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Income Tax Appellate Tribunal, ‘ A’ BENCH : CHENNAI
Before: SHRI GEORGE MATHAN & SHRI S.JAYARAMAN
आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER
This is an appeal filed by the Revenue against the order of the Commissioner of Income-tax (Appeals)-18, Chennai in dated 10.12.2017 for the assessment year 2009-10.
Mr.AR.V.Sreenivasan represented on behalf of the Revenue and Ms.S.Vidya represented on behalf of the Assessee.
The Revenue has raised the following grounds for adjudication.
The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. .
2. The Id. CIT(A) has erred in directing the Assessing Officer(AO) to delete the addition of Rs.93,55,477/-made towards non deduction of tax from the payment made for technical know-how to M/s Harward Medical International Inc., in the assessment order passed u/s 143(3) r.w.S. 254 of the IT Act in the assessee's case for the AY 2009- 10. 2.1 Having regard to his observation that invocation of the provisions of sec.40(a)(ia) of the IT Act in the assessee's case is not correct, since the assessee is only a charitable trust, the Id.CIT(A) ought to have appreciated that the AO has not disallowed the payment of Rs.93,55,477/- made to M/s Harward Medical International Inc., U/s.40(a)(ia) of the IT Act but has only held that the said payment cannot be treated as application of income for the AY 2009-10 as the assessee had not fulfilled its responsibilities as required under section 195 of the IT Act. 2.2 The Id. CIT(A) having relied on the decision of the Hon'ble Tribunal in dt. 21.09.2016 for AY 2010-11 in the assessee's own case, wherein the Hon'ble Tribunal followed the decision of the Hon'ble ITAT, Mumbai in JDIT(IT)- 3(1), Mumbai Vs Wockhardt Hospitals Ltd in ITA No. 3610/Mum/2005 dated 18.11.2011 ,ought to have appreciated that the both the said decisions were not accepted and the appeals filed by the revenue u/s 260A of the IT Act are pending before the respective Hon 'ble High court. 2.3 The ld.CIT(A) ought to have appreciated that for the A.Y 2009-10,the Hon'ble ITAT, vide its order in ITA No. 2281/Mds/2012 dated 11.07.2013, had only directed the AO to examine the Memorandum Of Agreement[MOA] entered into by the assessee with M/s Harvard Medical International Inc [HMII] and the services rendered by [HMII] and payments made by assessee and to decide the issue afresh in accordance with law and has not held that the assessee being a charitable Trust, the TDS provisions are not applicable to the assessee's case.
2.4 Having regard to the fact that the AO followed the directions of the Hon'ble ITAT for A.Y 2009-10 and concluded that deduction of tax as per Sec.195 r.w.s 9(1)(vi) read with the explanation appearing below sub section (2) raise on the payment made by the assessee trust to M/s Harvard Medical International Inc as per MOA and since the assessee had violated the said provisions, such payment cannot be treated as application of income of the Trust, the ld.CIT(A) ought to have upheld the action of the AO in the assessment order passed u/s 143(3) r.w.S. 254 of the IT Act in the assessee's case for the AY 2009-10.
3. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings,· the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored.
At the time of hearing, the ld.AR submitted that issue raised in this appeal of Revenue was squarely covered by the decision of Co-ordinate Bench of this Tribunal in assessee’s own case for the assessment year 2010-11 in vide order dated 21.09.2016 wherein it has been held by the Tribunal following the principles laid down by the Mumbai Tribunal in the case of JDIT(IT)-3(1), Mumbai Vas. Wockhardt Hospitals Ltd in ITA No.3610/Mum/2005 dated 18.11.2011 wherein it has been held that:-
“5.5 We find merit in the submissions of the learned Authorized Representative. On the identical situation, as pointed out by the learned Authorized Representative, the Mumbai Bench of the Tribunal in the case JDIT Vs. Wochhardt Hospitals Ltd., in has held the issue in favour of the assessee.
The relevant portion of the order is reproduced herein below for reference:-
“29. This is an appeal by the revenue against the order dated 4/2/2005 of CIT(A)-31, Mumbai passed in an appeal against the order under section 195(2) of the Act. We have already seen that WHL made payments to Harvard Medical International In the case of. In connection with the services rendered by the later in India. M/s. WHL applied for issue of nil deduction of tax at source u/ s.195 of the Act, on the ground that Harvard Medical International Inc. was a non- resident and that payment by M/s. WHL to Harvard Medical International Inc. was business profits and Since Harvard Medical International Inc. did not have a PE in India the receipts cannot be brought to tax in India and consequently a certificate of no deduction of tax at source before making payment to Harvard Medical International Inc. should be Issue. The AO treated the payment in question as royalty and FIS and directed the assessee to deduct tax at source treating 90%) of the payment as royalty and 10% as FIS.
On appeal by the assessee the CIT(A) confirmed the order of the Assessing Officer but however held that only 50% of the payment should be treated as FIS and tax deducted at source accordingly. We have already seen while deciding the appeal on Harvard Medical International Inc. that they payments by M/s. WHL to Harvard Medical International Inc. are business profits and since Harvard Medical International Inc. does not have a PE in India the same cannot be brought to tax in India for the reasons stated therein. We hold that M/s. WHL has no obligation to deduct tax at source on the payment made to Harvard Medical International Inc. Accordingly, this appeal is dismissed.”
It is further submitted that it is not disputed about the fact that as M/s Harvard Medical International Inc., did not have Permanent Establishment (P.E) in India, there was no question of addition made towards non-deduction of tax from the payment made for technical know-how to M/s Harvard Medical International Inc. It was submitted that ld.CIT(A) had followed the decision of Co-ordinate Bench of this Tribunal in assessee’s own case in vide order dated 21.09.2016 referred to supra wherein held the issue in favour of the assessee.
In reply, ld.DR strongly relied on the order of Assessing Officer. It was a prayer that the order of ld.CIT(A) was liable to be reversed.
We have considered the rival submissions. As it is noticed that ld.CIT(A) has followed the decision of Co-ordinate Bench of this Tribunal in assessee’s own case in for assessment year 2010-11 referred to supra and no distinguish facts has been brought out by the Revenue for distinguishing the said decision, the findings of the ld.CIT(A) stands confirmed.
In the result, the appeal of the Revenue is dismissed.