The Assistant Commissioner of Income Tax, Circle-2 (1), Panaji., Panaji V. M/s V. M. Salgaocar & Brothers (P) Ltd., Vasco

ITA 76/PAN/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1227 (ITAT-PANAJI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-09-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 12-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMESH S MUTAGAR LD
• Keywords: Services rendered outside India; Retrospective amendment; Permanent establishment; Question of law; Non-deduction of tax

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI NARENDRA SINGH SAINI, HONBLE ACCOUNTANT MEMBER AND GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA 71, 76, 77, 79/PAN/2016 : (ASST. YEAR : 2011 - 12, 12 - 13, & 13 - 14 ) ASSTT. COM MISSIONER OF INCOME TAX M/S V. M. SALGAONKAR & BROTHERS (P) LTD. CIRCLE 2(1) PANAJI . SALGAONKAR HOUSE, F.L. GOMES ROAD, VASCO DA - GAMA - GOA. PAN : AAACV5950B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PERCY PARDIWALA, SR. ADVOCATE SHRI A SHWIN BHOBE, ADVOCATE DEPARTMENT BY : SHRI RAMESH S MUTAGAR , LD. D.R. DATE OF HEARING : 15/09 /2016 DATE OF ORDER : 15/09 /2016 O R D E R PER GEORGE MATHAN, J M : THESE ARE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A), PANAJI 1 IN ITA N O 71/PAN/2016 DATED 12/05/2016 FOR THE A.Y. 20 11 - 12, ITA 76/PAN/2016 DATED 12/05/2016 F OR THE A. Y. 20 12 - 13, ITA 77/PAN/2016 DATED 12/05/2016 A.Y. 20 12 - 13 & ITA 79/PAN/2016 DATED 12/05/2016 A.Y. 20 13 - 14. SHRI RAMESH S MUTAGAR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI PERCY PARDIWALA, SR. ADVOCATE, SHRI ASHWIN BHOBE, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE. 2. AS THE ISSUES IN ALL THESE APPEALS ARE IDENTICAL THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - - 2 - ITA 71, 76, 77 & 79/PAN/2016 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE HONBLE CIT (A) IS RIGHT IN HOLDING THAT THE PAYMENTS MADE BY THE ASSESSEE TOWARDS SALES AND MARKETING SERVICES RENDERED OUTSIDE INDIA ARE NOT LIABLE FOR DEDUCTION OF TDS BY THE AS SESSEE. 2. THE APPELLANT PRAYS TO BE ALLOWED TO ADD VARY AND AMEND THE GROUNDS OF APPEAL AT OR BEFORE THE DATE OF HEARING. 3. AT THE TIME OF HEARING IT HAS SPECIFICALLY SUBMITTED BY THE LD. SR. COUNSEL ON BEHALF OF THE ASSESSEE THAT THE GROUNDS RAISED BY THE REVENUE DID NOT ARISE OUT OF THE ORDER OF THE LD. CIT (A). I T WAS THE SUBMISSION THAT THERE WAS NO ISSUE IN RESPECT OF THE PAYMENTS BY THE ASSESSEE TOWARDS SALE AND MARKETING SERVICES RENDERED OUTSIDE INDIA. IT WAS THE SUBMISSION THAT THE ASSESSEE RUNS BARGES AND SHIPS AND IS DOING THE BUSINESS OF MINING AND EXPORT OF IRON ORES. IN THE COURSE OF THE SHIPPING THE SHIPS OF THE ASSESSEE SOMETIMES UNDERGO REPAIRS AND MAINTENANCE AT FOREIGN PORTS. THE PAYMENTS FOR THE REPAIRS DONE IN RESPEC T OF THE SHIPS OF THE ASSESSEE ARE PAID FOR WITHOUT DEDUCTING TDS AS THE RECIPIENT WAS NOT A RESIDENT IN INDIA NOR WAS ITS INCOME LIABLE TO TAX IN INDIA NOR DID IT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA. THE REPAIRS AND MA I NTENA NCE WERE ALSO NOT IN THE NATURE OF ANY FEE FOR TECHNICAL SERVICES AS THEY WERE MERELY REPAIR WORKS. IT WAS THE SUBMISSION THAT THE LD. CIT (A) HAS DELETED THE ADDITION MADE ON THE GROUND THAT THE PAYEE COMPANY IS A NON RESIDENT FOREIGN COMPANY AND IT HAS NOT PROVIDED ANY SERVICES IN INDIA AND THEREFORE IT CANNOT BE SAID THAT ANY PART OF THE INCOME OF THE SAID COMPANY ACCRUED OR AROSE IN INDIA OR ANY PART OF THE INCOME OF THE SAID COMPANY WAS ASSESSABLE IN INDIA. IT WAS THE SUBMISSION TH AT ON MERITS THE ISSUE WAS SQUARE LY COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF BOMBAY AT PANAJI IN THE CASE OF CIT VS GUJARAT RECLAIM AND RUBBER PRODUCTS LTD IN ITA NO. 169/2014, DATED 08/12/2015 WHERE IN IT HAS BEEN HELD AS UNDER: - 5. RE: - QUESTION (A): (A) FOR THE S U BJ ECT ASSESSMENT YEAR, THE RESPONDENT - ASSESSEE HAD DURING TWO ASSESSMENT YEARS MADE PAYMENT OF COMMISSION TO NON - RESIDENT AGENT IN RESPECT OF SALES MADE OUTSIDE INDIA. THE ASSESSING OFFICER IN BOTH THE ASSESSMENT YEARS PASSED AN ORDER DISALLOWING - 3 - ITA 71, 76, 77 & 79/PAN/2016 THE PAYMENTS MADE TO NON - RESIDENT AGENT UNDER SECTION 40(A) (I) OF THE ACT FOR FAILURE TO DEDUCT TAX AT SOURCE. THE BASIS OF BOTH THE ASSESSMENT ORDER DISALLOWING THE EXPENDITURE IS IN VIEW OF THE FACT THAT THE CIRCULAR NO. 23 OF 1969 AND 786 OF 2000 ISSUED BY THE CBDT WHICH HAD CLARIFIED THAT COMMISSION PAID TO NON - RESIDENT AGENT FOR SALE DOES NOT GIVE IT RISE TO INCOME HAD BEEN WITHDRAWN BY CIRCULAR NO.7 DATED 22FLD OCTOBER, 2009; (B) IN APPEAL, SO FAR AS ASSESSMENT YEAR 2007 - 08 WAS CONCERNED, CIT(A) UPHELD THE ORDER OF THE ASSESS ING OFFICER ON THE SAME GROUND I.E. WITHDRAWAL OF THE EARLIER CIRCULAR NOS.23/1969, 786/2000 BY CIRCULAR NO. 7 OF 2009. SO FAR AS ASSESSMENT YEAR 2008 - 09 IS CONC ERNED, THE CIT(A) BY ORDER DATED 10 TH OCTOBER 2009 ALLOWED RESPONDENT - AS SESSE E S APPEAL. THE CIT(A) WHILE ALLOWING RESPONDENT - ASSESSEES APPEAL FOR THE ASSESSMENT YE A R 2008 - 09, INTER ALIA HELD THAT THE COMMISSION AGENT DID NOT HAVE ANY BUSINESS CONNECTION IN INDIA AS THEY HAD NO PERMANENT ESTABLISHMENT IN INDIA AND IN FACT NEIT HER ANY INCOME AROSE OR ACCRUED TO NON - RESIDENT AGENT IN INDIA . THE CIT(A), INTER ALIA RELIED UPON THE DECISION OF THE TRIBUNAL IN DEIT V/S ARDESHI B CURSETJEE & SONS LTD. 1 15 TTJ 916 WHICH HELD THAT THE COM MISSION PA ID TO NON - RESIDENT AGENT OUTSIDE INDIA FOR THE SERVICES RENDER E D WERE NOT CHARGEABLE TO TAX IN INDIA. IN THESE CIRCUMSTANCES, THE CIT(A) HELD THAT THERE WAS NO OCCASION TO DEDUCT TAX AT SOUR CE IN R E SPECT OF THE PAYMENT MADE TO THE NON - RESIDENT AGENT; (C) M O REOVER, THE ORDER OF CIT(A) ALSO HOLDS THAT THE CIRCULAR NO.7 OF 2009 WITHDRAWING THE EARLIER CIRCULARS WILL NOT HAVE RETROSPECTIVE EFFECT SO AS TO RENDER CIRCULAR NO.23 OF 1965 AND 786 OF 2000 INOPERATIVE FOR THE ASSESSMENT YEARS; (D) BEING AGGRIEVED, THE RESPONDENT - ASSESS E E AS WELL AS REVENUE PREFERRED AN APPEAL TO THE TRIBUNAL FROM THE ORDER OF CIT(A). IN RESPECT OF THE ORDER OF CIT(A) FOR ASSESSMENT YEAR 2007 - 08 RESPONDENT - ASSESSE E S FILED AN APPEAL, WHILE IN RESPECT OF ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2008 - 0 9 REVENUE HAS FILED APPEAL; ( E) BY THE COMMON IMPUGNED ORDER, THE TRIBU NA L AFTER CONSIDERING SUBMISSIONS PLACES RELIANCE UPON THE DECISION OF ITS CO - ORDINATE BENCH IN ARMAYESH GLOBAL V/S. ACIT, 50 SOT 564, THE DELHI HIGH COURT IN CIT V S. EON 366 AD THE REASONS RECORDED BY THE CIT(A) IN HIS ORDER FOR THE ASSESSMENT YEAR 2008 - 09 TO CONCLUDE THAT OF NON - RESIDENT COMMISSION AGENT CANNOT BE AS INCOME ARISING OR ACCRUING IN INDIA OF SECTION 40(A)(I) WOULD HAVE NO ASSESSMENT YEARS UNDER CONSIDERATION; - 4 - ITA 71, 76, 77 & 79/PAN/2016 (F) THE GRIEVANCE OF THE REVENUE IS THAT THE IMPUGNED O RD ER OF THE REPRODUCES THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2008 - 09 WHICH WAS IN FAVOUR OF THE RESPONDENT - ASSESSEE AND APPROVES THE SAME. THIS WITHOUT BESTOWING ANY CONSIDERATION TO THE ORDER PASSED BY THE CIT(A) IN RESPECT OF ASSE SSMENT YEAR 2007 - 08 WHICH WA S IN FAVOUR OF THE REVENUE. IN THESE CIRCUMSTANCES, IT IS SUBMITTED THAT APPEALS WARRANT ADMISSION. (G) WE FIND THAT THE COMMON ORDER OF THE TRIBUNAL WHILE DEALING WITH THE ORDER OF THE CIT(A) F OR THE ASSESSMENT YEAR 2008 - 09 ALSO CONSIDERS THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2007 - 08 WHILE DEALING WITH THE REVENUES CONTENTION AS REFLECTED IN THE ORDERS OF THE ASSESSING OFFICER WHICH ARE SIMILAR FOR BOTH THE ASSESSMENT YEARS. IN FACT, THE REASONS FOR THE ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 2007 - 08 ARE IDENTICAL TO THE ASSESSING OFFICERS ORDERS IN BOTH THE ASSESSMENT YEARS I.E. THE EARLIER CIRCU LAR NOS . 23 OF 1969 AND 786 OF 2000 S TAND WITHDRAWN BY CIRCULAR NO7 OF 2003. THEREFORE , THE EARLIER CIRCULAR WHICH COVER WOULD NOT BE AP PLICABLE/ AVAILABLE FOR THE ASSESSMENT YEAR 2007 - 08 AND 2008 - 09. IN FACT, THE CIT(A) IN HIS ORDER FOR ASSESSMENT YEAR 2008 - 09 WHILE ALLOWING THE APPEAL OF THE RESPONDENT - ASSESSEE PLACES RELIANCE UPON THE DECISION P1.. THE TRIBUNAL IN CASE OF ARDESHI B. CURSETJEE (SUPRA) WHICH IN TURN RELIES UPON THE DECISION OF THE SUPREME COURT IN CITWS TOSHOKU LTD 125 ITR 525 WHEREIN ON ALMOST IDENTICAL FACTS, THE APEX COURT HELD THAT THE COMMISSION EARNED BY THE NO N - RESIDENT AGENT WHO CARRIED ON THE BUSINESS OF SELLING INDI AN GO O DS OUTSIDE INDIA, CANNOT BE SAID HAVE DEEMED TO BE, INCOME WHICH HAS ACCRUED AND/OR ARISEN IN INDIA. THIS VIEW OF THAT CIT(A) FOR ASSESSMENT YEAR 2008 - 09 WAS F OUND ACCEPTABLE BY THE TRIBUNAL IN ITS IMPUGNED ORDER AND APPLIED THE SAME EVEN FOR ASSESSMENT YEAR 2007 - 0 8. IN VIEW OF THE FACT THAT THE ISSUE STANDS CONCLUDED IN FAVOUR OF THE RESPONDENT - ASSESSEE BY THE DECISION OF THE SUPREME COURT IN TOSHOKU LTD. (SUPR A). THE REVENUE HAS NOT SHOWN ANY CHANGE IN THE LAW IN THE SUBJECT ASSESSMENT YEARS WHICH WOULD WARRANT OUR NOT FOLLOWING THE APEX COURTS DECISION; (H) MOREOVER, WE FIND CBDT CIRCULAR NO.23 OF 1969 HAS BEEN REPRODUCED IN THE IMPUGNED ORDER AND THE RELE VANT EXTRACT READS AS UNDER: FOREIGN AGENTS OF INDIAN EXPORTS A FOREIGN AGENT OF INDIAN EXPORTER OPERATES IN HIS OWN COUNTRY AND NO PART OF HIS INCOME ARISES IN INDIA. HIS COMMISSION IS USUALLY REMITTED DIRECTLY TO HIM AND IS, THEREFORE, NOT RECEIVED BY HIM OR ON HIS BEHALF IN INDIA. SUCH AN AGE NT IS NOT LIABLE TO INCOME TAX IN INDIA ON THE COMMISSION. - 5 - ITA 71, 76, 77 & 79/PAN/2016 THIS CIRCULAR OF 1969 WAS ADMITTEDLY IN FORCE DURING THE TWO ASSESSMENT YEARS IT WAS ONLY SUBSEQUENTLY I . E ON 22 ND OCTOBER 2009 THAT THE EARLIER CIRCU LAR OF 1969 AND ITS REITERATION AS FOU N D IN CIRCULAR NO.786 OF 2000 WERE WITHDRAWN. HOWEVER, SUCH S UBSEQUENT WITHDRAWAL OF AN EARLIER C IRCULAR CANNOT HAVE RETROSPECT I VE OPERATION AS HE LD BY THIS COURT IN UTI V/S. P. K.UNNY AND OTHERS 249 ITR 612. ( I ) IN VIEW OF THE ABOVE, NOT ONLY THE ENTIRE I SSUE STANDS CONCLUDED IN FAVOUR OF THE RESPONDENT - AS S ESSEE IN THE PRESENT FACTS BY THE CBDT CIRCULAR NOS. 23 OF 2969 A N D 786 OF 2000 WHICH WERE IN FORCE DURING THE SUBJECT ASSESSMENT YEARS BUT ALSO BY THE DECISI ON OF THE APEX COURT IN TOSHOKU LTD. (SUPRA) IN FAVOUR OF THE RESPONDENT - ASSESSEE THUS, NO SUBSTANTIAL QUESTION OF LAW ARISES IN THE QUESTION FRAMED FOR OUR CONSIDERATION ACCORDINGLY, QUESTION (A) NOT ENTERTAINED . 4. IN REPLY THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION. ON PERUSAL OF THE ORDERS OF THE LD. CIT (A), IT IS CLEARED THAT THERE IS NO ISSUE OF PAYMENTS MADE BY THE ASSESSEE TOWARDS SALES AND MARKETING SERVICES RENDE RED OUTSIDE INDIA WIT HOUT DEDUCTING TDS IN ANY OF THE YEARS UNDER APPEAL. CONSEQUENTLY WE ARE OF THE VIEW THAT THE GROUNDS RAISED BY THE REVENUE IN THE FOUR APPEALS ARE MISCONSTRUED AND LIABLE TO BE DISMISSED AND WE DO SO. 6. EVEN ON MERITS CONSIDERING THE ISSUE IS ONE OF REPAIRS OF THE SHIPS OF THE ASSESSEE AT FOREIGN PORTS IT IS NOTICED THAT THE ISSUE IS SQUARELY COVERED BY THE PRINCIPLES LAID DOWN IN THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF BOMBAY AT GOA IN THE CASE OF GUJARAT RECLAIM AND RUBBER PRODUCTS LTD REFE R R ED TO SUPRA. THIS BEING SO WE ARE OF THE VIEW THAT EVEN ON MERITS THE APPEALS FILED BY THE REVENUE IS LIABLE TO BE DISMISSED AND WE DO SO. IN THE RESULT T HE APP EALS FILED BY THE REVENUE STANDS DISMISSED . ORDER P RONOUNCED IN THE OPEN COURT ON 15.09 .2016. S D / - (N.S. SAINI) ACCOUNTANT MEMBER S D / - (GEORGE MATHAN) JUDICIAL MEMBER PLACE: PANAJI - GOA DATED : 15/09 /2016 * NANU * - 6 - ITA 71, 76, 77 & 79/PAN/2016 COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, PANAJI BENCH, PANAJI