SHERATON APPEARLS, MUMBAI V. DCIT CIR 24(2), MUMBAI

ITA 7607/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3511 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 19-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: UTTAM CHAND BOTHRA
• Keywords: Permanent establishment
• Section: 10

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.7607/MUM/2014 ASSESSMENT YEAR: 2010-11 M/S SHERATON APPEARLS, 201, ASHISH UDYOG BHAWAN B.J. PATEL ROAD, NEW AMERICAN SPRING, MALAD (WEST), MUMBAI-400064 / VS. DCIT, CIRCLE-24(2), BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI / ASSESSEE / REVENUE P.A. NO . AAKFS7629D $ % & / ASSESSEE BY SHRI UTTAM CHAND BOTHRA $ % & / REVENUE BY SHRI SHRIKANT NAMDEV-DR / DATE OF HEARING 27/06/2016 & / DATE OF ORDER: 28/06/2016 & / O R D E R THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 19/09/2014 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI. THE ONLY GROUND RAISED IN THE PRESENT APPEA L ITA NO.7607/MUM/2014 SHERATON APPEARLS 2 PERTAINS TO DISALLOWING COMMISSION OF RS.26,48,222/ - U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. DURING HEARING OF THIS APPEAL, THE LD. COUNSEL FOR THE ASSESSEE SHRI UTTAM CHAND BOTHRA, FILED AN AFFIDAVIT, EXPLAINING THE REASONS BY CLAIMING THAT THE PERSONS TO WHOM COMMISSION WAS PAID WERE RESIDING ABROAD AND IT IS MERELY AN OVERSEAS COMMISSION PAID FOR THE SERVICES RENDERED/PROVIDED OUTSIDE INDIA FOR BO OKING OF ORDERS FOR SUPPLY OF GOODS OUTSIDE INDIA AND NON E OF THE PARTNERS HAVE MET ANY OF THE RECIPIENTS IN INDIA TO WHOM OVERSEAS COMMISSION WAS PAID. IT WAS EXPLAINED THAT ONE OF THE PARTNERS OF THE ASSESSEE FIRM SHRI PIYUSH K SHAH, WHENEVER USED TO VISIT COUNTRIES OF THE RESPECTIVE RECIPIENTS, TO WHOM OVERSEAS COMMISSION WERE PAID U SED TO CONTACT THEM PERSONALLY IN THEIR RESPECTIVE COUN TRY. 2.1. ON THE OTHER HAND, THE LD. DR, SHRI SHRIKANT NAMADEV, DEFENDED THE ADDITION BUT DID NOT CONTROVE RT THE SUBMISSIONS OF THE ASSESSEE WHICH ARE SUPPORTED BY AN AFFIDAVIT OF ONE OF THE PARTNER. 2.2. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS IN PARTNERSHIP FIRM DECLARING INCOME OF RS.21,73,710/- IN ITS RETURN FILED ON 14/10/2010. THE ASSESSEE FILED THE NECESSARY DETAI LS BEFORE THE LD. ASSESSING OFFICER. THE ASSESSEE CLAI MED OVERSEAS COMMISSION OF RS.26,48,222/- PAID TO NONE ITA NO.7607/MUM/2014 SHERATON APPEARLS 3 RESIDENCE WHO PROVIDED SERVICES, OUTSIDE INDIA AND HAVE NO PERMANENT PLACE OF BUSINESS/ESTABLISHMENT IN IN DIA. BEFORE THIS TRIBUNAL, THE ASSESSEE HAS CHALLENGED T HE DISALLOWANCE OF EXPENDITURE MADE TO SUCH OVERSEAS RECIPIENTS WHO RENDERED SERVICES TO THE ASSESSEE AB ROAD. THE ASSESSEE WAS DIRECTED BY THE BENCH TO ESTABLISH WHETHER THE RECIPIENT OF THE COMMISSION ARE HAVING PERMANENT ESTABLISHMENT IN INDIA OR THEY USED TO VI SIT INDIA DURING THE RELEVANT PERIOD. THE ASSESSEE HAS FILED AN AFFIDAVIT DULY SWORN BY SHRI BIMAL R SHAH, ONE OF T HE PARTNER AND HAS SWORN ON OATH THAT THE COMMISSION O F RS.26,48,222/- WAS PAID TO THE SERVICE PROVIDERS, O UTSIDE INDIA, FOR BOOKING ORDERS FOR SUPPLY OF GOODS (OUTS IDE INDIA). CONSIDERING THE CONTENTS OF THE AFFIDAVIT O F THE ASSESSEE, WE FIND MERIT IN THE CONTENTION OF THE AS SESSEE BECAUSE THE PAYMENTS TO A NON-RESIDENT, BEING COVER ED U/S 195 OF THE ACT AND THE DECISION FROM HONBLE AP EX COURT IN G.E. INDIA TECHNOLOGY (2010) 327 ITR 456 ( SC), THE RATIO LAID DOWN IN TRANSMISSION CORPORATION OF AP LTD. VS CIT (1999) 239 ITR 587, SINCE, THE PAYEES HAVE N O PLACE OF BUSINESS IN INDIA OR OTHERWISE ANY PRESENC E WHATSOEVER IN INDIA AND SINCE THE SERVICES BY THE P AYEES WERE RENDERED OUTSIDE INDIA, IN FACT NO CHARGE BY T HE REVENUE OF THE PAYEE HAVING ANY PLACE OF BUSINESS/BUSINESS CONNECTION IN INDIA, THE EXPLANAT ION BE OF NO CONSEQUENCE, THUS, THERE IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE. SECTION 19 5 OF THE ITA NO.7607/MUM/2014 SHERATON APPEARLS 4 ACT AND THE RELEVANT PART THEREOF IS REPRODUCED HEREUNDER:- OTHER SUMS. 195. (1) ANY PERSON RESPONSIBLE FOR PAYING TO A NON-RES IDENT, NOT BEING A COMPANY, OR TO A FOREIGN COMPANY, ANY INTER EST (NOT BEING INTEREST REFERRED TO IN SECTION 194LB OR SECTION 19 4LC) ORSECTION 194LD OR ANY OTHER SUM CHARGEABLE UNDER THE PROVISI ONS OF THIS ACT (NOT BEING INCOME CHARGEABLE UNDER THE HEAD 'SALARI ES') SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATES IN FORCE : PROVIDED THAT IN THE CASE OF INTEREST PAYABLE BY THE GOVERN MENT OR A PUBLIC SECTOR BANK WITHIN THE MEANING OF CLAUSE (23 D) OF SECTION 10 OR A PUBLIC FINANCIAL INSTITUTION WITHIN THE MEA NING OF THAT CLAUSE, DEDUCTION OF TAX SHALL BE MADE ONLY AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE : PROVIDED FURTHER THAT NO SUCH DEDUCTION SHALL BE MADE IN RESPECT OF ANY DIVIDENDS REFERRED TO IN SECTION 115-O. EXPLANATION 1.FOR THE PURPOSES OF THIS SECTION, WH ERE ANY INTEREST OR OTHER SUM AS AFORESAID IS CREDITED TO ANY ACCOUN T, WHETHER CALLED 'INTEREST PAYABLE ACCOUNT' OR 'SUSPENSE ACCOUNT' OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF T HIS SECTION SHALL APPLY ACCORDINGLY. EXPLANATION 2.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT THE OBLIGATION TO COMPLY WITH SUB-SECTION (1) AND T O MAKE DEDUCTION THEREUNDER APPLIES AND SHALL BE DEEMED TO HAVE ALWA YS APPLIED AND EXTENDS AND SHALL BE DEEMED TO HAVE ALWAYS EXTENDED TO ALL PERSONS, RESIDENT OR NON-RESIDENT, WHETHER OR NOT THE NON-RE SIDENT PERSON HAS (I) A RESIDENCE OR PLACE OF BUSINESS OR BUSINESS CONNECTION IN INDIA; OR (II) ANY OTHER PRESENCE IN ANY MANNER WHATSOEVER I N INDIA. (2) WHERE THE PERSON RESPONSIBLE FOR PAYING ANY SUC H SUM CHARGEABLE UNDER THIS ACT (OTHER THAN SALARY) TO A NON-RESIDENT CONSIDERS THAT THE WHOLE OF SUCH SUM WOULD NOT BE I NCOME CHARGEABLE IN THE CASE OF THE RECIPIENT, HE MAY MAK E AN APPLICATION TO THE ASSESSING OFFICER TO DETERMINE, BY GENERAL O R SPECIAL ORDER, THE APPROPRIATE PROPORTION OF SUCH SUM SO CHARGEABL E, AND UPON SUCH DETERMINATION, TAX SHALL BE DEDUCTED UNDER SUB -SECTION (1) ONLY ON THAT PROPORTION OF THE SUM WHICH IS SO CHARGEABL E. ITA NO.7607/MUM/2014 SHERATON APPEARLS 5 THE RATIO LAID DOWN IN CIT VS M/S PARIDA LEATHER CO MPANY (TAX CASE APPEAL NO.484 OF 2015) ORDER DATED 20/01/2016, THE HONBLE MADRAS HIGH COURT ON IDENT ICAL ISSUE AND APPLICABILITY OF SECTION 40(A)(IA), FOLLO WING THE DECISION FROM HONBLE APEX COURT IN G.E. INDIA TECHNOLOGY CEN. P. LTD. (SUPRA) DULY CONSIDERED EXPLANATION-4 TO SECTION 9(1)(I) AND EXPLANATION 2 TO SECTION 195(1) OF THE ACT, WHICH WAS INTRODUCED BY THE FINANCE ACT, 2012, ALSO CONSIDERED THE DECISION IN CIT VS FAIZAN SHOES PVT. LTD. ALONG WITH THE DECISION IN C IT KIKANI EXPORTS PVT. LTD. (2014) 369 ITR 96 (MAD.) DISMISSED THE APPEAL OF THE REVENUE BY CONFIRMING T HE ORDER OF THE TRIBUNAL. IDENTICAL RATIO WAS LAID DOW N BY HONBLE JURISDICTIONAL HIGH COURT AT GOA IN M/S SES A RESOURCES LTD. VS DCIT (TAX APPEAL NO.11 OF 2016) O RDER DATED 07/03/2016 DECIDED IN FAVOUR OF THE ASSESSEE. CONSIDERING THE TOTALITY OF FACTS CIRCUMSTANCES AND THE JUDICIAL PRONOUNCEMENTS DISCUSSED HEREINABOVE, THE APPEAL OF THE ASSESSEE IS ALLOWED. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 27/06/2016. SD/- (JOGINDER SINGH) ! ' / JUDICIAL MEMBER MUMBAI; DATED : 28/06/2016 ITA NO.7607/MUM/2014 SHERATON APPEARLS 6 F{X~{T? P.S / ! & $ )!*+ ,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. ) ) * ( '#$ ) / THE CIT, MUMBAI. 4. ) ) * / CIT(A)- , MUMBAI 5. -./ ' , ) '#$ ' 1 , / DR, ITAT, MUMBAI 6. /2 3$ / GUARD FILE. & / BY ORDER, (-# ' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI