M/s. OCL India Limited, Sundergarh V. DDIT(International Taxation), Bhubaneswar

ITA 185/CTK/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3767 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 20-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N B SOM
• Assessee Lawyers: SOUMEN ADAK A SHISH PODDAR
• Keywords: Permanent establishment

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAV AN KUMAR GADALE, JM ./ ITA NO. 185 / CTK /20 1 5 ( / ASSESSMENT YEAR : 20 12 - 20 1 3 ) M/S OCL INDIA LIMITED , ADMINISTRATIVE BUILDING, AT/PO: RAJGANPUR, DIST: SUNDERGARH, ODISHA VS. DDIT (INTERNATIONAL TAXATION), BHUBANESWAR - 751007 ./ ./ PAN/GIR NO. : A AACO 1354 J ( / APPELLANT ) .. ( / RESPONDENT ) /A S SESSEE BY : SHRI SOUMEN ADAK/ A SHISH PODDAR, AR /REVENUE BY : SHRI N.B.SOM, SR. DR / DATE OF HEARING : 29 / 0 6 /201 7 / DATE OF PRONOUNCEMENT 07 / 0 7 /201 7 / O R D E R PER SHRI PAV AN KUMAR GADAL E, JM : TH E ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDER OF CIT(A) - 1 , BHUBANESWAR , PASSED IN IT.APPEAL NO. 0262 /201 3 - 1 4 , DATED 27.01.2015 , PASSED U/S.201(1)/201(1A) OF THE INCOME TAX ACT. 2. THE ASSESSEE HAS RAISED THE SOLE SUBSTANTIVE GROUND THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF AO FOR TREATING THE ASSESS EE IN DEFAULT U/S.201(1)/201(1A) OF THE ACT IN RESPECT OF PAYMENT OF EXPORT COMMISSION OF RS.28,65,906/ - . 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN BUSINESS OF MAN UFACTURING OF CEMENT AND REFRACTORY PRODUCTS AND THE AO FOUND THAT THE ASSESSEE PAID AN AMOUNT OF RS.28,65,906/ - AS COMMISSION ON 26.9.2011 TO M/S INT ERNATIONAL LINK CORPORATION, IRAN, A COMPANY REGISTERED IN TEHRAN WITHOUT DEDUCTING THE TAX AT SOURCE AS P ER SECTION 195 OF THE ACT, 1961. SUBSEQUENTLY NOTICE U/S.201(1)/201(1A) OF THE ACT ITA NO. 185 / 201 5 2 WAS ISSUED TO THE ASSESSEE COMPANY AND LD.AR OF THE ASSESSEE APPEARED AND SUBMITTED THE INFORMATION. THE EXPLANATIONS OF LD. AR THAT THE ASSESSEE HAS ENGAGED ONE AGENT FOR SALE OF ITS CEMENT OUTSIDE INDIA AND CARRIED OUT VARIOUS FUNCTION S AND AGREEMENT WAS SIGNED WITH THE INTERNATIONAL LINK CORPORATION LTD. FOR A PERIOD OF 5 YEARS FOR PROMOTING SALES. AS PER AGREEMENT , THE AGENT SHALL RECEIVE 12% OF FOB OF VALUE OF EXPORT O F ORDERS DIRECTLY AND INDIRECTLY AFTER REALISATION OF DUES FROM THE BUYERS, WHEREAS THE CONTENTION OF LD. AR THAT THERE IS NO PERMANENT ESTABLISHMENT OR BUSINESS CONNECTION IN INDIA, THEREFORE, ANY TRANSACTION MADE IN OUT OF THE COUNTRY. FURTHER IT WAS BRO UGHT TO THE KNOWLEDGE OF THE AO THAT THERE IS NO DOUBLE TAXATION AGREEMENT BETWEEN INDIAN AND IRAN AND ALSO LD. A O DEALT ON THE PROVISIONS OF SECTION 5(2)(B) & 9(1)(I) OF THE ACT IN RESPECT OF SOURCE OF INCOME IN INDIA. THE AO FOUND THAT THE AGENT IS ENGAG ED WITH BUSINESS ACTIVITY IN INDIA ON RECEIVING COMMISSION OUTSIDE THE COUNTRY. FURTHER, SERVICES ARE NOT IN PARTICULAR OUTSIDE INDIA BUT ALSO IN RESPECT OF SERVICES WITHIN INDIA. THEREFORE, WITH THIS OBSERVATION, THE AO FOUND THAT THE COMMISSION IS TAXAB LE U/S.5(2)(B) R.W.S . SEC. 9(1) OF THE ACT AND OBSERVED THAT THE ASSESSEE IS IN DEFAULT FOR NOT DEDUCTING TAX U/S.195(1) AMOUNTING TO RS.11,46,362/ - AND INTEREST PAYABLE U/S.201(1A) RS.2,75,127/ - AND PASSED THE ORDER U/S.201(1) & 201(1A) OF THE ACT, DATED 30 .09.2013. 4 . AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), LD. CIT(A) CONSIDERED THE GROUNDS AND THE SUBMISSIONS OF THE ASSESSEE AND FINDINGS OF THE AO AND FURTHER AT PAGE 2 OF THE ORDER ITA NO. 185 / 201 5 3 REFLECTED THE WRITTEN SUBMIS SIONS FILED ON 27.1.2015 AND RELIED ON THE VARIOUS JUDICIAL DECISIONS AND CONCLUDED THAT THE AO HAS RIGHTLY MADE CALCULATION OF DEMAND U/S.201(1)/201(1A) OF THE ACT AND DISMISSED THE APPEAL. 5 . AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE HAS FILED AN A PPEAL BEFORE THE TRIBUNAL. 6. IN THE APPELLATE PROCEEDINGS, THE LD. AR ARGUED THAT THE AGENT RECEI VES INCOME OUTSIDE THE COUNTRY AND THERE IS NO DOUBLE TAXATION AGREEMENT BETWEEN INDIA AND IRAN. LD. AR FURTHER SUBMITTED THAT THE SERVICES ARE NOT IN THE NAT URE OF FEE FOR TECHNICAL SERVICES AND EXCLUSIVELY ACCRUED AND RECEIVED OUTSIDE INDIA AND SUPPORTED HIS ARGUMENTS WITH THE COPY OF LETTER OF APPOINTMENT OF AGENT AND PAPER BOOK WITH DETAILS AND PRAYED FOR ALLOWING THE APPEAL . 7. CONTRA, LD. DR SUBMITTED TH AT THE ASSESSEE HAS ENTERED INTO AGREEMENT WITH THE MANAGING DIRECTOR OF THE COMPANY AND AS PER THE APPOINTMENT LETTER DATED 21.11.2011, MR. JAGDISH KATARA IS TREATED AS AN AGENT AND AS PER THE INSTRUCTIONS , THE PAYMENTS ARE MADE TO DIFFERENT PERSONS ACCOU NTS. FURTHER, LD. DR RELIED ON THE PROVISIONS OF SECTION 9(1)( VI I) IN RESPECT OF FEES FOR TECHNICAL SERVICES AND THE DECISION OF HONBLE DELHI HIGH COURT WHERE THE CONCEPT OF INCOME ACCRUE D AND PAYMENT HAS BEEN DEALT EXHAUSTIVELY AND OPPOSED THE GROUNDS . 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES MATERIAL ON RECORD AND JUDICIAL DECISIONS CITED . PRIMA FA CIE, THE ASSESSEE COMPANY IS A MANUFACTURER OF CEMENT AND REFRACTORY PRODUCTS ITA NO. 185 / 201 5 4 AND FOR SALE OF CEMENT IT HAS ENGAGED AN A GENT OUTSIDE THE COUNTRY FOR ITS SALES. LD. ARS CON T ENTION THAT SINCE THE PAYMENTS ARE MADE OUTSIDE THE COUNTRY AND IT IS NOT TAXABLE IN INDIA AND THEREFORE NO TDS IS MADE . LD. DRS CONTENTION THAT THE NO APPLICATION IS MADE BY THE ASSESSEE WITH ASSESSI NG AUTHORITY FOR NON - DEDUCTION OF TDS OR LOWER DEDUCTION OF TDS. THE FACT REMAINS AS PER THE APPOINTMENT LETTER DATED 21.11.2011, THE AGENT SHALL RENDER THE SERVICES AS MENTIONED AT PAGE 1 OF THE LETTER. ON A QUERY FROM THE BENCH TO PRODUCE THE AGREEMENT, LD. AR WAS NOT IN A POSITION TO SUBMIT THE INFORMATION AND FURTHER THE CONTENTS OF THE LETTER RELIED BY THE LD. AR COULD NOT GIVE THE COMPLETE PICTURE OF RENDERING SERVICES AS PER CLAUSE 2 OF THE APPOINTMENT LETTER THE AGENT SHALL ALSO PERFORM SUCH DUTIES FROM TIME TO TIME IN REGARD TO COLLECTION OF THE MARKET INTELLIGENCE AGENTS REPORT , GENERAT ING ENQUIRIES AND ACTIVITIES RELATING TO THE EXECUTION OF THE ORDER. LD. AR EXPLAINED THAT IT IS ONLY A GENERAL CLAUSE AND THE AGENT IS EXCLUSIVELY WORKS FOR EXECUTI NG THE ORDER , AND SELLING AND FURTHER THE COMMISSION IS PAID AFTER REALISATION OF THE AMOUNTS FROM THE BUYER. THE L D. ARS SUBMISSION S ARE NOT CONVINCING THOUGH THE LD. AR EXPLAIN THAT THE AGENT IS NOT CONNECTED WITH THE INDIAN BUSINESS OPERATIONS AND THE RE IS NO BUSINESS ESTABLISHMENT IN INDIA AND NO PERMANENT ESTABLISHMENT BUT IT IS DIFFICULT TO UNDERSTAND WHEN THE ASSESSEE ENTERED INTO AGREEMENT AND HAS RESIDUAL CLAUSE MENTIONED AT PARA 2 OF THE LETTER DATED 21.11.2011 WHERE VARIOUS OTHER SERVICES ARE B EING RENDERED BY THE AGENT, WHICH REQUIRES SOME TECHNICAL EXPERTISE. FURTHER, L D. AR COULD NOT SATISFY WITH EXPLANATION ON AGENTS EXCLUSIVE ITA NO. 185 / 201 5 5 SERVICE S OF RENDERING OUTSIDE INDIA AND ALSO AGENT IS NOT CONNECTED IN RESPECT OF MANUFACTURING OR ANY OTHER ACTIVIT Y IN INDIA. FURTHER, WE SUPPORT OUR VIEW RELY ING ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF HAVELLS INDIA LTD., 352 ITR 376 (DELHIHC) , WHERE IT WAS HELD THAT THE EXPORT ACTIVITY HAVING TAKEN PLACE OR HAVING BEEN FULFILLED IN INDIA, THE SOURCE OF INCOME WAS LOCATED IN INDIA AND NOT OUTSIDE. MERE FACT THAT THE EXPORT PROCEEDS EMANATED FROM PERSONS SITUATED OUTSIDE INDIA DID NOT CONSTITUTE THEM AS THE SOURCE OF INCOME. IN THE PRESENT CASE , THE EXPORTS ARE FROM INDIA AND EXPORTS PROCEEDS ARE RECEIVED FROM FOREI GN COUNTRY AFTER REALISATION FROM BUYERS AND AGENT IS PAID COMMISSION ON FIXED PERCENTAGE. ACCORDINGLY, C ONSIDERING THE APPARENT FACTS, MATERIAL ON RECORD AND THE JUDICIAL DECISIONS, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF CI T(A) AND UPHELD THE SAME. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 06/07 / 201 7 . SD/ - ( N. S. SAINI ) SD/ - ( PA V AN KUMAR GADALE ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DATED 06 / 0 7 /201 7 . . / PKM , SENIOR PRIVATE SECRETARY / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT - M/S OCL INDIA LIMITED, ADMINISTRATIVE BUILDING, AT/PO: RAJGANPU R, DIST: SUNDERGARH, ODISHA 2. / THE RESPONDENT - DDIT(IT), BHUBANESWAR 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//