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Judgment
K. Raviraja Pandian J.
In this appeal, the assessee questioned the correctness of the order of the Income Tax Appellate Tribunal dated May 15, 2007, made in I.T.A.
No. 408/Mds/2004 in relation to the assessment year 2003-04.
The appellant is a limited company having its registered office at Calcutta and head office at Chennai and is engaged in the business of
manufacturing switch gears and selling electrical equipments including high voltage and medium voltage switch gears, transformers, control panels,
relays, electrical equipments involved in the development of power generation, transmission and distribution. The appellant''s parent company is in
France. The appellant is a holding company.
In order to facilitate easy and quick communication and to ensure internet access with its group companies throughout the world, the assessee
used the services of Equant, U.K., which is in the business of providing service in the area of connectivity by world-wide network. It is the further
case of the appellant that the appellant-company has paid Equant directly and had, in turn, re-invoiced the same on the appellant-company. Even if
Equant had raised the invoice directly on the appellant-company, it would not have suffered any tax, since the income would be in the nature of the
business income in the hands of Equant and as per Article 7 of the Double Tax Treaty between India and U.K., it would suffer tax on business
income only if it had a permanent establishment in India or was present in India for a period exceeding 90 days during the fiscal year.
On November 28, 2002, there was a survey conducted by the respondent in the premises of the appellant herein. On a perusal of the records
unearthed, the Assessing Officer, the respondent herein, found that there was a short deduction on payments made to Equant in a sum of Rs.
8,93,186, for the period ending March 31, 2002, June 30, 2002, and December 31, 2002. By order dated April 30, 2003, u/s 201(1A) of the
Act, the respondent charged simple interest at Rs. 1,54,075 for non-deduction of tax at source by the appellant-company and thus, a total sum of
Rs. 10,54,985 was demanded by the respondent. Against that order, the assessee had filed an appeal before the Commissioner of Income Tax
(Appeals). The Commissioner of Income Tax (Appeals) held that the payment made could not be considered to be a payment for ""technical
services"", liable for deduction of tax at source. As against that order, the Revenue took up the matter on appeal before the Income Tax Appellate
Tribunal. The Income Tax Appellate Tribunal, by the order impugned in this appeal, set aside the order of the Commissioner of Income Tax
(Appeals) and confirmed the order passed by the Assessing Officer on the ground that the correctness of the order could not be canvassed now in
the appeal.
Learned Counsel appearing for the appellant submitted that the Tribunal miserably failed to take into consideration the terms of the contract which
had been placed before the Tribunal for consideration. Further, the Tribunal is totally wrong in stating that the terms or the contract have not been
placed before the Tribunal. The contract was placed before the Tribunal, but it failed to consider the same.
We directed the learned Counsel appearing for the Revenue to find out whether the terms of contract were available on record before the
Tribunal for its perusal, learned Counsel appearing for the Revenue, on perusal of the records of the Tribunal, admitted that the contract had been
placed before the Tribunal for consideration; however, by inadvertence, that had not been taken into account while passing the order impugned.
Having regard to the fact that the contract was very much available at the time of passing of the impugned order, however, the Tribunal has
made an observation in the impugned order that the contract had not been placed before the Tribunal, we are of the view that the impugned order
may be set aside and the matter may be remitted back to the Tribunal for reconsideration of the issue in terms of the contract which was very much
available on record. Hence, the impugned order is set aside and the matter is remitted back to the Tribunal for reconsideration of the issue once
again.
As the impugned order has been set aside and the matter is remitted back to the Tribunal for reconsideration, it is well open to the assessee to
agitate all the issues, including the applicability of the Double Taxation Treaty Agreement. Likewise, it is always open to the Revenue to defend its
case on all grounds available to it.
The Tax Case Appeal is accordingly allowed.