Panchmahal Steel Ltd.,, Kalol v. The Dy.CIT., Panchmahal Circle,, Godhra

CO 228/AHD/2010 | 2002-2003
Pronouncement Date: 20-08-2010 | Result: Dismissed

Appeal Details

RSA Number 22820523 RSA 2010
Assessee PAN AABCP2649Q
Bench Ahmedabad
Appeal Number CO 228/AHD/2010
Duration Of Justice 17 day(s)
Appellant Panchmahal Steel Ltd.,, Kalol
Respondent The Dy.CIT., Panchmahal Circle,, Godhra
Appeal Type Cross Objection
Pronouncement Date 20-08-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 20-08-2010
Assessment Year 2002-2003
Appeal Filed On 03-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND D. C. AGRAWAL AM) ITA NO.1443 AND 1444/AHD/2010 A.Y.: 2002-03 AND 2007-08 THE D. C. I. T. PANCHMAHAL CIRCLE CIVIL LINES GODHRA 389 001 DIST. PANCHMAHAL VS PANCHMAHAL STEEL LTD. GIDC ESTATE KALOL DIST- PANCHMAHAL. PA NO. AABCP 2649 Q (APPELLANT) (RESPONDENT) C. O. NO.228/AHD/2010 (IN ITA NO.1443/AHD/2010 - A.Y.: 2002-03) PANCHMAHAL STEEL LTD. GIDC ESTATE KALOL DIST- PANCHMAHAL. VS THE D. C. I. T. PANCHMAHAL CIRCLE CIVIL LINES GODHRA 389 001 DIST. PANCHMAHAL PA NO. AABCP 2649 Q (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY SHRI R. K. DHANESTA DR ASSESSEE BY SHRI J. P. SHAH AR O R D E R PER BENCH: THE DEPARTMENTAL APPEALS AND THE CROSS OBJECTIONS BY THE ASSESSEE FOR THE ABOVE ASSESSMENT YEARS ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE LEARNED CIT(A)-VI BARODA DATED 27-01-2010 AND 28-01-2010 FOR ASSESSMENT YEARS 2002-03 AND 2007-20 08. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH THE PARTIES PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL ON RECORD POINTED OUT BY THE PARTIES. ITA NO.1443 AND 1444/AHD/2010 C. O. 228/AHD/2010 DCIT PANCHMAHAL CIR VS PANCHMAHAL STEEL LTD. 2 3. IN BOTH THE DEPARTMENTAL APPEALS THE REVENUE CH ALLENGED THE ORDER OF THE ORDER OF THE LEARNED CIT(A) IN DELETIN G THE DISALLOWANCE U/S 40(A) ( I) OF THE IT ACT OF RS.26 15 696/- AND RS.3 7 35 582/- RESPECTIVELY IN BOTH THE ASSESSMENT YEARS ON ACCOUNT OF COMMISSI ON PAYMENT IN FOREIGN CURRENCY TO FOREIGN AGENT IN CONNECTION WI TH EXPORTS MADE BY THE ASSESSEE WITHOUT DEDUCTION OF TAX AT SOURCE. THE AO MADE THE ADDITIONS IN BOTH THE ASSESSMENT YEARS ON THE GROUND THAT EXP LANATION OF THE ASSESSEE IS NOT ACCEPTABLE IN VIEW OF THE PROVISION S OF SECTION 40 (A) (I) READ WITH SECTION 195 OF THE IT ACT. THE DISALLOWAN CE WAS ACCORDINGLY MADE ON ACCOUNT OF BOTH UNEXPLAINED EXPENDITURE AS PER PROVISIONS MENTIONED ABOVE. 4. BEFORE THE LEARNED CIT(A) IN APPEAL IT WAS SUBM ITTED THAT THAT THE ASSESSEE HAS PAID COMMISSION TO FOREIGN AGENTS IN R ESPECT OF EXPORT ORDERS PROCURED FROM SUCH AGENTS CARRYING ON BUSINE SS OUTSIDE INDIA. IT WAS STATED THAT THE ASSESSEE HAS NOT DEDUCTED TAX I N VIEW OF THE PROVISIONS OF SECTION 195 OF THE IT ACT SINCE TAX IS DEDUCTIBLE AT SOURCE ONLY FROM PAYMENTS WHICH ARE CHARGEABLE TO TAX UNDE R THE PROVISIONS OF IT ACT. IT WAS FURTHER SUBMITTED THAT THE AMOUNT OF COMMISSION PAID IN FOREIGN CURRENCY IS NOT CHARGEABLE TO TAX IN INDIA IN VIEW OF THE FACT THAT THE PAYMENT REPRESENTS BUSINESS INCOME OF NON-RESID ENTS NONE OF THE PAYEES ARE HAVING PERMANENT ESTABLISHMENT OF BUSINE SS CONNECTION IN INDIA WITHIN THE MEANING OF SECTION 9 OF THE IT ACT NON-RESIDENTS ARE NOT CHARGEABLE TO TAX AS PER PROVISIONS OF SECTION 5(2) OF THE IT ACT OR IN TERMS OF VARIOUS DOUBLE TAXATION AVOIDANCE AGREEMEN TS AND SUCH PAYMENTS ARE NOT PAID FOR ROYALTIES OR TECHNICAL KN OW-HOW FEES DEEMED TO ACCRUE OR ARISE IN INDIA. THE ASSESSEE FURTHER R ELIED ON CBDT CIRCULAR NO.786 DATED 07-02-2000 AND IN CASE OF NQA QUALITY SYSTEM REGISTRARS LTD. VS CIT 2 SOT 249 WHEREIN THE ITAT DELHI BENCH HAS DECIDED THAT NO DISALLOWANCE OF PAYMENTS U/S 40 (A) (I) OF THE IT A CT CAN BE MADE FOR NON- DEDUCTION OF TAX AT SOURCE WHERE SUCH PAYMENTS TO N ON-RESIDENT ARE NOT ITA NO.1443 AND 1444/AHD/2010 C. O. 228/AHD/2010 DCIT PANCHMAHAL CIR VS PANCHMAHAL STEEL LTD. 3 TAXABLE IN THE HANDS OF RECIPIENT AS PER PROVISIONS OF IT ACT OR ADTA. IT WAS FURTHER SUBMITTED THAT SINCE COMMISSION WAS PAI D IN FOREIGN CURRENCY TO NON-RESIDENTS IN RESPECT OF BUSINESS CA RRIED OUTSIDE INDIA TAX IS NOT CHARGEABLE IN INDIA AND HENCE THE ASSESS EE DID NOT DEDUCT TAX AT SOURCE FROM SUCH PAYMENT. IT WAS SUBMITTED THAT CBDT CIRCULAR NO.786 DATED 07-02-2000 HAS BEEN WITHDRAWN WITH IMM EDIATE EFFECT FROM DT. 20.10.09 WITHOUT HAVING ANY RETROSPECTIVE EFFECT AND HENCE THE ASSESSEE HAS NO OBLIGATION TO DEDUCT TAX AT SOURCE FOR SUCH PAYMENT OF COMMISSION AND THAT THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF TRANSMISSION CORPORATION OF A. P. LTD. VS CIT 239 I TR 587 SUPPORTS THE CLAIM OF THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE AO HIM SELF IN THE REMAND REPORT IN THE APPEAL FOR AY 2005-06 STATED THAT PA YMENT OF COMMISSION TO FOREIGN AGENTS ARE COVERED BY THE AFORESAID CBDT CIRCULAR AND HENCE NO TAX IS DEDUCTIBLE. 5. THE LEARNED CIT(A) IN BOTH THE ASSESSMENT YEARS GAVE THE SIMILAR FINDINGS IN DELETING THE ADDITIONS. HIS FINDINGS IN ONE OF THE ASSESSMENT YEARS ARE REPRODUCED AS UNDER: 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AS WELL AS FACTS OF THE CASE. SIMILAR ISS UE WAS REMANDED BACK TO THE AO FOR A. Y. 2005-06 AND THE A O THROUGH JT. CIT PANCHMAHAL RANGE CONFIRMED THAT PA YMENT OF COMMISSION IN FOREIGN CURRENCY DOES NOT COME UND ER THE PURVIEW OF TDS AND THEREFORE NO TAX IS REQUIRED TO BE DEDUCTED. FURTHER THOUGH BOARD HAS WITHDRAWN THE SA ID CIRCULAR RECENTLY THAT TOO FROM IMMEDIATE EFFECT I AM OF THE OPINION THAT THE ASSESSEE SHOULD NOT BE AT DISADVAN TAGE AS THE SAID CIRCULAR WAS VALIDLY APPLICABLE DURING THE YEAR UNDER ASSESSMENT. CONSIDER SAID FACTS CIRCULAR OF THE BO ARD AND ITS APPLICABILITY AND DECISION RELIED UPON BY THE APPEL LANT DISALLOWANCE OF RS.26 15 696/- IS DIRECTED TO BE DE LETED. ITA NO.1443 AND 1444/AHD/2010 C. O. 228/AHD/2010 DCIT PANCHMAHAL CIR VS PANCHMAHAL STEEL LTD. 4 6. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT THE BOARD VIDE ITS CIRCULAR NO.7/2009 DATED 23-10-2 009 HAS WITHDRAWN THE EARLIER CIRCULAR NO.23 DATED 23-07-1969 AND CIR CULAR NO.786 DATED 07-02-2000. THE LEARNED DR SUBMITTED THAT SINCE THE CIRCULAR WAS WITHDRAWN LATER ON THEREFORE REMAND REPORT FILED BY THE AO WOULD NOT SERVE ANY PURPOSE AS IS HELD BY THE LEARNED CIT(A) FOR ASSESSMENT YEAR 2005-06. THE LEARNED DR SUBMITTED THAT SINCE EARLIE R CIRCULARS WERE WITHDRAWN WITH IMMEDIATE EFFECT VIDE CIRCULAR DATED 23-10-2009 THEREFORE EARLIER CIRCULARS ARE NO LONGER IN EXIST ENCE. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FILED COPY OF THE REMAND REPORT DATED 19-08-2009 FILED BY JCIT PANCHMAHAL RANGE GODHRA FOR ASSESSMENT YEAR 2005-06 AS IS REFERRED BY THE LEARNED CIT(A) I N THE IMPUGNED ORDER AND SUBMITTED THAT SINCE TDS WAS NOT TO BE DEDUCTED AS PER EARLIER CIRCULARS OF THE BOARD AND THAT JCIT GODHRA HAS ACCEPTED THE CLAIM OF THE ASSESSEE IN ASSESSMENT YEAR THEREFORE ON PRIN CIPLE OF CONSISTENCY THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE AD DITION. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BOARD H AS WITHDRAWN EARLIER CIRCULARS WITH IMMEDIATE EFFECT VIDE SUBSEQUENT CIR CULAR DATED 23-10-2009 WHICH WERE LATER TO THE ASSESSMENT YEARS UNDER APPEALS THEREFORE SAME CANNOT BE HAVING RETROSPECTIVE EFFE CT AND WOULD NOT APPLY TO THE ASSESSMENT YEARS UNDER APPEALS. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE SPECIFICALLY PLEA DED BEFORE THE LEARNED CIT(A) THAT TAX WAS NOT DEDUCTED BECAUSE INCOME TAX IS DEDUCTIBLE AT SOURCE ONLY FROM PAYMENTS WHICH ARE CHARGEABLE TO T AX UNDER INCOME TAX ACT. IT WAS SUBMITTED THAT THE AMOUNT WAS PAID FOR COMMISSION IN FOREIGN CURRENCY WAS NOT CHARGEABLE TO TAX IN INDIA BECAUSE THESE PAYMENTS REPRESENTED BUSINESS INCOME OF NON-RESIDEN T AND THAT NONE OF THE PAYEES HAVE PERMANENT ESTABLISHMENT OR BUSINESS CONNECTION IN ITA NO.1443 AND 1444/AHD/2010 C. O. 228/AHD/2010 DCIT PANCHMAHAL CIR VS PANCHMAHAL STEEL LTD. 5 INDIA WITHIN THE MEANING OF SECTION 9 OF THE IT ACT . IT WAS ALSO EXPLAINED THAT NON-RESIDENTS WERE NOT CHARGEABLE TO TAX IN IN DIA DUE TO VARIOUS DOUBLE TAXATION AGREEMENTS. IT WAS ALSO EXPLAINED T HAT PAYMENTS WERE NOT FOR ROYALTY OR TECHNICAL KNOW-HOW AND THEREFORE TAX WAS NOT LIABLE TO BE DEDUCTED. IT WAS ALSO SUBMITTED THAT THE ASSESSE E DID NOT DEDUCT TAX BECAUSE OF THE EXISTING CIRCULAR ISSUED BY CBDT . THEREFORE NO DISALLOWANCE COULD BE MADE. THE LEARNED DR HOWEVER SUBMITTED THAT EARLIER BOARD CIRCULAR RELIED UPON BY THE ASSESSEE HAS BEEN WITHDRAWN WITH IMMEDIATE EFFECT VIDE SUBSEQUENT CIRCULAR DATE D 23-10-2009; THEREFORE EARLIER CIRCULARS WOULD NO LONGER SURVIV E. HOWEVER WE DO NOT AGREE WITH THE SUBMISSIONS OF THE LEARNED DR BECAUS E LATER CIRCULAR DATED 23-10-2009 WAS HAVING NO RETROSPECTIVE EFFECT AND ALSO COULD NOT HAVE THE EFFECT TO THE ASSESSMENT YEARS WHERE THE A SSESSEE FILED THE RETURN OF INCOME ON TIME IN ACCORDANCE WITH THE EXI STING BOARD CIRCULAR. THEREFORE THERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE NOT TO DEDUCT TDS IN SUCH CIRCUMSTANCES BASED UPON ITS OPINION ON THE CBDT CIRCULARS. THE JCIT GODHRA RANGE IN THE CASE OF TH E SAME ASSESSEE FOR ASSESSMENT YEAR 2005-06 (COPY OF WHICH IS FILED BY THE LEARNED COUNSEL FOR THE ASSESSEE) EXAMINED SIMILAR ISSUE AND THE AO STATED IN THE REMAND REPORT THAT THE ASSESSEE COMPLIED WITH THE C ONDITIONS OF THE EARLIER BOARD CIRCULAR NO.786 (SUPRA). IT WAS ALSO EXPLAINED THAT THE TRANSACTIONS OF THE ASSESSEE WOULD NOT COME WITHIN THE PURVIEW OF TDS PROVISIONS. SINCE THE AO (JCIT GODHRA) ACCEPTED TH E CLAIM OF THE ASSESSEE IN THE EARLIER YEAR IN HIS REMAND REPORT B EFORE THE LEARNED CIT(A) THEREFORE THE AO CANNOT DEVIATE FROM ITS E ARLIER STAND TAKEN ON THE IDENTICAL MATTER AGAINST THE SAME ASSESSEE. THE BOARD CIRCULAR ON THE BASIS OF WHICH THE AO GAVE THE REMAND REPORT AN D THE ASSESSEE CLAIMED THAT THE TDS PROVISIONS ARE NOT APPLICABLE IN HIS CASE WERE ADMITTEDLY APPLICABLE IN THE ASSESSMENT YEARS UNDER APPEAL I.E. ASSESSMENT YEAR 2002-03 AND 2007-08 BECAUSE THE BOA RD CIRCULAR WAS ITA NO.1443 AND 1444/AHD/2010 C. O. 228/AHD/2010 DCIT PANCHMAHAL CIR VS PANCHMAHAL STEEL LTD. 6 WITHDRAWN LATER ON ON 23-10-2009. HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA V. SATISH PANALAL SHAH [2001] 249 IT R 221 (SC) DEPRECATED THE PRACTICE OF THE DEPARTMENT IN ACCEPT ING THE CORRECTNESS OF THE JUDGMENTS IN PARTICULAR CASE AND IN CHALLENGING ITS CORRECTNESS IN ANOTHER CASE. HONBLE PUNJAB & HARYANA HIGH COURT I N THE CASE OF CIT VS. VIKAS CHEMI GUM INDIA [2005] 276 ITR 32 HELD TH AT SINCE THE SOURCES OF INCOME IN ANY EARLIER YEAR NOT CHALLENGE D IT IS NOT OPEN TO THE REVENUE TO CHALLENGE THE SAME IN SUBSEQUENT YEAR. HONBLE SUPREME COURT IN THE CASE OF RADHASWAMI SATSANG VS CIT 193 ITR 321 HELD THAT CONSISTENCY IN THE APPROACH BY THE REVENUE DEPTT. SHOULD BE MAINTAINED. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PRAKASH INDUSTRIES LTD. 324 ITR 391 HELD TH AT WHEN THE ORDER FOR EARLIER YEAR HAS BECOME FINAL THE RULE OF CONS ISTENCY SHOULD BE FOLLOWED. CONSIDERING THE ABOVE IN THE LIGHT OF THE FINDING OF THE LEARNED CIT(A) WE ARE OF THE VIEW THAT SINCE THE C LAIM OF THE ASSESSEE WAS BASED UPON THE CIRCULAR EXISTING AT THE TIME OF ASSESSMENT YEAR UNDER APPEAL AND THE VIEW OF THE ASSESSEE HAS BEEN ACCEPTED BY THE AO IN ASSESSMENT YEAR 2005-06 THEREFORE THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITIONS. WE THEREFORE DO NOT FIND ANY PERVERSITY IN THE APPROACH OF THE LEARNED CIT(A). WE CONFIRM HIS FIND INGS AND DISMISS BOTH THE APPEALS OF THE REVENUE. 8. IN THE RESULT BOTH THE DEPARTMENTAL APPEALS ARE DISMISSED. C. O. NO.228/AHD/2010 (BY ASSESSEE ) (IN ITA NO.1443/AHD/2010) 9. THE ASSESSEE IN THE CROSS OBJECTION FOR ASSESSME NT YEAR 2002-03 CHALLENGED THE ORDER OF THE LEARNED CIT(A) IN HOLDI NG THAT THE ASSESSEE HAD VALIDLY TAKEN ACTION IN RESPECT OF 143(3) ORDER BEYOND A PERIOD OF 4 YEARS IN SPITE OF THE FACT THAT THERE WAS NO FAILUR E ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR IS ITA NO.1443 AND 1444/AHD/2010 C. O. 228/AHD/2010 DCIT PANCHMAHAL CIR VS PANCHMAHAL STEEL LTD. 7 ASSESSMENT NOR ANY INCOME HAD ESCAPED ASSESSMENT BE CAUSE THE PAYEE WAS NOT LIABLE TO INCOME TAX UNDER THE INCOME TAX A CT 1961. 10. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT RE- ASSESSMENT IS MADE AFTER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THAT THE AO HAS NOT MADE OUT AN Y CASE OF FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN U/S 139 O F THE IT ACT AND ALSO NOT TO DISCLOSE ALL THE MATERIAL FACTS TRULY AND FULLY AT THE ASSESSMENT STAGE. THEREFORE REASSESSMENT IS BAD IN LAW BECAUSE ORIGINAL ASSESSMENT WAS PASSED U/S 143(3) OF THE IT ACT DATE D 10-11-2004 (PB- 15 AND PB-16). SINCE THE ONLY ADDITION WAS MADE ON ACCOUNT OF NON- DEDUCTION OF TDS IN THE REASSESSMENT ORDER ON WHICH WE HAVE DISMISSED THE DEPARTMENTAL APPEAL THEREFORE THE ISSUE IS OF ACADEMIC INTEREST ONLY AND AS SUCH NO PURPOSE WOULD SERVE TO DECIDE THE SA ME. IN VIEW OF THE ABOVE FACTS THE CROSS OBJECTION OF THE ASSESSEE ST ANDS DISPOSED OF. 11. IN THE RESULT BOTH THE DEPARTMENTAL APPEALS AR E DISMISSED. THE CROSS OBJECTION OF THE ASSESSEE STANDS DISPOSED OF AS ABOVE. ORDER PRONOUNCED ON 20-08-2010 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 20-08-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR ITAT AHMEDABAD