ACIT, CHENNAI V. Dart Global Logistics P. Ltd., CHENNAI

ITA 432/CHNY/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7177 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 11-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Assessee Lawyers: G SEETHARAMAN
• Keywords: Permanent establishment

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 432/MDS/2013 ( / ASSESSMENT YEAR: 2008-09) ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(4), CHENNAI-600 034. VS M/S. DART GLOBAL LOGISTICS P.LTD., 31, VELACHERRY ROAD, LITTLE MOUNT, SAIDAPET, CHENNAI-600 015. PAN:AAACD3181G ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. GURU BHASHYAM, JCIT /RESPONDENT BY : MR. G.SEETHARAMAN, C.A / DATE OF HEARING : 7 TH OCTOBER, 2014 /DATE OF PRONOUNCEMENT : 31 ST OCTOBER, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IX, CHENNA I DATED 27.12.2012 FOR THE ASSESSMENT YEAR 2008-09. T HE ONLY ISSUE IN THE GROUNDS OF APPEAL OF THE REVENUE IS TH AT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE DISALLOWANCE UNDER SECTION 40(A)(I) IN RESPECT OF OVERSEAS MARKET FEE PAID TO M/S. DART EXPRESS(NYC) INC., USA WITHOUT DEDUCTING TAX AT SOURCE. 2 ITA NO.432/MDS/2013 2. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING SUBMITS THAT THE ISSUE IN APPEAL HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR IN ITA NO.657/MDS/2009 DATE D 11.9.2009, WHEREIN A SIMILAR DISALLOWANCE WAS MADE. COUNSEL SUBMITS THAT DISALLOWANCE WAS MADE ON ACCOU NT OF NON-DEDUCTION OF TDS ON THE MARKETING FEE (SALES COMMISSION) PAID TO NON-RESIDENT AGENT DART EXPRESS INC. SIMILAR PAYMENT WAS MADE IN EARLIER YEARS TO THE SA ID PARTY. THEREFORE, IN IDENTICAL CIRCUMSTANCES THIS TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE IN EARLIER YEARS. HE PLAC ES RELIANCE ON THE ORDERS OF THE TRIBUNAL FOR EARLIER ASSESSMEN T YEAR 2004-05 IN ITA NO.657/MDS/2009 DATED 11.9.2009. 3. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON T HE ORDER OF ASSESSING OFFICER AND GROUNDS OF APPEAL. 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND DECISIONS RELIED ON. ON GOING THROUGH THE ORDER OF THIS TRIBUNAL FOR EARLIER ASSESSMENT YEAR, WE FIND THAT SIMILAR 3 ITA NO.432/MDS/2013 PAYMENT WAS MADE TO DART EXPRESS, NEW YORK, INC AS SERVICE CHARGES IN THE ASSESSMENT YEAR 2004-05. THI S TRIBUNAL IN ITA NO.657/MDS/2013 DELETED THE DISALLO WANCE HOLDING THAT TDS IS NOT REQUIRED TO BE DEDUCTED AS THE PAYMENTS WERE FOR THE SERVICES RENDERED OUTSIDE IND IA I.E. IN USA. THE ASSESSEE SUBMITS THAT THIS IS ONLY PURE SA LES COMMISSION PAID TO NON-RESIDENT AGENTS AND THERE IS NO TECHNICAL SERVICES RENDERED BY THE NON-RESIDENT AGE NT. ON READING OF THE ORDER OF ASSESSING OFFICER, WE FIND THAT THERE IS NO FINDING THAT NON-RESIDENT AGENT HAS RENDERED ANY TECHNICAL SERVICES TO THE ASSESSEE. WE HAVE ALSO GONE THROUGH THE TERMS OF CONTRACT AND FIND THAT ASSESSEE IS PAYING COMMISSION @ 6 PER KG FOR EVERY SHIPMENT. THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND ALLOWED THE APPEAL OBSERVING AS UNDER:- 6 . 1 AFTER CONSIDERATION OF THE FACTS OF THE CASE, WRI TTEN SUBMISSIONS OF THE APPELLANT AND ALSO THE VARIOUS JUDICIAL PRONOUNCEMENTS MADE IN THIS REGARD , I AM OF THE CONSIDERED OPINION THAT THE AO IS NOT JUSTIFIED IN MAKING THE ABOVE D I SALLOWANCE FOR THE FOLLOWING REASONS: 4 ITA NO.432/MDS/2013 A) THE AO HAS APPLIED SEC 9 OF THE ACT AND HELD THAT THE SITUS OF THE PAYER AND THE SITUS OF THE UTILIZATION OF THE SERVICES WHICH DETERMINE THE TAXABILITY OF SUCH SERVICES IN INDIA IS NOT RELEVARTT AS LONG AS THE SERVICES ARE UTILIZED IN INDIA AND THEREBY INVOKED THE PROVISIONS U/S 40(A)(IA) OF THE I . T.ACT . THE APPELLANT COMPANY HAS PAID OVERSEAS ' MARKETINQ FEES WHICH IS IN THE NATURE OF COMMISSION PAYMENT . . THE NON- RESIDENT AGENT IRE PRESENTATIVE M/S. DART EXPRESS(NYC) INC. WOULD GET MARKETING FEE I COMMISSION FOR PROMOTING THE APPELLANT'S BUSINESS CONNECTION IN INDIA .. AS THE SERVICES ARE RENDERED OUTSIDE INDIA THE PROVISIONS OF SECTION 5 CANNOT BE ACCEPTED TO THE MARKETING FEES I COMMISSION PAID SO AS TO MAKE IT TAXABLE IN INDIA. IT IS ALSO SEEN THAT THE NON-RESIDENT AGENT/ REPRESENTATIVE M/S. DART EXPRESS(NYC) INC. DO NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA. FURTHER, IN ORDER TO ATTRACT SECTION 195, TH E SERVICES BY THE NON-RESIDENT AGENT / REPRESENTATIVE M/S . DART EXPRESS(NYC) INC. SHOULD HAVE BEEN RENDERED IN INDIA AND ALSO SHOULD HAVE BEEN USED IN INDIA. IT IS TO BE POINTED OUT THAT SECTION 195 OF THE ACT HAS TO BE READ ALONG WITH THE CHARGING SECTIONS 4, 5 AND 9 OF THE ACT AND THE PROVISIONS OF THE TAX TREATIES AND THE COMBINED READING OF THE AFORESAID SECTIONS CLEARLY INDICATE THAT UNLESS THE INCOME IS CHARGEABLE TO TAX IN INDIA, THERE IS NO OBLIGATION TO WITHHOLD THE TAX . B) THE AO HAS VIEWED THAT BOARD'S CIRCULARS 23 OF 1969 AND 786 DATED 7 . 2 . 2000 HAVE BEEN WITHDRAWN AND THEREFORE IT CANNOT BE RELIED UPON FURTHER . THE AO ' S VIEW IS NOT ACCEPTABLE AS THE LAW RELATED TO WITHHOLDING OF TAX U/S 195 OF THE ACT HAS NOT BEEN CHANGED EVEN AFTER WITHDRAWAL OF THE ABOVE CIRCULARS ISSUED BY THE CBDT. C) ON SIMILAR AND IDENTICAL ISSUE, HON'BLE ITAT, HYDERABAD IN THE CASE OF DCIT VS . DIVI'S 5 ITA NO.432/MDS/2013 LABORATORIES (12 TAXMAN 103) AND THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS . EON TECHNOLOGY PVT . LTD . (15 TAXMAN 391) HAVE HELD THAT THE MARKETING FEE I COMMISSION INCOME COULD NOT BE SAID TO HAVE ACCRUED TO THE NON- RESIDENTS IN INDIA AND HENCE THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM PAYMENT OF MARKETING FEE I COMMISSION TO NON-RESIDENT AGENT I REPRESENTATIVE . 6.2 SINCE THE FACTS OF THE APPELLANT CASE ARE SIMILAR TO THAT OF THE CASES MENTIONED SUPRA, RESPECTFULLY FOLLOWING THE DECISIONS IN THE ABOVE CASES, I AM OF THE OPINION THAT THE MARKETING FEE / COMMISSIONS RECEIVED BY THE NON-RES I DENT AGENT/ REPRESENTATIVE CANNOT BE SAID TO HAVE ACCRUED OR ARISEN TO THE PAYEE IN INDIA AND THEREFORE THE APPELLANT COMPANY IS NOT UNDER OBLIGATION FOR WITHHOLDING OF TAX U/S 195 ON THE ABOVE SAID AMOUNT OF RS. 37,37,087/-. THEREFORE THE AO IS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF ` 37,37,087/- U/S 40(A)(IA) OF THE ACT AND HENCE THE AO IS DIRECTED TO DELETE THE ADDITION OF ` 37,37,087/- MADE TO THE RETURNED INCOME. THIS GROUND OF APPEAL IS ALLOWED. 5. ON GOING THROUGH THE IMPUGNED ORDER, WE DO NOT F IND ANY VALID REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING TH E DISALLOWANCE. NO MATERIAL IS PLACED BEFORE US BY TH E REVENUE TO REBUT THE FINDINGS OF THE COMMISSIONER O F INCOME TAX (APPEALS). THEREFORE, WE SUSTAIN THE ORDER OF T HE 6 ITA NO.432/MDS/2013 COMMISSIONER OF INCOME TAX (APPEALS) AND REJECT THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 31 ST DAY OF OCTOBER, 2014 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGEND RA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 31 ST OCTOBER, 2014 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .