ACIT, CHENNAI V. T.Abdul Wahid & Co., CHENNAI

ITA 316/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9704 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 15-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: G BASKAR
• Keywords: Double taxation relief; Services rendered outside India; Permanent establishment; Non-deduction of tax
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . . . , . , % BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.316/MDS/2016 ( / ASSESSMENT YEAR: 2011-12) THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE-4, 611, ANNA SALAI, KANNAMMAL BUILDING, CHENNAI-6. VS M/S. T.ABDUL WAHID & CO., 55, VEPERY HIGH ROAD,PERIAMET CHENNAI-600 003. PAN: AAAFT0482B ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. P.RADHAKRISHNAN, JCIT /RESPONDENT BY : MR. G.BASKAR, ADVOCATE /DATE OF HEARING : 5 TH APRIL, 2016 /DATE OF PRONOUNCEMENT : 7 TH APRIL, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 5, CHENNAI DATED 16.12.2015 IN ITA NO. 1/CIT(A)-5/1 4-15 PASSED UNDER SECTION 143(3) R.W.S. 250(6) OF THE A CT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEAL, HOWEVER, THE CRUX OF THE ISSUE IS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN D IRECTING THE LEARNED ASSESSING OFFICER TO DELETE THE ADDITIO N OF RS.1,32,49,723/- MADE UNDER SECTION 40(A)(I) OF THE ACT ON 2 ITA NO.316/MDS/2016 ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE TOWARDS T HE PAYMENTS MADE TO OVERSEAS COMMISSION AGENTS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFAC TURE AND EXPORT OF LEATHER, SHOES UPPER AND FULL SHOE FILED ITS RETURN OF INCOME ON 07.11.2011 FOR THE ASSESSMENT YEAR 2011-1 2 ADMITTING INCOME OF RS.71,65,190/- . ON SCRUTINY T HE LEARNED ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLA IMED RS.1,32,49,723/- AS COMMISSION PAID TO VARIOUS FORE IGN AGENTS. WHEN QUERIED, THE ASSESSEE HAD SUBMITTED TH AT THE COMMISSION PAYMENT WAS MADE ONLY FOR THE PURPOSE OF SALES MADE OUTSIDE INDIA BY MEANS OF ENGAGING AGENTS OUTS IDE INDIA AND THE PROVISIONS OF SECTION 9(1)(VI) OF THE ACT WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE BECAUSE T HOSE PROVISIONS REFERS TO PAYMENT MADE FOR THE PURPOSE O F RENDERING MANAGERIAL SERVICES OUTSIDE INDIA AND PA YMENT MADE TOWARDS FEES FOR TECHNICAL SERVICES RENDERED O UTSIDE INDIA. HOWEVER, THE LEARNED ASSESSING OFFICER WAS OF THE VIEW THAT TDS HAS TO BE DEDUCTED AGAINST THE FOREIG N AGENTS COMMISSION PAYMENT AND THEREFORE BY INVOKING THE 3 ITA NO.316/MDS/2016 PROVISIONS OF SECTION 195(1) AND 40(A)(I) OF THE AC T DISALLOWED THE DEDUCTION FOR RS.1,32,49,723/-. 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) FOLLOWING THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11 VIDE ORDER DATED 10.04.2014 AND THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. FAIZA N SHOES PVT. LTD., DELETED THE DISALLOWANCE MADE BY THE LEA RNED ASSESSING OFFICER FOR NON-DEDUCTION OF TDS BY THE A SSESSEE TOWARDS PAYMENT OF COMMISSION TO FOREIGN AGENTS OUT SIDE INDIA FOR SERVICES RENDERED OUTSIDE INDIA, BY INVOK ING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 5. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT ON AN EARLIER OCCASION WITH RESPECT TO THE REVENUES APPEAL IN THE CASE OF DCIT VS. MATRIMONY. COM PVT. LTD IN ITA NO.1484/MDS./2015 VIDE ORDER DATED 13.01.2016 ON THE IDENTICAL ISSUE, THE CHENNAI BEN CH OF THE TRIBUNAL FOLLOWING THE DECISION OF THE THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.FAIZAN SHOES PVT LTD. , REPORTED IN 367 ITR 155 (MAD.) HAS HELD THAT, ANY PAYMENT MADE OUTSIDE 4 ITA NO.316/MDS/2016 INDIA, FOR SERVICES RENDERED OUTSIDE INDIA, WILL NO T BE TAXABLE IN INDIA AND THEREFORE THE PROVISIONS OF SECTION 40 (A)(I) OF THE ACT CANNOT BE INVOKED. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT TO THE SUBMISSI ONS OF THE LEARNED AUTHORIZED REPRESENTATIVE. 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD AND THE DECISION OF THE TRIBUNAL CITED HEREIN ABOVE. WE FIND MERIT IN THE SUBMISSIONS OF THE LEARNED AUTHORIZED REPRESENTATIVE. AS ARGUE D BY THE LEARNED AUTHORIZED REPRESENTATIVE ON THE IDENTICAL ISSUE IN THE CASE OF MATRIMONY.COM PVT. LTD., CITED SUPRA TH E CHENNAI BENCH OF THE TRIBUNAL FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.FAIZAN SHOES PVT LTD., REPORTED IN 367 ITR 155 (MAD.), HELD THAT, WHEN PAYMENTS ARE MADE OUTSIDE INDIA, FOR SERVICES RENDERED OUTSIDE I NDIA, SUCH PAYMENT WILL NOT BE TAXABLE IN INDIA. ACCORDINGLY P ROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT BE INVOKED, BEC AUSE THE PROVISIONS OF TAX DEDUCTED AT SOURCE UNDER SECTION 195 WILL NOT BE APPLICABLE. THE RELEVANT PORTION OF THE ORDE R IS REPRODUCED BELOW FOR REFERENCE:- 5 ITA NO.316/MDS/2016 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS EVIDENT FROM THE FACTS OF THE CASE THAT THE ASSESSEE HAD MADE PAYMENTS FOR WEBHOSTING CHARGES AND MARKETING EXPENSES OUTSIDE INDIA AND FOR SERVICES R ENDERED OUTSIDE INDIA. THESE EXPENSES WERE EARLIER MADE BY THE ASSE SSEE SUBSIDIARY AND LATER IT WAS REIMBURSED BY THE ASSESSEE. THE HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.FAIZAN SHOES PVT LTD. , REPORTED IN 367 ITR 155 (MAD.), HAS HELD THAT ANY PAYMENT MADE OUTS IDE INDIA FOR SERVICES RENDERED OUTSIDE INDIA WILL NOT BE TAXABLE IN INDIA. FROM THE FACTS OF THE CASE, IT IS ALSO EVIDENT THAT THE ASSE SSEE HAS NOT MADE ANY PAYMENT TOWARDS ROYALTY OR TECHNICAL SERVICES RENDE RED OUTSIDE INDIA. THEREFORE THE CASE OF THE ASSESSEE FALLS OUTSIDE TH E SCOPE OF DTAA. THE PARTIES, WHO HAVE RENDERED SERVICES TO THE ASSE SSEE OUTSIDE INDIA, DO NOT HAVE ANY PERMANENT ESTABLISHMENT (PE) IN IND IA. IN THESE CIRCUMSTANCES, TAKING INTO CONSIDERATION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE ITO VS. FAIZAN SHOES PVT. LT D., (SUPRA), WE HEREBY CONFIRM THE ORDER OF THE LD. CIT (A). ACCOR DINGLY, ADDITION MADE BY LD. ASSESSING OFFICER STANDS DELETED. 7. FOLLOWING THE DECISION OF THE TRIBUNAL IN THE C ASE OF DCIT VS. MATRIMONY.COM PVT. LTD., CITED SUPRA AND T HE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F M/S.FAIZAN SHOES PVT LTD., REPORTED IN 367 ITR 155 (MAD.), , WE HEREBY ONCE AGAIN DECIDED THE ISSUE IN FAVOUR OF TH E ASSESSEE BY HOLDING THAT WHEN PAYMENTS ARE MADE OUT SIDE INDIA, FOR SERVICES RENDERED OUTSIDE INDIA, SUCH PA YMENT WILL NOT BE TAXABLE IN INDIA. ACCORDINGLY PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT BE INVOKED, BECAUSE THE PROVISIONS OF TAX DEDUCTED AT SOURCE UNDER SECTION 195 WILL NOT BE APPLICABLE . 6 ITA NO.316/MDS/2016 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THE 7 TH APRIL, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 7 TH APRIL, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF