Income Tax Officer-2(2) , Kanpur V. M/s. Mehra Brothersm , Kanpur

ITA 223/LKW/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9064 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 08-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K UPADHYAYA
• Assessee Lawyers: YOGESH AGARWAL
• Keywords: Services rendered outside India
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.223/LKW2013 ASSESSMENT YEAR:2009-10 INCOME TAX OFFICER 2(2) KANPUR V. M/S MEHRA BROTHERS 117/H-1/249, PANDU NAGAR KANPUR TAN/PAN:AAEFM9151E (APPELLANT) (RESPONDENT) ITA NO.733 & 734/LKW/2014 ASSESSMENT YEAR:2010-11 & 2011-12 INCOME TAX OFFICER 2(2) KANPUR V. M/S MEHRA BROTHERS 117/H-1/249, PANDU NAGAR KANPUR TAN/PAN:AAEFM9151E (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. K. K. UPADHYAYA, D.R. RESPONDENT BY: SHRI. YOGESH AGARWAL, ADVOCATE DATE OF HEARING: 05 01 2015 DATE OF PRONOUNCEMENT: 13 01 2015 O R D E R PER SUNIL KUMAR YADAV: THESE APPEALS ARE PREFERRED BY THE REVENUE AGAINST THE RESPECTIVE ORDER OF THE LD. CIT(A) ON COMMON GROUNDS. 2. SINCE THESE APPEALS WERE HEARD TOGETHER, THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. 3. SINCE THE REVENUE HAS CHALLENGED THE RESPECTIVE ORDER OF THE LD. CIT(A) ON SIMILAR GROUNDS, EXCEPT THE DIFFERENCE IN QUANTUM, WE PREFER TO REPRODUCE THE GROUNDS RAISED IN I.T.A. NO. 223/LKW/2013 AS UNDER:- :- 2 -: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEAL)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.15,97,674/- MADE BY THE ASSESSING OFFICER, WITHOUT APPRECIATING THE FACTS ON RECORDS. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS BY HOLDING THAT THE AMOUNT PAID TO MR. MARTIN, A NON-RESIDENT, AS COMMISSION, WHICH WAS RIGHTLY HELD BY THE ASSESSING OFFICER AS SALARY. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS BY NOT APPRECIATING THE FACT THAT IN THE LEDGER ACCOUNT OF 'FOREIGN EXP', FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT HAS BEEN SPECIFICALLY MENTIONED THAT MR. MARTIN HAS BEEN PAID SALARY OF 3200 GBP. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS BY NOT APPRECIATING THE FACT THAT THERE EXISTED AN EMPLOYER AND EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEE AND MR. MARTIN. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS BY DELETING THE ADDITION OF RS.34,37,060/- MADE BY THE ASSESSING OFFICER, WHO HAD RIGHTLY DISALLOWED THE EXPENSES INCURRED BY THE ASSESSEE ON ACCOUNT OF AIR SEA FREIGHT AND INSURANCE MARINE IN ACCORDANCE WITH THE EXPLANATION 2(III) OF SEC. 10B OF THE I.T. ACT, 1961. 6. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS BY NOT APPRECIATING THE DEFINITION OF 'EXPORT TURNOVER' AS DEFINED IN THE EXPLANATION 2[III) OF SEC. 10B OF THE I.T. ACT, 1961. 7. THAT THE ORDER OF THE LD. CIT (A)-II, KANPUR DATED 28.12.2012 NEEDS TO BE QUASHED AND THE ORDER PASSED BY THE ASSESSING OFFICER DATED 23.12.2011 BE RESTORED. 4. THE MAIN ISSUES INVOLVED IN THESE APPEALS ARE WITH REGARD TO THE NATURE OF PAYMENTS MADE TO MR. MARTIN, A NON-RESIDENT AND DEDUCTION OF :- 3 -: TDS ON THE SAME AND THE SECOND ISSUE IS WITH REGARD TO THE CLAIM OF DEDUCTION UNDER SECTION 10B OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'). 5. WITH REGARD TO THE FIRST ISSUE RELATING TO THE NATURE OF PAYMENT MADE TO MR. MARTIN, A NON-RESIDENT, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION THAT THE NATURE OF PAYMENT IS ONLY A COMMISSION PAYMENT MADE TO MR. MARTIN, A NON-RESIDENT FOR THE SERVICES RENDERED OUTSIDE INDIA AND THE SAME WAS ACCEPTED BY THE REVENUE DURING THE ASSESSMENT YEARS 2006-07 AND 2007-08. IN ASSESSMENT YEAR 2008-09, THE NATURE OF PAYMENT WAS CONSIDERED TO BE PAYMENT OF COMMISSION BY THE ASSESSING OFFICER AND THE PAYMENT WAS DISALLOWED ON NON-DEDUCTION OF TDS. 6. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) HAS ALLOWED THE PAYMENT OF COMMISSION, HAVING OBSERVED THAT THERE IS NO LIABILITY OF DEDUCTION OF TDS ON COMMISSION PAYMENT TO FOREIGN AGENT. THIS ORDER OF THE LD. CIT(A) HAS NOT BEEN CHALLENGED BY THE REVENUE, THOUGH THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) ON DIFFERENT GROUNDS. COPIES OF THE ASSESSMENT ORDER, ORDER OF THE LD. CIT(A) AND THE ORDER OF THE TRIBUNAL ARE PLACED ON RECORD AT PAGES 1 TO 17 OF THE COMPILATION OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER PLACED RELIANCE UPON VARIOUS JUDICIAL PRONOUNCEMENTS IN SUPPORT OF HIS CONTENTION THAT THE REVENUE CANNOT TAKE A VIEW CONTRARY TO THE VIEWS TAKEN IN EARLIER YEARS. 7. THE LD. D.R., ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. 8. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT FROM ASSESSMENT YEAR 2006-07 TO 2008-09 THE NATURE OF PAYMENT TO THE FOREIGN AGENT WAS CONSIDERED TO BE COMMISSION PAYMENT AND THERE WAS NO DISPUTE IN THIS REGARD IN THOSE YEARS. NOW IN THE IMPUGNED ASSESSMENT :- 4 -: YEAR, SUDDENLY THE ASSESSING OFFICER HAS TREATED THIS PAYMENT TO BE AS SALARY PAYMENT TO MR. MARTIN AND DISALLOWED THE SAME ON ACCOUNT OF NON- DEDUCTION OF TDS. THE LD. CIT(A), FOLLOWING HIS EARLIER ORDER, HAS TREATED THIS PAYMENT TO BE COMMISSION PAYMENT HAVING OBSERVED THAT SINCE IT WAS PAID TO THE FOREIGN AGENT, PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT ARE NOT APPLICABLE FOR THE REASON THAT THE COMMISSION PAID IS NOT AN INCOME CHARGEABLE TO TAX IN INDIA IN TERMS OF SECTION 195 OF THE ACT. THEREFORE, THE NATURE OF PAYMENT CANNOT BE QUESTIONED IN THIS YEAR AND IT IS TO BE TREATED AS PAYMENT OF COMMISSION TO A NON-RESIDENT AGENT FOR RENDERING SERVICES OUTSIDE INDIA. OUR ATTENTION WAS ALSO INVITED TO THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT VS. FARIDA SHOES (P.) LTD. 34 TAXMANN.COM 268 (CHENNAI) AND THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. EON TEHNOLOGY (P) LTD [2012] 246 CTR (DEL) 40, IN WHICH IT HAS BEEN HELD THAT PAYMENT MADE TO THE FOREIGN AGENT CANNOT BE DISALLOWED ON NON-DEDUCTION OF TDS UNDER SECTION 40 (A)(IA) OF THE ACT. BUT IN THE INSTANT CASE, THE ASSESSING OFFICER HAS TREATED THIS PAYMENT TO BE IN THE NATURE OF SALARY AND DISALLOWED THE SAME ON NON-DEDUCTION OF TDS WITHOUT ASSIGNING ANY REASON AS TO WHY A CONTRARY VIEW IS TAKEN IN THIS YEAR. WE ARE, THEREFORE, OF THE VIEW THAT THE PAYMENT MADE TO MR. MARTIN IS A COMMISSION PAYMENT AND SINCE IT HAS BEEN PAID TO FOREIGN AGENT FOR THE SERVICES RENDERED IN ABROAD, THE LIABILITY OF DEDUCTION OF TAX IS EXAMINED IN THE LIGHT OF THE CIRCULARS ISSUED BY THE CBDT AT DIFFERENT POINT OF TIME. SINCE THIS ASPECT WAS NOT EXAMINED BY THE REVENUE AUTHORITIES WHILE DISALLOWING THE CLAIM OF THE ASSESSEE, WE ARE OF THE VIEW THAT THIS MATTER SHOULD BE RESTORED TO THE ASSESSING OFFICER FOR RE-ADJUDICATION OF THE ISSUE AFTER TREATING THE NATURE OF PAYMENT TO BE THE PAYMENT OF COMMISSION IN THE LIGHT OF VARIOUS CIRCULARS ISSUED BY THE CBDT AND THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. EON TEHNOLOGY (P) LTD (SUPRA). :- 5 -: 9. WITH REGARD TO THE OTHER ISSUE RELATING TO DEDUCTION UNDER SECTION 10B OF THE ACT IS CONCERNED, WE FIND THAT IN THE ASSESSMENT YEAR 2008-09, THE TRIBUNAL HAS SET ASIDE THIS ISSUE AND RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RE-COMPUTE THE DEDUCTION ALLOWABLE TO THE ASSESSEE UNDER SECTION 10B OF THE ACT IN THE LIGHT OF THE JUDGMENT OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. TATA ELXSI LTD., 17 TAXMANN.COM 100. THE LD. D.R. HAS FURTHER CONTENDED THAT IN THE IMPUGNED ASSESSMENT YEAR, THE ISSUE IS SAME, THEREFORE, THE ORDER OF THE LD. CIT(A) MAY KINDLY BE SET ASIDE WITH A DIRECTION TO RE-ADJUDICATE THE ISSUE AFRESH IN THE LIGHT OF THE JUDGMENT OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. TATA ELXSI LTD. (SUPRA). 10. HAVING CAREFULLY EXAMINED THE ORDER OF THE LD. CIT(A), WE FIND THAT AN IDENTICAL ISSUE WAS RESTORED BACK TO THE ASSESSING OFFICER WITH A DIRECTION TO RE-ADJUDICATE THE SAME IN THE LIGHT OF THE JUDGMENT OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. TATA ELXSI LTD. (SUPRA) IN ASSESSMENT YEAR 2008-09, THEREFORE, FOLLOWING THE SAME, WE SET ASIDE THIS ISSUE IN THIS ASSESSMENT YEAR AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO RE-ADJUDICATE THE SAME IN THE LIGHT OF THE AFORESAID JUDGMENT OF THE HON'BLE KARNATAKA HIGH COURT. 11. ACCORDINGLY, THE APPEALS OF THE REVENUE STAND ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:13 TH JANUARY, 2015 JJ:0501 :- 6 -: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR