Bosch Ltd., Bangalore V. ITO, Bangalore

ITA 713/BANG/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63813 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-11-2012
• Assessment Year: 2011-2012
• Appeal Filed On: 13-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ETWA MUNDA
• Assessee Lawyers: S ANANTHA
• Keywords: Residential status
• Section: 206AA; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH C BEFORE SMT. P MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.1260/BANG/2011 & ITA NO.712 & 713/BANG/2012 (ASST. YEAR - 2011-12) M/S BOSCH LTD., HOSUR ROAD, ADUGODI, BANGALORE-560 030. . APPELLANT PAN NO.AAACM 9840 P. VS. THE INCOME-TAX OFFICER, INTERNATIONAL TAXATION, WARD-1(1), BANGALORE. . RESPONDENT APPELLANT BY : SHRI S ANANTHA, C.A RESPONDENT BY : SHRI ETWA MUNDA, CIT DATE OF HEARING : 08-11-2012 DATE OF PRONOUNCEMENT : -11-2012 O R D E R PER P MADHAVI DEVI, JUDICIAL MEMBER : ALL THESE THREE APPEALS ARE FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2011-12. THE APPEALS ARE DIRECT ED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX - (APPEALS) IV AT ITA NO.712, 713/ B/12 & 1260/B/11 2 BANGALORE DATED 14.10.2011 IN CONFIRMING THE ORDER OF THE DIT, INTERNATIONAL TAXATION, BANGALORE HOLDING THE ASSE SSEE TO BE LIABLE TO DEDUCT TAX AT SOURCE U/S 195 OF THE INCOME-TAX ACT. THE APPEALS ARISES OUT OF THE ASSESSMENT COMPETED U/S 248 OF THE I.T A CT. 2. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED ITS CHART TO SHOW HOW THE GROUNDS ARE COVER ED IN FAVOUR OR AGAINST THE ASSESSEE BY THE DECISION OF THIS TRIBUN AL IN THE ASSESSEES OWN CASE IN ITA NOS.556, 557 AND 558 OF 2011 DATED 11.10.2012. GOING BY THE SAID CHART, WE FIND THAT AS REGARDS TH E ISSUE OF THE APPLICATION OF THE PROVISION OF SEC. 206AA, THE NON RESIDENT WHO IS REQUIRED TO OBTAIN PAN AS PER SEC. 139A(8)(D) READ WITH RULE 114C(B) OF THE INCOME-TAX ACT, WE FIND THAT THE TRI BUNAL AT PARA 21 HAS HELD AS UNDER : 21. AS REGARDS THESE APPEALS, WE FIND THAT THE SER VICES OF REPAIRS BY THE NON-RESIDENTS RENDERED INCLUDE ITS ASSISTANCE IN ANALYZING AND SOLVING TECHNICAL PROBL EM AND DISFUNCTIONS BY LOCATING AND MENDING THE CAUSE OF THE DISFUNCTION BY PROVIDING TELEPHONIC ADVICE, ANALYSI S AND ASSISTANCE TO THE OPERATOR AND FOR PREVENTIVE MAINTENANCE. THESE SERVICES CLEARLY FALL WITHIN TH E PURVIEW OF DEFINITION OF FEES FOR TECHNICAL SERVIC ES. IN ITA NO.712, 713/ B/12 & 1260/B/11 3 THESE CASES, THE SERVICES ARE NOT MERE REPAIRS BUT ARE TOWARDS PREVENTIVE MAINTENANCE WHICH CLEARLY SHOW T HAT THE RECIPIENTS ARE PROVIDING TECHNICAL ASSISTANTCE AND SERVICES TO THE ASSESSEE IN INDIA. THEREFORE THE A SSESSEE IS LIABLE TO WITHHOLD TAX FROM THE PAYMENT OF FEES FOR TECHNICAL SERVICES. IN VIEW OF EXPLANATION 2 TO CL AUSE (VII) OF SEC. 9(1), THE FEES FOR TECHNICAL SERVICE S IS CHARGEABLE TO TAX IN INDIA AND THE ASSESSEE IS LIAB LE TO DEDUCT TAX AT SOURCE. NOW, HAVING HELD THAT THE SERVICES RENDERED BY THE NON-RESIDENTS ARE TECHNICAL SERVICES, WE WIL L HAVE TO EXAMINE THE APPLICABILITY OF SEC. 206AA OF THE I NCOME- TAX ACT. THE ASSESSEES CONTENTION HAS BEEN THAT TH E ASSESSEE BEING A NON RESIDENT IS NOT REQUIRED TO AP PLY FOR AND OBTAIN PAN NO. BY VIRTUE OF RULE 114(C)(B) OF INCOME-TAX RULES READ WITH SEC. 139A(8)(D) OF THE INCOME-TAX ACT. WE CANNOT AGREE WITH THIS CONTENTI ON OF THE ASSESSEE. THE PROVISIONS OF SEC. 206AA CLEARLY OVERRIDES THE OTHER PROVISIONS OF THE ACT. THEREFO RE, A NON RESIDENT WHOSE INCOME IS CHARGEABLE TO TAX IN INDIA HAS TO OBTAIN PAN NO. AND PROVIDE THE SAME TO THE ASSESSEE DEDUCTOR. THE ONLY EXEMPTION GIVEN IS THA T NON- RESIDENT WHOSE INCOME IS NOT CHARGEABLE TO TAX IN I NDIA ARE NOT REQUIRED TO APPLY AND OBTAIN PAN NO. HOWEV ER, WHERE THE INCOME IS CHARGEABLE TO TAX IRRESPECTIVE OF THE RESIDENTIAL STATUS OF THE RECEIPEINTS, EVERY ASSESS EE IS REQUIRED TO OBTAIN THE PAN NO. AND THIS PROVISION I S ITA NO.712, 713/ B/12 & 1260/B/11 4 BROUGHT IN TO ENSURE THAT THERE IS NO EVASION OF TA X BY THE FOREIGN ENTITIES. THE ASSESSEES RELIANCE UPON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF KOWSALYABAI (CITED SUPRA), IN OUR OPINION, IS MISPLACED AND DISTINGUISHABLE ON FACTS FROM THE FAC TS OF THE CASE BEFORE US. IN THE CASE OF KOWSALYABAI AND OTHERS, THE RECIPIENTS OF THE INTEREST WERE RESIDEN TS OF INDIA AND THEIR TOTAL INCOME WAS LESS THAN THE TAX ABLE LIMIT PRESCRIBED BY THE RELEVANT FINANCE ACT. IT W AS IN THESE FACATS AND CIRCUMSTANCES THAT THE HONBLE HIG H COURT HAS HELD THAT WHERE THE RECIPIENTS OF THE IN TEREST INCOME WERE NOT HAVING INCOME EXCEEDING TAXABLE LI MITS, IT WAS NOT REQUIRED TO OBTAIN THE PAN NO. BUT IN THE CASE BEFORE US, THE ASSESSEES ARE NON-RESIDENTS AN D ADMITTEDLY THE INCOME EXCEEDS THE TAXABLE LIMIT PRESCRIBED BY THE RELEVANT FINANCE ACT. IN THE CIRCUMSTANCES, THE RECIPIENTS ARE BOUND AND ARE UND ER AN OBLIGATION TO OBTAIN THE PAN NO. AND FURNISH THE SA ME TO THE ASSESSEE. FOR FAILURE TO DO SO, THE ASSESSEE I S LIABLE TO WITHHOLD TAX AT THE HIGHER OF RATES PRESCRIBED U/S 206AA OF THE INCOME-TAX ACT I.E 20% AND THE CIT(A) HAS RI GHTLY HELD THAT THE PROVISION OF SEC. 206AA ARE APPLICABL E TO THE ASSESSEE. 3. RESPECTFULLY FOLLOWING THE SAME, THIS GROUND OF APPEAL IS REJECTED. ITA NO.712, 713/ B/12 & 1260/B/11 5 4. AS REGARDS THE GROUND RELATING TO GROSSING-UP U/ S 195A OF THE INCOME-TAX ACT TO BE DONE AT 20% AT RATES IN FORCE I.E 10% IN THE INSTANT CASE, WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER : 22. AS REGARDS THE GROSSING UP U/S 195A OF THE INCOME-TAX ACT IS CONCERNED, WE FIND THAT THE PROVI SION READS AS UNDER : [IN A CASE OTHER THAN THAT REFERRED TO IN SUB- SECTION (1A) OF SEC. 192, WHERE UNDER AN AGREEMENT] OR OTHER ARRANGEMENT, THE TAX CHARGEABLE ON ANY INCOME REFERRED TO IN THE FOREGOING PROVISIONS OF THIS CHA PTER IS TO BE BORNE BY THE PERSON BY WHOM THE INCOME IS PAY ABLE, THEN, FOR THE PURPOSES OF DEDUCTION OF TAX UNDER TH OSE PROVISIONS SUCH INCOME SHALL BE INCREASED TO SUCH AMOUNT AS WOULD, AFTER DEDUCTION OF TAX THEREON AT THE RATES IN FORCE FOR THE FINANCIAL YEAR IN WHICH SUCH INCOME IS PAYABLE, BE EQUAL TO THE NET AMOUNT PAYABLE UNDE R SUCH AGREEMENT OR ARRANGEMENT. 