The ITO,(Inl.Taxn.), Baroda v. M/s. Daniel Measurement Solutions Pvt.Ltd., Baroda

ITA 828/AHD/2010 | 2009-2010
Pronouncement Date: 14-11-2014 | Result: Dismissed

Appeal Details

RSA Number 82820514 RSA 2010
Assessee PAN AACCD5920F
Bench Ahmedabad
Appeal Number ITA 828/AHD/2010
Duration Of Justice 4 year(s) 7 month(s) 26 day(s)
Appellant The ITO,(Inl.Taxn.), Baroda
Respondent M/s. Daniel Measurement Solutions Pvt.Ltd., Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 14-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 14-11-2014
Date Of Final Hearing 05-11-2014
Next Hearing Date 05-11-2014
Assessment Year 2009-2010
Appeal Filed On 18-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI A.M.) I. T. A. NO. 828 / AHD/ 20 1 0 (A SSESSMENT YEAR: 2009 - 10) THE INCOME - TAX OFFICER(INTL. TAXN.)MULTIPURPOSE HALL AAYAKAR BHAVAN GR. FLOOR RACE COURSE CIRCLE VADODARA - 390007 V/S M/S D ENIAL MEASUREMENT SOLUTIONS PVT. LTD. 299/300 2 ND FLOOR GIDC MAKARPURA VADODARA (APPELLANT) (RESPONDENT) PAN: AACCD5920F APPELLANT BY : SMT. SONIA KUMAR SR. D.R. RESPONDENT BY : SHRI M.K. PATEL A.R. ( )/ ORDER DATE OF HEARING : 05 - 11 - 2014 DATE OF PRONOUNCEMENT : 14 - 11 - 2014 PER SHRI ANIL CHATURVEDI A.M. 1. THIS APPEAL IS FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A) GANDHINAGAR DATED 24.12.2009 FOR A.Y. 2 009 - 10 . 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING ULTRASONIC M ETERS WHICH IS GASSFLOW MEASUREMENT E QUIPMENT. IT WAS NOT E D ITA NO 828/AHD/2010 . A.Y. 2009 - 10 2 BY A.O THAT ASSESSEE HAD MADE P AYMENT TO COLORADO ENGINEERING E XPERIMENT ST ATION INC . U.S.A TOWARDS CALIBRAT ION AND TESTING OF EQUIPMENT BUT ASSESSEE HAD NOT DEDUCTED TD S FROM THE REMITTANCE MADE . A.O WAS OF THE VIEW THAT THE PAYMENT MADE BY THE ASSESSEE WERE IN THE NATURE OF TECHNICA L WORK AND RELATED TO ENGINEERING AND SAME WERE UTILIZED BY THE ASSESSEE AND WERE IN THE NATURE OF TECHNICAL SERVICES AS DEFINED IN EXPLANATION 2 OF SECTION 9(1)(VII) OF THE INCOME TAX ACT AND THEREFORE PROVISIONS OF SECTION 195 OF THE ACT WERE APPLICABLE AND THE ASSESSEE SHOULD HAVE DEDUCTED THE TAX BEFORE MAKING THE PAYMENT. THE SUBMISSION OF THE ASSESSEE THAT THE SERVICES PROVIDED BY THE NON - RESIDENT WERE NOT IN THE NATURE OF MAKING AVAILABLE HENCE A RTICLE 12 OF INDIA U.S.A. TREATY WERE NOT APPLICABLE . THE AFORESAID CONTENTION WAS NOT FOUND ACCEPTABLE TO THE A.O. A.O WAS THEREFORE OF THE VIEW THAT SINCE ASSESSEE HAS NOT DEDUCTED TDS IT WAS LIABLE FOR TAX U/S 201(1) AND INTEREST U/S 201(1A) OF THE ACT. HE ACCORDINGLY WORKED OUT THE TOTAL AMOUNT AT RS. 6 11 276/ - . AGGRIEVED BY THE ORDER OF A.O. ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER: - 2.4. THE MATTER HAS BEEN GIVEN DUE CONSIDERATION TO START WITH HI C ASE OF FOREIGN TRANSACTION OBVIOUSLY WE HAVE TO COVER AN ASSESSEE EITHER UNDER THE INCOME TAX ACT OR THE DTAA WHICHEVER IS BENEFICIAL TO THE ASSESSEE. THEREFORE ALTHOUGH THE PAYMENTS IN QUESTION WOULD HAVE BEEN TAXABLE U/S.9(L)(VII) OF THE INCOME TAX AC T THE APPELLANT HAS TAKEN RECOURSE TO THE INDO - US DTAA ON THE GROUND THAT THAT IS BENEFICIAL. FROM THE DETAILS OF THE NATURE OF SERVICES PROVIDED BY M/S COLORADO ENGINEERING EXPERIMENTS STATION INC. TO THE APPELLANT WHAT EMERGES VERY CLEARLY IS THAT M/S COLORADO ENGINEERING EXPERIMENTS STATION INC. IS ONLY GIVING A REPORT OF THE CORRECTNESS OF CALIBRATION OF THE ASSESSEE'S METERS. THIS FACT REMAINS UNCONTROVERTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. ARTICLE 12 OF THE INDO - US TREATY AS WELL A S THE MOU ASSOCIATED WITH THAT IS QUITE EMPHATIC ON THE ASPECT OF 'MAKE AVAILABLE' OF THE TECHNOLOGY. GENERALLY SPEAKING IF SOME TECHNOLOGICAL ACTIVITY IS DONE FOR AN ENTITY EARNING INCOME IN INDIA WITHOUT DISCLOSING OR ASSOCIATING IT AS TO HOW IT IS DON E OR HOW IT CAN BE REPLICATED IN FUTURE IT CAN BE STATED THAT THE TECHNOLOGY HAS NOT BEEN MADE AVAILABLE TO THAT ENTITY. IN THE INSTANT CASE ALSO THE APPELLANT HAS NOT BEEN TOLD HOW TO TEST CALIBRATION. IT NEEDS TO BE EMPHASIZED THAT M/S COLORADO ENGINEE RING EXPERIMENTS STATION INC. ONLY TESTED THE CALIBRATION AND THEREAFTER PROVIDED A TEST REPORT. HENCE IT APPEARS TO BE A CASE OF PROCESS OF STANDARDIZATION FOR WHICH THE EXPERTISE EXISTS WITH M/S COLORADO ENGINEERING EXPERIMENTS STATION INC. AND WHICH HA S NOT BEEN PASSED ON TO THE ASSESSEE. THE VARIOUS CASE LAWS CITED IN THE CONTEXT BY THE APPELLANT APPEARS TO BE APPLICABLE AND HAVE BEEN TAKEN INTO ACCOUNT IN COMING TO THE ABOVE CONCLUSIONS. THEREFORE CONSIDERING ALL THE FACTS AND CIRCUMSTANCES IT IS HE LD THAT THE PAYMENT OF US$ 31 200 AND US$92 300 ITA NO 828/AHD/2010 . A.Y. 2009 - 10 3 AMOUNTING TO RS.52 26 667/ - CANNOT BE TREATED AS FEE FOR TECHNICAL SERVICES AND THE SAME IS NOT COVERABLE U/S.195. HENCE CONSEQUENTLY THE ASSESSEE COULD NOT BE HELD AN ASSESSEE IN DEFAULT U/S.201(L). 4. AGGRI EVED BY THE ORDER OF CIT(A) REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS: - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE APPEAL OF THE ASSESSEE ON THE ORDER PASSED BY THE A.O. U/S 201(1) & U/S 201(1A) R.W.S. 195 O F THE I.T. ACT 1961. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE REMITTANCE TO NON - RESIDENT AS FEES FOR TECHNICAL SERVICES AS ' MAKE AVAILABLE' AS PER ARTICLE 12(4) OF INDIA U.S.A. DTAA. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT ACCEPTING THE DEEMING PROVISIONS AS EXPLANATION TO SEC. 9(L)(VII) INSERTED BY FINANCE ACT 2007 WITH RETROSPECTIVE EFFECT FROM 1.06.1976. 4. THE LD. CIT(A) HAS NOT CONSIDERED THE PAYMENT TO NON - /RESIDENT AS THERE IS INCOME ALIMENT IN VIEW OF HONO RABLE SUPREME COURT OF INDIA'S DECISION IN THE CASE OF TRANSMISSION CORPORATION OF INDIA OF A.P. LTD & ANR V/S COMMISSIONER OF INCOME - TAX VIDE 239 ITR 587 (SC) 1999 AND HONORABLE HIG H COURT'S DECISION IN THE CASE OF M/S SAMSUNG ELECTRONI CS CO LTD AND OTHERS V /S COMMISSIONER OF INCOME TAX V IDE ORDER NO. 2009 - TIOL - 629 - HC - KAR - IT DATED 24.09.2009. 5. BEFORE US LD. D.R. SUBMITTED THAT THOUGH VARIOUS GROUNDS ARE RAISED BUT THE ONLY ISSUE IS WITH RESPECT TO DEDUCTION OF TDS ON PAYMENT MADE TO FOREIGN PARTIES. 6. BEFOR E US LD. D.R. TOOK US THROUGH THE ORDER OF A.O AND POINTED TO THE FINDINGS OF A.O AND SUPPORTED HIS ORDER. SHE ALSO RELIED ON THE DECISIONS IN THE CASE OF ASHOK LEYLAND VS. DCIT (2008) 119 TT J 716 IN THE CASE OF DY. DIT VS. TATA IRON & STEEL CO. LTD. (2010 ) 132 TTJ 566 IN THE CASE OF XYZ LTD. (2012) 348 ITR 20 (AAR) & IN THE CASE OF CENTRICA INDIA OFFSHORE PVT. LTD. VS. CIT (2012) 348 ITR 45 (AAR) . 7. THE LD. A.R. ON THE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A) AND SUBMITTED THAT T HE PAYMENT MADE BY THE ASSESSEE WAS FOR PROCURING SERVICES IN RESPECT OF WET CALIBRATION AND TESTING OF ULTRASONIC METERS. HE FURTHER SUBMITTED THAT T HE SERVICES WERE PROVIDED OUTSIDE INDIA TO THE PAYEE WHO IS A RESIDENT OF U.S.A. AND DOES NOT HAVE ANY PE RMANENT ITA NO 828/AHD/2010 . A.Y. 2009 - 10 4 ESTABLISHMENT IN INDIA WITHIN THE MEANING OF ARTICLE 5 OF INDIA U.S.A DTAA. HE FURTHER SUBMITTED THAT PAYEE HAS ONLY GIVEN THE CERTIFICATE/REPORT OF THE CALIBRATION TO THE ASSESSEE AND CERTIFICATE/REPORT DOES NOT CONTAIN THE PROCESS OF HOW THE TEST ING OR CALIBRATION WAS CARRIED OUT BY THE PAYEE. HE ALSO PLACED RELIANCE ON THE DECISION OF ITO VS. V EEDA CLINICAL RESEARCH PVT. LTD. ITA NO. 1406/AHD/2009 ORDER DATED 28 TH JUNE 2013. HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID ORDER. HE THUS SUPPO RTED THE ORDER OF CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERI AL ON RECORD. WE FIND THAT CIT(A ) WHILE DELETING THE ADDITION HAS NOTED THAT THE SERVICES PROVIDED BY COLARDO ENGINEER ING WAS WITH RESPECT TO GIVING THE REPORT OF CORRECT NESS OF CALIBRATION OF ASSESSEE S METERS. HE HAS FURTHER NOTED THAT THE EXPERTISE CONNECTED WITH TESTING HAS NOT BEEN PASSED ON TO THE ASSESSEE AND THEREFORE THE AGGREGATE PAYMENT OF RS. 52 26 667/ - CANNOT BE TREATED AS FEE FOR TECHNICAL SERVICES AND IS N OT COVER ED U/S 195 OF THE ACT. BEFORE US REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF CIT(A). FURTHER THE CASE LAWS RELIED UPON BY LD. D.R. ARE DISTINGUISHABLE ON FACTS AND CANNOT BE APPLIED TO THE FACTS IN PRESENT CASE. WE FURTHER FIND THAT IN THE CASE OF ITO VS. V EEDA ENGINEERING RESEARC H (SUPRA) THE CO - ORDINATE BENCH AFTER RELYING ON THE DECISION IN THE CASE OF DIT VS. GUY CARPENTERS AND C OMPANY LTD. 346 ITR 504 AND CIT VS. DEBEERS INDIA PVT. LTD. 346 ITR 467 HAS HELD THA T THE CONDITION PRECEDENT FOR INVOKING THE MAKE AVAILABLE CLAU SE IS THAT THE SERVICES SHOULD E NABLE THE PERSON ACQUIRING THE SERVICES TO APPLY TECHNOLOG Y CONTAINED THEREIN. IT FURTHER HELD THAT UNLESS THERE IS A TRANSFER OF TECHNOLOGY INVOLVED IN TECHNIC AL SERVICES THE MAK E AVAILABLE CLAUSE IS NOT SATIS FIED. BEFORE US REVENUE HAS NOT BROUGHT ANY ITA NO 828/AHD/2010 . A.Y. 2009 - 10 5 BINDING CONTRARY DECISION IN ITS SUPPORT. WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT( A) AND WE THEREFORE DISMISS THE GROUND OF REVENUE . 9. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 14 - 11 - 201 4 . SD/ - SD/ - (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT AC COUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD