M.R.S.Leather Exports P Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2680/CHNY/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4996 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 12-01-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 27-10-2014
• Court: TRIBUNAL
• Department Lawyers: A S SRIRAMAN
• Assessee Lawyers: R DURAI PARDIAN
• Keywords: Bonafide belief; Retrospective amendment; Permanent establishment; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 147; 148; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , # $ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 2678/MDS/2014 / ASSESSMENT YEAR : 2005-06 ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(3), CHENNAI - 600 034. VS . M/S. MRS LEATHER EXPORTS PVT. LTD., NO. 5A, PATNOOL SARDAR JUNG, ST. PERIAMET, CHENNAI - 600 003. [PAN: AACCM 5720E] ./ I.T.A. NO. 2680/MDS/2014 / ASSESSMENT YEAR : 2005-06 M/S. MRS LEATHER EXPORTS PVT. LTD., NO. 5A, PATNOOL SARDAR JUNG, ST. PERIAMET, CHENNAI - 600 003. [PAN: AACCM 5720E] VS. ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(3), CHENNAI - 600 034. ( / APPELLANT) ( /RESPONDENT) & ' / APPELLANT BY : SHRI R. DURAI PARDIAN, JCIT *+& ' / RESPONDENT BY : SHRI A.S. SRIRAMAN, ADVOCATE ' /DATE OF HEARING : 12.01.2017 ' /DATE OF PRONOUNCEMENT : 12.04.2017 /O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THESE ARE THE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I V IN ITA NO. 446/13-14 :-2-: I.T.A. NOS. 2678 & 2680/MDS/2014 DATED 01.04.2014 PASSED U/S. 143(3) R.W.S. 144 AND 250 OF THE INCOME TAX ACT. SINCE, THE ISSUES IN THE APPEALS ARE COMMON, THE AP PEALS ARE CLUBBED AND HEARD TOGETHER AND DISPOSED OFF BY A COMMON ORDER. FOR T HE SAKE OF CONVENIENCE, WE CONSIDER THE FACTS NARRATED IN THE ASSESSEE APPEAL IN ITA NO. 2680/MDS/2014 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS: (I) THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION O F ASSESSING OFFICER ON THE VALIDITY OF RE-ASSESSMENT U/S. 147 OF THE ACT. (II) THE LD. CIT(A) ERRED IN SUSTAINING THE DISALLO WANCE OF TANNING CHARGES ON APPLICATION OF PROVISIONS OF SECTION 40(A)(IA) OF T HE ACT FOR NON-DEDUCTION OF TDS WITHOUT PROVIDING PROPER REASONS AND HAS NOT APPREC IATED THAT SUCH PAYMENTS ARE DIRECT EXPENSES. (III) THE LD. CIT(A) ERRED IN SUSTAINING DISALLOWAN CE OF DOMESTIC AGENCY COMMISSION U/S. 40(A)(IA) OF THE ACT FOR NON-DEDUCT ION OF TDS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS IN THE BUSINESS OF MANUFACTURING, TRADE, EXPORT AND FINISH ED LEATHER AND FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 ON 24.10.2005 WITH TOTAL INCOME OF RS. 80,33,781/- AND THE RETURN OF INCOME WAS PROCESSED U/S. 143(1) OF THE ACT AND THE ASSESSMENT WAS COMPLETED U/S. 14 3(3) OF THE ACT ON :-3-: I.T.A. NOS. 2678 & 2680/MDS/2014 22.11.2007 ACCEPTING THE RETURNED INCOME. SUBSEQUE NTLY, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS INCURRED EXPENDITURE OF RS. 4,67,44,581/- ON TANNING CHARGES AND RS. 1,83,66,606/- TOWARDS THE COMMISSIO N PAYMENT AND THE ASSESSEE HAS NOT DEDUCTED TDS AND DISALLOWANCE U/S. 40(A)(IA) OF THE ACT WAS PROPOSED AND ISSUED NOTICE U/S. 148 OF THE ACT. IN COMPLIANCE TO THE NOTICE, LD. AR OF THE ASSESSEE APPEARED AND WAS COMMUNICATED TH E REASONS FOR RE-OPENING OF ASSESSMENT AND THE ASSESSEE FILED LETTER TO TREA T THE RETURN OF INCOME FILED ON 24.10.2005 AS COMPLIANCE OF NOTICE AND ALSO SUBMITT ED OBJECTIONS ON RE-OPENING OF ASSESSMENT. THE ASSESSING OFFICER CONSIDERED TH E REASONS, OBJECTIONS AND RELIED ON THE HON'BLE SUPREME COURT DECISION AND TH E PROVISIONS OF LAW AND REJECTED THE ASSESSEE'S OBJECTIONS BY SPEAKING ORDE R DATED 19.02.2013 AND PROCEEDED WITH RE-ASSESSMENT PROCEEDINGS. THE LD. AR IN THE RE-ASSESSMENT PROCEEDINGS FILED THE DETAILS OF TANNING CHARGES AN D THE ASSESSING OFFICER FOUND AS PER THE DETAILS PROVIDED AT PARA 7.2, THE ASSESS EE HAS NOT DEDUCTED TDS IN RESPECT OF CERTAIN PAYMENTS OF RS. 25,07,861/- AND DISALLOWED U/S. 40(A)(IA) OF THE ACT. SIMILARLY, ASSESSING OFFICER DISALLOWED C OMMISSION PAYMENTS OF RS. 1,83,66,606/- OUT OF WHICH RS. 1,22,60,066/- PERTAI NS TO FOREIGN AGENTS AND REMAINING RS. 61,06,540/- PERTAINS TO DOMESTIC AGEN CY COMMISSION AGENTS. THE ASSESSING OFFICER FIND, OUT OF DOMESTIC COMMISSION PAYMENTS THE ASSESSEE HAS NOT DEDUCTED NOR HAS PROOF OF DEDUCTION OF TDS ON C OMMISSION CHARGES RS. 2,67,395/- AND WAS DISALLOWED. FURTHER, THE LD. AO RELIED ON THE CBDT CIRCULAR ON FOREIGN AGENCY COMMISSION PAYMENTS OF RS. 1,22,6 0,066/- AND DISCUSSED THE PROVISIONS AND CBDT CIRCULAR AT PAGE 6 TO 10 OF THE ORDER AND CONCLUDED THAT THE :-4-: I.T.A. NOS. 2678 & 2680/MDS/2014 ASSESSEE HAS FAILED TO DEDUCT THE TDS UNDER THE PRO VISIONS OF SECTION 195 OF THE ACT AND ALSO FAILED TO OBTAIN THE CERTIFICATE FROM THE CHARTERED ACCOUNTANT IN MAKING REMITTANCE AND DISALLOWED RS. 1,22,60,066/- AND ASSESSED INCOME OF RS. 2,89,08,251/- AND PASSED ORDER U/S. 143 R.W.S. 147 OF THE ACT DATED 01.03.2013. 4. AGGRIEVED BY THE ORDER, THE ASSESSEE COMPANY FIL ED AN APPEAL WITH THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. AR A RGUED THE GROUNDS AND SUBSTANTIATED HIS ARGUMENTS WITH THE SUBMISSIONS ON VALIDITY OF THE RE- ASSESSMENT PROCEEDINGS AND DISALLOWANCE U/S. 40(A)( IA) OF THE ACT. THE LD. CIT(A) CONSIDERED THE FACTS AND THE PROVISIONS OF L AW ON THE RE-ASSESSMENT PROCEEDINGS AND DEALT EXHAUSTIVELY AND CONFIRMED TH E ACTION OF THE ASSESSING OFFICER AS VALID. THE LD. CIT(A) FURTHER CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER AND OBSERVED THAT THE ASSESSEE HAS NOT SHOW N ANY PROOF OF PAYMENT OF TDS IN RESPECT OF 9 PARTIES AND CONFIRMED THE ADDIT ION OF TANNING CHARGES RS. 25,07,861/-. THE LD. CIT(A) FIND THAT THE ASSESSEE COMPANY HAS PAID THE COMMISSION TO ITS DOMESTIC AGENTS RS. 2,67,395/- AN D ARE NOT SUPPORTED WITH ANY PROOF OR FURNISHED EVIDENCE OF TDS AND CONFIRMED TH E ACTION OF THE ASSESSING OFFICER. ON THE FOURTH GROUND OF PAYMENT OF FOREIG N AGENT COMMISSION OF RS. 1,22,60,606/- THE LD. CIT(A) FOUND THAT THE AGENT O F THE ASSESSEE IS NON-RESIDENT AND HAVING BUSINESS ACTIVITIES OUTSIDE INDIA AND CO MMISSION WAS PAID TO SERVICES PROVIDED OUTSIDE INDIA AND ALSO NON-RESIDENT DOES N OT HAVE A PERMANENT ESTABLISH (PE) OR PERMANENT PLACE OF BUSINESS IN IN DIA AND SUCH COMMISSION :-5-: I.T.A. NOS. 2678 & 2680/MDS/2014 PAYMENTS WAS REMITTED OUTSIDE INDIA WHICH WAS NOT D ISPUTED BY THE ASSESSING OFFICER. THE LD. CIT(A) RELIED ON THE DECISION OF THE G.E. INDIA TECHNOLOGIES CENTRE PVT. LTD., VS DCIT 327 ITR 456, WHERE IT WAS HELD THAT THE TAX DEDUCTED AT SOURCE SHALL APPLY UNDER THE PROVISIONS OF SECTI ON 195(1) OF THE ACT ONLY WHERE THE PAYMENTS ARE CHARGEABLE TO TAX IN THE HANDS OF THE NON-RESIDENT. THE LD. CIT(A) RELIED ON THE APEX COURT DECISION AND OBSERV ED THAT THE NON-RESIDENT AGENT PROVIDE SERVICES OUTSIDE INDIA AND THE PAYMEN T CANNOT BE TREATED AS INCOME ARISED IN INDIA AND CAME TO A CONCLUSION THA T TO INVOKE THE PROVISIONS OF SECTION 195 OF THE ACT, THE INCOME HAS TO BE CHARGE ABLE TO TAX IN INDIA AND DIRECTED THE ASSESSING OFFICER TO DELETE PAYMENT OF FOREIGN AGENT COMMISSION AND PARTLY ALLOWED THE APPEAL. 5. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE COMP ANY HAS FILED AN APPEAL WITH THE TRIBUNAL. BEFORE US, THE LD. AR ARGUED TH E GROUND ON THE VALIDITY OF RE- ASSESSMENT PROCEEDINGS THAT THE ASSESSING OFFICER H AS MADE ASSESSMENT WITHOUT ANY TANGIBLE MATERIAL AND IS MERE CHANGE OF OPINION AND RELIED ON THE JUDICIAL DECISIONS. CONTRA, THE LD. DR RELIED ON THE ORDERS OF THE CIT(A). 6. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MAT ERIAL ON RECORD AND JUDICIAL DECISIONS. THE LD. AR ARGUED ON THE VALID ITY AND LEGAL IMPLICATIONS OF RE- ASSESSMENT PROCEEDINGS AS BAD IN LAW AND THERE IS N O VALID REASONS AND NO TANGIBLE MATERIAL WAS AVAILABLE ON RECORD FOR ISSUI NG NOTICE U/S. 148 OF THE ACT AS IT IS ONLY A MERE CHANGE OF OPINION ON THE SAME SET OF FACTS WHICH WAS :-6-: I.T.A. NOS. 2678 & 2680/MDS/2014 CONSIDERED IN THE ORIGINAL ASSESSMENT U/S. 143(3) O F THE ACT WAS PASSED ON 22.11.2007. THE ASSESSING OFFICER CAME TO A UNILAT ERAL CONCLUSION THAT THERE WAS REASON TO BELIEVE THAT THE INCOME OTHERWISE CHARGEA BLE TO TAX HAS ESCAPED INCOME AND ISSUED NOTICE U/S. 148 OF THE ACT. AS P ER THE INFORMATION THE ASSESSEE HAS CLAIMED EXPENDITURE OF TANNING CHARGES AND AGENCY COMMISSION WITHOUT DEDUCTION OF TDS. THE LD. AO PROVIDED THE REASONS TO THE ASSESSEE AND CONSIDERED THE OBJECTIONS ON CHALLENGING THE RE-OPE NING AND FURTHER THE LD. AO HAS PASSED A SEPARATE SPEAKING ORDER DATED 19.02.20 13 BASED ON THE INFORMATION, DETAILS AND REASONS FOR RE-OPENING OF ASSESSMENT AND OBJECTIONS FILED BY THE ASSESSEE AS RE-ASSESSMENT PROCEEDINGS ARE CORRECT IN LAW. PRIMA FACIE, THE PRESENT LD. AO HAS RELIED ON THE RECORDS AND TANGIBLE MATERIAL THAT THE PREDECESSOR HAS NOT VERIFIED AND BELIEVED THAT THER E IS INCOME ESCAPED ASSESSMENT. WE ARE OF THE OPINION THAT THE ORIGINA L ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT AND IT IS SETTLED LAW THAT O N THE BASIS OF MATERIAL AVAILABLE WITH THE ASSESSING OFFICER, IT IS OPINIONED THAT IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BE FORMED AND IN ORIGINAL ASSESS MENT THE LD. AO HAS NOT EXAMINED THESE ASPECTS AND PASSED THE ORDER. ACCOR DINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) AND WE ARE INCLINE D TO UPHOLD THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) ON THE VALIDIT Y OF RE-ASSESSMENT PROCEEDINGS AND DISMISS THE ASSESSEE'S GROUND. 7. ON THE SECOND DISPUTED ISSUE OF NON-DEDUCTION OF TDS ON TANNING CHARGES BY THE ASSESSEE, THE LD. AO MADE DISALLOWAN CE U/S. 40(A)(IA) OF THE ACT. :-7-: I.T.A. NOS. 2678 & 2680/MDS/2014 THE LD. AR SUBMITTED THAT THE LD. AO HAS NOT CONSID ERED THE FACTS AND PROVISIONS GOVERNING THE TDS AS TANNING CHARGES ARE THE DIRECT EXPENSES WHERE THE TDS PROVISIONS CANNOT BE APPLIED AND RELIED ON THE JUDI CIAL AND CO-ORDINATE BENCH DECISIONS. SIMILARLY, THE LD. AO DISALLOWED DOMEST IC AGENCY COMMISSION OF RS. 2,67,395/- FOR NON-DEDUCTION OF TDS AND RELIED ON T HE ORDER OF CO-ORDINATE BENCH IN ITO VS. TEEKATHIR PRESS IN ITA NO. 2076/MDS/2012 AND SUBMITTED THAT THE TDS PROVISIONS SHALL NOT APPLY AND PRAYED FOR ALLOWING THE APPEAL. CONTRA, THE LD. DR RELIED ON THE ORDERS OF THE CIT(A). 8. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS CITED. THE LD. AR ARGUED THE GR OUNDS ON NON-DEDUCTION OF TDS ON TANNING CHARGES AND DOMESTIC AGENCY COMMISSION A ND EXPLAINED THAT TDS PROVISIONS SHALL NOT APPLY AND NO AMOUNT IS PENDING OUTSTANDING THE END OF THE YEAR AND RELYING ON THE CO-ORDINATE BENCH DECISION OF N. PALANIVELU VS. ITO, 40 ITR 0325, WHERE IT WAS HELD AS UNDER: ' SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MAR ILYN SHIPPING AND TRANSPORTS VS. ACIT (2012) 136 ITD 23, (VISAKHAPATN AM) AND JUDGEMENT OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. M/S. V ECTOR SHIPPING SERVICES (P) LTD IN ITA NO. 122 OF 2013 DATED 09.07.2013 HEL D THAT SEC. 40(A)(IA) IS NOT APPLICABLE WHEN THERE IS NO OUTSTANDING BALANCE AT THE END OF THE CLOSE OF THE YEAR RELEVANT TO THE ASSESSMENT YEAR I N RESPECT OF THESE PAYMENT. HOWEVER, THE ASSESSEE HAS NOT BROUGHT ON RECORD, THE DETAILS OF OUTSTANDING EXPENSES OR SCHEDULE OF SUNDRY CREDITOR S SHOWING WHETHER THE IMPUGNED AMOUNT IS OUTSTANDING AT THE END OF THE CL OSE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR EITHER IN THE NAME OF THE PARTY OR OUTSTANDING EXPENSES. HENCE, IN THE INTEREST OF JU STICE, WE ARE REMITTING :-8-: I.T.A. NOS. 2678 & 2680/MDS/2014 THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO VERIFY THE CLAIM OF THE ASSESSEE AND THE ASSESSEE SHALL PL ACE NECESSARY EVIDENCE IN SUPPORT OF HIS CLAIM. ' WE RESPECTFULLY CONSIDERED THE CO-ORDINATE BENCH DE CISION AND REMIT THE DISPUTED ISSUE OF TANNING CHARGES AND DOMESTIC AGEN CY COMMISSION PAYMENT TO THE FILE OF THE ASSESSING OFFICER TO VERIFY ANY AMO UNT IS OUTSTANDING OR PAYABLE AT THE END OF THE RELEVANT ASSESSMENT YEAR AND THE ASS ESSEE SHALL SUBMIT THE DETAILS AND PROOF OF EVIDENCE IN RESPECT OF PAYMENT S AND THE ASSESSING OFFICER SHALL PROVIDE ADEQUATE OPPORTUNITY OF HEARING TO TH E ASSESSEE BEFORE PASSING THE ORDER ON MERITS. IN THE RESULT, ASSESSEE APPEAL IS ALLOWED FOR STAT ISTICAL PURPOSES. 9. NOW, WE TAKE UP THE REVENUE APPEAL IN ITA NO. 26 78/MDS/2014. THE REVENUE HAS CHALLENGED THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE OF FOREIGN AGENCY COMMISSION OF RS. 1,22,60,606/- U/S. 40(A)(I) R.W.S. 195 OF THE ACT. THE LD. DR ARGUED THAT THE LD. AO OBSERVED TH AT THE FOREIGN ENTITY HAS RECEIVED THE COMMISSION THROUGH ITS BUSINESS CONNEC TION IN INDIA AND THE PROVISIONS OF SECTION 195 OF THE ACT ARE APPLICABLE AND SUBSTANTIATED WITH THE PROVISIONS AND EXPLANATIONS OF SECTION 9 OF THE ACT AND RETROSPECTIVE AMENDMENTS, AND THE LD. CIT(A) HAS NOT CONSIDERED T HE AMENDMENT DATED 01.04.2014 WHICH IS RETROSPECTIVE FROM 01.04.1962 A ND FURTHER THE ASSESSEE COULD NOT ESTABLISH THE FACT THAT THE NON-RESIDENT DOES NOT HAVE ANY PERMANENT :-9-: I.T.A. NOS. 2678 & 2680/MDS/2014 RESIDENCE IN INDIA AND PRAYED FOR SETTING ASIDE THE ORDER OF THE CIT(A). CONTRA, THE LD. AR RELIED ON THE ORDERS OF THE CIT(A). 10. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MAT ERIAL ON RECORD AND JUDICIAL DECISIONS CITED. THE LD. AR SUBMITTED THA T THE ASSESSEE COMPANY IS IN THE BUSINESS OF MANUFACTURING, TRADING AND EXPORT O F FINISHED LEATHER AND MADE FOREIGN AGENT COMMISSION PAYMENTS FOR RENDERING SER VICES OUTSIDE THE COUNTRY AND APPLICABILITY OF PROVISIONS OF SECTION 195 OF T HE ACT. WE FIND THE CO-ORDINATE BENCH DECISION ON SIMILAR ISSUE IN THE CASE OF ACIT VS. M/S. M/M/ FORGINGS LTD IN ITA NO. 2679/MDS/2014, ASSESSMENT YEAR 2011-12 DATE D 19.06.2015 OBSERVED AT PARA 13 WHICH READ AS UNDER: 'WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. IN OUR OPINION, THIS ISSUE IS SQUARELY COVERED BY T HE EARLIER ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2010-2011 IN ITA NO.2311/MDS/2013 VIDE ORDER DATED 28.03.2014. I N THE SAID ORDER, THE TRIBUNAL OBSERVED AS UNDER:- 5. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH TH E CASE FILE. AS ALREADY STATED HEREINABOVE, THE CIT(A), WH ILST DELETING THE IMPUGNED ADDITION U/S 40(A)(I) PERTAINING TO OVERSE AS PAYMENTS MADE BY THE ASSESSEE ON ACCOUNT OF COMMISSION, WARE HOUSING AND OTHER CHARGES, HAS FOLLOWED ORDER OF THE 'TRIBUNAL' (SUPRA) QUA THE VERY ISSUE. ON BEING GRANTED OPPORTUNITY, THE REVEN UE HAS FAILED TO PROVE THAT THESE EXPENSES ARE LIABLE TO BE TAXED IN INDIA AS INCOME IN THE HANDS OF CONCERNED PAYEES OR ANY SERVICES HA D BEEN RENDERED IN INDIA. THE REVENUE SUBMITS THAT THE 'TR IBUNAL'S ORDER HAS NOT BEEN BECOME FINAL AND ITS APPEAL IS PENDING BEFORE THE :-10-: I.T.A. NOS. 2678 & 2680/MDS/2014 HON'BLE HIGH COURT. IN OUR CONSIDERED OPINION, MERE PENDENCY OF AN APPEAL INVOLVING THE SAME ISSUE AGAINST THE ORDER O F THE 'TRIBUNAL' IS NO GROUND TO ADOPT A DIFFERENT APPROACH IN THE IMPU GNED ASSESSMENT YEAR. THUS, WE AGREE WITH THE FINDINGS O F THE CIT(A) UNDER CHALLENGE AND REJECT GROUNDS RAISED BY THE RE VENUE. SIMILAR VIEW WAS ALSO TAKEN BY THE MUMBAI BENCH IN THE CASE OF VILAS N. TAMHANKAR IN ITA NO.4522/MUM/2013 FOR THE ASSESSMENT YEAR 2009-2010, VIDE ORDER DATED 21.11.2014, AND SAME VI EW WAS ALSO TAKEN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. FAIZAN SHOES PVT. LTD, 367 ITR 155 (MAD) AND FURTHER IN THE CASE OF B RAKES INDIA LTD. VS. DCIT (LTU) (144 ITD 403) THE CO-ORDINATE BENCH OF T HE TRIBUNAL, IT WAS HELD THAT 47. IN OUR OPINION, NATURE OF SERVICES MENTIONED A BOVE WILL COME NOT WITHIN THE DEFINITION OF FEES FOR TECHNIC AL SERVICES GIVEN UNDER EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT . BY VIRTUE OF SUCH SERVICES, THE CONCERNED RECIPIENTS HAD NOT MADE AVA ILABLE TO THE ASSESSEE ANY NEW TECHNIQUE OR SKILL WHICH ASSESSEE COULD USE IN ITS BUSINESS. THE SERVICES RENDERED BY THE SAID PARTIES RELATED TO CLEARING, ARE HOUSING AND FREIGHT CHARGES, OUTSIDE INDIA. THE LOGISTICS SERVICE RENDERED WAS ESSENTIALLY WAREHOUS ING FACILITY. IN OUR OPINION, THIS CANNOT BE EQUATED WITH MANAGERIAL , TECHNICAL OR CONSULTANCY SERVICES. EVEN IF IT IS CONSIDERED AS T ECHNICAL SERVICE, THE FEE WAS PAYABLE ONLY FOR SERVICES UTILIZED BY T HE ASSESSEE IN THE BUSINESS OR PROFESSION CARRIED ON BY THE SAID NON-R ESIDENTS OUTSIDE INDIA. SUCH BUSINESS OR PROFESSION OF THE NON-RESID ENTS, EARNED THEM INCOME OUTSIDE INDIA. THUS, IT WOULD FALL WITH IN THE EXCEPTION GIVEN UNDER SUB-CLAUSE (B) OF SECTION 9(1) OF THE A CT. IN ANY CASE, UNDER SECTION 195 OF THE ACT, ASSESSEE IS LIABLE TO DEDUCT TAX ONLY WHERE THE PAYMENT MADE TO NON-RESIDENTS IS CHARGEAB LE TO TAX UNDER THE PROVISIONS OF THE ACT. IN THE CIRCUMSTANC ES MENTIONED ABOVE, ASSESSEE WAS JUSTIFIED IN HAVING A BONAFIDE BELIEF THAT THE :-11-: I.T.A. NOS. 2678 & 2680/MDS/2014 PAYMENTS DID NOT WARRANT APPLICATION OF SECTION 195 OF THE ACT. IN SUCH CIRCUMSTANCES, WE ARE OF THE OPINION THAT IT C OULD NOT HAVE BEEN SADDLED WITH THE CONSEQUENCES MENTIONED UNDER SECTION 40(A)(I) OF THE ACT. DISALLOWANCES WERE RIGHTLY DEL ETED BY THE LD. CIT(APPEALS). NO INTERFERENCE IS CALLED FOR WE FOUND THE JURISDICTIONAL HIGH COURT DECISION WAS CONSIDERED AND THE PROVISIONS OF SEC.40(A)(I) OF THE ACT BY THE CO-ORD INATE BENCH. IN THE PRESENT CASE, THE LD. ASSESSING OFFICER OBSERVED THAT ANY P AYMENT TO NO-RESIDENT BY WAY OF INTEREST OR ANY SUM CHARGEABLE UNDER PROVISIONS OF THE ACT IS SUBJECTED TO TDS AT THE TIME OF PAYMENT AND ASSESSEE HAS FAILED TO D EDUCT TDS ON COMMISSION PAYMENTS AS PER SECTION 195 OF THE ACT AND REVENUE EMPHASIZED THAT FOREIGN AGENCY HAS PERMANENT PLACE OF RESIDENCE IN INDIA AN D LD. AO DISALLOWED COMMISSION PAYMENTS U/SEC. 40(A)(I) OF THE ACT FOR NON DEDUCTION OF TDS. BUT PRIME FACIE NOTHING WAS BROUGHT ON RECORD EVEN DURI NG THE HEARING PROCEEDINGS THAT THERE IS PERMANENT RESIDENCE OR ESTABLISHMENT OF THE FOREIGN AGENT IN INDIA. WE, CONSIDERING THE APPARENT FACTS, LEGAL PROVISION S AND JUDICIAL DECISIONS, FOUND THAT IT WOULD BE APPROPRIATE TO SET ASIDE THE DISPU TED ISSUE TO THE FILE OF LD. ASSESSING OFFICER TO VERIFY WHETHER THE SERVICES OU TSIDE INDIA OF FOREIGN AGENCY ATTRACTS THE TDS PROVISION AND FOREIGN AGENCY DOES NOT HAVE PERMANENT ESTABLISHMENT OR PLACE OF BUSINESS IN INDIA. ACCORD INGLY, WE SET ASIDE THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND REMIT T HE DISPUTED ISSUE TO THE FILE OF LD. ASSESSING OFFICER TO EXAMINE AND VERIFY THE FACTS AND PROVISIONS AND THE ASSESSEE SHALL BE PROVIDED WITH ADEQUATE OPPORTUNIT Y OF HEARING BEFORE PASSING :-12-: I.T.A. NOS. 2678 & 2680/MDS/2014 THE ORDER ON MERITS AND GROUNDS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSE. 11. IN THE RESULT, ASSESSEE APPEAL IN ITA NO. 2680/ MDS/2014 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND REVENUE APPEAL IN ITA N O. 2678/MDS/2014 FOR THE ASSESSMENT YEAR 2005-06 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY, THE 12TH DAY OF APRI L, 2017 AT CHENNAI. SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER SD/- ( . ) (G. PAVAN KUMAR) /JUDICIAL MEMBER /CHENNAI, 0 /DATED: 12TH APRIL, 2017. JPV ' *#23 43 /COPY TO: 1. &/ APPELLANT 2. *+& /RESPONDENT 3. 5 ( )/CIT(A) 4. 5 /CIT 5. 3 *## /DR 6. 8 /GF