23. THUS, IT CAN BE SEEN THAT THE INCOME SHALL BE INCREASED TO SUCH AMOUNT AS WOULD AFTER DEDUCTION O F TAX THERETO AT THE RATE IN FORCE FOR THE FINANCIAL YEAR IN WHICH SUCH INCOME IS PAYABLE, BE EQUAL TO THE NET AMOUNT PAYABLE UNDER SUCH AGREEMENT OR ARRANGEMENT. A LI TERAL ITA NO.712, 713/ B/12 & 1260/B/11 6 READING OF SEC. IMPLIES THAT THE INCOME SHOULD BE INCREASED AT THE RATES IN FORCE FOR THE FINANCIAL Y EARS AND NOT THE RATES AT WHICH THE TAX IS TO BE WITHHELD BY THE ASSESSEE. THE HONBLE APEX COURT IN THE CASE OF GE IN DIA TECHNOLOGY (CITED SUPRA) HAS HELD THAT THE MEAN ING AND EFFECT HAS TO BE GIVEN TO THE EXPRESSION USED I N THE SECTION AND WHILE INTERPRETING A SECTION, ONE HAS T O GIVE WEIGHTAGE TO EVERY WORD USED IN THAT SECTION. IN V IEW OF THE SAME, WE ARE OF THE OPINION THAT THE GROSSING U P OF THE AMOUNT IS TO BE DONE AT THE RATES IN FORCE FOR THE FINANCIAL YEAR IN WHICH SUCH INCOME IS PAYABLE AND NOT AT 20% AS SPECIFIED U/S 206AA OF THE ACT. 5. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT WE ALLOW THIS GROUND OF APPEAL. 6. AS REGARDS GROUND NO.4, THE MAINTAINABILITY OF THE APPEAL BEFORE THE CIT(A) U/S 248 OF THE INCOME-TAX ACT, WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE JURISDICTIONAL HIGH COURT DATED 24.9.2009 IN ITA NO .2808 OF 2005, WHEREIN IT WAS HELD AT PARA 87 AND 88 AS UNDER : 88. THE STATUTORY PROVISIONS IN THE SECTION IS VERY CLEAR ON THIS ASPECT AND THE TRIBUNAL IS CORRE CT IN HOLDING THAT THE APPEALS WERE MAINTAINABLE AND COUL D ITA NO.712, 713/ B/12 & 1260/B/11 7 NOT HAVE BEEN DISPOSED OF AT THE THRESHOLD AND THE CIT(A) COULD NOT HAVE DISPOSED OF THE APPEALS AT TH E THRESHOLD, AS NOT MAINTAINABLE. 89. HOWEVER, INSOFAR AS THE SCOPE OF EXAMINATION OF AN APPEAL U/S 248 IS CONCERNED AND I N THE LIGHT OF THE VIEW, THAT WE HAVE EXPRESSED IN TH E OTHER APPEALS, THAT VIEW EQUALLY APPLIES TO THE PRE SENT APPEALS ALSO AND WHILE THE REMAND ORDER PASSED BY T HE TRIBUNAL IS LEFT UNDISTURBED AND THE APPEALS OF THE REVENUE ARE DISMISSED, THE OBSERVATIONS AND THE INTERPRETATION OF LAW THAT WE HAVE PLACED ON THE PROVISIONS OF SEC. 195 OF THE ACT, AS ABOVE NECESSA RILY GOVERNS THE EXAMINATION OF THE APPEAL U/S 248 OF TH E ACT, WHEN THE CIT(A), TAKES UP THE APPEALS FOR DISP OSAL ON THE MERITS OF THE MATTER. FOR STATISTICAL PURPO SE, THESE APPEALS ARE DISMISSED. 7. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT TH E APPEALS OF THE ASSESSEE AGAINST THE ORDER OF THE AO AND BEFORE THE CIT(A) ARE MAINTAINABLE EVEN IF THE ASSESSEE HAS DEDUCTED TAX AT SOURCE U/S 198 OF THE INCOME-TAX ACT AND REMITTED THE SAME ON GOVERNM ENT ACCOUNT. THIS GROUND IS ACCORDINGLY ALLOWED. ITA NO.712, 713/ B/12 & 1260/B/11 8 8. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH NOV, 2012. SD/- SD/- (JASON P BOAZ) (MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE DATED : 30/11/2012 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETA RY, ITAT, BANGALORE.