DDIT (IT) 4(2), V. PANSONIC AVIATION CORPORATION, MUMBAI

ITA 525/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2573 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 22-01-2014
• Court: TRIBUNAL
• Section: 234B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH , JM ./ ITA NO. 525 / MUM/20 1 4 ( / ASSESSMENT YEAR : 20 08 - 20 09 ) DDIT(INTERNA TIONAL TAXATION) - 4(2), MUMBAI VS. M/S PANASONIC AVIATION CORPORATION, C/O.SRBC & ASSOCIATES LLP, 14 TH FLOOR, THE RUBY, 29, SENAPATI BAPAT MARG, DADAR(W), MUMBAI - 28 ./ ./ PAN/GIR NO. : A A ECP 2283 P ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI AWUNGSHI GIMSON /AS SESSEE BY : SHRI NIKHIL TIWARI / DATE OF HEARING : 23 /0 8 /2016 / DATE OF PRONOUNCEMENT 28/09 /201 6 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A), MUMBAI, FOR THE ASSESSMENT YEAR 20 08 - 200 , IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S.144C OF I.T.ACT . 2. AT THE OUTSET, LD. AR PLACED ON RECORD ORDER OF THE TRIBUNAL DATED 28/03/2013 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007 - 08, WHEREIN BOTH THE ISSUES WERE DECIDED IN FAVOUR OF THE ASSESSEE. THE ISSUE WITH REGARD TO LEVIABILITY OF INTEREST U/S.234B IN CASE OF NON - RESIDENT, HAS BEEN DECIDED BY TRIBUNA L AT PARA 9 , WHICH READS AS UNDER : - ITA NO. 525 /1 4 2 GROUND NO.9 IS ABOUT LEVY OF INTEREST ILLS 234B. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD WE FIND THAT THE ISSUE OF CHARGING INTEREST U/S 234B IN THE PRESENT CASE IS NO MORE R ES I NTEGRA IN VIEW OF THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIRECTOR OF INCOME - TAX (INTERNATIONAL TAXATION) V. NGC NETWORK ASIA LLC [(2009) 313 ITR 187 (BORN.)] IN WHICH IT HAS BEEN HELD THAT WHEN THE DUTY IS CAST ON THE PAYER TO DEDUCT TAX AT SOURCE, ON FAILURE OF THE PAYER TO DO SO, NO INTEREST CAN BE CHARGED FROM THE PAYEE ASSESSEE U/S 234B. THE SAME VIEW HAS BEEN REITERATED IN DIT (IT) V, KRUPP UDHE GMBH[(2010) 38 DTR (BOM.) 251]. AS THE ASSESSEE BEFORE US IS A NON - RESIDENT, N ATURALLY ANY AMOUNT PAYABLE TO IT WHICH IS CHARGEABLE TO TAX UNDER THE ACT, IS OTHERWISE LIABLE FOR DEDUCTION OF TAX AT SOURCE. IN THAT VIEW OF THE MATTER AND RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS, WE HOLD THAT NO INTEREST CAN BE CHARGED U/S 234B AND 234C OF THE ACT. THIS GROUND IS ALLOWED. 3. GROUND WITH REGARD TO APPLICABILITY OF SECTION 44C HAS BEEN DECIDED BY TRIBUNAL VIDE PARA 4 WHICH READS AS UNDER : - 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBS ERVED THAT THE ASSESSEE IS A COMPANY INCORPORATED IN USA WHICH SET UP BRANCH OFFICE IN INDIA TO PROVIDE TECHNICAL, MAINTENANCE SERVICES IN RESPECT OF IN - FLIGHT ENTERTAINMENT SYSTEM INSTALLED IN AIRCRAFTS OPERATED BY JET AIRWAYS INDIA LIMITED. CERTAIN EMPLO YEES OF THE ASSESSEE - COMPANY FROM USA FREQUENTLY TRAVELED IN INDIA FOR UNDERTAKING ACTIVITIES AS PER CONTRACT WITH JET AIRWAYS. IT IS IN THIS CONNECTION THAT THE SAID SUM WAS INCURRED ON SUCH EMPLOYEES VISITING INDIA. THE FIRST QUESTION IS AS TO WHETHER TH E AMOUNT SPENT ON AIR TICKETS, DOMESTIC EXPENSES IN RESPECT OF LOADING, BOARDING AND CONVEYANCE OF SUCH EMPLOYEES FROM USA SHOULD BE CONSIDERED U/S 44C. IT HAS BEEN RECORDED BY THE ASSESSING OFFICER IN PARA 6 OF THE ORDER THAT : 'THIS EXPENDITURE WAS INCUR RED BY THE EMPLOYEES OF PAC, US IN INDIA, IN INDIAN CURRENCY, AND SUBSEQUENTLY REIMBURSED TO THEM IN FOREIGN CURRENCY'. SECTION 44C TALKS OF DEDUCTION OF HEAD OFFICE EXPENSES IN THE CASE OF NON - RESIDENTS . CLAUSE (IV) OF EXPLANATION TO THIS SECTION DEFINES 'HEAD OFFICE EXPENDITURE' TO MEAN 'EXECUTIVE AND GENERAL ADMINISTRATION EXPENDITURE INCURRED BY THE ASSESSEE OUTSIDE INDIA, INCLUDING ..........'. A BARE PERUSAL OF THE DEFINITION OF HEAD OFFICE EXPENDIT URE IN SECTION 44C MAKES IT MANIFEST THAT ONLY THE EXPENDITURE INCURRED OUTSIDE INDIA CAN BE BROUGHT WITHIN THE PURVIEW OF THIS PROVISION. FROM THE REPRODUCTION OF THE PART OF THE ASSESSMENT ORDER, IT IS CLEAR THAT THE ASSESSING OFFICER HIMSELF ADMITTED THAT THIS AMOUNT WAS SPENT BY THE EMPLOYEES OF PAC, US 'IN INDIA, IN INDIAN CURRENCY'. IN VIEW OF THIS IT IS VIVID THAT THE PROVISIONS OF SECTION 44C CA NNOT APPLY. MORE OVER IT IS SEEN THAT SECTION 44C REFERS TO COMMON HEAD OFFICE EXPENSES AND CANNOT ENCOMPASS THE EXPENSES EXCLUSIVELY INCURRED BY THE HEAD OFFICE FOR INDIAN BRANCH. ITA NO. 525 /1 4 3 THE MUMBAI BENCH OF TH E TRIBUNAL IN THE CASE OF ADDL.DIT (IT) V. BANK OF BAHRAIN AND KUWAIT [(2011) 44 SOT 693 (MUM.)] HAS HELD SO. AS THE AMOUNT IN QUESTION REPRESENTS THE EXPENSES INCURRED BY HEAD OFFICE EMPLOYEES EXCLUSIVELY FOR RENDERING SERVICES IN INDIA, THIS CANNOT BE CO VERED WITHIN THE AMBIT OF SECTION 44C FROM THIS ANGLE ALSO. 4 . IT IS PERTINENT TO MENTION HERE THAT APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF TRIBUNAL DATED 28.3.2013 BEFORE HONBLE BOMBAY HIGH C OURT HAS BEEN DISMISSED BY HONBLE BOMBAY HIGH COURT VIDE ITS ORDER DATED 5 - 10 - 2015 WITH REGARD TO THE ADDITION MADE U/S.44C. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN A SSESEES OWN CASE, AS QUOTED ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). 5 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 2 8 /09 / 201 6 . S D/ - SD/ - PAWAN SINGH R.C.SHARMA / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 2 8 / 09 /201 6 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. 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//