ITO, New Delhi V. Brahmos Aerospace Pvt. Ltd., New Delhi

ITA 966/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7147 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 2
• Next Hearing Date: 05-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 17-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Double taxation relief
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-II, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 966/DEL/2015 ASSESSMENT YEAR: 2011-12 INCOME TAX OFFICER, VS. M/S BRAHMOS AEROSPACE PV T. LTD. WARD 1(1)(2), 16, CARIAPPA MARG, KIRBY PLACE, INTERNATIONAL TAXATION, DELHI CANTT., NEW DELHI 10 NEW DELHI ROOM NO. 315, BLOCK E-2, CIVIC CENTRE, NEW DELHI 2 (PAN: AABCR8269E) (APPELLANT) (RESPONDENT) DEPARTMENT BY : NONE ASSESSEE BY : SHRI GAGAN KAPOOR, A DV. & SH. S. KUMAR, ADV. DATE OF HEARING : 05-09-2016 DATE OF ORDER : 14-09-2016 ORDER PER H.S. SIDHU, J.M. THE DEPARTMENT HAS FILED THE APPEAL AGAINST THE IM PUGNED ORDER DATED 31.12.2014 OF LD. CIT(A)-42, NEW DELHI PERTAINING TO ASSESSMENT YEAR 2011-12. THE GROUNDS RAISED IN THE REVENUES APPEAL READS AS UNDER:- ON THE FACTS AND CIRCUMSTANCE OF THE CASE, LD CIT(A ) HAS ERRED IN HOLDING THAT THE ASSESSEE WAS NOT LIABLE T O WITHHOLD TAX ON THE PAYMENTS MADE BY IT FOR GROUND RENT, ADVERTISEMENT AND EXHIBITION EXPENSES. 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE, LD CI T(A) HAS ERRED IN ADJUDICATING ON THE NATURE OF PAYMENT AND LIABILITY TO WITHHOLD TAX AS IT IS BEYOND THE PURVI EW OF THE 2 PROVISIONS OF THE SECTION 154 OF THE ACT, AS HELD B Y THE AO. 1.2 AN THE FACTS AND CIRCUMSTANCE OF THE CASE, LD C IT(A) HAS ERRED NOT APPRECIATING THE FACT THAT THERE IS N O MISTAKE APPARENT FROM RECORD IN PROCESSING OF FORM 27Q, AS HELD BY THE AO IN ORDER U/S 154 WHICH WAS T HE SUBJECT MATTER OF APPEAL BEFORE CIT(A) 1.3 ON THE FACTS AND CIRCUMSTANCE OF THE CASE, LD C IT(A) HAS ERRED IN NOT APPRECIATING THAT NO ENQUIRIES OR DETAILED EXAMINATION OF NATURE OF THE TRANSACTIONS, NATURE AND SCOPE OF THE SERVICES RENDERED CAN BE MA DE IN THE PROCEEDINGS U/S 154 OF THE ACT. 1.4 ON THE FACTS AND CIRCUMSTANCE OF THE CASE, LD C IT(A) HAS ERRED THAT INCOME IS NOT TAXABLE IN THE HANDS O F PAYEES AS IT IS DEBATABLE ISSUE. 2. THE APPELLANT CRAVES TO ADD, AMEND, MODIFY OR ALTER ANY GROUNDS OF APPEAL AT ANY TIME OR BEFORE T HE HEARING OF THE APPEAL. IT IS CERTIFIED THAT THE ABOVE REFERRED ORDER OF TH E CIT(A) IN THIS CASE WAS RECEIVED IN THE OFFICE OF THE UNDE RSIGNED ON 07.01.2015 AND THE DATE OF LIMITATION EXPIRES ON 08.03.2015. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASS ESSEE HAD FILED AN APPLICATION U/S. 154 REQUESTING FOR RECTIFICATION O F MISTAKE APPARENT FROM RECORD IN THE INTIMATION U/S. 200A DATED 3.11. 2011. IN TERMS OF THE SAID INTIMATION, A SUM OF RS. 2360700/- WAS DET ERMINED AS 3 PAYABLE U/S. 200A BY THE DEDUCTOR IN THE TDS STATEM ENT (FORM 27Q) FILED BY IT ON 27.7.2010 FOR THE FIRST QUARTER OF T HE FINANCIAL YEAR 2010-11. THE APPLICANT DEDUCTOR WAS FOUND TO HAVE COMMITTED A DEFAULT OF SHORT DEDUCTION TO THE TUNE OF RS. 20014 00/-. ACCORDINGLY, A DEMAND OF RS. 2360700 (INCLUDING INT EREST OF RS. 358520/-) WAS DETERMINED AS PAYABLE ON ACCOUNT OF THE SAID SHORT DEDUCTION. THE ASSESSEE HAS STATED THAT IT HAD MAD E REMITTANCES TO FOREIGN COUNTRIES. THE SAID REMITTANCES RELATED TO RENT FOR OFFICE ACCOMMODATION, EXPENSES INCURRED TOWARD EXHIBITIONS OUTSIDE INDIA AND ADVERTISEMENT IN FOREIGN JOURNALS TOWARDS DISPL AY OF ITS PRODUCTS. ON THESE PAYMENTS, IT HAD ERRONEOUSLY DED UCTED THE TDS AT MINIMUM RATES. HOWEVER, AS PER THE INTIMATION A RATE OF 20% HAS BEEN APPLIED BY THE AO OWING TO NON-AVAILABILIT Y OF FOREIGN PARTIES. THEREAFTER, AO HAS REJECTED THE APPLICATIO N OF THE ASSESSEE FILED U/S. 154 OF THE I.T. ACT VIDE HIS ORDER PASSE D U/S. 154 OF THE I.T. ACT, 1961 ON 22.2.2013. 3. AGGRIEVED WITH THE AFORESAID ORDER, ASSESSEE PR EFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 30.12.2014 HAS ALLOWED THE APPEAL OF THE ASSESSEE. 4. NOW THE REVENUE IS AGGRIEVED AGAINST THE IMPUGNE D ORDER AND FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. NOTICE OF HEARING WAS SENT TO BOTH THE PARTIES AND IN RESPONSE TO THE SAME NONE APPEARED ON BEHALF OF TH E DEPARTMENT, NOR ANY APPLICATION FOR ADJOURNMENT HAS BEEN FILED BY THE DEPARTMENT. KEEPING IN VIEW OF THE FACTS AN D CIRCUMSTANCES OF THE PRESENT CASE, I AM OF THE CO NSIDERED VIEW 4 THAT NO USEFUL PURPOSE WOULD BE SERVED TO SERVE TH E NOTICE AGAIN AND AGAIN TO THE DEPARTMENT, THEREFORE, I AM DECIDING THIS APPEAL AS EXPARTE QUA DEPARTMENT, AFTER HEARING THE LD. COUNSEL OF THE ASSESSEE AND PERUSING THE RECORDS. 6. LD. COUNSEL OF THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT LD. CIT(A) HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE ON MY PA RT, HENCE, THE SAME MAY BE UPHELD AND ACCORDINGLY, THE APPEAL OF T HE REVENUE MAY BE DISMISSED. 7. I HAVE HEARD THE LD. COUNSEL OF THE ASSESSEE A ND PERUSED THE RECORDS, ESPECIALLY THE IMPUGNED ORDER PASSED B Y THE LD. CIT(A). I FIND THAT LD. FIRST APPELLATE AUTHORITY H AS ELABORATELY DISCUSSED THE ISSUE IN DISPUTE BY CONSIDERING THE S UBMISSIONS OF THE ASSESSEE AND ADJUDICATED THE ISSUE VIDE PARA NO. 5.1 TO 6 AT PAGE 5 OF THE IMPUGNED ORDER. THE SAID RELEVANT PARAS AR E REPRODUCED AS UNDER:- 5.1 I HAVE CAREFULLY CONSIDERED SUBMISSIONS OF THE APPELLANT. FROM DETAILS OF PAYMENTS AND TDS AS FURNISHED BY THE APPELLANT, IT IS SEEN THAT TAXES HAVE BEEN WITHHELD BY THE APPELLANT AFTER GROSSING UP AND TAXES SO WITHHELD HAVE BEEN DEPOSITED INTO CREDIT OF CENTRAL GOVERNMENT. THEREFORE, PRE-CONDITIONS AS MENTIONED IN SECTION 248 OF THE ACT ARE SATISFIED. FURTHER, IT IS SEEN THAT PAYMENTS MADE TO FOREIGN ENTITIES ARE IN NATURE OF RENT, ADVERTISEMENT AND EXHIBITION EXPENSES AND THEREFORE ARE IN THE NATURE OF 5 BUSINESS RECEIPTS IN HANDS OF PAYEE. SUCH BUSINESS RECEIPTS ARE TAXABLE IN INDIA ONLY IF PAYEE HAD PE IN INDIA WITHIN MEANING OF RELEVANT DTAA. FROM THE FACTS AS FURNISHED BY THE APPELLANT, IT IS SEEN THAT FOREIGN ENTITIES DID NOT HAVE PE IN INDIA AND THEREFORE PAYMENTS WERE NOT CHARGEABLE TO TAX IN INDIA. ACCORDINGLY, THE APPELLANT WAS UNDER NO OBLIGATION TO DEDUCT TAXES AT SOURCE WHILE MAKING THESE PAYMENTS. 5.2 ACCORDINGLY, I HOLD THAT TAXES WERE NOT REQUIRE D TO BE WITHHELD U/S. 195(1) OF THE ACT ON THE IMPUGNED PAYMENTS MADE BY THE APPELLANT. VARIOUS GROUND OF APPEAL TAKEN BY THE APPELLANT ARE ARGUMENTATIVE IN NATURE AND ARE IN RESPECT OF ON ISSUE ONLY WHICH IS ALLOWED IN FAVOUR OF THE APPELLANT. 6.0 IN THE RESULT, THE APPEAL IS ALLOWED. 7.1 AFTER GOING THROUGH THE FINDINGS OF THE LD.CIT( A), AS AFORESAID, I FIND FROM THE DETAILS OF PAYMENTS AND TDS AS FURNISHED BY THE ASSESSEE THAT THE TAXES HAVE BEEN WITHHELD BY THE ASSESSEE AFTER GROSSING UP AND TAXES SO WITHHELD HAVE BEEN D EPOSITED INTO CREDIT OF CENTRAL GOVERNMENT. THEREFORE, PRE-CONDIT IONS AS MENTIONED IN SECTION 248 OF THE ACT ARE SATISFIED. FURTHER, IT IS SEEN THAT PAYMENTS MADE TO FOREIGN ENTITIES ARE IN NATUR E OF RENT, ADVERTISEMENT AND EXHIBITION EXPENSES AND THEREFORE ARE IN THE 6 NATURE OF BUSINESS RECEIPTS IN HANDS OF PAYEE. SUCH BUSINESS RECEIPTS ARE TAXABLE IN INDIA ONLY IF PAYEE HAD PE IN INDIA WITHIN MEANING OF RELEVANT DTAA. FROM THE FACTS, IT HAS BE EN OBSERVED THAT FOREIGN ENTITIES DID NOT HAVE PE IN INDIA AND THEREFORE PAYMENTS WERE NOT CHARGEABLE TO TAX IN INDIA. ACC ORDINGLY, THE ASSESSEE WAS UNDER NO OBLIGATION TO DEDUCT TAXES AT SOURCE WHILE MAKING THESE PAYMENTS. ACCORDINGLY, LD. CIT(A) HAS RIGHTLY HELD THAT THE TAXES WERE NOT REQUIRED TO BE WITHHELD U/ S. 195(1) OF THE ACT ON THE IMPUGNED PAYMENTS MADE BY THE ASSESSEE A ND ALLOW THE ISSUE IN DISPUTE IN FAVOUR OF THE ASSESSEE WHICH IN MY CONSIDERED OPINION, DOES NOT NEED ANY INTERFERENCE ON MY PART, HENCE, I UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND REJECT THE GROUNDS RAISED BY THE RAISED BY THE REV ENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/09/2016 . SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED: 14/09/2016 *SR BHATNAGAR* COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR