M/s. Tagros Chemicals (India) Ltd., CHENNAI v. ITO (OSD), CHENNAI

ITA 854/CHNY/2007 | 2003-2004
Pronouncement Date: 14-01-2011 | Result: Allowed

Appeal Details

RSA Number 85421714 RSA 2007
Assessee PAN AAACT2952K
Bench Chennai
Appeal Number ITA 854/CHNY/2007
Duration Of Justice 3 year(s) 9 month(s) 10 day(s)
Appellant M/s. Tagros Chemicals (India) Ltd., CHENNAI
Respondent ITO (OSD), CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 14-01-2011
Date Of Final Hearing 12-01-2011
Next Hearing Date 12-01-2011
Assessment Year 2003-2004
Appeal Filed On 03-04-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN JUDICIAL MEMBER .. I.T.A. NO. 854/MDS/2007 ASSESSMENT YEAR : 2003-04 M/S. TAGROS CHEMICALS (INDIA) LTD. 72 JAVER CENTRE RAJA ANNAMALAI BUILDING 4 TH FLOOR MARSHALL ROAD EGMORE CHENNAI-600 008. V. THE INCOME-TAX OFFICER (OSD) COMPANY CIRCLE-III(1) CHENNAI. (PAN: AAACT2952K) (APPELLANT) (RESPONDENT) APPELLANT BY : DR. (MRS.) ANITA SUMANTH RESPONDENT BY : SHRI B. SRINIVAS O R D E R PER GEORGE MATHAN JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED CIT(APPEALS)-III CHENNAI IN ITA NO. 676/2005-06/A- III DATED 24-01-2007 FOR THE ASSESSMENT YEAR 2003-04. 2. DR. (MRS.) ANITA SUMANTH ADVOCATE REPRESENTED O N BEHALF OF THE ASSESSEE AND SHRI B. SRINIVAS SR. DR REPRESENTED ON BEHALF OF THE REVENUE. 3. IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRE SENTATIVE THAT THE ASSESSEE IS A COMPANY WHICH IS DOING THE BUSINESS O F MANUFACTURE AND SALE OF I.T.A. NO. 854/MDS/2007 2 PESTICIDE CHEMICALS. IT WAS THE SUBMISSION THAT IN THE COURSE OF ASSESSMENT THE ASSESSING OFFICER HAD DISALLOWED THE COMMISSION PAY MENTS TO AGENTS IN FOREIGN COUNTRIES ON THE EXPORT OF THE ASSESSEES PRODUCTS BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA) ON ACCOUNT OF THE NON-DEDUCTION O F TDS U/S. 195 OF THE INCOME TAX ACT 1961. IT WAS THE SUBMISSION THAT THIS HAD ALSO BEEN UPHELD BY THE LEARNED CIT(A). IT WAS THE SUBMISSION THAT THE PAY MENTS MADE TO THE AGENTS OF THE FOREIGN COUNTRIES WERE NOT LIABLE FOR TDS U/S. 195 OF THE ACT. IT WAS THE SUBMISSION THAT THE IDENTICAL ISSUE HAD BEEN CONSID ERED FOR THE IMMEDIATELY SUCCEEDING YEAR BEING THE ASSESSMENT YEAR 2004-05 W HEREIN THE ASSESSING OFFICER HAD ACCEPTED THE CONTENTION OF THE ASSESSEE . IT WAS THE SPECIFIC SUBMISSION THAT THE AGENTS TO WHOM THE COMMISSION H AD BEEN PAID DURING THE ASSESSMENT YEAR 2004-05 WERE IDENTICAL TO THE AGENT S TO WHOM THE COMMISSION WAS PAID FOR THE ASSESSMENT YEAR 2003-04 AND THE NA TURE OF THE WORK DONE BY THE AGENTS WAS ALSO IDENTICAL. IT WAS THE FURTHER SUBMISSION BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSESSMENT ORDER PASSED U/S. 143(3) FOR THE ASSESSMENT YEAR 2004-05 ON 22.12.2006 WAS SUBJECT M ATTER OF REVISION U/S 263 BY THE CIT CHENNAI-I AND AFTER CONSIDERING THE REP LY OF THE ASSESSEE THE LEARNED CIT HAD DROPPED THE PROCEEDINGS UNDER SECTION 263 I N HIS ORDER IN C. NO. 218/CIT-I/7/263/2007-08 DATED 26-03-2009. IT WAS T HE SUBMISSION THAT THE ISSUE RAISED BY THE LEARNED CIT FOR INVOKING HIS PO WERS U/S. 263 WAS IN REGARD TO THE COMMISSION PAYMENTS TO THE FOREIGN AGENTS WITHO UT DEDUCTING TDS. IT WAS I.T.A. NO. 854/MDS/2007 3 THE FURTHER SUBMISSION THAT FOR THE ASSESSMENT YEAR 2004-05 AFTER THE 263 PROCEEDINGS HAD BEEN DROPPED RE-OPENING OF THE SA ME HAD ALSO BEEN DONE BY INVOKING THE PROVISIONS OF SECTION 147/148 OF THE A CT AND CONSEQUENTIAL ASSESSMENT ORDER WAS PASSED ON 12-8-2010 WHEREIN THE ASSESSING OFFICER HAD SPECIFICALLY ACCEPTED THAT THE CIRCULAR ISSUED BY T HE CBDT IN CIRCULAR NO. 786 DATED 7-2-2000 WHEREIN IT HAS BEEN SPECIFICALLY MEN TIONED THAT TDS U/S 195 WOULD ARISE ONLY IF THE PAYMENT OF COMMISSION TO NO N-RESIDENTS IS CHARGEABLE TO TAX IN INDIA HAD BEEN CONSIDERED AND IT WAS SPECIF ICALLY NOTICED THAT THE ISSUE WAS EXHAUSTIVELY DEALT WITH BY THE ASSESSING OFFICE R IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND HAD ALSO CONSIDERED THE DECISION OF THE AUTHORITY OF ADVANCE RULINGS (INCOME TAX) IN THE CASE OF SPAHI PROJECTS P. LTD. IN RE REPORTED IN 315 ITR 374 (AAR) AND HAD ACCEPTED THE CLAIM OF THE ASS ESSEE THAT NO TDS WAS LIABLE TO BE MADE ON THE PAYMENT OF COMMISSION TO T HE FOREIGN AGENTS. THE LEARNED AUTHORISED REPRESENTATIVE FURTHER DREW OUR ATTENTION TO THE ASSESSMENT ORDERS FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 PASSED U/S. 143(3) WHEREIN ALSO NO DISALLOWANCE HAD BEEN MADE. IT WAS THE SUBMISSION THAT THE COMMISSION TO FOREIGN AGENTS WAS BEING PAID EVERY Y EAR. IT WAS THE FURTHER SUBMISSION THAT AS THE PAYMENTS HAD BEEN MADE TO NO N-RESIDENTS WHOSE INCOME WAS NOT LIABLE TO TAX IN INDIA NO TAX WAS LIABLE T O BE DEDUCTED. IT WAS THE SUBMISSION THAT THE DISALLOWANCE AS MADE BY THE ASS ESSING OFFICER AND AS CONFIRMED BY THE LEARNED CIT(A) MAY BE DELETED. I.T.A. NO. 854/MDS/2007 4 4. IN REPLY THE LEARNED DR SUBMITTED THAT THE DETAI LS OF THE COMMISSION PAYMENTS WERE NOT AVAILABLE. HE VEHEMENTLY SUPPORT ED THE ORDER OF THE ASSESSING OFFICER AND THE LEARNED CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THEORDER OF THE LEARNED CIT PASSED U/S. 263 OF THE ACT DROPPING THE REVISION PROCEEDINGS CLEARLY SHOWS THAT THE ISSUE IS IN RELATION TO FAILURE TO C OMPLY WITH THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ON THE PAYMENTS TO NON -RESIDENTS. IT IS ALSO NOTICED THAT THE LEARNED CIT IN HIS ORDER HAS DROPPED THE P ROCEEDINGS BECAUSE THE ISSUE HAS BEEN CONSIDERED BY THE ASSESSING OFFICER IN THE COURSE OF THE ASSESSMENT. A PERUSAL OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05 CLEARLY SHOWS THAT THE ASSESSING OFFICER HAD FOR THE ASSESSMENT Y EAR 2004-05 VERIFIED IN DETAIL THE ISSUE OF THE APPLICABILITY OF THE PROVISIONS OF SECTION 195 IN REGARD TO THE PAYMENTS TO THE NON-RESIDENT AGENTS. A PERUSAL OF THE REPLY GIVEN TO THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCE EDINGS FOR THE ASSESSMENT YEAR 2004-05 ALSO SHOWS THAT THIS ISSUE HAS BEEN DI SCUSSED THEREIN. IN THE CIRCUMSTANCES AS IT IS NOTICED THAT THE REVENUE HAS ACCEPTED THAT THE COMMISSION PAYMENT TO THE FOREIGN AGENTS WHOSE INC OME IS NOT LIABLE FOR TAXATION IN INDIA IS NOT LIABLE FOR TDS U/S. 195 F OR THE ASSESSMENT YEAR 2004-05 AND AS THE AGENTS TO WHOM THE COMMISSION HAS BEEN P AID HAVE BEEN SPECIFICALLY CLAIMED TO BE IDENTICAL FOR THE ASSESSMENT YEAR IN APPEAL AS THAT FOR THE ASSESSMENT YEAR 2004-05 WE ARE OF THE VIEW THAT NO DISALLOWANCE CAN BE MADE I.T.A. NO. 854/MDS/2007 5 OF THE SAID COMMISSION BY INVOKING THE PROVISIONS O F SECTION 40(A)(IA) OF THE ACT FOR THE RELEVANT ASSESSMENT YEAR. IN TAKING THIS V IEW WE ALSO FIND SUPPORT FROM THE DECISION OF THE AUTHORITY FOR ADVANCED RULING I N THE CASE OF SPAHI PROJECTS P. LTD. IN RE REFERRED TO SUPRA. IN THE CIRCUMSTANCE S THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. THE ORDER WAS PRONOUNCED IN THE COURT ON 14/1/20 11. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI DATED THE 14 TH JANUARY 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE