Asstt.Commissioner of Income Tax-1, Kanpur V. M/s. Northern Tannery, Kanpur

ITA 55/LKW/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70531 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-05-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 07-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Keywords: Retrospective amendment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A : LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A. NO. 55 /LKW/ 2012 ASSESSMENT YEAR: 2008 - 09 A.C.I.T. - 1, VS. M/S NORTHERN TANNERY, KANPUR. 150 FT. ROAD, JAJMAU, KANPUR. PAN:AAAFN6778L (APPELLANT) (RESPONDENT) C.O. NO.16/LKW/2012 ( I.T.A. NO. 55 /LKW/ 2012) ASSESSMENT YEAR: 2008 - 08 M/S NORTHERN TANNERY, VS. A.C.I.T. - 1, KANPUR. KANPUR. (OBJEC TOR) (RESPOND ENT) REVENUE BY : SHRI S. K. MEENA , D.R. ASSESSEE BY : SHRI ABHINAV MEHROTRA, ADVOCATE DATE OF HEARING : 3 0 /0 5 /201 3 DATE OF PRONOUNCEMENT :07/08/2013 ORDER PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF CIT(A) ON A SOLITARY GROUND THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF ` 52,75,631/ - ON ACCOUNT OF NON - DEDUCTION OF TDS ON PAYMENT OF COMMISSION TO FOREIGN AGENT S WI THOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2 2. THE FACTS, BORNE OUT FROM THE RECORD, ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND WAS ENGAGED IN THE BUSINESS OF TANNING OF LEATHER, MANUFACTURING & EXPORT OF LEATHER AND LEATHER GOODS DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS TAKEN THE SERVICES OF FOREIGN AGENTS WHO SECURED EXPORT ORDERS FOR THE ASSESSEE AND HELPED IN EXECUTION OF THE BUSINESS. FOR THE SERVICES R ENDERED BY THE FOREIGN AGENTS, THE ASSESSEE HAD PAID THE COMMISSION BY REMITTING THE AMOUNT THROUGH BANK. SUCH EXPENDITURE IS CLAIM ED BY THE ASSESSEE UNDER THE HEAD FOREIGN AGENT COMMISSION ACCOUNT. ON THIS PAYMENT OF COMMISSION TDS WAS NOT DEDUCTED A ND IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFICER, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT THE COMMISSION WAS PAID TO FOREIGN AGENTS BUT DID NOT DEDUCT TDS UNDER SECTION 195 OF THE INCOME - TAX ACT, 1961 ((HEREINAFTER CALLED AS ACT') BECAU SE THERE WERE NO MANAGERIAL OR TECHNICAL SERVICES PROVIDED BY THE AGENT. THE AGENT WAS SIMPLY PROCURING EXPORT ORDER FOR THE ASSESSEE. BEING NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED THE ASSESSEES CLAIM OF EXEM PTION ON THE PLEA THAT NO TDS WAS MADE AS REQUIRED UNDER SECTION 195 READ WITH SECTION 9(1)(VII) AND SECTION 40(A)(I) OF THE ACT AND MADE ADDITION OF ` 52,75,631/ - . 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WITH THE SUBMISSIONS THAT THE SERVICE S PROVIDED BY THE FOREIGN AGENTS IN THE ASSESSEES CASE WERE NOT IN THE NATURE OF SERVICES COVERED U/S 9(1)(VII) OF THE ACT BECAUSE MANAGERIAL AND CONSULTANCY SERVICES WERE PROVIDED BY THE AGENTS. THE ASSESSEE HAS ALSO PLACED RELIANCE UPON THE CBDT CIRCUL AR NO. 7 / 2009 DATED 22 / 10 / 2009 THROUGH WHICH EARLIER CIRCULARS ON THE SAME MATTER WERE WITHDRAWN. THE WITHDRAWAL OF EARLIER CIRCULARS CAN ONLY BE PROSPECTIVE EFFECT AND NOT RETROSPECTIVE AS HELD BY THE TRIBUNAL IN THE CASE 3 OF DCIT V. SIEMENS AKETIEGESELLSCHAFT [2010] TIOL 102. THE ASSESSEE HAS ALSO PLACED RELIANCE ON OLD CIRCULARS OF CBDT, ACCORDING TO WHICH WHICH THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TDS ON PAYMENT OF COMMISSION TO FOREIGN AGENTS. BESIDES, RELIANCE WAS PLACED ON VARIOUS JUDICIAL PRONOUNCEMENTS. THE CIT(A) HAS EXAMINED THE ISSUE IN DETAIL IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS, OLD AND NEW CBDT CIRCULARS AND HAS FINALLY CONCLUDED THAT FOR NON - DEDUCTION OF TDS ON COMMISSION PAYMENT, DISALLOWANCE CANNOT BE MADE. 4. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND PLACED HEAVY RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. THE LD. D.R. HAS CONTENDED THAT CIRCULAR NO.7/2009 WOULD APPLY TO THE IMPUGNED ASSESSMENT YEAR I.E. A SSESSMENT YEAR 2008 - 09, THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE PAYMENT OF COMMISSION ON ACCOUNT OF NON - DEDUCTION OF TDS. 5. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDER OF THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V. SANJIV GUPTA [2011] 135 TTJ (LUCKNOW) 641 IN WHICH IT HAS BEEN HELD THAT CIRCULAR NO.7/2009 DATED 22.10.2009 WOULD HAVE PROSPECTIVE EFFECT AND WILL NOT APPLY TO THE ASSESSMENT YEAR 2008 - 09. THE LD. CIT(A) HAS ALSO A DJUDICATED THE ISSUE FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL AND ALSO THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. TOSHOKA LTD. (SUPRA) . THE IDENTICAL ISSUE WAS EXAMINED BY THE TRIBUNAL IN THE CASE OF ACIT VS. INDIAN LEATHER INDUSTRIES, I. T.A. NO.170/LKW/2012 IN DETAIL AND IT WAS HELD THAT CIRCULAR NO.7/2009 DATED 20/10/2009 WITHDRAWING THE EARLIER CIRCULAR NOS.786 DATED 7/2/2000 AND 23 DATED 23/7./969 WILL BE OPERATIVE ONLY FROM THE DATE OF ISSUE AND HAD 4 NO RETROSPECTIVE EFFECT I.E. W.E.F. ASSESSMENT YEAR 2009 - 10. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED AS UNDER: 7. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF RECORD, WE FIND THAT THE LD. CIT(A) HAS ADJUDICATED THE ISSUE IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS AND ALSO THE ORDER OF THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V. SANJIV GUPTA (SUPRA) IN WHICH THE TRIBUNAL HAS HELD THAT DISALLOWANCE UNDER SECTION 40(A)(I) ON PAYMENT OF COMMISSION TO NON - RESIDE NT CANNOT BE MADE IN THE LIGHT OF OLD CIRCULAR NO.23 DATED 23.7.1969 AND CIRCULAR NO.786 DATED 7.2.2000 AS THE ASSESSEE WAS NOT OBLIGED TO DEDUCT TDS UNDER SECTION 195 OF THE ACT WITH REGARD TO PAYMENT OF COMMISSION TO FOREIGN AGENT. CIRCULAR NO.7/2009 DA TED 20.10.2009 WITHDRAWING THE EARLIER CIRCULAR NOS.786 DATED 7.2.2000 AND 23 DATED 23.7.1969 WILL BE OPERATIVE ONLY FROM THE DATE OF ISSUE AND HAD NO RETROSPECTIVE EFFECT I.E. W.E.F. ASSESSMENT YEAR 2009 - 10. SINCE THE IMPUGNED ISSUE IS SQUARELY COVERED B Y THE ORDER OF THE TRIBUNAL OF THIS BENCH, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS ADJUDICATED THE ISSUE FOLLOWING THE ORDER OF THE TRIBUNAL. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THE CASE OF DCIT V. SANJIV GUPTA (SUPRA) ARE EXT RACTED HEREUNDER: - AS PER THE CBDT CIRCULAR NO. 23, DT. 23RD JULY, 1969 AND CIRCULAR NO. 786, DT. 7TH FEB., 2000, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT THE TAX AT SOURCE UNDER S. 195 WITH REGARD TO PAYMENT OF COMMISSION TO FOREIGN AGENT. IN THE INSTANT CASE, THE ASSESSMENT YEAR INVOLVED IS 2007 - 08 AND THE RELEVANT PREVIOUS YEAR IS 2006 - 07. ADMITTEDLY, RETURN OF INCOME WAS FILED ON 30TH OCT., 2007. AT THE TIME OF FILING OF THE RETURN, CIRCULAR NO. 7 OF 2009, DT. 22ND OCT., 2009 WAS NOT IN FORCE BY WHICH THE CBDT WITHDREW CIRCULAR NO. 23, DT. 23RD JULY, 1969 WITH IMMEDIATE EFFECT. WHERE A CIRCULAR ISSUED EARLIER CREATED A VESTED RIGHT IN THE TAXPAYER AND SUCH RIGHT IS SOUGHT TO BE CURTAILED OR WITHDRAWN BY A SUBSEQUENT CIRCULAR, THEN SUCH SUBSEQUENT CIRCUL AR WILL NOT HAVE A RETROSPECTIVE EFFECT. NO INFIRMITY IS FOUND IN THE ORDER OF THE CIT(A) ON THIS ISSUE AND ACCORDINGLY THE SAME IS UPHELD. 5 8. SINCE THE IMPUGNED ISSUE IS SQUARELY COVERED BY THE AFORESAID ORDER OF THE TRIBUNAL, WE FIND NO JUSTIFICATION TO TAKE A CONTRARY VIEW IN THIS APPEAL. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY ADJUDICATED THE ISSUE FOLLOWING THE ORDER OF THE TRIBUNAL. 6. SINCE THE IMPUGNED ISSUE IS SQUARELY COVERED BY THE AFORESAID ORDER OF THE TRIBUNA L, WE FIND NO VALID REASON TO TAKE A CONTRARY VIEW. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A) WHO HAS RIGHTLY ADJUDICATED THE ISSUE FOLLOWING THE ORDER OF THE TRIBUNAL. 7. THE CROSS OBJECTION OF THE ASSESSEE IS IN SUPPORT OF THE ORDER OF CIT(A). SINCE WE HAVE CONFIRMED THE ORDER OF CIT(A), THE CROSS OBJECTION FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS. ACCORDINGLY, THE SAME IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE STAND DISMISSED. (ORDER PRONOU NCED IN THE OPEN COURT ON 07/08/201 3 ) SD/. SD/. ( PRAMOD KUMAR) ( SUNIL KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 07/08/2013 *SINGH COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR