CHEMICAL PROCESS PIPING PRIVATE LIMITED, MUMBAI V. DCIT CIRCLE-14(1)(2), MUMBAI

ITA 4255/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6145 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 09-06-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ASHOK SUTHAR
• Keywords: Retrospective amendment
• Section: 143(3); 195; 201

Judgement Text

, ,, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER ./ ITA NO.4255/MUM/2017 ( / ASSESSMENT YEAR :2013-2014) CHEMICAL PROCESS PIPING PRIVATE LIMITED, CPE HOUSE, CPE PLOTS, GOVANDI, MUMBAI VS. DCIT, CIRCLE-14(1)(2), MUMBAI ./PAN NO. : AACCC 6212 D ( /APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI ASHOK SUTHAR, AR /REVENUE BY : MS. BHARATI SINGH, DR / DATE OF HEARING : 10/01/2019 /DATE OF PRONOUNCEMENT 15/01/2019 / O R D E R PER RAJESH KUMAR, AM : THIS APPEAL BY REVENUE ARISES OUT OF THE ORDER OF T HE CIT(A) 56, MUMBAI, DATED 22.02.2017, WHICH IN TURN HAS ARISEN OUT OF THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) RELATING TO A.Y. 2013-2014. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING AND UPHOLDING THE ORDER OF AO WHEREBY THE AO MADE DISALLOWANCE U/S.40(A)(IA) OF THE ACT FOR NON-DEDUC TION OF TAX ON THE PAYMENT MADE TO A COMPANY IN GERMANY. 3. FACTS IN BRIEF ARE THAT THE AO FOUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAS PAID TECHNICAL/CONSULTANCY CHARGES TO THE FOREIGN PAR TIES WITHOUT DEDUCTION OF ITA NO.4255/17 2 TAX AT SOURCE AND ACCORDINGLY THE ASSESSEE WAS ASKE D TO EXPLAIN AS TO WHY THE TECHNICAL/CONSULTANCY CHARGES PAID TO FOREI GN PARTIES SHOULD NOT BE DISALLOWED U/S.40(A)(IA) OF THE ACT. FINALLY, T HE AO ADDED THE SAID PAYMENTS TO THE TUNE OF RS.51,29,859/- BY MAKING DI SALLOWANCE U/S.40(A)(IA) OF THE ACT BY FRAMING ASSESSMENT U/S. 143(3) OF THE ACT VIDE ORDER DATED 28.03.2016. 4. AT THE OUTSET, LD. AR POINTED OUT THAT THE ISSUE INVOLVED IN THE PRESENT CASE OF THE ASSESSEE IS COVERED AGAINST THE ASSESSEE IN ASSESSEES OWN CASE IN ITA NO.1036&1037/MUM/2016, F OR THE ASSESSMENT YEARS 2011-2012 & 2012-2013, ORDER DATED 02.05.2018. 5. ON THE OTHER HAND, LD. DR RELIED ON THE GROUNDS OF APPEALS AND ORDERS OF AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AFTER PERUSING THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR TH E ASSESSMENT YEAR 2011-2012 & 2012-2013 IN ITA NOS.1036&1037/MUM/2016 , ORDER DATED 02.05.2018, WE OBSERVE THAT THE ISSUE IS DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE. THE OPERATIVE PART OF THE ORDER OF TH E TRIBUNAL IN THE SAID CASE IS REPRODUCED BELOW :- 15. WE SHALL NOW ADVERT TO THE DISALLOWANCE UNDER SEC. 40(A)(I) OF RS.4,67,244/- PAID BY THE ASSESSEE TOWARDS TESTING CHARGES TO M/S TUV SUD INDUSTRIES SERVICES GMBH OF GERMANY. WE FIN D THAT THE CONTENTION OF THE ASSESSEE THAT AS PER THE PROVISIO N OF SEC. 9 OF THE ACT, ANY PAYMENT MADE FOR RENDERING SERVICES OUTSID E INDIA FOR EARNING INCOME OUTSIDE INDIA IS NOT TAXABLE IN INDI A, DID NOT FIND FAVOUR WITH THE LOWER AUTHORITIES. RATHER, IT WAS O BSERVED BY THE A.O THAT AS PER THE RETROSPECTIVE AMENDMENT IN EXPL ANATION OF SEC. 9(2) OF THE ACT BY THE FINANCE ACT, 2010, PAYMENT M ADE TO A NON- RESIDENT OUTSIDE INDIA SHALL BE TAXABLE IN INDIA, R EGARDLESS OF THE FACT THAT WHETHER THE SERVICES HAVE BEEN RENDERED I N INDIA OR NOT. ITA NO.4255/17 3 THE A.O ON THE BASIS OF HIS AFORESAID OBSERVATIONS CONCLUDED THAT AS THE PAYMENT MADE BY THE ASSESSEE TO THE AFORESAI D FOREIGN PARTY, VIZ. TUV SUD INDUSTRIES SERVICES BMBH, GERMA NY WAS CLEARLY AS PER SEC. 9(1)(VII) AND ARTICLE 12 OF IND IA-GERMANY TAX TREATY TOWARDS 'FEES FOR TECHNICAL SERVICES', THERE FORE, ON THE FAILURE ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE UNDER SEC. 195 ON THE PAYMENT MADE TO THE FOREIGN PARTY, THE SAME WAS LIABLE TO BE DISALLOWED UNDER SEC.40(A)(I) OF THE ACT. WE HAV E DELIBERATED ON THE FACTS PERTAINING TO THE ISSUE UNDER CONSIDER ATION AND THE ORDERS OF THE LOWER AUTHORITIES. THE LD. A.R SUBMIT TED BEFORE US THAT THE PAYMENT MADE BY THE ASSESSEE TO THE AFORESAID F OREIGN PARTY, VIZ. TUV SUD INDUSTRIES SERVICES GMBH, GERMANY, AS PER EXPLANATION 2 OF SEC. 9(1)(VII) WAS NOT IN THE NATU RE OF 'FEES FOR TECHNICAL SERVICES'. THE LD. A.R FURTHER AVERRED TH AT AS PER CBDT CIRCULAR NO. 3/2015, DATED 12.02.2015, THE BOARD RE FERRING TO ITS EARLIER INSTRUCTION NO. 02/2014, DATED 26.02.2014 H AD CLARIFIED THAT IN CASES WHERE TAX IS NOT DEDUCTED AT SOURCE UNDER SEC.195 OF THE ACT, THE A.O SHALL DETERMINE THE APPROPRIATE PORTIO N OF THE SUM CHARGEABLE TO TAX, AS MENTIONED IN SUBSECTION (1) O F SEC.195, IN ORDER TO ASCERTAIN THE TAX LIABILITY ON WHICH THE D EDUCTOR SHALL BE DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER SEC. 201 OF THE ACT. THE LD. A.R TAKING SUPPORT OF HIS AFORESAID CONTENT ION SUBMITTED THAT IN THE AFORESAID CIRCULAR IT HAS BEEN CLARIFIE D THAT FOR THE PURPOSE OF DISALLOWANCE UNDER SEC. 40(A)(I) WHICH I S INTERLINKED WITH THE SUM CHARGEABLE UNDER THE ACT AS MENTIONED IN SEC. 195, ONLY APPROPRIATE PORTION OF SUCH SUM WHICH IS CHARG EABLE TO TAX UNDER THE ACT SHALL BE DISALLOWED UNDER THE AFORESA ID STATUTORY PROVISION. IT WAS THUS THE CONTENTION OF THE LD. A. R THAT THE LOWER AUTHORITIES HAD ERRED IN MAKING/ SUSTAINING THE DIS ALLOWANCE UNDER SEC.40(A)(I) OF THE ENTIRE AMOUNT OF PAYMENT UNDER CONSIDERATION. WE HAVE DELIBERATED ON THE AFORESAID CONTENTIONS OF THE LD. A.R AND ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE T O THE SAME. WE FIND THAT THE AFORESAID CIRCULAR NO. 3/2015, DAT ED 12.02.2015 WAS ISSUED BY THE CBDT IN ORDER TO DISPEL DOUBTS AS REGARDS THE SCOPE OF DISALLOWANCE CONTEMPLATED UNDER SEC. 40(A) (I) OF THE ACT IN CONTEXT OF 'OTHER SUM' CHARGEABLE UNDER THE ACT, WHICH ARE PAYABLE OUTSIDE INDIA OR IN INDIA TO A NON-RESIDENT , NOT BEING A COMPANY, OR TO FOREIGN COMPANY. WE ARE OF THE CONSI DERED VIEW THAT AS DISALLOWANCE UNDER SEC. 40(A)(I) IN THE CAS E OF THE PRESENT ASSESSEE IS IN CONTEXT OF THE AMOUNTS PAID BY IT TO WARDS 'FEES FOR TECHNICAL SERVICES' TO THE AFORESAID PARTY, AND NOT TOWARDS 'OTHER SUM' CHARGEABLE UNDER THE ACT, THEREFORE, THE AFORE SAID CBDT CIRCULAR WOULD NOT BE OF ANY ASSISTANCE FOR ITS CAS E. THE CONTENTION OF THE ASSESSEE THUS FAILS IN TERMS OF OUR AFORESAI D OBSERVATIONS. WE THUS BEING OF THE CONSIDERED VIEW THAT AS THERE IS NO REASON FOR US TO DISLODGE THE WELL REASONED ORDER OF THE CIT{A ) IN CONTEXT OF THE ISSUE UNDER CONSIDERATION, THEREFORE, UPHOLD TH E DISALLOWANCE MADE UNDER SEC. 40{A){I) OF RS. 4,67,244/- AS HAD B EEN SUSTAINED BY HIM. THE GROUND OF APPEAL NO.1 IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ITA NO.4255/17 4 7. SINCE THE FACTS IN THE ABOVE DECISION ARE MATERI ALLY SAME AS IN THE PRESENT CASE BEFORE US, WE, THEREFORE, FOLLOWING TH E ABOVE DECISION OF THE TRIBUNAL, DISMISS THE APPEAL OF THE ASSESSEE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/01/2019. SD/- (RAM LAL NEGI) SD/- (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 15/01/2019 . . /PRAKASH KUMAR MISHRA , SR.PS. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSISTANT REGISTRAR ) , / ITAT, MUMBAI 1. / THE APPELLANT- 2. / THE RESPONDENT- 3. ( ) / THE CIT(A), MUMBAI 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//