TMI Blog2008 (8) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... id in India. Though the benefit of such booking may be obtained in India by the assessee s customers or clients. It is settled proposition of law that no income accrues or arises or deemed to accrue or arise to the non-resident agents in India where services were made by them outside India. The booking were undoubtedly made outside India by the commission agents. In this view of the matter we, therefore, hold that the authorities below were very much unjustified in holding that the sums by way of commission paid to the non-resident booking agents was taxable in India so as to attract the provisions of section 195(1) of the Act and section 40(a)(i) of the Act with a view to disallow the assessee s claim of deduction of commission. The non-resident commission agents having no permanent establishment in India had earned commission from booking of the hotel made by the assessee s customers at a place outside India. Further, no material has been pointed out to show and conclude that there was any business connection between the activities carried out by the assessee in India and earning of income from commission outside India by the non-resident commission agents. It has neither ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tfully following our decision given above in the AY1999-2000, we uphold the order of the CIT(A) in deleting the disallowance on account of commission paid to non-resident commission agents outside India in the AY's 2000-01 and 2001-02 and set aside the orders of both the authorities below in AYr 2002-03 by directing the AO to allow assessee s claim of deduction on account of the aforesaid commission. Treatment of rental income - derived from commercial complex - HELD THAT:- it is not the case of the department that the super-structure constructed by the assessee is not owned by the present assessee. At this stage, reliance may be placed upon the decision of Co-ordinate Bench Bench in the case of Premavati Estates Investments (P.) Ltd.[ 2006 (1) TMI 457 - ITAT MUMBAI] where income from sub-letting of property was held to be assessable under the head Income from house property . We, therefore, hold that the rental income derived from commercial complex constructed by the assessee on leasehold land is to be assessed under the head Income from house property inasmuch as, the ground given by the AO that the assessee should be the owner of the land on which superstructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer by applying provisions of section 40( a )( i ) of the Income-tax Act, on account of commission paid by the assessee-company to parties outside India. 4. It was noticed by the Assessing Officer that the assessee-company had claimed commission paid to parties outside India. The assessee submitted before the Assessing Officer that the parties to whom commission has been paid are non-resident and according to section 195 of the Act, TDS is not chargeable for the reason that the services were rendered by the said parties outside India and controlling of their operation was also outside India, and as per the provisions of section 9 of the Act, income arising out of operations carried out outside India cannot be charged to tax in India. This submission of the assessee was not accepted by the Assessing Officer, for the reason that any sum claimed as deduction under the head Profits and gains of business or profession shall not be allowed as deduction unless tax paid was deducted under Chapter XVII-B of the Act. 5. Being aggrieved, the assessee-company preferred an appeal before the CIT(A). 6. Before the CIT(A), the assessee submitted that section 195 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el reservations outside India : ( i )There is no justification for the authorities below to conclude that services and facilities were provided to the assessee-company by the agents, who have been paid the commission in question, in India; ( ii )The foreign booking agents have no operations in India and, therefore, no operations carried on in India can be held to be attributable, directly or indirectly, to the earning of commission by the foreign agents; ( iii )The foreign agents and the assessee-company have principal to principal relationship; ( iv )The foreign agents did not have any permanent establishment in India as defined in Article V of the DTAA entered into between India and USA; ( v )The conclusion arrived at by the authorities below that the income from commission to non-resident agents shall be deemed to have accrued or arisen in India on account of business connection under section 9(1)( i ) of the Act is misplaced inasmuch as, no part of the operations were carried out in India by the commission agents, and as such no income can be deemed to accrue and arisen from any business connection in India; ( vi )That stay of the customers or clients in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on without making any deduction or tax at source as under : (Rs.) ( i )To M/s. Radisson Hotel Inc. USA .. 25,46,903 ( ii )To other foreign agents. .. 65,325 26,12,228 13. Section 195 of the Act provides that any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest, not being interest on security, or any other sum, not being dividends, chargeable under the provisions of the Income-tax Act, 1961, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof any cash or by issue of a cheque or draft or by any other mode, whichever is earlier deduct income-tax thereon at the rates in force. On a plain reading of section 195(1) of the Act, it is clear that section 194(1) casts an obligation to deduct tax at source at the rates in force on the sums referred to therein, which are chargeable under the provisions of Income-tax Act, 1961. The expression "chargeable under the provisions of this Act" was the subject-matter of consideration before the Hon ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to such payment and, thus, no disallowance can be made in respect of any such payment. The ITAT, Delhi Bench in the case of Millennium Infocom Technologies Ltd. v. Asstt. CIT [2008] 21 SOT 152 has also taken a similar view that the obligation of the assessee to deduct tax under section 195 is limited only to the appropriate proportion of income chargeable under the Act. 17. In the light of the view we have taken above, it is now to be seen as to whether the commission paid by the assessee-company to non-resident agent is chargeable under the Income-tax Act or not. It is an admitted position that the non-resident commission agent of the assessee have accepted booking from the assessee s prospective clients or customers at the place outside India. The Assessing Officer as well as CIT(A) has not pointed out any material or evidence to show that the non-resident commission agents had booked the hotels for and on behalf of the assessee-company, in India. The services has been provided by the non-resident commission agents to the assessee only outside India. It is not in dispute that the assessee-company has provided services and facilities to its customers, who made reservati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission on the hammer price and, in those circumstances, it was held that there was no permanent establishment of M/s. CI in India. M/s. CI did not receive any income directly or indirectly from a person in India, but earned its remuneration from the sale proceeds of the paintings auctioned by it in UK. Similarly, in the present case, the non-resident commission agents having no permanent establishment in India had earned commission from booking of the hotel made by the assessee s customers at a place outside India. Further, no material has been pointed out to show and conclude that there was any business connection between the activities carried out by the assessee in India and earning of income from commission outside India by the non-resident commission agents. It has neither been alleged nor held by the authorities below that these foreign agents have permanent establishment in India. Therefore, the income derived by non-resident commission agents from commission earned on booking of hotels outside India is not assessable in India as business income on the ground that none of the payees had permanent establishment in India having regard to the provisions of DTAA entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-company had no liability to deduct tax at source under section 195(1) of the Act read with section 40( a )( i ) of the Act. 20. An identical issue has been raised in the appeal filed by the revenue for the assessment years 2000-01 and 2001-02, and by the assessee in the assessment year 2002-03. It is to be mentioned here that this issue has been decided in favour of the assessee by the CIT(A) in two assessment years i.e., assessment years 2000-01 and 2001-02, though an identical issue has been decided against the assessee by the CIT(A) in the assessment year 2002-03 as was so decided in the assessment year 1999-2000. Respectfully following our decision given above in the assessment year 1999-2000, we uphold the order of the CIT(A) in deleting the disallowance on account of commission paid to non-resident commission agents outside India in the assessment years 2000-01 and 2001-02, and set aside the orders of both the authorities below in assessment year 2002-03 by directing the Assessing Officer to allow assessee s claim of deduction on account of the aforesaid commission. 21. Ground No. 2 in the assessment year 1999-2000 as modified by the assessee vide lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer that the assessee is the owner of the super-structure, and thus the income from rent derived from the super-structure is to be assessed under the head Income from house property . The Assessing Officer denied the claim of the assessee by observing that in order to assess the income under the head House property , the assessee should be the owner of the property from which the income is derived, and since the ownership of land vested with IAAI and the land was given on lease for construction of the building for the purpose of running a hotel, the ingredients of becoming the landlord and the relationship of landlord and the tenant is not satisfied in the present case. 26. On an appeal in the assessment year 1999-2000, the CIT(A) has confirmed the Assessing Officer s action by observing that the Assessing Officer has given sufficient reasons to prove that the assessee is not the owner of the building and as such the Assessing Officer has rightly assessed the rental income as income from other sources and denied the statutory deduction under section 24 of the Act. 27. However, in the assessment years 2000-01 and 2001-02, the CIT(A) has taken a view contrary to the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wner of the property constructed by it. A reference was also made to a decision of ITAT, Mumbai Bench in the case of Premavati Estates Investments (P.) Ltd. v. Asstt. CIT [2006] 8 SOT 441 wherein income from sub-letting was held to be assessable under the head Income from house property . He further submitted that the assessee s claim is otherwise deserves to be succeeded by applying the rule of consistency as the Assessing Officer has accepted the assessee s claim in earlier assessment years, i.e., assessment years 1997-98 and 1998-99 vide assessment framed under section 143(3) of the Act. In the alternative, the assessee submitted that in case it is held that the income from letting out property is assessable under the head Income from other sources , the depreciation on the building is to be allowed as provided under section 32 of the Act. 30. The ld. DR, on the other hand, supported the Assessing Officer s order and the order of CIT(A) in the assessment years 1999-2000 and 2002-03, and has disputed the CIT(A) s action in accepting the assessee s claim for assessment years 2000-01 and 2001-02. He reiterated the reasons given by the Assessing Officer in rejecting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee s claim when the admitted position is that the assessee has constructed a superstructure on a land in its own right and using the same to the exclusion of others including the lessor of the land. The principle enunciated by the Supreme Court in the case of Podar Cement (P.) Ltd. ( supra ) has been accepted by the Legislator by inserting the definition of "owner of house property" in section 27 of the Act where it is provided, amongst others, that a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period of not exceeding one year) in or with respect to any building or part thereof, by way of any such transaction as is referred to in clause ( f ) of section 269 UA, shall be deemed to be the owner of that building or part thereof. Further, the legal position in India is also well settled to treat some person as owner of the superstructure constructed by him upon a land belonging to a lessor notwithstanding the fact that the land on which superstructure is made by the lessee belongs to and/or owned by the lessor of the land. In the lease agreement between the assessee and IAAI, nothing contrary is mentioned to show that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find any unjustification on the part of the CIT(A) in allowing the assessee s claim. Thus this ground raised by the revenue is rejected. 36. Ground No. 4 raised by the revenue in assessment year 2001-02 is with regard to the addition of Rs. 3,68,60,000 added back to the book profit determined under section 115JB by the Assessing Officer on account of arrears of depreciation debited in the profit and loss account. 37. We have heard both the parties and have gone through the orders of the authorities below. 38. On perusal of the orders of the authorities below and after hearing both the parties, we find that the assessee had debited certain amounts on account of depreciation in the profit and loss account prepared in accordance with the provisions of Parts II and III of Schedule VI of the Companies Act, 1956, which has been added back to the net profit by the Assessing Officer while computing the book profit for the purpose of section 115JB of the Act. The CIT(A) has reversed the Assessing Officer s action by observing that while computing the book profit under section 115JB, the Assessing Officer do not have any jurisdiction to go beyond the net profit shown in the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
