICAL SERVICE AND H EN CE N O D I SA L L O W ANCE IS REQUIRED TO BE MADE. 6.3 IN ORDER TO DETERMINE WHETHER THE SERVICE S R E N D ERED BY T H E N O N- RESIDENT CARRIER COMES UNDER TECHNICAL SERVICES , T H E P RO V I S I O NS O F D OUB LE TAXAT I ON AVOIDANCE 'AGREEMENT (DTAA) NEED TO BE L OO K E D IN TO . W H E N T H E APPELLANT ENTERS INTO A TRANSACTION WITH A NON-RESIDE NT , T H E P R OV I SIO NS OF THE INCOME TAX ACT OR THE DOUBLE TAXATION AVOIDANCE AGR EEM E NT ( DTAA) WHICHEVER IS FAVOURABLE SHALL APPLY. AS PER D TAA BETWEEN INDIA AND SOUTH AFRICA, THE FEE FOR TECHNICAL SERVICE HAS BEEN DEFINED AS , ' PA YM E N TS OF ANY KI ND RECEIVED AS A CONSIDERATION FOR SERVICES OF A M ANA GER I A L , T E C HN ICAL O R CONSULTANCY NATURE, INCLUDING THE PROV I SION OF SERVI CE S BY T EC H N I CA L O R OTHE R PERSONNEL, BUT DOES NOT INCLUDE PAYMENTS FOR SERV I C E S M E N T I O N E D I N A RTICLE 15 . ' IT IS SEEN FROM THE FACTS OF THE ' CASE THAT THE NAT U RE OF SERVICES R ENDERED BY THE NON- RESIDENT CARRIER WOULD NOT BE COVERE D B Y T H E ABOVE DEFINITION. THE DECISION RENDERED BY THE HON ' BLE S U PR E M E C O U RT IN T HE CASE OF BHARTI CELLULAR LTD, PROVIDES . THAT FOR A S ER VI C E T O B E LAB E L LED AS T E C HNICAL IN NATURE ' HUMAN INTERVENTION IS NECESSA RY . I N A S I MI L A R CASE , 319 ITR 139, THE HON'BLE DELHI HIGH COURT HAS HE L D TH AT AS T HESE S E RV I CE S D O NOT I NVOLVE HUMAN INTERVENTION, THESE CANNOT BE R E GA R DE D A S F EE FO R - - ITA 1651 & CO 111/15 4 T ECHNICAL SERVICE AS CONTEMPLATED UNDER THE INCOME T AX LA W S . 6 . 4 FURTHER, IT IS ALSO NOTICED THAT, FEE FOR TECHNIC A L SE R VI CE A P A R T FROM OTHER CONDITIONS, SHALL FULFILL THE REQUIREMEN T OF ' M A KE A VA I L A BL E ' . TH E SE R VICES ARE CONSIDERED TO BE 'MAKE AVAILABLE' W H E R E THE RECIPIENT O F SU CH S ERVICE IS AT T HE LIBERTY TO USE THE TECHNICAL KNOWLED G E , S KILL S A N D P R OC ESS I N HI S OWN R I GHT . THIS VIEW HAS BEEN UPHELD IN T HE CASE OF NQA Q UA LITY S Y STEMS REGISTRAR LTD. VS . DCIT (2004) 92 TTJ 946 . IN THE VI E W O F T H E D E C I S I O N S M EN T I ONE D SUP RA , I AM OF THE CONSIDERED OPINION THAT THE SER V ICES REN D E RE D B Y T H E N O N- R ES ID ENT CARRIER DO NOT FALL , UNDER THE CLAUSE ' FEE F O R T E CH N I CA L S E RVI C E ' ; 6.5 F UR TH E R, AFT ER H AVING GONE THROUGH THE FACTS OF THE CASE, I AM OF THE C ONS IDE R E D OPI N I O N THAT AO WAS ' NOT JUSTIF I ED IN INVOKING THE PROVISIONS U/S 40(A)(I ) , O N THE P AYMENT MADE TO M/S. CLICKATEL A . NON- RESIDENT CARRIER, F O R THE F OLL O W ING R EASO N S : . A) T HE NO N-R ESIDENT CARRIER WOULD GET PAYMENT FOR TRANSMITTING THE BULK ' S MS DA T A . AS TH E SERVICES ARE RENDERED OUTSIDE . INDIA THE PROVIS I O N S OF SE C T I O N 5 CANN O T BE APP L IED TO THE PAYMENT MADE T O THE NON- RESIDENT CARRIER S O A S T O M AKE IT T A X ABLE IN I N DIA. IT IS ALSO SEEN THAT THE NO N-R ESIDENT CAR R IER D O E S N OT H AV E ANY P ERMANENT ESTABLISHMENT IN IND I A . FURTHER , IN O R DER T O A TTR ACT SECTI O N 19 5 , THE SERV I CES BY THE NON-RESIDENT CARRIER SHOULD HAVE BEEN R E ND E R ED I N I N DI A A N D ALSO SHOULD HAVE BEEN USED I N INDIA . ' IT IS TO BE NOTED TH A T SE C TION 1 95 O F TH E ACT HAS TO BE READ ALONG WITH THE CHARGING SECTIONS 4, 5 A N D 9 OF TH E AC T A N D T HE PROVISIONS OF THE TAX TREATIES AND THE COMBINED READING OF T HE AFO R ESA I D SECTIONS CLEARLY IND I CATE THAT UN L ESS THE INCOME I S CH ARGE A BL E TO TA X I N I ND I A, THERE I S NO OBLIGAT I ON TO W I THHOLD T HE TAX. B) T H E AO H AS VI EWED THAT BOARD'S CIRCU L AR , 786 DATED 7 . 2.2000 HAS BEEN WITHDRA WN AND T H E R EFORE I T CANNOT BE RELIED UPON FURTHER . S I NCE THE LAW R ELATED TO W I T HHOLDING OF T A X U/S 195 OF THE ACT HAS NOT BEEN CHANGED EVEN AFTER W IT H DRAWA L OF THE A BOVE C I RCULAR ISSUED BY THE . CBDT THE AO'S V I EW I S NOT A C CE P T AB L E . 6 . 6 IN V I E W O F THE ' D ISC U SS I ON MADE IN THE ABOVE PARAS, - - ITA 1651 & CO 111/15 5 THE AO IS N OT JUS T I FIE D I N M AK I N G T HE D ISALLOWANCE U/S 40(A)(I) AS THE PAYMENT MADE TO M/ S . CLIC K A T E L, N O N- R ESIDENT CARRIER IS NOT CHARGEABLE TO TAX IN INDIA. T HERE F ORE T H E AO I S DIRECTED TO DELETE THE ABOVE DISALLOWANCE OF ` 51 , 9 7 , 532 . / - U /S 40(A)(I) OF THE ACT. THIS GROUND OF APPEA L IS ALLOWED. 8. ON GOING THROUGH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), WE FIND THAT THE NATURE O F SERVICES RENDERED BY NON-RESIDENT I.E. M/S. CLICKATEL IS ONL Y TO TRANSMIT BULK SMS. THE NATURE OF SERVICE PROVIDED B Y CLICKATEL REQUIRES NO TECHNICAL KNOWLEDGE AND WHAT WAS RENDERED WAS JUST TRANSMISSION OF DATA WHICH REQUIR ES NO TECHNICAL SKILL. THE FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS) THAT CARRIER WHICH IS A MEDIUM FOR SE NDING BULK SMS AND AS SUCH CANNOT BE CONSIDERED TO BE RENDERING ANY TECHNICAL SERVICES. THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT CLICKATEL WHICH IS A NON- RESIDENT CARRIER RENDERED SERVICES OUTSIDE INDIA AN D NO PART OF THE PAYMENT MADE TO CLICKATEL IS CHARGEABLE TO T AX IN INDIA. THE COMMISSIONER OF INCOME TAX (APPEALS) ALS O FOLLOWED THE DECISION OF HONBLE SUPREME COURT IN T HE CASE OF CIT VS.BHARTI CELLULAR LTD. (330 ITR 239 ) ON TH E ISSUE. THE HONBLE DELHI HIGH COURT THE CASE OF CIT VS. BH ARTI CELLULAR LTD. (319 ITR 139) HELD THAT THESE SERVICE S DO NOT INVOLVE HUMAN INTERVENTION AND THESE SERVICES CANNO T BE REGARDED AS FEE FOR TECHNICAL SERVICES. THE HONBLE MADRAS HIGH COURT IN THE CASE OF VERIZON COMMUNICATIONS LT D. VS. ITO IN T.C.(APPEAL) NOS. 147 TO 149 OF 2011 AND 230 OF 2012 DATED 7.11.2013 HELD THAT COLLECTION OF FEES F OR USAGE OF STANDARD FACILITY WOULD NOT AMOUNT TO PAYMENT MA DE FOR PROVIDING TECHNICAL SERVICES. IN THE CIRCUMSTANCES, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE DECI SION OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN HOLDING THA T PAYMENT MADE BY THE ASSESSEE TO CLICKATEL IS NOT FE ES FOR TECHNICAL SERVICES AND NO TDS IS REQUIRED TO BE MAD E. IN VIEW OF THE ABOVE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. - - ITA 1651 & CO 111/15 6 5. THE NEXT GROUND IN REVENUES APPEAL IS WITH REGA RD TO DELETING THE ADDITION OF ` 1.02. CRORES MADE BY THE ASSESSING OFFICER TOWARDS INCOME ACCRUED NOT OFFERED TO TAX. 6. IN OUR OPINION, THIS ISSUE WAS ALSO CONSIDERED B Y THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO.1030/MDS/2013 & CO NO.146/MDS/ DATED 27.1 2.2014, WHEREIN IT WAS HELD AS UNDER : 13. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTH ORITIES AND DECISIONS RELIED ON. ON READING OF THE ASSESSME NT ORDER AS WELL AS ORDER OF COMMISSIONER OF INCOME TA X (APPEALS), WE FIND THAT ASSESSEE RECEIVED ADVANCE INCOME FROM ITS CUSTOMERS AND WHENEVER SERVICES WER E PROVIDED BY THE ASSESSEE, ASSESSEE ADJUSTS THE ADVA NCES RECEIVED FROM CUSTOMERS AND RECOGNIZES THE INCOME I N THE YEAR IN WHICH SERVICES WERE RENDERED. HOWEVER, THE ASSESSING OFFICER TAXED THE ADVANCES RECEIVED BY TH E ASSESSEE AND THE COMMISSIONER OF INCOME TAX (APPEAL S) DELETED THE SAID ADDITION OBSERVING AS UNDER:- 7.2 I HAVE CONSIDERED THE AO'S OBSERVATIONS AND T HE AP P ELLANT S SUBM IS SIONS IN THIS REGARD . S I NCE THE APPELLANT M A I NT A INS B O O KS O N A CCRU AL S YS T E M, INCOME SHA L L BE RE C OGNIZED ONLY WHE N IT ACCR U E S . IN T H E GIVE N C ASE , T HE INCOME ACCRUES ONLY WHEN THE APPELLANT S E NDS THE R E QUIRE D NO . O F SMS . THEREFORE, THE SERV I CE C HA R GES RECEIVED IN ADVANCE FO R T HE S ER VICE T O BE R ENDERED IN FUTURE YEARS ARE NOT LIABLE TO TAX IN T H E Y E A R O F RE C E I PT . ONL Y ON COMPLETION OF THE SERV I CE , THE APPELLANT HAS R I G HT OVER T HE A M O U NT THA T W AS RECEIVED IN ADVANCE. . IN V IEW OF THE ABOVE, TH E AC TI O N O F T H E A O IS NO T JUSTIFIED IN MAKING THE ABOVE DISALLOWANCE OF ` 1,3 3 , 0 1 , 684 /- AN D HENC E DIREC T ED TO BE DELETED . TH I S GROUND OF APPEAL IS ALLOWED . - - ITA 1651 & CO 111/15 7 14. ON READING OF THE ABOVE ORDER, WE DO NOT FIND A NY GOOD REASON TO INTERFERE WITH THE FINDINGS OF THE COMMIS SIONER OF INCOME TAX (APPEALS). THUS, THE GROUND OF APPEAL RA ISED BY THE REVENUE ON THIS ISSUE IS REJECTED. IN VIEW OF THE ABOVE DECISION OF THIS TRIBUNAL, WE CONFIRM THE FINDING OF THE CIT(APPEALS) AND DISMISS THIS GROUND OF APPE AL OF THE REVENUE IS DISMISSED. 15. SINCE THE CROSS OBJECTION FILED BY THE ASSESSE E IS ONLY IN SUPPORT OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), IT HAS BECOME INFRUCTUOUS. 16. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, TH E 6 TH OF JAN, 2016 AT CHENNAI. SD/- SD/- ( '# $%& ' ) ( ' & ( ) ) *+,-..-/-01234-54-6-37 *+,-234-5889-4 :7 % '; /JUDICIAL MEMBER ';<=>>8?2@-2@A1BC14 '% /CHENNAI, D' /DATED, THE 6 TH JAN., 2016. MPO* 'E FGHG /COPY TO: /APPELLANT / /RESPONDENT / I*7 / CIT(A) / I /CIT GJ$ K /DR / $LM /GF.