Kikani Exports Private Limited, CHENNAI V. DCIT, CHENNAI

ITA 932/CHNY/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68919 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2013
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 09-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 09-05-2013
• Court: TRIBUNAL
• Department Lawyers: B ARULAPPA
• Assessee Lawyers: S SRIDHAR
• Keywords: Services rendered outside India; Permanent establishment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 932/MDS/2013 ASSESSMENT YEAR : 2008-09 M/S. KIKANI EXPORTS PRIVATE LIMITED, 104, WEST PERIASAMY ROAD, R.S.PURAM, COIMBATORE 641 002 [PAN: AABCK 4784 H] (APPELLANT) VS THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(3), COIMBATORE (RESPONDENT) APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE RESPONDENT BY : SHRI B. ARULAPPA, CIT-DR DATE OF HEARING : 09-12-2013 DATE OF PRONOUNCEMENT : 30-12-2013 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX-I, COIMBATORE DAT ED 27-03-2013 PASSED U/S.263 OF THE INCOME TAX ACT, 19 61 (HEREIN AFTER REFERRED TO AS THE ACT). I.T.A. NO. 932/MDS/2013 2 2. THE ASSESSEE IS ENGAGED IN TRADING OF YARN WITH VARIOUS COUNTRIES. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY.2008- 09 ON 16-09-2008 ADMITTING INCOME OF ` 1,97,53,442/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTIC E U/S. 143(2) WAS ISSUED TO THE ASSESSEE ON 03-09-2009. THE ASSE SSING OFFICER VIDE ORDER DATED 08-10-2010 MADE ADDITION/DIS-ALLOW ANCE ON ACCOUNT OF FOREIGN TRAVEL EXPENSES IN THE INCOME RE TURNED BY THE ASSESSEE. 3. THE COMMISSIONER OF INCOME TAX-I, COIMBATORE INI TIATED PROCEEDINGS U/S.263 OF THE ACT ON THE GROUND THAT T HE ASSESSEE HAD CLAIMED ` 2,19,15,480/- TOWARDS COMMISSION PAID TO NON- RESIDENT FOREIGN COMPANIES WITHOUT DEDUCTION OF TAX AT SOURCE. THE COMMISSIONER OF INCOME TAX CONCLUDED THAT SINCE THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE FROM TH E COMMISSIONS PAID TO THE OVERSEAS AGENTS, THE ASSESSEE HAS MADE HIMSELF LIABLE FOR DIS-ALLOWANCE ON THE PAYMENTS SO MADE. THE COM MISSIONER OF INCOME TAX SET ASIDE THE ASSESSMENT ORDER DATED 08- 10-2010 AND DIRECTED THE ASSESSING OFFICER TO RE-DO THE ASSESSM ENT AFRESH IN ACCORDANCE WITH THE OBSERVATIONS MADE BY HIM. I.T.A. NO. 932/MDS/2013 3 AGGRIEVED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX DATED 27-03-2013, THE ASSESSEE HAS COME IN APPE AL BEFORE THE TRIBUNAL. 4. SHRI S. SRIDHAR, APPEARING ON BEHALF OF THE ASSE SSEE SUBMITTED THAT IN ORDER TO MARKET ITS PRODUCTS, THE ASSESSEE HAS APPOINTED AGENTS ON SALES COMMISSION BASIS IN VARIO US OVERSEAS COUNTRIES. THE AGENTS SO APPOINTED ARE NON-RESIDEN TS AND DO NOT CARRY ANY BUSINESS IN INDIA. NO PART OF THEIR INCO ME IS RECEIVED OR DEEMED TO BE RECEIVED IN INDIA OR ARISES OR DEEMED TO ACCRUE OR ARISE IN INDIA. ALL THESE AGENTS DO NOT HAVE ANY P ERMANENT ESTABLISHMENT OR PERMANENT PLACE OF BUSINESS IN IND IA AND THE DEALING OF THE ASSESSEE WITH THESE OVERSEAS AGENTS IS THAT OF PRINCIPAL AND AGENT. HENCE, THERE WAS NO QUESTION OF DEDUCTION OF TAX AT SOURCE FOR THE COMMISSIONS PAID TO THEM FOR THE SERVICES RENDERED BY THEM OUTSIDE INDIA. IN ORDER TO FORTIF Y HIS SUBMISSIONS, THE LD.COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER S OF THE CO- ORDINATE BENCH OF THE TRIBUNAL IN THE FOLLOWING CAS ES: I. ACIT VS. M/S.EAGLE PRESS (P) LTD., IN ITA NO.776/MDS/2008 (AY.2004-05) DECIDED ON 06 TH JUNE, 2011; I.T.A. NO. 932/MDS/2013 4 II. M/S. PRAKASH IMPEX VS. ACIT IN ITA NO.08/MDS/2012 (AY.2008-09) DECIDED ON 30 TH MARCH, 2012; AND III. ACIT VS. M/S.FARIDA SHOES PRIVATE LTD., IN ITA NO.359/MDS/2013 (AY.2008-09) DECIDED ON 11 TH APRIL, 2013. 5. ON THE OTHER HAND, SHRI B. ARULAPPA, APPEARING ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF COMMI SSIONER OF INCOME TAX AND PRAYED FOR THE DISMISSAL OF THE APPE AL OF THE ASSESSEE. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE ALSO PER USED THE IMPUGNED ORDER AS WELL AS THE ORDERS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE. THE BRIEF FACTS OF THE C ASE ARE THAT: ASSESSEE IS ENGAGED IN THE TRADING OF YARN WITH VAR IOUS COUNTRIES. IN ORDER TO SELL ITS PRODUCTS, THE ASSESSEE APPOINT ED AGENTS ON SALES COMMISSION BASIS IN VARIOUS COUNTRIES. THE R ELATIONSHIP BETWEEN THE ASSESSEE AND THE NON-RESIDENT AGENTS IS ALLEGED TO BE THAT OF PRINCIPAL AND AGENT. THE SAID NON-RESID ENT AGENT IS A LINK BETWEEN THE FOREIGN BUYER AND THE ASSESSEE. T HE OVERSEAS AGENTS OF THE ASSESSEE DO NOT HAVE ANY PERMANENT ES TABLISHMENT OR PLACE OF BUSINESS IN INDIA AND THEY ARE RENDERIN G THEIR SERVICES I.T.A. NO. 932/MDS/2013 5 OUTSIDE INDIA. AS SUCH, CHARGING COMMISSION ON THE SERVICES RENDERED OUTSIDE INDIA IS NOT TAXABLE IN INDIA. TH E CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. M/S.EAGLE PRESS (P) LTD., (SUPRA) HAS HELD AS UNDER: 3. AS FAR AS THE FACTS OF THE PRESENT CASE ARE CON CERNED, THE SERVICES WERE RENDERED OUTSIDE INDIA AND SUCH SERVI CES WERE RENDERED BY NON RESIDENTS. NEITHER THE DELIVERY OF THE SERVICES WAS IN INDIA, NOR THE CONSUMPTION OF THE SERVICES W AS IN INDIA. IN SUCH CIRCUMSTANCES THE HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE P. LTD. VS. COMMISSIO NER OF INCOME-TAX AND ANOTHER, 327 ITR 456 HAS HELD THAT S UCH PAYMENTS DO NOT CONTAIN WHOLLY OR PARTLY ANY INCOME TAXABLE IN INDIA. THEREFORE THE LIABILITY OF TDS IS NOT CAS T ON THE ASSESSEE WHILE MAKING SUCH PAYMENTS. THE INCOME-TAX APPELLATE TRIBUNAL, CHENNAI BENCH B (SPECIAL BENC H) IN THE CASE OF INCOME-TAX OFFICER, INTERNATIONAL TAXATION, CHENNAI VS.PRASAD PRODUCTION LTD.,125 ITD 263(CHENNAI)(SB) HAS HELD ON THE SAME LINE ON THE ISSUE OF TDS IN SUCH CIRCUM STANCES. 4. IN VIEW OF THE ABOVE LEGAL POSITION, WE FIND THA T THE APPEAL FILED BY THE REVENUE CANNOT BE ALLOWED. IT IS LIABL E TO BE DISMISSED. SIMILAR VIEW HAS BEEN TAKEN BY THE CO-ORDINATE BENC H OF THE TRIBUNAL IN THE CASES OF M/S. PRAKASH IMPEX VS. ACIT (SUPRA) AND ACIT VS. M/S.FARIDA SHOES PRIVATE LTD., (SUPRA). I.T.A. NO. 932/MDS/2013 6 7. WE FIND, THAT THE FACTS IN THE PRESENT CASE ARE SIMILAR TO THE ONE ADJUDICATED BY THE CO-ORDINATE BENCH OF THE TRI BUNAL IN THE AFORESAID CASES. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE VIEW TAKEN BY THE COMMISSIONER OF INCOME TAX IS ERR ONEOUS. THE PROVISIONS OF SECTION 195 AND SECTION 9 OF THE ACT, RELATING TO DEDUCTION OF TAX AT SOURCE ON PAYMENTS MADE TO FORE IGN PARTIES AND LEVY OF TAX ON PAYMENTS SO MADE ARE NOT APPLICA BLE IN THE PRESENT FACTS OF THE CASE. THE IMPUGNED ORDER IS S ET ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 30 TH DECEMBER, 2013 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VIK AS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER DATED: 30 TH DECEMBER, 2013 TNMM COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR