SAHJANAND MEDICAL TECHNOLOGIES PVT. LTD.,SURAT vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(2), SURAT

34ar alafly 3fuaorul, Ta 7iydio, Ya IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, Hon'ble JUDICIAL MEMBER AND Dr.SHRI ARJUN LAL SAINI, Hon'ble ACCOUNTANT MEMBER (Virtual Hearing) 3T1.e. r.hT.A No.179/AHD/2017 Auu ai/Assessment Year: 2009-10 Sahajanand Medical Technologies Vs: The Deputy Commissioner Pvt: Ltd:, of Income Tax-4, Surat: Surendra Shah & Associates, (Chartered Accountants); 7006, World Trade Centre, 7th Floor, Ring Road, Near Udhna Darwaja, Surat 395 002. [PAN: AAFCS 7694 L] arareff Appellant WyrfffRespondent Auraia1r IAssessee by Shri Rajesh Shah CA REN433R H /Revenue by Mrs Anupama Singla Sr.DR Haaaio Date_of_hearing: 05.03.2021 3aulw & TidIPronouncement on: 05.03.2021 H LORDER PER PAWAN SINGH_JUDICIAL MEMEBER: 1_ This appeal by Assessee is directed against the order of ld_ Commissioner f Income Tax (Appeals)-2, Surat dated 05.10.2016 for assessment year (AY) 2009-10. The assessee has raised the following grounds of appeal: 1 The Hon'ble CIT (Appeals)-II, has erred in confirming the addition made against Payment exceeding Rs.20,000/- towards professional fees totaling to Rs.13,09,529/ ITA No: 179 /Ahd/2017 (AY 2009-10) Sahajanand Medical Technologies Pvt: Ltd 2. The Hon'ble CIT (Appeals)-I, has not justifyisng in making disallowance of professional fees for Rs. 13,09,529/ - for non-deduction 0f TDS for technical advisory fees and testing fees to 2 person to outside of country: 3 The appellant reserves the right to add, alter, amend or withdraw any grounds of appeal. 2 The assessee vide its submissions dated 08.02.2021 raised following additional ground of appeal: "The Ld. CITA) has erred in confirming the reopening u/ s 147 of the Act particularly when original assessment was passed u/ s 14303) of the Act and there was no new material on record. The Ld. CITIA) has further erred in not quashing the reassessment proceedings for not passing speaking order against reopening and also erred in making reassessment order within 10 days of passing the order against objection 3_ Brief facts of the case as extracted from the orders of lower authorities are that the assessee is a company engaged in the business of manufacturing of medical equipments, especially manufacturing Cardio Vascular stunt, filed its Return of Income for A.Y. 2009-10 declaring total income of Rs.3.97 crore. The case was selected for scrutiny; the assessment was completed under section 143(3) on 26.03.2013_ The case of assessee was again reopened under section 147 of the Act: The notice under section 148 of the Act was issued to the assessee on 29.03.2014. In response to notice under section 148 of the Act; the assessee filed Return of Income on 2 ITA No: 179/Ahd/2017 (AY 2009-10) Sahajanand Medical Technologies Pvt Ltd 26.05.2014. The Assessing Officer (AO) recorded that reasons of reopening was provided to the assessee vide letter dated 17.12.2014. The AO further recorded that none appeared on behalf of the assessee despite serving several notices, however, the assessee vide letter dated 14.02.2015 filed its objection against the reopening: The objection of assessee was disposed of vide order dated 20.02.2015 and was served on the assessee. The AO noted that assessee was again issued show cause dated 23.02.2015. The assessee failed to appear before the AO_ The AO, on verification of ledger accounts, noted that assessee has paid professional fees outside India, i.e Rs.3.59 lakhs was paid to Clear Steam Technology (Ireland) on account of testing fee and Rs.9.50 lakhs were paid to Imad Shiban on account of technical advisory fees Thus, the assessee paid total sum of Rs. 13,09,529/ without deducting tax at source under section 194J of the Act, which is in contravention of section 4Ola)(ia) of the Act. The AO recorded that in absence of any explanation, the assessment is completed under section 144 r:W.s 147 of the Act, and disallowed the entire amount of Rs.13,09,529/ - under section 4O(a)(ia) 4_ On appeal before the ld.CIT(A), the assessee challenged the validity of reopening as well as disallowance under section 4O(a)(ia) of the Act: The ld.CIT(A) after considering the submissions and the evidence 3 ITA No: 179 /Ahd/2017 (AY 2009-10) Sahajanand Medical Technologies Pvt: Ltd furnished by the assessee, upheld the validity of reopening as well as disallowance on account of non-deduction of tax on professional fees. Further aggrieved, the assessee has filed present appeal before this Tribunal: 5 We have heard the submission of learned Authorised Representative (AR) of the assessee and the learned Sr. Departmental Representative (Sr. DR) for the Revenue. At the outset, the ld.AR of the assessee submits that the assessee has raised additional ground of appeal. For adjudication of additional ground of appeal no new facts are required to be brought on record The relevant material for adjudicating the additional ground of appeal is emanating from the order of lower authorities 6 On the other hand, the Sr: DR for the Revenue not seriously objected for raising additional ground of appeal Considering the contention of ld.AR of the assessee that no new fact is required to be brought on record for adjudicating the additional ground of appeal, the additional ground of appeal is purely legal in nature_ Moreover, the assessee challenged the validity of reopening before the ld.CIT(A) as well: Hence, the additional ground of appeal is admitted, 7 In support of Ground No.1 and 2 the Id.AR of the assessee submits that assessee made the payment of consultation fees to two parties ie. Rs.3.59 lakhs was paid to Clear Steam Technology (Ireland) on ITA No: 179 /Ahd/2017 (AY 2009-10) Sahajanand Medical Technologies Pvt. Ltd account of testing fees. The said party rendered services of testing outside India in their lab for which the assessee has paid fees. The said entity is not having any business connection or any permanent establishment in India: And its income is not taxable in India: Similarly, the payment of Rs.9.50 lakhs was paid to Imad Shiban on account of technical advisory fees. Imad Shiban is a surgeon by profession of Italy and rendered independent personal and profession services, in representing the assessee in various business conventions at world level: The income of said recipient is also not taxable in India: The ld.AR for the assessee submitted that both the persons has no business connection in India and nor their income is taxable in India, thus, the assessee was not under obligation to make TDS and payments made to them: 8 On the other hand, the Sr. DR for the Revenue supported the order of ld: CIT(A): The Sr: DR submits that assessee responsible for making TDS on payment made to professional under section 194J of the Act: Thus, the AO rightly made the disallowance of professional fees under section 4O(a)(ia) of the Act:. The ld DR for the revenue prayed for confirming the order of Ld: CIT(A): In support of her submissions the learned DR for the revenue relied on the decisions of Authority of Advance Ruling in Mersen India (P) Ltd (2012) 20 taxmann com 475 (AAR) and in XYZ Ltd (2012) 19 taxmann.com 231 (AAR) 5 ITA No: 179/Ahd/2017 (AY 2009-10) Sahajanand Medical Technologies Pvt. Ltd 9 We have considered the rival submission of both the parties and have gone through the orders of the authorities below. There is no dispute that the assessee made payment to two persons, both the persons rendered professional services to assessee outside India: The AO has not brought any material on record that the recipient has any business connection in India or their income was taxable in India: It is settled law that if the recipient has no business connection nor rendered any services within India or their income is not taxable in India; SO , there was no obligation on the part of the assessee to deduct at source on payment of such professional fees paid to them Therefore, the disallowance made by the AO and confirmed by learned CIT(A),is deleted: The ratio of case laws in Mersen India (P) Ltd (supra) and in XYZ Ltd (supra) relied by Ld. DR for revenue is not applicable on the facts of the present case as facts of both the case are at variance with the facts of case in hand. In both the case i.e. in Mersen India (P) Ltd (supra) and in XYZ Ltd (supra), payments for technical services were paid to their associated enterprises. 10.In the result, Ground No.1 and 2 of the assessee is allowed: 11. Considering the fact, we have deleted the substantial addition/ disallowance, therefore, adjudication of additional ground of appeal on the validity of reopening have become academic: 12_ In the result, appeal of the assessee is allowed: ITA No: 179 /Ahd/ 2017 (AY 2009-10) Sahajanand Medical Technologies Pvt. Ltd Order pronounced on Sth March 2021 by placing the result on notice board. l- (Dr.ARJUN LAL SAINI) (PAWAN SINGH) (da HaRJACCOUNTANT MEMBER) (ifug Ha JJUDICIAL MEMBER) Kai Surat, fa7v Dated: 5mh Mar 2021 #SGR Copy of order sent to- Assessee/AO /Pr. CIT / CIT (A)/ ITAT (DR)/Guard file of ITAT. By orderAssistant Registrar, Surat