YAHOO INDIA P. LTD ( FORMELRY KNOWN AS YAHOO WEB SERVICES INDIA P. LTD), MUMBAI V. DCIT RG 7(3), MUMBAI

ITA 6181/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8233 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2004-2005
• Appeal Filed On: 07-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R MURLIDHAR
• Assessee Lawyers: AMARD EEP

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI RAJENDRA SINGH (A.M.) ITA NO. 6181/MUM /2011 ASSESSMENT YEAR : 2004-05 YAHOO INDIA PRIVATE LIMITED (FORMERLY KNOWN AS YAHOO WEB SERVICES INDIA PRIVATE LIMITED). UNIT NO. 1261, 6 TH FLOOR, BUILDING 12, SOLITAIRE CORPORATE PARK, GURU HARGOVINDJI MARG, ANDHERI (E), MUMBAI 400 093. PAN : AAACY 1252B VS. DEPUTY COMMISSIONER OF INCOME TAX 7(3), MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R. MURLIDHAR ASSESSEE BY : SHRI AMAR DEEP DATE OF HEARING 31-7-2012 DATE OF PRONOUNCEMENT 03-8-2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 7-4-2011 PASSED BY THE LD. CIT (A)-13, MUMBAI FOR THE A.Y. 2004- 05 TAKING THE FOLLOWING GROUND OF APPEAL:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) 13 [CIT (A)] ERRED IN CONFIRMING THE FOLLOWING GROUND: THE CIT (A) HAS ERRED ON FACTS AND IN LAW BY CONFIR MING PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT) O F RS. 12,50,942/- ON THE GROUND THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF INCOME WHICH WERE NOT BONAFIDE AND THEREBY CONCEALED THE I NCOME. ITA NO. 6181/MUM/2011 2 2. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT IN THIS CASE THE A.O. HAS IMPOSED THE PENALTY U/S 2 71(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT) IN RESPECT OF PAYMENTS MADE TO NON-RESIDENT AMOUNTING TO RS. 34,86,947/- WITHOUT DEDUCTING TAX THEREON. HE FURTHER SUBMITS THAT THE TRIBUNAL IN THE QUANTUM APPEAL OF THE ASSESSEE, HOWEVER, DELETED THE SAME VERY ADDITION MADE BY THE A.O. VIDE ORDER DTD. 24-6-2011 REPORTED IN (2011) 140 TTJ (MUMBAI) 195. HE THEREFORE SUBMITS THAT THE PENALTY IMPOSED BY THE A.O. AND SU STAINED BY THE LD. CIT(A) BE DELETED. 3. ON THE OTHER HAND, THE LD. D.R. SUPPORTS THE ORD ER OF THE A.O. AND THE LD. CIT(A). 4. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE U NDISPUTED FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE COMPANY IS A FU LLY OWNED SUBSIDIARY OF YAHOO. INC. USA WHICH IS ENGAGED IN THE BUSINESS OF PROVIDING CONSUMER SERVICES SUCH AS SEARCH ENGINE, CONTENT AND INFORMA TION ON WIDE SPECTRUM OF TOPICS, E-MAIL, CHAT ETC. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE AS SESSEE HAS MADE A PAYMENT OF RS. 34,86,947/- TO YAHOO HOLDINGS (HONG KONG) LTD. BEING COST OF SERVICES/RESEARCH MATERIAL/ADVERTISEMENT M EDIA. SINCE THE ASSESSEE COMPANY DID NOT DEDUCT TAX AT SOURCE FROM THE PAYMENT REMITTED TO YAHOO HOLDINGS (HONG KONG) LTD., THE DE DUCTION CLAIMED BY ITA NO. 6181/MUM/2011 3 THE ASSESSEE ON ACCOUNT OF THE SAID PAYMENT WAS DIS ALLOWED BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION 40(A) OF THE ACT WHICH WAS UPHELD BY THE LD. CIT(A). HOWEVER, ON SECOND APPEAL BEFOR E THE TRIBUNAL VIDE ORDER DTD. 24-6-2011 (SUPRA) , THE TRIBUNAL HELD TH AT THE PAYMENT MADE BY ASSESSEE TO A FOREIGN COMPANY FOR THE SERVICES R ENDERED BY IT FOR UPLOADING AND DISPLAY OF THE BANNER ADVERTISEMENT O N ITS PORTAL WAS IN THE NATURE OF BUSINESS PROFIT AND NOT ROYALTY AND S UCH PAYMENT WAS NOT CHARGEABLE TO TAX IN INDIA AS THE RECIPIENT HAS NO PE IN INDIA AND, THEREFORE, ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE PAYMENT FOR SUCH SERVICES AND THE SAME CANNOT BE DI SALLOWED BY INVOKING THE PROVISIONS OF SECTION 40(A)(I) FOR NON -DEDUCTION OF TAX. 5. IN THE ABSENCE OF AN CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE AND IN VIEW OF THE FACT THAT THE QUANTUM AP PEAL HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE, VIRTUALLY THE BA SIS FOR IMPOSITION AND LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IS NOT AVA ILABLE AND AS SUCH THE PENALTY IMPOSED BY THE A.O. AND SUSTAINED BY THE LD . CIT(A) IS DELETED. THE GROUND TAKEN BY THE ASSESSEE IS, THEREFORE, ALL OWED. 6. IN THE RESULT, THE ASSESSEES APPEAL STANDS ALLO WED. ORDER PRONOUNCED ON 03-8-2012. SD/- (RAJENDRA SINGH) ACCOUNTANT MEMBER SD/- (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 3-8-2012 ITA NO. 6181/MUM/2011 4 RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 13 MUMBAI 4. COMMISSIONER OF INCOME TAX -7, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH G, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI