SAMEX AGENCY, MUMBAI V. ITO-17(3)(2), MUMBAI

ITA 4148/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4976 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 10-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Permanent establishment; TDS; Set aside
• Section: 142(1); 143(1); 201; 143(2); 9(1); 9(1); 9(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO. 4148 /MUM/201 9 ( / ASSESSMENT YEAR : 201 4 - 1 5 ) SAMEX AGENCY 201, 2 ND FLOOR, SABARI SAMRIDHI, PLOT NO.10, OPP . UNION PARK, V. N. PURAV MARG, CHEMBUR, MUMBAI - 400071 . / VS. ITO - 17(3)(2) 114, AAYKAR BHAVAN, M. K. ROAD, MUMBAI - 400020. ./ ./ PAN/GIR NO. : AAKFS6502P ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 16 / 0 2 / 20 2 1 /DATE OF PRONOUNCEMENT: 07 / 0 4 / 2021 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT A PPEAL AGAINST THE ORDER DATED 03 .0 5 .201 9 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 28 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2014 - 1 5 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - GROUND 1 (A) THE HONBLE CIT (A) - 28. MUMBAI HAS ERRED IN CONFIRMING THE DISALLOWANCE U/S 40(A)(I) OF INCOME TAX ACT. 1961 (THE ACT) BY AFFIRMING PAYMENTS OF RS. 12,22,102/ - (US $ 18, 904 . 27) MADE TO NON - RESIDENT HAVING NO PERMANENT ESTABLISHMENT (PE) IN INDIA VIZ. AL - ZAHENI & MALHOTRA GENERAL TRADING CO. W.L.L, P.O. KUWAIT TOWARDS REIMBURSEMENT OF EXHIBITION EXPENSES AND COST OF FREE SAMPLES DISTRIBUTED IN SUPER MARKETS & CO - OPERATIVE STORES IN KUWAIT AS ASSESSEE BY : SHRI NAVIN B. GANDHI (AR) REVENUE BY: SHRI T. S. KHALSA (DR) ITA NO . 4148 / M/201 9 A.Y. 2014 - 15 2 'MANAGERIAL SERV ICES COVERED IN ETS' AS PER EXPLANATION 2 TO SECTION 9(1) (VII) OF THE ACT. THE APPELLANT FIRM HUMBLY SUBMITS THAT: AS PER THE PROVISIONS OF SECTION 5 OF THE ACT AND PROVISIONS OF THE DTAA BETWEEN INDIA AND KUWAIT. NO INCOME HAS ACCRUED OR ARISEN OR DEEMED TO HAVE BEEN ACCRUED OR ARISEN IN INDIA IN THE HANDS OF THE SAID NON - RESIDENT VIZ. AL - ZAHEM & MALHOTRA GENERAL TRADING CO. W.L.L. P.O. WHO HAS NO PE IN INDIA OUT OF THE PAYMENTS OF RS. 12,22,102/ - MADE TOWARDS THE REIMBURSEMENT OF EXPENSES. B) T HE PAYMENT S OF ITS. 12,22,102/ - TO THE SAID NON - RESIDENT WERE MERELY REIMBURSEMENT OF EXPENSES AND DID NOT HAVE ANY ELEMENT OF SUPERVISION, SUPERINTENDENCE, CONTROL, DIRECTION AND GUIDANCE WHICH IS THE ESSENCE OF MANAGERIAL SERVICES SO AS TO BRING THE SAID SERVICES WITHIN THE AMBIT OF FEES FOR TECHNICAL SERVICES (FTS). RELIEF CLAIMED: THE APPELLANT FIRM HUMBLY SUBMITS THAT THE ENTIRE ADDITION IS INCORRECT, UNJUSTIFIED AND BAD IN LAW AND HENCE MAY PLEASE BE DELETED. GROUND 2 THE APPELLANT FIRM PRAYS FOR YOUR LEAVE TO ADD, ALTER & AMEND THE ABOVE GROUNDS OF APPEAL IF NECESSARY. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 01.09.2014 DECLARING TOTAL INCOME TO THE TUNE OF RS.53,52,296/ - FOR THE A.Y.2014 - 1 5. THE RETURN WAS PROCESSED U /S 143(1) OF THE I. T. ACT, 1961 ACCEPTING THE INCOME RETURNED BY THE ASSESSEE. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY. NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINES S OF EXPORT OF AGRICULTURE PRODUCE, SPICES SUCH AS CARDAMOM, GINGER, BLACK PEPPER ETC. THE ASSESSEE HAS DEBITED A SUM OF RS.12,22,102/ - IN THE PROFIT AND LOSS ACCOUNT AS FOREIGN SALES PROMOTION EXPENSES. NO TDS WAS DEDUCTED ON RS.12,22,102/ - . THE NOTICE WA S ISSUED AND AFTER THE REPLY OF THE ASSESSEE, THE SAID AMOUNT IN SUM OF RS.12,22,102/ - FOREIGN SALES PROMOTION EXPENSES WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSE. ITA NO . 4148 / M/201 9 A.Y. 2014 - 15 3 THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED IN SUM OF RS.65,74,400 / - . FEELING A GGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ORDER OF THE AO, THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. GROUND NO. 1 4 . UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF THE DISALLOWANCE U/S 40(A)( I) OF T HE ACT IN SUM OF RS.12,22,102/ - MADE TO NON - RESIDENT HAVING NO PERMANENT ESTABLISHMENT (PE) IN INDIA. AT THE VERY OUTSET, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ISSUE HAS DULY BEEN COVERED BY THE DECISION OF THE HONBLE IT AT IN THE ASSESSEES OWN CASE BEARING ITA. NO.70/MUM/2019 FOR THE A.Y.2012 - 1 3 DATED 27 .0 2 .2020 , THEREFORE, THE CLAIM OF THE ASSESSEE IS LIABLE TO BE ALLOWED. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTI ON. BEFORE GOING FURTHER, WE DEEM IT NECESSARY TO ADVERT THE FINDING OF THE HONBLE ITAT IN THE ASSESSEES OWN CASE (SUPRA). THE RELEVANT FINDING IS HEREBY REPRODUCED AS UNDER.: - 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. ADMITTEDLY, THE ASSESSEE EXPLAINED BEFORE THE LD. CIT(A) THAT RS.9,94,000/ - WAS PAID TO AL - ZAHAM & MALHOTRA TO MAKE THE EMPEROR AKBAR BRAND CARDAMOM FOR DISPLAY AND SALE ON THE SHELVES OF VARIOUS SUPERMARKETS AND MALLS; THE FIRM HAD PAID LISTING FEES TO THE SUPERMARKETS AND MALLS BY VIRTUE OF WHICH THE DIFFERENT SIZES OF THE EMPEROR AKBAR CARDAMOM POUCHES ARE REGISTERED INTO THE BAR CODE SYSTEM OF THE SUPERMARKETS/MALLS AND THUS THE PRODUCTS OF THE FIRM ARE NOW AVAILABLE FOR SALE IN VARIOUS SUP ERMARKETS AND MALLS OF KUWAIT. THE ASSESSEE ALSO FILED BEFORE THE LD. CIT(A) THE DEBIT NOTE OF AL - ZAHAM & MALHOTRA AND PHOTOGRAPHS OF THE FIRMS EMPEROR AKBAR PRODUCT DISPLAYED FOR SALE ON THE SHELVES OF SUPERMARKETS AND MALLS IN KUWAIT. FURTHER, IN RESP ECT OF PAYMENT OF THE BALANCE AMOUNT OF RS.2,31,247/ - PAID TO AL - ZAHAM & MALHOTRA, THE ASSESSEE HAD SUBMITTED DEBIT NOTE OF AL - ZAHAM & MALHOTRA AND PHOTOGRAPHS OF THE FIRMS EMPEROR AKBAR ITA NO . 4148 / M/201 9 A.Y. 2014 - 15 4 PRODUCT DISPLAYED FOR SALE AT INCREDIBLE INDIA PROMOTION FESTIVAL. WE FIND THAT THE ASSESSEE - FIRM HAD FILED THE DEBIT NOTES ALONG WITH THE OTHER DETAILS BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. A PERUSAL OF THE DOCUMENTS FILED BEFORE THE AO AS WELL AS CIT(A) CLEARLY INDICATES THAT THE SAID EXPENSES ARE MERE REIMBURSEMENT OF EXPENSES INCURRED BY AL - ZAHAM & MALHOTRA AND THERE IS NO ELEMENT OF SUPERVISION, SUPERINTENDENCE, CONTROL, DIRECTION AND GUIDANCE WHICH IS THE ESSENCE OF MANAGERIAL SERVICES SO AS TO BRING THE SAID SERVICES WITHIN THE AMBIT OF FTS. WH EN THE ABOVE DETAILS WERE FILED BEFORE THE AO AND CIT(A), IT WAS INCUMBENT ON THEM TO EXAMINE AND MAKE FURTHER INQUIRY. EVEN ELEMENTARY EXAMINATION HAS NOT BEEN MADE BY THEM. IN SUCH A SITUATION, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DELETE THE ADDITION OF RS.12,25,247/ - MADE BY THE AO. 5 . SINCE THE ISSUE HAS DULY BEEN COVERED BY THE DECISION OF HONBLE ITAT IN THE ASSESSEE S OWN CASE BEARING ITA. NO. 70/MUM/2019 DATED 27.02.2020 , THEREFORE, BY HO NORING THE DECISION OF THE HONBLE ITAT IN THE ASSESSEES OWN CASE (SUPRA), WE ALLOWED THE CLAIM OF THE ASSESSEE AND DECIDE THIS GROUND IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED . OR DER PRONOUNCED IN THE OPEN COURT ON 07 /04 /202 1 SD/ - SD/ - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 07 /04 /2021 V IJAY PAL SINGH/ SR. P.S. ITA NO . 4148 / M/201 9 A.Y. 2014 - 15 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE AP PELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) , / ITAT, MUMBAI