Income Tax Appellate Tribunal - Chennai
Dcit, Pondicherry vs Integra Software Services P. Ltd., ... on 28 February, 2017
आयकर अपील य अ धकरण, 'ए' यायपीठ, चे नई।
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH: CHENNAI
ी एन.आर.एस. गणेशन, या यक सद य एवं
ी !ड.एस. सु दर $संह, लेखा सद य के सम)
BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No.1099/Mds/2015
नधा*रण वष* /Assessment Year: 2010-11
The Dy. Commissioner of Income Vs. M/s.Integra Software
Tax, Circle-I, D.P.Thottam, Services P. Ltd.,
Muthialpet, Puducherry-605 003. No.51, 2nd Cross Street,
Jawahar Nagar,
Pondicherry.
[PAN: AAACI 6193 B]
(अपीलाथ-/Appellant) (./यथ-/Respondent)
अपीलाथ- क0 ओर से/ Appellant by : Mr.Shiva Srinivas, JCIT
./यथ- क0 ओर से /Respondent by : Mr.S. Sridhar, Adv.
सन
ु वाई क0 तार ख/Date of Hearing : 02.02.2017
घोषणा क0 तार ख /Date of Pronouncement : 28.02.2017
आदे श / O R D E R
PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:
This is an appeal filed by the Revenue against the Order dated 20.02.2015 of Commissioner of Income Tax (Appeals), Puducherry, in ITA No.702/PDY/13-14 for the AY 2010-11 and raised the following grounds:
1. The order of the CIT(A) is contrary to the law and facts of the case.
2. The learned CIT(A) ought to have considered the fact that the assessee company itself had admitted that the foreign vendors have rendered translation services which involve ITA No.1099/Mds/2015 :- 2 -:
copy, editing, indexing which are all essentially knowledge driven services and listed out the services rendered by the vendors which include 'Project Management' and other ancillary services like "art alteration, design alteration etc" which would fall within the meaning of technical services as defined in Sec 9.
3. The learned CIT(A) ought to have considered the fact that if the whole of the services do not constitute as technical service, the assessee should have made an application as per sec 195(2) to determine the appropriate portion of the sum chargeable under the Act.
4. The learned CIT(A) ought to have remitted the issue to the Assessing Officer as per Rule 46A, since the details submitted before the CIT(A) for the amounts paid within threshold limits laid down by Section 194C which were not available in the records.
5. For the above and for any other reasons that may be adduced at the time of hearing the order of the CIT(A) may be cancelled and that of the AO may be restored.
Condonation of delay:
There was delay of 3 days in filing the appeal by the Revenue and the assessing officer filed petition requesting for condonation of delay. We heard both the parties and Ld.AR did not object for condonation of delay. We are convinced with the explanation offered by the Revenue and condone the delay.
2.0 Ground Nos.1 & 5 are general in nature which do not require specific adjudication.
3.0 Ground Nos.2 & 3 are related to the disallowance u/s.40(a)(i) of Income Tax Act. During the course of assessment proceedings, the Assessing Officer (hereinafter referred to as 'AO') found that the assessee has made payments to non-resident individuals and foreign companies for outsourcing charges without deduction of tax at source amounting to ₹5,47,68,636/- u/s.195 of Income Tax Act. The assessee explained before the AO that the payments were made to non-resident individuals falls in ITA No.1099/Mds/2015 :- 3 -:
two categories. One is for payment made to individuals who are claimed to be non-resident individuals and the other one is for foreign companies. The assessee relied on the DTAA with United Kingdom for non-deduction of tax at source in respect of non-resident individuals under Article-15 and in respect of payments made to the assessee companies the assessee relied on the decision of the Hon'ble Supreme Court in the case of GE India Technology Centre (P) Ltd. v. CIT (2010) 327 ITR 456 (SC) wherein it was held that obligation regarding the deduction of tax at source arises only on such remittances chargeable under the Income Tax Act. The assessee submitted that the payments made to foreign companies are not chargeable to tax in India and thus TDS is not deductible and accordingly no deduction is required to be made u/s.195 of Income Tax Act. The remittances were made based on the declarations u/s.15CB along with Certificate issued by the Chartered Accountant u/s.15CB in terms of Rule 37B. For the translation services carried out by the non-resident freelancers or business entities payments are made outside India, they were not actually received in India and there was no PE or business establishment in India. The knowledge driven services of the assessee were carried out by non-resident outside India. Hence, the assessee contended before the AO that the assessee was outsourcing the job of indexing, translation project management which involve copy of editing, proofing, etc... are not in the nature of technical services, thus section 195 has no application in it's case and consequent addition u/s40(a)(i) is not called for. Not being impressed with the explanation offered by the ITA No.1099/Mds/2015 :- 4 -:
assessee, the AO held that the payments made to foreign individuals are in the nature of Fee for technical services and required to be taxed in India u/s.9(1)(vii) of Income Tax Act. Since the assessee has not deducted the tax at source as required u/s.195, the AO disallowed the same of Rs.5,47,68,636/- u/s 40(a)(i)and brought to tax. 4.0 Aggrieved by the Order of the AO, the assessee went on appeal before the Learned Commissioner of Income Tax(Appeals) (hereinafter referred to as 'Ld.CIT(A)') and the Ld.CIT(A) allowed the assessee's appeal holding that the assessee has not rendered any technical services and the provisions of Sec.195 does not attract for the payments made to non-resident individuals and foreign body corporate. 5.0 Aggrieved by the Order of the Ld.CIT(A) the Revenue is on appeal before us. Appearing for the Revenue, Learned Departmental Representative (hereinafter referred to as 'Ld.DR') argued that the assessee has made the payments to foreign individuals and the foreign body corporate towards the knowledge driven services such as foreign indexing, copy editing, translation, and payments which were in the nature of Fee for foreign technical services and liable for deduction of tax at source u/s 195 of Income Tax Act. The assessee has failed to deduct tax at source and the provisions of Sec.195 clearly applies and the AO has rightly made the addition u/s.40(a)(ia). On the other hand, the Ld.AR relied on the orders of the Ld.CIT(A) and also the decision of this Tribunal ITA No.1099/Mds/2015 :- 5 -:
in M/s.Cosmic Global Limited v. ACIT in ITA No.744/Mds/2014 dated 30.07.2014.
6.0 We heard the rival submissions and perused the material placed on record. Certificates from the qualified Chartered Accountants in the form of 15CA and15CB were called for by the AO but not filed by the assessee and the verification/requirements u/s 195(6) have not been carried out.
The said information of 15CA and the 15CB were filed before the Ld.CIT(A), but the Ld.CIT(A) has not given an opportunity to the AO. Non-submission of Form-15CA/CB was discussed in the assessment order. Therefore, the issue requires verification at the level of the AO regarding submission of Form-15CA/CB and satisfactory compliance of the requirement of Sec.195(6) to verify the application of TDS under section 195 of Income Tax Act. Therefore, we are of the considered opinion that the issue should be remitted back to the file of the AO to verify the satisfactory compliance of Form-15CA/CB. Accordingly, the issue regarding the payments made to be foreign companies/individuals is set- aside to the file of the AO to decide the issue afresh on merits and Ground Nos.2 & 3 of the Revenue's appeal are allowed for statistical purposes.
7.0 Ground No.4 is related to the disallowance of expenditure u/s 40(a)(ia) for non deduction of tax at source. u/s.194C. The AO disallowed a sum of Rs.1,01,85,791/- u/s.40(a)(ia) of Income Tax Act in respect of ITA No.1099/Mds/2015 :- 6 -:
the payments made to the local contractors for carrying out the works without deduction of tax at source. Therefore the AO made the addition.
8.0 Aggrieved by the Order of the AO, the assessee went on appeal before the Ld.CIT(A) and the Ld.CIT(A) allowed the assessee's appeal.
Before the Ld.CIT(A), the assessee filed evidences regarding non application of TDS on payments made to certain local persons since the payment was within the threshold limit. Therefore, the Revenue has challenged the Order under Rule 46A of Income Tax Rules. The Ld.DR argued that since the Ld.CIT(A) has accepted the fresh evidence and not placed before the AO, the case should be remitted back to the AO. On the other hand, the Ld.AR relied on the Order of the Ld.CIT(A). 9.0 We have heard the rival submissions and perused the material placed on record. The assessee has filed fresh evidence relating to non- deduction of tax at source not exceeding the threshold limits. During the assessment proceedings, the assessee has not furnished the above details to the A.O. The Ld.CIT(A) has not given an opportunity to the AO to defend the case. Therefore, in the interest of justice we are of the considered opinion that the case should be remitted back to the file of AO to examine the additional evidences submitted before the Ld.CIT(A) and decide the issue afresh on merits. It is needless to say that the assessee ITA No.1099/Mds/2015 :- 7 -:
should be given an opportunity of being heard. The Revenue's appeal on this ground is allowed for statistical purposes.
10.0 In the result, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced in the Open Court on 28th February, 2017, at Chennai.
Sd/- Sd/-
(एन.आर.एस. गणेशन) (!ड.एस. स
ु दर $संह)
(N.R.S. GANESAN) (D.S.SUNDER SINGH)
या यक सद य/JUDICIAL MEMBER लेखा सद य/ACCOUNTANT MEMBER
चे नई/Chennai,
5दनांक/Dated: 28th February, 2017.
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आदे श क0 . त$ल6प अ7े6षत/Copy to:
1. अपीलाथ-/Appellant 4. आयकर आय8
ु त/CIT
2. ./यथ-/Respondent 5. 6वभागीय . त न ध/DR
3. आयकर आय8
ु त (अपील)/CIT(A) 6. गाड* फाईल/GF