Vidya Bal Mandli, Meerut V. JCIT(OSD) International Taxation, Noida

ITA 6082/DEL/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8704 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 23-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 12; 2; 195; 13; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D” DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.As. No.6081, 6082 & 6083/DEL/2018 Assessment Year 2014-15, 2015-16 & 2016-17 Vidya Bal Mandli, C/o Pushkar Jain, Adv., 115-C, Jain Nagar, Meerut. v. JCIT (OSD), International Taxation, Noida. TAN/PAN: AAATV3392C (Appellant) (Respondent) Appellant by: Shri S. Krishnan, CA. Respondent by: Shri Sanjay Kumar, Sr.D.R. Date of hearing: 09 02 2022 Date of pronouncement: 17 02 2022 O R D E R PER PRADIP KUMAR KEDIA, A.M.: The c ap ti one d ap p eal s ha ve be en f ile d a t the i ns ta nc e o f the ass es se e ag ai ns t t he c on sol id at ed o r der of the C o mmi ssi on er of Inc o me T ax (A p pea ls )- II, N oid a [ ‘CIT (A )’ in sh o rt] , d at ed 23. 07 .2 01 8 ari si ng f ro m co ns oli da te d ord er da te d 28. 0 3.2 01 8 p as se d b y th e A ss es si ng O f f icer ( AO ) u nd er Sec ti on 2 01( 1) /2 01 (1A ) of th e Inc o me Ta x Act , 1 96 1 ( th e Act ) co nc ern in g AY s 20 14 -1 5, 20 15 -1 6 and 2 01 6- 17 . 2. As s ta te d at t he b a r, t he g rie va nc e of the a ss esse e in a l l th e thr ee c ap ti on ed a p pea ls a re c o mmo n and a ri ses f r o m t he c o mmo n ord er of t he A ss es s ing Of f ic er an d f ir s t a pp el lat e or de r t h ere on . 3. As p er it s g ro un ds of appea l, t he a ss ess ee h as cha ll en g ed th e act io n of the R ev enu e de e min g th e asse ss ee t o be ‘ ass es se e in I.T.As. No.6081, 6082 & 6083/DEL/2018 2 def au lt ’ a ll eg in g f ailu re to d ed uc t ta x as re qu ir ed un de r th e pro vi si on s of th e A ct on c ert ai n f o rei g n e xc ha ng e re mit ta nce s. 3. Bri ef l y sta te d, t he ded uc to r- as ses se e M/ s. V id ya Gl ob al Sc ho ol (Vi d ya B al M an dl i) is an I B W or ld S c ho ol i mp art in g te ac hin g i n th e Pri ma r y Y ea rs Pr o gra m me. T he as se sse e Vi d ya Glo ba l Sc ho ol i s eng ag ed in p ro vi di ng ed uc ati on t o t he st ud en ts en rolle d wit h it. F or thi s pur po se , i t h as ma de a t ie up wi t h I nte rn at io na l B ac cal au rea te Org an iz at io n ( IB O ) w hic h is an ed uca ti on al in st itu te ha vi ng it s hea dq ua rt ers i n Ge nev a, S wi tz erl and a nd v ari ou s re gi on al cen tr es /br an ch es a cro ss va ri ou s c ou n tri es in cl ud in g S in gap or e a nd Un ite d K in gd o m (UK ). O nl y sc ho ols aut ho ri ze d b y th e IB org an iz ati o n c an o f f er an y of it s t hr e e a ca de mic p ro gr a mme s , i .e ., Pri ma r y Y ea rs P r ogr a mme ( P YP ), t he M id dle Y ea rs Pr ogr a mme (M YP ), or th e D i plo ma P ro gr a mme . Th e of f ice of V i d ya G lo bal Sc ho ol (V id ya Ba l Ma nd li ) i s at Vi d ya Kn ow le dg e Park, Ba gh pa t Ro ad, M ee ru t.- 2 50 00 1. Th e a ss es se e is al so re gi st ere d f or ca rr yi n g out ed uc at io nal a cti vi ti es u nd er Se cti on 12 A of t he Act . O n inq ui ri es , th e A ss es sin g Of f ice r o bs erv ed t ha t th e as se ss ee has ma de sev er al r e mit ta nce s dur in g th e F ina nc i al Y ear s 2 01 3- 14 , 2 01 4-1 5 a nd 20 15- 16 ab ro ad ( as tab ul ate d i n pa ge 3 of the i mp u gne d or de r) t o M/ s. I nt ern at io na l Bac ca la ure at e (I B) Org an iza ti on a n d Un ive rs it y of Ca mb ri dg e ( lo ca l e xa mi nat io n s yn d ica te ) t ow ar ds (i ) P YP an nu al f ees; (ii ) r egi st ra tio n r en ew al f ee ; (ii i) e xa mi na ti o n f ee et c. Ho we ver , w hi le m aki ng th e re mi tt an ces , t he a ss es se e h as f ai le d to ded uc t w it hh ol di ng tax an d t hu s i nf ri nge d t he pr ov is io n of Sec ti on 19 5 of th e A ct . F o r su ch co nc lu si on , the As se ss in g Of f i cer ref er re d to th e p ro vi si on of Sec ti on 9( 1) (v ii ) of th e A ct and Ar ti cl e 1 2 of the res pe ct ive D TA As and co nc lu de d th at t he pa yme nt s m ade b y th e ded uc to r as se sse e are i n th e nat ur e of ‘f ee f or tech ni c al se rv ice s’ and c on se qu ent l y dee me d to ac cr ue or ar is e i n In di a an d hen ce I.T.As. No.6081, 6082 & 6083/DEL/2018 3 cha rg ea ble to ta x u nde r S ec ti on 4 a nd Sec ti on 5 of t he A ct i n t er ms of pro vis io ns of Se cti on 9(1 )( vi i) a nd rel ev an t DT AA s. It was i nt er ali a al le ge d th at t h e act iv it ie s ca rri ed out b y t he a sses se e can no t be ter me d as ‘ te ac hi n g in o r b y e du ca t ion al i ns ti tu te’ c o nte mp la te d un der A rt icl e 12 of th e D T AA an d t hu s doe s no t f all wit hi n exc lu si on ar y c la us e of A rt icl e 12( 5) of th e r el eva nt D TA As . T he As ses si ng Of f ice r acc or di ng l y de e me d t he a sse ss ee to b e i n def au lt un der S ec ti on 2 01 (1) r ea d wi th S ec tio n 19 5( 1) of the Act a nd con se qu en tl y i mp os ed c on se qu en ce s of suc h f ai lu re to d ed uct or pa y tax u nd er Sec ti o n 20 1( 1) a nd al so i nte re st o n t ax li ab il it y u/s .2 01 (1 A) of the Act of dif f ere nt s u ms in re sp ec tiv e ass es s men t ye a rs . 4. Ag gri ev ed , th e a ss ess ee p ref er re d ap pea l bef o re th e CI T( A) see ki ng t o c hal le ng e the i mpu gn ed a ct ion of the A sses si n g Of f icer . The C IT (A) h ow ev er b ro ad l y en do rs e d t he act io n of the As se ss in g Of f icer un de r S ec ti on 20 1( 1) /2 01( 1 A) in it s c on so lida te d o rd er f o r all t he th re e a ss es s ment ye a rs w ith a min or a ber ra ti on /re li ef . T he CI T( A) tr ea te d the co mpo ne nt of re mitt an ce s to war ds ‘ r egi st ra ti on ren ew al f e es ’ o ut sid e t he a mbi t of Se cti on 9 (1) (v ii) rea d wit h Art ic le 12 of th e DT AA an d c on se q uen tl y h el d t ha t as ses se e i s n ot lia bl e f or de du ct io n u nd er Se cti on 1 95 of th e A ct in res pe ct of reg is tr ati on r en ew a l f ee c o mpo ne nt. H ow eve r, t he C IT( A) up he ld t he act io n of t he As se s sin g Of f icer f o r f ix ing th e l ia bi li t y un der Se ct io n 19 5 i n re sp ec t of ‘ PY P a nn ua l f ee’ co mp on ent an d ‘ ex a mina ti on f e e’ co mp one nt of re m itt an ce a nd co ns e que nt def a ult un d er S ec ti on 20 1(1 )/ 20 1( 1A ) of t he Ac t. 5. Fu rth er a gg rie ve d, th e as se ss ee pr ef err ed a ppe al b ef or e t he Tri bu na l. 6. W h en th e mat te r w as cal le d f or h ear in g, th e l d. co un se l f or th e I.T.As. No.6081, 6082 & 6083/DEL/2018 4 ass es se e, M r. S . Kri sh na n, A dv . s u b mitt ed a t th e out set t ha t th e wh ole act io n of the Rev en ue A ut ho rit i es is ma rre d by mi s con ce pt io n of law a nd f act s and t he a ut hor it ies b el ow hav e mi sdi re ct ed the ms el ve s i n de e mi ng th e a ss es se e as ‘a sse ss ee i n d ef aul t’ u nde r Sec ti on 20 1( 1) /2 01 (1A ) of t he Ac t. T o be gi n w it h, it wa s s ub mit te d tha t t he as se ss ee h ere in is ed uc at io na l i nst it ut io n r eg is t ere d u nd er Sec ti on 1 2A of t he Ac t an d cat er s to t he pr o mot io n of ed uca ti on f or wh ich i t h as ti ed up w ith I BO h a vin g He ad qu art er at Je nev a, Sw itz er la nd an d o the r re gio na l ce nt ers a cr oss v ar ious co un tr ie s inc lu di ng S in gap or e a nd U K w hi ch f act is bo rn e o ut f ro m p ar ag rap h 1 of the or de r it s elf as p as se d b y the As se ss in g Off ice r u nde r Sec ti on 20 1( 1)/ 2 0 1(1 A) of the Ac t . It wa s su b mit t ed t ha t in pur su an ce of no tic e iss ue d u nd er Se ct i on 13 3(6 ) i n Sep te mb er, 20 07 , the as se ss ee poi nt ed o ut in pa rti cu l ar t ha t ze ro certi f icat e ha s alr ea d y b een i ss ue d on s i mil ar re mi tt an ces o n 21 .1 1. 20 16 wh ich f al ls un der Fi na nc ia l Y ear 20 16 -1 7 ( As se ss me nt Yea r 2 01 7-18) . I t w as su b mitt ed th at th e ent ir e p ro cee di ng s wer e c on ti nu ed an d car ri ed ou t on th e ba si s of th e i mpu gne d no ti ce u n der S ec ti on 13 3( 6) of th e Ac t at w hi ch t i me th e ass es se e wa s a lre a d y h ol di ng a zer o cert if ic ate obt ai ne d un de r Se c tio n 1 95 (2) of the Act me an in g there b y t ha t th e ass es se e wa s a ll ow ed b y t he re ve nu e a uth or it ie s t o ma ke r e mi tt an ce s of id en tic al n at ure wi th ou t an y d ed u cti on of t ax t o s u ch f o rei gn cou nt er pa rt. I t wa s sub mi tte d t hat o n the b asi s of su ch cer tif ic at e, the ass es se e wa s n ot t rea te d as a ss es s ee i n def au lt in t he sub se qu en t ass es s men t ye a r, i .e. , A ss es s men t Y ear 20 17 -1 8 a nd t hu s b y t he sa me t ok en, th e as s ess ee c ou ld not ha ve b een tre at ed a s ass es se e in def au lt f or th e i m pu gne d Ass es s men t Yea rs 20 14 -1 5, 2 01 5-1 6 a nd 20 16- 17 in q ues ti on. It wa s p oi nt ed out th at de sp i te a we ll con si de re d st an d of the De pa rt men t i n As ses s me nt Y ea r 2 01 6-1 7 f or the a bs enc e of o b lig at io n un der S ec tio n 19 5( 1) of the Ac t, th e I.T.As. No.6081, 6082 & 6083/DEL/2018 5 obl ig at io n ha s be en f ast en ed o n th e ass es se e in t he i mp ug ne d ass es s men t ye ar s in qu es tio n. L d . cou ns el n ex t a dvert ed o ur att en ti on t o A rt ic le 12 of t he DT AA d eal in g w it h ‘ Ro ya l t ies an d F ee f or Inc lu de d S er vic es’ as r ep ro du ced i n th e or de r it se lf and p oi nt ed out th at cla us e 5 of Art ic le pro vi de s f o r ex cl us io n of ce rta in s er vi ces wit hi n t he s wee p of ‘ro ya l t ie s a nd f ees f o r i nc lu ding s erv ic es ’. It was s ub mi tt ed t ha t cl au se (c ) to A rt i cle 1 2( 5) s pecif ic a ll y r ec or ds tha t ‘ Fe e f or I ncl u ded S er vic es ’ sha ll no t c ov er a su m i n t he na tu re of ‘f or tea ch in g i n or b y ed uc at io n al in st it ut io ns ”. I t was t hu s poi nt ed ou t t hat in vie w of g lar in g e xcl us io n p ro vide d in A rt ic le 12( 5) (c ) of the D TA A, t he r e mit ta nce s mad e f ro m educa ti on al act iv it ies st oo d ex clu de d f ro m th e a mb it of ta xa ti on a nd a re n ot sus ce pt ib le to ta x obl ig at io n i n I nd ia in te r ms of DT AA an d h en ce the as ses se e is no t lia ble to d ed uc t ta x un de r Se ctio n 19 5(1 ) of th e Act . Th er ef ore , th e asse ss ee c an no t be trea te d as ass es see in def au lt in su ch ci rc u msta n ces . I t wa s h ar pe d b y th e l d. co un se l tha t a ll th e act iv it ies ca rr ied o ut b y t he re gi ste re d edu ca ti on al i ns ti tu tio n h er ei n are o ste ns ib l y i n th e f ie ld of edu ca ti on w hic h ha s be en mi sin te rp re ted an d mi sre ad b y bo th th e lo we r a ut ho ri tie s deh or s t he f acts on re co rd. It was f urt he r p oi nt ed ou t t hat the a ss es s ee h as ma de a co mp o sit e r e mit ta nce f o r a ll ed uca ti o n re la te d s ou rce s. I t ha s bee n art if ici al l y br ok en do wn b y th e As se s sin g Of f icer in (i ) PY P a nn ua l f ee; (i i) r eg is tra ti on r en ew al f ee; ( iii ) ex a min at io n f ee. I t w as poi nt ed out th at t h e As se ss in g Of f ice r in p ag e 9 of its i mp ug ne d ord er its elf h as o bs erv ed tha t t he f ee s all ow th e sc ho ol to acc es s th e IB’ s o nl in e c urr ic ulu m c en tr e ( OC C ), t he co- or di na to r s no te s a nd pro gr a m u pd ate s p ubl is he d b y IB . I t was t hu s c on te nd ed th at on th e f ace of it, t he re mi t tan ce s ma de w er e f or th e pu rp os es i nt egr al t o th e edu ca ti on al a ct iv it y c a rr ie d o n b y th e as se ss ee wh ic h i s ex cl ud ed un der be nef i cia l c l aus e of Art ic le 12 of DT AA s f ro m t h e a mbi t of I.T.As. No.6081, 6082 & 6083/DEL/2018 6 f ee f or t ec hn ic al se rvi ce s a nd co ns eq u ent o bli ga ti on of d edu ct io n of tax un de r S ec ti on 1 95 of the Ac t. It w as f ur th er poin ted out th at th e wh ole pr oc ee di ng s wer e c ur so ri l y car ri ed a nd co nt inue d o n t he bas is of iss ue of no ti ce un der Se ct io n 1 33 ( 6) of t he Ac t o nl y wh ich is pur el y me ant f or c oll ec ti on of ev id en ces . I t wa s t hu s su b mitt ed t hat the a ct io n of th e Re ven ue a ut ho ri tie s is to ta ll y i n c ont ra ve nti on f ro m the pro vi si on s of Sec ti on 9(1 )( vi i) o f the Inc o me Tax Act rea d i n con ju nc ti on wi th Art ic le 12 of th e res pe ct ive D TA A. It w as th us urg ed th at t he ord er of th e C IT (A ) b e se t as id e an d t he Ass es si ng Of f icer be d ir ect ed to no t tre at t he as se sse e as a sse ss ee i n def au lt . 7. Ld. D R f o r th e Re ven ue , on t he ot he r h an d, re li ed u po n t he ord er s of th e A ss e ssi ng Of f ice r an d CI T( A) an d s ub mi t ted t hat t he wel l rea so ne d ord er do es no t c al l f or an y i nt erf er en c e f ro m t he Tri bu na l. 8. W e h av e ca ref ul l y con si de re d th e su b mi ssi on s a nd t he o r der of the C IT (A ) as w el l a s th e as ses s me n t o rd er . As n oted abo ve , th e ass es se e is a re gi st ere d ed uc ati on al i n sti tu ti on u nd er S ect ion 1 2 A of the Ac t a nd ha s mad e c er tai n p a ymen ts b y wa y of f orei gn re mit ta nc es du rin g the as se ss me nt ye a rs i n que st io n. W h ile ma ki ng suc h f or ei gn re mi tt anc es , t he as ses se e has no t d ed uc te d t a x at so ur ce as ob li ga ted u nd er Sec ti on 1 95 of t he Act o n th e g ro un d t hat t he su m so re mi tt ed b y th e ded uc to r- as ses se e i s no t cha rg eabl e to tax i n In di a b y vi rt ue of e xce pt ion s pr ov id ed in A rti cl e 1 2( 5) of D T AA s whi ch pro vi de s f or ex one r ati on f r o m ob li gat i on t o d ed uc t t ax i n res pe ct of Ed uca ti on al In st it ut ion s gi vi ng r ise t o pre se nt c ont ro ve rs y. 8.1 . In t er ms of Sec ti o n 19 5 of t he A ct , the ob li gat io n t o d edu ct inc o me ta x b y th e pa ye r i s dep en de nt up on th e f ac t th at s uch i nc o me is c ha rg ea bl e t o t a x i n I nd ia. T he go ver ni ng DT A As in the i nst an t cas e pr ov id es f or a ppr op ri at e art ic le ( Art ic le 1 2 or A rt icl e 13) w hi ch I.T.As. No.6081, 6082 & 6083/DEL/2018 7 exo ne ra te s t he pa yee f ro m th e l ia bi li t y to pa y t a x i n I ndi a wi th ref er enc e to te ac he s i n or b y e du ca ti o nal i ns ti tu tio n. 8.2 It is t he c as e of the as se ss ee t hat t h e re mit tance s ha ve been ma de s ol el y f o r th e pur po se s of tea ch i ng i n or b y the f or eig n e nti t y (pa ye e ) a nd t hu s s uch pa yme nt c le ar l y f all s wi th in t he excl us io n cla us e of Ar ti cl e 1 2 of th e Ac t. Th e DT AA th us r es tr ict s th e s co pe and c on di ti on of ta xa bi lit y of t h e r e mit ta nce s in re la tio n to edu ca ti on al i ns ti tu tio ns . T he as se ss ee t hu s c on te nds tha t i t i s ent it le d t o c la i m th at ben ef ic ial pr ov is ion s of DT AA s ho u ld ap pl y t o its c ase . It is w e ll se ttl ed p os iti on of la w th at wh e rev er an y pro vi si on of t he D TA A i s mo re be ne f icia l t o a n a ss es se e, a ss es se e can cla i m to b e g o ver ne d b y th e D TA AA a s S ect io ns 4 a nd 5 of the Act are ov er rid de n b y S ec ti on 9 0 w hi c h gi ve s th e e nab li n g po we r to the C en tr al G ove rn me nt to e nt er in to DT AA s. 8.3 Sec ti on 1 95 of the Act p ro vi de s f or vic ar io us lia bil it y on t he pa ye r r es po ns ib le f or ma ki ng p a yme nt t o no n- re si de nt an y s u m cha rg ea ble a s pe r t he pr ov is io ns of t h e A ct . 8.4 On a pl ain re adi ng of the f ac tu al mat ri x in the in st an t ca s e, i t is os te ns ib le t hat t h e ass es se e ha s ma d e re mit ta nces f or th e pur po se s of i mp ar ti ng e du ca tio n t o i ts s tu de nt s and th e pa yme n t so mad e i s dir ec tl y o r i ndi re ct l y i n r el at io n t o te ach in g i n or b y t h e ov er se as pa ye e (s ) in qu es ti o n. He nc e, t he as se s see i s en tit le d to c l ai m t ha t th e ben ef ic ial pro vi si o ns of DT AA sh ou ld ap pl y in its ca se f or th e pur po se s of a sce rt a ini ng wh et he r s uc h inc o me i s c harge ab le t o t ax in Ind ia or o th er wis e in t er ms of Se ct io n 195 of t he Act . T he c lai m of the as ses se e th at i t is g ov er ned b y t he ben ef ic ial pr ov isi o n of DT AA thu s ca nn ot be br u she d as id e. T he f a ctu al mat ri x clear l y g i ves an ove rr id in g e xp re ss ion t ha t t he se rv ice s obt ai ne d b y th e p a ye r ass es se e f ro m f o re ign e nt it y i s in re lat io n to te achi ng an d ot her I.T.As. No.6081, 6082 & 6083/DEL/2018 8 act iv it ies s qu ar el y in c on nec ti on w i th i mpa rt in g e du c ati on . Thi s bei ng s o, be nef ic i al pro vi si on s of D TA A s qu ar el y a pp lie s t o t he ins ta nt a ss es se e. Un der the cir cu m sta nc es , wh er e the inc o me re mit te d to th e no n-r es id en t is no t c har ge ab le t o ta x i n In di a b y vir tu e of D TA A, t he l ia bi lit y t o d ed uct ta x w ou ld no t ari se un der Sec ti on 1 95 of t he Act . Co ns eq ue nt l y, th e as ses se e he rei n c an no t be tre at ed as ‘ as se sse e in d ef aul t’ f or su c h r e mit ta nce s. 8.5 W e t hu s f ind mer it in th e pl ea of th e ass es see f or can ce lli ng the ta x l ia bi lit y u nde r Sec ti on 20 1( 1) a nd co ns eq uent l y i nt er es t un der Se ct io n 2 01( 1 A) f or all eg ed f ai lur e t o d edu ct ta x. Co ns eq uen tl y, w e set a si de th e or de r of t he C IT (A ) a n d q ua sh t he i mpu gne d or de r f or al l the t hr ee as se ss me nt ye a r s in qu es t ion . 9. In th e res ul t, a ll th e ap pe al s of th e as se sse e ar e a ll ow ed . Order pronounced in the open Court on 17/02/2022. Sd/- Sd/- [SAKTIJIT DEY] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17/02/2022 Prabhat