Elgi Rubber Company Ltd., CHENNAI V. DCIT, Coimbatore

ITA 1810/CHNY/2013

• Counselvise Citation: 181021714 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 08-06-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 07-10-2013
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNANJCIT

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI ... , . , , BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.1810 /MDS./2013 ( ! '! / ASSESSMENT YEAR :2010-11) M/S.ELGI RUBBER COMPANY LTD ., NO.2000, TRICHY ROAD, SINGANALLUR, COIMBATORE 641 005. VS. DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(3) COIMBATORE. PAN AAACE 4565 F ( / APPELLANT ) ( / RESPONDENT ) #$ % & / APPELLANT BY : MR.PHILIP GEORGE, ADVOCATE '(#$ % & / RESPONDENT BY : MR.P.RADHAKRISHNAN,JCIT, D.R ) * % +, / DATE OF HEARING : 08.06.2015 -' % +, /DATE OF PRONOUNCEMENT : 05.08.2015 / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-I, COIMBA TORE DATED ITA NO.1810 /MDS/2013 2 09.07.2013 IN ITA NO.140/12-13 PASSED UNDER SEC.143 (3) READ WITH SECTION SEC. 250 OF THE ACT. 2. THE ASSESSEE HAS RAISED TWELVE ELABORATE GROUND S IN ITS APPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT:- I) THE LD. CIT (A) HAS ERRED IN UPHOLDING THE DISA LLOWANCE U/S.40(A)(IA) OF THE ACT TOWARDS PROFESSIONAL CHARG E PAID TO NON-RESIDENT IN FOREIGN CURRENCY OUTSIDE INDIA VIZ. MR.HARRY DAVIS (USA) ` 8,66,202/-, MR.ANTHONY BATTAGLIA (USA) ` 32,48,252/- AND MR.TONY (AUSTRALIA) ` 5,21,591/-. II) THE LD. CIT (A) HAS ERRED IN NOT TAKING INTO C ONSIDERATION OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT WHILE CONSIDERI NG THE PROFESSIONAL CHARGES PAID TO THE AFORESAID THREE IN DIVIDUALS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A DOMESTIC COMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURE AN D SALE OF RUBBER RETREATING MACHINERY AND RECLAIM OF RUBBER, FILED ITS RETURN OF INCOME ON 22.09.2010 ADMITTING INCOME OF ` 6,01,45,365 FOR THE ITA NO.1810 /MDS/2013 3 ASSESSMENT YEAR 2010-11. THE RETURN WAS INITIALLY P ROCESSED U/S.143(1) OF THE ACT AND SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND THEREAFTER ASSESSMENT WAS COMPLETED ON 23.01.2013. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E LD. ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PA ID AN AGGREGATE AMOUNT OF ` 47,56,025/- TO MR.HARRY DAVIS (USA) RS.8,66,202/-, MR.ANTHONY BATTAGLIA (USA) RS.32,48,252/- AND MR.TO NY (AUSTRALIA) RS.5,21,591/- FOR PROVIDING TECHNICAL SERVICE TO TH E ASSESSEE WITHOUT DEDUCTING TAX AT SOURCE. THEREFORE, THE LD. ASSESS ING OFFICER INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND ADDED THE AMOUNT OF ` 47,56,025/- TO THE INCOME OF THE ASSESSEE. ON APPEA L, THE LD. CIT (A), UPHELD THE ORDER OF THE LD. ASSESS ING OFFICER BY HOLDING THAT ALL THE AFORESAID ASSESSEE HAD RENDERE D TECHNICAL SERVICE TO THE ASSESSEE AND THEREFORE, PROVISIONS O F SECTION 195 OF THE ACT WOULD BE APPLICABLE AND ACCORDINGLY PROVISI ONS OF SECTION 40(A)(IA) WILL BE ATTRACTED. THE RELEVANT PORTION O F THE ORDER IS EXTRACTED HEREIN BELOW:- ITA NO.1810 /MDS/2013 4 6. I HAVE GONE THROUGH THE SUBMISSIONS MADE BY T HE APPELLANT AND ALSO THE ORDER OF THE ASSESSING OFFICER. DURING THE COUR SE OF APPELLATE PROCEEDINGS, THE CFO OF THE COMPANY SHRI S.R.VENKAT ACHALAM APPEARED AND FILED THE DETAILS OF CONSULTANCY FEES PAID TO M R.ANTHONY BATTAGLIA AND MS.SHARIN DAWN FARRELL. THE CFO CLARIFIED THAT THER E IS NO WRITTEN AGREEMENT REGARDING THE PROFESSIONAL CHARGES PAID T O VARIOUS CONSULTANTS. (I) MR.ANTHONY BATTAGLIA : THIS PROFESSIONAL IS A U.S. CITIZEN AND HE WAS PA ID CONSULTANCY CHARGES FROM APRIL 2009 TO DECEMBER 200 9. AS SEEN FROM THE INVOICES WHICH WERE RAISED ON 1ST OF EVERY MONTH, A N AMOUNT OF 7500 US DOLLARS WERE PAID AS CONSULTANCY FEES. THE APPELLAN T ALSO FURNISHED DETAILS OF AIR TICKET FOR MR.ANTHONY BATTAGLIA DATED 13TH J UNE 2009. AS SEEN FROM THE INVOICES FILED BY THE ASSESSEE, THE SERVICE CHA RGES WERE PAID FOR AIRCRAFT TYRE RETREADING. AS STATED BY THE CFO, IT WAS REGUL AR CONSULTATION WITH REGARD TO THE TYRE RETREADING OF AIRCRAFT. MR.ANTHO NY BATTAGLIA AS PER THE INFORMATION FILED BY THE ASSESSEE, HAS COME HERE IN JUNE AND HAS GIVEN CONSULTATION WHICH IS IN THE NATURE OF TECHNICAL FE ES. IT WAS STATED BY THE COMPANYS REPRESENTATIVE THAT HE WAS A SPECIALIST A ND A TECHNICAL PERSON IN RESPECT OF AIRCRAFT TYRES. THERE WAS NO AGREEMENT B ETWEEN MR.ANTHONY BATTAGLIA AND THE APPELLANT COMPANY TO ASCERTAIN TH E FULL DETAILS OF NATURE OF SERVICES RENDERED IN INDIA AND ALSO THE VISITS MADE BY MR.ANTHONY BATTAGLIA TO INDIA. THE SERVICES RENDERED BY MR.ANTHONY BATTA GLIA CLEARLY FALL UNDER ITA NO.1810 /MDS/2013 5 THE FEES FOR TECHNICAL SERVICES AS MENTIONED UNDER EXPLANATION 2 OF SECTION 9 OF THE INCOME TAX ACT. THE AR WAS ASKED TO FURNIS H THE DETAILS OF VISITS MADE BY MR.ANTHONY BATTAGLIA TO INDIA. EXCEPT FOR T HE AIR TICKET INVOICE DATED 13THI JUNE 2009, NO OTHER INFORMATION WAS PRO VIDED. IN THE ABSENCE OF THE AGREEMENT REGARDING CONSULTANCY FEES PAID TO MR.ANTHONY BATTAGLIA, THE PROVISION OF SECTION 9 REGARDING THE INCOME DEE MED TO ACCRUE OR ARISE IN INDIA ARE ATTRACTED. THE ADDITION MADE BY THE AS SESSING OFFICER WITH RESPECT TO THE PROFESSIONAL PAYMENTS MADE TO MR.ANT HONY BATTAGLIA IS CONFIRMED. (II) MR.HARRV DAVIS : REGARDING THE CONSULTANCY FEES PAID TO MR.HARRY D AVIS, A U.S.CITIZEN, THE COMPLETE DETAILS COULD NOT BE FU RNISHED. THE AR ONLY FURNISHED INVOICES SIGNED BY AUTHORIZED SIGNATORY M R.HARRY DAVIS. IT HAS TO BE CONSIDERED THAT THE INVOICE WAS RAISED BY MR.HAR RY DAVIS. COMING TO THE NATURE OF SERVICES RENDERED, THE INVOICE SAYS RETRE ADING SERVICE FOR THE MONTH OF ..... THE APPELLANT ALSO COULD NOT EXPLAI N THE NATURE OF SERVICES RENDERED BY MR.HARRY DAVIS IN INDIA. THERE IS NO AG REEMENT BETWEEN MR.HARRY DAVIS AND THE APPELLANT COMPANY EVEN THOUG H MONTHLY CONSULTANCY FEES WERE PAID FROM APRIL, 2009 TO DECE MBER, 2009. THE BASIS FOR FIXING THE AMOUNT OF VALUE @ 2000 US DOLLARS PE R MONTH ALSO COULD NOT BE EXPLAINED BY THE APPELLANT. THE NATURE OF SERVIC ES IS TECHNICAL IN NATURE AND COME UNDER FEES FOR TECHNICAL SERVICES RENDERED IN INDIA. THE ITA NO.1810 /MDS/2013 6 ASSESSING OFFICER AFTER DISCUSSING THE PROVISIONS O F SECTION 9 AND 40(1)(IA) HAS RIGHTLY DISALLOWED THE TECHNICAL FEE PAID TO MR .HARRY DAVIS. (IV) THE APPELLANT HAS NOT FURNISHED ANY DETAILS W ITH REGARD TO PAYMENTS MADE TO MR.TONY OF AUSTRALIA. IN THE ABSENCE OF ANY DETAILS AND THE NATURE OF PROFESSIONAL SERVICES RENDERED, THE ARRANGEMENT OF SERVICES BETWEEN THE APPELLANT AND MR.TONY, I CONFIRM THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER. THE GROUND OF APPEAL IS PARTLY ALLOWED. 5. BEFORE US, LD. A.R. COULD NOT CONTROVERT THAT T HE AFORESAID INDIVIDUALS HAD NOT RENDERED TECHNICAL SERVICE TO T HE ASSESSEE, HOWEVER HE PLEADED THAT THE REVENUE AUTHORITIES HAV E NOT LOOKED INTO THE DIRECT TAX AVOIDANCE AGREEMENT FOR MAKING THE DISALLOWANCE UNDER PROVISIONS OF THE ACT BY WHICH THE DISALLOWAN CE WOULD BE CONSIDERABLY REDUCED AND THEREFORE, REQUESTED THE M ATTER MAY BE REMITTED BACK TO THE FILE OF LD. ASSESSING OFFICER FOR CONSIDERATION OF THE SAME. LD. D.R THOUGH OPPOSED TO THE SUBMISSION S OF THE LD. A.R., COULD NOT REBUT TO THE CLAIM OF THE LD. A.R. 6. AFTER HEARING BOTH THE SIDES, WE ARE OF THE CON SIDERED VIEW THAT IN THE INTEREST OF JUSTICE THE MATTER HAS TO BE REM ITTED BACK TO THE FILE ITA NO.1810 /MDS/2013 7 OF LD. ASSESSING OFFICER TO LOOK INTO THE DOUBLE TA XATION AVOIDANCE AGREEMENT IN ORDER TO COMPUTE THE DISALLOWANCE AS P ER THE PROVISIONS OF THE ACT. ACCORDINGLY, WE REMIT BACK T HE CASE TO THE FILE OF THE LD. ASSESSING OFFICER FOR FRESH CONSIDERATIO N IN THE LIGHT OF THE OBSERVATIONS MADE HEREIN ABOVE AND THE PRAYER OF TH E LD. A.R. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 5 TH AUGUST, 2015 AT CHENNAI. SD/- SD/- ( . . . ) ( N.R.S.GANESAN ) ( . '#$ %' ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 5 TH AUGUST, 2015. K S SUNDARAM. % '+./ 0 /'+ /COPY TO: 1. #$ /APPELLANT 2. '(#$ /RESPONDENT 3. ) 1+ () /CIT(A) 4. ) 1+ /CIT 5. /4 '+5 /DR 6. 6! 7* /GF