Asstt. Commissioner of Income Tax, Central Circle-II, Kanpur v. M/s Model Exims, Kanpur

ITA 697/LKW/2013 | 2009-2010
Pronouncement Date: 11-04-2014 | Result: Dismissed

Appeal Details

RSA Number 69723714 RSA 2013
Assessee PAN AADFM6163H
Bench Lucknow
Appeal Number ITA 697/LKW/2013
Duration Of Justice 6 month(s) 2 day(s)
Appellant Asstt. Commissioner of Income Tax, Central Circle-II, Kanpur
Respondent M/s Model Exims, Kanpur
Appeal Type Income Tax Appeal
Pronouncement Date 11-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 11-04-2014
Date Of Final Hearing 04-03-2014
Next Hearing Date 04-03-2014
Assessment Year 2009-2010
Appeal Filed On 09-10-2013
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER ITA NO.697/LKW/2013 ASSESSMENT YEAR:2009 - 10 A.C.I.T. CIRCLE - II KANPUR. VS. M/S MODEL EXIMS JAJMAU KANPUR. PAN:AADFM6163H (APPELLANT) (RESPONDENT) ITA NO.725/LKW/2013 ASSESSMENT YEAR:2009 - 10 M/S MODEL EXIMS JAJMAU KANPUR. PAN:AADFM6163H VS. A.C.I.T. CIRCLE - II KANPUR. (APPELLANT) (RESPONDENT) O R D E R PER SUNIL KUMAR YADAV: THESE CROSS APPEALS ARE PREFERRED BY THE ASSESSEE AS WELL AS THE REVENUE AGAINST THE ORDER OF CIT(A). SINCE THESE APPEALS WERE HEARD TOGETHER THE SAME ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. WE HOWEVER PREFER TO ADJUDICATE THEM ONE AFTER THE OTHER. I.T.A. NO. 725 /LKW/201 3 2. THIS IS AN APPEAL OF THE ASSESSEE IN WHICH TH E ORDER OF CIT(A) IS ASSAILED ON THE FOLLOWING GROUNDS: ASSESSEE BY SHRI RAKESH GARG ADVOCATE REVENUE BY SHRI Y. P. SRIVASTAVA D.R. DATE OF HEARING 04/03/2014 DATE OF PRONOUNCEMENT 1 1 / 0 4 / 2 0 1 4 2 1. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE DISALLOWANCE OF RS.5 85 066/ - CLAIMED U/S 80IB OF THE ACT. 2. BECAUSE THE DEDUCTION OF RS.5 85 066/ - CLAIMED U/S 80IB BEING IN A CCORDANCE WITH THE PROVISIONS OF LAW THE CIT(A) HAS ERRED IN DISALLOWING THE SAME. 3. BECAUSE IN VIEW OF THE DECISION OF THE HON'BLE TRIBUNAL IN THE CASE OF ARVIND FOOTWEAR PVT. LTD. VS. DCIT IN ITA NO. 263 OF 2010 ORDER DATED 27.08.2013 THE DEDUCTION CLAIMED U/S 801B SHOULD OUGHT TO HAVE BEEN ALLOWED. 3. THOUGH VARIOUS GROUNDS ARE RAISED BUT THEY ALL RELATE TO DEDUCTION CLAIMED U/S 80IB OF THE ACT. DURING THE COURSE OF HEARING OF THE APPEAL THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF ARVIND FOOTWEAR IN I.T.A. NO.263/LKW/2010 WHICH HAS BEEN REVERSED BY HON'BLE ALLAHABAD HIGH COURT FOLLOWING THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF LIBERTY INDIA VS. CIT [2009] 225 CTR 233 I N WHICH IT HAS BEEN HELD THAT THE DUTY DRAW BACK AND OTHER EXPORT INCENTIVES ARE NOT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT AS THEY ARE NOT INCOME DERIVED FROM INDUSTRIAL UNDERTAKING. FOLLOWING THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF LIBERTY INDIA THE CIT(A) HAS CONFIRMED THE DISALLOWANCE. SINCE THE ISSUE HAS BEEN ADJUDICATED BY THE CIT(A) IN THE LIGHT OF THE JUDGMENT OF HON'BLE APEX COURT IN THE AFORESAID CASE WE FIND NO INFIRMITY THEREIN AND CONFIRM THE ORDER OF CIT(A). I.T.A. NO.697/LKW /2013 4. THIS IS AN APPEAL OF THE REVENUE IN WHICH THE ORDER OF CIT(A) IS ASSAILED ON VARIOUS GROUNDS WHICH ARE AS UNDER: 1. THAT LD. CIT(A) HAS ERRED IN LAW & FACTS IN DELETING THE ADDITION OF RS.84 47 729/ - MADE UNDER SECTION 40(A)(I) ON ACCOUNT OF PAYMENT MADE TO NON - RESIDENTS WITHOUT TDS ON EXPORT SALES WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE AO. 2. THAT LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE PROVISIONS OF SECTION 9( 1 )(VII) THAT SERVICE 3 RENDERED BY THE NON - RESIDENT AGENT TO PROCURE ORDER FROM FOREIGN BUYERS ARE TECHNICAL OR MANAGERIAL IN NATURE WHICH WAS CLEARLY APPLICABLE ON SUCH ASSESSEE AND THUS ERRED IN COMING TO THE CONCLUSION THAT FOREIGN AGENTS DO NOT FALL WITHIN THE MEANING OF 'FTS' AS DESCRIBED I N SECTION 9( 1 )(VII) OF THE I.T ACT. 3. THAT LEARNED CIT (A) HAS IGNORED THE PROVISION OF EXPLANATION TO SECTION 9 INTRODUCED BY FINANCE ACT 2007 WITH RETROSPECTIVE EFFECT FROM 01.06.1976 TO THE EFFECT THAT FEE FOR SERVICE SHALL BE TAXABLE IN INDIA WHETHER OR NOT THE NON - RESIDENT HAS RENDERED SERVICE IN INDIA. 4. THAT LD. CIT (A) HAS ERRED IN LAW AND FACT IN RELYING ON THE DECISION OF HIGH COURT WHERE THE AMENDED PROVISIONS OF SECTION 9 ARE NOT TAKEN INTO CONSIDERATION. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACT IN MIS - APPRECIATING THE FACT THAT CIRCULAR NO. 23 STANDS WITHDRAWN BY SUBSEQUENT CIRCULAR NO. 7.2009 [F. NO. 500/135/2007 - FTD - L] DATED 22.10.2009 AND THEREFORE AS PER PROVISIONS OF SECTION 9 THE SAME WAS TAXABLE IN INDIA AND ACCORDINGLY TAX SHOULD HAVE BEEN DEDUCTED AT SOURCE U/S 195 OF THE I.T. ACT. 6. THAT LD. CIT(A) HAS ERRED IN LAW & FACTS IN DELETING THE ADDITION OF RS.2 00 000/ - ON ACCOUNTS OF LOW G.P. BY HOLDING THAT ADDITION HAS BEEN MADE ON CONJECTURE & SURMISES WITHOUT LOOKING INT O THE FACTS OF THE CASE AND MATERIALS BROUGHT ON RECORD BY THE AO. 7. THAT THE ORDER OF THE LD. CIT (A) BEING ERRONEOUS IN LAW AND ON FACTS NEEDS TO BE VACATED AND THE ORDER OF THE A. O. BE RESTORED. 8. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY ONE OR MORE OF THE GROUND OF THE APPEAL AS STATED ABOVE AS AND WHEN NEED FOR DOING SO MAY ARISE. 5. GROUND NOS. 1 TO 4 RELATE TO THE DEDUCTION OF TDS ON PAYMENTS OF COMMISSION TO FOREIGN RESIDENTS. DURING THE COURSE OF HEARING OF THE APPEAL THE LEARN ED COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION THAT THIS ISSUE IS SQUARELY COVERED BY THE VARIOUS ORDERS OF THE TRIBUNAL IN WHICH THE EFFECT OF 4 CIRCULAR WITHDRAWN BY THE CBDT WAS PROPERLY EXAMINED. FOLLOWING THE SE JUDGMENT S THE CIT(A) HAS ADJUDICATED T HE ISSUE BY HOLDING THAT APPELLANT WAS NOT REQUIRED TO DEDUCT TDS U/S 195 OF THE ACT IN RESPECT OF COMMISSION PAID TO FOREIGN AGENTS. THE CIT(A) HAS ALSO TAKEN NOTE OF THE FACT THAT IN THE IMMEDIATELY PRECEDING YEAR I.E. ASSESSMENT YEAR 2008 - 09 THE SIMIL AR VIEW WAS TAKEN BY CIT(A) WHICH WAS LATER ON APPROVED BY THE TRIBUNAL. THE RELEVANT OBSERVATION OF CIT(A) IS EXTRACTED HEREUNDER FOR THE SAKE OF READY REFERENCE: I HAVE CAREFULLY CONSIDERED THE VIEWS EXPRESSED BY THE A.O. (WHILE MAKING THE DISALLOWANCE U/S 40(A)(I) FOR NON DEDUCTION OF TAX AT SOURCE ON PAYMENT OF COMMISSION TO FOREIGN AGENT) AS WELL AS SUBMISSIONS MADE BY THE APPELLANT. IN VIEW OF THE CATEGORICAL F INDING OF THE HON'BLE ITAT IN THIS REGARD I AGREE WITH THE SUBMISSIONS OF APPELLANT THAT THE ISSUANCE OF CIRCULAR NO. 7 OF 2009 DATED 22 - 10 - 2009 WITHDRAWING THE CIRCULAR NO. 23 OF 1969 163 OF 1975 AND 786 OF 2000 WILL BE OPERATIVE ONLY FROM 22.10.2009 AN D NOT PRIOR TO THAT DATE. THUS THE WITHDRAWAL OF EARLIER CIRCULARS WITH EFFECT FROM 22/10/2009 HAS NO BEARING IN THE INSTANT ASSESSMENT YEAR. MOREOVER THE RELIANCE BY THE ASSESSING OFFICER ON THE DECISION IN THE CASE OF VAN OORD ACZ INDIA (P) LTD. VS AC IT (2008) REPORTED IN 112 ITD 79 (DELHI) HAS NO MEANING SINCE THE SAME HAS BEEN OVERRULED BY THE HON'BLE DELHI HIGH COURT ON 15 TH MARCH 2010. THE A.O. HAS ALSO INVOKED THE PROVISIONS OF SECTION 9( 1 )(VII) ON THE PREMISE THAT SUCH PAYMENTS ALSO FALL UNDER FT S . IN THIS REGARD SHE HAS OBSERVED THAT NORMALLY THE EXPORTER APPOINTS THE AGENTS AS HIS SELLING AGENT DESIGNER & TECHNICAL AD VISOR FOR HIS PRODUCTS. HE HAS FURTHER OBSERVED THAT BEING COMMISSION AGENT REQUIRED MANAGERIAL ACUMEN & EXPERTISE AND THEREFO RE WOULD BE COVERED UNDER SECTION 9( 1 )(VII) OF THE ACT AS MANAGERIAL SERVICES. ON PERUSAL OF THE ASSESSMENT ORDER AND ASSESSMENT FOLDER I FIND THAT THE A.O. HAS NOT BROUGHT ANYTHING ON RECORD WHICH COULD DEMONSTRATE THAT THESE AGENTS HAD BEEN APPOINTED A S SELLING AGENTS DESIGNERS & TECHNICAL ADVISORS. RATHER ON THE CONTRARY I FIND THAT THE AGREEMENT IS OF FOR PROCURING ORDERS AND NOTHING ELSE. IN ABSENCE OF ANY SUCH EVIDENCE THIS OBSERVATION OF THE A.O. IS MERE CONJECTURE AND THEREFORE NO COGNIZANCE OF THE SAME CAN BE TAKEN. IT IS A TRITE LAW THAT SUSPICION NO MATTER HOW GRAVE CANNOT TAKE PLACE OF EVIDENCE. IN THIS CASE THERE IS EVEN NO CASE 5 OF SUSPICION LEAVE ASIDE ANY EVIDENCE TO THE EFFECT THAT THE AGENTS WERE NOT ONLY SELLING AGENTS BUT ALSO DESIGNERS AND TECHNICAL ADVISORS. THE CONFIRMATION FROM THE RESPECTIVE FOREIGN AG ENTS THAT THE FOREIGN AGENTS DID NOT HAVE ANY BRANCH OR PE IN INDIA FURTHER SUPPORTS THE CASE OF THE APPELLANT. THE A.O.'S OBSERVATION THAT AS A SELLING AGENT THE AGENT HAS TO HAVE MANAGERIAL ACUMEN AND THEREFORE HIT BY THE PROVISIONS OF SECTION 9( 1 )( VII) IS BASELESS. THE PROVISIONS OF SECTION 9( 1 )(VII) DEALS WITH FEES FOR TECHNICAL SERVICES AND IT HAS TO BE READ IN THAT CONTEXT. THUS THE AFORESAID PAYMENTS DO NOT FALL WITHIN THE MEANING OF 'FTS' AS DESCRIBED IN SECTION 9( 1 )(VII) OF THE ACT. THE IN COME OF THE NON - RESIDENT WAS NOT CHARGEABLE TO TAX IN INDIA SINCE THE SAME WAN NEITHER RECEIVED IN INDIA NOR HAD IT ACCRUED OR DEEMED TO ACCRUE IN INDIA. ACCORDINGLY THE APPELLANT WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 195 IN RESPECT OF COMMISSION P AID TO THE FOREIGN AGENTS. A SIMILAR ISSUE HAD ARISEN IN THE APPELLANTS OWN IN THE ASSTT. YE AR 2008 - 09 WHEREIN THE SAME WAS DECIDED BY THE CIT(A) IN APPEAL NO. CIT (A) - II/366/DCIT - I/10 - 11 ORDER DT. 30.01.2012. THE HON'BLE ITAT LUCKNOW WHILE DECIDING THE C ASE OF DCIT VS. SANJIV GUPTA 135 TT J 641 (2011) HAS DELETED THE ADDITION U/S.40( A)(I) ON SIMILAR CIRCUMSTANCES. HOWEVER THE RELIANCE IS ALSO PLACED ON THE FOLLOWING DECISIONS: 1. 125 ITR 525 (SC) CIT VS. TTOSHOKN LTD - HELD - THAT WHEN A NON - RESIDENT WITH NO OPERATION OF BUSINESS IN INDIA RENDERED SERVICES OUTSIDE INDIA TO AN INDIAN CONCERN THEN THE PROVISIONS OF S . 9 ARE NOT ATTRACTED. 2. CIT VS. EON TECHNOLOGY P. LTD. (DELHI HC ) (ITA NO.1167 DATED 8 TH MARCH 2011) - HELD THAT - TDS U/ S 195 ON COMMISSION PAYABLE TO NON - RESIDENT IS NOT TO BE DEDUCTED FOR THE SERVICES RENDERED OUTSIDE INDIA. 3. DCIT VS. ARDESHI B. CURSETJEE & SONS LTD. 115 TTJ 916 ITAT MUMBAI 2008. 4. TVS MOTO R COMPANY VS. ACIT ITAT CHENNAI ITA NO.697 & 757/M DS /2009. ON CONSIDERATION OF THE DECISIONS (SUPRA) AND THE FACTS AND CIRCUMSTANCES OF THE CASE THE ADDITION MADE BY A O IS MISPLACED HENCE THE SAME IS BEING DELETED. 6 5.1 SINCE THE CIT(A) HAS ADJUDICATED THE ISSUE FOLLOWING THE RATIO LAID DOWN BY THE TRIBUNAL AND VARIOUS HIGH COURTS IN THE CASES MENTIONED IN THE ORDER OF CIT(A) WE FIND NO INFIRMITY THEREIN. ACCORDINGLY WE CONFIRM THE SAME. 6. GROUND NO. 6 RELATES TO THE DELETION OF ADDITION OF RS.2 00 000/ - MADE BY THE ASSESSING OFFICER HAVING CONSIDERED THE GROSS PROFIT RATE DECLARED BY THE ASSESSEE AT LOWER SIDE. THE ASSESSING OFFICER HAS MADE A TEST CHECK OF THE BOOKS OF ACCOUNT OF THE ASSESSEE AND WITHOUT POINTING OUT ANY FAULT THEREIN THE AD HOC ADDITION WAS MADE. THE CIT(A) HAS DELETED THE ADDITION HAVING RELIED UPON THE CASE LAWS REFERRED TO BY THE ASSESSEE ON THE GROUND THAT NO ADDITIONS ARE POSSIBLE ON CONJECTURES AND SURMISES. 7. DURING THE COURSE OF HEARING THE LEARNED D.R. CO ULD NOT PLACE ANYTHING ON RECORD IN SUPPORT TO THIS ADDITION MADE BY THE ASSESSING OFFICER. SINCE THE ADDITION WAS MADE ON AD HOC BASIS WITHOUT POINTING OUT ANY FAULT IN THE MAINTENANCE OF BOOKS OF ACCOUNT THE ADDITION IS NOT CALLED FOR. WE ACCORDINGLY SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE AS WELL AS REVENUE IS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON 1 1 / 0 4 / 2 0 1 4 ) SD/. SD/. ( A. K. GARODIA ) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 1 / 0 4 / 2 0 1 4 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R. I.T.A.T. LUCKNOW ASSTT. REGISTRAR