DCIT, CHENNAI vs. PEIRCE LESLIE TRAVELS PVT. LTD., CHENNAI

This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) 3, Chennai, dated 28.02.2017 relevant to the assessment year 2013-14. The only effective ground raised in the appeal of the Revenue is that the ld. CIT(A) has erred in directing to delete the disallowance made under section 40(a)(i) of the Income Tax Act, 1961 [“Act” in short] on the ground that the payments made to the foreign entities are not liable to TDS.

Brief facts of the case are that the assessee is a tour operator in the business of providing customized tour package and filed its return admitting total income of ₹.61,80,720/-. The return filed by the assessee was processed under section 143 (1) of the Act. Subsequently, the case of the assessee was selected for scrutiny and notice under section 143(2) of the Act was served on the assessee. Against statutory notices, the assessee produced all particulars as sought for. After verification of details filed by the assessee, the Assessing Officer has completed the assessment under section 143(3) of the Act by assessing total income at ₹.1,82,62,232/- after making disallowance of Representation Fees to the extent of ₹.1,18,74,662/- under section 40(a)(i) of the Act and sales promotion expenses as certain inapplicable expenses were claimed to the extent of ₹.2,06,851/-. On appeal, by following his own order for the assessment year 2011-12, the ld. CIT(A) directed the Assessing Officer to delete the addition made on account of non deduction of TDS, against which the Revenue preferred present appeal.

It was the submissions of the ld. DR that the assessee is liable to deduct TDS on the payments made towards representation fees to the non- resident entities since the non-resident entities rendered service for improving the sales and business contracts of the assessee and also carried out services for the clients/visitors of the assessee, which directly covered under Explanation 2 to section 9(1)(vii) of the Act being in the nature of fees for technical services. It was further submissions of the ld. DR that the non- resident entities provided services in the nature of guidance in the development of annual international sales and marketing for the assessee company and also representing the clients, which kind services is nothing but consultancy services. It was further submission that the non-resident entities provided services to the assessee/its clients located in India and hence since the recipient of the services is located in India, the place of rendering of service is of no consequence, but the services are to be deemed to have been provided in India. By stating that the order of the Tribunal in assessee’s own case for the assessment year 2012-13 has been contested in further appeal, the ld. DR pleaded that the order of the ld. CIT(A) should be reversed and restored that of the Assessing Officer.

On the other hand, the ld. Counsel for the assessee has submitted that the issue is squarely covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for the assessment year 2012-13, where, the decision of the Hon’ble Jurisdictional High Court in the case of CIT v. Faizan Shoes (P) Ltd. 367 ITR 155 has been followed.

We have heard both sides, perused the materials available on record and gone through the orders of authorities below. With regard to the issue as to whether the TDS has to be deducted or not on the payments made to non-resident entities, we find that the issue is squarely covered in favour of the assessee by the decision in assessee’s own case for the assessment year 2012-13 in dated 03.03.2017, wherein, by following the decision of the Hon’ble Jurisdictional High Court in the case of CIT v. Faizan Shoes Pvt. Ltd. [2014] 367 ITR 155, the Coordinate Benches of the Tribunal decided the issue in favour of the assessee. The ld. DR. could not controvert the above findings of the Tribunal. Just because the Department preferred further appeal, we cannot take different view until and unless the decision of the Tribunal in earlier assessment year is reversed or modified by the High Court. Accordingly, the ground raised by the Revenue is dismissed.

In the result, the appeal of Revenue is dismissed. Order pronounced on the 22nd May, 2018 at Chennai.