DCIT, CHENNAI V. Mobius Knowledge Services Pvt. Ltd., CHENNAI

ITA 3308/CHNY/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1057 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 07-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C YAMUNA
• Assessee Lawyers: L SHIBI CS
• Keywords: Non-deduction of tax

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.3308/CHNY/2016 ( )( / ASSESSMENT YEAR : 2008-09 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -4(1), CHENNAI - 600 034. V. M/S MOBIUS KNOWLEDGE SERVICES PVT. LTD., NO.484-485, PANTHEON PLAZA, GROUND/FIRST FLOOR, PANTHEON ROAD, EGMORE, CHENNAI - 600 008. PAN : AAGCS 9749 B (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SMT. C. YAMUNA, JCIT -.+, / 0 / RESPONDENT BY : SHRI L. SHIBI, CS 1 / 2% / DATE OF HEARING : 05.09.2018 3') / 2% / DATE OF PRONOUNCEMENT : 12.09.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -8, CHENNA I, DATED 30.09.2016 AND PERTAINS TO ASSESSMENT YEAR 2008-09. 2 I.T.A. NO.3308/CHNY/16 2. THERE WAS A DELAY OF ONE DAY IN FILING THIS APPE AL BY THE REVENUE. THE REVENUE HAS FILED A PETITION FOR COND ONATION OF DELAY. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESEN TATIVE AND THE LD. REPRESENTATIVE FOR THE ASSESSEE. WE FIND T HAT THERE WAS SUFFICIENT CAUSE FOR NOT FILING THE APPEAL BEFORE T HE STIPULATED TIME. THEREFORE, WE CONDONE THE DELAY AND ADMIT THE APPEA L. 3. THE FIRST ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE OF 73,13,850/- BEING THE CONSULTANCY CHARGES PAID TO N ON-RESIDENTS, FOR NON-DEDUCTION OF TAX UNDER SECTION 40(A)(I) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 4. SMT. C. YAMUNA, THE LD. DEPARTMENTAL REPRESENTAT IVE, SUBMITTED THAT THE ASSESSEE HAS PAID 73,13,850/- TO A NON- RESIDENTS WITHOUT DEDUCTING TAX. ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER FOUND THAT THE PAYMENT MADE BY TH E ASSESSEE WAS TOWARDS TECHNICAL SERVICES, THEREFORE, THE ASSE SSEE HAS TO DEDUCT TAX. HOWEVER, THE CIT(APPEALS) BY PLACING R ELIANCE ON THE JUDGMENT OF MADRAS HIGH COURT IN CIT V. FAIZAN SHOE S PVT. LTD. (367 ITR 155), DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. ACCORDING TO THE LD. D.R., SINCE THE PAYM ENT MADE TO NON- 3 I.T.A. NO.3308/CHNY/16 RESIDENT CONSULTANTS IS CHARGEABLE TO TAX IN INDIA, THE CIT(APPEALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSES SEE. 5. ON THE CONTRARY, SHRI L. SHIBI, THE LD. REPRESEN TATIVE FOR THE ASSESSEE, SUBMITTED THAT THE PAYMENTS WERE MADE TO NON-RESIDENTS FOR RENDERING SERVICE OUTSIDE THE COUNTRY. ACCORDI NG TO THE LD. REPRESENTATIVE, ALL THE THREE PERSONS ARE RESIDENTS OF USA. THE NON-RESIDENTS ARE RESPONSIBLE FOR PROCURING ORDERS FOR THE ASSESSEE- COMPANY IN THEIR INDIVIDUAL CAPACITY. SINCE THE EN TIRE SERVICES WERE OFFERED OUTSIDE THE TERRITORIAL LIMIT OF INDIA, ACC ORDING TO THE LD. REPRESENTATIVE, THE SAME IS NOT TAXABLE IN INDIA IN VIEW OF THE JUDGMENT OF MADRAS HIGH COURT IN FAIZON SHOES PVT. LTD. (SUPRA), THEREFORE, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE-COMPANY ENGAGED THE SERVI CES OF THREE CONSULTANTS, WHO ARE RESIDENTS OF USA, FOR PROCURIN G ORDERS FOR THE ASSESSEE-COMPANY. THEREFORE, IT IS OBVIOUS THAT TH E ENTIRE SERVICES WERE OFFERED OUTSIDE THE COUNTRY. HENCE, NO PART O F INCOME OF THE NON-RESIDENTS IS TAXABLE IN INDIA. THEREFORE, THE CIT(APPEALS) HAS 4 I.T.A. NO.3308/CHNY/16 RIGHTLY PLACED RELIANCE ON THE JUDGMENT OF MADRAS H IGH COURT IN FAIZON SHOES PVT. LTD. (SUPRA) AND DELETED THE DISA LLOWANCE MADE BY THE ASSESSING OFFICER. THIS TRIBUNAL DO NOT FIN D ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 7. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE MADE BY THE ASSESSING OFFICER TO THE EXTENT OF 16,36,225/-. 8. SMT. C. YAMUNA, THE LD. DEPARTMENTAL REPRESENTAT IVE, SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED 86,49,551/- FOR NON-DEDUCTION OF TAX UNDER SECTION 40(A)(IA) OF THE ACT. THE ASSESSEE ITSELF DISALLOWED A SUM OF 8,88,652/- AND THE BALANCE AMOUNT IS 77,60,899/-. ACCORDING TO THE LD. D.R., THE CIT(APPEALS) FOUND THAT LEASED LINE CHARGES PAID BY THE ASSESSEE ARE IN THE NATURE OF ROYALTY, THEREFORE, THE ASSESS EE IS LIABLE TO DEDUCT TAX UNDER SECTION 194J OF THE ACT. HAVING H ELD THAT THE ASSESSEE IS LIABLE TO DEDUCT TAX UNDER SECTION 194J OF THE ACT, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) GRANTED RELIEF TO THE EXTENT OF 16,36,225/- WITHOUT ANY FURTHER DISCUSSION, THEREFO RE, THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFF ICER. 5 I.T.A. NO.3308/CHNY/16 9. WE HEARD SHRI L. SHIBI, THE LD. REPRESENTATIVE F OR THE ASSESSEE ALSO. AS RIGHTLY SUBMITTED BY THE LD. D.R ., OUT OF TOTAL DISALLOWANCE OF 86,49,551/-, THE CIT(APPEALS) FOUND THAT THE ASSESSEE HAS NOT DEDUCTED TAX WITH REGARD TO 61,26,674/-. THE CIT(APPEALS) HAS ALSO FOUND THAT THE ASSESSEE ITSEL F DISALLOWED 8,86,652/-. IT IS NOT KNOWN HOW THE CIT(APPEALS) A LLOWED THE BALANCE OF 16,36,225/-. THERE IS NO DISCUSSION IN THE CIT(APPEALS)S ORDER. IN THE ABSENCE OF ANY DISCUS SION IN THE CIT(APPEALS)S ORDER, THIS TRIBUNAL IS OF THE CONSI DERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, THE DISALLOWANCE OF 16,36,225/- ALONE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RE-CONSIDE RATION. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AND B RING ON RECORD THE NATURE OF PAYMENT TO THE EXTENT OF 16,36,225/- AND THEREAFTER PASS ORDER IN ACCORDANCE WITH LAW, AFTER GIVING A R EASONABLE OPPORTUNITY TO THE ASSESSEE. 10. THE NEXT GROUND OF APPEAL IS WITH REGARD TO FOR EIGN CURRENCY EXPENDITURE OF 97,46,461/- AND TELECOMMUNICATION CHARGES OF 61,26,674/-. 6 I.T.A. NO.3308/CHNY/16 11. SMT. C. YAMUNA, THE LD. DEPARTMENTAL REPRESENTA TIVE, SUBMITTED THAT THE ASSESSING OFFICER EXCLUDED FOREI GN CURRENCY EXPENDITURE TO THE EXTENT OF 97,46,461/- AND TELECOMMUNICATION CHARGES OF 61,26,674/- FROM THE TOTAL TURNOVER. THE CIT(APPEA LS) DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE SAME FROM THE EXPORT TURNOVER ALSO. ACCORDING TO THE LD. D.R., THE DECI SION OF SPECIAL BENCH OF THIS TRIBUNAL IN ITO V. SAK SOFT LTD. (121 ITD 865) WAS NOT ATTAINED FINALITY AND THE APPEAL IS PENDING BEFORE THE HIGH COURT. 12. WE HEARD SHRI L. SHIBI, THE LD. REPRESENTATIVE FOR THE ASSESSEE, ALSO. WHILE COMPUTING THE ELIGIBLE PROFI T, THE EXPORT TURNOVER AS WELL AS THE TOTAL TURNOVER SHALL BE THE SAME FACTOR. THEREFORE, ONCE THE EXPENDITURE INCURRED BY THE ASS ESSEE IN FOREIGN CURRENCY AND TELECOMMUNICATION CHARGES ARE EXCLUDED FROM EXPORT TURNOVER, THE SAME HAVE ALSO TO BE EXCLUDED FROM TO TAL TURNOVER. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SA ME IS CONFIRMED. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7 I.T.A. NO.3308/CHNY/16 ORDER PRONOUNCED IN THE COURT ON 12 TH SEPTEMBER, 2018 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 12 TH SEPTEMBER, 2018. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-8, CHENNAI 4. PRINCIPAL CIT, CHENNAI- 4, CHENNAI 5. 7: -2 /DR 6. ;( < /GF.