ALKYL AMINES CHEMICALS LTD, NAVI MUMBAI V. DCIT (ITDS) 1(1), MUMBAI

ITA 7440/MUM/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7528 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 12-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: DIVYESH I SHAH
• Keywords: Retrospective amendment; Non-deduction of tax

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A, MU MBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.7440/MUM/2014 (ASSESSMENT YEAR- 2007-08) ITA NO.7441/MUM/2014 (ASSESSMENT YEAR- 2008-09) ALKYL AMINES CHEMICALS LTD. 401-402, NIRMAN VYPAR KENDRA, PLOT NO. 10, SECTOR 17, VASHI, NAVI MUMBAI-400703 PAN:AAACA6783F VS. DCIT (TDS) 1(1) MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DIVYESH I. SHAH (AR) REVENUE BY : SHRI RAJESH KUMAR YADAV (DR). DATE OF HEARING : 24.04.2018 DATE OF PRONOUNCEMENT : 24.04.2018 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THESE TWO APPEAL BY ASSESSEE UNDER SECTION 253 OF I NCOME-TAX ACT ARE DIRECTED AGAINST THE SEPARATE ORDER OF LD. COMMISSI ONER OF INCOME-TAX (APPEALS) (CIT-A)-14, MUMBAI DATED 29.04.2014 FOR A SSESSMENT YEAR 2007-08 AND 2008-09. IN BOTH THE APPEAL, THE ORDER PASSED BY LD CIT(A) IS ALMOST IDENTICAL EXCEPT VARIATION OF FIGURE, THE ASSESSEE HAS RAISED THE IDENTICAL GROUNDS OF APPEAL, THUS, BOTH THE APPEAL WERE CLUBBED, HEARD AND ARE DECIDED BY COMMON ORDER. FOR APPRECIATION OF FA CTS THE APPEAL FOR ASSESSMENT YEAR 2007-08 IS PICKING UP AS A LEAD CAS E. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.1 THE COMMISSIONER OF INCOME-TAX (APPEALS) - 14, MUMBAI ['THE CIT (A)'] ERRED IN CONFIRMING THE ACTION OF THE DEPUTY COMMISSIONER OF INCOME- ITA NO.7440 & 7441/M/2014 ALKYL AMINES CHEMICALS LTD. 2 TAX (TDS) - 1 (1), MUMBAI ('THE AO') IN APPLYING PR OVISIONS OF SEC. 194J OF THE INCOME TAX ACT, 1961 ('THE ACT') ON THE PAYMENT MADE FOR VSAT/LEASEDLINE CHARGES. 1.2 THE CIT(A) ALSO ERRED IN NOT APPRECIATING THE F ACT THAT THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF VERIZON CO MMUNICATIONS SINGAPORE PTE LTD. V.ITO [2013] 39 TAXMANN.COM 70 ( MADRAS)RELIED UPON WOULD NOT BE APPLICABLE TO THE APPELLANT'S CASE. 1.3 THE APPELLANT PRAYS THAT IT BE HELD THAT THE AP PELLANT WAS NOT LIABLE TO DEDUCT TAX AT SOURCE U/S 194J OF THE ACT AND AS SUC H THE ORDER PASSED U/S 201(1)/ 201(LA) OF THE ACT BE QUASHED. WITHOUT PREJUDICE TO ABOVE, 2.1 THE CIT(A) ERRED IN APPLYING PROVISIONS OF SEC. 194-I OF THE ACT ON THE PAYMENT MADE FOR VSAT/LEASED LINE CHARGES ON THE AL LEGED GROUND THAT THE SAID SERVICES COMES UNDER PROVIDING RIGHT TO USE LE ASED EQUIPMENT. 2.2 THE APPELLANT PRAYS THAT IT BE HELD THAT THE PR OVISIONS OF SEC. 194-I OF THE ACT WOULD NOT BE APPLICABLE AND AS SUCH ORDER PASSE D U/S 201(1)1 201(1A) OF THE ACT BE QUASHED. 2. BRIEF FACTS OF THE CASE ARE THAT A SURVEY UNDER SEC TION 133 WAS CARRIED OUT IN THE PREMISES OF ASSESSEE ON 19.03.2008. DURING S URVEY STATEMENT OF SH. P.S.R MURTHY, CFO (CHIEF FINANCE OFFICER) WAS R ECORDED. THE SURVEY TEAM FOUND THAT DURING THE RELEVANT PERIOD R ELATED TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE PA ID THE INTERNET CHARGES OF RS.1,69,232/- TO M/S SIFY COMMUNICATION, TATA INDICOM AND HATHWAY INTERNET ON WHICH TAX WAS NOT DEDUCTED AT S OURCE. A SHOW CAUSE NOTICE UNDER SECTION 201(1A) WAS ISSUED TO THE ASSE SSEE. IN RESPONSE TO THE NOTICE VIKRAM PATEL AN EMPLOYEE OF THE ASSESSEE COMPANY ATTENDED THE PROCEEDINGS AND EXPLAINED THAT THE PAYMENT IS N OT MADE TOWARDS ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES BUT P AID FOR USAGE OF INTERNET ACCESS FACILITIES. THE CONTENTION OF THE A SSESSEE WAS NOT ACCEPTED ITA NO.7440 & 7441/M/2014 ALKYL AMINES CHEMICALS LTD. 3 BY ASSESSING OFFICER/ DCIT (TDS) HOLDING THAT INTER NET IS A TECHNICAL PHENOMENON AND CAN ONLY BE PROVIDED WHO HAS NECESSA RY EQUIPMENTS AND TECHNICAL ABILITY. THEREFORE, THE ASSESSEE WAS TREATED IN DEFAULT UNDER SECTION 201 OF THE ACT, FOR NON-DEDUCTION OF TAX AT SOURCE UNDER SECTION 194J. THE ASSESSING OFFICER CALCULATED THE DEFAULT OF TAX AT RS. 9,494/- UNDER SECTION 201 AND FURTHER LEVIED INTEREST OF RS . 4,557/- UNDER SECTION 201(1A) OF THE ACT. ON APPEAL BEFORE THE LD. CIT(A) , THE ACTION OF ASSESSING OFFICER WAS CONFIRMED. THE LD CIT(A) ALSO SUSTAINED THE ACTION OF ASSESSING OFFICER HOLDING THAT THE VIOLATION IS ALSO COVERED UNDER SECTION 194I. WHILE COVERING THE ASSESSEE UNDER SEC TION 194I, THE LD CIT(A) HOLD THAT USE OF USE OF VSAT/ LEASE LINE COM ES UNDER RIGHT TO USE EQUIPMENT. THUS, FURTHER AGGRIEVED THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE RE VENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE COVERE D IN FAVOUR OF ASSESSEE BY A NUMBER OF DECISIONS OF TRIBUNAL. THE LD. AR FU RTHER SUBMITS THAT IN ALOK INDUSTRIES LTD. VS DCIT (ITA NO.1423/MUM/2015) DATED 03.07.2017, THE TRIBUNAL WHILE CONSIDERING THE PAYM ENT MADE TO SIFY LTD TOWARDS THE USE OF INTERNET, THE SIMILAR ORDER UNDE R SECTION 201 AND 201(1A) WAS SET-ASIDE. ITA NO.7440 & 7441/M/2014 ALKYL AMINES CHEMICALS LTD. 4 4. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT EXP LANATION(6) TO SECTION 9(1)(VI) INTRODUCED IN THE YEAR 2012 WITH RETROSPEC TIVE EFFECT FROM 1976 AND THE HONBLE BOMBAY HIGH COURT IN CIT VS NGT NET WORK (INDIA) PVT LTD AND THIS TRIBUNAL IN ACIT VS. BSR & CO. [20 16] 70 TAXMANN.COM 69 (MUMBAI-TRIB.), HELD THAT LIABILITY AT THE HAND OF THE RECIPIENT ON ACCOUNT OF SUBSEQUENT AMENDMENT CANNOT EXPOSE ASSESSEE- PAYER TO AN IMPOSSIBLE SITUATION OF REQUIRING DEDUC TION OF TAX AT SOURCE. ON SUCH SITUATION THE ASSESSEE CANNOT BE HELD IN D EFAULT FOR NOT DEDUCTING THE TAX AT SOURCE. IN FURTHER SUPPORT OF HIS SUBMIS SION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF TRIBUNAL AND C IT VS M/S. NGC NETWORKS (INDIA) PVT. LTD. [ITA NO. 397 OF 2015 DAT ED 29.01.2018 (BOM H.C.)]. THE LD AR FOR THE ASSESSEE ALSO FILED COPY OF FOLLOWING DECISIONS; 1. CIT VS ESTEL COMMUNICATION (P.) LTD. [2008] 217 CTR 102 (DELHI). 2. SKYCELL COMMUNICATION LTD. VS DCIT [2001] 119 TA XMAN 496 (MAD.). 3. PACIFIC INTERNET (INDIA) (P.) LTD. VS ITO [2009] 27 SOT 523 (MUM.). 4. ACIT VS TORRY HARRIS BUSINESS SOLUTION (P.) LTD. [2015] 61 TAXMANN.COM 234 (BANGALORE-TRIB.). 5. HOLCIM SERVICES SOUTH ASIA LTD. VS. DCIT [2016] 67 TAXMANN.COM 189 (MUMBAI-TRIB.). 6. ITO VS. CHINUBHAI KALIDAS & BROS [2016] 76 TAXMA NN.COM 289 (MUMBAI- TRIB.). 7. IGATE COMPUTER SYSTEMS LTD. VS. DCIT [2015] 53 T AXMANN.COM 432 (PUNE- TRIB.). 8. ALOK INDUSTRIES LTD. VS. DCIT (ITA NO. 1423/MUM/ 2015 ) 5. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPP ORTED THE ORDER OF AUTHORITIES BELOW. ITA NO.7440 & 7441/M/2014 ALKYL AMINES CHEMICALS LTD. 5 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THAT CO -ORDINATE BENCH OF TRIBUNAL IN ALOK INDUSTRIES LTD. (SUPRA) WHILE CONS IDERING THE SIMILAR GROUND OF APPEAL HELD THAT PAYMENTS MADE TOWARDS BR OADBAND / LEASE LINE CHARGES ARE NOT IN THE NATURE OF TECHNICAL SERVICES OR ROYALTY SO AS TO ATTRACT THE PROVISION OF SECTION 194J. IT WAS FURTH ER HELD THAT THE ATTEMPT OF LD CIT(A) IN ROPING THE PAYMENT UNDER SECTION 19 4I BY REFEREEING TO THE DEFINITION OF PROCESS AS PROVIDED UNDER EXPLA NATION (6) TO SECTION 9(1)(VI), CANNOT HELD THE ASSESSEE LIABLE. THE SAID AMENDMENT WAS INSERTED BY FINANCE ACT, 2012 W.R.E.F. 01.06.1967, AND, WHEN, THE ASSESSEE MADE THE PAYMENT THERE WAS NO LIABILITY TO DEDUCT TAX AT SOURCE BY TREATING IT AS ROYALTY. THE AMENDMENT MADE WITH RETROSPECTIVE EFFECT CANNOT FASTEN LIABILITY ON THE ASSESSEE. IN OUR VIE W THE DECISION OF COORDINATE BENCH IN ALOK INDUSTRIES LIMITED (SUPRA) SQUARELY COVERS THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE. WE ARE AL SO IN FULL AGREEMENT WITH THE SUBMISSIONS OF THE LD AR FOR THE ASSESSEE THAT LIABILITY AT THE HAND OF THE RECIPIENT ON ACCOUNT OF SUBSEQUENT AMEN DMENT WITH RETROSPECTIVE AMENDMENT CANNOT EXPOSE ASSESSEE-PAYE R TO AN IMPOSSIBLE SITUATION OF REQUIRING DEDUCTION OF TAX AT SOURCE O N THAT PAYMENT AND THE ASSESSEE CANNOT BE HELD IN DEFAULT FOR NOT DEDUCTIN G THE TAX AT SOURCE. WITH THIS LEGAL POSITION THE ASSESSEE SUCCEEDED ON BOTH THE GROUNDS OF APPEAL RAISED HEREIN. AS THE ASSESSEE IS SUCCEEDED ON THE BASIS OF DECISION ITA NO.7440 & 7441/M/2014 ALKYL AMINES CHEMICALS LTD. 6 OF COORDINATE BENCH IN ALOK INDUSTRIES LTD (SUPRA), THE DISCUSSION ON OTHER SUBMISSIONS HAVE BECOME ACADEMIC. 7. THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL IN APPEAL FOR ASSESSMENT YEAR 2008-09. CONSIDERING OUR FINDING IN APPEAL FOR ASSESSMENT YEAR 2007-08, IN EARLIER PARAS THE APPEA L FOR ASSESSMENT YEAR 2008-09 IS ALSO ALLOWED MUTATIS MUTANDIS. 8. IN THE RESULT BOTH THE APPEALS FILED BY THE ASSESSE E ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH DAY OF APRIL 2018 WHILE HEARING OF THE APPEAL. SD/- SD/- (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 24 /04/2018 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. C