DEPUTY COMMISSIONER OF INCOME TAX (CPC)-TDS, MUMBAI V. M/S.OASIS REALTY, MUMBAI

ITA 5713/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5368 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 07-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP LD
• Assessee Lawyers: R MURALIDHAR LD
• Keywords: Capital asset; Double taxation relief; Permanent establishment; TDS
• Section: 206AA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5713/MUM/2017 ( / ASSESSMENT YEAR: 2011-12) & ./ I.T.A. NO.5714/MUM/2017 ( / ASSESSMENT YEAR: 2014-15) IT O (IT) - 3 ( 2 )( 2 ) 16 TH FLOOR, R.NO.1627 AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 / VS. OA SIS REALTY COMMERZ, 3 RD FLOOR INTERNATIONAL BUSINESS PARK OBEROI GARDEN CITY, OFF.W.E.HIGHWAY GOREGAON (EAST), MUMBAI 400 063 ! ./ ./PAN/GIR NO. AAAAO-1735-B ( /APPELLANT ) : ( / RESPONDENT ) & ./ I.T.A. NO.5715/MUM/2017 ( / ASSESSMENT YEAR: 2016-17) IT O (IT) - 3 ( 2 )( 2 ) 16 TH FLOOR, R.NO.1627 AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 / VS. O BE RO I CONSTRUCTION LTD. COMMERZ, 3 RD FLOOR INTERNATIONAL BUSINESS PARK OBEROI GARDEN CITY OFF.W.E.HIGHWAY, GOREGAON (EAST), MUMBAI 400 063 ! ./ ./PAN/GIR NO. AAACO-1805-E ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI R.MURALIDHAR LD. AR DEPARTMENT BY : SHRI NEIL PHILIP LD. DR / DATE OF HEARING : 14/05/2019 / DATE OF PRONOUNCEMENT : 31/05/2019 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEALS BY REVENUE HAS COMMON GRIEVANC E. SINCE IDENTICAL ISSUES ARE INVOLVED, WE PROCEED TO DISPOSE-OFF THE APPEALS BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE & BREVITY. ITA NO. 5713/MUM/2017 : OASIS REALTY : AY 2011-12 2.1 THE GROUNDS RAISED BY REVENUE READ AS UNDER: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) IS CORRECT IN GIVING RELIEF TO DEDUCT TAX AS PER THE P ROVISIONS OF ACT AND NOT AS PER THE DOUBLE TAXATION AVOIDANCE AGREEMENT [DTAA] WITH OUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT FURNISHED PAN OF THE RECI PIENT AND HENCE AS PER THE ACT IT HAS TO DEDUCT TAX AT HIGHER RATE. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) IS CORRECT IN GIVING RELIEF TO THE ASSESSEE WITHOUT VE RIFYING WHETHER THE RECIPIENT OF THE FEES FOR TECHNICAL SERVICES WAS BENEFICIAL OWNE R AS REQUIRED UNDER THE DOUBLE TAXATION AVOIDANCE AGREEMENT [DTAA]. 2.2 AGGRIEVED BY THE ORDER DATED 25/11/2014 FOR ASS ESSMENT YEAR [AY] 2011-12 PASSED BY DY.CIT(CPC)-TDS, MUMBAI [AO] U/S 200A(1) OF THE ACT RAISING CERTAIN DEMAND AGAINST THE ASSESSEE ON ACCO UNT OF SHORT DEDUCTION OF TAX AT SOURCE, THE ASSESSEE PREFERRED APPEAL AGA INST THE SAME BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS)-57 MUMBAI [CIT (A)] WITH SUCCESS VIDE IMPUGNED ORDER DATED 28/06/2017. AGGRIEVED, TH E REVENUE IS IN FURTHER APPEAL BEFORE US. 2.3 FACTS ON RECORD REVEAL THAT THE ASSESSEE BEING ASSOCIATION OF PERSONS STATED TO BE ENGAGED IN THE BUSINESS OF REAL ESTATE , MADE CERTAIN FOREIGN REMITTANCES DURING IMPUGNED AY TOWARDS ARCHITECT / DESIGNING / CONSULTANCY FEES TO CERTAIN NON-RESIDENTS IN RESPECT OF ITS PROJECT AT WORLI, 3 MUMBAI . THE STATED PAYMENTS FALL UNDER THE HEAD ROYALTY OR FEE FOR TECHNICAL SERVICES. THE ASSESSEE HAD DEDUCTED TAX AT SOURCE [TDS] AGAINST THE SAME @10.3%. HOWEVER, LD. AO, IN TERMS OF PROVISIONS OF SECTION 206AA, APPLYING THE RATE OF TDS @20.6%, RAI SED A DEMAND OF RS.62.90 LACS AGAINST THE ASSESSEE. THIS RATE WAS A PPLIED SINCE THE PAYEE DID NOT HAVE PERMANENT ACCOUNT NUMBER [PAN] IN INDIA. 2.4 THE ASSESSEE JUSTIFIED THAT RATE ON THE PLEA TH AT THE TDS WAS DEDUCTED AT THE RATES AS SPECIFIED IN DOUBLE TAXATION AVOIDANCE AGREEMENT [DTAA] ENTERED INTO BY INDIA WITH RESPECTIVE COUNTRIES OF THE PAYEES. IT WAS ALSO PLEADED THAT THE TERMS OF DTAA WOULD HAVE OVERRIDING EFFECT ON SECTION 206AA OF THE ACT AND THEREFORE, T HE DEMAND WAS UNJUSTIFIED. IT WAS ALSO PLEADED THAT THERE WAS NO REQUIREMENT TO FURNISH PAN U/S 139A R.W.R. 114C OF THE INCOME TAX RULES, 1 962 SINCE NONE OF THE PAYEE HAD PERMANENT ESTABLISHMENT IN INDIA. THE ATTENTION WAS DRAWN TO THE FACT THAT THE APPLICABLE RATE UNDER DTAA WAS 15 % VIS--VIS RATE OF 10% PRESCRIBED UNDER THE ACT AND THEREFORE, THE CORRECT RATE TO BE APPLIED WAS 10.3% (INCLUDING CESS) AS PER THE PROVISIONS OF SEC TION 90(2) WHICH PROVIDE FOR APPLICATION OF BENEFICIAL PROVISION TO THE ASSE SSEE. 2.5 LASTLY, THE ATTENTION WAS FURTHER DRAWN TO THE FACT THAT AS PER AMENDMENT IN SECTION 206AA WITH EFFECT FROM 01/06/2 016 READ WITH RULE R.W.R. 37BC, THE REQUIREMENT OF PAN WAS DONE AWAY W ITH IN CASE OF NON- RESIDENTS, NOT BEING A COMPANY OR A FOREIGN COMPANY , FOR PAYMENTS IN THE NATURE OF INTEREST, ROYALTY, FEES FOR TECHNICAL SER VICES AND PAYMENT ON TRANSFER OF ANY CAPITAL ASSETS. 4 2.6 RELIANCE WAS PLACED ON THE DECISION OF HYDERABA D TRIBUNAL RENDERED IN NAGARJUNA FERTILIZERS & CHEMICALS LTD. VS. ACIT DAT ED 13/02/2017 [ITA NO.1187/H/2014] FOR THE SUBMISSIONS THAT THE PROVISIONS OF SECTION 206AA SHALL NOT HAVE OVERRIDING EFFECT AND THE PROV ISIONS OF TREATY TO THE EXTENT THEY ARE BENEFICIAL TO THE ASSESSEE WILL OVE RRIDE SECTION 206AA BY VIRTUE OF SECTION 90(2). 2.7 AFTER DUE CONSIDERATION OF ASSESSEES SUBMISSIO NS AND CONSIDERING THE DECISION OF FIRST APPELLATE AUTHORITY RENDERED ON 13/05/2015, IN ASSESSEES GROUP CONCERN I.E. M/S BEACHWOOD PROPERT IES PVT. LTD., IT WAS HELD THAT THE PROVISIONS OF SECTION 206AA SHALL NOT HAVE AN OVERRIDING EFFECT AND THE PROVISIONS OF TREATY TO THE EXTENT THEY ARE MORE BENEFICIAL TO THE ASSESSEE WILL OVERRIDE SECTION 206AA BY VIRTUE OF S ECTION 90(2) AND THEREFORE, THE RATE ADOPTED BY THE ASSESSEE WAS JUS TIFIED. ACCORDINGLY, LD. AO WAS DIRECTED TO ALLOW THE CLAIM AFTER VERIFYING THE RATE OF TAX UNDER DTAA. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL B EFORE US. 3. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE, AT THE OUTSET, SUBMITTED THAT ACTION OF LD. FIRST APPELLATE AUTHOR ITY WAS SQUARELY IN LINE WITH THE DECISION OF SPECIAL BENCH, HYDERABAD TRIBUNAL R ENDERED IN NAGARJUNA FERTILIZERS & CHEMICALS LTD. VS. ACIT DATED 13/02/2 017 [ITA NO.1187/H/2014] AND THEREFORE, NO INFIRMITY COULD BE FOUND IN THE S AME. THE AFORESAID FACT COULD NOT BE CONTROVERTED BY LD. DR. NO CONTRARY JUDGMENT HAS BEEN PLACED ON RECORD AND NOTHING HAS BEEN PLACED ON RECORD TO CONTROVERT THAT THE AFORESAID RULING WAS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 5 4. UPON CAREFUL CONSIDERATION, WE CONCUR WITH THE S TAND OF LD. AR THAT THE ISSUE STOOD SQUARELY COVERED IN ASSESSEES FAVO R BY THE CITED DECISION OF SPECIAL BENCH, HYDERABAD TRIBUNAL WHEREIN THE HO NBLE BENCH HAS CONCLUDED THE MATTER IN THE FOLLOWING MANNER: - 33. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIE W THAT THE PROVISIONS OF SECTION 206AA OF THE ACT WILL NOT HAVE A OVERRIDING EFFECT FOR ALL OTHER PROVISIONS OF THE ACT AND THE PROVISIONS OF THE TREATY TO THE EXTENT THEY ARE BENEFICIAL TO THE ASSESSEE WILL OVERRIDE SECTION 206AA BY VIRTUE OF SECTION 90(2). IN OUR OPINION, THE ASSESSEE THEREFORE CANNOT BE HELD LIABLE TO DEDUCT TAX AT HIGHER OF TH E RATES PRESCRIBED IN SECTION 206AA IN CASE OF PAYMENTS MADE TO NON-RESIDENT PERSONS HAVIN G TAXABLE INCOME IN INDIA IN SPITE OF THEIR FAILURE TO FURNISH THE PERMANENT ACCOUNT N UMBERS. WE, ACCORDINGLY, ANSWER THE QUESTION REFERRED TO THIS SPECIAL BENCH IN THE NEGA TIVE AND IN FAVOUR OF THE ASSESSEE AND ALLOW BOTH THE APPEALS OF THE ASSESSEE FOR A.YS . 2011-12 AND 2012-13. RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THE APP EAL. ITA NO. 5714/MUM/2017 & ITA NO. 5715/MUM/2017 5. FACTS ARE PARI-MATERIA THE SAME IN THESE APPEALS. THE IMPUGNED ORDER IS ON SIMILAR LINES. THE REVENUE IS BEFORE US WITH IDENTICAL WORDED GROUNDS OF APPEAL. NO DISTINGUISHING FEATURES HAVE BEEN POINTED OUT IN THESE APPEALS. THEREFORE, OUR DECISION IN PRECEDING APPEAL SHALL MUTATIS- MUTANDIS APPLY TO THESE APPEALS ALSO. RESULTANTLY, BOTH THES E APPEALS STAND DISMISSED. CONCLUSION 6. ALL THE APPEALS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 31/05/2019 SR.PS:-JAISY VARGHESE 6 ! / COPY OF THE ORDER FORWARDED TO : 1. !% / THE APPELLANT 2. &'!% / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ( )&* , * , / DR, ITAT, MUMBAI 6. ) ,-. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.