ACIT, CHENNAI V. K.M.Ishtiaq, CHENNAI

ITA 317/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9711 (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
• Keywords: Double taxation relief; Services rendered outside India; Permanent establishment; Non-deduction of tax; Revised return
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A BENCH, CHENNAI . . . , . , % BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.317/MDS/2016 ( / ASSESSMENT YEAR: 2011-12) THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE-4, 611, ANNA SALAI, KANNAMMAL BUILDING, CHENNAI-6. VS MR. K.M. ISHTIAQ, OLD NO.8, NEW NO.32, KARPURA STREET, PERIAMET, CHENNAI-600 003. PAN: AAAPI2465D ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. P.RADHAKRISHNAN, JCIT /RESPONDENT BY : NONE /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. 18/CIT(A)-5/ 14-15 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.37,19,762/- MADE UNDER SECTION 40(A)(I) OF THE A CT ON 2 ITA NO.317/MDS/2016 ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE ON THE PA YMENTS MADE TO OVERSEAS COMMISSION AGENTS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS AS WHOLESALE DEA LER IN LEATHER PRODUCTS FILED HIS REVISED RETURN OF INCOME ON 29.09.2011 FOR THE ASSESSMENT YEAR 2011-12 ADMITTIN G TOTAL INCOME OF RS. 27,86,190/-. DURING THE SCRUTINY PRO CEEDINGS, THE LEARNED ASSESSING OFFICER NOTICED THAT THE ASSE SSEE HAS DEBITED COMMISSION PAID TO FOREIGN AGENTS NAMELY SO NG XUAN LIN & SHRI SHENG JU AND SONG ZHEN PING AMOUNTI NG TO RS.37,19,762/-. WHEN QUERIED, THE ASSESSEE HAD SUBM ITTED THAT ALL PAYMENTS WERE MADE THROUGH BANKING CHANNEL AND TOWARDS AGENCY COMMISSION FOR SALES MADE OUTSIDE AN D SERVICES RENDERED OUTSIDE INDIA. IT WAS FURTHER SUB MITTED THAT THE FOREIGN AGENT DOES NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA AND HENCE THERE IS NO TAX LI ABILITY ON THE ASSESSEE. HOWEVER, THE LEARNED ASSESSING OFFIC ER WAS OF THE VIEW THAT TDS HAS TO BE DEDUCTED AGAINST THE FOREIGN AGENTS COMMISSION PAYMENT AND THEREFORE BY INVOKIN G THE PROVISIONS OF SECTION 195(1) AND 40(A)(I) OF THE AC T, HE 3 ITA NO.317/MDS/2016 DISALLOWED THE CLAIM OF RS.37,19,762/-. ON APPEAL , THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOLLOW ING THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN THE CA SE OF M/S. T.ABDUL WAHID COMPANY VIDE ORDER DATED 10.04.2014 A ND THE DECISION OF THE HONBLE MADRAS HIGH COURT IN TH E CASE OF M/S. FAIZAN SHOES PVT.LTD., DELETED THE DISALLOWANC E MADE BY THE LEARNED ASSESSING OFFICER FOR NON-DEDUCTION OF TDS TOWARDS THE COMMISSION PAYMENTS MADE TO FOREIGN AGE NTS. 4. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT IN 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 BENCH OF THE TRIBUNAL FOLLOWING THE DECISI ON OF 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 INDIA, FOR SERVICES RENDERED OUTSIDE INDIA, WILL NOT BE TAXABLE IN INDI A. HENCE, PROVISIONS OF SECTION 40(A)(I) OF THE ACT CANNOT BE INVOKED. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT 4 ITA NO.317/MDS/2016 CONTROVERT TO THE SUBMISSIONS OF THE LEARNED AUTHOR IZED REPRESENTATIVE. 5. 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 RENDE RED OUTSIDE INDIA, SUCH PAYMENT 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. THE RELEV ANT PORTION OF THE ORDER IS REPRODUCED BELOW FOR REFERENCE:- 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS E VIDENT FROM THE FACTS OF THE CASE THAT THE ASSESSEE HAD MA DE PAYMENTS FOR WEBHOSTING CHARGES AND MARKETING EXPENSES OUTSIDE INDIA AND FOR SERVICES RENDERED OUTSIDE INDIA. THESE EXPENSES WERE EARLIER MADE BY 5 ITA NO.317/MDS/2016 THE ASSESSEE SUBSIDIARY AND LATER IT WAS REIMBURSED BY THE ASSESSEE. 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 INDIA FOR SERVICES RENDERED OUTSIDE INDIA W ILL NOT BE TAXABLE IN INDIA. FROM THE FACTS OF THE CASE, IT IS ALSO EVIDENT THAT THE ASSESSEE HAS NOT MADE ANY PAYMENT TOWARDS ROYALTY OR TECHNICAL SERVICES RENDERED OUTS IDE INDIA. THEREFORE THE CASE OF THE ASSESSEE FALLS OUT SIDE THE SCOPE OF DTAA. THE PARTIES, WHO HAVE RENDERED SERVICES TO THE ASSESSEE OUTSIDE INDIA, DO NOT HAVE ANY PERMANENT ESTABLISHMENT (PE) IN INDIA. IN THESE CIRCUMSTANCES, TAKING INTO CONSIDERATION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE ITO VS. FAIZA N SHOES PVT. LTD., (SUPRA), WE HEREBY CONFIRM THE ORD ER OF THE LD. CIT (A). ACCORDINGLY, ADDITION MADE BY LD. ASSESSING OFFICER STANDS DELETED. 6. FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CA SE OF DCIT VS. MATRIMONY.COM PVT. LTD., CITED SUPRA AND T HE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.FAIZAN SHOES PVT LTD., REPORTED IN 367 ITR 155 (MAD.), , WE HEREBY ONCE AGAIN DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT WHEN PAYMENT S 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 . 6 ITA NO.317/MDS/2016 7. 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.MOHAN 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