DCIT , CIRCLE - 13(1)(2), MUMBAI V. PINSTORM TECHNOLOGIES PVT. LTD., MUMBAI

ITA 3693/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5983 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 28-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; TDS; Set aside
• Section: 142(1); 40(a)(ia); 143(1); 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI M. BALAGANESH , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO.3693 /MUM/201 8 ( / ASSESSMENT YEAR: 20 14 - 15 ) DCIT CIRCLE - 13(1)(2) 2 ND FLOOR, ROOM NO. 218, AAYAK AR BHAVAN, M.K. ROAD, MUMBAI - 400020 . / VS. M/S. PINSTORM TECHNOLOGIES PVT.LTD. GROUND FLOOR, SWATI BUILDING, NORTH AVENUE ROAD, SANTACRUZ (W), MUMBAI - 400054. ./ ./ PAN/GIR NO. : AADCP4854B ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 30 /07/2019 /DATE OF PRONOUNCEMENT: 31 /07/ 201 9 / O R D E R PER AMARJIT SINGH, JM: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 28 . 02 .201 8 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 21 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 1 4 - 1 5 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - ' I. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE U/S 40(A)(I) MADE BY AO HOLDING THAT THE AMOUNT PAID BY ASSESSEE TO M/S GOOGLE IRELAND LTD. IS REVENUE BY : SHRI ABI RAMA KARTIKIYEN (DR) ASSESSEE BY: SHRI HARIDAS BHAT (AR) ITA NO. 3693/M/2018 A.Y.20 14 - 15 2 NOT CHARGEABLE TO TAX IN INDIA, IN THE ABSENCE OF ANY PE OF M/S GOOGLE IRELAND IN INDIA. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LIGHT OF HON'BLE SUPREME COURT'S DECISION IN THE CASE OF CIT VS KANPUR COAL SYNDICATE [1965 AIR 325, 1964 SCR (6)(85)] AND AS PER CLAUSE (IVA) TO EXPLANATION 2 BELOW SEC 9(1)(VI) OF THE INCOME TAX ACT, 1961, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 91,92,344/ - WHICH SHOULD HAVE BEEN TREATED AS ROYALTY AND HE OUGHT TO HAVE UPHELD THE DECISION OF THE AO. 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ' 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED ITS RETURN OF INCOME ON 18.09.2014 DECLARING TOTAL LOSS TO THE TUNE AT RS. 36,70,426 / - . THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. THEREAFTER, THE CAS E WAS SELECTED FOR SCRUTINY, THERE FORE, NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF SEARCH ENGINE, MARKETING THROUGH INTERNET CONSISTING OF GENERATING CLICKS, LINKS, VISITS THROUGH INTERNET WITH CLIE NTS. ON VERIFICATION, THE ASSESSEE WAS ASKED TO FURNISH THE DETAIL OF TDS DEDUCTED ALONG WITH NECESSARY DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE PAYMENT MADE TO THE GOVERNMENT TREASURY. IT WAS ALSO NOTICED THAT THE TDS WAS NOT DEDUCTED ON ADVERTISEMENT COS T IN SUM OF RS .91,92,344/ - WHICH WAS REQUIRED U/S 195 OF THE ACT. NOTICE WAS GIVEN AND AFTER THE REPLY OF THE ASSESSEE, THE SAID AMOUNT WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS . 55,21,920/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ITA NO. 3693/M/2018 A.Y.20 14 - 15 3 I SSUE NOS. 1 & 2 : - 4. UNDER THESE ISSUES THE REVENUE HAS CHALLENGED THE DEL ETION OF DISALLOW ANCE OF RS.91,92,344/ - U/S 40A(A )(I A ) OF THE ACT . THE LD. REPRESENTATIVE OF THE REVENUE HAS ARGUED THAT THE ASSESSEE FAILED TO DEDUCT THE TDS UPON THE PAYMENT OF AD VERTISEMENT COST IN SUM OF RS.91,92,344/ - U/S 195 OF THE ACT, THEREFORE, THE AO HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE BUT THE CIT(A) HAS WRONGLY DELETED THE SAID ADDITION, THEREFORE, T HE FINDING OF THE CIT(A) IS NOT JUSTIFIABLE, HENCE IS LIABLE TO BE SET ASIDE. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE A SSESSEE HAS PLACED RELIANCE UPON THE ORDER OF THE CIT(A) IN QUESTION. BEFORE GOING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT( A) ON RECORD : - I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BY THE APPELLANT. THE ASSESSEE IS IN THE BUSINESS OF PLACING THE CLIENTS PARTICULARS IN THE VANTAGE POINTS IN THE SEARCH ENGINES LIKE GOOGLE, YAHOO ETC. THE APPELLANT BUYS THE VANTAGE POINTS IN THE SEARCH ENGINES AND SELLS THE SAME TO CLIENTS BY PLACING THEIR NAME AND ALSO BY GENERATIN G THE DATA OF HITS THEREON AND BILLS THE CLIENTS ACCORDINGLY. THE PAYMENTS TO THE POPULAR SEARCH ENGINES LIKE GOOGLE IS MADE BY SWIPING THE CREDIT CARDS AND THEREBY REMITTING THE MONIES TO GOOGLE WHO HAS HEADQUARTERS IN IRELAND. GOOGLE DOES NOT HAVE ANY PE RMANENT ESTABLISHMENT IN INDIA. THE NATURE OF PAYMENT IS TOWARDS BUSINESS INCOME AND NOT FEES FOR TECHNICAL SERVICE, IT IS FURTHER SEEN THAT THIS ISSUE WAS DECIDED IN FAVOUR OF THE APPELLANT IN ITS OWN CASE IN AY 2006 - 07, I.T.A. NO.4332/MUMBAI/2009 DATED 1 8.07.2012. THIS DECISION WAS FOLLOWED IN THE APPELLANT'S OWN CASE IN THE SUBSEQUENT ASSESSMENT YEARS ALSO IN THE DECISION OF THE HONBLE ITAT. FURTHER, LD. CIT(A)HAD ALSO ALLOWED THE APPELLANTS APPEAL ON THIS ISSUE FOR THE EARLIER ASSESSMENT YEARS. FURTHE R THE ISSUE IS COVERED IN FAVOUR OF THE APPELLANT BY THE ITAT AND CIT(A) IN ITS OWN CASE, FOR THE EARLIER ASSESSMENT YEARS, RESPECTFULLY FOLLOWING THE SAME THE AO IS DIRECTED TO DELETE THE ADDITIONS OF RS.91,92,344/ - . THE GROUNDS OF APPEAL NO.1 IS ALLOWED. ITA NO. 3693/M/2018 A.Y.20 14 - 15 4 5 . ON APPRAISAL OF THE ABOVE MENTIONED ORDER, WE FIND THAT THE ISSUE HAS BEEN DECIDED ON THE BASIS OF THE DECISION OF HONBLE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y.2006 - 07 IN ITA. NO.4332/M/2009 DATED 18.07.2012 . THE FACTS ARE NOT DISTINGUISHABLE A T THIS STAGE. NO LAW CONTRARY TO THE LAW RELIED UPON THE LD. REPRESENTATIVE OF THE CIT(A) HAS BEEN PRODUCED BEFORE US. FURTHER, WE ALSO NOTICED THAT THE ISSUE HAS ALSO BEEN DEAL T WITH BY HONBLE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y.2012 - 13 IN ITA. N O.4937/M/2016 DATED 14.02.2018 . THE RELEVANT FINDING HAS BEEN GIVEN IN PARA NO. 4 WHICH IS HEREBY REPRODUCED AS UNDER: - 4 . UNDER THESE ISSUES THE REVENUE HAS CHALLENGED THE DELETION OF THE DISALLOWANCE U/S 40(A)(IA) OF THE I.T. ACT, 1961 OF AN AMOUNT OF R S.1,01,02,632/ - . THE CONTENTION OF THE ASSESSEE IS THAT THE PAYMENT TO M/S. GOOGLE IRELAND LTD. FOR UPLOADING AND DISPLAY OF BANNER ADVERTISEMENT WAS NOT IN THE NATURE OF RENDERING OF ROYALTY BUT THE SAME WAS FOR RENDERING THE BUSINESS PROFIT OF M/S. GOOGL E IRELAND LTD. AND IN THE ABSENCE OF ANY PE OF M/S. GOOGLE IRELAND LTD. IN INDIA, THE SAME IS NOT CHARGEABLE TO TAX IN INDIA. THE REVENUE IS OF THE VIEW THAT THE SAID PAYMENT WAS IN THE NATURE OF ROYALTY, THEREFORE, THE TDS WAS LIABLE TO BE DEDUCTED IN ACC ORDANCE WITH LAW. ON APPRAISAL OF THE ORDER OF THE CIT(A), IT CAME INTO NOTICED THAT THE ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y. 2006 - 07 IN ITA. NO.4332/M/2009 DATED 18.07.2012. THE SAID DECISION WAS FOLLOWED IN THE APPELLANTS OWN CASE IN THE SUBSEQUENT ASSESSMENT YEAR ALSO. THE HONBLE ITAT HAS ALSO DECIDED THESE ISSUES IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CASE FOR THE A.Y. 2008 - 09 IN ITA. NO.2895/M/2012 DATED 23.01.2013. THE CIT(A) HAS ALSO DECIDED THESE ISSUE IN FAVOUR OF THE ASSESSEE ON THE BASIS OF THE DECISION OF ITAT. SINCE THESE ISSUES HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT AND THE CIT(A) HAS ALSO FOLLOWED THE SAME, THEREFORE, IN THE SAID CIRCUMST ANCES, WE NOWHERE FOUND ANY ILLEGALITY AND IRREGULARITY IN THE ORDER PASSED BY THE CIT(A) IN QUESTION. THEREFORE, WE CONFIRMED THE FINDING OF THE CIT(A) ON THESE ISSUES AND DECIDED THESE ISSUES IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 6 . SINCE THE I SSUE HAS DULY BEEN COVERED BY THE DECISION OF HONBLE ITAT IN THE ASSESSEES OWN CASE (SUPRA), THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY ITA NO. 3693/M/2018 A.Y.20 14 - 15 5 WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS AP PELLATE STAGE. ACCORDINGLY, ALL THESE ISSUES ARE DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 7 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE D ISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 31 /07/2019 SD/ - SD/ - ( M. BALAGANESH ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 31 /07/2019 V IJAY /SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI