M/s Nisho Iwai Corporation rep by RINL, Visakhapatnam V. The ACIT, Special Range-1, Visakhapatnam

ITA 372/VIZ/2002

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0633 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 8 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-04-2010
• Assessment Year: 1991-1992
• Appeal Filed On: 22-05-2002
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DR ANITHA SUMANTHI SHRI G S
• Keywords: Set aside

Judgement Text

ITA NO.372/VIZAG/2002 NISSHO IWAI CORPN.REP.BY RINL VIZAG PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 372/VIZAG/2002 ASSESSMENT YEAR: 1991-92 M/S NISSHO IWAI CORPN. REP. RINL, VSP, VISAKHAPATNAM VS. ACIT, SPECIAL RANGE-1, VISAKHAPATNAM (APPELLANT) PAN NO: (RESPONDENT) APPELLANT BY: DR. ANITHA SUMANTHI, ADVOCATE RESPONDENT BY: SHRI G.S.S. GOPINATH, (DR) ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 21-02- 2002 PASSED BY THE LD CIT (A)-II VISAKHAPATNAM AND IT RELATES TO THE ASSESSMENT YEAR 1991-92. 2. ALL THE GROUNDS RAISED BY THE ASSESSEE ARE DIREC TED AGAINST A SINGLE ISSUE NAMELY WHETHER THE FEE FOR DESIGN AND ENGINEE RING DOCUMENTATION RECEIVED BY THE ASSESSEE COMPANY IS TAXABLE IN INDI A. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS A NON-RESIDENT COMPANY AND IT IS REPRESENTED BY M/S R ASHTRIYA ISPAT NIGAM LTD., (RINL) VISAKHAPATNAM. THE ASSESSEE COMPANY HAS PROVIDED DESIGN AND ENGINEERING SERVICES, MANUFACTURE, DELIVERY, TE CHNICAL ASSISTANCE THROUGH SUPERVISION OF ERECTION AND COMMISSIONING E TC., TO ESTABLISH COMPRESSOR HOUSE-I FOR M/S. RINL. THE PAYMENTS WERE M ADE BY M/S RINL SEPARATELY FOR EACH OF THE SERVICES/EQUIPMENTS PROV IDED/SUPPLIED BY THE ASSESSEE. IT, INTER ALIA, INCLUDED PAYMENT MADE TO WARDS SUPPLY OF DESIGN ITA NO.372/VIZAG/2002 NISSHO IWAI CORPN.REP.BY RINL VIZAG PAGE 2 OF 4 AND ENGINEERING DRAWINGS. THE ASSESSEE COMPANY CLAI MED THE SAID PAYMENT IS NOT TAXABLE UNDER THE INDIAN INCOME TAX A CT AS IT WAS A TRANSACTION OF SALE OF GOODS THAT HAS TAKEN PLACE O UTSIDE INDIA. THE SAID CLAIM WAS REJECTED BY THE AO AND HIS ORDER WAS CONF IRMED BY CIT (A). HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. DURING THE COURSE OF HEARING THE LD COUNSEL FOR THE ASSESS EE CARRIED US THROUGH THE FOLLOWING CLAUSES IN THE AGREEMENT BETWEEN THE ASSESSEE COMPANY AND RINL IN 1986 TO SUPPORT HER CASE THAT EVEN AS PER TH E ORIGINAL CONTRACT THAT THE SUPPLY OF DESIGN AND DRAWING DOCUMENTS HAVE TO TAKE PLACE OUTSIDE INDIA. A) 1.2 SUPPLY OF DRAWING AND DOCUMENTATION: THE PRIME CONTRACTOR SHALL SUPPLY THE DRAWINGS AND DOCUMENTATION AS DETAILED IN ARTICLE-11 OF THE PURCHASERS GENERA L CONDITIONS OF CONTRACT. B) 2.4.1. THE PRIME CONTRACTOR SHALL TRANSFER, DELIVER AND IMPART THE DESIGNS AND DRAWING TO THE REPRESENTATIVE DESIGNATE D FOR THAT PURPOSE BY PURCHASER IN JAPAN OR AT THE REQUEST OF THE PURCHASER BY TRANSMITTING THE SAME EITHER BY SURFACE MAIL OR AIR MAIL OR THROUGH A CARRIER IN WHICH CASE THE POST OFFICE OR SUCH CARRI ER IN JAPAN SHALL BE THE AGENT OF THE PURCHASER. C) 3.5.1.1 PROPERTY IN THE DESIGNS AND DRAWINGS SHALL VEST WITH THE PURCHASER ON THE SAME BEING TRANSFERRED, DELIVERED AND IMPARTED TO THE REPRESENTATIVE OF THE PURCHASER IN JAPAN OR WHE N THE PACKET CONTAINING THE DESIGN AND DRAWINGS IS DELIVERED EIT HER TO THE POST OFFICE OR TO A CARRIER DESIGNATED BY THE PURCHASER IN JAPAN AS THE CASE MAY BE. THOUGH THE LD DR CONTENDED THAT THERE IS NO PROOF T O SHOW THAT THE SUPPLY HAS TAKEN PLACE IN JAPAN, YET WE NOTICE FROM THE RE CORD THAT THERE WAS NO DISPUTE ON THIS POINT. ACCORDING TO THE CLAUSES CI TED ABOVE, THE PREPARATION AND DELIVERY OF DESIGN AND DRAWINGS HAVE TO TAKE PL ACE IN JAPAN. SINCE THE CONTRACT WAS ENTERED INTO BETWEEN THE PARTIES PRIOR TO THE COMMENCEMENT OF CONSTRUCTION OF THE COMPRESSOR HOUSE-I, IN THE ABSENCE OF ANY OTHER ITA NO.372/VIZAG/2002 NISSHO IWAI CORPN.REP.BY RINL VIZAG PAGE 3 OF 4 CONTRARY EVIDENCE, IT HAS TO BE ACCEPTED THAT THE P REPARATION AND DELIVERY OF THE SAID DOCUMENTS HAVE TAKEN PLACE IN JAPAN. 4.1 THE HONBLE SUPREME COURT, IN THE CASE OF IS HIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD., VS. DIR. OF IT (288 ITR 408) HAS HELD THAT IN CASE OF OFF SHORE SUPPLY OF GOODS, IF ALL PARTS OF THE TRAN SACTION, I.E. THE TRANSFER OF PROPERTY IN GOODS AS WELL AS THE PAYMENT, WERE CARR IED ON OUTSIDE THE INDIAN SOIL, THE TRANSACTION COULD NOT HAVE BEEN TAX ED IN INDIA. IN THE INSTANT CASE ALSO, ALL THE PARTS OF THE TRANSACTION S HAVE TAKEN PLACE OUTSIDE THE INDIAN SOIL AND HENCE THE IMPUGNED TRANSACTION FALLS OUTSIDE THE PURVIEW OF INDIAN TAXATION. 4.2 IN THE ALTERNATIVE, THE LD AR ALSO SUBMITTED THAT THE DESIGN AND DRAWING CONSTITUTES A PLANT AND HENCE IT CANNOT BE TAKEN AS FEE FOR TECHNICAL SERVICES. IN THAT REGARD THE RELIANCE WAS PLACED ON THE FOLLOWING DECISION OF THE HONBLE SUPREME COURT: I) SCIENTIFIC ENGINEERING HOUSE P LTD., VS. CIT (AP) ( SUPREME COURT 157, ITR 86 II) ELICON ENGINEERING 166, ITR 66 SINCE THE PAYMENT IN THE INSTANT CASE HAS BEEN MADE FOR OUTRIGHT PURCHASE OF DESIGN AND ENGINEERING DRAWINGS, THE SAME WOULD NOT FALL UNDER THE DEFINITION OF FEE FOR TECHNICAL SERVICES PROVIDED I N 9(1) (VII) OF THE ACT. 4.3 IN OUR VIEW THE DECISION OF DELHI ITAT BENCH IN THE CASE OF MANNESMAN DEMAG SACK AG VS.ADD.CIT REPORTED IN (200 8), 119 TTJ (DEL) 543, ON WHICH RELIANCE WAS PLACED BY LD DR, IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE. IN THE CASE OF MANNESMAN DEMAG S ACK, SUPRA, THE DECISION WAS RENDERED ON THE BASIS OF THE TERMS OF THE CONTRACT WHICH PROVIDED THAT TECHNICAL SERVICES SHALL INCLUDE SUPP LY OF DESIGN AND DRAWINGS. HENCE ON THE FACTS OF THE CASE, THE TRIBUNAL HELD T HAT DESIGN AND DRAWING CHARGES ARE IN THE NATURE OF FEE FOR TECHNICAL SERV ICES. HOWEVER, IT MAY BE ITA NO.372/VIZAG/2002 NISSHO IWAI CORPN.REP.BY RINL VIZAG PAGE 4 OF 4 PERTINENT TO NOTE THAT THE TRIBUNAL IN THAT CASE, A CCEPTED THE ALTERNATIVE CONTENTION OF THE ASSESSEE THAT THE SAID FEE CANNOT BE ASSESSED IN INDIA, UNLESS IT IS SHOWN THAT SOME PART OF WORK HAS EMANA TED FROM INDIAN TERRITORIES. 4.4 HENCE ON A CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT THE AMOUNT RECEIVED BY THE ASSESSEE FOR SUPPLY OF DESIG N AND ENGINEERING DRAWINGS IS IN THE NATURE OF PLANT AND SINCE THE PR EPARATION AND DELIVERY HAS TAKEN PLACE OUTSIDE INDIAN TERRITORIES, THE SAM E CAN NOT BE SUBJECTED TO TAX IN INDIA. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD CIT (A) AND DIRECT THE AO TO DELETE THE ADDITION ON THIS ISSUE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. PRONOUNCED IN THE OPEN COURT ON 22 ND JUNE, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 22-06-2010. COPY TO 1 M/S.NISSHO IWAI CORPN. JAPAN, REP. BY M/S RINL, V.S. P. VISAKHAPATNAM 530031 2 THE ACIT, SPECIAL RANGE-1, VISAKHAPATNAM 3 4. THE CIT II VISAKHAPATNAM THE CIT(A)-II, VISAKHAPATNAM. 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM