Irwin Leathers, CHENNAI V. ITO, CHENNAI

ITA 677/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8004 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 21-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: K BALASUBR AMANIAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.677/MDS/2016 ( )( / ASSESSMENT YEAR : 2007-08 M/S IRWIN LEATHERS, 14/42, KATTUR SADAYAPPAN STREET, PERIAMET, CHENNAI - 600 003. PAN : AAAFI 7801 D V. THE INCOME TAX OFFICER, BUSINESS WARD X(1) CHENNAI NOW ITO NON-CORPORATE CIRCLE 4, CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI K. BALASUBRAMANIAN, ADVOCATE -.+, / 0 / RESPONDENT BY : SHRI SUPRIYO PAL, JCIT 1 / 2% / DATE OF HEARING : 03.10.2016 3') / 2% / DATE OF PRONOUNCEMENT : 25.11.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 5, CHENN AI, DATED 26.11.2015 AND PERTAINS TO ASSESSMENT YEAR 2007-08. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE INCOME-TAX 2 I.T.A. NO.677/MDS/16 ACT, 1961 (IN SHORT 'THE ACT') IN RESPECT OF PAYMEN T OF FREIGHT CHARGES TO MALAYSIAN AIRLINES. THIS GROUND WAS RAISED BY T HE ASSESSEE BY WAY OF ADDITIONAL GROUND. 3. SHRI K. BALASUBRAMANIAN, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE PAID THE FREIGHT CHARGE S TO MALAYSIAN AIRLINES. REFERRING TO DOUBLE TAXATION AVOIDANCE A GREEMENT BETWEEN INDIA AND MALAYSIA, THE LD.COUNSEL SUBMITTE D THAT IN RESPECT OF OPERATION OF AIRCRAFT IN THE INTERNATION AL TRAFFIC, THE PROFIT WOULD BE TAXABLE ONLY IN THE STATE OF ORIGIN. IN T HIS CASE, THE MALAYSIAN AIRLINES OPERATES ITS AIRCRAFT FROM MALAY SIA. MALAYSIA BEING A CONTRACTING STATE, PROFIT ON OPERATION OF A IRCRAFT BY MALAYSIAN AIRLINES IS TAXABLE ONLY IN MALAYSIA, THE REFORE, THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX IN INDIA. THE LD.COUNSEL FURTHER SUBMITTED THAT THE PROFIT ARISING TO MALAYSIAN AIRL INES IS NOT TAXABLE IN INDIA, THEREFORE, THERE IS NO QUESTION OF DEDUCT ION OF TAX IN INDIA. 4. ON THE CONTRARY, SHRI SUPRIYO PAL, THE LD. DEPAR TMENTAL REPRESENTATIVE, SUBMITTED THAT IF THE ASSESSEE CLAI MS THAT THE PROFIT ARISING TO MALAYSIAN AIRLINES IS NOT TAXABLE IN IND IA, AN APPLICATION UNDER SECTION 194 OF THE INCOME-TAX ACT, 1961 (IN S HORT 'THE ACT') OUGHT TO HAVE BEEN FILED BEFORE THE ASSESSING OFFIC ER. SINCE SUCH 3 I.T.A. NO.677/MDS/16 AN EXERCISE WAS NOT DONE BY THE ASSESSEE, TAX OUGHT TO HAVE BEEN DEDUCTED AS PROVIDED IN SECTION 194 OF THE ACT. TH EREFORE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER HA S RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 40(A)(IA) OF THE ACT AND THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE SAME. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ARTICLE 8 OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN THE GOV ERNMENT OF INDIA AND GOVERNMENT OF MALAYSIA PROVIDES FOR PAYME NT OF TAX IN MALAYSIA IN RESPECT OF AIRCRAFT OPERATED BY ENTERPR ISE FROM MALAYSIA. IN FACT, THE DOUBLE TAXATION AVOIDANCE AGREEMENT BE TWEEN GOVERNMENT OF INDIA AND GOVERNMENT OF MALAYSIA WAS NOT BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER AS WELL AS T HE CIT(APPEALS). THEREFORE, BOTH THE AUTHORITIES BELOW HAD NO OCCASI ON TO CONSIDER THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN THE TWO SOVEREIGN COUNTRIES. THEREFORE, THIS TRIBUNAL IS N OT EXPRESSING ANY OPINION ON MERIT. IT IS OPEN TO THE ASSESSING OFFI CER TO EXAMINE THE CLAIM OF THE ASSESSEE IN THE LIGHT OF DOUBLE TAXATI ON AVOIDANCE AGREEMENT BETWEEN GOVERNMENT OF INDIA AND GOVERNMEN T OF MALAYSIA. ACCORDINGLY, THE ORDERS OF THE AUTHORITI ES BELOW ARE SET 4 I.T.A. NO.677/MDS/16 ASIDE AND THE DISALLOWANCE MADE BY THE ASSESSING OF FICER UNDER SECTION 40(A)(IA) OF THE ACT IN RESPECT OF PAYMENT OF FREIGHT CHARGES TO MALAYSIAN AIRLINES IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE TH E ISSUE IN THE LIGHT OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEE N GOVERNMENT OF INDIA AND GOVERNMENT OF MALAYSIA AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 6. NOW COMING TO THE DISALLOWANCE OF LABOUR CHARGES , SHRI K. BALASUBRAMANIAN, THE LD.COUNSEL FOR THE ASSESSEE, S UBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE LABOUR CHARGES OF ` 6,74,360/-. ACCORDING TO THE LD. COUNSEL, FOR NON-DEDUCTION OF TDS, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE. HOWEVER, THE CIT(APPEALS) FOUND THAT IN CASE THE PAYEE HAS R ECEIVED SINGLE INVOICE FOR CHARGES AS WELL AS TAX, THE ASSESSEE HA S TO DEDUCT TAX ON THE ENTIRE AMOUNT. THE LD.COUNSEL SUBMITTED THA T THAT THE MATTER MAY BE REMITTED BACK TO THE FILE OF THE ASSESSING O FFICER FOR RECONSIDERATION. 7. WE HAVE HEARD SHRI SUPRIYO PAL, THE LD. DEPARTME NTAL REPRESENTATIVE ALSO. SINCE THE MAIN ISSUE WITH REG ARD TO 5 I.T.A. NO.677/MDS/16 DISALLOWANCE OF FREIGHT CHARGES IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER, THIS TRIBUNAL IS OF THE CONSIDER ED OPINION THAT THE DISALLOWANCE OF LABOUR CHARGES ALSO NEEDS TO BE REC ONSIDERED IN THE LIGHT OF THE MATERIAL THAT MAY BE FILED BY THE ASSE SSEE. ACCORDINGLY, THE ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE A ND THE ISSUE OF DISALLOWANCE OF LABOUR CHARGES TO THE EXTENT OF ` 6,74,360/- IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASO NABLE OPPORTUNITY TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 25 TH NOVEMBER, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 25 TH NOVEMBER, 2016. KRI. 6 I.T.A. NO.677/MDS/16 / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-5, CHENNAI 4. PRINCIPAL CIT-9, CHENNAI 5. 7: -2 /DR 6. ;( < /GF.