DCIT Corporate Circle 1(2), CHENNAI V. COSMIC GLOBAL Ltd., CHENNAI

ITA 2845/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5137 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 24-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B RAMAKRISHNAN
• Section: 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , , # BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER / I .T.A. NO: 2845/CHNY/2017 / ASSESSMENT YEAR : 2013-14 DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -1(2), CHENNAI 600 034. VS. M/S. COSMIC GLOBAL LTD., OLD NO. 5, NEW NO. 77, 1 ST FLOOR, APEX PLAZA, NUNGAMBAKKAM HIGH ROAD, CHENNAI 600 034. [PAN: AAACT 8201B] ( / APPELLANT) ( / RESPONDENT ) REVENUE BY : SHRI. CLEMENT RAMESH KUMAR, ADDL. CIT ASSESSEE BY : SHRI. B. RAMAKRISHNAN, CA % /DATE OF HEARING : 12.06.2018 % /DATE OF PRONOUNCEMENT : 12.06.2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI IN ITA NO. 345/CIT(A)- 1/2015-16 DATED 22.09.2017 FOR THE ASSESSMENT YEAR 2013-14. :-2-: ITA NO. 2845/CHNY/2017 2. M/S. COSMIC GLOBAL LTD., THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING TRANSLATION SERVICES. WHILE MAKING THE A SSESSMENT FOR ASSESSMENT YEAR 2013-14, THE ASSESSING OFFICER, INTER ALIA, DI SALLOWED RS. 1,23,906/- U/S. 36(1)(VA), REPRESENTING EMPLOYEES CONTRIBUTION TOWA RDS PROVIDENT FUND AND ESI, WHICH HAS NOT BEEN REMITTED ON OR BEFORE THE D UE DATES PRESCRIBED UNDER THE RELEVANT ACTS BUT PAID BEFORE THE DUE DATE FOR FILING THE RETURN UNDER THE INCOME TAX ACT, 1961. FURTHER, HE DISALLOWED RS. 2 .17 CRORES PAID, TOWARDS TRANSLATION CHARGES TO NON-RESIDENT TRANSLATORS U/S . 40(A)(IA), TREATING IT AS TECHNICAL SERVICES COVERED U/S. 9(1)(VII), FOR WHIC H TDS WAS NOT MADE U/S. 40(A)(IA). 3. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). IN RESPECT OF THE ISSUE ON THE PAYMENT TO EMPLOYEES CONTRIBUTI ON TOWARDS PF & ESI, THE LD. CIT(A) FOLLOWING THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT VS INDUSTRIAL SECURITY AND INTELLIGENCE INDIA (P) L TD (TCA NO. 585 & 586 OF 2015 DATED 24.07.2015) DELETED THE ADDITION MADE BY THE AO. WITH REGARD TO THE PAYMENTS MADE TOWARDS TRANSLATION CHARGES TO NO N-RESIDENT TRANSLATORS, THE LD. CIT(A) FOLLOWING THE DECISION OF THIS TRIBU NAL IN THE ASSESSEES OWN CASE VIDE ITA NO. 649/2016 DATED 25.11.2016 DELETED THE DISALLOWANCE HOLDING THAT THE FACTS PREVAILING DURING THE RELEVA NT PREVIOUS YEAR ARE THE SAME AS FOR THIS YEAR. AGGRIEVED, THE REVENUE FILE D THIS APPEAL CHALLENGING THESE TWO ISSUES. :-3-: ITA NO. 2845/CHNY/2017 4. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL. WITH REGARD TO THE DISALLOWANCE ON EMPLOYEES CONTRI BUTION TOWARDS PF & ESI, SINCE THE LD. CIT(A) HAS FOLLOWED THE DECISION OF T HE JURISDICTIONAL HIGH COURT, SUPRA, WE DO NOT FIND ANY REASON TO INTERFERE WITH HER ORDER AND HENCE, THE CORRESPONDING GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 4.1 WITH REGARD TO THE DISALLOWANCE ON TRANSLATION CHARGES TO NON-RESIDENT TRANSLATORS U/S. 40(A)(IA), THE RELEVANT PORTION OF THE ORDER OF THIS TRIBUNAL FROM ITA NO. 649/2016 DATED 25.11.2016, SUPRA, IS E XTRACTED AS UNDER: 6.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSA L OF THE MATERIAL PLACED BEFORE US. THE LD.AR RELIED ON THE DECISION OF ASSE SSEES OWN CASE FOR THE AY 2009-10 ON SIMILAR FACTS AND HELD AS UNDER: WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSING OFFICER HAS MA DE DISALLOWANCE OF RS.2. 63 CRORES UNDER SECT/ON 40(A)(I) ON ACCOUN T OF NON- DEDUCTION OF TAX AT SOURCE ON THE PAYMENTS MADE TO NON-RESIDENT TRANSLATORS. THE AUTHORITIES BELOW HAVE HELD TRANSL ATION SERVICES TO BE TECHNICAL IN NATURE. ON THE OTHER HAND, THE CONT ENTION OF THE ASSESSEE IS THAT THE PAYMENT FOR TRANSLATION SERVIC ES TO NON- RESIDENTS DOES NOT FALL WITHIN THE AMBIT OF FEES F OR TECHNICAL, MANAGERIAL OR CONSULTANCY SERVICES. LET US FIRST UNDERSTAND THE SCOPE OF THE TERM TECH NICAL SERVICES THE EXPRESSION TECHNICAL SERVICES HAS N OT BEEN DEFINED ANYWHERE IN THE ACT. HOWEVER, FEES FOR TECHNICAL S ERVICES HAS BEEN DEFINED IN EXPLANATION 2 TO SECTION 9(L)(VII) OF THE ACT, WHICH READS AS UNDER:EXPLANATION (2) FOR THE PURPOSES OF THIS CLAUSE, FEES FOR TECHNICAL SERVICES MEANS ANY CONSIDERATI ON (INCLUDING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MA NAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PR OVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLU DE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJ ECT UNDERTAKEN BY :-4-: ITA NO. 2845/CHNY/2017 THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOM E OF THE RECIPIENT CHARGEABLE UNDER THE HEAD SALARIES THE DICTIONARY MEANING OF THE WORD TECHNICAL AS G IVEN IN OXFORD ENGLISH DICTIONARY IS (1) RELATING TO A PARTICULAR SUBJECT, ART, OR CRAF T, OR ITS TECHNIQUES REQUIRING SPECIAL KNOWLEDGE TO BE UNDERSTOOD; (2) INVOLVING OR CONCERNED WITH APPLIED AND INDUSTR IAL SCIENCES RELATING TO THE OPERATION OF MACHINES; (3) ACCORDING TO A STRICT APPLICATION OR INTERPRETA TION OF THE LAW OR RULES THE CHAMBERS ENGLISH DICTIONARY EXPLAINS THE TERM TECHNICAL AS (1) RELATING TO PRACTICAL SKILL OR APPLIED SCIENCE , ESPECIALLY THOSE SCIENCES USEFUL TO INDUSTRY; (2) RELATING TO A PARTICULAR SUBJECT OR REQUIRING K NOW/EDGE OF PARTICULAR SUBJECT TO BE UNDERSTOOD; (3) ACCORDING TO A STRICT INTERPR ETATION OF THE LAW OR RULES; (4) BELONGING OR RELATING TO OR SHOWING A QUALITY OF TECHNIQUE IN THE PRESENT CASE, THE ASSESSEE IS GETTING THE TR ANSLATION OF THE TEXT FROM ONE LANGUAGE TO ANOTHER. THE ONLY REQUIREMENT FOR TRANSLATION FROM ONE LANGUAGE TO OTHER IS, THE PROF ICIENCY OF THE TRANSLATORS IN BOTH THE LANGUAGES, / E. THE LANGUAG E FROM WHICH THE TEXT IS TO BE TRANSLATED, TO THE LANGUAGE IN WHICH IT IS TO BE TRANSLATED. THE TRANSLATOR IS NOT CONTRIBUTING ANYT HING MORE TO THE TEXT WHICH IS TO BE TRANSLATED. HE IS NOT SUPPOSED TO EXPLAIN OR ELABORATE THE MEANING OF THE TEXT. APART FROM THE K NOWLEDGE OF THE LANGUAGE, THE TRANSLATOR IS NOT EXPECTED TO HAVE TH E KNOWLEDGE OF APPLIED SCIENCE OR THE CRAFT OR THE TECHNIQUES IN R ESPECT OF THE TEXT WHICH IS TO BE TRANSLATED. A BARE PERUSAL OF EXPLAN ATION 2 TO SECTION 9(1)(VII), WHICH EXPLAINS FEES FOR TECHNICAL SERVI CE AND THE DICTIONARY MEANING OF THE WORD TECHNICAL MAKES IT UNAMBIGUOUSLY DEAR THAT TRANSLATION SERVICES RENDERED BY THE ASSE SSEE ARE NOT TECHNICAL SERVICES. THEREFORE, THE PAYMENT MADE BY THE ASSESSEE TO THE NON-RESIDENT TRANSLATORS WOULD NOT FAIL WITHIN THE SCOPE OF FEES FOR TECHNICAL, MANAGER/AL OR CONSULTANCY SERVICE A S DETAILED IN EXPLANATION 2. IN OUR CONSIDERED VIEW, THE CIT(APPE ALS) HAS TRAVELLED BEYOND THE DEFINITION OF FEES FOR TECHNI CAL SERVICE TO BRING THE TRANSLATION SERVICES WITHIN THE COMPASS O F THE TERM FEES FOR TECHNICAL SERVICES IN OUR CONSIDERED OPINION, THE PAYMENTS MADE BY THE ASSESSEE TO NON-RESIDENTS ON ACCOUNT OF TRANSLATION SERVICES DO NOT ATTRACT THE PROVISIONS OF SECTION .194J. THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) IS THUS DELETED. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. :-5-: ITA NO. 2845/CHNY/2017 RESPECTFULLY, FOLLOWING THE DECISION OF THE COORDIN ATE BENCH OF THIS TRIBUNAL, SINCE THE FACTS IN THE CASE ARE IDENTICAL TO THE FA CTS OF THE AY 2009- 10, WE HOLD THAT THE SERVICES RENDERED BY THE ASSESSEE ARE NOT TECHNICAL SERVICES AS PER EXPLANATION OF SEC.9(I)(VII) OF INCOME TAX ACT AND THE ASSESSEE IS NOT REQUIRED TO DEDUCT THE TAX AT SOURCE AND ACCORDINGLY, WE CON FIRM THE ORDER OF THE LD.CIT(A). THE REVENUES GROUND OF APPEAL ON THIS I SSUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL IS DISMISSED. SINCE THE FACTS IN THIS CASE ARE IDENTICAL TO THE F ACTS OF THE ABOVE ASSESSMENT YEAR , FOLLOWING THE DECISION OF THE COORDINATE BEN CH, SUPRA, WE HOLD THAT THE SERVICES RENDERED BY THE ASSESSEE ARE NOT TECHNICAL SERVICES AS PER EXPLANATION OF SECTION 9(1)(VII) AND THE ASSESSEE I S NOT REQUIRED TO DEDUCT THE TAX AT SOURCE AND ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A). THE CORRESPONDING GROUNDS OF APPEAL OF THE REVENUE ON T HIS ISSUE ARE DISMISSED. 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JUNE, 2018 AT CHENNAI. SD/- ( ) (GEORGE MATHAN) ! ' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, * /DATED: 12 TH JUNE, 2018 JPV %-./0/ /COPY TO: 1. 1 / APPELLANT 2. -31 /RESPONDENT 3. 4 ) ( /CIT(A) 4. 4 /CIT 5. /- /DR 6. /GF