Ocmi Glass Machinery Manufactures(India)Pvt.Ltd., Ahmedabad V. The Dy.CIT.,Circle-5, Ahmedabad

ITA 2881/AHD/2011

• Counselvise Citation: 288120514 RSA 2011
• Duration Of Justice: 3 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH SR D R
• Assessee Lawyers: S N SOPARKAR
• Keywords: Opportunity of being heard

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI S. S. GODARA, JUDICIAL MEMBER ./ ./ ./ ./ ITA NO. 2881/AHD/2011 / ASSESSMENT YEAR: 2007-08 OCMI GLASS MACHINERY MANUFACTURERS (INDIA) PVT LTD, 202, 2 ND FLOOR, PARITOSH, USHMANPURA (RIVERSIDE), USHMANPURA, AHMEDABAD PAN : AAACO 7995 D VS. DCIT, CIRCLE-5, AHMEDABAD ./ ./ ./ ./ ITA NO. 3038/AHD/2011 / ASSESSMENT YEAR: 2007-08 ACIT (OSD), CIRCLE-5, AHMEDABAD VS. OCMI GLASS MACHINERY MANUFACTURERS (INDIA) PVT LTD, AHMEDABAD PAN : AAACO 7995 D / // / (APPELLANT) ! ! ! ! / // / (RESPONDENT) ASSESSEE(S) BY : SHRI S N SOPARKAR, AR REVENUE BY : SHRI DINESH SINGH, SR DR '# $ %&'/ // / DATE OF HEARING : 06/08/2015 () $ %&' / // / DATE OF PRONOUNCEMENT: 07/08/2015 *+ *+ *+ *+/ // / O R D E R PER G.D. AGRAWAL, VICE PRESIDENT: THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE A ND THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XI, AHMEDABAD DATED 06.09.2011 FOR ASSESSMENT YEAR 2007 -08. ITA NOS. 2881 & 3038/AHD /2011 OCMI GLASS MACHINERY MANUFACTUERES (INDIA) PVT LTD FOR AY 2007-08 2 ITA NO. 2881/AHD/2011 BY ASSESSEE FOR AY 2007-08 2. THE ONLY GROUND RAISED IN THIS APPEAL BY THE ASS ESSEE IS AGAINST THE DISALLOWANCE OF WARRANTY EXPENSES OF RS.2,25,64 0/-. 3. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LD. COUNSEL FOR THE ASSESSEE THAT IN THE NEXT YEAR, I.E . AY 2008-09, THE ASSESSEE HAS INCURRED SOME EXPENDITURE FOR FULFILLM ENT OF THE WARRANTY GIVEN TO THE CUSTOMERS. SUCH EXPENDITURE WAS DEBITE D TO THE PROVISION MADE FOR WARRANTY. THE BALANCE OF THE PROVISION MADE IN THE YEAR UNDER CONSIDERATION, WHICH WAS IN EXCESS OF THE ACT UAL EXPENDITURE INCURRED, WAS RETURNED BACK AND ALSO OFFERED AS INC OME IN ASSESSMENT YEAR 2008-09. THAT, SINCE THE PROVISION FOR WARRAN TY WAS DISALLOWED IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE REQUESTE D THE ASSESSING OFFICER TO ALLOW THE ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE IN ASSESSMENT YEAR 2008-09 AND ALSO DO NOT TAX THE PRO VISION FOR WARRANTY WRITTEN BACK BY THE ASSESSEE IN THE SAID Y EAR. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES CON TENTION IN ASSESSMENT YEAR 2008-09. IN THE PROCESS, THERE IS DOUBLE DISALLOWANCE, I.E., IN ASSESSMENT YEAR 2007-08 THE PROVISION MADE BY THE ASSESSEE IS DISALLOWED BY THE ASSESSING OFFICER AND IN ASSESSME NT YEAR 2008-09, WHEN THE EXPENDITURE WAS ACTUALLY INCURRED BY THE A SSESSEE, THE SAME WAS ALSO NOT ALLOWED. HE, THEREFORE, SUBMITTED THAT THE REVENUE SHOULD TAKE ONE STAND, I.E., EITHER THE PROVISION I S ALLOWED IN THIS YEAR OR IF THE PROVISION IS DISALLOWED, THEN IN THE NEXT YEAR THE ACTUAL EXPENDITURE INCURRED HAS TO BE ALLOWED AND MOREOVER , THE WRITING BACK OF THE PROVISION SHOULD NOT BE TREATED AS INCO ME. HE HAS NO ITA NOS. 2881 & 3038/AHD /2011 OCMI GLASS MACHINERY MANUFACTUERES (INDIA) PVT LTD FOR AY 2007-08 3 OBJECTION IN EITHER OF THE COURSE REVENUE TAKES; BU T, THE STAND OF THE REVENUE IN BOTH THE YEARS SHOULD BE CONSISTENT. 4. THE LD. DEPARTMENTAL REPRESENTATIVE SUGGESTED TH AT LET THE MATTER GO BACK TO THE FILE OF THE ASSESSING OFFICER AND HE MAY TAKE A PROPER VIEW. AFTER CONSIDERING THE FACTS OF THE CAS E AND ARGUMENTS OF BOTH THE SIDES, WE DEEM IT PROPER TO SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THE MATTER BACK TO TH E FILE OF THE ASSESSING OFFICER. WE DIRECT THE ASSESSING OFFICER TO ADOPT A CONSISTENT APPROACH IN THIS YEAR AND IN ASSESSMENT YEAR 2008-09. IF THE PROVISION IS ALLOWED AS AN EXPENDITURE IN THIS YEAR, THEN NATURALLY THE EXPENDITURE ACTUALLY INCURRED IN THE SUBSEQUENT YEAR, I.E., ASSESSMENT YEAR 2008-09 WOULD BE DEBITED TO THE PRO VISION ACCOUNT AND WOULD NOT BE ALLOWED AS AN EXPENDITURE IN THAT YEAR. IN THAT SCENARIO, THE WRITE BACK OF PROVISION IN ASSESSMENT YEAR 2008-09 WOULD ALSO BE CONSIDERED AS INCOME AS HAS ALREADY B EEN OFFERED BY THE ASSESSEE. HOWEVER, IF THE PROVISION IS NOT ALLOWED IN THIS YEAR, THEN THE ACTUAL EXPENDITURE INCURRED IN ASSESSMENT YEAR 2008-09 SHOULD BE ALLOWED AND THE WRITE BACK OF THE PART OF THE PROVI SION WHICH IS OFFERED AS INCOME SHOULD NOT BE ASSESSED AS INCOME. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO RE-ADJUDICATE THE I SSUE BY TAKING A CONSISTENT APPROACH IN THIS YEAR AND IN ASSESSMENT YEAR 2008-09. NEEDLESS TO MENTION THAT WHILE GIVING EFFECT TO THI S ORDER, HE WILL ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO THE AS SESSEE. ITA NO.3038/AHD/2011 BY REVENUE FOR AY 2007-08 5. THE GROUND NO.1 RAISED IN THE REVENUES APPEAL R EADS AS UNDER:- ITA NOS. 2881 & 3038/AHD /2011 OCMI GLASS MACHINERY MANUFACTUERES (INDIA) PVT LTD FOR AY 2007-08 4 THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF EXPENDITURE OF RS.1 4,53,500/- TOWARDS COMMISSION, INSTALLATION AND TRAINING EXPENSES, MAD E BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE ACT. 6. ALL OTHER GROUNDS ARE THE ARGUMENTS IN SUPPORT O F ABOVE GROUND. 7. THE FACTS OF THE CASE ARE THAT THE ASSESSEE MADE THE PAYMENT OF RS.14,53,500/- FOR COMMISSION, INSTALLATION AND TRA INING EXPENSES OUTSIDE INDIA. NO TAX WAS DEDUCTED ON SUCH PAYMENT . IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE ASSESSING OFFI CER THAT THE PROVISION OF TDS IS NOT APPLICABLE BECAUSE THE PAYM ENTS HAVE BEEN MADE TO A NON-RESIDENT FOR THE SERVICES RENDERED OU TSIDE INDIA. THEREFORE, THE RECIPIENT IS NOT CHARGEABLE TO TAX U NDER THE INDIAN INCOME-TAX LAW. THE ASSESSING OFFICER REJECTED THE ASSESSEES CONTENTION WITH THE FOLLOWING FINDING:- THIS CONTENTION OF THE ASSESSEE IS NOT ACCEPTABL E BECAUSE IT IS THE ASSESSEE WHO IS ASKING FOR DEDUCTION OF THE EXPENSE UNDER INDIAN INCOME-TAX LAWS AND THEREFORE, TAXABILITY OF THE SA ME OR OTHERWISE IN THE HANDS OF RECIPIENT IS NOT MATERIAL. SO, SINCE THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF SECTION 40(A)(I), IN TO WHICH THE CASE OF ASSESSEE FALLS, THE AMOUNT IS NOT ALLOWABLE EXPENSE BECAUSE OF NON- DEDUCTION AND PAYMENT OF DUE TDS THEREON. ACCORDIN GLY, THE SUM OF RS.14,53,500/- IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. PENALTY PROCEEDINGS U/S 271(1)(C) O F THE ACT ARE INITIATED SEPARATELY FOR FURNISHING INACCURATE PART ICULARS OF INCOME. ITA NOS. 2881 & 3038/AHD /2011 OCMI GLASS MACHINERY MANUFACTUERES (INDIA) PVT LTD FOR AY 2007-08 5 8. ON APPEAL, THE CIT(A) DELETED THE ADDITION WITH THE FOLLOWING FINDING:- IN THE INSTANT CASE, APPELLANT HAD CONTENDED THA T THESE PAYMENTS HAVE BEEN MADE TO NON RESIDENT, OUTSIDE INDIA FOR S ERVICES RENDERED OUTSIDE INDIA. IN VIEW OF THESE FACTS, I AM IN AGRE EMENT WITH LD. A.R. THAT THESE PAYMENTS ARE NOT SUBJECTED TO THE PROVIS IONS OF INDIAN I.T. ACT. A.O. HAS MADE GENERAL OBSERVATIONS IN THE ASS ESSMENT ORDER AND HAS NOT DWELLED UPON THE ISSUE OF TAXABILITY OF THE SE PAYMENTS AS PER INDIAN INCOME-TAX ACT. IN VIEW OF ABOVE MENTIONED FACTS, I DO NOT HAVE ANY HESITATION IN DIRECTING A.O. TO DELETE THE ADDI TION OF RS.14,53,000/- THIS GROUND OF APPEAL IS ALLOWED. 9. AFTER CONSIDERING THE FACTS OF THE CASE AND ARGU MENTS OF BOTH THE SIDES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). SECTION 195 WHICH PROVIDES FOR DEDUCTION OF TAX AT SOURCE F ROM THE PAYMENT MADE TO NON-RESIDENT READS AS UNDER:- 195. (1) ANY PERSON RESPONSIBLE FOR PAYING TO A NON -RESIDENT, NOT BEING A COMPANY, OR TO A FOREIGN COMPANY, ANY INTER EST (NOT BEING INTEREST REFERRED TO IN SECTION 194LB OR SECTION 19 4LC) [OR SECTION 194LD] OR ANY OTHER SUM CHARGEABLE UNDER THE PROVISI ONS OF THIS ACT (NOT BEING INCOME CHARGEABLE UNDER THE HEAD 'SALARI ES') SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHE QUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATES IN FORCE : 10. FROM THE ABOVE, IT IS EVIDENT THAT IN RESPECT O F PAYMENT OTHER THAN INTEREST THE LIABILITY OF TDS WOULD BE ONLY IF SUCH OTHER SUM IS CHARGEABLE UNDER THE PROVISIONS OF THIS ACT. THERE FORE, THE VIEW OF THE ASSESSING OFFICER THAT THE TAXABILITY OR OTHERWISE OF THE PAYMENT IN THE HANDS OF THE RECIPIENT IS NOT MATERIAL IS THE ERRON EOUS VIEW. IT IS NOT ITA NOS. 2881 & 3038/AHD /2011 OCMI GLASS MACHINERY MANUFACTUERES (INDIA) PVT LTD FOR AY 2007-08 6 THE CONTENTION OF THE ASSESSING OFFICER THAT THE PA YMENT MADE BY THE ASSESSEE TO A NON-RESIDENT FOR TRAINING TO THE ASSE SSEES STAFF OUTSIDE INDIA WAS CHARGEABLE TO TAX IN INDIA IN THE HANDS O F THE RECIPIENT. IN SUCH CIRCUMSTANCES, IN OUR OPINION, THE CIT(A) RIGH TLY HELD THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT THE TAX AT SOURCE AND CONSEQUENTLY THE DISALLOWANCE OF THE PAYMENT U/S 40 (A)(I) ON TH E GROUND OF FAILURE OF THE ASSESSEE TO DEDUCT THE TAX AT SOURCE WAS UNS USTAINABLE AND THEREFORE, THE ADDITION WAS RIGHTLY DELETED BY THE CIT(A). 11. IN THE RESULT, THE ASSESSEES APPEAL IS DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES WHILE THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 7 TH AUGUST, 2015 AT AHMEDABAD. SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (G.D. AGRAWAL) VICE-PRESIDENT AHMEDABAD; DATED 07/08/2015 BIJU T., PS *+ $ %, -*,% *+ $ %, -*,% *+ $ %, -*,% *+ $ %, -*,%/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. % '. / CONCERNED CIT 4. '. ( ) / THE CIT(A) 5. ,12 % , , / D R, ITAT, AHMEDABAD 6. 24 5# / GUARD FILE . *+' *+' *+' *+' / BY ORDER, TRUE COPY 6 66 6/ // / 7 7 7 7 ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD