Servall Engineering Workd P Ltd., Coimbatore V. JCIT, Coimbatore

ITA 491/CHNY/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8151 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 12-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 09-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DURAI
• Assessee Lawyers: R VIJAYARAGHAVAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , ! . '#'$ , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ./ ITA NO.491/MDS/2015 $ '$ / ASSESSMENT YEAR : 2011-12 M/S.SERVALL ENGINEERING WORKS P.LTD., 31, BHARATHI PARK ROAD, VIII CROSS, SAIBABA COLONY, COIMBATORE 641 011. PAN : AAECS 2949 H V. THE JOINT COMMISSIONER OF INCOME TAX, RANGE III, COIMBATORE. ( () /APPELLANT) ( *+() /RESPONDENT) () , - /APPELLANT BY : SHRI R.VIJAYARAGHAVAN, ADVOCATE *+(),- /RESPONDENT BY : SHRI DURAI PANDIAN, JCIT . ,/% /DATE OF HEARING : 12.09.2016 01' ,/% /DATE OF PRONOUNCEMENT : 28.10.2016 /O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF CIT(A)-1, COIMBATORE DATED 23.01.2015 AND PERTAINS TO ASSESSM ENT YEAR 2011-12. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF RS.19,33,839/-. SHRI R.VIJAYARAGHAVAN, THE LEARNED COUNSEL FOR THE ASSESSEE 2 I.T.A. NO.491/MDS/2015 SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS PAID RS.19,33,839/- TOWARDS ENGINEERING SERVICE CHARGES. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, ALL THE PAYMENTS WERE MAD E TO INDIVIDUAL. THEREFORE, THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX. HENCE, TH E DISALLOWANCE MADE BY THE ASSESSING OFFICER FOR NON DEDUCTION OF TAX AT THE T IME OF PAYMENT IS NOT JUSTIFIED. REFERRING TO DOUBLE TAXATION AVOIDANCE A GREEMENT BETWEEN THE GOVERNMENT OF INDIA AND GOVERNMENT OF GERMANY, THE LEARNED COUNSEL SUBMITTED THAT IN VIEW OF THE ARTICLE 14 OF DOUBLE TAXATION AVOIDANCE AGREEMENT, THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX WHEN THE PAYMENT WAS MADE TO THE INDIVIDUALS. THE LEARNED COUNSEL FURTHE R SUBMITTED THAT THE PROVISIONS OF DOUBLE TAXATION AVOIDANCE AGREEMENT W AS NOT BROUGHT TO THE NOTICE OF BOTH THE AUTHORITIES BELOW. THEREFORE, TH EY HAD NO OCCASION TO CONSIDER THE PROVISIONS OF DOUBLE TAXATION AVOIDANC E AGREEMENT. 3. ON THE CONTRARY, SHRI DURAI PANDIAN, THE LEARNED DEPARTMENT REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS MADE PAYMENT TO THREE COMPANIES AND TWO INDIVIDUALS. THE PROVISIONS OF DO UBLE TAXATION AVOIDANCE AGREEMENT ADMITTEDLY NOT APPLICABLE TO PAYMENT MADE TO THE COMPANIES. THEREFORE, THE ASSESSEE HAS TO DEDUCT TAX IN RESPEC T OF THE PAYMENT MADE TO COMPANIES. HOWEVER, IN RESPECT OF PAYMENT MADE TO I NDIVIDUALS, THE ASSESSEE NOW CLAIMS THAT TAX NEED NOT BE DEDUCTED IN VIEW OF DOUBLE TAXATION AVOIDANCE AGREEMENT. HOWEVER, BOTH THE AUTHORITIES BELOW HAD NO OCCASION TO CONSIDER THE SAME SINCE THE SAME WAS NOT BROUGHT TO THEIR NOTICE. THEREFORE, 3 I.T.A. NO.491/MDS/2015 AN OPPORTUNITY MAY BE GIVEN TO THE ASSESSING OFFICE R TO EXAMINE THE PROVISIONS OF DOUBLE TAXATION AVOIDANCE AGREEMENT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AS PER TH E ORDER OF THE LOWER AUTHORITIES, IT APPEARS THAT THE ASSESSEE HAS PAID A SUM OF RS.8,22,461/- TO ONE ENGINEER MR.HARMUT DROPCZYNSKI, GERMANY. THE ASSESS EE HAS ALSO PAID ANOTHER SUM OF RS.6,17,560/- TO MR.MICHEAL MEYCKE. THE OTHER PAYMENTS WERE MADE TO COMPANIES. THEREFORE, THE PROVISIONS OF DOUBLE TAXATION AVOIDANCE AGREEMENT ARE NOT APPLICABLE TO PAYMENTS MADE TO COMPANIES. 5. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF ARTICLE 14 OF DOUBLE TAXATION AVOIDANCE AGREEMENT . THE TAX LIABILITY OF THE INDEPENDENT SERVICE PROVIDER IS SUBJECT TO CERTAIN EXCEPTIONS AS PROVID ED IN ARTICLE 14 OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN GOVERNMENT OF INDIA AND GOVERNMENT OF GERMANY. THEREFORE, THE INDIVIDUAL PAYMENTS MADE TO INDIVIDUALS HAS TO BE EXAMINED IN THE LIGHT OF THE PROVISIONS OF ARTICLE 14. SINCE BOTH THE AUTHORITIES BELOW ARE TO CONSIDER THE PROVISIONS OF DOUBLE TAXATION AVOIDANCE AGREEMENT , THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED IN RESPECT OF PAYMENT MADE TO INDIVIDU ALS. ACCORDINGLY, THE ORDERS OF AUTHORITIES BELOW ARE CONFIRMED IN RESPECT OF PA YMENTS MADE TO THREE COMPANIES. HOWEVER, IN RESPECT OF PAYMENTS MADE TO TWO INDIVIDUALS I.E., A SUM OF RS.8,22,461/- TO ONE ENGINEER MR.HARMUT DROP CZYNSKI, GERMANY AND ANOTHER SUM OF RS.6,17,560/- TO MR.MICHEAL MEYCKE A RE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICE R SHALL REEXAMINE THE PAYMENT 4 I.T.A. NO.491/MDS/2015 IN RESPECT OF THESE TWO INDIVIDUALS IN THE LIGHT OF THE PROVISIONS OF ARTICLE 14 OF DOUBLE TAXATION AVOIDANCE AGREEMENT AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPOR TUNITY TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED ON 28 TH OCTOBER, 2016 AT CHENNAI. SD/- SD/- ( ! . '#'$ ) ( . . . ) (ABRAHAM P. GEORGE) (N.R.S. GANESAN) % /ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 2 /DATED, THE 28 TH OCTOBER, 2016. SP. , */34 54'/ /COPY TO: 1. () /APPELLANT 2. *+() /RESPONDENT 3. . 6/ ( )/CIT(A) 4. . 6/ /CIT, 5. 47 */ /DR 6. $ 8 /GF.