DCIT, CHENNAI V. Wheels India Limited, CHENNAI

ITA 310/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81159 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C V PAVANA KUMAR
• Keywords: Permanent establishment
• Section: 143(3); 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! ' , # $ BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ ITA NO. ASSESSMENT YEAR ( /APPELLANT /RESPONDENT 310 /MDS/201 4 2006-07 DEPUTY COMMISSIONER OF INCOME TAX, LTU, CHENNAI-101. M/S. WHEELS INDIA LTD., PADI, CHENNAI-600 050. PAN:AAACW0315K 3 77 /MDS/201 4 2006-07 M/S. WHEELS INDIA LTD., PADI, CHENNAI-600 050. PAN:AAACW0315K DEPUTY COMMISSIONER OF INCOME TAX, LTU, CHENNAI-101. ASSESSEE BY : MR.VIKRAM VIJAYARAGHAVAN, ADVOCATE REVENUE BY : MR. C.V.PAVANA KUMAR, JCIT / DATE OF HEARING : 13 TH AUGUST, 2014 / DATE OF PRONOUNCEMENT : 26 TH SEPTEMBER, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: BOTH THESE APPEALS ARE FILED BY THE REVENUE AND ASSESSEE RESPECTIVELY AGAINST THE ORDER OF THE COMM ISSIONER OF INCOME TAX (APPEALS) LTU, CHENNAI DATED 25.11 .2013 FOR THE ASSESSMENT YEAR 2006-07 ARISING OUT OF ASSE SSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT. ITA NOS.310 & 377/MDS/2014 2 ITA NO.310/MDS/2014: 2. THE ONLY GRIEVANCE OF THE REVENUE IN ITS APP EAL IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE DISALLOWANCE MADE UNDER SECTION 40(A)(I) OF THE ACT IN RESPECT OF PAYMENT OF SALES COMMISSION MADE TO NON-RESIDENT AGENTS AT ABROAD WITHOUT DEDUCTION OF TAX AT SOURCE. 3. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE IN APPEAL HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE IN ITA NO.479/MDS/2 013 DATED 30.04.2014 FOR THE ASSESSMENT YEAR 2008-09 ON IDENTICAL FACTS AND CIRCUMSTANCES AND THE NON-RESID ENT AGENTS TO WHOM COMMISSION PAID WERE THE SAME. 4. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION RELIED ON. WHILE COMPLETING THE A SSESSMENT THE ASSESSING OFFICER DISALLOWED THE COMMISSION PAI D BY THE ITA NOS.310 & 377/MDS/2014 3 ASSESSEE TO NON-RESIDENT AGENTS ON THE PROCUREMENT OF SALES ORDERS ON THE GROUND THAT ASSESSEE HAS NOT DEDUCTED TDS UNDER SECTION 195 OF THE ACT. THE PAYMENT MADE BY THE ASSESSEE AS COMMISSION IS NOTHING BUT PAYMENT MADE TOWARDS FEE FOR TECHNICAL SERVICES, ACCORDING TO TH E ASSESSING OFFICER. ON APPEAL, COMMISSIONER OF INCOME TAX (APP EALS) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND THE AGREEMENT BETWEEN THE ASSESSEE AND THE NON-RESIDENT AGENTS DELETED THE DISALLOWANCE FOLLOWING THE DECI SION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER ASS ESSMENT YEAR, WHEREIN THE TRIBUNAL FOLLOWING THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF G.E. TECHNOLOG Y CENTRE P.LTD. (327 ITR 456) HELD THAT COMMISSION PA ID BY THE ASSESSEE TO NON-RESIDENT AGENTS FOR PROCURING ORDER S IS NOT TAXABLE IN INDIA AND THEREFORE PROVISIONS OF SECTIO N 195 HAVE NO APPLICATION TO SUCH PAYMENTS. THE CO-ORDINATE BE NCH WHILE HOLDING SO OBSERVED AS UNDER:- 20. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING DISALLOWANCE UNDER SECTION 40(A)(I) OF THE ACT IN RESPECT OF SALES COMMISSION PAID TO NON-RESIDENT AG ENTS M/S. ISU TRADING CORPORATION AND V.C.EDWARD, SINGA PORE WITHOUT DEDUCTION OF TAX AT SOURCE. THE ASSESSING OFFICER ITA NOS.310 & 377/MDS/2014 4 WHILE COMPLETING THE ASSESSMENT DISALLOWED SALES COMMISSION PAID BY THE ASSESSEE TO NON-RESIDENT AGE NTS STATING THAT ASSESSEE FAILED TO DEDUCT TDS UNDER SE CTION 195 OF THE ACT, THEREFORE, THE SAME ARE DISALLOWABL E UNDER SECTION 40(A)(I) OF THE ACT. ACCORDING TO THE ASSES SING OFFICER, THESE AMOUNTS WERE PAID FOR RENDERING MANA GERIAL SERVICES AND SUCH SERVICES WOULD FALL UNDER FEES FO R TECHNICAL SERVICES AS PER PROVISIONS OF SECTION 9(1 )(VII) OF THE ACT. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE HOLDING THAT SER VICES RENDERED BY THE NON-RESIDENT AGENTS MAY NOT FALL UN DER MANAGERIAL SERVICES. 21. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN DISALLOWING THE SALES COMMISSION PAID TO NON-RESIDENT AGENTS UNDER SECTI ON 40(A)(I) OF THE ACT FOR NON-DEDUCTION OF TDS UNDER SECTION 195 OF THE ACT. 22. COUNSEL FOR THE ASSESSEE PLACES RELIANCE ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) A ND FURTHER SUBMITS THAT SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE FOR THE ASSE SSMENT YEAR 2005-06 IN ITA NO.2560/MDS/ DATED 16.12.2010 AND FOR THE ASSESSMENT YEAR 2003-04 IN ITA NO.163/MDS/2 012 DATED 27.7.2012. 23. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHORITIES. THE ASSESSING OFFICER DISALLOWED SALES COMMISSION PAID TO NON-RESIDENT AGENTS ON THE GROUN D THAT NO TDS WAS DEDUCTED BY THE ASSESSEE UNDER SEC TION 195 OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE HOLDING THAT SER VICES RENDERED BY THE NON-RESIDENTS NOT FALL UNDER MANAGE RIAL SERVICES SO AS TO ATTRACT PROVISIONS OF SECTION 9( 1)(VII) OF THE ACT AND NO TDS IS REQUIRED TO BE DEDUCTED UNDER SECTION 195 OF THE ACT AND SERVICES RENDERED BY THE NON- RESIDENTS SHALL NOT FALL UNDER FEES FOR TECHNICAL S ERVICES. COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE ITA NOS.310 & 377/MDS/2014 5 ENTIRE SERVICES ARE RENDERED OUTSIDE INDIA AND THE NON- RESIDENTS DO NOT HAVE PERMANENT ESTABLISHMENT IN IN DIA AND IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE P.LTD. V S. CIT (327 ITR 456) WHEREIN IT WAS HELD IF THE AMOUNT IS NOT DEDUCTIBLE UNDER THE ACT, THE QUESTION OF DEDUCTION OF TAX DOES NOT ARISE AND CONSEQUENTLY NO DISALLOWANCE OF EXPENDITURE IS WARRANTED. IT WAS THE OBSERVATION O F THE COMMISSIONER OF INCOME TAX (APPEALS) THAT SIMILAR I SSUE HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE . IN THE CIRCUMSTANCES, WE DO NOT FIND ANY GOOD REASON TO IN TERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING DISALLOWANCE. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE REJECTED. 6. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPH OLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) O N THIS ISSUE AND REJECT THE GROUNDS OF APPEAL RAISED BY TH E REVENUE. ITA NO.377/MDS/2014 :- 7. THE ASSESSEE FILED CROSS APPEAL CHALLENGING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN NOT ALLOWING THE CLAIM MADE IN THE RETURN OF INCOME FILED IN PUR SUANCE OF SECTION 147 IN RESPECT OF AMOUNT CREDITED TO PROFIT AND LOSS ACCOUNT BEING SALES TAX COLLECTED AND WAIVED UNDER SALES TAX DEFERRAL SCHEME OF THE MAHARASHTRA STATE GOVERN MENT. ITA NOS.310 & 377/MDS/2014 6 8. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE IN APPEAL WAS ALSO RAISED AS AN ADDI TIONAL GROUND BEFORE THIS TRIBUNAL IN THE APPEAL PROCEEDIN GS AGAINST ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT. THE COUNSEL SUBMITS THAT THE TRIBUNAL BY ORDER IN I TA NO.43/MDS/2010 DATED 14.3.2014 ADMITTED THE ADDITI ONAL GROUND BUT REMANDED BACK TO THE FILE OF THE ASSESSI NG OFFICER FOR FRESH CONSIDERATION AND TO DECIDE THE MATTER ON MERITS IN ACCORDANCE WITH LAW, SINCE SUCH GROUND WAS NOT RAIS ED BEFORE THE ASSESSING OFFICER OR COMMISSIONER OF INC OME TAX (APPEALS). 9. WE HAVE PERUSED THE ORDER OF THE CO-ORDINATE BEN CH IN ITA NO.43/MDS/2010 DATED 14.3.2014 AND FIND THAT THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO CONSIDER THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IN RESPEC T OF SALES TAX LIABILITY TREATED AS INCOME OF THE ASSESSEE UND ER SECTION 41(1) OF THE ACT IN ACCORDANCE WITH LAW AND MERITS. SINCE THIS TRIBUNAL HAS ALREADY ADMITTED THE ADDITIONAL GROUND IN RESPECT OF SALES TAX LIABILITY TREATED AS INCOME UNDER SECT ION 41(1) IN ITA NOS.310 & 377/MDS/2014 7 THE APPEAL AGAINST THE ORDER PASSED UNDER SECTION 1 43(3) OF THE ACT AND REMANDED THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH, THE G ROUND RAISED BY THE ASSESSEE IN THE APPEAL PROCEEDINGS AG AINST THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ W ITH SECTION 147 BECOMES ONLY ACADEMIC. IN THE CIRCUMST ANCES, WE REJECT THE GROUNDS OF APPEAL OF THE ASSESSEE IN THIS APPEAL. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE & ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 26 TH DAY OF SEPTEMBER, 2014 AT CHENNAI. SD/- SD/- . ( $ '( ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGEN DRA PRASAD ) ACCOUNTANT MEMBER / * JUDICIAL MEMBER/ ' * ' /CHENNAI, + /DATED, 26 TH SEPTEMBER, 2014 SOMU -. /. /COPY TO: 1. ASSESSEE 2. ASSESSING OFFIC ER 3. 0 () /CIT(A) 4. 0 /CIT 5. . 4 /DR 6. /GF .