DCIT CORPORATE CIRCLE 1(2), CHENNAI V. CARAT LANE TRADING PRIVATE LTD., CHENNAI

ITA 2981/CHNY/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 4997 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 29-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A SUNDARARAJAN
• Keywords: Double taxation relief; Non-deduction of tax; TDS; Set aside
• Section: 143(3); 195

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , ! ' # ' $ . ! &' , ( ) BEFORE SHRI INTURI RAMA RAO , ACCOUNT ANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ ITA NOS.2981/CHNY/2018 ( * +* /ASSESSMENT YEAR: 2013-14 THE DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1(2), CHENNAI. VS. M/S. CARAT LANE TRADING PVT. LTD., 2 ND , 3 RD & 4 TH FLOOR, RUTLAND GATE, 2 ND STREET, KHADER NAWAZ KHAN ROAD, NUNGAMBAKKAM, CHENNAI 600 006. [PAN: AADCC 1791Q] ( ,- /APPELLANT) ( ./,- /RESPONDENT) ,- 0 1 / APPELLANT BY : SHRI A.SUNDARARAJAN, ADDL. CIT ./,- 0 1 /RESPONDENT BY : NONE ' 0 2 /DATE OF HEARING : 17.10.2019 34+ 0 2 /DATE OF PRONOUNCEMENT : 20.11.2019 5 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGA INST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -4, CHENNAI (HEREINAFTER CALLED AS CIT(A)) DATED 08.08.2018 F OR THE ASSESSMENT YEAR 2013-14. ITA NO.2981/CHNY/2018 :- 2 -: 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPE AL: 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) ERRED IN ALLOWING RELIEF TO THE A SSESSEE WITHOUT FOLLOWING THE RATIO IN THE JUDGEMENT OF CHENNAI TRI BUNAL IN M/S FOSTER WHEELER FRANCE SA V. DCIT IN ITA NO. 774/MDS /2014 AND ITA NO.641/MDS/2015 DATED 05.02.2016 AND WHICH IN T URN HAS ALSO RELIED UPON COCHIN BENCH OF TRIBUNAL IN THE CASE OF U S TECHNOLOGY RESOURCE PCT LTD. V. ACIT IN ITA NO.222/COCH/2013 W HEREIN IT HAS BEEN ELABORATELY DISCUSSED AND HELD THAT SALE, MARK ETING AND CONSULTANCY SERVICES RENDERED BY THE FOREIGN COMPAN Y WERE UTILIZED BY THE ASSESSEE COMPANY IN THE DECISION MAKING PROC ESS IS TECHNICAL IN NATURE AND FALLS WITHIN THE SCOPE OF A RTICLE 12 OF THE DTAA AND ALSO COMPLIES WITH EXPLANATION TO SECTION 9(1)(VII) WHICH CLEARLY SAYS THAT PAYMENT MADE BY THE ASSESSEE COMP ANY WITH REGARD TO MANAGERIAL TECHNICAL AND CONSULTANCY SERV ICE IS LIABLE TO BE TAXED IN INDIA SINCE SERVICES ARE UTILIZED IN TH E BUSINESS FOR EARNING INCOME IN INDIA. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LD. CIT (A) BE SET ASIDE AND THAT OF THE AC RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT-ASSESSEE IS A COMPANY NAMELY M/S. C ARAT LANE TRADING PVT. LTD. INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF JEWELLERY AND TRADING OF SOLITAIRES. THE RETURN OF INCOME FO R THE AY 2013-14 WAS FILED ON 29.11.2013 DISCLOSING A LOSS OF RS. 17,92, 08,483/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY DY. CIT, CORPORATE CIRCLE-1(2), CHENNAI (HEREINAFTER CALLED AO) VIDE ORDER DATED 08.03.2016 PASSED U/S. 143(3) OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF RS. 13,16,66,655/-. WHILE DOING SO, THE AO MADE ITA NO.2981/CHNY/2018 :- 3 -: SEVERAL DISALLOWANCES. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE AO NOTICED THAT THE RESPONDENT-ASSESSEE COMPANY MADE PAYMENT TO NON-RESIDENT TOWARDS THE CONSULTANCY AND PROFESSION AL SERVICES ON WHICH NO TDS WAS MADE. THE AO WAS OF THE OPINION THAT THE PAYMENT PARTAKES THE CHARACTER OF FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF PROVISIONS OF S. 9(1)(VII) OF THE ACT. 4. BEING AGGRIEVED BY THE ABOVE DECISION, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER GRANTED RELIEF ON THE GROUND THAT THE PAYMENT NOT FALL WITHIN AMBIT OF TECHNICA L SERVICES AS THERE IS NO TECHNICAL KNOW-HOW WAS MADE AVAILABLE AFTER PLAC ING RELIANCE ON THE DECISION OF CERTAIN JUDICIAL PRECEDENT. BEING AGGRI EVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US IN T HE PRESENT APPEAL. 5. THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE LD. CIT(A) OUGHT NOT TO HAVE GRANTED RELIEF AS THE PAYMENT WAS MADE FOR SERVICES TOWARDS SALES MARKETING CONSULTANCY WE RE UTILIZED BY THE RESPONDENT-ASSESSEE COMPANY FOR THE PURPOSE OF CARR YING ON THE BUSINESS IN INDIA AND IT PARTAKES THE CHARACTER FOR TECHNICAL SERVICES AS DEFINED UNDER EXPLANATION-II TO S. 9(1)(VII) OF THE ACT. 6. DESPITE SERVICE OF NOTICE NONE APPEARED ON BEHAL F OF THE ASSESSEE. ITA NO.2981/CHNY/2018 :- 4 -: 7. WE HEARD THE LD. SR. DR AND PERUSED THE MATERIAL ON RECORD. THE PAYMENT TO THE NON-RESIDENT WAS MADE BY THE RESPOND ENT-ASSESSEE COMPANY TOWARDS SALES MARKETING SERVICES. ADMITTEDL Y, NO TAX DEDUCTION AT SOURCE WAS MADE AT THE TIME OF PAYMENT OR CREDIT TO THE PARTY NOR OBTAINED CERTIFICATE FROM THE DEPARTMENT AS STIPULA TED U/S. 195 OF THE ACT. THE AO OF THE VIEW THAT THE SERVICES RENDERED BY TH E NON-RESIDENTS ARE IN THE NATURE FEES FOR TECHNICAL SERVICES AND THE REFORE, WAS OF THE VIEW OF THE RESPONDENT-ASSESSEE COMPANY WAS LIABLE TO DE DUCT TDS. ON APPEAL BEFORE LD. CIT(A), AFTER EXTRACTING PLETHORA OF THE DECISIONS, SIMPLY HELD THAT THERE WAS NO LIABILITY ON THE PART OF THE RESPONDENT-ASSESSEE COMPANY TO DEDUCT TAX AT SOURCE. FROM THE PERUSAL O F THE IMPUGNED ORDER, IT IS CLEAR THAT THE LD. CIT(A) HAD FAILED T O DISCUSS FACTUAL SITUATION OF THE PAYMENT MADE AND THE NATURE OF THE SERVICES RENDERED BY THE NON- RESIDENT ETC. THE LD. CIT(A) SIMPLY DISCUSSED THE CERTAIN JUDICIAL PRECEDENTS WITHOUT DISCUSSING AS TO HOW THE FACTUAL SITUATION OF THE ASSESSEE FITS INTO RATIO OF THOSE DECISIONS. THUS, THE ORDER OF THE LD. CIT(A) IS BEREFT OF FACTS AND REASONING AND THEREFO RE, WE ARE OF THE CONSIDERED OPINION THAT THE MATTER SHOULD BE REMITT ED BACK TO THE FILE OF LD. CIT(A) FOR A DENOVO ADJUDICATION IN ACCORDANCE WITH LAW AND WE ORDER ACCORDINGLY. ITA NO.2981/CHNY/2018 :- 5 -: 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 20 TH DAY OF NOVEMBER, 2019 IN CHENNAI. SD/- SD/- ( . ) (DUVVURU RL REDDY) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER /CHENNAI, 6 /DATED: 20 TH NOVEMBER, 2019. EDN, SR. P.S 5 0 .(278 98+2 /COPY TO: 1. ,- /APPELLANT 2. ./,- /RESPONDENT 3. ' :2 ( )/CIT(A) 4. ' :2 /CIT 5. 8;< .(2( /DR 6. <'* = /GF