RUSKIN CHEMIPHARMA, MUMBAI V. DCIT 14(2), MUMBAI

ITA 6606/MUM/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9295 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 19-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-10-2012
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Permanent establishment
• Section: 143(3)

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . , . , BEFORE SHRI D. MANMOHAN , VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, AM ./I.T.A. NO. 6606/M/2012 (AY:2009 - 2010) M/S. RUSKIN CHEMIPHARMA, 4 - A, BHANGWADI SHOPPING ARCADE, 1 ST FLOOR, BHANGWADI, KALBADEVI ROAD, MUMBAI 400 002. VS. DCIT - 14(2), MUMBAI. ./ PAN : AAAFR8482M ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIJAY MEHTA, AR / RESPONDENT BY : SHRI LOVE KUMAR, DR / DATE OF HEARING : 19.2.2015 / DATE OF PRONOUNCEMENT : 11. 3.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 19.2.2015 IS AGAINST THE ORDER OF THE CIT (A) - 25, MUMBAI DATED 6.9.2012 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE LD CIT (A) HAS ERRED IN LAW AND ON FACTS IN PASSING THE APPELLANT ORDER, WHICH IS INVALID AND BAD IN LAW. 2. THE LD CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE AMOUNTING TO RS. 2,74,681/ - US/ 40(A)(IA) BEING THE AMOUNT OF COMMISSION PAID TO A FOREIGN PARTY. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DEALER IN PHARMACEUTICAL PRODUCTS AND COMMISSION AGENT. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 30,40,785/ - . ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 33,15,470/ - . IN THE ASSESSMENT, ASSESSING OFFICER MADE 2 ADDITION OF RS. 2,74,681/ - U/S 40 ( A ) (I) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, ASSESS ING OFFICER NOTICED THAT THE ASSESSEE MADE COMMISSION PAYMENT OF RS. 2,74,681/ - WITHOUT MAKING TDS TO A NON - RESIDENT. AGGRIEVED WITH THE SAID ADDITION OF RS. 2,74,681/ - , ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3. DURING THE PROCEE DINGS BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSEE SUBMITTED THAT THE COMMISSION PAID TO A FOREIGN PARTY AND THE IT DOES NOT HAVE PERMANENT ESTABLISHMENT IN INDIA THEREFORE, THE SAID AMOUNT IS NO T CHARGEABLE TO TAX AT SOURCE AND TDS PROVISIONS DO NOT APP LY TO THIS PAY OUT. CIT (A) CONSIDERED THE SAME AND RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT I N THE CASE OF CIT VS. HAVELLS INDIA LTD [ITA NO.55/2012 AND 57/2012 DATED 21.5.2012] 352 ITR 376 (DEL.) . THIS JUDGMENT WHICH IS RELEVANT FOR THE P ROPOSITION THAT IN CASE OF EXPORT FROM INDIA ANY PAYMENT IN CONNECTION WITH EXPORT ACTIVITIES FALLS U/S 40(A)(IA) OF THE ACT AND NON DEDUCTION OF TAX WARRANTS DISALLOWANCE U/S 40(A)(IA) OF THE ACT. CIT (A) REASONED THAT RECIPIENT OF COMMISSION CONSTITUTES AN AGENT FOR THE ASSESSEE . THEREFORE , FROM ALL ANGLES, THE SOURCE OF INCOME TO THE NON - RESIDENT IS IN INDIA AND THEREFORE, THE COMMISSION PAYOUT IS CHARGEABLE UNDER THE ACT. CIT (A) FURTHER REFERRED THE JUDGMENT OF THE APEX COURT IN THE CASE OF G.E. IND IA TEC. CEN. (P) LTD VS. CIT (327 ITR 456) AGAINST THE ASSESSEE. EVENTUALLY, CIT (A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER U/S 40(A)(I) OF THE ACT AND DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE SAME, ASSESSEE IS IN APPEAL BEF ORE US. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT BY VIRTUE OF CBDT CIRCULAR NO.786, DATED 7.2.2000, THE ASSESSEE IS UNDER OBLIGATION TO MAKE TDS IN RESPECT OF THE EXPORT COMMISSION. HE READ OUT THE CLARIFICATION ISSU ED BY THE CBDT IN CONNECT ION WITH THE DEDUCTION OF TAX U/S 195 OF THE ACT. FURTHER, LD COUNSEL FOR THE ASSESSEE CLARIFIED THAT THE SAID CIRCULAR WAS WITHDRAWN SUBSEQUENTLY ON 22.10.2009 VIDE ANOTHER CIRCULAR NO.7 OF 2009. THIS CIRCULAR WAS WITHDRAWN AFTE R THE END OF THE FY RELEVANT TO THE AY 2009 - 2010 , WHICH IS UNDER 3 CONSIDERATION. IT IS THE CLAIM OF THE LD COUNSEL THAT THE ASSESSEE IS UNDER BONA FIDE BELIEF FOR NOT DEDUCTING THE TDS IN RESPECT OF THE COMMISSION OF RS. 2,74,681/ - . HE FURTHER SUBMITTED T HAT THE CIRCULAR NO.7 OF 2009 DOES NOT OPERATIVE RETROSPECTIVELY, THEREFORE, THE CLAIM OF THE ASSESSEE IS PROPER AND THE ADDITION NEEDS TO BE DELETED. FOR THE ABOVE PROPOSITION, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ORDER OF THE TRIBUNA L IN THE CASE OF M/S. INDIA FASHIONS LTD VS. ITO VIDE ITA NO.5262/M/2011, DATED 8.8.2014 WHEREIN ONE OF US (AM) IS A PARTY TO THE SAID ORDER OF THE TRIBUNAL, AND READ OUT THE CONTENTS OF THE PARA 2.2.3 WHICH DEALS WITH THE ISSUE OF NON - DEDUCTION OF TDS QUA THE CIRCULAR NO.786, DATED 7.2.2000. IT IS THE DECISION OF THE TRIBUNAL THAT THE CIRCULAR NO.786 OF 2000 WILL BE OPERATIVE ONLY FROM OCTOBER 2009 AND NOT TO THE AY 2009 - 2010. FURTHER, REFERRING TO THE ANOTHER ORDER OF THE TRIBUNAL IN ITA NO.661/M/2012 ( AY 2008 - 2009) DATED 3.7.2013, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PARA 4.1 WHICH DEALS WITH THE CIRCULAR NO.786, DATED 7.2.2000. ACCORDING TO THIS DECISION OF THE ITAT, THE ONUS IS ON THE ASSESSING OFFICER TO DEMONSTRATE THAT THE COMMISSI ON PAYMENT IS CHARGEABLE TO TAX IN THE HANDS OF THE NON - RESIDENT WHICH IS DONE BY THE ASSESSING OFFICER IN THE PRESENT CASE. 5. ON THE OTHER HAND, LD DR HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICER AND THE CIT (A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT PAPER BOOK FILED BEFORE US. THERE IS NO DISPUTE ON THE FACT THAT THE CIRCULAR NO.786 DATED 7.2.2000 WAS IN FORCE FOR THE YEAR UNDER CONSIDERATION AND THE SAID CIRCULAR HELPS THE AS SESSEE FOR NON - APPLICATION OF TDS PROVISIONS TO THE PAYMENTS OF EXPORT COMMISSION. WITHDRAWAL OF THE SAID CIRCULAR WAS DONE AFTER 21.10.2009 I.E., AFTER THE EXPIRY OF THE ASSESSMENT YEAR UNDER CONSIDERATION. THE CITED DECISIONS OF THE TRIBUNAL WERE CATEG ORICAL IN STATING THAT THE CIRCULAR DATED 22.10.2009 HAS NO RETROSPECTIVE APPLICATION. AS SUCH, ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ON RECORD TO DEMONSTRATE THAT THE IMPUGNED COMMISSION PAID TO THE NON - RESIDENT IS CHARGEABLE TO TAX AND THEREFORE, THE PROVISIONS OF SECTION 195 4 APPLY. IT IS ALSO A SETTLED LEGAL PROPOSITION THAT THE ONUS IS ON THE ASSESSING OFFIC ER TO DEMONSTRATE THAT THE SAID COMMISSION PAYMENTS ARE CHARGEABLE TO TAX IN INDIA. IN THESE CIRCUMSTANCES, WITHOUT GOING INTO THE OTHER ASPECTS, WE ARE OF THE OPINION THAT THE DECISION OF THE CIT (A) IS REQUIRED TO BE REVERSED. ACCORDINGLY, GROUNDS RAIS ED BY THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRON OUNCED IN THE OPEN COURT ON 1 1 T H MARCH, 2015. S D / - S D / - (D. MANMOHAN) (D. KARUNAKARA RAO) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; 11 /3/2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI