ACIT, CHENNAI v. M/s. Mainetti India Pvt. Ltd., CHENNAI

ITA 106/CHNY/2014 | 2006-2007
Pronouncement Date: 08-04-2014 | Result: Dismissed

Appeal Details

RSA Number 10621714 RSA 2014
Assessee PAN AAACM6894M
Bench Chennai
Appeal Number ITA 106/CHNY/2014
Duration Of Justice 2 month(s) 29 day(s)
Appellant ACIT, CHENNAI
Respondent M/s. Mainetti India Pvt. Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 08-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 08-04-2014
Assessment Year 2006-2007
Appeal Filed On 10-01-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNALC BENCH CHE NNAI . . . ! ' # $ BEFORE DR. O.K. NARAYANAN VICE PRESIDENT & SHRI VIKAS AWASTHY JUDICIAL MEMBER I.T.A. NO. 106/MDS/2014 & C.O. NO. 18/MDS/2014 ( IN ITA NO. 106/MDS/2014 ) ASSESSMENT YEAR : 2006-07 DEPUTY COMMISSIONER OF INCOME TAX COMPANY CIRCLE -IV(1) CHENNAI VS M/S.MAINETTI INDIA PVT. LTD. 3 RD FLOOR FLORIDA TOWERS NO.138/30 NELSON MANICKAM ROAD CHENNAI-29 [PAN: AAACM 6894 M] (APPELLANT) (RESPONDENT/CROSS OBJECTOR) / APPELLANT BY : SHRI T.N.BETGERI JCIT / RESPONDENT BY : SHRI T.BANUSEKAR CA / DATE OF HEARING : 07-04-2014 / DATE OF PRONOUNCEMENT : 08-04-2014 #% / O R D E R PER VIKAS AWASTHY J.M: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE O RDER OF COMMISSIONER OF INCOME TAX (APPEALS)-IV CHENNAI DA TED 03-10-2013 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 6-07. THE REVENUE HAS ASSAILED THE FINDINGS OF CIT(APPEALS) W ITH RESPECT TO I.T.A. NO.106/MDS/14 & C.O. NO. 18/MDS/14 :- 2 -: DELETING OF DIS-ALLOWANCE U/S.40(A)(I) OF THE INCOM E TAX ACT 1961 (HEREIN AFTER REFERRED TO AS THE ACT). THE ASSES SEE HAS FILED CROSS-OBJECTIONS IMPUGNING THE FINDINGS OF CIT(APPE ALS) ON THE ISSUE OF RE-OPENING. 2. THE BRIEF FACTS OF THE CASE ARE: THE ASSESSEE IS A PART OF MAINETTI GROUP AND IS IN THE BUSINESS OF MANUFACTUR E AND SALE OF HANGERS. THE ASSESSEE HAS ASSOCIATE GROUP COMPANIES WORLDWIDE. THESE ASSOCIATE COMPANIES CARRY ON SIMI LAR BUSINESS OF MANUFACTURE AND SALE OF HANGERS IN THEIR RESPECT IVE LOCATIONS. FOR THE AY UNDER CONSIDERATION THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING LOSS OF ` 73 45 124/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FILED REVISED STATEMENT OF INCOME ADMITTING PROFIT OF ` 1 20 22 295/-. DRAFT ASSESSMENT U/S.144C R.W.S.92CA WAS MADE COMPUTING THE INCOME O F THE ASSESSEE AS ` 7 71 23 803/-. THE ASSESSEE FILED OBJECTION BEFORE DISPUTE RESOLUTION PANEL [DRP]. ON THE DIRECTIONS OF THE DRP ASSESSMENT U/S.143(3) R.W.S.144C AND 92CA WAS COMPL ETED AND THE INCOME OF THE ASSESSEE WAS ASSESSED AS ` 1 41 25 549/-. SUBSEQUENTLY NOTICE U/S.148 OF THE ACT WAS ISSUED TO THE ASSESSEE FOR THE REASON THAT THE ASSESSEE HAD CLAI MED I.T.A. NO.106/MDS/14 & C.O. NO. 18/MDS/14 :- 3 -: ADDITIONAL DEPRECIATION WHICH WAS NOT TENABLE IN LA W. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DT.14-03-20 13 PASSED U/S.143(3) R.W.S.147 DETERMINED THE TAXABLE INCOME OF THE ASSESSEE AS ` 2 71 86 588/-. IN RE-ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER INTER ALIA MADE DIS-ALLOWANCE OF EXPORT COMMISSION AMOUNTING TO ` 1 08 01 999/- U/S.40(A)(I). AGGRIEVED AGAINST THE ASSESSMENT ORDER THE ASSESS EE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS). THE CI T(APPEALS) FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF G.E. INDIA TECHNOLOGY CENTRE P. LTD . VS. CIT REPORTED AS 327 ITR 456 DELETED THE ADDITION MADE BY THE ASSESSING OFFICER AND ALLOWED THE APPEAL OF THE ASSESSEE. TH E REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL ASSAILING TH E FINDINGS OF THE CIT(APPEALS). 3. SHRI T.BANUSEKAR APPEARING ON BEHALF OF THE ASS ESSEE AT THE OUTSET SUBMITTED THAT THE ISSUE IN APPEAL IS SQ UARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN C ASE FOR THE AY.2005-06 & 2008-09. THE LD.AR OF THE ASSESSEE PL ACED ON RECORD A COPY OF THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I.T.A. NO.106/MDS/14 & C.O. NO. 18/MDS/14 :- 4 -: IN ITA NO.2201/MDS/2010 FOR THE AY.2005-06 AND ITA NO.2074/MDS/2012 FOR THE AY.2008-09. 4. SHRI T.N.BETGERI APPEARING ON BEHALF OF THE REV ENUE FAIRLY STATED THAT THE ISSUE IN APPEAL HAS ALREADY BEEN AD JUDICATED BY THE TRIBUNAL IN ASSESSEES FAVOUR IN THE AFOREMENTI ONED APPEALS. 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BEL OW AS WELL AS THE DECISIONS OF THE CO-ORDINATE BENCH OF THE TRIBU NAL ON WHICH THE LD.AR HAS PLACED RELIANCE EXAMINED. IN THE PRE SENT CASE THE ASSESSING OFFICER HAS MADE DIS-ALLOWANCE U/S.40(A)( I) ON THE GROUND THAT THE PAYMENTS HAVE BEEN MADE IN THE NATU RE OF FEE FOR TECHNICAL SERVICES TO OVERSEAS PARTIES FOR REND ERING MANAGERIAL SERVICES OUTSIDE INDIA. 6. THE CIT(APPEALS) IN HIS ORDER HAS OBSERVED THAT THE ASSESSING OFFICER HAS NOT DISPUTED THE FACT THAT: I. THE AGENTS WERE NON-RESIDENT ASSOCIATE GROUP COMPANIES; II. THE NON-RESIDENT GROUP COMPANIES WERE OPERATING THEIR BUSINESS ACTIVITIES OUTSIDE INDIA; I.T.A. NO.106/MDS/14 & C.O. NO. 18/MDS/14 :- 5 -: III. THE COMMISSION PAID RELATE TO SERVICES PROVIDE D OUTSIDE INDIA NAMELY PROCURING EXPORT ORDERS AND FOLLOW UP ON PAYMENTS; IV. THE NON-RESIDENT COMPANIES DID NOT HAVE ANY PERMANENT ESTABLISHMENT OR PERMANENT BUSINESS PLACE IN INDIA; V. THE COMMISSION WAS REMITTED TO THE NON-RESIDENT COMPANIES DIRECTLY OUTSIDE INDIA; AND FURTHER THE ASSESSING OFFICER HAS NOT GIVEN VALID REASONS FOR HOLDING THAT THERE IS PRIMA-FACIE REASON THAT THE COMMISSION IS NOT INCURRED WHOLLY AND EXCLUSIVELY F OR THE PURPOSE OF BUSINESS OF THE ASSESSEE. 7. WE FIND THAT THE ISSUE IN HAND HAD COME UP BEFO RE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY.2005-06. WHEREIN THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.220 1/MDS/2010 DECIDED ON 25 TH MARCH 2011 HAS HELD AS UNDER: 7. NOW COMING TO THE SECOND ASPECT REGARDING DEDU CTION OF TAX AT SOUCE HAVING NOT BEING MADE OBVIOUSLY AO A FTER COMING TO A CONCLUSION THAT INVOLVEMENT OF GROUP CO MPANY WAS NOT PROVED COULD NOT HAVE IN THE SAME BREATH H ELD THAT THE PAYMENT WAS FOR TECHNICAL SERVICES. NO DOUBT TE CHNICAL SERVICE WOULD DEFINITELY INCLUDE MANAGERIAL SERVICE S. HOWEVER IN OUR OPINION CANVASSING OF ORDERS ABROAD COULD NO T BE FOR I.T.A. NO.106/MDS/14 & C.O. NO. 18/MDS/14 :- 6 -: MANAGERIAL SERVICES NOR CAN IT BE SAID TO BE FOR AN Y CONSULTATION. THUS DEFINITELY TECHNICAL SERVICES AS PER EXPLANATION 2 TO SEC. 9(1)(VII) OF THE ACT WOULD HA VE NO APPLICATION. WHEN AN ASSESSEE IS NOT OBLIGED TO DED UCT TAX ON A PAYMENT MADE TO NON-RESIDENT THEN IN VIEW OF THE DECISION OF HON. APEX COURT IN THE CASE OF GE INDIA TECHNOLO GY CENTRE P. LTD. (SUPRA) THERE WAS NO QUESTION OF ANY FAILUR E TO DEDUCT SUCH TAX BEING FASTENED ON IT. OR IN OTHER WORDS A N ASSESSEE CANNOT BE VISITED IN SUCH A SITUATION WITH CONSEQU ENCES OF A NATURE MENTIONED IN SEC. 40(A)(I) OF THE ACT. IN OU R OPINION THERE WAS NO QUESTION OF DEDUCTION OF TAX BEING MAD E BY THE ASSESSEE ON THE COMMISSION PAYMENT ABROAD. HOWEVER FROM THE LIST SUBMITTED BY THE ASSESSEE WE FIND THAT A S UM OF ` 2 37 648/- WAS DOMESTIC COMMISSION AND ONLY ` 1 43 79 3457/- WAS ITA NO.2201/MDS/10 COMMISSION PA ID OVERSEAS. FOR DOMESTIC COMMISSION OF ` 2 37 648/- ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE IF THE PAYMENT E XCEEDED THE LIMIT PRESCRIBED UNDER THE ACT. HENCE WHILE HOLDIN G THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE FOR WARR ANTING A DISALLOWANCE INSOFAR AS IT RELATED TO OVERSEAS COMM ISSION OF ` 1 43 79 347/-. WE ARE OF THE OPINION THAT THE BALAN CE OF ` 2 37 648/- BEING DOMESTIC COMMISSION THE LATTER PO RTION REQUIRE A RELOOK BY THE AO. SO WE REMIT THE QUESTIO N OF DISALLOWANCE BY APPLICATION OF SEC. 40(A)(I) OF THE ACT INSOFAR AS IT RELATES TO DOMESTIC COMMISSION OF ` 2 37 648/- BACK TO THE FILE OF THE AO FOR VERIFICATION AND DISPOSAL IN ACC ORDANCE WITH LAW AFTER GIVING THE ASSESSEE AN OPPORTUNITY TO EX PLAIN ITS CASE. BUT INSOFAR AS OVERSEAS COMMISSION OF ` 1 43 79 347/- IS I.T.A. NO.106/MDS/14 & C.O. NO. 18/MDS/14 :- 7 -: CONCERNED WE UPHOLD THE ORDER OF THE CIT(A) DELETI NG SUCH DISALLOWANCE. SINCE THE ISSUE IN HAND HAS ALREADY BEEN ADJUDICATE D BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE RESPECTFULLY FOLLOWING THE SAME THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF MERIT. 8. THE ASSESSEE HAS FILED CROSS-OBJECTIONS IMPUGNIN G THE ORDER OF THE CIT(APPEALS) ON THE ISSUE OF RE-OPENIN G. SINCE THE APPEAL OF THE REVENUE IS DISMISSED THE CROSS-OBJE CTIONS OF THE ASSESSEE HAVE BECOME INFRUCTUOUS AND THE SAME ARE D ISMISSED AS SUCH. ORDER PRONOUNCED ON TUESDAY THE 08 TH APRIL 2014 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VIKAS AWA STHY) ( . . . ) ( ! ) / VICE PRESIDENT ! '# / JUDICIAL MEMBER $ /CHENNAI %'& /DATED: 08 TH APRIL 2014 TNMM COPY TO: ASSESSEE/AO/CIT(A)/CIT/DR