DCIT, New Delhi V. M/s. Sportking India Ltd., New Delhi

ITA 4280/DEL/2014

• Counselvise Citation: 428020114 RSA 2014
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 2
• Next Hearing Date: 09-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 06-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL
• Keywords: Double taxation relief; Permanent establishment
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELATE TRIBUNAL DELHI BENCH SMC - 2 : NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 4280 /DEL/201 4 A.Y. : 200 9 - 10 DCIT, CIRCLE - 9(1), VS. M/S SPORTKING INDIA LTD., ROOM NO. 163, 5/69, GURU MANSION PADAM SINGH CR BUILDING, ROAD, KAROL BAGH, NEW DELHI NEW DELHI 110 005 (PAN : AAACS3037Q) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. ROBIN RAWAL, SR. DR ASSESSEE BY : NONE DATE OF HEARING : 09 - 07 - 2015 DATE OF ORDER : 09 - 07 - 2015 O R D E R PER H.S. SIDHU, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - X I , NEW DELHI DATED 29 . 5 .201 4 PERTAINING TO ASSESSMENT YEAR 200 9 - 10 . 2. T HE GROUNDS OF APPEAL READ AS UNDER: - I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASES THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIONS OF RS. 4,60,400/ - MADE BY THE AO BEING PAYMENT MADE WITHOUT DEDUCTING TAX U/S. 40(A)(IA) OF I.T. ACT. 2 (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 13,00,762/ - MADE BY THE AO BEING DISALLOWANCES OF COMMISSION PAID TO FOREIGN AGENT. (III) THE APPELLANT CRAVES T O AMEND, MODIFY, ALTER, ADD OR FORGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED THE RETURN DECLARING NIL INCOME ON 30.9.2009.THE RETURN WAS PROCESSED U/S. 14 3(1) OF THE I.T. ACT, 1961. THE CASE WAS SELECTED FOR SCRUTINY AND THE AO COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT AT A TOTAL LOSS OF RS. 10,97,400/ - VIDE ORDER DATED 28.12.2011, AFTER MAKING THE FOLLOWING DISALLOWANCES: - (I) DISALLOWANCE ON AC COUNT OF PRINTING AND STATIONERY U/S. 40(A)(IA) OF THE ACT: RS. 4,60,400/ - (II) DISALLOWANCE OF COMMISSION PAID TO FOREIGN AGENTS U/S. 40(A)(IA) OF THE ACT: RS. 13,00,762/ - 4 . AGGRIEVED WITH THE AFORESAID ASSESSMENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 29.5.2014 ALLOWED THE APPEAL OF THE ASSESSEE. 5. AGAINST THE ABOVE MENTIONED IMPUGNED ORDER DATED 29.5.2014, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. LD. DR RELIED UPON THE ORDER OF THE AO AND REITERATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 3 7. IN THIS CASE THE NOTICE WAS SENT TO THE ASSESSEE FOR HEARING BY REGD. AD POST FOR TODAY I.E. 09 .07.2015 AT THE ADDRESS MENTIONED IN FORM NO. 36 VIDE COLUMN NO. 10, BUT NOBODY APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT APPLICATION WAS FILED. IN MY CONSIDERED OPINION, NO USEFUL PURPOSE WOULD BE SERVED TO ISSUE NOTICE AGAIN AND AGAIN ON THE SAME ADDRESS. THEREFORE, I AM OF THE CONSIDERED VIEW THAT THE CASE MAY BE DECIDED EXPARTE QUA ASSESSEE, AFTER HEARING THE LD. DR. 8. I HAVE HEARD THE LD. DR AND PERUSED THE RECORDS, ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES. WITH REGARD TO GR OUND NO. 1 RELATING TO DELETION OF ADDITION OF RS. 4,60,400/ - MADE BY THE AO BEING PAYMENT MADE WITHOUT DEDUCTING TAX U/S. 40(A)(IA) OF THE I.T. ACT, 1961 IS CONCERNED, I FIND THAT THIS DISALLOWANCE OF RS. 4,60,400 / - MAD E BY THE A.O. IS ON ACCOUNT OF EX PENSES UNDER THE HEAD PRINTING AND STATIONERY MADE BY THE A SSESSEE FROM THE FOLLOWING PARTIES: (A) MANBIK GRAPHICS PVT. LTD. RS.1,28,461/ - (B) CAPITAL STATIONERY MART RS.2,05,063/ - (C) ESS KAY SALES CORPORATION RS.1,26,876/ - RS.4,60,400 / - 8.2 I FIND THAT IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE HAS MADE PAYMENTS TO THESE PARTIES ON ACCOUNT OF PRINTING OF LETTER HEADS, BILL BOOKS, INVOICES AND OTHER STATIONERY ITEMS ETC. SINCE THE ASSESSEE HAD NOT DEDUCTED TAX ON SUCH PAYMENTS, THE A.O . DISALLOWED THE SAME U/S 40(A)(IA) OF THE ACT. I FURTHER NOTE THAT IN THE APPELLATE PROCEEDINGS, THE A SSESSEE HAS EMPHASIZED THAT THE PAYMENTS TO ABOVE MENTIONED PARTIES WERE MAD E MA INLY FOR THE PURCHASES OF STATIONERY ITEMS AND 4 THE BILLS WERE SUBJECTED TO VAT (SALES TAX ) . SINCE NO TDS IS REQUIRED TO BE MADE ON PRINTING PAYMENTS AS THERE WAS NO WORK CONTRACT INVOLVED IN BUYING THE STATIONERY ITEMS WITH LETTERS HEADS PRINTED UPON THEM, THE AO S ACTION WAS NOT JUSTIFIED. I FURTHER FIND THAT THE ASSESSEE HAS NOT GIVEN ANY JOB WORK TO THE MENTIONED PARTIES IN RESPECT OF SUPPLY OF THE STATIONERY OR THE PRINTING MATERIAL. IN FACT THE A SSESSEE WAS PURCHASING STATIONERY ITEMS ON WHICH THE COMPANY'S LETTER HEADS AND OTHER DETAILS E.G. DETAILS OF INVOICES, BILL BOOK S ETC. ARE MENTIONED. THESE ARE THE OUTRIGHT PURCHASES ON WHICH THE SELLER HAS ALSO CHARGED VAT. THE ASSESSEE HAS RELIED UPON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. DABUR INDIA LTD. 283 ITR 197 DEL WHEREIN , IT WAS HELD BY THE HON'B LE COURT THAT WHEN THERE WAS NO WORK CONTRACT INVOLVED IN BUYING THE PACKING MATERIAL, IT TANTAMOUNT TO PURCHASING GOODS FOR THE PURPOSE OF PACKING AND THAT JUST BECAUSE SOME PRINTING WAS REQUIRED TO BE DONE BY THE SUPPLIER ON SUCH GOODS, IT CANNOT BE TERM ED AS A JOB WORK. AS THE MATTER IS SQUARELY COVERED BY THE DECISION OF JURISDICTIONAL HIGH COURT, THE AO'S ACTION IN MAKING DISALLOWANCE U/S 40(A)(IA) OF THE ACT IN RESPECT OF PURCHASES OF PRINTING AND STATIONERY IS NOT JUSTIFIED. THEREFORE, THE LD. CIT(A ), HAS RIGHTLY DELETED THE DISALLOWANCE OF RS.4,60,400/ - ON THIS ACCOUNT. 8.3 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENT AS AFORESAID, I DO NOT SEE ANY REASON TO INTERFERE WITH THE WELL REASONED ORDER OF THE LD. CIT(A), HENCE, I UPH OLD THE SAME AND DISMISS THE GROUND NO. 1 RAISED BY THE REVENUE. 9. WITH REGARD TO GROUND NO. 2 RELATING TO DELETION OF ADDITION OF RS. 13,00,762/ - MADE BY THE AO BEING DISALLOWANCES OF COMMISSION 5 PAID TO FOREIGN AGENT IS CONCERNED, I FIND THAT THIS DIS ALLOWANCE OF RS.13,00,762/ - AS COMMISSION PAID TO THE FOLLOWING FOREIGN AGENTS: (A) SPARTEX KUMAR H. BHAGCHANDANI RS.8,56,389/ - (B) RABATEX S.A.C. RS. 87,210/ - (C) VICTOR GALPERIN TRADING RS.3,57,163/ - R S.13 ,00 ,762/ - 9.1 I FIND THAT THE A.O. HAS OBSERVED THAT THE PAYMENTS MADE TO FOREIGN AGENTS AS COMMISSION WAS SUBJECT TO PROVISIONS OF SECTION 195 OF THE ACT WHERE NO DOUBLE TAX AVOIDANCE AGREEMENT (DTAA) WAS SIGNED. IN THE CASE OF THE ABOVE THREE AGENTS, SINCE NO DTAA WAS SIGNED WITH THE RESPECTIVE COUNTRIES IN WHICH THE AGENTS WERE RESIDING, THE A.O. MADE THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT AS NEITHER ANY CERTIFICATE U/S 195(2) OF THE ACT FOR NO DEDUCTION OF TAX WAS OBTAINED BY THESE PARTIES NOR ANY TDS WAS MADE ON THE COMMISSION PAID TO THEM. I FURTHER FIND THAT DU RING THE APPELLATE PROCEEDINGS, IT WAS ARGUED THAT EVEN IF NO DTAA WAS SIGNED WITH THE RESPECTIVE COUNTRIES IN WHICH THESE AGENTS WERE RESIDING, YET THE TDS PROVISIONS ARE NOT ATTRACTED ON THE COMMISSION PAYMENTS MADE TO THESE FOREIGN AGENTS BECAUSE OF THE FOLLOWING REASONS: (A) THESE NON - RESIDENT AGENTS DO NOT HAVE ANY PERMANENT ESTABLISHMENTS (PES) IN INDIA. (B) THE SERVICES ARE RENDERED OUTSIDE INDIA. (C) PAYMENTS ARE MADE DIRECTLY OUTSIDE INDIA AND THUS IT IS CERTAINLY NOT RECEIVED BY THEM IN INDIA. 6 9.2 I FIND THAT I T WAS ALSO CLARIFIED BEFORE THE APPELLATE PROCEEDINGS THAT THE ASSESSEE COMPANY HAS PAID COMMISSION TO THE NON - RESIDENT AGENTS IN RESPECT OF FACILITAT ING EXPORT ORDERS ABROAD AND NO TECHNICAL SERVICES HAVE BEEN GIVEN BY THESE AGENTS TO THE APPELLANT COMPANY. THUS, THE PAYMENTS ARE OUTSIDE THE AMBIT OF DEEMING PROVISIONS AS PROVIDED IN SECTION 9 OF THE ACT AND THUS, NO LIABILITY TO DEDUCT TDS ON SUCH PAY MENT ARISE. 9.3 ON CONSIDERING THE FACTS OF THE CASE IT WAS OBSERVED BY THE LD. CIT(A) THAT THE NATURE OF COMMISSION PAID TO NON RESIDENTS IS IN RESPECT OF THEIR SERVICES RECEIVED BY THE A SSESSEE ABROAD FOR FACILITATING THE EXPORT ORDERS AND THUS ENHANCI NG THE BUSINESS OF THE A SSESSEE . THERE IS NO DISPUTE IN RESPECT OF THE NON EXISTENCE OF PERMANENT ESTABLISHMENTS OF THESE AGENTS IN INDIA AND THE PAYMENTS RECEIVED BY THEM DIRECTLY OUTSIDE INDIA. I FIND THAT ISSUE IS COVERED BY THE DECISION OF HON'BLE SUP REME COURT IN THE CASE GE (INDIA) TECHNOLOGY PVT. LTD. V. CIT & ANOTHER (20LO) 234 ITR 153 (SC) AS WELL AS OTHER SEVERAL DECISIONS AS RELIED UPON BY THE A SSESSEE IN ITS WRITTEN SUBMISSIONS BEFORE THE LD. CIT(A) . IN ASSESSEE S OWN CASE IN A.Y. 2008 - 09, THE ISSUE HAS COME UP FOR ADJUDICATION AND LD.CIT(A) HAS ALLOWED THE APPEAL ON THIS GROUND. IN VIEW OF THE ISSUE BEING FULLY COVERED BY THE DECISIONS OF HON'BLE COURTS, THE AO'S ACTION IN DISALLOWING RS.13,00,762/ - ON 7 ACCOUNT OF PAYMENT OF COMMISSION TO FOREIG N AGENTS IS NOT JUSTIFIED AND THE SAME WAS RIGHTLY DIRECTED BY THE LD. CIT(A) TO BE DELETED. 9. 4 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENT AS AFORESAID, I DO NOT SEE ANY REASON TO INTERFERE WITH THE WELL REASONED ORDER OF THE LD. CIT( A), HENCE, I UPHOLD THE SAME AND DISMISS THE GROUND NO. 2 RAISED BY THE REVENUE. 1 0 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN CO URT ON 09 /7/201 5 . SD/ - [ H.S. SIDHU ] JUDICIAL MEMBER DATE: 09 /7/201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES