ITO 8(2)(1), MUMBAI V. SHAMROCK PHARMACHEMI P. LTD., MUMBAI

ITA 2279/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9960 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 28-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESHPANDE
• Assessee Lawyers: BHARAT L GANDHI
• Keywords: Double taxation relief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 2279/MUM/2016 (ASSESSMENT YEAR: 2010-11) INCOME TAX OFFICER - 8(2)(1) ROOM NO. 447B, 4TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 VS. M/S. SHAMNROCK PHARMACHEMI PVT. LTD. 83-E, HANSRAJ PRAGJI BLDG. OFF DR. E. MOSSES ROAD WORLI, MUMBAI 400018 PAN AAACS6290H APPELLANT RESPONDENT APPELLANT BY: SHRI SAURABH DESHPANDE RESPONDENT BY: SHRI BHARAT L. GANDHI DATE OF HEARING: 12.03.2018 DATE OF PRONOUNCEMENT: 16.03.2018 O R D E R PER SHAMIM YAHYA, AM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-8, MUMBAI DATED 27.01.2016 FOR A.Y. 2010-11. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READS A S UNDER: - 1. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LA W IN DELETING THE DISALLOWANCE MADE BY THE AO OF RS.1,05,30,824/-, UN DER SECTION 40(A)(IA) FOR NOT DEDUCTING THE TDS AS PER THE PROV ISIONS OF SEC.195 OF THE INCOME TAX ACT, WITHOUT PROPERLY APP RECIATING THE FACTUAL AND LEGAL MATRIX AS CLEARLY BROUGHT OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. 2. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.1,05,30,824/- WITHOUT APPRECIATING T HE FACT THAT AS PER AMENDED PROVISION OF SEC.195, THE ASSESSEE H AS TO FILE AN APPLICATION BEFORE THE AO FOR DETERMINATION OF SUM AND RATE OF TAX AT WHICH TAX WOULD BE DEDUCTED ON SUCH FOREI GN REMITTANCE AND THE SAID EXERCISE HAS NOT BEEN CARRIED OUT BY T HE ASSESSEE. ITA NO. 2279/MUM/2016 M/S. SHAMNROCK PHARMACHEMI 2 3. THE LD. CIT(A)'S ORDER IS CONTRARY TO LAW AND F ACTS AND DESERVES TO BE SET ASIDE.' 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE CO URSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE HAS D EBITED OVERSEAS COMMISSION AMOUNTING TO ` 1,05,30,824/- TO RECIPIENTS IN FOUR COUNTRIES. THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS NOT FOLLOWED THE PROVISIONS OF SECTION 195 OF THE INCOME TAX ACT (HE REINAFTER THE ACT) AND HAS NOT DEDUCTED ANY TAX AT SOURCE AT THE TIME OF C REDIT. THE ASSESSEES CONTENTION THAT THE PAYMENT WAS MADE TO OVERSEAS RE CIPIENTS AND WAS NOT TAXABLE UNDER THE DTAA WITH THE RESPECTIVE COUNTRIE S WAS REJECTED BY THE AO. UPON ASSESSEES APPEAL THE LEARNED CIT(A) DIREC TED FOR DELETION OF THE ADDITION BY HOLDING THAT IT WAS NOT NECESSARY TO DE DUCT TAX AT SOURCE WHEN THE SAID INCOME WAS EXEMPT IN THE HANDS OF THE RECI PIENTS. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECO RD. WE FIND THAT IN THIS CASE OVERSEAS COMMISSION HAS BEEN PAID TO R ECIPIENTS IN SEVERAL COUNTRIES. THE ASSESSEES CLAIM IS THAT THE SAID PA YMENT IS EXEMPT UNDER THE DTAA. WE FIND THAT NEITHER THE AO NOR THE CIT(A ) HAS EXAMINED THE NATURE OF SERVICES AGAINST WHICH THE COMMISSION HAS BEEN PAID. WE ALSO NOTE THAT THERE IS NO REFERENCE TO THE RELEVANT CLA USE OF THE DTAA UNDER WHICH THE PAYMENT HAS BEEN CLAIMED TO BE EXEMPT. TH E LEARNED COUNSEL FOR THE ASSESSEE WAS ALSO NOT IN A POSITION TO EXPL AIN AS TO WHAT WERE THE NATURE OF SERVICES FOR WHICH THE COMMISSION WAS PAI D. IN OUR CONSIDERED OPINION IT IS NECESSARY IN THIS CASE TO EXAMINE THE NATURE OF SERVICES RENDERED BY THE OVERSEAS PARTIES FOR WHICH COMMISSI ON HAS BEEN PAID. IT IS ONLY AFTER EXAMINING THE NATURE OF SERVICES, THE EX EMPTION OR OTHERWISE OF THE PAYMENT FROM TDS PROVISIONS CAN BE EXAMINED. BO TH THE COUNSEL FAIRLY AGREED THAT IN SUCH SITUATION IT IS NECESSARY TO RE STORE THE ISSUE TO THE FILE OF THE AO. ACCORDINGLY THE ISSUE IS REMITTED TO THE FILE OF THE AO FOR PROPER FINDING. THE AO IS DIRECTED TO EXAMINE THE NATURE O F SERVICES FOR WHICH COMMISSION HAS BEEN PAID. HE WILL ALSO EXAMINE THE RELEVANT PROVISIONS OF DTAA WITH RESPECTIVE COUNTRIES AND THEREAFTER DECID E THE ISSUE AS PER LAW. ITA NO. 2279/MUM/2016 M/S. SHAMNROCK PHARMACHEMI 3 NEEDLESS TO ADD THAT THE ASSESSEE SHOULD BE PROVIDE D REASONABLE OPPORTUNITY OF HEARING. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2018. SD/ - SD/ - (PAWAN SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 16 TH MARCH, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -8, MUMBAI 4. THE PR. CIT - 3, MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.