The ACIT, Circle-2(1)(2), Baroda V. M/s. Panasonic Energy India Co. Ltd., Vadodara

ITA 2882/AHD/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9704 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 02-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Double taxation relief; Permanent establishment
• Section: 143(3); 40(a)(ia); 147; 148

Judgement Text

, MH MHMH MH IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD L LL LK KK KOZJH OZJH OZJH OZJH OLHE OLHE OLHE OLHE VGEN VGEN VGEN VGEN] YS[KK LNL; , ] YS[KK LNL; , ] YS[KK LNL; , ] YS[KK LNL; ,OA OAOA OA EK/ EK/EK/ EK/KQFERK KQFERK KQFERK KQFERK JKW; JKW;JKW; JKW;] U; ] U;] U; ] U;KF KFKF KF;D LNL; ;D LNL; ;D LNL; ;D LNL; DS LE{KA DS LE{KA DS LE{KA DS LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SMT MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 2882/AHD/2016 ( / ASSESSMENT YEAR : 2008-09) ACIT, CIR-2(1)(2), BARODA. / VS. M/S. PANASONIC ENERGY INDIA CO. LTD., POST BOX NO.719, GIDC ESTATE, MAKARPURA, VADODARA. CROSS OBJECTION NO.8/AHD/2017 (IN ITA NO.2882/AHD/2016) ( / ASSESSMENT YEAR : 2008-09) M/S. PANASONIC ENERGY INDIA CO. LTD., POST BOX NO.719, GIDC ESTATE, MAKARPURA, VADODARA. / VS. ACIT, CIR-2(1)(2), BARODA. ./ ./ PAN/GIR NO. : AAACL 3332 K ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI LALIT P. JAIN, SR. D.R. / RESPONDENT BY : SHRI BHAVIN MARFATIA, A.R. / DATE OF HEARING 12/10/2018 !'# / DATE OF PRONOUNCEMENT 03/12/2018 ITA NO.2882/AHD/2016 & CO 8/AHD/2017 ACIT VS. PANASONIC ENERGY IND PVT. LTD. A.Y. 2008-09 - 2 - $% / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THIS IS AN APPEAL BY THE REVENUE ALONG WITH A CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-2, VADODARA, DATED 29.08.2016 FOR ASSESSMENT YEAR 2008-09. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE A RE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.. CIT(APPEALS) ERRED IN DELETING ADDITION OF RS. 72,43,870/- MADE U/S 40(A)(IA) OF THE IT. ACT IGNORING THE AO'S FINDING ON THE ISSUE IN THE ASSESSMENT ORDER WHICH FINDS SUPPORT FROM THE DECISION OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS. PVS MEMORIAL HOSPITAL LTD. IN ITA NOS. 2 OF 2012 & 16 OF 2014 DATED 20.05.2015 WHEREIN IT HAS BEEN HELD. THAT SHORT FALL IN DEDUCTION OF TAX IS LIABLE FOR DISALLOWANCE U/S 40(A)(IA) OF THE IT. ACT. 2. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR ALTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL IT IS PRAYED THAT THE ORDER OF THE CIT (APPEALS) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE SOLITARY ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A O ON ACCOUNT OF SHORT DEDUCTION OF TDS FOR RS. 72,43,870/- U/S 40(A )(IA) OF THE ACT. ITA NO.2882/AHD/2016 & CO 8/AHD/2017 ACIT VS. PANASONIC ENERGY IND PVT. LTD. A.Y. 2008-09 - 3 - 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN TH E PRESENT CASE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURING, TRADING, AND EXPORT OF DRY BATTERIES AND ALSO DEALS IN THE SPARE PARTS OF DRY BATTERIES. THE ASSESSEE DURING THE YEAR HAS PAI D A SUM OF RS. 6,17,09,072/- ON ACCOUNT OF ROYALTY PAYMENT AND A B RAND USAGE FEE TO PANASONIC CORPORATION JAPAN. 4.1 THE ASSESSEE ON THE PAYMENT OF RS. 6,17,09,072/ - DEDUCTED TDS OF RS. 1,23,41,815/- (20% OF RS. 6,17,09,072). HOWEVER, THE AO DURING THE ASSESSMENT PROCEEDINGS O BSERVED THAT THE ASSESSEE WAS LIABLE TO DEDUCT TDS @22.66% ON THE PA YMENT MADE TO PANASONIC CORPORATION JAPAN. AS SUCH, THE ASSESSEE FAILED TO CONSIDER THE SURCHARGE AND EDUCATION CESS @ 2.66% WHILE DEDUCTIN G THE TDS AS DISCUSSED ABOVE. ACCORDINGLY, THE AO WAS OF THE VIE W THAT THE ASSESSEE HAS DEDUCTED THE SHORT AMOUNT OF TDS AMOUNTING TO R S. 72,43,870/- AND PROPOSED TO DISALLOW THE PROPORTIONATE EXPENSES ON ACCOUNT OF SHORT DEDUCTION OF TDS. 4.2 THE ASSESSEE BEFORE THE AO SUBMITTED THAT AS PE R THE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) WITH JAPAN, THE TAXES COVER THE SURCHARGE AS WELL, THEREFORE, THE ASSESSEE WAS LIAB LE TO DEDUCT TDS ONLY AT THE RATE AS SPECIFIED UNDER THE PROVISION OF SEC TION DTAA WITH JAPAN. ITA NO.2882/AHD/2016 & CO 8/AHD/2017 ACIT VS. PANASONIC ENERGY IND PVT. LTD. A.Y. 2008-09 - 4 - 4.3 THE ASSESSEE ALSO SUBMITTED THAT AS PER THE ART ICLE 12 OF THE DTAA WITH JAPAN IT WAS LIABLE TO DEDUCT TDS AT THE RATE NOT EXCEEDING 10% OF THE GROSS AMOUNT. HOWEVER, THE ASSESSEE HAS DEDUCTE D TDS @20% ON THE AMOUNT PAID TO PANASONIC JAPAN. THEREFORE, THE ASSESSEE SHOULD NOT BE TREATED AS IN DEFAULT ON ACCOUNT OF SHORT DEDUCT ION OF TDS. HOWEVER, THE AO DISREGARDED THE CONTENTION OF THE A SSESSEE AND TREATED IT AS IN DEFAULT ON ACCOUNT OF SHORT DEDUCTION OF T DS. ACCORDINGLY, THE AO DISALLOWED THE SUM OF RS. 72,43,870/- BEING PROP ORTIONATE AMOUNT REPRESENTING SHORT DEDUCTION OF TDS AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT AS PE R THE PROVISION OF ARTICLE 12 OF THE DTAA WITH JAPAN THE PAYMENT WAS L IABLE TO THE TAX AT THE RATE NOT EXCEEDING 10% WHEREAS IT HAS DEDUCTED TDS @20% WHICH IS SUFFICIENT ENOUGH TO COVER THE AMOUNT OF SURCHARGE AND EDUCATION CESS. 5.1 THE ASSESSEE ALSO SUBMITTED THAT AS PER THE PRO VISION OF ARTICLE 2 OF DTAA WITH JAPAN THE TAX COVERS THE SURCHARGE. AC CORDINGLY, THE EDUCATION CESS IS ALSO LIKE SURCHARGE ONLY. THEREFO RE, THE SCOPE OF ARTICLE 2 COVERS BOTH SURCHARGES AS WELL AS EDUCATION CESS. THE ASSESSEE IN SUPPORT OF HIS CLAIM RELIED ON THE ORDER OF KOLKATA TRIBUNAL IN THE CASE OF ITA NO.2882/AHD/2016 & CO 8/AHD/2017 ACIT VS. PANASONIC ENERGY IND PVT. LTD. A.Y. 2008-09 - 5 - DIC ASIA PACIFIC PTE. LTD. VS. ADIT REPORTED IN 18 ITR(T) 358 PERTAINING TO THE A.Y. 2009-10. 5.2 IN ADDITION TO THE ABOVE, THE ASSESSEE ALSO SUB MITTED THAT THERE COULD NOT BE ANY DISALLOWANCE U/S 40(A)(I) OF THE A CT ON ACCOUNT OF SHORT DEDUCTION OF TDS. THE ASSESSEE IN SUPPORT OF HIS CL AIM RELIED ON THE VARIOUS JUDGMENTS WHICH ARE RECORDED IN THE ORDER O F LD. CIT(A). 5.3 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 4.1 GROUND NO. 3 TO 6 PERTAIN TO DISALLOWANCE OF RS. 72,43,870/- U/S 40(A)(I) OF THE ACT. UNDISPUTEDLY, THE APPELLAN T HAS PAID ROYALTY AND BRAND USAGE FEES AMOUNTING TO RS. 6,17,09,072/- TO A NON-RESIDENT PERSONS LOCATED IN JAPAN. THE APPELLANT HAS ALSO DE DUCTED TAX U/S 195 ON THE ABOVE PAYMENT TO NON-RESIDENT AT 20% IN VIEW OF THE SPECIFIC RATES PRESCRIBED IN DTAA, HOWEVER, THE AO WAS OF TH E VIEW THAT SURCHARGE AND EDUCATION CESS SHOULD. ALSO BE INCLUD ED IN THE AMOUNT OF THE TDS AND ACCORDINGLY HE WORKED OUT SHORT DEDUCTI ON OF RS. 16,41,461/-. ON THIS BASIS, THE AO HAS FURTHER WORK ED OUT THE EXPENDITURE RELATABLE TO SHORT DEDUCTION AMOUNTING TO RS. 72,43,870/- AND MADE THE DISALLOWANCE U/S 40(A)(I). 4.1.1 THE LD..AR HAS HEAVILY RELIED UPON THE PROVI SIONS OF DTAA AND ARGUED THAT THE RATE PRESCRIBED IN DTAA IS INCLUSIV E OF SURCHARGE AND ANY INCIDENTAL OR SUBSTANTIALLY SIMILAR TAXES. VARI OUS DECISIONS RENDERED BY HON'BLE ITAT ALSO SUPPORT THE ABOVE CON TENTION OF THE LD..AR. 4.1.2 IT HAS BEEN ALSO SUBMITTED THAT THE PROVISION S OF SECTION 40(A)(I) ARE NOT APPLICABLE FOR ANY SHORT DEDUCTION OF THE T AX BECAUSE THE SAME WOULD. BE APPLICABLE ONLY IF THE TAX WAS NOT DEDUCT ED AT ALL OR AFTER DEDUCTION, THE SAME WAS NOT PAID ON OR BEFORE DUE D ATE OF FILING OF ITA NO.2882/AHD/2016 & CO 8/AHD/2017 ACIT VS. PANASONIC ENERGY IND PVT. LTD. A.Y. 2008-09 - 6 - RETURN U/S 139. SIMILAR LANGUAGE HAS BEEN USED IN S ECTION 40(A)(IA). TO SUPPORT ITS CONTENTION, THE ID.AR HAS RELIED UPON T HE FOLLOWING DECISIONS RENDERED IN RESPECT OF DISALLOWANCE MADE U/S 40(A)( IA). 1) CIT VS. S.K. TEKRIWAL ITAT NO. 183 OF 2012 AND GA NO. 2069 OF 2012 (CALCUTTA HIGH COURT), ORDER DATED 03.12.20 12. 2) HIGHLIGHT PICTURES (INDIA) PVT. LTD. VS. ACI T ITA NO. 5826/MUM/ 2011. 3) DCIT VS. CHANDABHOY & JASSOBHOY [2012] 17 TA XMANN.COM 158 (MUM.) 4) APOLLO TYRES LTD. VS. DCIT [2013] 35 TAXMANN. COM 593 (COCHIN TRIB) 5) THREE STAR GRANITES (P.) LTD. VS. ACIT [2014] 49 TAXMANN.COM 578 (COCHIN TRIB.) I HAVE ALSO GONE THROUGH THE DECISIONS RELIED UPON BY THE LD..AR AND FIND THAT THE DISALLOWANCE U/S 40(A)(I) OR 40(A)(IA ) CAN BE MADE ONLY IF THERE WAS EITHER NO DEDUCTION OR AFTER DEDUCTION OF TAX, THE SAME WAS NOT PAID ON OR BEFORE DUE DATE OF FILING OF RETURN. UNDISPUTEDLY, IN THE CASE OF APPELLANT, THE TAX WAS DEDUCTED AS PER THE RATES PRESCRIBED UNDER DTAA AND ALSO PAID BEFORE THE DUE DATE OF FIL ING OF RETURN. ACCORDINGLY, I HOLD. THAT PROVISIONS OF SECTION 40( A)(I) ARE NOT APPLICABLE AND HENCE NO DISALLOWANCE WAS CALLED FOR . THUS THE DISALLOWANCE MADE BY THE AO AT RS. 72,43,870/- IS DIRECTED TO BE DELETED. HENCE APPELLANT SUCCEEDS IN THIS REGARD. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 6. THE LD. DR BEFORE US SUBMITTED THAT THERE WAS SH ORT DEDUCTION OF TDS. THEREFORE, THE ADDITION WAS RIGHTLY MADE BY TH E AO. THE LD. DR IN SUPPORT OF HIS CLAIM RELIED ON THE JUDGMENT OF HON BLE KERALA HIGH COURT IN THE CASE OF CIT VS. PVS MEMORIAL HOSPITAL LTD. AND OTHERS IN ITA NO.16 OF 2014 VIDE ORDER DATED 16 AUGUST 2013. ITA NO.2882/AHD/2016 & CO 8/AHD/2017 ACIT VS. PANASONIC ENERGY IND PVT. LTD. A.Y. 2008-09 - 7 - 7. ON THE OTHER HAND, LD. AR BEFORE US FILED A PAPE R BOOK RUNNING FROM PAGES 1-141 AND REITERATED THE SUBMISSION AS M ADE BEFORE THE LD. CIT(A). BOTH THE PARTIES BEFORE US RELIED ON THE ORDER OF A UTHORITIES BELOW AS FAVORABLE TO THEM. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE INSTANT CASE RELATES TO WHETHER THE SHORT DEDUCTION OF TDS REQUIRES PROPORTIONATE DISAL LOWANCE OF THE EXPENSES. THE ASSESSEE HAS PAID ROYALTY CHARGES AND BRAND FEES TO PANASONIC CORPORATION JAPAN AFTER DEDUCTING THE TDS @20% OF THE GROSS AMOUNT. HOWEVER, THE AO WAS OF THE VIEW THAT THE TD S SHOULD HAVE BEEN DEDUCTED @22.66% AFTER INCLUDING THE SURCHARGE AND EDUCATION CESS. THEREFORE, AS PER THE AO, THERE WAS A SHORT D EDUCTION OF TDS ON THE EXPENSE CLAIMED BY THE ASSESSEE AMOUNTING TO RS. 72 ,43,870/-. HOWEVER, THE VIEW TAKEN BY THE AO WAS REVERSED BY T HE LD. CIT(A) AS DISCUSSED ABOVE. 8.1 AT THIS JUNCTURE, WE FIND IMPORTANT TO REFER TH E PROVISION ARTICLE 2 AND ARTICLE 12 OF DTAA WITH JAPAN WHICH READS AS UN DER: ITA NO.2882/AHD/2016 & CO 8/AHD/2017 ACIT VS. PANASONIC ENERGY IND PVT. LTD. A.Y. 2008-09 - 8 - ARTICLE 2 1. THE TAXES WHICH ARE THE SUBJECT OF THIS CONVENTI ON ARE : (A) IN JAPAN : (I ) THE INCOME-TAX ; AND (II) THE CORPORATION TAX (HEREINAFTER REFERRED TO AS 'JAPANESE TAX') ; (B) IN INDIA : THE INCOME-TAX INCLUDING ANY SURCHARGE THEREON (HEREINAFTER REFERRED TO AS 'INDIAN TAX'). 2. THIS CONVENTION SHALL ALSO APPLY TO ANY IDENTICA L OR SUBSTANTIALLY SIMILAR TAXES WHICH ARE IMPOSED AFTER THE DATE OF SIGNATURE OF THIS CONVENTION IN ADDITION TO, OR IN PLACE OF THOSE REFERRED TO IN PA RAGRAPH 1. THE COMPETENT AUTHORITIES OF THE CONTRACTING STATES SHALL NOTIFY EACH OTHER OF ANY SUBSTANTIAL CHANGES WHICH HAVE BEEN MADE IN THEIR RESPECTIVE TA XATION LAWS WITHIN A REASONABLE PERIOD OF TIME AFTER SUCH CHANGES. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XX XXXXXXXXXXXXXXXX ARTICLE 12 1. ROYALTIES AND FEES FOR TECHNICAL SERVICES ARISIN G IN A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OTHER CONTRACTING STATE M AY BE TAXED IN THAT OTHER CONTRACTING STATE. 1 [2. HOWEVER, SUCH ROYALTIES AND FEES FOR TECHNICAL SERVICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE AND AC CORDING TO THE LAWS OF THAT CONTRACTING STATE, BUT IF THE RECIPIENT IS THE BENE FICIAL OWNER OF THE ROYALTIES OR FEES FOR TECHNICAL SERVICES, THE TAX SO CHARGED SHALL NOT EXCEED 10 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIES OR FEES FOR TE CHNICAL SERVICES.] 3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEA NS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING CIN EMATOGRAPH FILMS AND FILMS OR TAPES FOR RADIO OR TELEVISION BROADCASTING, ANY PAT ENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR THE USE OF, OR THE RIGHT TO USE, ITA NO.2882/AHD/2016 & CO 8/AHD/2017 ACIT VS. PANASONIC ENERGY IND PVT. LTD. A.Y. 2008-09 - 9 - INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE. 4. THE TERM 'FEES FOR TECHNICAL SERVICES' AS USED I N THIS ARTICLE MEANS PAYMENTS OF ANY AMOUNT TO ANY PERSON OTHER THAN PAYMENTS TO AN EMPLOYEE OF A PERSON MAKING PAYMENTS AND TO ANY INDIVIDUAL FOR INDEPENDE NT PERSONAL SERVICES REFERRED TO IN ARTICLE 14, IN CONSIDERATION FOR THE SERVICES OF A MANAGERIAL, TECHNICAL OR CONSULTANCY NATURE, INCLUDING THE PROV ISIONS OF SERVICES OF TECHNICAL OR OTHER PERSONNEL. 5. THE PROVISIONS OF PARAGRAPHS 1 AND 2 SHALL NOT A PPLY IF THE BENEFICIAL OWNER OF THE ROYALTIES OR FEES FOR TECHNICAL SERVIC ES, BEING A RESIDENT OF A CONTRACTING STATE, CARRIES ON BUSINESS IN THE OTHER CONTRACTING STATE IN WHICH THE ROYALTIES OR FEES FOR TECHNICAL SERVICES ARISE, THROUGH A PERMANENT ESTABLISHMENT SITUATED THEREIN, OR PERFORMS IN THAT OTHER CONTRACTING STATE INDEPENDENT PERSONAL SERVICES FROM A FIXED BASE SIT UATED THEREIN, AND THE RIGHT, PROPERTY OR CONTRACT IN RESPECT OF WHICH THE ROYALTIES OR FEES FOR TECHNICAL SERVICES ARE PAID IS EFFECTIVELY CONNECTE D WITH SUCH PERMANENT ESTABLISHMENT OR FIXED BASE. IN SUCH CASE, THE PROV ISIONS OF ARTICLE 7 OR ARTICLE 14, AS THE CASE MAY BE, SHALL APPLY. 6. ROYALTIES AND FEES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ARISE IN A CONTRACTING STATE WHEN THE PAYER IS THAT CONTRACTIN G STATE ITSELF, A POLITICAL SUB-DIVISION, A LOCAL AUTHORITY THEREOF OR A RESIDE NT OF THAT CONTRACTING STATE. WHERE, HOWEVER, THE PERSON PAYING THE ROYALTIES OR FEES FOR TECHNICAL SERVICES, WHETHER HE IS A RESIDENT OF A CONTRACTING STATE OR NOT, HAS IN A CONTRACTING STATE A PERMANENT ESTABLISHMENT OR A FI XED BASE IN CONNECTION WITH WHICH THE LIABILITY TO PAY THE ROYALTIES OR FE ES FOR TECHNICAL SERVICES WAS INCURRED, AND SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES ARE BORNE BY SUCH PERMANENT ESTABLISHMENT OR FIXED BASE, THEN SUCH RO YALTIES OR FEES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ARISE IN THE CONTRACTING STATE IN WHICH THE PERMANENT ESTABLISHMENT OR FIXED BASE IS SITUAT ED. 7. WHERE, BY REASON OF SPECIAL RELATIONSHIP BETWEEN THE PAYER AND THE BENEFICIAL OWNER OR BETWEEN BOTH OF THEM AND SOME O THER PERSON, THE AMOUNT OF THE ROYALTIES OR FEES FOR TECHNICAL SERVICES, HA VING REGARD TO THE USE, RIGHT OR INFORMATION FOR WHICH THEY ARE PAID, EXCEEDS THE AMOUNT WHICH WOULD HAVE BEEN AGREED UPON BY THE PAYER AND THE BENEFICIAL OW NER IN THE ABSENCE OF SUCH RELATIONSHIP, THE PROVISIONS OF THIS ARTICLE S HALL APPLY ONLY TO THE LAST- MENTIONED AMOUNT. IN SUCH CASE, THE EXCESS PART OF THE PAYMENTS SHALL REMAIN TAXABLE ACCORDING TO THE LAWS OF EACH CONTRACTING S TATE, DUE REGARD BEING HAD TO THE OTHER PROVISIONS OF THIS CONVENTION. ITA NO.2882/AHD/2016 & CO 8/AHD/2017 ACIT VS. PANASONIC ENERGY IND PVT. LTD. A.Y. 2008-09 - 10 - 8.2 THE PLAIN READING OF THE ABOVE PROVISIONS REVEA LS THAT THE AMOUNT OF TAX INCLUDES SURCHARGE THEREFORE IN OUR CONSIDER ED VIEW, THERE WAS NO OBLIGATION UPON THE ASSESSEE TO DEDUCT THE TDS ON T HE PAYMENT MADE TO PANASONIC JAPAN AFTER INCLUDING THE SURCHARGE OVER AND ABOVE THE TAX RATE AS SPECIFIED UNDER THE PROVISION OF DTAA WITH JAPAN . THERE IS MENTIONED IN THE DTAA THAT THE TAX INCLUDES THE SUR CHARGE. THEREFORE, WE HOLD THAT THE ASSESSEE WAS LIABLE TO DEDUCT THE TDS WITHOUT INCLUDING THE SURCHARGE ON THE PAYMENT MADE TO PANASONIC CORP ORATION JAPAN. 8.3 WE ALSO NOTE THAT THE EDUCATION CESS PARTAKES T HE CHARACTER OF THE SURCHARGE. THEREFORE, THE ASSESSEE WAS NOT LIABLE T O DEDUCT THE TDS AFTER INCLUDING THE EDUCATION CESS. IN HOLDING SO, WE FIN D SUPPORT AND GUIDANCE FROM THE JUDGMENT OF KOLKATA TRIBUNAL IN THE CASE O F DIC ASIA PACIFIC PTE. LTD.(SUPRA) WHEREIN IT WAS HELD AS UNDER: 7. WE FIND THAT EDUCATION CESS WAS INTRODUCED IN INDIA BY THE FINANCE ACT, 2004, AND SECTION 2(11) OF THE FINANCE ACT 2004 DESCRIBED IT AS FOLLOWS: (11) THE AMOUNT OF INCOME-TAX AS SPECIFIED IN SUBSE CTIONS (4) TO (10) AND AS INCREASED BY A SURCHARGE FOR PURPOSES O F THE UNION CALCULATED IN THE MANNER PROVIDED THEREIN, SHALL BE FURTHER INCREASED BY AN ADDITIONAL SURCHARGE FOR PURPOSES O F THE UNION, TO BE CALLED THE EDUCATION CESS ON INCOME-TAX, SO AS TO FULFIL THE COMMITMENT OF THE GOVERNMENT TO PROVIDE AND FIN ANCE UNIVERSALISED QUALITY BASIC EDUCATION, CALCULATED A T THE RATE OF TWO PER CENT OF SUCH INCOME -TAX AND SURCHARGE. (EM PHASIS SUPPLIED) 8. IT IS THUS CLEAR THAT THE EDUCATION CESS, AS IN TRODUCED IN INDIA INITIALLY IN 2004, WAS NOTHING BUT IN THE NATURE OF AN ADDITIONAL ITA NO.2882/AHD/2016 & CO 8/AHD/2017 ACIT VS. PANASONIC ENERGY IND PVT. LTD. A.Y. 2008-09 - 11 - SURCHARGE. IT WAS DESCRIBED AS SUCH IN THE FINANCE ACT INTRODUCING THE SAID CESS. 9. WE HAVE ALSO NOTED THAT ARTICLE 2(1) OF THE APPL ICABLE TAX TREATY PROVIDES THAT THE TAXES COVERED SHALL INCLUDE TAX A ND SURCHARGE THEREON. ONCE WE COME TO THE CONCLUSION THAT EDUCATION CESS IS NOTHING BUT AN ADDITIONAL SURCHARGE, IT IS ONLY COROLLARY THERE TO THAT THE EDUCATION CESS WILL ALSO BE COVERED BY THE SCOPE OF ARTICLE 2 . ACCORDINGLY, THE PROVISIONS OF ARTICLE 11 AND 12 MUST FIND PRECEDENC E OVER THE PROVISIONS OF THE INCOME TAX ACT AND RESTRICT THE T AXABILITY, WHETHER IN RESPECT OF INCOME TAX OR SURCHARGE OR ADDITIONAL SU RCHARGE WHATEVER NAME CALLED, AT THE RATES SPECIFIED IN THE RESPECTI VE ARTICLE. IN ANY CASE, EDUCATION CESS WAS INTRODUCED BY THE FINANCE ACT 20 04, WITH EFFECT FROM ASSESSMENT YEAR 2005-06 WHICH WAS MUCH AFTER T HE SIGNING OF INDIA SINGAPORE TAX TREATY ON 24T H JANUARY 1994. I N VIEW OF THE SPECIFIC PROVISIONS TO THE EFFECT THAT THE SCOPE OF ARTICLE 2 SHALL ALSO COVER ANY IDENTICAL OR SUBSTANTIALLY SIMILAR TAXES WHICH ARE IMPOSED BY EITHER CONTRACTING STATE AFTER THE DATE OF SIGNA TURE OF THE PRESENT AGREEMENT IN ADDITION TO, OR IN PLACE OF, THE TAXES REFERRED TO IN PARAGRAPH 1, AND IN VIEW OF THE FACT THAT EDUCATIO N CESS IS ESSENTIALLY OF THE SAME NATURE AS SURCHARGE, BEING AN ADDITIONA L SURCHARGE, THE SCOPE OF ARTICLE 2 ALSO EXTENDS TO THE EDUCATION CE SS. 10. FOR THE REASONS SET OUT ABOVE, WE ARE OF THE C ONSIDERED VIEW THAT THE EDUCATION CESS CANNOT INDEED BE LEVIED IN RESPE CT OF TAX LIABILITY OF THE APPELLANT COMPANY. THE ASSESSEE, THEREFORE, DES ERVES TO SUCCEED ON THIS ISSUE. FROM THE ABOVE ORDER, THERE REMAINS NO AMBIGUITY TH AT THE EDUCATION CESS IS CHARGED ON THE INCOME TAX WHICH IS NOTHING BUT I N NATURE OF ADDITIONAL SURCHARGE. THEREFORE, WE HOLD THAT THE ASSESSEE WAS NOT LIABLE TO INCLUDE THE EDUCATION CESS OVER AND ABOVE THE TAX DEDUCTED BY THE ASSESSEE. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REASON TO INT ERFERE IN THE ORDER OF LD. CIT(A). THE ASSESSEE SUCCEEDS ON THE STRENGTH O F THE PROVISION OF ITA NO.2882/AHD/2016 & CO 8/AHD/2017 ACIT VS. PANASONIC ENERGY IND PVT. LTD. A.Y. 2008-09 - 12 - DTAA WITH JAPAN. WE ARE NOT INCLINED TO ADJUDICATE OTHER ARGUMENTS RAISED BY THE LD. AR FOR THE ASSESSEE AT THE TIME O F THE HEARING. HENCE, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 9. NOW WE ARE COMING TO CROSS OBJECTION OF THE ASSE SSEE IN CO NO.08/AHD/2017 IN ITA NO.2882/AHD/2016 FOR A.Y. 200 8-09. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS CO: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-2, VADODARA ['CIT(A)'] ERRED IN FACT AND IN LAW IN CON FIRMING THE ACTION OF ASSISTANT COMMISSIONER OF INCOME TAX-2(1) (2), VADODARA ('THE AO') IN REOPENING ASSESSMENT PROCEED INGS U/S. 147 OF THE INCOME TAX ACT. 1961 ('THE ACT') 2. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE LEARNED AO IN REOPENING THE ASSESSMEN T WITHOUT SATISFYING THE CONDITIONS MENTIONED IN PROVISO TO S ECTION 147 AS ASSESSMENT U/S. 143(3) WAS ALREADY FRAMED IN THE CA SE OF THE APPELLANT AND NOTICE U/S. 148 WAS ISSUED BEYOND THE PERIOD OF 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. 3. YOUR RESPONDENT CRAVES A RIGHT TO ADD TO OR AMEND, ALTER, SUBSTITUTE, DELETE OR WITHDRAW ALL OR ANY OF THE GR OUNDS OF CROSS OBJECTIONS. 10. AT THE OUTSET, WE NOTE THAT THE ASSESSEE HAS SU CCEEDED IN THE APPEAL FILED BY THE REVENUE ON MERIT. THEREFORE, WE ARE NO T INCLINED TO ADJUDICATE THE TECHNICAL ISSUE RAISED BY THE ASSESS EE IN ITS CROSS-OBJECTION. THUS WE DISMISS THE GROUND RAISED IN THE CO AS INFR UCTUOUS. HENCE, THE CO FILED BY THE ASSESSEE IS DISMISSED. ITA NO.2882/AHD/2016 & CO 8/AHD/2017 ACIT VS. PANASONIC ENERGY IND PVT. LTD. A.Y. 2008-09 - 13 - 11. IN THE COMBINED RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED , AND CO FILED BY THE ASSESSEE IS ALSO DISMISSED AS INFRUCTUOUS . THIS ORDER PRONOUNCED IN OPEN COURT ON 03/12/2018 SD/- SD/- E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 03/12/2018 PRITI YADAV, SR.PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-2, VADODARA. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD. 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 26/10/2018 (PAGE-6) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER : .. 05/11/2018 3. OTHER MEMBER.. 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S15/11/2018 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT.. 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER 10. DATE OF DESPATCH OF THE ORDER