ITO(IT)-1(1), Kolkata, Kolkata v. National Engineering Industries Ltd., Kolkata

ITA 1270/KOL/2010 | 2009-2010
Pronouncement Date: 28-01-2011

Appeal Details

RSA Number 127023514 RSA 2010
Bench Kolkata
Appeal Number ITA 1270/KOL/2010
Duration Of Justice 7 month(s) 9 day(s)
Appellant ITO(IT)-1(1), Kolkata, Kolkata
Respondent National Engineering Industries Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Department
Bench Allotted B
Tribunal Order Date 28-01-2011
Assessment Year 2009-2010
Appeal Filed On 18-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BEN CH B KOLKATA () BEFORE . .. . . .. . SHRI B.R.MITTAL JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . #$ SHRI C.D.RAO ACCOUNTANT MEMBER % % % % / ITA NOS . 1270 & 1271/KOL/2010 &' ()/ ASSESSMENT YEAR : 2009-10 (+ / APPELLANT ) I.T.O. (IT)-1(1) KOLKATA - & - - VERSUS - . (./+ / RESPONDENT ) M/S.NATIONAL ENGINEERING INDUSTRIES LTD. KOLKATA + 0 1 #/ FOR THE APPELLANT: SHRI A.K.PRAMANIK ./+ 0 1 #/ FOR THE RESPONDENT: SHRI R.N.BAJORIA S.BANDHAPADHAY #2 / ORDER ( (( ( . .. .!' !'!' !'. .. . ) )) ) #$ PER SHRI C.D.RAO AM THE ABOVE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER DATED 19.03.2010 OF THE CIT(A)-VI KOLKATA PERTAINING TO A.YR. 2009-10. 2. IN BOTH THESE APPEALS THE REVENUE HAS RAISED S IMILAR GROUNDS OF APPEAL WHICH ARE AS UNDER:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN INTERPRETING THAT THE AGREEMENT DATED 17.8 .2007 IS A NEW AGREEMENT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE NEW AGREEMENT IS NOT AN EXTENSI ON OF THE EXISTING AGREEMENT BUT A FRESH AGREEMENT ENTERED AFTER 01.06.2005. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE WITHHOLDING TAX IS TO BE DEDUCT ED @ 10.557% AND NOT 15%. 2 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT WHILE PA SSING ORDER U/S 195(1) OF THE IT ACT THE AO DIRECTED THE ASSESSEE TO WITHHOLD THE TAX @1 5% AS PER PROVISION OF ARTICLE 12 (2)(A)(II) OF THE DTAA BETWEEN USA & INDIA BY OBSER VING AS UNDER : IT IS SEEN FROM THE LICENSE & TECHNICAL ASSISTANCE AGREEMENT DATED 17.8.2007 BETWEEN BRENCO INC.(USA) & YOUR COMPANY V IDE DEFINITION PARAGRAPH [PARA 1(E)] THAT THE PRESENT AGREEMENT IS IN CONTINUATION WITH THE PREVIOUS AGREEMENT DATED 19.08.2002 AND THE MINISTR Y OF INDUSTRY GOVT. OF INDIA VIDE THEIR LETTER DATED 05.03.2008 HAD ALSO A PPROVED THE SAID EXTENDED AGREEMENT DATED 17.08.2007. THUS IT CANNOT BE LOGIC ALLY CONSIDERED TO BE A NEW & SEPARATE AGREEMENT & ACCORDINGLY THE PROVISION OF SECTION 115A(1)(B)(AA) OF THE INCOME TAX ACT IS NOT APPLICABLE IN THIS CAS E. SO YOU ARE REQUIRED TO WITHHOLD TAX @ 15% AS PER PROVISION OF ARTICLE 12(2 )(A)(II) OF THE DTAA BETWEEN USA & INDIA ON THE GROSS AMOUNT OF ROYALTY TO BE REMITTED TO BRENCO INC. USA. 3.1. AGGRIEVED BY THIS THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A). AFTER TAKING INTO CONSIDERATION OF THE VARIOUS SUBMISSION S AND CAREFUL PERUSAL OF THE AGREEMENT DATED 19.08.2002 AND 17.08.2007 THE LD. C IT(A) HELD THAT THE WITHHOLDING TAX IS TO BE DEDUCTED @10.557% AS AGAINST 15% BY OB SERVING AS UNDER :- I HAVE PERUSED THE AGREEMENT DATED 19.8.2002 FI LED BEFORE ME. AS SEEN FROM THIS AGREEMENT THERE WERE CHANGES MADE IN CASE OF R OYALTY GRANT OF LICENSE TECHNICAL ASSISTANCE & PLANT VISITATION. THERE WERE CHANGES IN THE PERCENTAGE OF ROYALTIES TO BE PAID . IN THE DEFINITION PART AT CL AUSE (E) IT IS MENTIONED THAT THIS AGREEMENT IS IN CONTINUATION WITH THE PREVIOUS AGRE EMENT AND THEREFORE WILL BE EFFECTIVE FROM 26 TH JUNE 2007 PURSUANT TO THE ACCEPTANCE BY THE GOVT. OF INDIA. IN THE OLD AGREEMENT DATED 19.08.2002 AT CLAUSE (E) OF THE DEFINITION IT IS STATED THAT THIS AGREEMENT IS IN CONTINUATION WITH THE PRE VIOUS AND THEREFORE WILL BE EFFECTIVE FROM 26 TH JUNE 2002 PURSUANT TO THE ACCEPTANCE BY THE GOVER NMENT OF INDIA. SINCE THE EARLIER AGREEMENT MADE ON 19 TH DAY OF AUGUST 2002 EXPIRES ON 25 TH JUNE 2007 THE CLAUSE (E) IN THE NEW AGREEMENT SP ECIFIES THAT THIS AGREEMENT WILL BE EFFECTIVE FROM 26 TH JUNE 2007 ALTHOUGH THE AGREEMENT WAS ENTERED ON 17 TH DAY OF AUGUST 2007. THIS SHOWS THAT THE CLAUSE WA S INSERTED TO HAVE A CONTINUITY IN THE AGREEMENT. THE I.T.O. IN H IS ORDER HAS INTERPRETED THAT THE NEW AGREEMENT WAS IN CONTINUATION OF PREVIOUS A GREEMENT. THE AGREEMENT DATED 17.08.2007 WAS A NEW AGREEMENT WITH MODIFICAT IONS AND CHANGES. UNDER THE FINANCE ACT 2009 PART-II THE RATES OF TAX AT SOURCES FOR FOREIGN REMITTANCE ARE MENTIONED. AS PER THE FINANCE ACT WHEN THE AGRE EMENT IS MADE ON OR AFTER THE 1 ST DAY OF JUNE 2005 THE RATE OF TAX AT SOURCE FOR F OREIGN REMITTANCE IS ONLY 10%. ACCORDING TO THE LEGAL FRAME WORK IF ANY ACTI ON IS TO BE TAKEN THEN IT HAS TO BE TAKEN UNDER NEW AGREEMENT AND NOT UNDER OLD A GREEMENT. IN VIEW OF THE ABOVE MENTIONED DISCUSSION IT IS CLEAR THAT THE NEW AGREEMENT IS NOT AN EXTENSION OF THE EXISTING AGREEMENT BUT A FRESH AGR EEMENT ENTERED AFTER 3 01.06.2005 AND WITH HOLDING TAX IS TO BE DEDUCTED A T THE RATE OF 10.5575 PERCENT AND NOT 15 PERCENT. THE GROUND OF APPEAL IS ALLOWED. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFORE U S 4. AT THE TIME OF HEARING BEFORE US THE LD. DR HAS HEAVILY RELIED ON THE ORDER OF THE AO PASSED U/S 195(1) OF THE IT ACT. 5. ON THE OTHER HAND THE LD. AR APPEARING ON BEHAL F OF THE ASSESSEE BY REFERRING TO THE AGREEMENTS DATED 19.08.2002 AND 17.08.2007 U NDER APPROVAL OF GOVT. OF INDIA DATED 5.3.2008 AND BY PLACING RELIANCE ON FINANCE A CT 2009 SUBMITTED THAT THE ACTION OF THE LD. CIT(A) IS JUSTIFIABLE IN THE FACTS AND C IRCUMSTANCES OF THE CASE. THEREFORE HE REQUESTED TO UPHOLD THE SAME. 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL CONSIDERATION OF THE MATERIALS AVAILABLE ON RECORD WE ARE OF THE VIEW TH AT THE AGREEMENT ENTERED BY THE ASSESSEE ON 17.08.2007 IS NOT IN CONTINUATION OF TH E AGREEMENT DATED 19.8.2002 FOR THE REASONS MENTIONED BY THE LD. CIT(A) IN THE IMPUGNED ORDER WHICH WAS REPRODUCED IN THE PRECEDING PARAGRAPHS. WE FIND NO INFIRMITY IN T HE ORDER OF THE LD. CIT(A) TO BE INTERFERED WITH AND WE UPHOLD THE SAME. 7. IN THE RESULT THE APPEALS OF THE REVENUE ARE DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 28.01.2011. SD/- SD/- . .. . . .. . B.R.MITTAL JUDICIAL MEMBER . .. .!' !'!' !'. .. . #$ C.D.RAO ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE: 28.01.2011. R.G.(.P.S.) 4 #2 0 .3 4#3(5- COPY OF THE ORDER FORWARDED TO: 1. M/S.NATIONAL ENGINEERING INDUSTRIES LTD. 9/1 R.N. MUKHERJEE ROAD KOLKATA-700001. 2 THE ITO(IT)-1(1) KOLKATA. 3. THE CIT 4. THE CIT(A)-VI KOLKATA 5. DR KOLKATA BENCHES KOLKATA /3 ./ TRUE COPY #2&:/ BY ORDER DEPUTY /ASST. REGISTRAR ITAT KOLKATA BENCHES