Koshambh Multitred Pvt. Ltd., Vadodara V. The ACIT, Circle-1(2), Baroda

ITA 977/AHD/2015

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 3561 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 20-04-2015

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER KOSHAMBH MULTITRED PVT. LTD., 301 - 302, GAMTHI COMPLEX, PRODUCTIVITY ROAD, RACE COURSE, VADODARA - 390007 PAN: AAACK7744A (APPELLANT) VS THE ACIT, CIRCLE - 1 (2) , BARODA (RESPONDENT) REVENUE BY : S H RI V.K. SINGH , SR. D . R. ASSESSEE BY: MS. ARTI N. SHAH, A.R. DATE OF HEARING : 12 - 07 - 2 018 DATE OF PRONOUNCEMENT : 27 - 09 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THESE TWO APPEALS FILED BY ASSESSEE FOR A. Y. 2011 - 12 & 2009 - 10 , ARI SE FROM ORDER OF THE CIT(A) - I, VADODARA DATED 03 - 02 - 2 015 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THERE ARE IDENT ICAL GROUNDS OF APPEAL OF THE ASSESSEE PERTAINING TO BOTH ASSESSMENT YEAR S 2011 - 12 & 2009 - 10 THEREFORE THE SAME ARE ADJUDICATED TOGETHER. I T A NO S . 977 / A HD/20 15 & 1766/A HD/2016 A SS ESSMENT YEAR 2011 - 12 & 2009 - 10 I.T.A NO. 977 /AHD/20 1 5 & 1766/AHD/2016 A.Y. 2011 - 12 & 2009 - 10 PAGE NO M/S. KOSHAMBH MULTITRED PVT. LTD. VS. IT O 2 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2009 - 10 : - ITA NO. 1766/AHD/2016 1. THE LEARNED COMMISSIONER OF INCOME TAX, (APPEALS) - 1, VADODARA HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE OF PAYMENT OF COMMISSION OF RS.10,84,437/ - MADE TO SIDAF SARL, BURKINA FASO U/S.40(A)(I) ON ACCOUNT OF NON - DEDUCTIO N OF TAX AT SOURCE THOUGH THE SAID PAYMENT HAS BEEN MADE TO FOREIGN AGENT IN RESPECT OF SERVICES RENDERED OUTSIDE INDIA AND THE AGENT HAVING NO PERMANENT ESTABLISHMENT IN INDIA. 4 . IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 5 ,35, 43 , 190/ - WAS FILED ON 23 RD OCT OBER, 2009. THE CIT - 1 BARODA VIDE ORDER U/S. 263 OF THE ACT PASSED ON 21 ST MARCH, 2014 HAS SET ASIDE THE ASSESSMENT TO THE ASSESSING OFFICER WITH A DIRECTION TO FRAME THE SAME AFTER EXAMINING ALL THE ISSUES INVOLVED A FTER MAKING PROPER I NQUIRY. T HE COMMISSIONER OF INCOME TAX - 1, BARODA HAS PASSED ORDER U/S. 263 OF THE ACT AND HELD THAT ORIGINAL ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE CIT ON EXAMINATION OF THE ASSE SSMENT RECORD HAS OBSERVED THAT ASSESSEE COMPANY HAD PAID COMMISSION OF RS. 36,69,848/ - TO THREE FOREIGN ENTITY ON ACCOUNT OF COMMISSION OF EXPORT SALE BUT DID NOT DEDUCT TAX AT SOURCE ON THE SAME. THE DETAILS OF THE COMMISSION PAID TO THESE FOREIGN ENTIT IES ARE AS UNDER: - SR. NO. NAME OF THE PAYEE AMOUNT 1 KAYSUN GENERAL TRADING, DUBAI RS. 11,53,169/ - 2 TC SONS TRADING, MALI RS. 14,32,242/ - 3 SIFAF SARL, BURKINA FASO RS. 10,84,437/ - TOTAL RS. 36,69,848/ - THE RELEVANT PART OF THE OBSERVATION OF T HE CIT IS REPRODUCED AS UNDER: - '3 .THE SUBMISSION OF THE ASSESSEE HAS BEEN CONSIDERED. IN RESPECT OF ITS CONTENTION, THE ASSESSEE HAS RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT'S IN THE CASE OF CIT VS. TOSHOKU LTD., WAS DELIVERED ON 01.01.2001 FOR A.Y. 1962 - 63 AND THE SAME IS NOT I.T.A NO. 977 /AHD/20 1 5 & 1766/AHD/2016 A.Y. 2011 - 12 & 2009 - 10 PAGE NO M/S. KOSHAMBH MULTITRED PVT. LTD. VS. IT O 3 APPLICABLE IN THE CASE AS THE ISSUE WAS PERTAINING TO THE A.Y.1962 - 63 AND THE AFORESAID CIRCULAR WAS NOT IN EXISTENCE THAT TIME. 3.1 IT IS NOTICED FROM THE CASE RECORDS THAT THE, ASSESSEE HAD NOT DEDUCTED ANY TDS ON AB OVE MENTIONED PAYMENTS IN VIEW OF THE CIRCULAR NO.23 DATED 23.07.1959 AND CIRCULAR NO.786 DATED 07.02,2000 ISSUED BY THE BOARD. BUT IT IS WORTHWHILE TO MENTION HERE THAT THE BOARD HAS WITHDRAWN THIS CIRCULAR VIDE CIRCULAR NO. 7 DATED 22.10.2009. 3.3 SINCE THE CIRCULAR NO, 7 WAS ISSUED ON 22.10,2009, THE PAYMENTS MADE AFTER THE ISSUANCE ARE REQUIRED TO BE DISALLOWED. THEREFORE, IN VIEW OF THIS, THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE CLAIM IN LIGHT OF CIRCULAR AND MAKE DISALLOWANCE AS PER THE CIRCUL AR ISSUED. HE IS ALSO DIRECTED TO BRING EVIDENCE ON RECORD REGARDING DATE OF ACTUAL PAYMENTS TO FOREIGN AGENTS AND ALSO THE MODE OF PAYMENT. 4. IN VIEW OF THE AFORESAID DISCUSSION, THE ORDER IS SET ASIDE WITH A DIRECTION TO REFRAME THE SAME AFTER EXAMINING ALL THE ISSUES INVOLVED AND MAKING PROPER ENQUIRIES AND AFTER GIVING THE ASSESSES REASONABLE OPPORTUNITY OF BEING HEARD THEREAFTER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S. 143(3) R.W.S 263 O F THE ACT, THE ASSESSING OFFICE HAS ISSUED SHOW CAU SE NOTICE TO THE ASSESSEE ON 9 TH FEB, 2015 REQUESTING THE ASSESSEE TO FURNISH VARIOUS DETAILS AND EXPLAIN WHY COMMISSION EXPENSES SHOULD NOT BE DISALLOWED KEEPING IN VIEW OF THE PROVISIONS OF SECTION 195 OF THE ACT AND IN THE LIGHT OF THE CBDT CIRCULAR NO. 7 DATED 22N D OCTOBER, 2009. T HE ASSESSEE EXPLAINED T HAT THE AFORESAID COMMISSION WAS PAID TO NON - RESIDENTS FOR SERVICES RENDERED BY THEM OUTSIDE INDIA AND THEY D I D NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA, THEREFORE, THEY WERE NOT LIABLE TO BE T AXED IN INDIA FOR THE COMMISSION RECEIVED BY THEM AS THE INC OME NEITHER A C CRUED NOR ARISES IN INDIA. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION . HE HAS STATED THAT THE CBDT RECENTLY VIDE ITS CIRCULAR NO. 7 OF 2009 DATED 22 ND OCTOBER, 2009 H A S WITHDRAWN ITS EARLIER CIRCULAR NO. 23 RD DATED 23 RD JULY, 2009, NO. 136 D AT ED 29 TH MAY, 1975 AND NO. 786 DATED 7 TH FEB, 2009. HE HAS ALSO MENTIONED THAT IN THE ABSENCE OF THE IMMUNITY GRANTED VIDE CIRCULAR NO. 23 DATED 23 RD JULY, 1969, THE CAS E OF THE A SSESSEE IS GOVERNED BY THE PROVISION OF SECTION 9 OF T H E ACT REGARDING TAXABILITY OF INCOME WHICH IS DEEMED TO ACCRUE OR ARISE IN INDIA BECAUSE OF ITS BUSINESS CONNECTION IN INDIA. CONSEQUENTLY, THE ASSESSING OFFICER HAS DISALLOWED RS. 36 , 69 ,8 48/ - U/S. 4 0(A)(IA) OF TH E ACT. I.T.A NO. 977 /AHD/20 1 5 & 1766/AHD/2016 A.Y. 2011 - 12 & 2009 - 10 PAGE NO M/S. KOSHAMBH MULTITRED PVT. LTD. VS. IT O 4 THE ASSESSEE HAS PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION OF THE LD . CIT(A) IS REPRODUCED AS UNDER: - 4.2. I HAVE CONSIDERED APPELLANT'S SUBMISSION, THE AO'S OBSERVATIONS AND THE DIRECTIONS ISSUED BY THE CIT - I, BARODA IN HIS ORDER U/S.263. THE APPELLANT'S CONTENTION REGARDING NON - DEDUCTIBILITY OF TDS ON COMMISSION PAID TO FOREIGN ENTITIES HAVE ALREADY BEEN DISCUSSED AND CONSIDERED BY CIT - I , BARODA IN HIS ORDER U/S.263. HE HAS ALSO CONSIDERED THE CBDT'S CIRCULAR NO.23 DATED 23/07/1969, - CIRCU LAR NO.786 DATED 07/02/2000 AND CIRCULAR NO.7 DATED 22/10/2009. AFTER SUCH CONSIDERATION, THE COMMISSIONER HAS GIVEN EXPLICIT DIRECTION TO THE AO THAT S INCE THE CIRCULAR NO.7 WAS ISSUED ON 22/10/2009, THE PAYMENT MADE AFTER THE ISSUANCE ARE REQUIR ED, TO BE DISALLOWED. ACCUCDINGL Y, HE DIRECTED THE AO TO EXAMINE THE CLAIM IN THE LIGHT OF CIRCULAR AND MAKE DISALLOWANCE AS PER IT AFTER BRINGING EVIDENCE ON R ECORD REGARDING DATE OF ACTUAL PAYMENTS TO FOREIGN AGENTS AND ALSO MODE OF PAYMENT. THUS, THESE DIRE CTIONS OF COMMISSIONER ARE FINAL AND THE SAME CANNOT BE ADJUDICATED BY THIS OFFICE, BESIDES, THE APPELLANT IS ALREADY IN APPEAL BEFORE ITAT AGAINST THE ORDE R U/S.263 WHERE SUCH DIRECTIONS CAN BE AGITATED BY THE APPELLANT. 4.2.1. AT THE SAME TIME,, IT IS SEEN THAT THE AO HAS NOT MADE THE DISALLOWANCE AS PER THE DIRECTIONS ISSUED BY THE CIT - I, BARODA. VIDE LETTER DATED 28/02/2014, THE APPELLANT HAD SUBMITTED TH E DETAILS OF PAYMENTS MADE TO FOREIGN ENTITIES AS COMMISSION AND ALSO EVIDENCES IN THE FORM OF BANK STATEMENT, CERTIFICATE ISSUED BY INDIAN OVERSEAS BANK FOR THE PAYMENTS AND THE PAYMENT ADVICES ISSUED BY I.O.B AT THE TIME OF MAKING RESPECTIVE PAYMENTS. A S PER THIS, THE PAYMENTS TO KAYSUR, GENERAL TRADING, DUBAI AND TC SONS TRADING, MALI HAD BEEN MADE DURING THE MONTH OF JULY & AUGUST, 2009. THUS, THESE PAYMENTS WERE MADE PRIOR TO ISSUANCE OF CIRCULAR NO.7 OF 2009 AND HENCE THE SAME COULD NOT HAVE BEEN DIS ALLOWED AS PER THE DIRECTION ISSUED BY CIT - 1, BARODA. BESIDES, THE ITAT, AHRNEDABAD BENCH IN ITS DECISION IN THE CASE OF AJST IMPEX 46 TAXMANN.COM 163 (AHD) AND PANKAJ A. SHAH 47 TAXMANN.COM 20S (AHD) HAD HELD THAT PAYMENTS MADE BEFORE ISSUANCE OF CIRCUIAR - 7 OF 2009, FOR SERVICES RENDERED OUTSIDE INDIA ARE NOT LIABLE FOR TDS AS PER SEC, 195. HENCE, THE DISALLOWANCE MADE BY THE AO FOR PAYMENTS MADE TO THESE PARTIES OF RS.11,53,169/ - AND RS.14,32,242/ - RESPECTIVELY IS DIRECTED TO BE DELETED. 4.2.2. SO FAR AS PAYMENT MADE TO SIDAF SARL, BURKINA FASO OF RS.10,84,437/ - IS CONCERNED, THE SAME WAS PAID ON 31 ST MARCH, 2010 AND HENCE AS PER THE DIRECTION ISSUED BY CIT - I, BARODA, THIS AMOUNT WAS DISALLOWABLE U/S.40(A)(I) ON ACCOUNT OF NON - DEDUCTION OF TAX AT SOURCE. HENCE, DISALLOWANCE OF THIS AMOUNT IS UPHELD. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS SUBMITTED PAPER BOOK CONTAINING DETAIL S AND INFORMATION FURNISHED BEFORE THE ASSESSING OFFICER AND LD. CIT(A) DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS. SHE H AS ALSO FURNISHED ANOTHER PAPER BOOK OF VARIOUS JUDICIAL PRONOUNCEMENTS . LD. COUNSEL HAS CONTENDED THAT LD. CIT(A) HAS ERRED IN LAW AND ON FACT IN CONFIRMING THE DISALLOWANCE ON PAYMENT OF COMMISSI ON OF RS. 10,84 ,437/ - MADE TO SIDAF SARL, BURKINA FASO U/S. 40(A) (IA) ON ACCOUNT OF DEDUCTION OF TAX IN RESPECT OF PAYMENT OF COMMISSION MADE TO I.T.A NO. 977 /AHD/20 1 5 & 1766/AHD/2016 A.Y. 2011 - 12 & 2009 - 10 PAGE NO M/S. KOSHAMBH MULTITRED PVT. LTD. VS. IT O 5 FOREIGN AGENTS FOR THE SERVICES RENDERED OUTSIDE I NDIA AND THE FOREIGN AGENTS WERE NOT HAVING ANY PERMANENT EST ABLISHMENT IN INDIA. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED ON THE ORDER OF CIT(A) . 6. ON THE SIMILAR ISSUE PERTAINING TO DISALLOWANCE OF COMMISSION PAYMENT TO RESIDENT AGENTS FOR THE ASSESSMENT YEAR 2011 - 12, WE HAVE NOTICED THA T ON SCRUTINY THE ASSESSING OFFICER HAS NOTICED THAT T H E ASSESSEE HAS CLAIMED COMMISSION FOR EXPORT SALES TO NON - RESIDENT TO THE AMOUNT OF RS. 475000/ - . THIS COMMISSION WAS PAID TO THE PARTY CALLED SIDAF SARL DURING THE YEAR UNDER CONSIDERATION. THE DISA LLOWANCE WAS MADE BY THE ASSESSING OFFICER ON THE REASONS THAT T HE ASSESSEE HAD FAILED TO SUBSTANTIATE THE SERVICES RENDERED BY THE RECIPIENT OF THE COMMISSION. AT THE TIME OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), THE ASSESSEE HAS AGREED THAT T H E SO CALLED FOREIGN AG E N T S W ERE BUYING GOODS FROM THE ASSESSEE AND AFTER ADDING REASONABLE PROFIT THEY WERE FURTHER SELLING THE GOODS PURCHASED TO THE CUSTOMERS. THE CUSTOMERS TO WHOM THE Y WERE SELLING THE GOODS WERE NOT KNOW N TO THE ASSESSEE COMPANY. THESE FACTS DEMONST RATE THAT T H E RELATIONSHIP BETWEEN THE ASSESSE COMPANY W AS OF SELLER AND BUYER BECAUSE OF WHICH THE FACTS IN THE CASE OF THE ASSESSEE ARE DISTINGUISHABLE FROM THE VARIOUS JUDICIAL PRONOUNCEMENTS REFERRED IN THE PAPER BOOK. THESE FA C TS MAD E CLEAR THAT T H E NON - RESIDENT HAS NOT ACTED AS AN AGENT OF THE ASSESSEE AND IT HAS ALSO FAILED TO ESTABLISH THE EXISTENCE OF RELATIONSHIP OF PRINCIPLE A N D A G ENT BETWEEN THEM IN THE LIGHT OF THE ABOVE , THE ASSESSE HAS FAILED TO SUBSTANTIATE THE SERVICE S RENDERED BY THE SO CALLED NON - RESIDENT AS AGENT T HEREFORE, WE DO NOT FIND ANY ERROR IN THE DECISION OF THE LD. CIT(A). ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS DISMISSED. T HE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2011 - 12 WAS PASSED ON 31 - 12 - 2013 AND ORDER FOR THE ASSESSMENT YEAR 2009 - 10 PASSED U/S. 1 4 3(3) R.W.S. 263 OF THE ACT ON 23 - 03 - 2015 H OWEVER , WE FIND THAT DURING THE ASSESSMENT YEAR 2009 - 10 THE ASSESSING OFFICER AND CIT(A) HAS NOT EXAMINED THESE FACTS WHETHER THERE WERE EXISTENCE OF RELATION OF BUYER AND SELLER BETWEEN THE ASSESSEE AND SO CALLED AGENT AS EXISTED I.T.A NO. 977 /AHD/20 1 5 & 1766/AHD/2016 A.Y. 2011 - 12 & 2009 - 10 PAGE NO M/S. KOSHAMBH MULTITRED PVT. LTD. VS. IT O 6 IN THE ASSESSMENT YEAR 2011 - 12. THEREFORE, WE CONSIDER IT WILL BE APPROPRIATE TO RESTORE TH IS IDENTICAL ISSUE PERTAINING TO ASSESSMENT YEAR 2009 - 2010 TO THE FILE OF ASSESSING OFFI CER TO EXAMINE WHETHER THERE WAS EXISTENCE OF RELATIONSHIP OF PRINCIPLE AND AGENT BETWEEN THEM OR SIMILARLY THE ASSESSEE HAS SOLD GOODS TO THE FOREIGN AGENT IN THE CAPACITY OF SELLER AND BUYER I.E. ASSESSMENT 2011 - 12 . ACCORDINGLY THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2011 - 12 IS DISMISSED AND APPEAL FOR ASSESSMENT YEAR 2009 - 10 IS ALLOWED FOR STATISTICAL PURPOSES FOR DECIDING A FRESH AFTER PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE AS DIRECTED ABOVE. 7. IN THE COMBINED RESUL T, THE APPEALS FOR ASSESSMENT YEAR 2011 - 12 IS DISMISSED AND APPEAL FOR ASSESSMENT YEAR 2009 - 10 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OURT ON 2 7 - 09 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 27 /09 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUAR D FILE. BY ORDER/ , / ,