ACIT, CHENNAI V. M/s. Good Leather Company, CHENNAI

ITA 3078/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4874 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 06-04-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 03-11-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: M KARUNAKARAN
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! ' . #$ , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.3078/MDS/2016 ( / ASSESSMENT YEAR: 2013-14) THE ASST. COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 4(1), NUNGAMBAKKAM, CHENNAI 34. VS M/S. GOOD LEATHER COMPANY, NO.47, THIRUVENGADAM STREET, PERIAMET, CHENNAI 600 003. PAN: AAAFG3306P ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT /RESPONDENT BY : SHRI M. KARUNAKARAN, ADVOCATE /DATE OF HEARING : 06.04.2017 ! /DATE OF PRONOUNCEMENT : 17.04.2017 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-5, CHENNAI DATED 23.08.2016 IN ITA NO.136/CIT(A)-5/15- 16 PASSED U/S.250(6) R.W.S. 143(3) OF THE ACT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN 2 ITA NO.3078/MDS/2016 DELETING THE ADDITION OF RS.70,94,092/- MADE BY THE LD.AO INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT DUE TO NON- DEDUCTION OF TAX AT SOURCE BY THE ASSESSEE ON PAYME NT MADE TO OVERSEAS COMMISSION AGENTS U/S.195 OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A FIRM ENGAGED IN THE BUSINESS OF TRADING OF FINISHED LEAT HER, SHOE UPPERS AND OTHER RELATED GOODS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013-14 ON 20.09.2013. SUBSEQUENTL Y THE CASE WAS SELECTED UP FOR SCRUTINY AND FINALLY ORDER U/S. 143(3) WAS PASSED ON 31.12.2015 WHEREIN THE LD.AO DISALLOW ED RS.70,94,092/- INVOKING THE PROVISIONS OF SECTION 4 0(A)(IA) OF THE ACT SINCE PAYMENTS WERE MADE TO FOREIGN AGENTS ON W HICH TAX WERE NOT DEDUCTED AT SOURCE U/S. 195 OF THE ACT. O N APPEAL, THE LD.CIT(A) FOLLOWING THE DECISION OF THE JURISDICTIO NAL HIGH COURT IN THE CASE CIT VS. FAIZAN SHOES PVT. LTD. REPORTED IN 367 ITR 155 HELD THE ISSUE IN FAVOUR OF THE ASSESSEE AND THEREB Y DELETED THE ADDITION MADE BY THE LD.AO. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 4. AT THE OUTSET THE LD.AR SUBMITTED THAT THE CHENN AI BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 2011-12 IN 3 ITA NO.3078/MDS/2016 ITA NO.2381/MDS/2014 VIDE ORDER DATED 02.01.2015 ON THE IDENTICAL ISSUE ALSO HELD THE ISSUE IN FAVOUR OF TH E ASSESSEE FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONA L HIGH COURT CIT VS. FAIZAN SHOES PVT. LTD. (SUPRA). HE THEREFORE P LEADED THAT FOR THE RELEVANT ASSESSMENT YEAR ALSO THE ADDITION MADE BY THE LD.AO MAY BE DELETED. THOUGH THE LD.DR VEHEMENTLY OPPOSED TO THE SUBMISSION OF THE LD.AR, HE COULD NOT SUCCES SFULLY CONTROVERT TO HIS SUBMISSIONS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND MERIT IN THE SUBMISSION OF THE LD.AR. AS POINTED OUT BY HIM, THE ISSUE RAI SED BY THE REVENUE IS HELD AGAINST THE REVENUE BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE CIT VS. FAIZA N SHOES PVT. LTD. (SUPRA). FOLLOWING THE DECISION OF THE HONBL E JURISDICTIONAL HIGH COURT, THE CHENNAI BENCH OF THE TRIBUNAL FOR T HE AY 2011- 12 ALSO HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IS EXTRACTED H EREIN BELOW FOR REFERENCE: 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIAL S ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. T HE ISSUE INVOLVED IN THIS APPEAL IS WHETHER THE COMMISSION PAYMENTS 4 ITA NO.3078/MDS/2016 MADE TO THE NON-RESIDENT FOREIGN AGENTS, TDS HAS TO BE DEDUCTED OR NOT. IN A RECENT JUDGEMENT OF THE HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. FAI ZAN SHOES PVT. LTD. (SUPRA), DISMISSING THE APPEAL OF THE REV ENUE HAS HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT ON A READING OF SECTION 9(1)(VII), COMMISSION PAID BY THE ASSESSEE TO THE N ON- RESIDENT AGENTS WOULD NOT COME UNDER THE TERM 'FEES FOR TECHNICAL SERVICES'. FOR PROCURING ORDERS FOR LEATH ER BUSINESS FROM OVERSEAS BUYERS, WHOLESALERS OR RETAILERS, AS THE CASE MAY BE, THE NON-RESIDENT AGENT WAS PAID 2.5 PER CEN T COMMISSION ON FREE ON BOARD BASIS. THIS WAS A COMMI SSION SIMPLICITER. WHAT WAS THE NATURE OF TECHNICAL SERVI CE THAT THE NON-RESIDENT AGENTS HAD PROVIDED ABROAD TO THE ASSE SSEE WAS NOT CLEAR FROM THE ORDER OF THE ASSESSING OFFIC ER. THE OPENING OF LETTERS OF CREDIT FOR THE PURPOSE OF COM PLETING THE EXPORT OBLIGATION WAS AN INCIDENT OF EXPORT AND, TH EREFORE, THE NON-RESIDENT AGENT WAS UNDER AN OBLIGATION TO R ENDER SUCH SERVICES TO THE ASSESSEE, FOR WHICH COMMISSION WAS PAID. THE NON-RESIDENT AGENT DID NOT PROVIDE TECHNI CAL SERVICES FOR THE PURPOSES OF RUNNING OF THE BUSINES S OF THE ASSESSEE IN INDIA. THEREFORE, THE COMMISSION PAID T O THE NON-RESIDENT AGENTS WOULD NOT FALL WITHIN THE DEFIN ITION OF 'TEES FOR TECHNICAL SERVICES' AND THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE ON PAYMENT OF COMMISSION. 7. RESPECTFULLY FOLLOWING THE ABOVE JUDGEMENT OF T HE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. FAI ZAN SHOES PVT. LTD. (SUPRA), THE GROUND RAISED BY THE REVENUE IS DISMISSED. SINCE THE LD.CIT(A) HAD ONLY FOLLOWED THE DECISIO N OF THE HONBLE JURISDICTIONAL HIGH COURT AND THE CHENNAI B ENCH OF THE TRIBUNAL FOR THE EARLIER ASSESSMENT YEAR IN THE ASS ESSEES OWN CASE HAD ALSO MADE A FINDING THAT THE FACTS IN BOTH THE CASE ARE 5 ITA NO.3078/MDS/2016 IDENTICAL AND HELD THE ISSUE IN FAVOUR OF THE ASSES SEE FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF TH E LD.CIT(A). 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S HEREBY DISMISSED. ORDER PRONOUNCED IN THE COURT ON THE 17 TH APRIL, 2017. SD/- SD/- ( ! ' . #$ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) ' #$ /JUDICIAL MEMBER #$ / ACCOUNTANT MEMBER %' /CHENNAI, &# /DATED 17 TH APRIL, 2017 JR # () *) /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. - ( )/CIT(A) 4. - /CIT 5. )./ 0 /DR 6. /1 /GF