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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI G. MANJUNATHA, HONBLE
O R D E R PER C.N. PRASAD (JM)
This appeal is filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals) – 22 Mumbai [hereinafter in short “Ld.CIT(A)”] dated 28.08.2018 for the A.Y. 2014-15.
Assessee in its appeal has raised the following grounds: - “1.0. The Hon. Commissioner of Income Tax (Appeals) [Hon CIT-A)] erred in upholding the Learned Assessing Officer's disallowance u/s-40(a)(i) of Income tax Act for non-deduction of tax on payment to Foreign Party of Germany. 1.1. On the facts and circumstances of the case and in law, the Hon. CIT-(A) erred in upholding disallowance made for Testing Charges of Rs.3,43,224/- considering the same as Fees for 2 ITA.NO. 6522/MUM/2018 (A.Y: 2014-15) M/s. Chemical Process Piping Pvt. Ltd., Technical Services in respect of payment made to a Company in Germany. 1.2. On the facts and circumstances of the case and in law, the Hon. CIT-(A) erred in incorrectly understanding and interpreting the amendment in explanation to section 9(1)(vii) to state that it covers all the payments to Non-Residents. 1.3. Without prejudice to the above, the Hon. CIT-(A) erred in not considering the CBDT Circular No. 3/2015 dated 12.02.2015, which is clarification and hence applicable retrospectively, wherein it was directed that for the purpose of making disallowance of "other sum chargeable" under section 40(a)(i) of the Act, the "appropriate portion of the sum which is chargeable to fax" under the Act shall form the basis of such disallowance. 2.0 The Appellant craves leave, to add, amend, alter, modify and/or withdraw any of the above grounds of appeal as the situation may warrant, on or before the date of hearing of appeal.”
At the outset, Ld. Counsel for the assessee submitted that the issue in appeal has been decided against the assessee by the Tribunal in ITA.No. 4255/Mum/2017 dated 15.01.2019 for the immediately preceding Assessment Year i.e. A.Y. 2013-14. Copy of the order is placed on record.
Ld. DR fairly accepted the submission of the Ld. Counsel for the assessee.
Heard both sides and perused the order of the Coordinate Bench of the Tribunal in assessee’s own case for the A.Y. 2013-14 and we find that the issue has been decided against the assessee by the Tribunal by following its earlier years order in ITA.Nos. 1036 & 1037/Mum/2016 dated 02.05.2018 for the A.Ys. 2011-12 & 2012-13 observing as under: -
3 ITA.NO. 6522/MUM/2018 (A.Y: 2014-15) M/s. Chemical Process Piping Pvt. Ltd., “6. We have heard the rival submissions of both the parties and perused the material on record. After perusing the order of the coordinate bench of the Tribunal in assessee’s own case for the assessment year 2011-2012 & 2012-2013 in order dated 02.05.2018, we observe that the issue is decided by the Tribunal against the assessee. The operative part of the order of the Tribunal in the said case is reproduced below :- “15. We shall now advert to the disallowance under Sec. 40(a)(i) of Rs.4,67,244/- paid by the assessee towards testing charges to M/s TUV SUD Industries Services GMBH of Germany. We find that the contention of the assessee that as per the provision of Sec. 9 of the Act, any payment made for rendering services outside India for earning income outside India is not taxable in India, did not find favour with the lower authorities. Rather, it was observed by the A.O that as per the retrospective amendment in Explanation of Sec. 9(2) of the Act by the Finance Act, 2010, payment made to a nonresident outside India shall be taxable in India, regardless of the fact that whether the services have been rendered in India or not. The A.O on the basis of his aforesaid observations concluded that as the payment made by the assessee to the aforesaid foreign party, viz. TUV SUD Industries Services BMBH, Germany was clearly as per Sec. 9(1)(vii) and Article 12 of India-Germany tax treaty towards "fees for technical services", therefore, on the failure on the part of the assessee to deduct tax at source under Sec. 195 on the payment made to the foreign party, the same was liable to be disallowed under Sec.40(a)(i) of the Act. We have deliberated on the facts pertaining to the issue under consideration and the orders of the lower authorities. The ld. A.R submitted before us that the payment made by the assessee to the aforesaid foreign party, viz. TUV SUD Industries Services GMBH, Germany, as per Explanation 2 of Sec. 9(1)(vii) was not in the nature of "fees for technical services". The ld. A.R further averred that as per CBDT circular No. 3/2015, dated 12.02.2015, the Board referring to its earlier Instruction No. 02/2014, dated 26.02.2014 had clarified that in cases where tax is not deducted at source under Sec.195 of the Act, the A.O shall determine the appropriate portion of the sum chargeable to tax, as mentioned in Subsection (1) of Sec.195, in order to ascertain the tax liability on which the deductor shall be deemed to be an assessee in default under Sec. 201 of the Act. The ld. A.R taking support of his aforesaid contention submitted that in the aforesaid circular it has been clarified that for the purpose of disallowance under Sec. 40(a)(i) which is interlinked with the sum chargeable under the Act as mentioned in Sec. 195, only appropriate portion of such sum which is chargeable to tax under the Act shall be disallowed
4 ITA.NO. 6522/MUM/2018 (A.Y: 2014-15) M/s. Chemical Process Piping Pvt. Ltd., under the aforesaid statutory provision. It was thus the contention of the ld. A.R that the lower authorities had erred in making/ sustaining the disallowance under Sec.40(a)(i) of the entire amount of payment under consideration. We have deliberated on the aforesaid contentions of the ld. A.R and are unable to persuade ourselves to subscribe to the same. We find that the aforesaid Circular No. 3/2015, dated 12.02.2015 was issued by the CBDT in order to dispel doubts as regards the scope of disallowance contemplated under Sec. 40(a)(i) of the Act in context of "other sum" chargeable under the Act, which are payable outside India or in India to a non-resident, not being a company, or to foreign company. We are of the considered view that as disallowance under Sec. 40(a)(i) in the case of the present assessee is in context of the amounts paid by it towards 'fees for technical services' to the aforesaid party, and not towards 'other sum' chargeable under the Act, therefore, the aforesaid CBDT circular would not be of any assistance for its case. The contention of the assessee thus fails in terms of our aforesaid observations. We thus being of the considered view that as there is no reason for us to dislodge the well reasoned order of the CIT{A) in context of the issue under consideration, therefore, uphold the disallowance made under Sec. 40{a){i) of Rs. 4,67,244/- as had been sustained by him. The Ground of appeal
No.1 is partly allowed in terms of our aforesaid observations.”
7. Since the facts in the above decision are materially same as in the present case before us, we, therefore, following the above decision of the Tribunal, dismiss the appeal of the assessee.”
Facts being identical, respectfully following the said decision we uphold the order of the Ld.CIT(A) and reject the grounds raised of the assessee.
In the result, appeal of the assessee is dismissed.