Ita/230/2014 Of M/S. Chariot International (P) Ltd v. Dy.commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 19TH DAY OF NOVEMBER 27072 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD 1LT.A. NO.230 OF 2014 BETWEEN: M/S. CHARIOT INTERNATIONAL (P) LTD.,.NO.97, CHUDAGONDANAHALLI VILLAGE|MALUR HOSUR MAIN ROAD|MALUR TALUK, KOLAR DISTRICT|KARNATAKA-563 130. OLD ADDRESS:|107, AGRAHARA TOWN|WHITE FIELD ROADWHITE FIELD, BANGALORE. (BY SRI. VENKATESH KUMAR, ADV.) .., APPELLANT] AND DY. COMMISSIONER OF INCOME TAXCIRCLE 11(2), 14/3.RASTROTHANA BHAVAN59TH FLOOR, NRUPATUNGA ROADBANGALORE-560001. (BY SRI. K.V. ARAVIND, ADV.) ... RESPONDENT THIS I.T.A. IS. FILED UNDER SECTION 260-A OFI.T.ACT, 1961, ARISING OUT OF ORDER DATED 20-12-2013PASSED IN ITA NO.1445/BANG/ 2012, FOR THE ASSESSMENTYEAR 2009-10, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTION OF LAW ASSTATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THEAPPELLANT. I]. ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TOTHE EXTENT AGAINST THE APPELLANT IN THE ORDER|PASSED BY THE INCOME TAX APPELLATE TRIBUNAL,BANGALORE BENCH, ‘'B', ITA NO.1445/BANG/2012 DATED20-17-2013 RELATING TO THE ASSESSMENT YEAR 2009-10O THIS I.T.A. COMING ON FOR HEARING, THIS DAY,|ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260-A of the Income Tax Act, 1961 (nereinafter referred to as the Act, for snort)has been preferred by the assessee. The subject matter|of the appeal pertains to the Assessment Year 2009-10. The appeal was admitted by a Bench of this Court vide’order dated 01.12.2014 on the following substantial|questions of law:| /. Whnetner the Income Tax AppellateTribunal was correct in law in disposing ofthe appeal filed by the assessee without independentlyexaminingthefactsand|merely relying upon the order passed byCommissioner of Income-tax (Appeals). |Whether the tribunal was Justifiedin law upholding the order of CIT(A).| 2. Facts leading to filing of this appeal brieflystated are that the assessee is engaged in the business|of conversion of rough granite blocks / slabs into|polished granite slabs, tiles, monuments, etc. Theassessee is 100% export oriented unit having its factory|and registered office at Bangalore and exporting its|products to United States of America and UnitedKingdom, etc. The assessee filed its return of income|for the Assessment Year 2009-10 on 27.09.2009 and|declared the income as NIL after claiming deduction ofRs.1,36,42,554/- under Section 10B of the Act. The)return was processed under Section 143(1) of the Actand was subsequently taken up for scrutiny. During tne.course of the assessment, the assessee was called upon.the explain as to why the gross sales commission paid to. the foreign parties / non-residents to the extent of Rs.39,94,627/- without deduction of TDS should not be)disallowed and brought to tax. The Assessing Officer, byan order dated 16.12.2011,inter allaheld that the.assessee was afforded an opportunity to explain as to.why gross commission paid without deduction of TDS.should not be disallowed and be applied to tax. It was.further noticed by the Assessing Officer that theassessee in response submitted tnat the tax need not bededucted at source against the payments made to'foreign parties / non-residents on the commission.agents and relied on the decision of Jaipur Bench of the|Tribunal. The Assessing Officer,|inter aliaheld that asper Section 195 of the Act, the tax is required to bededucted at source on the payments made to non-residents. However, in the instant case, the payments.had been made to non-residents without deduction of.tax at source. Therefore, the assessee had violated theprovisions of Section 195 of the Act. 3. The assessee thereupon filed an appeal beforethe Commissioner of Income Tax (Appeals) who, Dy an.order dated 30.08.2012|inter alla, held that theassessee nas failed to furnish either any evidence orproof with regard to the fact that the payments weremade to the foreign parties for the services renderedoutside India eitner in tne course of assessment|proceedings or before the Commissioner of Income Tax.(Appeals). It was further held that the terms andconditions of payment are only explained withoutestablishing the fact that the payments Nave been made.by the assessee for services rendered outside India andtnerefore, the deduction cannot be permitted. In theresult, disallowance made by the Assessing Officer totune of Rs.39,94,627/- was sustained and the appealpreferred by tne assessee was partly allowed. Tribunal by filing an appeal. The Tribunal, by. an order dated 20.17.7013|inter aliaheld that theassessee despite opportunity being afforded, failed toplace on record any material to controvert the finding.recorded by the Commissioner of Income Tax (Appeals)that the assessee has failed to establish that no materialevidence are brought on record to show that thepayments to the tune of Rs.39,94,627/- were made tothe foreign parties for the services rendered by them.outside India. Tne appeal preferred by tne assesseewas therefore, dismissed. In the aforesaid factualbackground, this appeal has been filed. 4. Learned counsel for the assessee, while invitingour attention to the communication dated 07.12.7011|addressed to the Deputy Commissioner of Income Tax,Submitted that certain documents were filed before the|Assessing Officer in support of the fact that thepayments were made to the foreign firms and invoices.were alsoplaced on_- record. However, neither Commissioner of Income Tax (Appeals) nor the Tribunalhas taken note of the aforesaid documents. Therefore,|the matter deserves to be remitted to the Tribunal for!consideration afresh in accordance with law. 5. On the otner hand, learned counsel for the|revenue, while inviting the attention of this Court to|paragraph 3.4 of the order passed by the Tribunal,submitted that despite opportunity being afforded even.by the Tribunal, the assessee did not file any documents.to snow that the payments were made for the purpose.of business so as to entitle the assessee to claim under|Section 3/7(1) of the Act and therefore, no usefulpurpose would be served by remitting the matter. 6. We have considered the submissions made onboth sides and Nave perused the record. The relevantextract of the order passed by the Commissioner of.Income Tax (Appeals) reads as under: "... However, the basic fact that thpayments were paid to the foreign parties for|services rendered outside India was notsestablished with any evidence or proof on|record elther at the time of assessment or§during the course of appeal proceedings.... The relevant extract of paragraph 3.4 of the orderpassed by the Tribunal reads as under: "... Before us also, the learned authorizerepresentative,exceptforpleadingforrestoring this issue to the file of the Assessing|Officer for de novo consideration, has notbrought on record any material to controvert|the finding of the learned CIT (Appeals) that|the assessee has failed to establish with any|material evidence brought on record, that the|payments amounting to Rs.39,94,627 made tothese two foreign parties were for services|rendered by them to the assessee outside|India. In this view of the matter, we concurwith and uphold the conclusion of the learnedCIT (appeals) that since it is not establishedthat the aforesaid payments were made for theservices rendered by the two foreign parties to| the assessee outside India, these payments|cannot be allowed as a deduction.. "... Before us also, the learned authorizerepresentative,exceptforpleadingforrestoring this issue to the file of the Assessing|Officer for de novo consideration, has notbrought on record any material to controvert|the finding of the learned CIT (Appeals) that|the assessee has failed to establish with any|material evidence brought on record, that the|payments amounting to Rs.39,94,627 made tothese two foreign parties were for services|rendered by them to the assessee outside|India. In this view of the matter, we concurwith and uphold the conclusion of the learnedCIT (appeals) that since it is not establishedthat the aforesaid payments were made for theservices rendered by the two foreign parties to| the assessee outside India, these payments|cannot be allowed as a deduction.. 7Thus,boththeaforesaidCourtshave|concurrently held that the assessee has failed to placeany material evidence on record to show that thepayment of Rs.39,94,627/- made by the assessee to theforeign firms was for the services rendered by them to the assessee outside India. It is pertinent to mention.here that the revenue has not disputed the payments.made by the assessee to the foreign firms. However, it.is the case of the revenue that the assessee has failed to|prove that the aforesaid expenditure was incurred by the.assessee In connection with its business so as to entitle|it to claim deduction under Section 37(1) of the Act. 8. In view of preceding analysis, the substantialquestions of law framed by this Court do not arise for ����������������������������������������������������������������������������������������� &�������������������������������������������������������� ������������� ����������� /