Permasteelisa (India) Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 863/BANG/2012

• Counselvise Citation: 86321114 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 28-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N BALAKRISHNAN
• Assessee Lawyers: D S VIVEK
• Keywords: Double taxation relief; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER I T(I T )A NO. 863 / BANG/20 1 2 (ASSESSMENT YEAR: 20 08 - 09 ) M/S.PERMASTEELISA (INDIA) PVT. LTD., NO .110/3, KRISHNAPPA LAYOUT, LALBAGH CROSS ROAD, BANGALORE - 560027. APPELLANT PAN:AACCP9769J VS. DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 12(2), BANGALORE. RESPONDENT APPELLANT BY: SHRI D.S.VIVEK, CA. RESPONDENT BY: SH RI N.BALAKRISHNAN, JCIT DATE OF HEARING : 20 - 08 - 2014 . DATE OF PRONOUNCEMENT: 05 - 0 9 - 2014 . O R D E R PER SMT. P.MADHAVI DEVI, JM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - III, BANGALORE, DATED 26 - 3 - 2012 FOR THE AS SESSMENT YEAR 2008 - 09. THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER (AO) HOLDING THAT THE ASSESSEE IS LIABLE TO MAKE TDS BEFORE MAKING PAYMENT TO THE NON - RESIDENT HOLDING COMPANY AND THUS INVOKING THE PROVISIONS OF SEC.40(A)(IA) OF THE INCOME - TAX ACT, 1961[HEREINAFTER REFERRED TO AS 'THE ACT']. I T(I T ) A NO . 863 /BANG/20 12 M/S.PERMASTEELISA (INDIA) PVT. LTD. PAGE 2 OF 9 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND INSTALLATION OF STRUCTURAL GLAZING WORKS IN INDIA. IT ENTERED INTO A SEPARATE MANAGEMENT SERVICES AGREEMENT WITH ITS HOLDING COMPANY ON 7 - 1 - 2008 FOR THE PURPOSE OF RECEIVING ADVI CE ON VARIOUS MATTERS OF STRATEGIC AND OPERATIONAL IMPORTANCE THROUGH PHONE CALLS OR IN PERSONAL MEETINGS. DURING THE RE LEVANT PREVIOUS YEAR , THE ASSESSEE MADE A TOTAL PAYMENT OF RS.1,69,90,080/ - TO ITS HOLDING COMPANY OUT OF WHICH A SUM OF RS.71,43,829/ - WAS TOWARDS MANAGEMENT FEE AS PER THE AGREEMENT AND IT WAS PAID WITHOUT DEDUCTION OF TAX AT SOURCE. THE AO WAS OF THE O PINION THAT THE PAYMENT WAS TOWARDS FEES FOR TECHNICAL SERVICES UNDER THE INCOME - TAX ACT AND ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE BEFORE MAKING THE PAYMENT AND SINCE THE ASSESSEE FAILED TO DEDUCT TAX, HE THEREFORE, INVOK ED THE PROVISIONS OF SEC T ION 40(A)(IA) AND RAISED A DEMAND OF RS.48,78,270/ - AFTER CONSIDERING THE INTEREST PAYMENT ALSO. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) STATING THAT THE SERVICES RECEIVED BY THE ASSESSEE FROM ITS HOLDING C OMPANY IS NOT FEES FOR TECHNICAL SERVICES AS PER THE DTAA BETWEEN INDIA AND SING A PORE AND THEREFORE TDS WAS NOT REQUIRED AND THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT ATTRACTED. HOWEVER, THE CIT(A) UPHELD THE ORDER OF THE AO HOLDING THAT THE MANAGEMENT I T(I T ) A NO . 863 /BANG/20 12 M/S.PERMASTEELISA (INDIA) PVT. LTD. PAGE 3 OF 9 FEE IS FEES FOR TECHNICAL SERVICES EVEN AS PER THE DTAA BETWEEN INDIA AND SINGAPORE. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI D.S.VIVEK, WHILE REITERATING THE SUBMISSIONS MADE BY THE ASSESSE E BEFORE THE AUTHORITIES BELOW, SUBMITTED THAT AS PER THE MANAGEMENT FEE AGREEMENT BETWEEN THE ASSESSEE AND ITS HOLDING COMPANY AT SINGAPORE, ONLY MANAGEMENT SERVICES WERE RENDERED AND THEY DID NOT FALL UNDER THE CATEGORY OF FEES FOR TECHNICAL SERVICES U NDER THE DTAA BETWEEN INDIA AND SINGAPORE AND THEREFORE NO TDS WAS MADE. HE SUBMITTED THAT THE AO HAS ONLY INVOKED THE PROVISIONS OF SEC.9 (1)(VII) OF THE IT ACT TO HOLD THAT EVEN MANAGEMENT SERVICES COME UNDER THE CATEGORY OF FEE OF TECHNICAL SERVICES AND TDS WAS LIABLE TO BE MADE. HE SUBMITTED THAT WHERE THERE IS A TREATY BETWEEN INDIA AND THE COUNTRY IN WHICH THE NON - RESIDENT TRANSACTING COMPANY IS LOCATED, THE TREATY PROVISIONS ALSO HAVE TO BE CONSIDERED AND THE BENEFICIAL PROVISION HAS TO BE APPLIE D. HE SUBMITTED THAT AS PER THE TREATY BETWEEN INDIA AND SINGAPORE, SERVICES WOULD FALL WITHIN THE DEFINITION OF FEES FOR TECHNICAL SERVICES ONLY IF THE SERVICES RENDERED MADE AVAILABLE THE TECHNOLOGY. ON THE MEANING AND PURPORT OF THE TERM MADE AVAI LABLE WHICH IS NOT DEFINED UNDER THE ACT, BUT IS INTERPRETED AS OCCURRING IN INDIA - US TREATY IN VARIOUS JUDICIAL PRECEDENTS, THE LEARNED COUNSEL FOR THE ASSESSEE I T(I T ) A NO . 863 /BANG/20 12 M/S.PERMASTEELISA (INDIA) PVT. LTD. PAGE 4 OF 9 PLACED RELIANCE UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN ITA NO.35/2010 DATED 2 - 6 - 2014 IN THE CASE OF DIRECTOR OF INCOME - TAX (INTERNATIONAL TAXATION) VS. M/S.SUN MICROSYSTEMS INDIA PVT. LTD. WHEREIN SIMILAR PROVISION HAS BEEN INTERPRETED AND IT HAS BEEN HELD THAT NO TDS WAS REQUIRED TO BE MADE WHERE THE TECHNOLOGY OR TECHNOLOGICAL SER VICES ARE NOT MADE AVAILABLE TO THE RECIPIENT OF THE SERVICES . HE SUBMITTED THAT THE ASSESSEE HAS RAISED A GROUND OF APPEAL ON THE DTAA PROVISIONS BEING APPLICABLE TO THE ASSESSEE BEFORE THE CIT(A) . HE SUBMITTED THAT THE CIT(A) HAS THOUGH AGREED THAT D TAA PROVISIONS ARE APPLICABLE, HE HAS CONSIDERED ONE OF THE COPIES OF THE INVOICES FILED BY THE ASSESSEE WHEREIN THERE WAS MENTION OF DESIGN WHICH HAS THEN B E EN STRUCK OFF AND BASED ON THE STRUCK OFF PORTION HE HAS COME TO THE CONCLUSION THAT THE HOLDI NG COMPANY WAS PROVIDING DESIGNS TO THE ASSESSEE AND THEREFORE IT WAS MAKING AVAILABLE THE TECHNOLOGICAL SERVICES AND THEREFORE THE SERVICES FALL UNDER THE CATEGORY OF FEES FOR TECHNICAL SERVICES EVEN AS PER THE DTAA BETWEEN INDIA AND SINGAPORE . THE L EARNED COUNSEL FOR THE ASSESSEE HAS FURTHER DRAWN OUR ATTENTION TO THE COPY OF THE AGREEMENT BETWEEN THE ASSESSEE - COMPANY AND THE HOLDING COMPANY AT SINGAPORE TO DEMONSTRATE THAT NONE OF THE SERVICES RENDERED OR AGREED TO BE RENDERED WERE TECHNICAL SERVICE S AND NO TECHNOLOGY WAS BEING MADE AVAILABLE TO THE ASSESSEE. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO FILED ADDITIONAL I T(I T ) A NO . 863 /BANG/20 12 M/S.PERMASTEELISA (INDIA) PVT. LTD. PAGE 5 OF 9 EVIDENCE IN THE FORM OF A LE TTER FROM SINGAPORE COMPANY TO STATE THAT NO DESIGNS WERE SUPPLIED TO THE ASSESSEE - COMPANY AND THAT ONLY MANAGEMENT SERVICES WERE RENDERED. AN AFFIDAVIT WAS ALSO FILED IN SUPPORT OF THIS CONTENTION. THE ASSESSEE HAS SOUGHT ADMISSION OF ADDITIONAL EVIDENCE AND CONSIDERATION THEREOF AS IT GOES TO THE ROOT OF THE MATTER. HE SUBMI TTED THAT MENTION OF DESIGN IN THE INVOICE WAS ONLY AN INADVERTENT MISTAKE COMMITTED BY ADOPTING COPY AND PASTE OPTION S IN THE COMPUTER WHILE MAKING THE BILL. FURTHER, THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUNDS OF APPEAL STATING THAT THE PAYMENTS MADE WERE NOTHING BUT REIMBURSEMENT OF EXPENSES INCURRED BY THE COMPANY AT SINGAPORE AND ALLOCATED TO INDIA AND OTHER COMPANIE S IN THE GROUP AND THEREFORE NO TDS WAS LIABLE TO BE MADE. IN SUPPORT OF THIS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE H AS PLACED RELIANCE UPON THE DECISION OF THE TRIBUNAL AT BANGALORE IN ITA NOS.861 & 862/BANG/2011 IN THE CASE OF KALYANI STEELS LTD. & M/S.MUKUND LTD , . AND THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. M/S.EXPEDITORS INTERNATIONAL (I NDIA) PVT. LTD. IN ITA 1088 OF 2011 . HE SUBMITTED THAT THESE GROUNDS WERE NOT RAISED BEFORE THE CIT(A) INITIALLY AS IN THE VIEW OF THE ASSESSEE THE CASE HAD SUBSTANTIAL MERIT FOR NON - APPLICABILITY OF TDS U/S 195 OF THE ACT ON THE GROUNDS ALREADY RAISED BU T POST FILING OF APPEAL, THE CASE HAS EVOLVED AS THERE WERE VARIOUS JUDICIAL DECISIONS PROVIDING CLARITY ON THE ISSUE OF APPLICABILITY OF TDS U/S 195 OF THE ACT AND I T(I T ) A NO . 863 /BANG/20 12 M/S.PERMASTEELISA (INDIA) PVT. LTD. PAGE 6 OF 9 THEREFORE, THE ADDITIONAL GROUNDS ARE RAISED AT THIS STAGE. IT IS ALSO SUBMITTED THAT THES E GROUNDS ARE LEGAL GROUNDS AND THEREFORE NEED TO BE ADMITTED AND ADJUDICATED BY THIS TRIBUNAL. THE ASSESSEE HAS TAKEN ANOTHER ADDITIONAL GROUND THAT TDS IS APPLICABLE ONLY ON PAYMENT BASIS AND AS IT WAS ONLY A BOOK ENTRY AND PAYMENT WAS NOT MADE TO THE HO LDING COMPANY, NO TDS WAS LIABLE TO BE MADE. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS BEEN TAKING DIFFERENT STANDS BEFORE EACH OF THE AUTHORITIES BELOW. HE SU BMITTED THAT THE ASSESSEE HAS FILED A COPY OF THE AGREEMENT BETWEEN THE ASSESSEE AND THE HOLDING COMPANY AND ITS GROUP COMPANY AT ITALY BEFORE THE CIT(A) WHEREAS BEFORE THIS TRIBUNAL, THE ASSESSEE HAS FILED A COPY OF THE AGREEMENT BETWEEN THE ASSESSEE AND ITS HOLDING COMPANY AT SINGAPORE. HE SUBMITTED THAT THE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE ALSO NEED VERIFICATION OF FACTS BY THE AO AND THEREFORE THEY SHOULD NOT BE ADMITTED. AS REGARDS THE ASSESSEE S CLAIM THAT THE WORD DESIGN MENTION ED IN INVOICE WAS AN INADVERTENT MISTAKE, HE SUBMITTED THAT THE ADDITIONAL EVIDENCE FILED BEFORE US IS SUBSEQUENT TO THE ASSESSMENT PROCEEDINGS AND THEREFORE CANNOT BE RELIED UPON AND SHOULD NOT BE ADMITTED. I T(I T ) A NO . 863 /BANG/20 12 M/S.PERMASTEELISA (INDIA) PVT. LTD. PAGE 7 OF 9 6. HAVING HEARD BOTH THE PARTIES AND HAVING C ONSIDERED THE RIVAL CONTENTIONS, WE FIND THAT THE AO HAS ONLY CONSIDERED THE APPLICABILITY OF THE DEFINITION OF THE TERM FEES FOR TECHNICAL SERVICES U/S 9(1)(VII) OF THE INCOME - TAX ACT AND HAS NOT CONSIDERED THE APPLICABILITY OF THE DEFINITION OF FEES F OR TECHNICAL SERVICES UNDER THE DTAA BETWEEN INDIA AND SINGAPORE AND HAS NOT EXAMINED AS TO WHICH OF THE PROVISIONS IS BENEFICIAL TO THE ASSESSEE . I T HAS BEEN HELD BY VARIOUS COURTS THAT WHERE THERE IS A DTAA BETWEEN INDIA AND THE COUNTRY IN WHICH THE OTH ER TRANSACTING COMPANY IS LOCATED AND THERE IS A VARIANCE BETWEEN THE PROVISIONS OF THE DTAA AND THE INDIAN INCOME - TAX ACT, THEN THE PROVISION S WHICH ARE BENEFICIAL TO THE ASSESSEE ARE TO BE APPLIED . AS REGARDS THE APPEAL BEFORE THE CIT(A), WE FIND THAT THE CIT(A) HAS ONLY GONE ON THE PREMISE THAT MENTION OF THE WORD DESIGN IN THE INVOICE PROVED THAT THE HOLDING COMPANY HAS PROVIDED DESIGNS TO THE ASSESSEE AND THEREFORE , IT SATISFIES THE PHRASE OF MAK E AVAILABLE IN THE DEFINITION OF FEES FOR TECHNICA L SERVICES IN THE TREATY BETWEEN INDIA AND SINGAPORE. BEFORE US , THE ASSESSEE HAS FILED DOCUMENTS TO CLAIM THAT NO SERVICES RELATING TO DESIGN WERE RENDERED BY THE HOLDING COMPANY TO THE ASSESSEE. IN OUR OPINION, ALL THESE DOCUMENTS NEED VERIFICATION BY THE AO. FURTHER, THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE ALSO LEGAL GROUNDS WHICH NEED ADJUDICATION ON THE BASIS OF FACTS ON RECORD. BEFORE US, NO FACTS ARE AVAILABLE TO COME TO A I T(I T ) A NO . 863 /BANG/20 12 M/S.PERMASTEELISA (INDIA) PVT. LTD. PAGE 8 OF 9 CONCLUSION AS TO WHETHER THE PAYMENT IS REIMBURSEMENT OF EXP ENSES OR PAYMENT FOR SERVICES RENDERED BY THE HOLDING COMPANY. AS REGARDS THE APPLICABILITY OF TDS PROVISIONS ONLY ON PAYMENT BASIS ALSO , WE FIND THAT NO FACTS ARE AVAILABLE ON RECORD. IN VIEW OF THE SAME, WE ARE OF THE OPINION THAT THE ISSUE NEEDS RE - CO NSIDERATION BY THE AO IN THE LIGHT OF THE DETAILS AVAILABLE IN THE RECORDS OF THE AO AS WELL AS THOSE FILED BEFORE US A ND THE JUDICIAL PRECEDENT S ON THE ISSUE. THE ISSUE IS, THEREFORE, SET ASIDE TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE APPLIC ABILITY OF THE DEFINITION OF FEES FOR TECHNICAL SERVICES UNDER THE DTAA BETWEEN INDIA AND SINGAPORE AND APPLY THE SAME IN ACCORDANCE WITH LAW. THE AO SHALL ALSO CONSIDER THE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE AS WELL AS THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE US AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW . N EEDLESS TO MENTION THAT THE ASSESSEE SHALL BE GIVEN A FAIR OPPORTUNITY OF HEARING. 7. IN THE RESULT, THE ASSESSEE S APPEAL IS ALLOWED FOR STATISTICAL PURP O SES. PRO N OUNCED IN THE OPEN COURT ON 5 TH OF SEPTEMBER , 201 4. SD/ - SD/ - (JASON P BOAZ ) ( SMT. P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER EKSRINIVASULU I T(I T ) A NO . 863 /BANG/20 12 M/S.PERMASTEELISA (INDIA) PVT. LTD. PAGE 9 OF 9 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE . 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE T RIBUNAL BANGALORE