ITO, CHENNAI V. Gadsyl Exports P Ltd., CHENNAI

ITA 821/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77323 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 10-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2014
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Keywords: Permanent establishment; Non-deduction of tax

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, C HENNAI . . . , !' , # $! % BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO.821/MDS/2014 / ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER, COMPANY WARD-II(1), ROOM NO.515, FIFTH FLOOR, NEW BLOCK, 121, MAHATMA GANDHI ROAD, CHENNAI-600 034 ( '& /APPELLANT) VS M/S.GADSYL EXPORTS P.LTD., 7-A, SINDHALAMMAN KOIL STREET, PAMMAL, CHENNAI-600 075 [PAN: AACCG 3334 N] ( '('& /RESPONDENT) REVENUE BY : SHRI GURU BHASHYAM, JCIT ASSESSEE BY : NONE / DATE OF HEARING : 10-06-2014 / DATE OF PRONOUNCEMENT : 10-06-2014 $) / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-II, CHEN NAI, DATED 11-11-2013 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 9-10. THE ONLY ISSUE IN APPEAL IS DELETING OF DIS-ALLOWANCE M ADE U/S.40(A)(IA) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) I.T.A. NO. 821/MDS/2014 2 FOR NON-DEDUCTION OF TAX AT SOURCE ON THE OVERSEAS PAYMENT OF AGENCY COMMISSION. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPOR TING LEATHER GOODS. THE ASSESSEE FILED ITS RETURN OF INC OME FOR THE AY.2009-10 ON 04-12-2009 DECLARING ITS TOTAL INCOME AS ` 18,71,750/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 23-08-2010. DURING THE COURSE OF SCRUTINY ASSESSME NT, THE ASSESSING OFFICER MADE DIS-ALLOWANCE INTER-ALIA U/S.40(A)(I) FOR NON-DEDUCTION OF TAX ON PAYMENTS TOWARDS AGENCY COM MISSION AMOUNTING TO ` 53,92,763/- TO M/S.KEITH WILSON OF UNITED KINGDOM ( ` 9,25,299/-) AND MR.FABIEN CORROYOR OF FRANCE ( ` 44,67,464/-). AGGRIEVED AGAINST THE ASSESSMENT ORDER DT.23-12-20 11, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY. AFTER CONSIDERING THE FACTS OF THE CASE AND THE DEC ISION OF THE TRIBUNAL IN THE CASES OF M/S.FARIDA SHOES P. LTD., (ITA NO.359 & 360/MDS/2013) DECIDED ON 11-04-2013 AND IN THE CASE OF ACIT VS. DELTA SHOES P. LTD., (ITA NO.909/MDS/2013) DECIDED ON 31-07-2013, THE CIT(APPEALS) DELETED THE ADDITION. I.T.A. NO. 821/MDS/2014 3 3. SHRI GURU BHASHYAM, APPEARING ON BEHALF OF THE D EPARTMENT ASSAILING THE ORDER OF CIT(APPEALS) VEHEMENTLY SUPP ORTED THE ASSESSMENT ORDER AND REITERATED THE GROUNDS RAISED IN THE APPEAL. THE LD.DR SUBMITTED THAT THE CIT(APPEALS) HAS ALLOW ED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION IN THE CA SE OF M/S.FARIDA SHOES P. LTD., (SUPRA). THE DEPARTMENT HAS FILED APPEAL BEFORE THE HONBLE HIGH COURT IN THE CASE OF M/S.FARIDA SHOES P. LTD., (SUPRA). THE APPEAL IS STILL PENDING FOR FINAL ADJ UDICATION. 4. WE HAVE HEARD THE SUBMISSIONS MADE BY THE LD.DR. DESPITE SERVICE OF NOTICE, NONE HAS APPEARED ON BEHALF OF T HE ASSESSEE. THE ASSESSEE IS AVAILING THE SERVICES OF NON-RESIDE NT AGENTS FOR PROCURING EXPORT ORDERS FOR WHICH COMMISSION IS PAI D. THE NON- RESIDENT AGENTS HAVE NO BUSINESS CONNECTION NOR THE Y HAVE ANY PERMANENT ESTABLISHMENT (PE) IN INDIA. THE NON-RES IDENT AGENTS ARE PROCURING ORDERS FOR THE ASSESSEE AND ARE THUS OPERATING OUTSIDE THE INDIAN TERRITORY. THE CIT(APPEALS) IN HIS ORDER HAS GIVEN A CATEGORIC FINDING THAT THE FACTS IN THE PRE SENT CASE ARE SIMILAR TO FACTS AND CIRCUMSTANCES IN THE CASE OF M/S.FARIDA SHOES P. LTD., (SUPRA). THE PAYMENTS TO NON-RESIDENTS FOR PROCURI NG EXPORT ORDERS ARE NOT ASSESSABLE TO TAX IN INDIA. I.T.A. NO. 821/MDS/2014 4 THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF GE TECHNOLOGY CEN. P. LTD., VS. CIT REPORTED AS 327 ITR 456 (SC) HAS HELD, THAT IF ANY SUM IS PAID TO THE NON-RESIDE NT WHICH IS NOT CHARGEABLE TO TAX UNDER THE INCOME TAX ACT, THE ASS ESSEE IS UNDER NO OBLIGATION TO DEDUCT TAX AT SOURCE U/S.195 IN RESPECT OF SUCH PAYMENTS. THE OBLIGATION TO DEDUCT TAX AT SOU RCE ARISES ONLY WHERE THE SUM IS CHARGEABLE TO TAX IN INDIA. IN VI EW OF THE SETTLED LAW, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF C IT(APPEALS). THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON TUESDAY, THE 10 TH JUNE, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( !' ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) / VICE PRESIDENT ! / JUDICIAL MEMBER '# /CHENNAI, $ /DATED: 10 TH JUNE, 2014 TNMM #% & '( )#( /COPY TO: 1. *+ /APPELLANT 2. &,*+ /RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. (01 & 2 /DR 6. 13 4 /GF