The DCIT, Special Range-1, Visakhapatnam v. M/s Skoda Exports Co Ltd Rep RINL, Visakhapatnam

ITA 147/VIZ/1998 | 1994-1995
Pronouncement Date: 14-05-2010 | Result: Dismissed

Appeal Details

RSA Number 14725314 RSA 1998
Assessee PAN AABCR0435L
Bench Visakhapatnam
Appeal Number ITA 147/VIZ/1998
Duration Of Justice 12 year(s) 3 month(s) 9 day(s)
Appellant The DCIT, Special Range-1, Visakhapatnam
Respondent M/s Skoda Exports Co Ltd Rep RINL, Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 14-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 14-05-2010
Date Of Final Hearing 12-04-2010
Next Hearing Date 12-04-2010
Assessment Year 1994-1995
Appeal Filed On 04-02-1998
Judgment Text
ITA NO.147/VIZAG/1998 & OTHERS SKODA EXPORTS PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.147/VIZAG/1998 ASSESSMENT YEAR: 1994-95 DCIT SPL.RANGE VS. SKODA EXPORTS LTD. VISAKHAPATNAM VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AABCR 0435 L ITA NOS.32/VIZ/2000 397/VIZ/2002 398/VIZ/2002 538/VIZ/2002 & 237/VIZ/2003 ASSESSMENT YEARS: 1995-96 1997-98 1998-99 1996-9 7 & 1994-95 SKODA EXPORTS LTD. VS. DCIT SPL. RANGE VISAKHAPATNAM VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO: AABCR 0435 L DEPARTMENT BY: SHRI SUBRATA SARKAR CIT (DR) ASSESSEE BY : SHRI V. RAMA CHANDRAN ADVOCATE ORDER PER SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER: OUT OF THESE SIX APPEALS 5 ARE PREFERRED BY THE A SSESSEE AND ONE APPEAL (ITA NO.147/VIZ/1998) IS PREFERRED BY THE RE VENUE. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS THESE WERE HE ARD TOGETHER AND ARE BEING DISPOSED OFF THROUGH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. WE HOWEVER PREFER TO ADJUDICATE THESE APPEALS ONE AFT ER THE OTHER. ITA NOS.237 32 398 397 AND 538: THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAINST THE RESPECTIVE ORDERS OF THE CIT ( A). INITIALLY THE ASSESSEE HAS FILED THE GROUNDS OF APPEAL RUNNING INTO 5 PAGE S IN THE FORM OF ARGUMENTS ITA NO.147/VIZAG/1998 & OTHERS SKODA EXPORTS PAGE 2 OF 7 WHICH WERE LATER ON REVISED BY FILING THE CONCISE G ROUNDS OF APPEAL. ACCORDINGLY THE REVISED GROUNDS OF APPEALS WERE TAK EN ON RECORD FOR ITS ADJUDICATION. 2. THROUGH FIRST GROUND IN ITA NO.32 AND 237 THE AS SESSEE HAS ASSAILED THE ORDER OF THE CIT (A) FOR THE YEAR 1994-95 AND 1 995-96 THAT CIT (A) HAS ERRED IN CONFIRMING THE ASSESSMENT AS FEE FOR TECHN ICAL SERVICE OF THE SUM OF RS.3 28 57 474/- IN A.Y 1994-95 AND RS.84 52 958/- IN A.Y 1995-96 BEING THE TECHNICAL ASSISTANCE FEE RECEIVED BY THE ASSESSEE A ND FURTHER ERRED IN NOT ALLOWING THE CLAIM OF EXPENDITURE AMOUNTING TO RS.3 06 77 294/- AND RS.53 69 151/- RESPECTIVELY INCURRED IN EARNING THE SAID INCOME. 3. DURING THE COURSE OF HEARING OF THE APPEAL OUR A TTENTION WAS INVITED TO THE FACT THAT CIT (A) HAS DECIDED THE IMPUGNED ISSU E FOLLOWING ITS ORDER FOR THE ASSESSMENT ORDER 1993-94 AND DISALLOWED THE CLA IM OF THE ASSESSEE. IN ASSESSMENT ORDER 1993-94 THE ORDER OF THE CIT (A) W AS CHALLENGED BEFORE THE TRIBUNAL AND THE TRIBUNAL HAS ADJUDICATED THE ISSUE IN DETAILS AND HAS HELD THAT FEE FOR THE SUPERVISION HAVING BEEN PAID FOR S ERVICES RENDERED IN INDIA AND THE NON-RESIDENT COMPANY HAVING PERMANENT ESTAB LISHMENT IN INDIA THE SAME SHOULD BE SUBJECT TO TAX AS BUSINESS INCOME AL LOWING THE DEDUCTION FOR THE EXPENDITURE INCURRED AS CLAIMED BY THE ASSESSE E. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDE R: 5. ON HEARING THE RIVAL SUBMISSION AND ON A PERUSA L OF THE WRITTEN SUBMISSION ALONG WITH THE MATERIALS AVAILAB LE ON RECORD IT HAS BEEN OBSERVED THAT THE FACTUAL POSITION AS H AS BEEN CARVED OUT BY THE LEARNED COUNSELS ON BEHALF OF THE ASSESS EE FOR THE ASSESSMENT YEARS UNDER CONSIDERATION IN THE INSTANT CASE GIVEN A CLEAR PICTURE OF THE SEQUENCE OF ASSESSMENTS RELATI NG TO THE ASSESSEE INVOLVED AND THE FACTUAL AS WELL AS THE LE GAL POSITION SUPPORT THEIR CONTENTION. ON THE OTHER HAND THE AT TEMPT OF THE REVENUE TO COUNTER THE ARGUMENT AND WRITTEN SUBMISS ION OF THE ASSESSEE COMPANY IS ALTHOUGH APPRECIABLE BUT THE S EQUENCE OF EVENTS THAT HAVE BEEN FOUND IN THE ASSESSMENT ORDER S TILT THE ITA NO.147/VIZAG/1998 & OTHERS SKODA EXPORTS PAGE 3 OF 7 FACTUAL POSITION IN FAVOUR OF THE ASSESSEE COMPANY MORE THAN THAT OF REVENUE. IN VIEW OF THE FACT THAT THE AO WHI LE COMPLETING THE ASSESSMENT FOR THE ASSESSMENT YEAR H AS NOT CONSIDERED THE ASSESSMENT OF THE EARLIER YEARS IN R IGHT PERSPECTIVE. THE LEGAL POSITION PARTICULARLY THE P ROVISIONS OF THE DTAA BETWEEN INDIA AND CZESLOVAKIA AND THE RELEVANT PROVISIONS OF THE ACT ALONG WITH THE CASE LAWS CITED BY THE LE ARNED COUNSEL BOTH AT THE TIME OF ARGUMENT AND WHILE FILING THE W RITTEN SUBMISSION ALSO TILT HEAVILY IN FAVOUR OF THE ASSE SSEE THE FEE FOR SUPERVISION HAVING BEEN PAID FOR SERVICES RENDERED IN INDIA AND THE NON RESIDENT COMPANY HAVING PERMANENT ESTABLISH MENT IN INDIA THE SAME SHOULD BE SUBJECTED TO TAX AS BUSINE SS INCOME ALLOWING DEDUCTION FOR THE EXPENDITURE INCURRED AS CLAIMED BY THE ASSESSEE-APPELLANT. WHEN BOTH FACTUAL AS WELL A S LEGAL ASPECT FAVOUR STRONGLY TO THE CAUSE OF THE ASSESSEE COMPAN Y THE APPEAL HAS TO BE ALLOWED IN FAVOUR OF THE ASSESSEE . 4. THE LD DR ON THE OTHER HAND PLACED A STRONG RELI ANCE ON THE ORDER OF THE CIT (A). 5. HAVING GONE THROUGH THE ORDER OF THE TRIBUNAL FO R THE ASSESSMENT YEAR 1993-94 AND THE IMPUGNED ORDERS WE FIND THAT CIT (A ) WHILE ADJUDICATING THE IMPUGNED ISSUE HAS PLACED SOLE RELIANCE UPON THE OR DER OF THE CIT (A) FOR THE ASSESSMENT YEAR 1993-95. THIS ORDER OF THE CIT (A) WAS CHALLENGED BEFORE THE TRIBUNAL THROUGH ITA NO.2190/H/96 AND THE TRIBU NAL HAS ADJUDICATED THE ISSUE IN THE LIGHT OF WRITTEN SUBMISSIONS AND VARIO US JUDICIAL PRONOUNCEMENTS AND HAS FINALLY CONCLUDED THE FEE FOR SUPERVISION H AVING BEEN PAID FOR SERVICES RENDERED IN INDIA AND NON-RESIDENT COMPANY HAVING PERMANENT ESTABLISHMENT IN INDIA THE SAME SHOULD BE SUBJECT T O TAX AS BUSINESS INCOME ALLOWING THE DEDUCTION FOR THE EXPENDITURE INCURRED AS CLAIMED BY THE ASSESSEE. SINCE THE FINDINGS OF THE TRIBUNAL HAS NO T BEEN REVERSED SO FAR WE FOLLOWING THE SAME DECIDE THE ISSUE IN FAVOUR OF TH E ASSESSEE IN TERMS INDICATED IN THE ORDER OF THE TRIBUNAL FOR THE A.Y 1993-94. 6. THE NEXT GROUND IN THESE TWO APPEALS AND THE SOL E GROUND IN OTHER APPEALS RELATE TO THE DISALLOWANCE OF SPECIAL DRAWI NG RIGHTS (SDR VARIATIONS) ITA NO.147/VIZAG/1998 & OTHERS SKODA EXPORTS PAGE 4 OF 7 ON THE ERRONEOUS ASSUMPTION THAT THE PAYMENT IS IN THE NATURE OF FEE FOR TECHNICAL SERVICE. IN THIS REGARD IT WAS ALSO CONTE NDED THAT THIS ISSUE IS ALSO COVERED BY THE ORDER OF THE TRIBUNAL PERTAINING TO THE ASSESSMENT YEAR 1992- 93 IN ITA NO.1176/H/96 IN WHICH THE IDENTICAL ISSUE WAS RAISED AND WAS ADJUDICATED BY THE TRIBUNAL AND FINALLY THE TRIBUN AL HAS CONCLUDED THAT THE RECEIPT FOR IMPORT OF DRAWINGS AND DESIGNS AND TECH NICAL DOCUMENTS BEING IN THE NATURE OF PLANT AND MACHINERY CANNOT BE CONSIDE RED AS FEE FOR TECHNICAL SERVICES AND ONCE THIS DECISION IS ARRIVED AT THE SDR VARIATIONS HAS TO BE TREATED AS NOT TAXABLE FOR NOT BEING IN THE NATURE OF FEE FOR TECHNICAL SERVICES. THE COPY OF THE ORDER IS PLACED ON RECORD . 7. THE LD DR ON THE OTHER HAND DID NOT DISPUTE THES E FACTUAL ASPECTS. HE HOWEVER PLACED RELIANCE UPON THE ORDER OF THE A O. IT WAS ALSO CONTENDED BY THE LD DR THAT THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.1263 AND 1288 WAS NOT BROUGHT TO THE NOTICE OF T HE TRIBUNAL WHILE DECIDING THE APPEAL IN ITA NO.1176/H/96. SINCE THE AMOUNT WERE HELD TO BE TAXABLE IN THE ABOVE MENTIONED ORDER OF THE TRIBUNA L THE REASONING GIVEN IN ITA NO.1176 OF 1996 THAT THE SDR VARIATION IS NOT T AXABLE AS THE ORIGINAL PAYMENT IS ALSO NOT TAXABLE IS NOT ON APPRECIATION OF THE CORRECT FACTS OF THE CASE. IT WAS FURTHER CONTENTED BY THE LD DR THAT SI NCE THE TECHNICAL FEES IS ON DIFFERENT FOOTING THE SAME LOGIC CANNOT BE APPLIED . IN SUPPORT OF HIS CONTENTION HE PLACED RELIANCE UPON HINDUSTAN TRADIN G COMPANY REPORTED IN 160 ITR 15 WHEREIN IT WAS HELD THAT EXCESS AMOUNT R ECEIVED ON DEVALUATION GAINS ON PRICE IS A TRADING RECEIPT AND IS A PART O F THE SALE PROCEEDS. IN VIEW OF THE SAME ONCE TECHNICAL FEES IS HELD TO BE TAXA BLE THE SDR VARIATION OF THE SAME WHICH IS NOTHING BUT THE DEVALUATION GAINS ALSO NEEDS TO BE TAXED IN THE HANDS OF THE ASSESSEE COMPANY. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE DOCUMENTS PLACED O N RECORD. THOUGH THE REVENUE HAS MADE A REFERENCE OF SOME TRIBUNAL ORDER S IN THE ASSESSEES OWN ITA NO.147/VIZAG/1998 & OTHERS SKODA EXPORTS PAGE 5 OF 7 CASE IN ITA NO.1263 AND 1288/H/89 & 92 IN WHICH THE TRIBUNAL HAS TAKEN A CONTRARY VIEW BUT THE SAME ARE NOT PLACED BEFORE US FOR PERUSAL. ON THE OTHER HAND THE ASSESSEE HAS PLACED THE ORDERS OF THE TRIB UNAL FOR THE ASSESSMENT YEAR 1992-93 AND 1993-94. THE CIT (A) WHILE DISALLO WING THE CLAIM OF THE ASSESSEE HAS PLACED RELIANCE UPON THE CIT (A) ORDER S FOR THE ASSESSMENT YEAR 1993-94 WHICH HAD BEEN REVERSED BY THE TRIBUNAL THR OUGH THE AFORESAID ORDER. THE TRIBUNAL WHILE DEALING WITH THE ISSUE HA S MADE A DETAILED ANALYSIS OF THE RELEVANT PROVISIONS IN THE LIGHT OF THE DETA ILED SUBMISSIONS OF THE ASSESSEE AND HAS FINALLY CONCLUDED THAT ONCE THE RE CEIPT FOR IMPORT OF DRAWINGS AND DESIGNS RECEIPTS AND TECHNICAL DOCUMEN TS BEING THE NATURE OF PLANT AND MACHINERY CANNOT BE CONSIDERED AS FEE FOR TECHNICAL SERVICES THE SDR VARIATIONS HAS TO BE TREATED AS NON TAXABLE FOR NOT BEING IN THE NATURE OF FEE FOR TECHNICAL SERVICES. THE RELEVANT OBSERVATIO NS OF THE TRIBUNAL ARE EXTRACTED HERE UNDER: 11. ON HEARING THE RIVAL SUBMISSIONS ON A PERUSAL OF THE AVAILABLE MATERIALS ON RECORD AND AFTER GOING THROU GH THE CITED CASE LAWS FROM ANY VIEW OF THE MATTER WE DO NOT FI ND ANY SUBSTANCE IN THE ORDERS OF THE AUTHORITIES BELOW TO JUSTIFY THE INFERENCE THAT THE RECEIPT BY THE FOREIGN COMPANY F OR IMPORT OF DRAWINGS AND DESIGNS AND TECHNICAL DOCUMENTS CAN BE TREATED AS FEES RECEIVED IN INDIA AND HAS TO BE TAXABLE IN INDIA. WE ARE OF THE OPINION THAT THE RECEIPT FOR IMPORT OF DRAWI NGS AND DESIGNS AND TECHNICAL DOCUMENTS BEING IN THE NATURE OF PLANT AND MACHINERY CANNOT BE CONSIDERED AS FEE FOR TECHN ICAL SERVICES. ONCE THIS DECISION IS ARRIVED AT SDR VAR IATION HAS TO BE TREATED AS NOT TAXABLE FOR NOT BEING IN THE NAT URE OF FEES FOR TECHNICAL SERVICES. EVEN ON THE ALTERNATE GROUNDS R AISED BY THE ASSESSEE-APPELLANT THE SAME IS NOT TAXABLE. ON A PE RUSAL OF THE PROVISIONS RELATING TO DOUBLE TAXATION AVOIDANCE AG REEMENT AND THE RELEVANT PROVISIONS OF THE INCOME TAX ACT A LONG WITH THE JUDGMENTS CITED IT IS EVIDENT THAT IN CASE OF ANY DISPUTE OR DOUBT EMERGING OUT IN BETWEEN THE SAME THE PROVISI ONS OF DOUBLE TAXATION AVOIDANCE AGREEMENT HAVE TO OVERRID E THE OTHER. HAVING CONSIDERED FROM ALL POSSIBLE FACTUAL AS WELL AS LEGAL ANGLES THE APPEAL WILL HAVE TO BE ALLOWED IN FAVOUR OF THE ASSESSEE COMPANY. ITA NO.147/VIZAG/1998 & OTHERS SKODA EXPORTS PAGE 6 OF 7 SO LONG AS THE ORDER OF THE TRIBUNAL IN THE ASSESSE ES OWN CASE FOR IMMEDIATE PRECEDING YEARS HAS NOT BEEN REVERSED IT HOLDS THE FIELD AND WE FOLLOWING THE SAME DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. AC CORDINGLY WE SET ASIDE THE ORDER OF THE CIT (A) AND DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE IN TERMS INDICATED IN THE AFORESAID ORDER OF THE TRIBU NAL. 9. THE NEXT GROUNDS IN THESE TWO APPEALS (ITA NOS.2 37 AND 32) RELATING TO THE DISALLOWANCE OF SET OFF OF BUSINESS LOSS PER TAINS TO THE ASSESSMENT YEAR 1993-94. IN THIS REGARD WE DO NOT FIND ANY OBSERVAT IONS OF THE CIT (A) IN THEIR RESPECTIVE ORDERS. SINCE THIS GROUND DOES NOT ARISE OUT OF THE ORDER OF CIT(A) WE DECLINE TO ENTERTAIN THE SAME. 10 . APPEAL NO.147 OF 1998 : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE CIT (A) ON A SOLITARY GROU ND THAT THE CIT (A) HAS ERRED IN DELETING THE INTEREST U/S 234B AMOUNTING T O RS.91.25 LAKHS SINCE CHARGING OF INTEREST U/S 234B IS MANDATORY UNDER TH E LAW. IN THIS REGARD THE LD COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE IDENTICAL ISSUE WAS EXAMINED BY THE TRIBUNAL IN ITA NO.1486 OF 1996 FOR THE ASSESSMENT YEAR 1993-94 IN THE ASSESSEES OWN CASE IN WHICH THE TRIB UNAL HAS HELD THAT WHEN THE QUESTION OF LIABILITY FOR PAYMENT OF ADVANCE TA X DOES NOT ARISE FOR THE REASON THAT ONLY AFTER DEDUCTION OF TAX AT SOURCE P AYMENT SHOULD BE MADE TO THE ASSESSEE COMPANY THERE IS NO JUSTIFICATION FOR LEVYING THE INTEREST U/S 234B AND 234C. ACCORDINGLY THE TRIBUNAL CONFIRMED T HE ORDER OF THE CIT (A). THE RELEVANT PORTION OF THE TRIBUNAL ORDER IS EXTRA CTED BELOW: 3. IN FURTHERANCE TO THE ARGUMENT ADVANCED BY THE LE ARNED COUNSEL ON BEHALF OF THE ASSESSEE HE FURTHER INVIT ED OUR ATTENTION TO THE PROVISIONS OF SECTION 234B ALONG W ITH THAT OF SECTION 210 208 209 AND 195 OF THE INCOME TAX ACT AND MADE A SERIOUS ATTEMPT TO CONVINCE THE BENCH THAT IN THE INSTANT CASE INTEREST UNDER SECTION 234B IS NOT LEVIABLE SINCE N O TAX IS PAYABLE BY THE ASSESSEE COMPANY ITA NO.147/VIZAG/1998 & OTHERS SKODA EXPORTS PAGE 7 OF 7 SIMILAR VIEW WAS ALSO EXPRESSED BY THE TRIBUNAL WHI LE DEALING WITH THE ASSESSEES OWN CASE FOR THE IMMEDIATE PRECEDING YEAR S I.E. 1993-94 IN ITA NO.2161/H/96. SINCE THE TRIBUNAL HAS TAKEN A CONSIS TENT VIEW IN THIS REGARD WE FIND NO JUSTIFICATION TO TAKE A CONTRARY VIEW IN THIS APPEAL. ACCORDINGLY WE CONFIRM THE ORDER OF THE CIT (A). 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NOS. 397 398 538 ARE ALLOWED IN ITA NO.237 AND 32 ARE PARTLY ALLOWED AN D THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 14.5.2010. SD/- SD/- (B R BASKARAN) (SUNIL KUMAR YADA V) ACCOUNTANT MEMBER JUDICIAL MEMBER PVV/SPS VISAKHAPATNAM DATE:14 TH MAY 2010 COPY TO 1 THE DCIT SPECIAL RANGE-1 VISAKHAPATNAM 2 SKODA EXPORTS LTD. REP. BY RINL ADM. BUILDING V ISAKHAPATNAM STEEL PLANT VISAKHAPATNAM 3 4 THE CIT (A) VISAKHAPATNAM THE CIT VISAKHAPATNAM 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM