Income Tax Appellate Tribunal - Chennai
Macmillan India Limited, Chennai vs Department Of Income Tax on 30 January, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'D' CHENNAI
Before Shri Abraham P. George, Accountant Member and
Shri George Mathan, Judicial Member
.....
I.T.A. Nos. 425 & 426/Mds/2011
Assessment Years : 2005-06 & 2006-07
The Deputy Commissioner of M/s. Macmillan India Limited,
Income-tax, Company Circle-IV(1), v. (Now known as M/s. MPS
Chennai. Limited),
No. 21, Pattulos Road,
Chennai-600 002.
[PAN: AAACM2423L]
(Appellant) (Respondent)
AND
C. O. Nos. 55 & 56/Mds/2011
(In I.T.A. Nos. 425 & 426/Mds/2011)
Assessment yeas : 2005-06 & 2006-07
M/s. Macmillan India Limited, v. The Deputy Commissioner of
(Now known as M/s. MPS Limited), Income-tax,
No. 21, Pattulos Road, Company Circle-IV(1),
Chennai-600 002. Chennai.
(Cross Objector) (Respondent)
Department by : Shri K.E.B. Rengarajan,
Jr. Standing Counsel
Assessee by : Shri Vikram Vijayaraghavan
and Shri S.P. Chidambaram,
Advocates
Date of Hearing : 30-01-2012
Date of Pronouncement : 31/01/2012
2
I.T.A. Nos. 425 & 426/Mds/2011
and CO Nos. 55 & 56/Mds/2011
ORDER
PER GEORGE MATHAN, JUDICIAL MEMBER :
ITA No. 425/Mds/2011 is an appeal filed by the Revenue against the order of
the learned CIT(Appeals)-V, Chennai in ITA NO. 519/2008-09 dated 29-11-2010 for the assessment year 2005-06. ITA No. 426/Mds/2011 is an appeal filed by the Revenue against the order of the learned CIT(Appeals)-V, Chennai in ITA No. 373/2009-10 dated 29-11-2010 for the assessment year 2006-07. C.O. No. 55/Mds/2011 is the cross objection filed by the assessee in the Revenue's appeal in ITA No. 425/Mds/2011. C. O. No. 56/Mds/2011 is the cross objection filed by the assessee in the Revenue's appeal in ITA No. 426/Mds/2011.
2. Shri K.E.B. Rengarajan, learned Jr. Standing Counsel represented on behalf of the Revenue and Shri Vikram Vijayaraghavan and Shri S.P. Chidambaram, Advocates represented on behalf of the assessee.
3. In the Revenue's appeal in ITA No. 425/Mds/2011 in regard to ground Nos. 2.1 and 2.2 it was submitted by the learned Jr. Standing Counsel that the issue was against the action of the learned CIT(A) in directing the Assessing Officer to re- compute the deduction u/s 10A of the Income Tax Act, 1961 by excluding the telecom expenditure from both the export turnover and total turnover relying upon the decision of the Special Bench of this Tribunal in the case of M/s. Sak Soft Ltd., reported in 121 TTJ 865. It was the submitted by the learned Jr. Standing Counsel 3 I.T.A. Nos. 425 & 426/Mds/2011 and CO Nos. 55 & 56/Mds/2011 that the Revenue has filed appeal against the decision of the Special Bench in the case of M/s. Sak Soft Ltd. It was the submission that the order of the learned CIT(A) is liable to be reversed.
4. In reply, the learned authorised representative vehemently supported the order of the learned CIT(A). It was the submission that the issue was squarely covered by the decision of the Special Bench of this Tribunal in the case of M/s. Sak Soft Ltd., referred to supra.
5. We have considered the rival submissions. As it is noticed that the learned CIT(A) has only followed the decision of the Special Bench of this Tribunal in the case of M/s. Sak Soft Ltd., referred to supra, when deciding the issue and has only followed the judicial discipline, respectfully following the decision of the Special Bench of this Tribunal, referred to supra, the finding of the learned CIT(A) on this issue stands confirmed.
6. In regard to grounds 3.1 and 3.2 of the Revenue's appeal it was submitted by the learned Jr. Standing Counsel that the issue was against the action of the learned CIT(A) in holding that the assessee was entitled to depreciation at 80% on the UPS as against 25% allowed by the Assessing Officer. It was the submitted that the UPS was entitled to depreciation only at 25%.
7. In reply, the learned authorised representative submitted that the issue was squarely covered by the decision of the co-ordinate Bench of this Tribunal in the case of M/s. Brakes India Ltd. in ITA Nos. 249 , 1166 and 1069/Mds/2010 dated 06- 4 I.T.A. Nos. 425 & 426/Mds/2011 and CO Nos. 55 & 56/Mds/2011 01-2012, wherein following the decision of the Jodhpur Bench of this Tribunal in the case of DCIT v. Surface Finishing and Equipment reported in 81 TTJ 448 (Jodh), the co-ordinate Bench had held that the assessee was entitled to the higher rate of depreciation on the UPS which is an energy saving device. 8 We have considered the rival submissions. As it is noticed that the issue is squarely covered by the decision of the co-ordinate Bench of this Tribunal in the case of M/s. Brakes India Ltd., wherein both of us are parties, the finding of the learned CIT(A) on this issue stands confirmed. In the circumstances, the appeal of the Revenue in ITA No. 425/Mds/2011 stands dismissed.
9. In the Revenue's appeal in ITA No. 426/Mds/2011, in regard to ground Nos. 2.1 and 2.2 it was submitted that the issue is identical to grounds 2.1 and 2.2 of the Revenue's appeal in ITA No. 425/Mds/2011. Consequently, following our decision in ITA No. 425/Mds/2011, supra, on identical grounds the finding of the learned CIT(A) on this issue stands confirmed.
10. In regard to grounds 3.1 to 3.5 it was submitted by the learned Jr. Standing Counsel that the issue was against the action of the learned CIT(A) in deleting the disallowance made by invoking the provisions of section 40(a)(i) of the Income Tax Act, 1961 on the payments made by the assessee to M/s. Macmillan Publishers Ltd., UK without deducting tax at source. It was submitted that the assessee had paid fee for technical services insofar as M/s. Macmillan Publishers Ltd., UK was carrying out as a UK selling agent of the assessee's photo typesetting, printing, computer 5 I.T.A. Nos. 425 & 426/Mds/2011 and CO Nos. 55 & 56/Mds/2011 software, data capture, copy editing, books published and complimentary and connected activities for publishing, typesetting, printing and computer software giving full sales and after-sales service and for maintaining liaison with the printers. It was the submission that the order of the learned CIT(A) is liable to be reversed.
11. In reply, the learned authorised representative submitted that what was being paid was an agency commission. It was the submission that M/s. Macmillan Publishers Ltd., UK was not giving the assessee any technical support. It was the further submission that M/s. Macmillan Publishers Ltd., UK was a non-resident agent and they had no establishment, much less a permanent establishment, in India. It was the submission that the payment of commission that the payment of commission to M/s. Macmillan Publishers Ltd., UK was payment of commission to the non-resident agent outside India and was the income of the non-resident earned outside India. It was the submission that no TDS was liable to be made. He vehemently supported the order of the learned CIT(A).
12. We have considered the rival submissions. A perusal of the order of the learned CIT(A) clearly shows that the learned CIT(A) has considered the provisions of section 9(1) of the Act. Undisputedly, M/s. Macmillan Publishers Ltd., UK had rendered the marketing services outside India and the assessee had also paid the agency commission outside India. It was also noticed that the learned CIT(A) has followed the decision of the Hon'ble Supreme Court in the case of GE India Technology Centre Private Ltd. in civil appeal Nos. 7541 & 7542 of 2010 to hold 6 I.T.A. Nos. 425 & 426/Mds/2011 and CO Nos. 55 & 56/Mds/2011 that M/s. Macmillan Publishers Ltd., UK was not liable to tax in India and consequently there was no warrant for withholding tax. As it is noticed that the learned CIT(A) has relied upon the decision of the Hon'ble Supreme Court in the case of GE India Technology Centre Private Limited and as it is noticed that the facts as brought out by the learned CIT(A) have not been shown to be wrong or perverse, the finding of the learned CIT(A) on this issue stands confirmed.
13. In regard to grounds 4.1 and 4.2 it was submitted that the issue was identical to grounds 3.1 and 3.2 of the appeal of the Revenue in ITA No. 425/Mds/2011, i.e. in regard to the higher rate of depreciation on the UPS. In the circumstances, following our decision in ITA No. 425/Mds/2011, supra in regard to grounds 3.1 and 3.2, the finding of the learned CIT(A) on this issue stands confirmed.
14. In regard to grounds 5.1 to 5.3 it was submitted by the learned Jr. Standing Counsel that the issue was against the action of the learned CIT(A) in restricting the expenditure for earning the exempted income to 2% in regard to the applicability of the provisions of section 14A. It was the submission that the Assessing Officer had relied upon the decision of the co-ordinate Bench of this Tribunal in the case of M/s. Daga Capital Management Pvt. Ltd. It was the submission that he had no objection if the issue is restored to the file of the Assessing Officer for re-adjudication in line with the decision of the Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. reported in 328 ITR 81. 7
I.T.A. Nos. 425 & 426/Mds/2011 and CO Nos. 55 & 56/Mds/2011
15. In reply, the learned authorised representative vehemently supported the order of the learned CIT(A).
16. We have considered the rival submissions. As it is noticed that the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd., referred to supra, was not available to the Assessing Officer when he took the decision, we are of the view that the issue is liable to be restored to the file of the Assessing Officer for re-adjudication after considering the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd., referred to supra. In the circumstances, the appeal of the Revenue in ITA No.426/Mds/11 is partly allowed.
17. In the cross objections filed by the assessee in CO Nos. 55 & 56/Mds/2011 it was submitted by the learned authorised representative that the issue was against the action of the learned CIT(A) in confirming the reduction of the telecommunication expenses from the export turnover while computing the deduction under section 10B of the Act as the expenditure was not recovered as part of the sale price.
18. In reply, the learned Jr. Standing Counsel submitted that the issue was covered against the assessee by the decision of the co-ordinate Bench of this Tribunal in the case of M/s. RR Donnelley India Outsource Pvt. Ltd. in ITA Nos. 1989, 1990 and 2145/Mds/2010 dated 14-10-2011.
8
I.T.A. Nos. 425 & 426/Mds/2011 and CO Nos. 55 & 56/Mds/2011
19. We have considered the rival submissions. As it is noticed that the issue in the cross objections is covered by the decision of the co-ordinate Bench of this Tribunal in the case of M/s. RR Donnelley India outsource Pvt. Ltd., referred to supra, following the decision of this Tribunal in the case of M/s. RR Donnelley India Outsource Pvt. Ltd., the order of the learned CIT(A) on this issue stands confirmed. In the circumstances, the cross objections filed by the assessee are dismissed.
20. In the result, the Revenue's appeal in ITA No. 425/Mds/2011 stands dismissed and the Revenue's appeal in ITA No. 426/Mds/2011 stands allowed for statistical purposes. The cross objections filed by the assessee in CO Nos. 55 & 56/Mds/2011 stand dismissed.
21. The order was pronounced in the court on 31/01/2012.
Sd/- Sd/-
(Abraham P. George) (George Mathan)
Accountant Member Judicial Member
Chennai,
Dated the 31st January, 2012.
H.
Copy to: Assessee/AO/CIT (A)/CIT/D.R./Guard file