ACIT, Ooty V. M/s. Myrind School of Catering & Computer Management (P) Ltd., Ooty

ITA 411/CHNY/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77352 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 28-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 27-02-2012
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI
• Assessee Lawyers: S SRIDHAR
• Keywords: Non-deduction of tax

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHE NNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 411/MDS/2012 / ASSESSMENT YEAR : 2008-09 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-I(1), INCOME TAX OFFICE, CHRISTO BUILDING, BANK ROAD, OOTY-643 001 ( !% /APPELLANT) VS M/S.MYRIND SCHOOL OF CATERING & COMPUTER MANAGEMENT (P) LTD., FOREST GATE, PUDUMUND, OOTY-643 007 [PAN: AABCM 8044 Q] ( &'!% /RESPONDENT) REVENUE BY : SHRI T.N.BETGERI, JCIT ASSESSEE BY : SHRI S.SRIDHAR, ADVOCATE / DATE OF HEARING : 28-04-2014 / DATE OF PRONOUNCEMENT : 16-06-2014 #( / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, COIMB ATORE DATED 16-11-2011 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 8-09. 2. THE FACTS AS RADIATED FROM RECORDS ARE; THE ASSE SSEE IS A COMPANY REGISTERED UNDER THE PROVISIONS OF THE COMP ANIES ACT I.T.A. NO. 411/MDS/2012 2 AND IS ENGAGED IN IMPARTING EDUCATION IN THE FIELD OF CATERING, HOTEL AND COMPUTER MANAGEMENT. THE ASSESSEE IS RUNNING A N INSTITUTE UNDER THE NAME MONARCH INTERNATIONAL COLLEGE OF HOT EL MANAGEMENT (HEREIN AFTER REFERRED TO AS MIC). THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY.2008-09 ON 30-09-20 08 DECLARING LOSS OF ` 23,52,233/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) OF THE INCOME TAX A CT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) WAS ISSUED TO THE A SSESSEE ON 18-09- 2009. THE ASSESSEE IS CONDUCTING HOTEL MANAGEMENT COURSE IN ASSOCIATION WITH INTERNATIONAL ACCLAIMED INSTITUTIO NS, SUCH AS, REGENCY AUSTRALIA AND CENTENNIAL COLLEGE, CANADA. DURING THE PERIOD RELEVANT TO THE AY UNDER CONSIDERATION, THE ASSESSEE PAID AN AMOUNT OF ` 48,64,161/- TOWARDS EXAMINATION FEES STUDY MATERIAL AND BOOKS TO REGENCY, AUSTRALIA AND CENTEN NIAL CANADA WITHOUT DEDUCTION OF TAX AT SOURCE. THE ASSESSING O FFICER VIDE ASSESSMENT ORDER DT.31-12-2010 INTER ALIA MADE DIS-ALLOWANCE U/S.40(A)(I) FOR NON-DEDUCTION OF TAX AT SOURCE ON THE PAYMENT OF SAID AMOUNT. THE ASSESSING OFFICER HELD THE PAYMEN T AS FEE FOR TECHNICAL SERVICES. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSESSE E PREFERRED AN APPEAL BEFORE THE CIT(APPEALS). THE C IT(APPEALS) VIDE IMPUGNED ORDER DELETED THE ADDITION U/S.40(A)( I) AND OBSERVED I.T.A. NO. 411/MDS/2012 3 THAT THE AMOUNT HAS BEEN PAID BY THE ASSESSEE TO TH E OVERSEAS INSTITUTIONS AS FEES FOR AWARDING THE DEGREES, SUPP LYING BOOKS AND COURSE MATERIAL. THE CIT(APPEALS) ALLOWED THE APPE AL OF THE ASSESSEE IN TOTO. NOT SATISFIED WITH THE ORDER, TH E REVENUE HAS ASSAILED THE FINDINGS OF THE CIT(APPEALS) BEFORE US . 3. SHRI T.N.BETGERI, APPEARING ON BEHALF OF THE DEP ARTMENT VEHEMENTLY SUPPORTED THE ORDER OF ASSESSING OFFICER AND PRAYED FOR SETTING ASIDE THE IMPUGNED ORDER. THE LD.DR SU BMITTED THAT THE CIT(APPEALS) HAS ERRED IN COMING TO THE CONCLUSION THAT THE FEES WAS PAID BY THE ASSESSEE FOR AWARDING DEGREES AND S UPPLY OF BOOKS AND COURSE MATERIAL. THE LD.DR REFERRED TO A RTICLES 2 & 3 OF THE AGREEMENT BETWEEN MIC AND CENTENNIAL COLLEGE OF APPLIED ARTS AND TECHNOLOGY, CANADA TO EMPHASIZE THAT THE A MOUNT PAID INCLUDED TECHNICAL FEES. 4. ON THE OTHER HAND, SHRI S.SRIDHAR, APPEARING ON BEHALF OF THE ASSESSEE CONTENDED THAT THE AMOUNT PAID BY THE ASSE SSEE IS NOT IN THE NATURE OF TECHNICAL SERVICES OR CONSULTANCY. THE LD.COUNSEL ALSO REFERRED TO ARTICLE 2 & 3 OF THE AGREEMENT. T HE LD.COUNSEL SUPPORTING THE IMPUGNED ORDER CONTENDED THAT THE CI T(APPEALS) HAS OBSERVED IN HIS ORDER THAT IN THE COPY OF APPLI CATION FOR RELEASE I.T.A. NO. 411/MDS/2012 4 OF FOREIGN EXCHANGE FILED BEFORE THE STATE BANK OF TRAVANCORE, IT IS CLEARLY MENTIONED THAT THE FOREIGN CURRENCY IS BEIN G PAID ON ACCOUNT OF BOOKS AND COURSE MATERIAL ON BEHALF OF T HE STUDENTS. THE LD.COUNSEL PRAYED FOR THE DISMISSAL OF THE APPE AL OF THE REVENUE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO EXAMINED THE C O-OPERATION AGREEMENT BETWEEN MIC AND CENTENNIAL COLLEGE OF APP LIED ARTS AND TECHNOLOGY, CANADA PLACED BEFORE US. THE DISPU TE IN THE APPEAL RELATES TO THE PAYMENT OF ` 48,64,161/- BY ASSESSEE TO THE OVERSEAS INSTITUTION WITHOUT DEDUCTION OF TAX AT SO URCE AS ENVISAGED U/S.195 OF THE ACT. THE CONTENTION OF TH E ASSESSEE IS THAT THE PAYMENTS ARE MADE TOWARDS THE COST OF BOOK S AND STUDY MATERIAL WHEREAS, THE STAND OF THE REVENUE IS THAT THE PAYMENT IS IN NATURE OF TECHNICAL FEES. BOTH THE SIDES HAVE R EFERRED TO ARTICLE 2 & 3 OF CO-OPERATION AGREEMENT. ARTICLE 2 RELATES TO THE RESPONSIBILITIES OF CENTENNIAL COLLEGE OF APPLIED A RTS AND TECHNOLOGY, CANADA, WHEREAS ARTICLE 3 RELATES TO TH E FEE STRUCTURE. THE RELEVANT EXTRACT OF BOTH THE ARTICLES IS RE-PRO DUCED HEREIN BELOW: I.T.A. NO. 411/MDS/2012 5 ARTICLE-2: CENTENNIAL SHALL: 2.1 PROVIDE CURRICULUM AND ASSESSMENT TOOLS FOR THE HOTEL AND TOURISM ADMINISTRATION PROGRAM AS USED BY HTA. T HE CONTENTS OF SUCH CURRICULUM WILL BE DECIDED BY CENT ENNIAL COLLEGE IN ITS SOLE DISCRETION, AND ALL RIGHT TO TH E MATERIALS DEVELOPED BY OR USED BY CENTENNIAL COLLEGE IN CONNE CTION WITH THE DEVELOPMENT AND DEPLOYMENT OF SUCH PROGRAM S, INCLUDING WITHOUT LIMITATION ALL INTELLECTUAL PROPE RTY, COPYRIGHTS AND TRADEMARKS, (IN ALL MEDIA NOW KNOWN OR HEREINAF TER DEVISED) TO THE CURRICULUM, TEACHERS TEXTBOOKS, TEA CHING AIDS AND ALL ASSOCIATED MARKETING TOOLS AND MATERIALS, S HALL AT ALL TIMES REMAIN THE SOLE AND EXCLUSIVE PROPERTY OF CEN TENNIAL COLLEGE (THE CENTENNIAL PROPRIETARY..) 2.2 XXXXXXXXXXXXXXXX 2.3 XXXXXXXXXXXXXXXX 2.7 WILL BE RESPONSIBLE FOR PROVIDING CURRICULUM, E VALUATION AND GRADUATION AUDIT FOR THE COURSES INCLUDED IN TH E MODEL ROUTE. ARTICLE-3: FEES: 3.1 THE CENTENNIAL FEES FOR THE HTA PROGRAM PAYAB LE TO CENTENNIAL COLLEGE WOULD BE $600.00 CANADIAN DOLLAR S, OR US$ EQUIVALENT AT RATE POSTED BY THE CANADIAN IMPER IAL BANK OF COMMERCE (CIBC), PER STUDENT PER YEAR BASED ON 2 SEMESTERS. THIS FEE IS TO BE FORWARDED TO CENTENNI AL COLLEGE 6 WEEKS PRIOR TO THE COMMENCEMENT OF THE SEMESTER S TART IN JULY. 3.2 XXXXXXXXXXXXXX 3.3 MONARCH AGREES THAT SAID MONEY SHALL NOT BE SUB JECTED TO DEDUCTIONS OF ANY KIND AND SHOULD BE FORWARDED TO C C I.T.A. NO. 411/MDS/2012 6 FORTHWITH. TUITION FEES ARE NOT REFUNDABLE 3 WEEKS PRIOR TO THE START DATE OF THE PROGRAM. 3.4 XXXXXXXXXXXXX. FROM THE CONJOINT READING OF ARTICLE 2 & 3, IT IS E VIDENT THAT THE FEES IS PAID TOWARDS THE STUDY CURRICULUM WHICH INCLUDES TEACHERS TEXTBOOKS, TEACHING AIDS, ASSOCIATED MARKETING TOOL S AND MATERIALS ETC. THERE IS NO TRANSFER OF ANY TECHNICAL KNOW-HO W OR TECHNICAL SERVICES. THE REVENUE HAS NOT BEEN ABLE TO SUBSTAN TIATE ITS PLEA, AS TO HOW THE AMOUNT PAID FALLS IN THE CATEGORY OF TECHNICAL FEE. WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER. THUS, THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED ON MONDAY, THE 16 TH JUNE, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( ! ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) / VICE PRESIDENT ! / JUDICIAL MEMBER '# /CHENNAI, $ /DATED: 16 TH JUNE, 2014 TNMM #% & '( )#( /COPY TO: 1. *+ /APPELLANT 2. &,*+ /RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. (01 & 2 /DR 6. 13 4 /GF