M/s. Herbalife International India Pvt,Ltd., Bangalore V. ITO (Intl.Taxn), Bangalore

ITA 842/BANG/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2070 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-12-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 15-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JASON P BOAZ
• Assessee Lawyers: KAUSHIK MUKHERJEE
• Keywords: Opportunity of being heard; TDS; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI A. MOHAN ALANKAMONY, AM ITA NOS. 842, 843 & 844(BANG.)/2007 (ASSESSMENT YEARS : 2003-04, 2004-05 & 2005-06) M/S HERBALIFE INTERNATIONAL INDIA PVT.LTD., NO.14, VASWANI WILSHIRE, COMMISSARIAT ROAD, BANGALORE-560 025 APPELL ANT VS THE INCOME-TAX OFFICER, INTERNATIONAL TAXATION, WARD-19(1), BANGALORE. RESPONDENT APPELLANT BY : SHRI KAUSHIK MUKHERJEE REVENUE BY : SHRI JASON P BOAZ O R D E R PER BENCH: ALL THESE APPEALS PERTAIN TO SAME ASSESSEE FOR THE ASSESSMENT YEARS 2003-04, 2004-05 & 2005-06, SO THEY ARE BEING DISPOSED OF BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREV ITY. 2. THESE APPEALS ARISE FROM THE RESPECTIVE ORDER PA SSED U/S 195(2) OF THE IT ACT WHICH WAS CONFIRMED BY THE CIT (A). THE ASSESSEE HAD MADE APPLICATION U/S 195(2) SEEKING AN ORDER FR OM THE REVENUE THAT NO TAX IS REQUIRED TO BE DEDUCTED AT SOURCE FR OM PAYMENT OF ADMINISTRATIVE SERVICE FEES TO M/S HERBALIFE INTERN ATIONAL INC. USA. ITA NOS.842, 843 & 844(B)/07 2 AO FOR THE AY: 2003-04 HELD THAT THE FULL AMOUNT OF ADMINISTRATIVE SERVICE FEES ARE TO BE TREATED AS INCOME AND SUBJEC T TO TDS U/S 195(2) OF THE IT ACT. SIMILARLY, ASSESSMENT YEAR 20 04-05, FULL AMOUNT OF ADMINISTRATIVE SERVICE FEES HAD BEEN TREATED AS INCOME SUBJECT TO TDS U/S 195(2) OF THE IT ACT. HOWEVER, FOR ASSESSM ENT YEAR 2005- 06, 90% OF THE ADMINISTRATIVE SERVICE FEES ARE TO B E TREATED AS INCOME AND SUBJECT TO TDS U/S 195(2) OF THE IT ACT. THE A BOVE MENTIONED ORDERS WERE CONFIRMED BY THE CIT(A). 3. THE LEARNED AR IN HIS WRITTEN SUBMISSION SUBMITT ED WITH REGARDS TO VARIOUS ASSESSMENT YEARS ON THE TDS FROM THE POINT OF ADMINISTRATIVE SERVICE FEES PAYABLE BY THE ASSESSEE TO M/S HERBALIFE INTERNATIONAL INC. USA. 3.1 IT WAS SUBMITTED THAT THE COMPETENT AUTHORITI ES OF INDIA AND USA UNDER THE MUTUAL AGREEMENT PROCEDURE (MAP) AGREED THAT 25% OF THE ADMINISTRATIVE SERVICE FEES FOR AY: 2001 -02 AND AY: 2002- 03 PAID TO M/S HERBALIFE INTERNATIONAL OF AMERICA I NC. WOULD BE TREATED AS INCOME AND SUBJECT TO TDS IN INDIA. THE SAID ORDER UNDER MAP WAS ACCEPTED BY THE INCOME-TAX DEPARTMENT. IN V IEW OF THE ABOVE, BOTH THE ASSESSEE AND THE RESPONDENT WITHDRE W THE APPEALS FILED BY THEM RESPECTIVELY BEFORE THE HONBLE TRIBU NAL. A COPY OF THE ORDER PASSED BY THE HONBLE TRIBUNAL WAS ENCLOSED A S ANNEXURE-2 ITA NOS.842, 843 & 844(B)/07 3 ALONGWITH THE WRITTEN SUBMISSION WHEREIN THE TRIBUN AL HAS DISMISSED THE APPEAL AS WITHDRAWN. 3.2 WITH REGARD TO ASSESSMENT YEAR 2003-04 TO 2005- 06, THE AO HAS REJECTED THE APPLICATION FILED U/S 195(2) AN D HELD THAT TAX NEEDS TO BE WITHHELD ON ACCRUAL/PAYMENT OF ADMINIST RATIVE SERVICE FEES. THE AO DECIDED THAT FOR THE AY: 2005-06 TAX NEEDS TO BE WITHHELD ON ONLY 90% OF ADMINISTRATIVE SERVICE FEES WHICH WAS UPHELD BY THE CIT(A) WHICH IS SUBJECT MATTER OF THE PRESENT APPEALS. 3.3 FOR ASSESSMENT YEAR 2008-09, THE AO ON AN APPL ICATION U/S 195(2) HAS PASSED AN ORDER DIRECTING TO WITHHOL D TAX ON 25% OF THE ADMINISTRATIVE SERVICE FEES PAYABLE. A COPY OF THE ORDER PASSED BY THE AO IS ENCLOSED AS ANNEXURE-3 TO WRITTEN SUBM ISSION FILED ON BEHALF OF ASSESSEE. SIMILARLY, FOR AY: 2009-2010, THE AO HAS DIRECTED TO HOLD TAX ON 25% OF THE ADMINISTRATIVE SERVICE FE ES PAYABLE. A COPY OF THE ORDER PASSED BY THE AO IS ENCLOSED AS ANNEXU RE-4 TO THE WRITTEN SUBMISSION FILED ON BEHALF OF THE ASSESSEE. 3.4 IN THIS BACKGROUND, IT WAS SUBMITTED THAT MAP A S WELL AS ORDER U/S 1595 OF THE IT ACT FOR SUBSEQUENT YEARS A S DISCUSSED ABOVE WERE NOT AVAILABLE WHEN THE MATTER WAS DECIDED BY T HE REVENUE AUTHORITIES FOR YEARS UNDER CONSIDERATION. SO IT W AS SUBMITTED THAT POSITION THAT OF 25% OF THE ADMINISTRATIVE SERVICE FEES WILL ONLY BE TAXABLE IN INDIA, HAS BEEN DECIDED IN THE MAP PROCE EDINGS IN THE ITA NOS.842, 843 & 844(B)/07 4 EARLIER YEARS AND ACCEPTED BY THE ASSESSEE AS WELL AS THE REVENUE. THE NATURE OF PAYMENT IN THE YEAR UNDER APPEAL IS T HE SAME AS IN THE PRECEDING AS WELL AS THE SUCCEEDING YEARS. SO, IT WAS REQUESTED THAT AO BE DIRECTED TO APPLY CONSISTENT POSITION IN THE YEARS UNDER THE PRESENT APPEAL. ON THE OTHER HAND, LEARNED DR SUPP ORTED THE ORDER OF AUTHORITIES BELOW, BUT FACTUAL ASPECT AS DISCUSS ED ABOVE HAS NOT BEEN DISPUTED ON BEHALF OF REVENUE. 4. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT THE ASSESSEE AS WELL AS THE RE VENUE IN PRECEDING YEARS I.E AY: 2001-02 AND 2002-03 AS WELL AS SUCCEE DING YEARS I.E. AY: 2008-09 & 2009-10 HAVE AGREED THAT 25%OF THE AD MINISTRATIVE SERVICE FEES PAID TO M/S HERBALIFE INTERNATIONAL IN C. AMERICA, WOULD BE TREATED AS INCOME AND SUBJECT TO TDS IN INDIA. HOWEVER, IN THE YEARS UNDER CONSIDERATION, I.E AY : 2003-04 TO 2005 -06. THE AO HAS REJECTED THE APPLICATION FILED U/S 195(2) OF THE IT ACT. THE REVENUE HAS BROUGHT NOTHING ON RECORD TO JUSTIFY ITS INCONS ISTENT APPROACH IN SIMILAR SET OF CIRCUMSTANCES. IT SEEMS THAT REVE NUE AUTHORITIES WERE NOT HAVING ADVANTAGE OF A FINALITY IN EARLIER YEAR AND SUBSEQUENT YEARS AS DISCUSSED ABOVE. ACCORDING TO US, INCONSISTENT APPROACH IS NOT JUSTIFIED. SIMILAR VIEW HAS TO BE TAKEN IN SIMILAR CIRCUMSTANCES, UNLESS THERE IS VALID REASON FOR DEV IATION FROM SAME. IN VIEW OF ABOVE DISCUSSION, WE SET ASIDE THE ORDER OF CIT(A) IN AY: ITA NOS.842, 843 & 844(B)/07 5 2003-04 TO 2005-06 AND RESTORE THE MATTER TO AO WIT H A DIRECTION TO DECIDE THE SAME AS PER FACTS AVAILABLE ON RECORD AN D AS PER LAW AVAILABLE AT THE RELEVANT POINT OF TIME, AFTER PROV IDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IT IS PERTINENT TO MENTION HERE THAT SINCE WE ARE SETTING ASIDE THE MATTER ON THE POINT OF PRELIMINARY ISSUE I.E INCONSISTENCY, WE ARE REFRAIN ING TO MAKE COMMENT ON THE MERIT OF THE ISSUE AT HAND. 5. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE OF H EARING. (A. MOHAN ALANKAMONY) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: BANGALORE DATED: 23-12-2009 AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) 7. GF(DELHI) BY ORDER AR, ITAT, BANGALORE