DCIT 9(2), MUMBAI V. PINSTORM TECHNOLOGIES P.LTD, MUMBAI

ITA 6275/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100583 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 28-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Permanent establishment; Advance ruling
• Section: 143(3); 260A

Judgement Text

M/S PINSTORM TECHNOLOGIES PVT LTD ITA NO. 6 275 /MUM/20 1 3 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI . . , , BEFORE SHRI B R BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , J UDICIAL MEMBER ITA NO. : 6275 /MUM/20 1 3 ( ASSESSMENT YEAR: 20 1 0 - 11 ) DY COMMISSIONER OF INCOME TAX - 9 (2) , ROOM NO. 218, 2 ND FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 VS M / S PINSTORM TECHNOLOGIES PVT LTD , SWATI BUILDING, NORTH AVENUE, SANTACRUZ (WEST ), MUMBAI - 400 0 54 .: PAN: AA DCP 4854 B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DURGA DUTT RESPONDENT BY : SHRI HARIDAS BHAT /DATE OF HEARING : 2 4 - 06 - 201 5 / DATE OF PRONOUNCEMENT : 12 - 08 - 201 5 ORDER , . . : PER AMIT SHUKLA, AM : THE A FORESAID APPEAL HA S BEEN FILED BY THE REVENUE A GAINST THE IMPUGNED ORDER DATED 12 . 08 .20 1 3 , PASSED BY CIT (A) - 2 0 , MUMBAI FOR QUANTUM OF ASSESSME NT PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 20 1 0 - 11 , ON THE FOLLOWING GROUNDS OF APPEAL : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE OF OPE RATING EXPENSES MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE I.T. ACT AMOUNTING TO RS. 1,08,54,686/ - . 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) WAS J USTIFIED IN DELETING THE DISALLOWANCE U/S 40(A)(IA ) HOLDING THAT THE AMOUNT PAID BY THE ASSESSEE TO M/S GOOGLE IRELAND LTD. FOR RENDER ING OF BUSINESS PROFIT AND IN THE ABSENCE OF ANY PE OF M/S GOOGLE IRELAND IN INDIA, IS NOT CHARGEABLE TO TAX IN INDIA. M/S PINSTORM TECHNOLOGIES PVT LTD ITA NO. 6 275 /MUM/20 1 3 2 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) WAS J USTIFIED IN DELETING THE DISALLOWANCE U/S 40(A)(IA) RELYING ON THE ITATS DECISION IN THE ASSESSEES OWN CASE FOR AY 2006 - 07 AND 2008 - 09, WITHOUT APPRECIATING THE FACT THAT THE DECISION OF THE ITAT HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AN APPEAL U/S 260A ARE PENDING BEFORE THE HONBLE BOMBAY HIGH COURT. 2. AT THE OUTSET, THE LD. COUNSEL SUBMITTED THAT THIS ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE RIGHT F ROM THE ASSESSMENT YEAR 2006 - 07 TO ASSESSMENT YEAR 2008 - 09. EVEN THE LD. CIT(A) HAS FOLLOWED THE EARLIER ORDER OF THE TRIBUNAL AND DEPARTMENTS ONLY CONTENTION IS THAT THE REVENUE HAS NOT ACCEPTED THE DECISION OF THE TRIBUNAL AND MATTER IS DECIDING BEFORE T HE HONBLE BOMBAY HIGH COURT IN THE APPEAL FILED U/S 260A. 3. WE HAVE HEARD THE PARTIES AND ALSO CONSIDERED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER AS WELL AS ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN THE EARLIER YEARS. THE RELEVANT FAC TS AS NOTED IN THE IMPUGNED ORDER AS UNDER : - THE ASSESSEE IS IN THE BUSINESS OF PLACING THE CLIENTS PARTICULARS IN THE VANTAGE POINTS IN THE SEARCH ENGINES LIKE GOOGLE, YAHOO ETC. THE ASSESSEE BUYS THE VANTAGE POINTS IN THE SEARCH ENGINES AND SELLS THE SA ME TO CLIENTS BY PLACING THEIR NAME AND ALSO BY GENERATING THE DATA OF HITS THEREON AND BILL THE CLIENTS ACCORDINGLY. THE PAYMENTS TO THE POPULAR SEARCH ENGINE LIKE GOOGLE IS MADE BY SWIPING THE CREDIT CARDS AND THEREBY REMITTING THE MONIES TO GOOGLE WHO H AS THE HEADQUARTERS IN IRELAND. THE BILLS ARE SENT BY GOOGLE FOR THE SAME. ACCORDING TO THE CLAIM OF THE APPELLANT, GOOGLE INC NEITHER HAD ANY OFFICE IN INDIA, NOR ANY PERMANENT ESTABLISHMENT IN INDIA DURING THE ASSESSMENT YEAR. THUS SUCH INCOME OF GOOGLE BEING THE BUSINESS PROFIT OUTSIDE THE PURVIEW OF SECTION 9(1) OF THE ACT, AND A LS O O UTSIDE THE PURVIEW OF THE SECTION 195(1) OF THE ACT. THUS ACCORDING TO THE M/S PINSTORM TECHNOLOGIES PVT LTD ITA NO. 6 275 /MUM/20 1 3 3 APPELLANT , THE NATURE OF PAYMENT IS A PURE BUSINESS INCOME WHEREBY THE SLOT IS BOUGHT AND SOLD. 4. THE ASSESSING OFFICER FOLLOWING THE ASSESSMENT ORDER FOR THE EARLIER YEARS, MADE THE ADDITION ON ACCOUNT OF PAYMENT MADE BY THE ASSESSEE ON WHICH TDS WAS NOT DEDUCTED WHILE REMITTING THE AMOUNT TO THE FOREIGN PARTIES. H E ALSO FURTHER HELD THAT DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEAL HAS BEEN FILED BEFORE THE HONBLE BOMBAY HIGH COURT U/S 260A. THE LD. CIT(A) FOLLOWING THE DECISION OF THE TRIBUNAL FOR THE EARLIER YEARS ALLOWED THE GROUND. 5 . WE FIND THAT IN AY 2006 - 07, THE TRIBUNAL IN ITA NO. 43 32 /MUM/2009, ORDER DATED 18.07.2012 HA S DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AFTER OBSERVING AND HOLDING AS UNDER : - 6. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT A SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE CASE OF YAHOO INDIA PVT. LTD. AND VIDE ITS ORDER DATED 24TH JUNE, 2011 PASSED IN ITA NO.506/MUM/2008, THE TRIBUNAL DECIDED THE SAME IN FAVOUR OF THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO.8 OF ITS ORDER: 8. AS ALREADY NOTED BY US, THE PAYMENT MADE BY ASSESSEE IN THE PRESENT CASE TO YAHOO HOLDINGS (HONG KONG) LTD. WAS FOR SERVICES RENDERED FOR UPLOADING AND DISPLAY OF THE BANN ER ADVERTISEMENT OF THE DEPARTMENT OF TOURISM OF INDIA ON ITS PORTAL. THE BANNER ADVERTISEMENT HOSTING SERVICES DID NOT INVOLVE USE OR RIGHT TO USE BY THE ASSESSEE ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT AND NO SUCH USE WAS ACTUALLY GRANTED BY Y AHOO HOLDINGS (HONG KONG) LTD. TO ASSESSEE COMPANY. UPLOADING AND DISPLAY OF BANNER ADVERTISEMENT ON ITS PORTAL WAS ENTIRELY THE RESPONSIBILITY OF YAHOO HOLDINGS (HONG KONG) LTD. AND ASSESSEE COMPANY WAS ONLY REQUIRED TO PROVIDE THE BANNER AD TO YAHOO HOLD INGS M/S PINSTORM TECHNOLOGIES PVT LTD ITA NO. 6 275 /MUM/20 1 3 4 (HONG KONG) LTD. FOR UPLOADING THE SAME ON ITS PORTAL. ASSESSEE THUS HAD NO RIGHT TO ACCESS THE PORTAL OF YAHOO HOLDINGS (HONG KONG) LTD. AND THERE IS NOTHING TO SHOW ANY POSITIVE ACT OF UTILIZATION OR EMPLOYMENT OF THE PORTAL OF YAHOO HOLDINGS (HONG KONG) LTD. BY THE ASSESSEE COMPANY. HAVING REGARD TO ALL THESE FACTS OF THE CASE AND KEEPING IN VIEW THE DECISION OF THE AUTHORITY OF ADVANCE RULINGS IN THE CASE OF ISRO SATELLITE CENTRE 307 ITR 59 AND DELL INTERNATIONAL SERVICES (INDIA) P. LTD. 305 ITR 37 , WE ARE OF THE VIEW THAT THE PAYMENT MADE BY ASSESSEE TO YAHOO HOLDINGS (HONG KONG) LTD. FOR THE SERVICES RENDERED FOR UPLOADING AND DISPLAY OF THE BANNER ADVERTISEMENT OF THE DEPARTMENT OF TOURISM OF INDIA ON ITS PORTAL WAS NOT IN THE NATURE OF ROYALTY B UT THE SAME WAS IN THE NATURE OF BUSINESS PROFIT AND IN THE ABSENCE OF ANY PE OF YAHOO HOLDINGS (HONG KONG) LTD. IN INDIA, IT WAS NOT CHARGEABLE TO TAX IN INDIA. ASSESSEE THUS WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE PAYMENT MADE TO YAHOO HOLDINGS ( HONG KONG) LTD. FOR SUCH SERVICES AND IN OUR OPINION, THE PAYMENT SO MADE CANNOT BE DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40(A) FOR NON - DEDUCTION OF TAX. IN THAT VIEW OF THE MATTER WE DELETE THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LEARNED CIT (A) U/S 40(A) AND ALLOW THE APPEAL OF THE ASSESSEE. 7. AS THE ISSUE INVOLVED IN THE PRESENT CASE AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE CASE OF YAHOO INDIA P. LTD. (SUPRA), WE RESPECTFULLY FOLLOW THE DECISION RENDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE SAID CASE AND DELETE THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT (A) BY INVOKING THE PROVISIONS OF SEC.40(A)(I) HOLDING THAT THE AMOUNT PAID BY THE ASSESSEE TO M/S. GOOGLE IRELAND LTD. FOR THE SERVICES RENDERED FOR UPLOADING AND DISPLAY OF BANNER ADVERTISEMENT ON ITS PORTAL WAS IN THE NATURE OF BUSINESS PROFIT ON WHICH NO TAX WAS M/S PINSTORM TECHNOLOGIES PVT LTD ITA NO. 6 275 /MUM/20 1 3 5 DEDUCTIBLE AT SOURCE SINCE THE SAME WAS NOT CHARGEABLE TO TAX IN INDIA IN THE ABSENCE OF ANY PE OF GOOGLE IRELAND LTD. IN INDIA . 6. FURTHER , IN AY 2007 - 08 AND 2008 - 09 , THIS ORDER HAS BEEN FURTHER FOLLOWED AND THE SAME HAS BEEN ALLOWED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, CONSISTENT WITH THE VIEW TAKEN IN THE EARLIER YEARS, WE HOLD THAT THE ADDIT ION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) CANNOT BE MADE. TH US, GROUND RAISED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST , 2015 . SD/ - SD/ - ( . . ) ( ) ( B R BASKARAN ) ( AMIT SHUKLA ) ACCOUNTANT MEMBE R JUDICIAL MEMBER MUMBAI, DATE: 12 TH AUGUST , 2015 / COPY TO: - 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A) - 2 0 , MUMBAI. 4) THE CIT 9 , MUMBAI. 5) , , / THE D.R. C BENCH, MUMBAI. 6) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS