Tca/448/2012 Of Commissioner Of Income Tax-Ltu v. M/S Wheels India Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS The Honourable Mr.Justice T.S.SIVAGNANAMandThe Honourable Mr.Justice SATHI KUMAR SUKUMARA KURUP Tax Case Appeal No.448 of 2012 Commissioner of Income Tax-LTU,Chennai. ...Appellant/Respondent M/s.Wheels India Limited,Padi, Chennai – 600 050. ...Respondent/Appellant APPEAL under Section 260A of the Income Tax Act, 1961against the order dated 27.07.2012 made in ITA.No.163/Mds/2012on the file of the Income Tax Appellate Tribunal, 'A' Bench,Madras for the assessment year 2003-2004. And against the o/othe Commissioner of Income Tax(Appeals) large Tax payer Unit IIfloor 175 Jawaharlal Nehru Inner Ring Road, Anna Nagar WesternExtension, Chennai 600 101. and made in ITA.29/10-11/LTU(A)Dated 24/11/2012 and agaist the Deputy Commissioner of Income-Tax large Tax payer Unit Chennai. And mede in G1. No./PA.No.AAACW0315K dated 30/11/2010. For the assesment year 2003-2004. This appeal, filed by the Revenue under Section 260A of theIncome Tax Act, 1961 (for brevity, 'the Act') is directedagainst the order 27.07.2012 made in ITA.No.163/Mds/2012 on thefile of the Income Tax Appellate Tribunal, 'A' Bench, Chennai(for brevity, the Tribunal) for the assessment year 2003-2004. 2.The appeal was admitted on 06.03.2013 on the followingsubstantial question of law: https://hcservices.ecourts.gov.in/hcservices/ “Whether on the facts and in the circumstancesof the case, the Appellate Tribunal was right indeleting the disallowance under Section 40(a)(i)of the Income Tax Act in respect of payments ofexport sales commission and service charges madeto non-resident without deduction of tax atsource?” 3.We have heard M/s.R.Hemalatha, learned Senior StandingCounsel for the appellant/revenue and Mr.Vikram Vijayaraghavan,learned counsel appearing for the respondent/assessee. 4.The short issue which falls for consideration is whetherthe Tribunal was right in affirming the order passed by theCommissioner of Income Tax [Appeals][CIT(A)], LTU, Chennaideleting the disallowance under Section 40(a)(i) of the Act inrespect of the payments effected by thea ssessee to non-residentwithout deducting tax at source. Thus the core issue involvesas to for what purpose the payments were effected by theassessee to the non-resident and whether the assessee wasrequired to deduct the tax at source. This is a factual matterwhich needs to be considered taking note of what was availablein the hands of the Assessing Officer. The Assessing Officer isof the view that the payments were in the nature of fees fortechnical service and therefore, tax was to be deducted atsource. The Assessing Officer was of such a view byinterpreting the nature of the services rendered by the non-resident as a managerial service which was received by theassessee and therefore, referred to Indo South Korean DTAA, inparticular, Article 13 and held that the payments made formanaging the sales affairs of the assessee Company outside Indiawithout deducting tax at source under Section 195 of the Act hasto be disallowed under Section 40(a)(i) of the Act. 5.The correctness of the said contention was decided by theCIT(A). As pointed out earlier, the nature of service which wasrendered to the respondent/assessee has to be decided based onthe available facts. This exercise was done by the CIT(A) notonly in the assessment year under consideration but also for theassessment year 2005-2006 and in both the cases, the CIT(A) hasheld in favour of the assesee. Thought for the assessment year2005-2006, the revenue had filed an appeal before the Tribunal,on account of low tax effect that appeal could not be pursued bythe Tribunal. However, what what we are required to see iswhether in the instant case, the CIT(A) has recorded a findingas to the nature of services availed by the assessee from thenon-resident. After hearing the submissions of the auhorizedrepresentative of the assessee, the CIT(A) perused the copies ofthe agreement and on facts, found that the amounts paid by theassessee were sales commission and marketing services to non- resident agents outside India for their services renderedoutside India by way of canvassing sales order and none of theentities to whom payments were made by the assessee have aPermanent Establishment in India. Further, taking note ofthe relevant Articles in the respective DTAA agreements enteredinto between India and the respective Country, it was held thatthe income earned is taxable in those Countries. In support ofthe conclusion, the CIT(A) relied on the decision of the Hon'bleSupreme Court in the case of G.E.Technology Centre (P) Ltd., vs.CIT [327 ITR 456]. Thus, on facts, the nature of servicesrendered by the non-resident to the assessee was considered bythe CIT(A) after perusing the copies of the agreement. Thisfactual finding has attained finality as the appeal filed by therevenue before the Tribunal was dismissed by the impugned order. 6.Further, the assessee would place reliance on thedecision of the Hon'ble Division Bench of this Court in the caseof Commissioner of Income Tax vs. Farida Leather Company [(2016)95 CCH 0146 ChenHC] wherein it was held that sourcing ordersabroad, for which payments have been made directly to the non-residents abroad, does not involve any technical knowledge orassistance in technical operations. In the case of Commissionerof Income Tax vs. Faizan Shoes Pvt. Ltd., [(2014) 367 ITR 0155(Mad)], it was held that the commission paid for procuring orderfor leather business from overseas buyers – wholesalers orretailers cannot be treated as if for technical services. Inthe case of Evolv Clothing Company Pvt. Ltd., vs. AssistantCommissioner of Income Tax [(2018) 407 ITR 0072(Mad)], theHon'ble Division Bench held that the Assessing Officer acceptedthat the assessee therein had paid commission charges for theoverseas agents and the same cannot be regarded as if fortechnical services. 7.As pointed out, on facts the First Appellate Authorityand the Tribunal have held that what was paid by the assessee tothe non-resident was sales commission and cannot be regarded asif for technical services. 8.In the light of the said factual conclusion, we find nogrounds to interfere with the order passed by the Tribunal, moreparticularly, when no question of law or substantial question oflaw arises for consideration. Accordingly, the tax case appealis dismissed. No costs. Sd/- Assistant Registrar(CS VI) //True Copy// cse Sub Assistant Registrar To 1. The Income Tax Appellate Tribunal, 'A' Bench, Chennai. 'A' Bench, Chennai. 2. The Commissioner of Income Tax(Appeals) large Tax payer Unit II floor 175 Jawaharlal Nehru Inner Ring Road, Anna Nagar Western Extension, Chennai 600 101. large Tax payer Unit II floor 175 Jawaharlal Nehru Inner Ring Road, Anna Nagar Western Extension, Chennai 600 101. 3. The Deputy Commissioner of Income Tax large Tax payer Unit Chennai large Tax payer Unit Chennai 4. The Deputy Commissioner of Income Tax LTU Chennai Chennai Sd/- Assistant Registrar(CS VI) //True Copy// cse Sub Assistant Registrar To 1. The Income Tax Appellate Tribunal, 'A' Bench, Chennai. 'A' Bench, Chennai. 2. The Commissioner of Income Tax(Appeals) large Tax payer Unit II floor 175 Jawaharlal Nehru Inner Ring Road, Anna Nagar Western Extension, Chennai 600 101. large Tax payer Unit II floor 175 Jawaharlal Nehru Inner Ring Road, Anna Nagar Western Extension, Chennai 600 101. 3. The Deputy Commissioner of Income Tax large Tax payer Unit Chennai large Tax payer Unit Chennai 4. The Deputy Commissioner of Income Tax LTU Chennai Chennai +1 cc to M/s. T.Ravikumar ,Advocate Sr.No. 39511 TCA.No.448 of 2012 RR (CO)CT (06/09/2021)