DCIT, CHENNAI V. Naser Tanning Co., CHENNAI

ITA 178/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9489 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 01-02-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: RAGHAV PRASAD B ACA
• Keywords: Permanent establishment; Non-deduction of tax

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 178/MDS/2016 / ASSESSMENT YEAR : 2012-13 THE DEPUTY COMMISSIONER OF INCOME-TAX, NON-CORPORATE CIRCLE-5, CHENNAI 600 006. APPELLANT) V. M/S. NASER TANNING CO., NO.10, KUMARAPPA STREET, PERIAMET, CHENNAI 600 003. PAN AAAFN0380N RESPONDENT) / APPELLANT BY : SHRI A.V.SREEKANTH, JCIT / RESPONDENT BY : SHRI RAGHAV PRASAD B, ACA ! / DATE OF HEARING : 30.03.2016 '# ! / DATE OF PRONOUNCEMENT: 27.04.2016 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 2 6.11.2015 - - ITA 178/16 2 FOR THE ASSESSMENT YEAR 2012-13. 2. THE GROUND RAISED BY THE REVENUE IN THIS APPEAL IS AS UNDER: 2.1 THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSI NG OFFICER TO DELETE THE ADDITION OF ` 37,39,848/- MADE ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE BY THE ASSESSEE ON PAYMENT MADE TO OVERSEAS COMMISSION AGENTS U/S.40(A)(I) OF THE I.T. ACT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE SAID TO BE PAID FOREIGN AGENCY COMMISSION FOR WHICH TDS WAS NO T DEDUCTED. THERE WAS DISALLOWANCE U/S.40(A)(IA) OF THE ACT. ON APPEAL, THE COMMISSIONER OF INCOME-TAX(APPEALS) AL LOWED THE APPEAL OF THE ASSESSEE BY PLACING RELIANCE ON THE O RDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.2227/MDS/ 2013 DATED 18.8.2014, WHEREIN IT WAS HELD AS UNDER: WE FIND THAT A CO-ORDINATE BENCH OF THE TRIBUNAL IN CASE OF M/S. FARIDA SHOES P. LTD. IN ITA NO.159/MDS/2013, DT. 11.04.2013 HAS DECIDED AN IDENTICAL ISSUE AGAINST THE REVENUE. THERE IS NO DISTINCTION POINTED ON FACTS. THUS, WE HOLD THAT T HE COMMISSIONER OF INCOME-TAX(APPEALS) HAS RIGHTLY DELETED THE DISALLOWANCE OF ` 35,93,820/- MADE BY THE ASSESSING OFFICER PERTAINING TO FOREIGN AGENCY COMMISSION PAYMENTS U/S.40(A)(IA) FOR NON-DEDUCTION - - ITA 178/16 3 OF TDS. THE REVENUES GROUNDS ARE REJECTED. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. IN OUR OPINION, THE NATURE OF SERVICES RENDERED BY THE IS NOT AVAILABLE ON RECORD. THE COMMISSIONER OF IN COME- TAX(APPEALS) HAS NOT EXAMINED THE NATURE OF SERVICE S AND HENCE, AT THIS STAGE, WE ARE NOT IN A POSITION TO A PPRECIATE THE CORRECT APPLICATION OF PROVISIONS OF THE ACT. FURT HER, THE TRIBUNAL IN THE CASE OF ACIT V. EURO LEDER FASHIONS LTD. (15 6 ITD 208), CONSIDERED SIMILAR ISSUE. VIDE ORDER DATED 16.10.2 015, THE TRIBUNAL HAS HELD AS FOLLOWS : SECTION 40(A)(I) MAKES IT CLEAR THAT THE DISALLOWANCE SHALL BE MADE IN CASE OF ANY PAYMENT MADE WHICH IS CHARGEABLE UNDER THIS ACT AND IS PAYABLE OUTSIDE INDIA OR IN INDIA TO A NON- RESIDENT NOT BEING A COMPANY OR TO A FOREIGN COMPANY ON WHICH TAX IS DEDUCTIBLE AT SOURCE. THEREFORE, THE FIRST CONDITION REQUIRED TO BE FULFI LLED IS THE PAYMENT MUST BE CHARGEABLE UNDER THE ACT, THEREAFTER THE QUESTION OF DEDUCTION OF TAX WILL ARISE. SECTION 195(1) ALSO PRESCRIBES THAT TAX HAS TO BE DEDUCTED WHILE MAKING PAYMENT TO NON-RESIDENT WHICH IS CHARGEABLE UNDER THE PROVISIONS OF THE ACT. THEREFORE, THE CONDITION PRECEDENT FOR - - ITA 178/16 4 DEDUCTION OF TAX IS THAT INCOME MUST BE CHARGEABLE UNDER THE PROVISIONS OF THE ACT. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAS NOT PRODUCED THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH FOREIGN AGENTS TO SHOW THAT THEY WERE APPOINTED TO ACT AS COMMISSION AGENTS OUTSIDE INDIA IN THEIR RESPECTIVE COUNTRIES. AS SEEN FROM THE ORDERS OF THE LOWER AUTHORITIES, THE ASSESSEE HAS NOT DISCHARGED THE BURDEN CAST UPON IT TO SHOW THE NATURE OF SERVICES RENDERED BY NON-RESIDENT AGENT. IF THERE ARE SERVICES RENDERED BY NON-RESIDENTS, WHO HAVE NO PERMANENT ESTABLISHMENT IN INDIA OR HAVE ANY BUSINESS CONNECTION IN INDIA, BY VIRTUE OF WHICH THE PAYMENT OF COMMISSION ACCRUED OR AROSE IN INDIA THEN, IT IS EXEMPTED, IF THE ASSESSEE IS ABLE TO PROVE THAT THE SERVICES WERE RENDERED BY THOSE NON-RESIDENTS ABROAD. IN THE PRESENT CASE, THE ASSESSEE HAD NOT ESTABLISHED THAT THE NON-RESIDENT HAD RENDERED SERVICES ABROAD AND THERE WAS NO BUSINESS CONNECTION IN INDIA BY PRODUCING RELEVANT RECORDS, VIZ., EITHER AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THEM OR CORRESPONDENCE TOOK BETWEEN THE PARTIES. WITHOUT EXAMINING THESE DETAILS, ONE IS NOT IN A POSITION TO DECIDE THE NATURE OF SERVICES RENDERED BY THE NON-RESIDENT AGENT. THEREFORE, IT IS APPROPRIATE TO REMIT THE ENTIRE IS SUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO THE ASSESSEE TO PROVE THAT IT WAS SALE S COMMISSION TOWARDS PROCUREMENT OF ORDERS FROM ABROAD. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED - - ITA 178/16 5 FOR STATISTICAL PURPOSES. IN VIEW OF THE ABOVE, WE ARE INCLINED TO REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER ON SIMILAR DIR ECTION. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY, THE 27 TH OF APRIL, 2016 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 27 TH APRIL, 2016. MPO* 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF.