ACIT, CHENNAI V. M/s. Ramachandra Educational and Health Trust, CHENNAI

ITA 985/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64454 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 04-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M BALAGANESH
• Keywords: Charitable institution; Advance ruling; Non-deduction of tax
• Section: 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ------- ITA NO. 985/MDS/2012 ASSESSMENT YEAR : 2008-09 THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-I(3), CHENNAI. V. M/S. RAMACHANDRA EDUCATIONAL AND HEALTH TRUST, NO.22, SIR C.V. RAMAN ROAD, ALWARPET, CHENNAI-600 018. (P AN : AAATS2283D) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : SHRI M. BALAGANESH, CA DATE OF HEARING : 13.0 9.2012 DATE OF PRONOUNCEMENT : 11.10.201 2 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE CIT(APPEALS)-I, CHENNAI DATED 21-02-2012 FOR TH E ASSESSMENT YEAR 2008-09. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS : ITA NO.985/MDS/2012 2 1.A ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF ` 29,10,287 MADE BY THE A.O. TOWARDS CONTRAVENTION OF SECTION 11(5) OF THE I.T.ACT 1961. 1.B THE LEARNED CIT(A) HAS FAILED TO CONSIDER THAT THE ISSUE HAS NOT BECOME FINAL AND THAT THE DEPARTMENT HAS FILED APPEAL BEFORE THE HON'BLE HIGH COURT AGAINST THE DECISIONS OF THE ITAT RELIED UPON BY HIM IN THE CAS E OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2003-04 TO 2005-0 6. 2.A ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF ` 96,22,500 MADE BY THE A.O. TOWARDS DISALLOWANCE ON ACCOUNT OF SECTION 40(A)(I). 2.B THE LEARNED CIT(A) HAS FAILED TO CONSIDER THAT THE PAYMENTS TO M/S HARVARD MEDICAL ASSOCIATION IS NOTH ING BUT ROYALTY, FEES FOR TECHNICAL SERVICES AS DEFINED IN SECTION 9 OF THE INCOME-TAX ACT 1961. 2.C THE LEARNED CIT(A) HAS FAILED TO CONSIDER THAT THERE IS NO EXEMPTION AVAILABLE TO THE EDUCATIONAL TRUST FROM THE APPLICABILITY OF PROVISIONS OF SECTION 192 TO 206 OF THE INCOME-TAX ACT 1961. 2.D THE LEARNED CIT(A) HAS FAILED TO CONSIDER THAT THE ASSESSEE HAS CLAIMED EXPENSES WHICH ARE PROVIDED IN SECTIONS 28 TO 44 OF THE INCOME-TAX ACT 1961 AND HE NCE DISALLOWANCE ON ACCOUNT OF SECTION 40(A)(I) IS JUST IFIED. THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND OR ALT ER THE ABOVE GROUNDS OF APPEAL AS MAY BE DEEMED NECESSARY. ITA NO.985/MDS/2012 3 3. THE FIRST GROUND OF APPEAL RELATES TO DELETION O F THE ADDITION OF ` 29,10,287/-. THE FACTS IN BRIEF ARE THAT DURING TH E COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT ON PERUSAL OF ANNEXURE TO PART A OF S CHEDULE D OF THE RETURN WHICH SHOWED THE DETAILS OF INVESTMENTS/DEPOSITS MADE U/S 11(5) OF THE INCOME T AX ACT, 1961 ('THE ACT' FOR SHORT), A SUM OF ` 2,42,21,660/- HAD BEEN SHOWN AS SECURITY DEPOSIT IN THE JOINT NAME OF THE DIRECTOR OF MEDICAL EDUCATION AND PARA MEDICAL COURSES. ` 29,10,287/- WAS SHOWN AS INTEREST RECEIVED WHICH HAD BEEN INVES TED IN M/S. EGMORE BENEFIT FUND LTD. THIS INVESTMENT WAS NOT AN APPROVED INVESTMENT AS PER THE PROVISIONS OF SEC. 1 1(5) OF THE ACT. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT SIMILAR ADDITION MADE IN THE EARLIER YEARS WAS DELETED. HO WEVER, THE ASSESSING OFFICER BY OBSERVING THAT THE DEPARTMENT HAS PREFERRED APPEAL TO THE HONBLE JURISDICTIONAL HIGH COURT THE AMOUNT OF ` 29,10,287/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARN ED CIT(APPEALS). IT WAS SUBMITTED BEFORE THE LEARNED CIT(APPEALS) THAT SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL IN ITA NO.985/MDS/2012 4 ITA NO. 1222/MDS/2010 FOR THE ASSESSMENT YEAR 2006- 07 AND THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE. THE LEARNED CIT(APPEALS) BY FOLLOWING THE DECISION OF T HE TRIBUNAL, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 5. THE REVENUE HAS CARRIED THE MATTER BEFORE THE TR IBUNAL. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED BY THE ORDER OF THE TRIBUNAL IN ITA NO. 1222/MDS/2010 DATED 22- 12-2010. 6. ON THE OTHER HAND, THE LEARNED DR FAIRLY ACCEPTE D THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. 7. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL IN T HE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 AND THE TRIBUNAL VIDE ORDER DATED 22-12-2010 IN ITA NO. 1222/MDS/2010 HAS HELD AS UNDER : 4. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR. AS IT IS NOTICED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL REFERRED TO SUPRA, AND ALSO AS IT IS NOTICED THAT THE LEARNED CIT(A) HAS ONLY FOLLOWED ITA NO.985/MDS/2012 5 THE ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL FOR THE EARLIER YEARS, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) HAS ONLY FOLLOWED THE PRINCIPLES OF JUDICIAL DISCIPLINE WHICH ARE ALSO APPLICABLE TO US . AS THE REVENUE HAS NOT BEEN ABLE TO BRING OUT ANY FACTS FOR THE RELEVANT ASSESSMENT YEAR WHICH CAN DISTINGUISH THE DECISION TAKEN BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL FOR THE EARLIER YEARS, REFERRED TO SUPRA, WE ARE OF THE VIEW, RESPECTFULLY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEARS, REFERRED TO SUPRA, THAT THE FINDING OF THE LEARNED CIT(A) IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. IN THE CIRCUMSTANCES, THE APPEAL OF THE REVENUE IS DISMISSED. 8. THE LEARNED CIT(APPEALS) BY FOLLOWING THE DECISI ON OF THE TRIBUNAL IN THE ASSESSEES OWN CASE HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. WE FIND NO REASON TO IN TERFERE. MOREOVER, NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE THAT THE ORDER PASSED BY THE TRIBUNAL HAS EITHER BE EN MODIFIED OR REVERSED BY THE HONBLE JURISDICTIONAL HIGH COUR T. WE THEREFORE, RESPECTFULLY FOLLOWING THE EARLIER DECIS ION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE, UPHOLD THE ORD ER OF THE ITA NO.985/MDS/2012 6 LEARNED CIT(APPEALS) AND DISMISS THE GROUND RAISED BY THE REVENUE. 9. GROUND NO.2 RELATES TO THE DELETION OF THE ADDIT ION OF ` 96,22,500/- MADE BY THE ASSESSING OFFICER UNDER SEC TION 40(A)(I) OF THE ACT. THE FACTS IN BRIEF ARE THAT T HE ASSESSING OFFICER HAS OBSERVED THAT ON PERUSAL OF THE ACCOUNT S FILED BY THE ASSESSEE THAT THE ASSESSEE HAD PAID TECHNICAL K NOW HOW FEES AMOUNTING TO ` 96,22,500/- TO HARWARD MEDICAL INTERNATIONAL WITHOUT DEDUCTING TAX AT SOURCE. AS PER SECTION 40(A)(I) OF THE ACT, ANY FEES FOR TECHNICAL SERVICE S WHICH IS PAYABLE OUTSIDE INDIA; OR IN INDIA TO A NON-RESIDEN T, NOT BEING A COMPANY OR TO A FOREIGN COMPANY, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII B OF THE INCOME TAX AC T, 1961 AND SUCH TAX HAS NOT BEEN DEDUCTED IS NOT DEDUCTIBL E IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PRO FITS AND GAINS OF BUSINESS PROFESSIONS. THE AUTHORITY FOR ADVANCE RULINGS VIDE AAR NO. MISC.03/673 OF 2006 DATED 29-0 5-2009 HAS STATED THAT WE CANNOT GIVE RULING THAT THE APP LICANT IS NOT AT ALL LIABLE TO DEDUCT ANY TAX AT SOURCE IN RESPEC T OF THE PAYMENTS MADE TO HARVARD MEDICAL INTERNATIONAL. IT DEPENDS ON FURTHER SCRUTINY BY THE APPROPRIATE AUTHORITY IN THE LIGHT OF ITA NO.985/MDS/2012 7 OBSERVATIONS MADE THEREIN. THE APPLICANT MAY MAKE AN APPLICATION TO THE ASSESSING OFFICER IN TERMS OF SU B-SECTION (2) OF SEC. 195 OF THE ACT FOR DETERMINATION OF THE APP ROPRIATE PROPORTION OF SUCH PAYMENT WHICH WOULD BE CHARGEABL E TO TAX. THE ASSESSEE HAS NOT GIVEN THE DETAILS TO DECIDE TH E ABOVE ISSUE. HENCE THE ASSESSING OFFICER DISALLOWED ` 96,22,500/- U/S 40(A)(I) OF THE ACT. 10. THE ASSESSEE CARRIED THE MATTER BEFORE THE LEAR NED CIT(APPEALS) AND SUBMITTED THAT SECTION 40(A)(I) OF THE ACT CAN BE INVOKED ONLY IN RESPECT OF AN ASSESSEE DERIV ING PROFITS AND GAINS FROM BUSINESS OR PROFESSION AND NOT APPL ICABLE TO OTHERS. ADMITTEDLY THE ASSESSEE IS A PUBLIC CHARIT ABLE TRUST AND IS CLAIMING EXEMPTION U/S 11 OF THE ACT WHICH I S GRANTED BY THE ASSESSING OFFICER. HENCE THE DISALLOWANCE O F ANY EXPENDITURE FOR NON-DEDUCTION OF TAX AT SOURCE BY I NVOKING SEC. 40(A)(I) OF THE ACT IS NOT WARRANTED. THE LEA RNED CIT(APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE OBSERVED THAT AS PER CLAUSE 4 OF THE MOU WITH HARWA RD MEDICAL INTERNATIONAL, THE AMOUNT PAID IS ONLY FOR EDUCATIONAL ACTIVITIES. SO TO THAT EXTENT TDS DOES NOT ARISE A S THESE PAYMENTS ARE ON ACCOUNT OF USAGE OF INTELLECTUAL PR OPERTY. ITA NO.985/MDS/2012 8 THESE DETAILS WERE BEFORE THE ASSESSING OFFICER. S ECTION 40(A)(I) APPLIES TO ASSESSEES DERIVING INCOME FROM PROFITS AND GAINS OF BUSINESS/PROFESSION. THE ASSESSEE IS A CH ARITABLE TRUST. ASSUMING THAT THIS PAYMENT COMES UNDER TDS, THIS PAYMENT IS ONLY AN APPLICATION OF INCOME AND A SEPA RATE ADDITION CANNOT BE MADE. SECTION 40(A)(I) APPLIES TO AMOUNTS PAYABLE WHEREIN IN THIS CASE THE AMOUNT HAS ALREADY BEEN PAID. WITH THE ABOVE OBSERVATIONS, THE LEARNED CIT (APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 11. ON BEING AGGRIEVED, THE REVENUE HAS CARRIED THE MATTER BEFORE THE TRIBUNAL. THE LEARNED DR SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 12. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THE ASSESSEE IS A PUBLIC CHARITABLE TRUST . SEC. 40(A)(I) OF THE ACT HAS NO APPLICATION AND ALL THE DETAILS IN RESPECT OF THE PAYMENTS MADE TO HARVARD MEDICAL INTERNATIONAL WERE FILED BEFORE THE ASSESSING OFFIC ER. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT ON SIMILAR PAYMENTS MADE BY THE ASSESSEE IN EARLIER YE ARS NO TDS WAS DEDUCTED. THE DEPARTMENT HAS ACCEPTED THAT NO TDS IS NECESSARY TO BE DEDUCTED. ONLY IN THIS YEAR THE DE PARTMENT ITA NO.985/MDS/2012 9 HAS RAISED THE OBJECTION. THE ASSESSEE HAS RAISED VARIOUS CONTENTIONS. HOWEVER HE SUBMITTED THAT THE WORDS U SED IN SECTION 40(A)(I) AND SECTION 40(A)(IA) ARE SIMILAR, I.E. PAYABLE AND AS PER THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. ADDL . CIT (2012) 16 ITR (TRIB) 1 (VISAKHAPATNAM) (SB), NO DISA LLOWANCE CAN BE MADE IF THE AMOUNT HAD ALREADY BEEN PAID. 13. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THIS CASE IT IS AN ADMITTED POSITION THAT THE ASSESSEE HAS AL READY PAID THE AMOUNT. AS PER THE DECISION OF THE SPECIAL BEN CH IN THE CASE OF MERLYN SHIPPING & TRANSPORTS V. ADDL. CIT ( SUPRA), ONCE THE PAYMENT HAS ALREADY BEEN MADE, NO DISALLOW ANCE U/S 40(A)(I) OF THE ACT CAN BE MADE. IN THIS CASE THE ASSESSEE HAS ALREADY PAID THE AMOUNT. WE FIND THAT THE WORDINGS USED IN SECTION 40(A)(I) AND SECTION 40(A)(IA) ARE SIMILAR. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS V. ADDL. CIT (SUPRA), WE UPHOLD THE ORDER PASSED BY THE LEARNED CIT(APPEALS) AND DISMISS THE GROUND RAISED BY THE REVENUE. ITA NO.985/MDS/2012 10 14. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 11 TH OF OCTOBER, 2012, AT CHENNAI. SD/- SD/- (ABRAHAM P. GEORGE) ( V.DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 11 TH OCTOBER, 2012. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE