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TMI Blog2020 (3) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... at such promotional events generate enquires of potential customers in India who in turn would like to purchase Audi cars in India and finance the same from the assessee company, and that it was for this reason that the assessee company was a part of this event. It is also an admitted position that the audio-visual clips were available for use exclusively for Audi India and VWFPL . When these audio-visual clips were for exclusive use of the assessee and the Audi India, and both of these entities have operations only in India, the use of this event, as a tool of marketing, was only in India. In the terms of MoU signed between the assessee and celebrity s agent, predominant benefit to the assessee was usage of all the event footage/ material/ films/ stills/ interviews etc of the above mentioned launch event capturing celebrity s presence across all platform for below the line publicity on internet, in press releases, news reports, social media, Audi Magazine etc . There is also no dispute about the position that all expenses are borne by the assessee, and its associate Audi India, and claimed as a deduction under section 37(1), which essentially implies that the expenses, even b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipation in Dubai A8L launch event, was taxable in India. As a corollary to these findings, in our considered view, the assessee had the liability to withhold taxes from payment made for appearance made by the celebrity at Dubai A8L launch event, and the CIT(A) was justified in upholding impugned demands raised under section 201 r.w.s 195 of the Income Tax Act,1961. We, therefore, confirm the orders of the authorities below and decline to interfere in the matter. - Decided against assessee. - ITA No. 2195/Mum/2017 - - - Dated:- 19-3-2020 - Pramod Kumar VP And Amarjit Singh JM For the Appellant : Nitesh Joshi along-with Manoj Dixit For the Respondent : Avanessh Tiwari ORDER PER PRAMOD KUMAR, VP: [1] This appeal challenges correctness of the order dated 8th February 2016, passed by the learned Commissioner (Appeals) in the matter of tax withholding demands raised by the Assessing Officer under section 201 r.w.s. 195 of the Income Tax Act, 1961, for the assessment year 2015-16. [2] While the assessee has raised a large number of grounds of appeal, core issue requiring our adjudication in this case is whether or not the assessee appellant was required t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et, in press releases, news reports, social media, Audi Magazine etc for a period of 6 months from the date of launch event, and for an unlimited period of time only for internal usage with the Volkswagen Group . In an undated, though signed, note filed during the course of hearing, the assessee has explained the event as follows: Audi India launched the 2014 A8L facelift for exclusive Indian customers for special invite in Dubai. The Company had flown about 150 people mostly prospective buyers and some journalists to the launch ceremony. Audi A8L is a luxury brand and holds a prestigious status or brand value in the market. Hence the launch was a lavish event which was held in the world's tallest building with Vegas style fountain shows, a world class illusionist and guest appearance by a celebrity. The entire event was designed in a manner to give a feeling of luxury and exclusiveness to Indian customers. Audi India invests significantly in branding through marketing initiatives. It was a marketing strategy to call customers/dealers from India to Dubai for this event and also to call celebrities for the event. This model is imported from Germany as a completely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g or arising in India , and referred to the provisions of Section 9(1)(i). The impugned tax withholding demand under section 201 r.w.s. 195 was thus confirmed. The assessee is aggrieved and is in further appeal before us. [5] We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. [6] So far as a non-resident taxpayer is concerned, under section 5(2), there are only two situation in which the income can be taxed in India-(a)first, when the income is received or is deemed to be received in India in such year by or on behalf of such person ; and (b) second, when an income accrues or arises or is deemed to accrue or arise to him in India during such year. It is not even the case of the Assessing Officer, nor does it emerge out of the material on record, that the income was received or was deemed to have been received by the celebrity or his agent in India. The case of the Assessing Officer thus hinges on application of Section 5(2)(b), i.e. when an income accrues or arises in India or is deemed to accrue or arise in India. [7] Section 5(2)(b) provides that subject to the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l revered work The Law and Practice of Income Tax (7th edition; published in 1976) also put it at page 200, the categories of business connection are incapable of exhaustive enumeration . The definition of business connection , as set out in Explanation 2 to Section 9(1)(i) introduced by the Finance Act 2003, is also only an inclusive, and not exhaustive, definition. Whatever are the instances of business connection set out in the available literature, are admittedly only illustrative in nature. [9] In the landmark case of CIT Vs R D Aggarwal Co [(1965) 56 ITR 20 (SC)] , Hon ble Supreme Court had an occasion to deal with a situation in which an Indian assessee was representing, as a commission agent, two entities, based in Belgium and Italy respectively, and, based on this association, the Assessing Officer proceeded to bring to tax income, computed @5% on exports to India, of these two foreign entities as, in his view, there subsisted business connection between the non-resident exporters and the assessee . It was in this context that Hon ble Supreme Court observed that that the Income Tax Act contains no definition of the expression business connection and its pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly, through or from any business connection in India particularly when this event is specifically targeted for India based customers of a group of Indian entities- namely Audi India and its financing affiliate i.e. the assessee before us, is admittedly for below the line publicity on internet, in press releases, news reports, social media for the benefit of these entities, and the costs of the event is borne by these entities as expenditure in furtherance of their business interests in India. [11] It is an agreed position that the Audi A8L facelift launch event was India-centric and the entire expenses of the launch event were treated as expenses of Indian entities, namely this assessee and Audi India. The event has physically taken place in Dubai, UAE, but, beyond any dispute or controversy, the benefits of this event were to accrue to the assessee and Audi India. Going even by the information furnished by the assessee, the company had flown 150 persons, mostly prospective buyers and some journalists, to Dubai. Whether these persons included prospective buyers or not, these persons did not include Indian socialites and page three personalities, whose association with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity was paid for his participation in the Dubai Audi 8 L facelift event. The income thus cleared accrue and arises, on the facts of this case, by the reason of business connection in India. We find, as the assessee has admitted in so many words in the written note, that the event in Dubai was India centric, that the event was for the purpose of promoting business in India, that such promotional events generate enquires of potential customers in India who in turn would like to purchase Audi cars in India and finance the same from the assessee company, and that it was for this reason that the assessee company was a part of this event. It is also an admitted position that the audio-visual clips were available for use exclusively for Audi India and VWFPL . When these audio-visual clips were for exclusive use of the assessee and the Audi India, and both of these entities have operations only in India, the use of this event, as a tool of marketing, was only in India. We have also noted that in the terms of MoU signed between the assessee and celebrity s agent, predominant benefit to the assessee was usage of all the event footage/ material/ films/ stills/ interviews etc of the above me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in the taxable territories which contributed to the earnings of the income may or may not be regarded as business connections . None of the judicial precedents before us had an occasion to examine an intangible business connection, and, there is thus no guidance available on this issue. The business connection in India, on the facts of the present case, is intangible inasmuch as it is a relationship rather than an object, but it is a significant business connection which has resulted in income accruing and arising to the non-resident, but for which there would not have been any business expediency in making the impugned payment to the non-resident celebrity. [12] Learned counsel for the assessee has relied upon a series of judgments by Hon ble Courts above, and all these judgments are said to support the proposition that in order to be taxable in India, the assessee must carry out the economic activity in India or render the related services in India. We do not think this line of reasoning has much relevance to the issue before us, and that issue is whether participation in an India centric event, carried out at the instance of Indian entities for furtherance of their busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption of facts and the legal position. Undoubtedly, our powers are restricted to dealing with the issues raised before us. While on this aspect of the matter, it is useful to remember, as was held by the Hon ble Guwahati High Court in the case of Jeypore Timber Veneer Mills (P.) Ltd. v. CIT [(1982) 137 ITR 415 (Gau)] as follows: Parliament in its wisdom has conferred upon the Tribunal broad and sweeping powers but at the same time controlled the powers by requisite constriction. The provision of section 254 of the Act is an enabling as well as disabling provision. A passing glance creates an impression that the Tribunal has been endowed with plenary power under section 254 of the Act to pass any order as it thinks fit. However, it is not so, as it will appear in the expression such orders thereon as it thinks fit , in section 254. The word thereon in the expression is a serious constriction on the exercise of power by the Tribunal. It can decide only the points or grounds raised before it whereas the IT authorities can travel beyond the grounds and consider the entire assessment. The Tribunal has no power for the enhancement of any penalty or assessment nor can it rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5(2) read with section 9(1)(i), it is not really necessary to deal with taxability under the other provisions of the Act. Suffice to say that under the provisions of the Act, the payment in question is taxable in India in the hands of the non-resident. It is nobody s case, nor can it be anyone s case, that the decision of the Tribunal resulted in an enhancement. What has been done is to adjudicate upon the question whether the assessee had the liability to withhold the tax from the payment in question. The assessee has not been saddled with a new tax withholding liability. In any case, while examining powers of the Tribunal to deal with an aspect of the matter which has not been raised by the Assessing Officer, we may usefully refer to the following observations made by a Special Bench of this Tribunal, in the case of Tata Communications Ltd Vs JCIT [(2009) 121 ITD SB 384 (Mum)] : . The issue before the Tribunal was whether the assessee was entitled to relief under the above provision. It was bounden duty of the Tribunal to consider and decide the above issue and to examine that each of the condition specified by the section is satisfied. The question relating to satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calculating depreciation under section 10(2)( vi ) of the Act. It was certainly open to the Department, in the appeal filed by the assessee before the Tribunal, to support the findings of the AAC with regard to written down value on any of the grounds decided against it.... We are accordingly of the view that the Tribunal had jurisdiction to entertain the argument of the Department in this case and direct the ITO to find out whether any depreciation was actually allowed.... and whether such depreciation should be taken into account for computing the written down value. 16. The facts of the case before us are materially similar to the above case before the Hon'ble Supreme Court. In the present case also, the condition regarding providing eligible telecommunication services was not discussed by the Assessing Officer and the Commissioner (Appeals) and yet this issue was taken up by the Departmental Representative before us. The same was the situation in Hukumch and Mills Ltd.'s case ( supra ) wherein, as noted by the Hon'ble Supreme Court in paragraph 4 of their judgment, it was urged before the Tribunal by the department that although the ITO had not considered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the scheme of Section 115 BBA which provides for taxation an entertainer, who is not a citizen of India and is a nonresident, includes any income received or receivable from his performance in India . It is submitted that this refers to the performance in India implying thereby that performance outside India is outside the ambit of taxation in India. Having heard the rival contentions on this plea and having considered material on record, we are unable to share this perception. Section 115 BBA deals with the mode and rate of taxation in the hands of non-resident sportsmen, non-resident sports associations and institutions, and non-resident entertainers. These modalities of taxation, in our considered view, cannot be treated restrictions on chargeability to tax under section 5(2)(b). In case an income is not eligible to specified treatment under section 115BBA, on account of not fulfilling the criterion set out therein, such an income is at best taxable in the normal course in the hands of the non-resident entertainer in India. We reject this plea as well. [18] So far as treaty protection is concerned, limited plea of the learned counsel is that since the income on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realities of the business world, rather than in the strict confines of what was decided in the judicial precedents, in the context of a different business world when these ground realities did not exist. Today, virtual and intangible business connections are perhaps far more critical, important and commonplace than the conventional brick and mortar business connections half a century ago, and, therefore, to disregard these business connections as a real and intimate business connection leading to earning of income by the non-residents, only because Hon ble Courts, while delivering judgments several decades ago, could not visualize the same and hedge their observations about such possibilities, will certainly be travesty of justice. Let us, in this respect, not lose sight of Hon'ble Supreme Court s guidance in Mumbai Kamgar Sabha v. Abdulbahi Faizullabhai AIR 1976 SC 1455 wherein Their Lordships have, in their inimitable and felicitous words observed thus, It is trite, going by Anglophonic principles that a ruling of a superior court is binding law. It is not of scriptural sanctity but of ratio-wise luminosity within the edifice of facts where the judicial lamp plays the leg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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