Arvind Metals & Minerals Private Limited, Kolkata V. DCIT, C ircle- 4, Kolkata, Kolkata

ITA 777/KOL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78368 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 13-07-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 19-04-2010
• Court: TRIBUNAL
• Department Lawyers: D J MEHTA
• Keywords: Double taxation relief
• Section: 143(3)

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' / I.T.A NO.777/KOL/2010 #$ %&/ ASSESSMENT YEAR: 2003-04 ARVIND METALS & MINERALS (P) LTD. VS. DEPUTY COM MISSIONER OF INCOME-TAX, (PAN:AACCA2199K) CIRCLE-4, KOLKATA. (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 05.05.2014 DATE OF PRONOUNCEMENT: 30.06.2014 FOR THE APPELLANT: SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT: SHRI D. J. MEHTA, JCIT, SR. DR / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-VI, KOLKATA IN APPEAL NO. 1026/CIT(A)-VI/09-10/5(2)/KOL DATED 16.02.2010. AS SESSMENT WAS FRAMED BY DCIT, CIRCLE-4, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2003-04 VIDE HIS ORDER DATED 30.01. 2006. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO IN RESTRICTING THE CREDIT FOR TAX PAID IN THAILAND ON PROPORTIONATE BASIS. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.1: 1. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER WAS WHOLLY WRONG AND UNJUSTIFIED IN RESTRICTING THE CREDIT OF TAX PAID IN THAILAND TO THE EXTENT OF RS.,48,170/- ON PROPORTIONATE BASIS AS AGAINST RS.8 ,33,411/- ACTUALLY PAID BY THE APPELLANT. THE ACTION OF THE A.O. WAS WHOLLY UNREA SONABLE, UNCALLED FOR AND BAD IN LAW. THE LD. CIT(A) WAS UNJUSTIFIED IN CONFIRMING THE AC TION OF AO. 3 . BRIEFLY STATED FACTS ARE THAT THE AO NOTICED THAT T HE ASSESSEE HAS CLAIMED TDS IN RESPECT OF TAX PAID IN THAILAND AT RS.8,33,411/-. THE AO A LLOWED TDS CREDIT IN PROPORTION TO THE THAILAND INCOME BY NOTING CLAUSE (2) OF ARTICLE 23 UNDER CHAPTER-14 OF THE CONVENTION BETWEEN GOVT. OF INDIA AND THAILAND I.E. THE TAX TR EATY. THE AO NOTED THE FACTUAL POSITION AND RESTRICTED THE CREDIT OF TDS AT 68.72% AS UNDER : 2 ITA NO. 777/K/2010 ARVIND METALS & MINERALS (P) LTD. AY 2003-04 . THE TOTAL TURNOVER OF THE BUSINESS WAS RS.4,83 ,25,168/- IN WHICH THE COMMISSION FROM THAILAND WAS RS.59,46,730/-. LEAVING ASIDE THE DIR ECT EXPENSES OF PURCHASE AND CUSTOMS DUTY ETC. THE GROSS TOTAL INCOME INCLUDING THAILAND INCOME COMES TO RS.86,53,656/- AS UNDER: GROSS TURNOVER RS. 4,83,25,168/- LESS: DIVIDEND 3,150/- CLOSINGH STOCK 10,11,802/- PROFIT ON SALE OF INVESTMENT 74,148/- RS. 10,89,100/- RS. 4,72,36,068/- LESS: OPENING STOCK 36,90,229/- PURCHASE OF TDG. GOODS 3,34,34,033/- CUSTOM DUTY 12,72,397/- OCTROI 68,079/- CLEARING & FORWARDING 1,17,674/- RS. 3,85,82,412/- GROSS TOTAL INCOME INCLUDING BROKERAGE OF RS.59,46,730/- FROM THAILAND RS. 86,53,656/ - THE RATIO COMES FOR THAILAND INCOME WITH REFERENCE TO GROSS COMPOSITE INCOME 59,46,730 OR 68.72% 86,53,656 THE CREDIT OF TDS PAID IN THAILAND SHOULD BE RESTRI CTED TO 68.72% OF THE TOTAL TAX ASSESSED, CONSIDERING THAT THE NET INCOME ASSESSED HAS WITHIN IT 68.72% OF INCOME AROSE IN THAILAND. THEREBY THE AO RESTRICTED CREDIT FOR TDS AT RS.4,48 ,170/- AS AGAINST THE CLAIM OF THE ASSESSEE AT RS.8,33,411/-. AGGRIEVED, ASSESSEE PREFERRED AP PEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO FOR PROPORTIONATE CREDIT BY OBSERVING AS UNDER: AS SEEN FROM PARA 2 OF ARTICLE 23 I.E. PAGE 14 OF THE DOUBLE TAXATION AGREEMENT THE AMOUNT OF THAILAND TAX PAYABLE IN RESPECT OF PROFIT S OR INCOME ARISING IN THAILAND WHICH HAS BEEN SUBJECTED TO TAX BOTH IN INDIA AND N THAI LAND SHALL BE ALLOWED AS A CREDIT AGAINST THE INDIAN TAX PAYABLE IN RESPECT OF SUCH PROFITS O R INCOME, PROVIDED THAT SUCH CREDIT SHALL NOT EXCEED THE INDIAN INCOME TAX WHICH IS APPROPRIA TE TO THE PROFITS OR INCOME ARISING IN THAILAND, THAT IS THERE WILL BE NO REFUND FOR FOREI GN TAX DEDUCTION. ON GONG THROUGH THE WORKING DONE BY THE A.O, THE TDS AMOUNT IS RESTRICT ED TO THE RATIO OF THAILAND INCOME WITH REFERENCE TO GROSS COMPOSITE INCOME. I FULLY AGREE WITH THE WORKING OF THE A.O IN RESTRICTING THE TDS AMOUNT TO THE RATIO OF INCOME FROM THAILAND OPERATIONS. THE APPELLANT HAS TAKEN PROPORTIONATE EXPENSES INCURRED, FOR THE COMPUTATIO N BY TAKING THE GROSS RECEIPT AT 4.73 CRORES. IN THIS CALCULATION OF GROSS RECEIPT THE PU RCHASE OF TRADING GOODS, CUSTOM DUTIES AND OPENING STOCK HAVE NOT BEEN TAKEN TO ARRIVE AT THE GROSS TOTAL INCOME. THE METHOD OF CALCULATION DONE BY THE APPELLANT DOES NOT GVE A T RUE PICTURE OF THE STATE OF AFFARS OF THE ACTUAL INCOME EARNED BY THE APPELLANT. IN VIEW OF T HIS I CONFIRM THE ACTION OF THE A.O AND THIS GROUND OF THE APPEAL IS DISMISSED. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE US. 3 ITA NO. 777/K/2010 ARVIND METALS & MINERALS (P) LTD. AY 2003-04 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE MAIN CONTENTION OF THE ASSESSEE WAS THAT THE AO HAS NOT DETERMINED THE PROFIT IN RESPECT OF COMMISSION RECEIVED FROM THAILAND COMPANY. ACCORDI NG TO HIM, THE ASSESSEE COMPANY HAS INCURRED ONLY OVERHEAD EXPENSES OF EARNING THE COMM ISSION TO DETERMINE TAX IMPLICATION IN INDIA AND FOR THAT THE AO HAD TO DETERMINE FIRST PR OPORTIONATE PROFIT OF THE OVERHEAD EXPENSES. WE ARE NOT AT ALL IN AGREEMENT WITH THE ARGUMENT OF THE ASSESSEE. ACCORDING TO US, SECTION 91(1) OF THE ACT AUTHORISES RELIEF IN ACCORDANCE WI TH THE DOUBLE TAX AVOIDANCE AGREEMENT, IF ANY, IN RESPECT OF INCOMES ARISING IN THE COUNTRY W ITH WHICH THERE IS SUCH AN AGREEMENT. WHERE SUCH RELIEF IS BY WAY OF CREDIT SYSTEM, IT IS THE L ESSER OF THE TWO TAXES ON THE DOUBLY TAXED INCOME. WHERE THE TAX PAYER IS ENTITLED TO RELIEF UNDER MORE THAN ONE AGREEMENT, SUCH RELIEF HAS TO BE WORKED OUT WITH REFERENCE TO EACH SUCH AG REEMENT BUT NOT WITH REFERENCE TO THE AGGREGATE OF TAX ON ALL THE FOREIGN INCOMES OF THE ASSESSEE. THIS VIEW IS ENDORSED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BOMBAY BUR MAH TRADING CORPORATION LTD. (2003) 259 ITR 423 (BOM). THE ASSESSEE IS ENTITLED FOR CR EDIT OF TAX ACTUALLY PAID IN BOTH THE JURISDICTION. IN THE PRESENT CASE BEFORE US AS PER ARTICLE 23 OF THE DTAA WITH THAILAND THE AMOUNT OF THAILAND TAX PAYABLE IN RESPECT OF PROFI TS ARISING IN THAILAND WHICH HAS BEEN SUBJECTED TO TAX IN INDIA AND IN THAILAND, IT SHAL L BE ALLOWED AS A CREDIT AGAINST THE INDIAN TAX PAYABLE IN RESPECT TO SUCH INCOME PROVIDED THAT SUC H CREDIT SHALL NOT EXCEED THE TAX COMPUTED AS PER INDIAN INCOME TAX ACT, WHICH IS APPROPRIATED TO THE PROFITS ARISING IN THAILAND AND THERE WILL BE NO REFUND FROM FOREIGN TAX DEDUCTED. IN OU R VIEW, THE LOWER AUTHORITIES HAVE RIGHTLY CONSIDERED THE ALLOWANCE OF TDS AS DEDUCTED IN THAI LAND. WE CONFIRM THE ORDERS OF THE LOWER AUTHORITIES. THIS GROUND OF ASSESSEES APPEAL IS DI SMISSED. 5. THE NEXT ISSUE IS AS REGARDS TO THE DISALLOWANCE OF EXPENDITURE CLAIMED BY THE ASSESSEE ON FLAT MAINTENANCE. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED THIS ISSUE. HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 6. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO IN CHARGING INTEREST U/S. 234B, 234C A ND 234D OF THE ACT. 7. AFTER HEARING RIVAL CONTENTIONS AND GOING THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT CHARGING OF INTEREST UNDER THESE PROVISIONS IS CONSEQUENTIAL IN NATURE BUT THE SAME SHOULD BE CHARGED ACCORDING TO LAW. HENCE, THE AO WILL RECOMPUTE THE 4 ITA NO. 777/K/2010 ARVIND METALS & MINERALS (P) LTD. AY 2003-04 CHARGING OF INTEREST AFTER ALLOWING REASONABLE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED FOR STATISTIC AL PURPOSES. 8. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES. 9. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.06.2 014 SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30TH JUNE, 2014 -. #/0 1 JD.(SR.P.S.) 2 *3 4 3%5- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT ARVIND METALS & MINERALS (P) LTD., 23/2 4, RADHA BAZAR STREET, KOLKATA-700 001 2 *+() / RESPONDENT DCIT, CIRCLE-4, KOLKATA. 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 3:; *# / DR, KOLKATA BENCHES, KOLKATA +3 */ TRUE COPY, #