THE ADIT(IT)-3(1), MUMBAI V. M/S. KPMG HOUSE, MUMBAI

ITA 6390/MUM/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7711 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 29-12-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 18-10-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NARENDER SINGH
• Assessee Lawyers: ARVIND SONDE
• Keywords: TDS; Set aside
• Section: 201(1); 195

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE SHRI D. MANMOHAN (VP) AND SHRI RAJENDRA SIN GH(AM) ITA NO.6390/M/2007 ASSESSMENT YEAR 2005-06 ITA NO.6391/M/2007 ASSESSMENT YEAR 2006-07 ITA NO.6392/M/2007 ASSESSMENT YEAR 2006-07 ITA NO.6393/M/2007 ASSESSMENT YEAR 2006-07 ITA NO.6394/M/2007 ASSESSMENT YEAR 2006-07 THE ADIT (IT)-3(1), R.NO.132, M/S. KPMG HOUSE SCINDIA HOUSE, 1 ST FLOOR, 448, SENAPATI BAPAT MARG N.M.ROAD, MUMBAI 400 038. KAMALA MILLS COMPOUND LOWER PAREL, MUMBAI 400 013. PAN : AAAFK 1415 H APPELLANT RESPONDENT REVENUE BY : SHRI NARENDER SINGH ASSESSEE BY : SHRI ARVIND SONDE O R D E R PER BENCH THESE APPEALS ARE DIRECTED AGAINST DIFFERENT ORDER S OF CIT(A) IN RELATION TO THE ORDERS OF AO PASSED UNDER SECTION 201(1) AND 201(1A). THE ONLY DISPUTE RAISED BY THE REVENUE IN THESE APPEALS IS WHETHER O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE CIT(A) WAS JUSTIFIED IN H OLDING THAT PAYMENT MADE BY THE ASSESSEE TOWARDS INSURANCE PREMIUM AND GUARA NTEE CHARGES WERE NOT COVERED BY TDS PROVISIONS. SINCE THE DISPUTE RAISED IS IDENTICAL IN ALL THE APPEALS, THESE APPEALS ARE BEING DISPOSED OFF BY A SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A MEMBER OF THE FIRM M/S.KPMG INTERNATIONAL WHICH IS REGISTERED IN SWITZERLAND AND HAS ITS HEAD QUARTERS AT NETHERLANDS. THE ASSESSEE HAD MADE CERTAIN PAYMENTS TO M/S.KPMG INTERNATIONAL DURING THE YEAR RELEVANT TO A.Y.2001-02 AND WHILE MAKING THE SAID PAYMENTS, NO TAX HAD BEEN DEDUCTED AT SOURCE UNDER SECTION 195 OF THE INCOME-TAX ACT. IN RESPONSE TO SHOW-CAU SE NOTICE OF THE AO AS TO WHY THE ASSESSEE SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT UNDER SECTION 201(1), IT WAS EXPLAINED THAT KPMG INTERNATIONAL WA S A MUTUAL CONCERN AND THEREFORE THE PAYMENTS MADE WERE NOT TAXABLE. IT WA S ALSO SUBMITTED THAT THE PAYMENTS WERE IN THE NATURE OF REIMBURSEMENT OF COS T AND THEREFORE THERE WAS NO ELEMENT OF INCOME EMBEDDED IN IT AND THEREFORE N O TAX WAS REQUIRED TO BE DEDUCTED. THE AO HOWEVER REJECTED THE CONTENTIONS R AISED AND HELD THE ASSESSEE IN DEFAULT UNDER SECTION 201(1) AND ALSO L EVIED INTEREST UNDER SECTION 201(1A). IN APPEAL CIT(A) HELD THAT THE PAYMENTS MA DE BY THE ASSESSEE TOWARDS INSURANCE PAYMENT AND GUARANTEE CHARGES WER E REIMBURSEMENT OF COST AND THEREFORE NO TAX WAS REQUIRED TO BE DEDUCTED. C IT(A) HOWEVER DID NOT ADJUDICATE THE GROUND RAISED BY THE ASSESSEE IN REL ATION TO MUTUALITY. AGGRIEVED BY THE ORDERS OF CIT(A), THE REVENUE IS I N APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD BOTH THE PARTIES IN THE MATTER. T HE LEARNED AR FOR THE ASSESSEE AT THE VERY OUTSET POINTED OUT THAT THE SA ME ISSUE HAD ARISEN EARLIER IN RELATION TO SIMILAR OTHER PAYMENTS IN RESPECT OF WHICH ALSO THE ASSESSEE HAD BEEN TREATED AS ASSESSEE IN DEFAULT. IN THESE CASES ALSO SIMILAR ARGUMENTS HAD BEEN ADVANCED AND CIT(A) HAD HELD THAT PAYMENTS TOW ARDS INSURANCE PREMIUM AND GUARANTEE CHARGES WERE REIMBURSEMENT OF COST AN D NO TAX WAS REQUIRED TO BE DEDUCTED. IN THESE CASES ALSO CIT(A) DID NOT ADJ UDICATE THE ISSUE RELATING TO MUTUALITY. BOTH THE PARTIES HAD APPEALED TO THE TRI BUNAL AND THE TRIBUNAL VIDE 3 ORDER DATED 20.10.10 IN ITA NO.1959 AND 1823/M/2007 HELD THAT CIT(A) WAS NOT JUSTIFIED IN NOT ADJUDICATING THE GROUND RELATI NG TO NON TAXABILITY OF THE PAYMENT ON ACCOUNT OF MUTUALITY. THE TRIBUNAL ALSO OBSERVED THAT IT WAS FOR THE ASSESSEE WHO WAS A MEMBER OF KPMG INTERNATIONAL TO SATISFY THE ADJUDICATOR WITH ALL POSSIBLE EVIDENCES THAT KPMG INTERNATIONAL WAS A MUTUAL CONCERN. THE TRIBUNAL THEREAFTER SET ASIDE THE APPEALS TO THE FI LE OF CIT(A) WITH DIRECTION TO ADJUDICATE THE ISSUE RAISED BY THE ASSESSEE ON THE CHARGEABILITY OF INCOME-TAX ON PAYMENTS MADE TO M/S. KPMG INTERNATIONAL. BOTH T HE PARTIES AGREED THAT THE FACTS IN THE PRESENT APPEALS WERE IDENTICAL AND THEREFORE THERE WAS NO OBJECTION TO THE MATTER BEING RESTORED TO THE FILE OF CIT(A) FOLLOWING THE EARLIER DECISION OF THE TRIBUNAL. WE THEREFORE SET ASIDE TH E ORDERS OF CIT(A) AND RESTORE THE ISSUE TO THE FILE OF CIT(A) FOR PASSING FRESH O RDERS AFTER NECESSARY EXAMINATION IN THE LIGHT OF OBSERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. IN THE RESULT ALL THE APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. 5. THE DECISION WAS PRONOUNCED IN THE OPEN COURT TO DAY I.E. 31.03.2011. SD/- SD/- ( D. MANMOHAN ) (RAJENDRA SINGH ) VICE PRESIDENT ACCOUNTANT MEMBE R DATE : 31.03.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CITY CONCERNED 4 5. THE DR L BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ALK