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Income Tax Appellate Tribunal, BENCH “A”, MUMBAI
Before: SHRI G.S. PANNU & SHRI PAWAN SINGH
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH “A”, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER (Assessment Year- 2007-08) (Assessment Year- 2008-09) Alkyl Amines Chemicals Ltd. DCIT (TDS) 1(1) Mumbai. 401-402, Nirman Vypar Kendra, Vs. Plot No. 10, Sector 17, Vashi, Navi Mumbai-400703 PAN:AAACA6783F (Appellant) (Respondent) Assessee by : Shri Divyesh I. Shah (AR) Revenue by : Shri Rajesh Kumar Yadav (DR). Date of hearing : 24.04.2018 Date of Pronouncement : 24.04.2018 Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeal by assessee under section 253 of Income-tax Act are directed against the separate order of Ld. Commissioner of Income-tax (Appeals) (CIT-A)-14, Mumbai dated 29.04.2014 for Assessment Year 2007-08 and 2008-09. In both the appeal, the order passed by ld CIT(A) is almost identical except variation of figure, the assessee has raised the identical grounds of appeal, thus, both the appeal were clubbed, heard and are decided by common order. For appreciation of facts the appeal for Assessment Year 2007-08 is picking up as a lead case. The assessee has raised the following grounds of appeal:
1.1 The Commissioner of Income-tax (Appeals) - 14, Mumbai ["the CIT (A)"] erred in confirming the action of the Deputy Commissioner of Income- & 7441/M/2014 Alkyl Amines Chemicals Ltd. tax (TDS) - 1 (1), Mumbai ("the AO") in applying provisions of sec. 194J of the Income Tax Act, 1961 ("the Act") on the payment made for VSAT/Leasedline charges. 1.2 The CIT(A) also erred in not appreciating the fact that the decision of Hon'ble Madras High Court in the case of Verizon Communications Singapore Pte Ltd. v.ITO [2013] 39 taxmann.com 70 (Madras)relied upon would not be applicable to the Appellant's case. 1.3 The Appellant prays that it be held that the Appellant was not liable to deduct tax at source U/S 194J of the Act and as such the order passed U/S 201(1)/ 201(lA) of the Act be quashed. Without prejudice to above, 2.1 The CIT(A) erred in applying provisions of sec. 194-I of the Act on the payment made for VSAT/Leased line charges on the alleged ground that the said services comes under providing right to use leased equipment. 2.2 The Appellant prays that it be held that the provisions of sec. 194-I of the Act would not be applicable and as such order passed U/S 201(1)1 201(1A) of the Act be quashed.
2. Brief facts of the case are that a survey under section 133 was carried out in the premises of assessee on 19.03.2008. During survey statement of Sh. P.S.R Murthy, CFO (Chief Finance Officer) was recorded. The survey team found that during the relevant period related to the assessment year under consideration the assessee paid the internet charges of Rs.1,69,232/- to M/s Sify Communication, Tata Indicom and Hathway Internet on which tax was not deducted at source. A show cause notice under section 201(1A) was issued to the assessee. In response to the notice Vikram Patel an employee of the assessee company attended the proceedings and explained that the payment is not made towards any managerial, technical or consultancy services but paid for usage of internet access facilities. The contention of the assessee was not accepted & 7441/M/2014 Alkyl Amines Chemicals Ltd. by Assessing officer/ DCIT (TDS) holding that internet is a technical phenomenon and can only be provided who has necessary equipments and technical ability. Therefore, the assessee was treated in default under section 201 of the Act, for non-deduction of tax at source under section 194J. The assessing officer calculated the default of tax at Rs. 9,494/- under section 201 and further levied interest of Rs. 4,557/- under section 201(1A) of the Act. On appeal before the Ld. CIT(A), the action of assessing officer was confirmed. The ld CIT(A) also sustained the action of assessing officer holding that the violation is also covered under section 194I. While covering the assessee under section 194I, the ld CIT(A) hold that use of use of VSAT/ lease line comes under right to use equipment. Thus, further aggrieved the assessee has filed the present appeal before us.
We have heard the Ld. Authorized Representative (AR) of the assessee and Ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The Ld. AR of the assessee submits that the grounds of appeal
raised by assessee are covered in favour of assessee by a number of decisions of Tribunal. The ld. AR further submits that in Alok Industries Ltd. Vs DCIT (ITA No.1423/Mum/2015) dated 03.07.2017, the Tribunal while considering the payment made to Sify Ltd towards the use of internet, the similar order under section 201 and 201(1A) was set-aside.
3. ITA No.7440 & 7441/M/2014 Alkyl Amines Chemicals Ltd.
4. The Ld. AR of the assessee further submits that Explanation(6) to section 9(1)(vi) introduced in the year 2012 with retrospective effect from 1976 and the Hon’ble Bombay High Court in CIT Vs NGT Network (India)
Pvt Ltd and this Tribunal in ACIT Vs. BSR & Co. [2016] 70 taxmann.com 69 (Mumbai-Trib.), held that liability at the hand of the recipient on account of subsequent amendment cannot expose assessee- payer to an impossible situation of requiring deduction of tax at source.
On such situation the assessee cannot be held in default for not deducting the tax at source. In further support of his submission, the Ld. AR of the assessee relied upon the decision of Tribunal and CIT Vs M/s. NGC Networks (India) Pvt. Ltd. [ITA No. 397 of 2015 dated 29.01.2018 (Bom H.C.)]. The ld AR for the assessee also filed copy of following decisions; 1. CIT Vs Estel Communication (P.) Ltd. [2008] 217 CTR 102 (Delhi).
Skycell Communication Ltd. Vs DCIT [2001] 119 TAXMAN 496 (MAD.).
3. Pacific Internet (India) (P.) Ltd. Vs ITO [2009] 27 SOT 523 (Mum.).
ACIT Vs Torry Harris Business Solution (P.) Ltd. [2015] 61 taxmann.com 234 (Bangalore-Trib.).
5. Holcim Services South Asia Ltd. Vs. DCIT [2016] 67 taxmann.com 189 (Mumbai-Trib.).
6. ITO Vs. Chinubhai Kalidas & Bros [2016] 76 taxmann.com 289 (Mumbai- Trib.). 7. iGATE Computer Systems Ltd. Vs. DCIT [2015] 53 taxmann.com 432 (Pune- Trib.).
8. Alok Industries Ltd. Vs. DCIT (ITA No. 1423/Mum/2015 )
On the other hand, the Ld. DR for the Revenue supported the order of authorities below. 4 & 7441/M/2014 Alkyl Amines Chemicals Ltd.
We have considered the rival submission of the parties and perused the material available on record. We have noted that co-ordinate bench of Tribunal in Alok Industries Ltd. (supra) while considering the similar ground of appeal held that payments made towards broadband / lease line charges are not in the nature of technical services or royalty so as to attract the provision of section 194J. It was further held that the attempt of ld CIT(A) in roping the payment under section 194I by refereeing to the definition of ‘process’ as provided under Explanation (6) to section 9(1)(vi), cannot held the assessee liable. The said amendment was inserted by Finance Act, 2012 w.r.e.f. 01.06.1967, and, when, the assessee made the payment there was no liability to deduct tax at source by treating it as Royalty. The amendment made with retrospective effect cannot fasten liability on the assessee. In our view the decision of coordinate bench in Alok Industries Limited (supra) squarely covers the grounds of appeal raised by the assessee. We are also in full agreement with the submissions of the ld AR for the assessee that liability at the hand of the recipient on account of subsequent amendment with retrospective amendment cannot expose assessee-payer to an impossible situation of requiring deduction of tax at source on that payment and the assessee cannot be held in default for not deducting the tax at source.
With this legal position the assessee succeeded on both the grounds of appeal raised herein. As the assessee is succeeded on the basis of decision 5 & 7441/M/2014 Alkyl Amines Chemicals Ltd. of coordinate bench in Alok Industries Ltd (supra), the discussion on other submissions have become academic.
The assessee has raised identical grounds of appeal in appeal for assessment year 2008-09. Considering our finding in appeal for assessment year 2007-08, in earlier paras the appeal for assessment year 2008-09 is also allowed mutatis mutandis.
In the result both the appeals filed by the assessee are allowed. Order pronounced in the open court on 24th day of April 2018 while hearing of the appeal.