DCIT, CHENNAI V. Matrimony Com Pvt. Ltd., CHENNAI

ITA 2441/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96471 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 30-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-09-2014
• Court: TRIBUNAL
• Department Lawyers: JOE SEBASTIAN
• Keywords: Double taxation relief; Services rendered outside India

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . , ! ' . #$ , % & BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.2441/MDS./2014 ( / ASSESSMENT YEAR :2008-09) DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(1), CHENNAI. VS. M/S.MATRIMONY .COM PVT. LTD., 94,TVH BELICAA TOWERS, 10 TH FLOOR, TOWER-II, MRC NAGAR, MANDAVELI, CHENNAI 600 028. PAN AADCM 0845 M ( '( / APPELLANT ) ( )*'( / RESPONDENT ) / APPELLANT BY : MR.JOE SEBASTIAN, CIT D.R / RESPONDENT BY : MR.S.P.CHIDAMBARAM ADVOCATE / DATE OF HEARING : 30.09.2015 /DATE OF PRONOUNCEMENT : 20.11.2015 + / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-I, CHENNA I DATED 25.06.2014 IN ITA NO.874/2010-11/A-1 PASSED UNDER S EC.143(3) READ WITH SEC. 250 OF THE ACT. ITA NO.2441 /MDS/14 2 2. THE REVENUE HAS RAISED THREE ELABORATE GROUNDS IN ITS APPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE REVENUE I S AGGRIEVED BY THE ORDER OF THE LD. CIT (A), WHO HAD DELETED THE DISAL LOWANCE OF WEBHOSTING AND MARKETING EXPENSES TO THE TUNE OF ` 6,15,45,661/- MADE U/S./40(A)(IA) R.W.S 195 OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A COMPANY, ENGAGED IN THE BUSINESS OF MATRIMONIAL AN D OTHER ONLINE SERVICES, FILED ITS RETURN ON 30.09.2008 CLAIMING L OSS OF ` 31,31,22,190/-. SUBSEQUENTLY, THE RETURN WAS TAKEN FOR SCRUTINY AND ASSESSMENT U/S.143(3) OF THE ACT WAS COMPLETED ON 3 1.12.2010 WHEREIN THE LD. ASSESSING OFFICER MADE CERTAIN DIS ALLOWANCES AMONGST WHICH ONE OF THE DISALLOWANCES WAS MADE WIT H RESPECT TO WEBHOSTING AND MARKETING EXPENSES, AGGREGATING TO ` 6,15,45,661/-. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, I T WAS OBSERVED BY THE LD. ASSESSING OFFICER THAT THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE FOR PAYMENTS MADE IN RESPECT OF WEBHOSTIN G CHARGES OF ` 3,81,31,236/- AND MARKETING EXPENSES OF ` 2,34,14,425/- AGGREGATING TO ITA NO.2441 /MDS/14 3 ` 6,15,45,661/-. ON QUERY BY THE LD. ASSESSING OFFICER, THE ASSESSEE HAD EXPLAINED THAT THIS PAYMENT WAS REIMBURSEMENT O F EXPENSES TO THE ASSESSEES SUBSIDIARY COMPANY ABROAD FOR PAYMEN T MADE BY THEM ON BEHALF OF THE ASSESSEE COMPANY FOR SERVICES RENDERED OUTSIDE INDIA. HENCE, PROVISIONS OF SECTION 195 OF THE ACT WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE COMPANY. HO WEVER, THE LD. ASSESSING OFFICER WAS OF THE OPINION THAT THE PROVI SIONS OF SECTION 195(3) OF THE ACT WOULD BE APPLICABLE, THEREFORE IN VOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND DISA LLOWED THE AMOUNT OF ` 6,15,45,661/-. ON APPEAL, THE LD. CIT (A) DELETED THE ADDITION MADE BY THE LD. ASSESSING OFFICER BY OBSERVING AS U NDER:- 6.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE LD.A.R. WITH REGARD TO WEBHOSTING CHARGES, THE APPE LLANT SOUGHT THE SERVICES OF MIS. INFONAUTS, USA, A SUBSIDIARY OF TH E APPELLANT, WHOSE BUSINESS IS MANAGEMENT OF HOSTING, TO PROVIDE HOSTI NG FACILITIES IN THEIR COMPUTERS WHICH CAN BE USED BY THE APPELLANT FOR DE VELOPMENT OF WEBSITE. PAYMENTS MADE FOR HOSTING WEB SITES IS NOT FTS OR R OYALTY. IT IS ONLY REIMBURSEMENT OF THE AMOUNT WHICH HAS BEEN PAID BY, INFONAUTS, USA. THEREFORE, IT WILL, NOT ATTRACT ANY TDS PROVISIONS. WITH REGARD TO MARKETING EXPENSES ALSO, IT IS OBSERVED THAT THESE EXPENSES W ERE REIMBURSED TO THE SUBSIDIARY COMPANY OF THE, APPELLANT OUTSIDE INDIA AND IT WILL NOT ATTRACT TDS PROVISIONS. THE PARTIES DO NOT HAVE ANY PERMANENT E STABLISHMENT IN INDIA. THE PAYMENT IS NOT IN THE NATURE OF ROYALTY OR FOR ANY TECHNOLOGY TRANSFER. ITA NO.2441 /MDS/14 4 THE SERVICE CHARGES SO EARNED BY THE NON-RESIDENT E NTITIES ARE BUSINESS PROFITS. AS PER THE DOUBLE TAXATION AVOIDANCE AGREE MENT BETWEEN INDIA AND USA, THE PAYMENTS MADE REPRESENTS ONLY BUSINESS PROFITS AS PER RELEVANT ARTICLES OF THE DTAA WHICH CAN BE TAXED IN THE CONTRACTING STATE ONLY. THE HONBLE SUPREME COURT IN THE CASE OF GE I NDIA TECHNOLOGY CENTRE PRIVATE LIMITED VS. CIT HAS HELD THAT IN THE CASE WHERE REMITTANCE IS NOT CHARGEABLE IN INDIA THEN THERE IS NO QUESTION O F TAX AT SOURCE BEING DEDUCTED. SINCE THE TAX AT SOURCE IS NOT REQUIRED T O BE DEDUCTED, SECTION 40(A)(I) WILL NOT BE APPLICABLE RELIANCE IS ALSO PL ACED ON THE JURISDICTIONAL TRIBUNALS DECISIONS IN THE FOLLOWING CASES:- 1. ITO VS. MIS. FAIZAN SHOES PRIVATE LTD ITA NO.2 095/MD/2Q12 ITAT D BENCH, CHENNAI. 2. ACIT VS. FARIDHA SHOES PRIVATE LIMITED ITA. NO . 359/MDS/2013 ITAT A BENCH, CHENNAI. 3. M/S.PRAKASH IMPEX VS. ACIT ITA NO.08/MDS/2012 ITAT CHENNAI A BENCH. 4. M/S. RENA (MADRAS) LTD VS. ITO -ITA NO.106/MDS/2 011 ITAT CHENNAI A BENCH. 5. M/S.BRAKES INDIA LIMITED VS. DCIT (LTU) ITA NO .266/MDS./2012 ITAT CHANNEL C BENCH. 6. ACIT VS. TAMILNADU NEWSPRINTS AND PAPERS LIMITED ITA NO.555/MDS/2011 - ITAT CHENNAI A BENCH. 6.2.1 IN VIEW OF ABOVE DISCUSSION, THE QUESTION O F MAKING TDS DOES NOT ARISE AND DISALLOWANCE U/S.40(A)(I) IS NOT CALL ED FOR. ACCORDINGLY, THE ADDITION IS DELETED. THE GROUND RAISED BY THE APPEL LANT IS ALLOWED. ITA NO.2441 /MDS/14 5 5. THE LD. D.R VEHEMENTLY ARGUED IN SUPPORT OF THE ORDER OF THE LD. ASSESSING OFFICER WHEREAS THE LD. A.R. RELIED O N THE ORDER OF THE LD. CIT (A). 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD. IT IS EVIDENT FROM THE FACTS OF THE CASE THAT THE ASSESSEE HAD MADE PAYMENTS FOR WEBHOSTING CHARGES AND MARKETING EXPENSES OUTSIDE INDIA AND FOR SERVICES R ENDERED OUTSIDE INDIA. THESE EXPENSES WERE EARLIER MADE BY THE ASSE SSEE SUBSIDIARY AND LATER IT WAS REIMBURSED BY THE ASSESSEE. THE HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.FAIZAN SHOES PVT LTD., REPORTED IN 367 ITR 155 (MAD.), HAS HELD THAT ANY P AYMENT MADE OUTSIDE INDIA FOR SERVICES RENDERED OUTSIDE INDIA W ILL NOT BE TAXABLE IN INDIA. FROM THE FACTS OF THE CASE, IT IS ALSO EVIDE NT THAT THE ASSESSEE HAS NOT MADE ANY PAYMENT TOWARDS ROYALTY OR TECHNIC AL SERVICES RENDERED OUTSIDE INDIA. THEREFORE THE CASE OF THE A SSESSEE FALLS OUTSIDE THE SCOPE OF DTAA. THE PARTIES, WHO HAVE R ENDERED SERVICES TO THE ASSESSEE OUTSIDE INDIA, DO NOT HAVE ANY PERM ANENT ESTABLISHMENT (PE) IN INDIA. IN THESE CIRCUMSTANCE S, TAKING INTO ITA NO.2441 /MDS/14 6 CONSIDERATION OF THE HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE ITO VS. FAIZAN SHOES PVT. LTD., (SUPRA), WE HEREBY CONF IRM THE ORDER OF THE LD. CIT (A). ACCORDINGLY, ADDITION MADE BY LD. ASSESSING OFFICER STANDS DELETED. 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER PRONOUNCED ON 20 TH NOVEMBER, 2015 AT CHENNAI. SD/- SD/- ( ! ' . #$ ) ( DUVVURU RL REDDY ) ( . ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 20 TH NOVEMBER, 2015. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE