Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-II, NEW DELHI
Before: SHRI H.S. SIDHU
The Department has filed the Appeal against the impugned order dated 31.12.2014 of Ld. CIT(A)-42, New Delhi pertaining to assessment year 2011-12. The grounds raised in the revenue’s appeal reads as under:- On the facts and circumstance of the case, Ld CIT(A) has erred in holding that the assessee was not liable to withhold tax on the payments made by it for ground rent, advertisement and exhibition expenses.
On the facts and circumstance of the case, Ld CIT(A) has erred in adjudicating on the nature of payment and liability to withhold tax as it is beyond the purview of the provisions of the section 154 of the Act, as held by the AO.
1.2 an the facts and circumstance of the case, Ld CIT(A) has erred not appreciating the fact that there is no mistake apparent from record in processing of Form 27Q, as held by the AO in order u/s 154 which was the subject matter of appeal before CIT(A)
1.3 On the facts and circumstance of the case, Ld CIT(A) has erred in not appreciating that no enquiries or detailed examination of nature of the transactions, nature and scope of the services rendered can be made in the proceedings u/s 154 of the Act.
1.4 On the facts and circumstance of the case, Ld CIT(A) has erred that income is not taxable in the hands of payees as it is debatable issue.
2. The appellant craves to add, amend, modify or alter any grounds of appeal at any time or before the hearing of the appeal.
It is certified that the above referred order of the CIT(A) in this case was received in the office of the undersigned on 07.01.2015 and the date of limitation expires on 08.03.2015.”
The brief facts of the case are that the assessee had filed an Application u/s. 154 requesting for rectification of mistake apparent from record in the intimation u/s. 200A dated 3.11.2011. In terms of the said intimation, a sum of Rs. 2360700/- was determined as payable u/s. 200A by the deductor in the TDS statement (Form 27Q) filed by it on 27.7.2010 for the First Quarter of the Financial Year 2010-11. The applicant deductor was found to have committed a default of Short Deduction to the tune of Rs. 2001400/-.
Accordingly, a demand of Rs. 2360700 (including interest of Rs. 358520/-) was determined as payable on account of the said short deduction. The assessee has stated that it had made remittances to foreign countries. The said remittances related to rent for office accommodation, expenses incurred toward exhibitions outside India and Advertisement in foreign journals towards display of its products. On these payments, it had erroneously deducted the TDS at minimum rates. However, as per the intimation a rate of 20% has been applied by the AO owing to non-availability of foreign parties. Thereafter, AO has rejected the application of the assessee filed u/s. 154 of the I.T. Act vide his order passed u/s. 154 of the I.T. Act, 1961 on 22.2.2013.
Aggrieved with the aforesaid order, assessee preferred an appeal before the Ld. CIT(A), who vide his impugned order dated 30.12.2014 has allowed the appeal of the assessee.
Now the Revenue is aggrieved against the impugned order and filed the present appeal before the Tribunal.
Notice of hearing was sent to both the parties and in response to the same none appeared on behalf of the Department, nor any application for adjournment has been filed by the Department. Keeping in view of the facts and circumstances of the present case, I am of the considered view that no useful purpose would be served to serve the notice again and again to the Department, therefore, I am deciding this Appeal as Exparte qua Department, after hearing the Ld. Counsel of the assessee and perusing the records.
Ld. Counsel of the Assessee has relied upon the order of the Ld. CIT(A) and stated that Ld. CIT(A) has passed a well reasoned order which does not need any interference on my part, hence, the same may be upheld and accordingly, the appeal of the Revenue may be dismissed.
I have heard the Ld. Counsel of the Assessee and perused the records, especially the impugned order passed by the Ld. CIT(A). I find that Ld. First Appellate Authority has elaborately discussed the issue in dispute by considering the submissions of the assessee and adjudicated the issue vide para no. 5.1 to 6 at page 5 of the impugned order. The said relevant paras are reproduced as under:- “5.1 I have carefully considered submissions of the appellant. From details of payments and TDS as furnished by the appellant, it is seen that taxes
have been withheld by the appellant after grossing up and taxes so withheld have been deposited into credit of central government.
Therefore, pre-conditions as mentioned in section 248 of the Act are satisfied. Further, it is seen that payments made to foreign entities are in nature of rent, advertisement and exhibition expenses and therefore are in the nature of business receipts in hands of payee. Such business receipts are taxable in India only if payee had ‘PE’ in India within meaning of relevant
DTAA. From the facts as furnished by the appellant, it is seen that foreign entities did not have PE in India and therefore payments were not chargeable to tax in India. Accordingly, the appellant was under no obligation to deduct taxes at source while making these payments.
5.2 Accordingly, I hold that taxes were not required to be withheld u/s. 195(1) of the Act on the impugned payments made by the appellant.
Various ground of appeal taken by the appellant are argumentative in nature and are in respect of on issue only which is allowed in favour of the appellant.
6.0 In the result, the appeal is allowed.”
7.1 After going through the findings of the Ld.CIT(A), as aforesaid, I find from the details of payments and TDS as furnished by the assessee that the taxes have been withheld by the assessee after grossing up and taxes so withheld have been deposited into credit of central government. Therefore, pre-conditions as mentioned in section 248 of the Act are satisfied. Further, it is seen that payments made to foreign entities are in nature of rent, advertisement and exhibition expenses and therefore are in the nature of business receipts in hands of payee. Such business receipts are taxable in India only if payee had ‘PE’ in India within meaning of relevant DTAA. From the facts, it has been observed that foreign entities did not have PE in India and therefore payments were not chargeable to tax in India. Accordingly, the assessee was under no obligation to deduct taxes at source while making these payments. Accordingly, Ld. CIT(A) has rightly held that the taxes were not required to be withheld u/s. 195(1) of the Act on the impugned payments made by the assessee and allow the issue in dispute in favour of the assessee which in my considered opinion, does not need any interference on my part, hence, I uphold the order of the Ld. CIT(A) on the issue in dispute and reject the grounds raised by the raised by the Revenue.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 14/09/2016.