ACIT LTU-2, CHENNAI V. Rane (Madras) Limited, CHENNAI

ITA 2788/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5268 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 20-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Keywords: Business income; Double taxation relief; Retrospective amendment

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , , BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER & SHRI S. JAYARAMAN , ACCOU NTANT MEMBER I.T.A.NO S . 2788 AND 2789 / CHNY /2017 A SSESSMENT YEAR S :20 09 - 1 0 AND 2011 - 12 THE ASSISTANT COMMISSIONER OF INCOME TAX , LARGE TAXPAYER UNIT 2, CHENNAI 600 034. VS. M/S. RANE (MADRAS) LIMITED, MAITHRI , 132, CATHEDRAL ROAD, CHENNAI 600 086. [PAN:AACCR9772M] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI N. MADHAVAN, ADDL. CIT / RESPONDENT BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE / DATE OF HEARING : 05 . 0 4 .201 8 / DATE OF P RONOUNCEMENT : 27 . 0 4 .201 8 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : BOTH THE APPEAL S FILED BY THE REVENUE PERTAINING TO THE SAME ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (AP PEALS) 17 , C HENNAI DATED 31 . 0 8 .201 7 RELEVANT TO THE ASSESSMENT YEAR S 2009 - 2010 AND 20 1 1 - 1 2 . THE ONLY EFFECTIVE GROUND RAISED IN BOTH THE APPEALS OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE PAYMENTS MADE TO LOGISTIC COMPANIES (USA), MEXICO) OUTSIDE INDIA OF .54,51,048/ - ARE NOT IN THE NATURE OF FEES FOR INCLUDE SERVICES OR FEES FOR I.T.A. NO S . 2788 & 2789 /M/ 1 7 2 TECHNICAL SERVICES ON THE GROUND THAT THEY HAVE NOT MADE AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW - HOW, OR PROCESS TO THE ASSESSEE, NOT TAKING INTO ACCOUNT TH E FACT THAT THE PAYMENT MADE ARE FOR MANAGERIAL SERVICES AND THUS, TAXABLE IN INDIA IN TERMS OF DTAA WITH USA. THE LD. CIT(A) HAS ALSO NOT CONSIDERED THE FACT THAT THERE WAS NO DTAA WITH MEXICO. 2. IT WAS THE SUBMISSION OF THE LD. DR THAT THE ASSESSEE W AS ENGAGED IN THE BUSINESS OF AUTOMOBILE ANCILLARIES AND MADE PAYMENTS TO THE EXTENT OF .54,51,048/ - IN THE ASSESSMENT YEAR 2009 - 10 TO THE NON - RESIDENTS FOR THE PURPOSE OF RECEIVING LOGISTIC SERVICES OUTSIDE INDIA. SIMILARLY, IN THE ASSESSMENT YEAR 2011 - 12, THE ASSESSEE MADE PAYMENTS AT .65,09,509/ - . IT WAS THE SUBMISSION OF THE LD. DR THAT THE ASSESSEE HAS NOT EFFECTED TDS ON THE WAREHOUSE CHARGES IN RESPECT OF PAYMENTS MADE IN FOREIGN CURRENCY AND THEREFORE, THE ASSESSING OFFICER DISALLOWED THE SAME FOR BOTH THE ASSESSMENT YEARS UNDER SECTION 40(A)(I) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT]. IT WAS THE SUBMISSION THAT ON APPEAL, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE FOR BOTH THE ASSESSMENT YEARS BY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE S OWN CASE. IT WA S A SUBMISSION THAT THE BY EXPLANATION TO SECTION 9(2) OF THE ACT INTRODUCED WITH RESTROSPECTIVE EFFECT FROM 01.06.1976, WHICH CLEARLY HOLDS THAT EVEN IF THE NON - RESIDENT HAS NO BUSINESS CONNECTION I.T.A. NO S . 2788 & 2789 /M/ 1 7 3 IN INDIA AND HAS NOT RENDERED SERVICE IN INDIA, STILL THE INCOME WOULD DEEMED TO HAVE BEEN ACCRUED OR ARISEN IN INDIA AND THEREFORE, THE SAME IS TAXABLE AND PLEADED THAT THE COMMON ORDER OF THE L D.CIT(A) BE REVERSED AND THAT OF THE A SSESSING O FFICER RESTORED. 3 . IN REPLY, THE L D. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE ISSUE I S NOW SQUARELY COVERED BY THE DECISION OF THE CO - ORDINATE BENCH ES OF THIS TRIBUNAL IN THE AS SESSEE S OWN CASE FOR THE AY 2010 - 11 IN ITA NO.1 493 /MDS/201 5 DATED 14 .0 2 .201 7 . HE VEHEMENTLY SUPPORTED THE ORDER OF THE LD.CIT(A). 4 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE L D.CIT(A) HAS FOLLOWED THE JUDICIAL DISCIPLINE IN FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE S OWN CASE FOR THE AY 2010 - 11, WHEREIN THE COORDINATE BENCHES OF THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND FROM THE NATURE OF SERVICES RENDERED BY THE NON - RESIDENT TO THE ASSESSEE, THE SAME ARE ONLY LOGISTIC SERVICES WHICH DOES NOT INVOLVE ANY TECHNICAL SKILL, EXPERT ISE OR TRANSFER OF TECHNICAL KNOWLEDGE THEREON, SO AS TO FALL WITHIN THE AMBIT OF FEE FOR TECHNICAL SERVICES (FTS). WE ALSO FIND THAT THE NATURE OF SERVICES RENDERED BY NON - RESIDENT WOULD HAVE TO BE CONSIDERED ONLY AS BUSINESS INCOME IN THE HANDS OF NON - RE SIDENT WHICH CAN BE TAXED ONLY IN THE EVENT OF EXISTENCE OF PE IN INDIA. WE FOUND THAT THE LD. AO HAD CATEGORICALLY STATED IN HIS ORDER THAT THE NON - RESIDENT DO NOT HAVE ANY PE IN INDIA. 6.1 WE FIND THAT PURSUANT TO THE AMENDMENT BROUGHT IN THE EXPLANATI ON TO SECTION 9(2) THOUGH RETROSPECTIVE IN OPERATION COULD I.T.A. NO S . 2788 & 2789 /M/ 1 7 4 HAVE APPLICABILITY ONLY FOR THE PURPOSE OF TAXABILITY OF INCOME AND THE SAID AMENDMENT CANNOT BE MADE APPLICABLE WITH RETROSPECTIVE OPERATION FOR WITHHOLDING TAX LIABILITY. IN OTHER WORDS, THE RETR OSPECTIVE AMENDMENT CANNOT BE MADE APPLICABLE FOR TDS PROVISIONS AS THE ASSESSEE COULD BE EXPECTED TO COMPLY WITH THE TDS PROVISIONS AS PER THE LAW PREVAILING ON THE DATE OF PAYMENT AND IT CANNOT BE EXPECTED TO FORESEE WHAT AMENDMENT WOULD COME IN FUTURE, WHICH WOULD HAVE RETROSPECTIVE APPLICATION. THE TAX DEDUCTOR CANNOT BE EXPECTED TO HAVE CLAIRVOYANCE OF KNOWING HOW THE LAW WILL CHANGE IN FUTURE. A RETROSPECTIVE AMENDMENT IN LAW DOES CHANGE THE TAX LIABILITY IN RESPECT OF AN INCOME WITH RETROSPECTIVE EFF ECT, BUT IT CANNOT CHANGE THE TAX WITHHOLDING LIABILITY WITH RETROSPECTIVE EFFECT. THE PROVISIONS OF SECTION 195 AND OTHER TDS PROVISIONS UNDER CHAPTER XVII B OF THE ACT ARE VERY CLEAR OBLIGATING THE TAX DEDUCTOR TO FOLLOW THE LAW AND DEDUCT TAX THEREON BY THE RATES IN FORCE AS PREVAILING ON THE DATE OF CREDIT TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREON. WE FIND THAT THE DECISION RELIED UPON BY THE LD. AR ON THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF BRAKES INDIA LTD., VS. DCIT ( LTU) REPORTED IN 144 ITD 403 IS VERY WELL FOUNDED. THE OPERATIVE PORTION OF THIS ORDER IS ALREADY REPRODUCED HEREIN ABOVE. THE RELIANCE PLACED BY THE DECISION OF CO - ORDINATE BENCH OF AGRA TRIBUNAL IN THE CASE OF METRO & METRO VS ACIT RETURNED IN 147 ITD 20 7 (AGRA) IS ALSO WELL FOUNDED. IN THE CASE OF PROPERTY, THE DECISION RENDERED THEREON IS NOT REITERATED HEREIN. 6.2 ADMITTEDLY THE DISALLOWANCE MADE BY THE LD. AO IS ONLY FOR NON - DEDUCTION OF TAX AT SOURCE AND ACCORDINGLY ONLY THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT IS INVOKED BY HIM. THERE IS NO DISPUTE AS TO THE ALLOWABILITY OF SUCH PAYMENTS AS AN ELIGIBLE DEDUCTION OTHERWISE. WE ALSO FIND THAT EXPECTING A PERSON TO FORESEE THE FUTURE AMENDMENT IN THE STATUTE VIS - - VIS TAX WITHHOLDING LIABILITY W OULD ONLY RESULT IN IMPOSSIBILITY OF PERFORMANCE ON THE PART OF THE TAX DEDUCTOR. IN THIS REGARD, THE FAMOUS MAXIM WOULD COME TO THE RESCUE OF THE ASSESSEE (TAX DEDUCTOR): 'LEX NON COGIT AD IMPOSSIBLIA, MEANING: THAT THE LAW CANNOT COMPEL THE PERSON TO DO SOMETHING WHICH IS IMPOSSIBLE TO PERFORM.' WE ALSO FIND THAT THE HON'BLE SUPREME COURT IN THE CASE OF KRISHNASWAMY S. PD. AND ANR. VS UNION OF INDIA, REPORTED IN 281 ITR 305 (SC) HAS ALSO ACCEPTED AND APPROVED THIS LEGAL MAXIM. I.T.A. NO S . 2788 & 2789 /M/ 1 7 5 7. IN VIEW OF THESE FIND INGS AND RESPECTFULLY FOLLOWING THE VARIOUS JUDICIAL DECISIONS RELIED UPON HEREIN ABOVE, WE HAVE NO HESITATION IN DIRECTING THE LD. AO TO DELETE THE DISALLOWANCE OF PAYMENT OF WAREHOUSE CHARGES FOR THE SUM OF RS. 26,09,058/ - U/S. 40(A)(I). SINCE THE LD. CIT(A) HAS FOLLOWED THE ABOVE DECISION OF THE TRIBUNAL IN HIS ORDER WHILE DIRECTING HE ASSESSING OFFICER TO DELETE THE DISALLOWANCES MADE ON THIS COUNT FOR BOTH THE ASSESSMENT YEARS, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE L D.CIT(A). CONSEQUENTL Y, BOTH THE APPEAL S FILED BY THE REVENUE ARE DISMISSED. 5 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE REVENUE ARE DISMISSED . ORDER PRONOUNCED ON THE 27 TH APRIL , 201 8 AT CHENNAI. SD/ - SD/ - ( S. JAYARAMAN ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICI AL MEMBER CHENNAI, DATED, THE 27 . 0 4 .201 8 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.