DDIT (IT) 4(2) vs. PANSONIC AVIATION CORPORATION, MUMBAI

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ITA 525/MUM/2014Status: DisposedITAT Mumbai28 September 2016AY 2008-093 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that interest under Section 234B cannot be charged from a non-resident payee when the payer failed to deduct tax at source. It also held that Section 44C is not applicable to expenses incurred in India by head office employees for services rendered in India.

What were the facts?

The Revenue appealed against the CIT(A)'s order for AY 2008-09. The assessee, a non-resident, had issues regarding the levy of interest under Section 234B and the applicability of Section 44C.

What were the issues?

Whether interest under Section 234B is leviable on a non-resident assessee for failure to deduct TDS by the payer, and whether expenses incurred in India by head office employees are covered under Section 44C.

Which sections of the Income-tax Act were involved?

Section 234B,Section 44C,Section 143(3),Section 144C

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, “C”, BENCH MUMBAI

Before: SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM

Hearing: 23/08/2016Pronounced: 28/09/2016

O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the revenue against the order of CIT(A), Mumbai, for the assessment year 2008-200, in the matter of order passed u/s.143(3) r.w.s.144C of I.T.Act.

2.

At the outset, ld. AR placed on record order of the Tribunal dated 28/03/2013 in assessee’s own case for the assessment year 2007-08, wherein both the issues were decided in favour of the assessee. The issue with regard to leviability of interest u/s.234B in case of non-resident, has been decided by Tribunal at para 9, which reads as under :-

1.

2 “Ground no.9 is about levy of interest ills 234B. Having heard the rival submissions and perused the relevant material on record we find that the issue of charging interest u/s 234B in the present case is no more res integra in view of the judgment of the Hon'ble jurisdictional High Court in the case of Director of Income-tax (International Taxation) v. NGC Network Asia LLC [(2009) 313 ITR 187 (Born.)] in which it has been held that when the duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be charged from the payee assessee U/S 234B. The same view has been reiterated in DIT (IT) v, Krupp UDHE GmbH[(2010) 38 DTR (Bom.) 251]. As the assessee before us is a non-resident, naturally any amount payable to it which is chargeable to tax under the Act, is otherwise liable for deduction of tax at source. In that view of the matter and respectfully following the above precedents, we hold that no interest can be charged u/s 234B and 234C of the Act. This ground is allowed.”

3.

Ground with regard to applicability of section 44C has been decided by Tribunal vide para 4 which reads as under :-

“4. We have heard the rival submissions and perused the relevant material on record. It is observed that the assessee is a company incorporated in USA which set up branch office in India to provide technical, maintenance services in respect of in-flight entertainment system installed in aircrafts operated by Jet Airways India Limited. Certain employees of the assessee-company from USA frequently traveled in India for undertaking activities as per contract with Jet Airways. It is in this connection that the said sum was incurred on such employees visiting India. The first question is as to whether the amount spent on air tickets, domestic expenses in respect of loading, boarding and conveyance of such employees from USA should be considered u/s 44C. It has been recorded by the Assessing Officer in para 6 of the order that : "This expenditure was incurred by the employees of PAC, US in India, in Indian currency, and subsequently reimbursed to them in foreign currency". Section 44C talks of deduction of head office expenses in the case of non- residents. Clause (iv) of Explanation to this section defines "head office expenditure" to mean "executive and general administration expenditure incurred by the assessee outside India, including ..........". A bare perusal of the definition of head office expenditure in section 44C makes it manifest that only the expenditure incurred outside India can be brought within the purview of this provision. From the reproduction of the part of the assessment order, it is clear that the Assessing Officer himself admitted that this amount was spent by the employees of PAC, US "in India, in Indian currency". In view of this it is vivid that the provisions of section 44C cannot apply. More over it is seen that section 44C refers to common head office expenses and cannot encompass the expenses exclusively incurred by the head office for Indian branch.

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