ACIT-3, Kanpur V. M/s Eastern Exports, Kanpur

ITA 369/LKW/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6545 (ITAT-LUCKNOW)
• Duration Of Justice: 3 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-06-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 24-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K RAM
• Assessee Lawyers: P K KAPOOR
• Keywords: Retrospective amendment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO S . 369 & 370/LKW/2011 ASSESSMENT YEAR S : 2007 - 08 & 2008 - 09 ASSTT. CIT - 3 KANPUR V. M/S E ASTERN EXPORTS KANPUR PAN: AAAFE9872G (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. R. K. RAM, D.R. RESPONDENT BY: SHRI. P. K. KAPOOR, C.A. DATE OF HEARING: 19 0 6 2014 DATE OF PRONOUNCEMENT: 25 0 6 2014 O R D E R PER SUNIL KUMAR YADAV: THESE A PPEALS ARE PREFERRED BY THE REVENUE AGAINST THE RESPECTIVE ORDER OF THE LD. CIT(A) ON COMMON GROUNDS, EXCEPT THE DIFFERENCE IN QUANTUM OF ADDITION. FOR THE SAKE OF REFERENCE, WE EXTRACT THE GROUNDS OF APPEAL RAISED IN I.T.A. NO.369/LKW/2011 AS UNDER: - 1 . TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.24,59,826/ - ON ACCOUNT OF NON - DEDUCTION OF TDS ON PAYMENT OF COMMISSION TO FOREIGN AGENT WITHOUT APPRECIATING THE FACTS BROUGHT ON REC ORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ABOVE ADDITION WITHOUT CONSIDERING THE BOARD'S CIRCULAR NO.7 OF 2009 PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : 3 . THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS NOT APPRECIATED THE SETTLED PRINCIPLE IN RESPECT OF INTERPRETATION OF PROSPECTIVE OR RETROSPECTIVE NATURE OF AMENDMENT IN THE STATUE AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS GOLD COIN HEALTH FOOD PVT. LTD.(2008) 304 ITR 308 (SC) AND CIT VS MOSER BAER INDIA LTD. [2009] 315 ITR 460 (SC) . 4 . THAT THE LD COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE SERVICES RE NDERED BY THE NON RESIDENT AGENT TO PROCURE ORDERS FROM FOREIGN BUYERS ARE PURELY TECHNICAL AS WELL AS MANAGERIAL IN NATURE. THEREFORE, THE PROVISION OF SECTION 9(1 )(VII) IS CLEARLY APPLICABLE ON THE ASSESSEE. 5 . THAT THE LD COMMISSIONER OF INCOME TAX (APPEAL S) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE PAYMENT BY THE RESIDENT ASSESSEE IN CONNECTION WITH HIS BUSINESS IN INDIA TO A PERSON OUTSIDE INDIA MAKING USE OF HIS EXPERTISE IN SALE OF SIMILAR GOODS IN A PARTICULAR COUNT RY IS NOTHING BUT A FEE WHICH HAS BEEN PAID BY THE RESIDENT ASSESSEE TO THE NON - RESIDENT FOR THE TECHNICAL SERVICES R ENDERED BY HIM . 6 . THAT THE ORDER OF THE LD. CIT(A) - II, KANPUR DATED 29.3.2011 NEEDS TO BE QUASHED AND THE ORDER PASSED BY THE ASSESSING OFFI CER DATED 24.12.2009 BE RESTORED. 2 . THOUGH VARIOUS GROUNDS ARE RAISED, BUT THE SOLE ISSUE INVOLVED IN THESE GROUNDS OF APPEAL RELATES TO THE DISALLOWANCE OF COMMISSION PAID TO FOREIGN AGENT ON ACCOUNT OF NON - DEDUCTION OF TDS. 3 . DURING THE COURSE OF HEARING, T HE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION THAT THE ISSUE RELATING TO THIS GROUND IS SQUARELY COVERED BY VARIOUS ORDER S OF THE LUCKNOW BENCH OF THE TRIBUNAL. HE HAS PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : ALSO PLACED RELIANCE UPON THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN T HE CASE OF CIT VS. EON TEHNOLOGY (P) LTD [2012] 246 CTR (DEL) 40 AND ALSO ORDER OF THE ITAT, HYDERABAD IN THE CASE OF DY. CIT VS. DIVIS LABORATORIES LTD [2011] 131 ITD 271 (HYD.). 4 . THE LD. D.R. HAS PLACED RELIANCE UPON THE ORDER S OF THE ASSESSING OFFICER. 5 . WE HAVE CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES AND HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND WE FIND THAT ISSUE RELATING TO DISALLOWANCE OF COMMISSION PAID TO FOREIGN AGENT ON ACCOUNT OF NON - DEDUCTION OF TDS WAS EXTENSIVELY EXAMINED BY THIS BENCH OF THE TRIBUNAL I N THE CASE OF ACIT - 1, KANPUR VS. M/S NORTHERN TANNERY, KANPUR IN ITA NO.55/LKW/2012 , IN WHICH THE TRIBUNAL FINALLY CONCLUDED THAT THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TDS ON THE PAYMENT OF COMMISSION TO NON - RESIDE NT AND ACCORDINGLY THE ORDER OF THE LD. CIT(A) DELETING THE ADDITION MADE IN THIS REGARD WAS CONFIRMED FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL. FOR THE SAKE OF REFERENCE, WE EXTRACT THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL AS UNDER: - 5. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDER OF THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V. SANJIV GUPTA [2011] 135 TTJ (LUCKNOW) 641 IN WHICH IT HAS BEEN HELD THAT CIRCULAR NO.7/2009 DATED 22.10.2009 WOU LD HAVE PROSPECTIVE EFFECT AND WILL NOT APPLY TO THE ASSESSMENT YEAR 2008 - 09. THE LD. CIT(A) HAS ALSO ADJUDICATED THE ISSUE FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL AND ALSO THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. TOSHOKA LTD. (SUPRA). THE IDENTICAL ISSUE WAS EXAMINED BY THE TRIBUNAL IN THE CASE OF ACIT VS. INDIAN LEATHER INDUSTRIES, I.T.A. NO.170/LKW/2012 IN DETAIL AND IT WAS HELD THAT CIRCULAR NO.7/2009 DATED 20/10/2009 WITHDRAWING THE EARLIER CIRCULAR NOS.786 DATED 7/2/2000 AND 23 D ATED 23/7./969 WILL BE OPERATIVE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : ONLY FROM THE DATE OF ISSUE AND HAD NO RETROSPECTIVE EFFECT I.E. W.E.F. ASSESSMENT YEAR 2009 - 10. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED AS UNDER: 7. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SU BMISSIONS AND FROM A CAREFUL PERUSAL OF RECORD, WE FIND THAT THE LD. CIT(A) HAS ADJUDICATED THE ISSUE IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS AND ALSO THE ORDER OF THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V. SANJIV GUPTA (SUPRA) IN WHI CH THE TRIBUNAL HAS HELD THAT DISALLOWANCE UNDER SECTION 40(A)(I) ON PAYMENT OF COMMISSION TO NON - RESIDENT CANNOT BE MADE IN THE LIGHT OF OLD CIRCULAR NO.23 DATED 23.7.1969 AND CIRCULAR NO.786 DATED 7.2.2000 AS THE ASSESSEE WAS NOT OBLIGED TO DEDUCT TDS UN DER SECTION 195 OF THE ACT WITH REGARD TO PAYMENT OF COMMISSION TO FOREIGN AGENT. CIRCULAR NO.7/2009 DATED 20.10.2009 WITHDRAWING THE EARLIER CIRCULAR NOS.786 DATED 7.2.2000 AND 23 DATED 23.7.1969 WILL BE OPERATIVE ONLY FROM THE DATE OF ISSUE AND HAD NO R ETROSPECTIVE EFFECT I.E. W.E.F. ASSESSMENT YEAR 2009 - 10. SINCE THE IMPUGNED ISSUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL OF THIS BENCH, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS ADJUDICATED THE ISSUE FOLLOWING THE ORDER OF THE TRIBUNAL. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THE CASE OF DCIT V. SANJIV GUPTA (SUPRA) ARE EXTRACTED HEREUNDER: - AS PER THE CBDT CIRCULAR NO. 23, DT. 23RD JULY, 1969 AND CIRCULAR NO. 786, DT. 7TH FEB., 2000, THE ASSESSEE WAS NOT REQUIRED TO DED UCT THE TAX AT SOURCE UNDER S. 195 WITH REGARD TO PAYMENT OF COMMISSION TO FOREIGN AGENT. IN THE INSTANT CASE, THE ASSESSMENT YEAR INVOLVED IS 2007 - 08 AND THE RELEVANT PREVIOUS YEAR IS 2006 - 07. ADMITTEDLY, RETURN OF INCOME WAS FILED ON 30TH OCT., 2007. AT THE TIME OF FILING OF THE RETURN, CIRCULAR NO. 7 OF 2009, DT. 22ND OCT., 2009 WAS NOT IN FORCE BY WHICH THE CBDT WITHDREW CIRCULAR NO. 23, DT. 23RD JULY, 1969 WITH IMMEDIATE EFFECT. WHERE A CIRCULAR ISSUED EARLIER CREATED A VESTED RIGHT IN THE TAXPAYER AND SUCH RIGHT IS SOUGHT TO BE CURTAILED OR WITHDRAWN BY A SUBSEQUENT CIRCULAR, THEN SUCH SUBSEQUENT CIRCULAR WILL NOT HAVE A RETROSPECTIVE EFFECT. NO INFIRMITY IS FOUND IN THE ORDER OF THE CIT(A) ON THIS ISSUE AND ACCORDINGLY THE SAME IS UPHELD. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 5 - : 8. SINCE T HE IMPUGNED ISSUE IS SQUARELY COVERED BY THE AFORESAID ORDER OF THE TRIBUNAL, WE FIND NO JUSTIFICATION TO TAKE A CONTRARY VIEW IN THIS APPEAL. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY ADJUDICATED THE ISSUE FOLLOWING THE ORDER OF THE TRIBUNAL. 6. SINCE THE IMPUGNED ISSUE IS SQUARELY COVERED BY THE AFORESAID ORDER OF THE TRIBUNAL, WE FIND NO VALID REASON TO TAKE A CONTRARY VIEW. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A) WHO HAS RIGHTLY ADJUDICATED THE ISSUE FOLLOWING THE ORDE R OF THE TRIBUNAL. 6 . SINCE THE TRIBUNAL HAS TAKEN A PARTICULAR VIEW IN A SIMILAR SET OF FACTS, WE FIND NO JUSTIFICATION TO TAKE A CONTRARY VIEW IN THIS APPEAL. ACCORDINGLY, FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL, WE DECIDE THIS ISSUE IN FAVOUR OF TH E ASSESSEE AND CONFIRM THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION. 7 . IN THE RESULT, APPEAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.6.2014. SD/ - SD/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUD ICIAL MEMBER DATED: 25 TH JUNE , 2014 JJ: 1906 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )