Sterling Abrasives Ltd,, Ahmedabad v. The Addl.CIT(Intl.Taxn.), Ahmedabad

ITA 1070/AHD/2009 | 2002-2003
Pronouncement Date: 14-03-2011 | Result: Allowed

Appeal Details

RSA Number 107020514 RSA 2009
Assessee PAN AACCS1266P
Bench Ahmedabad
Appeal Number ITA 1070/AHD/2009
Duration Of Justice 1 year(s) 11 month(s) 6 day(s)
Appellant Sterling Abrasives Ltd,, Ahmedabad
Respondent The Addl.CIT(Intl.Taxn.), Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 14-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 14-03-2011
Date Of Final Hearing 14-03-2011
Next Hearing Date 14-03-2011
Assessment Year 2002-2003
Appeal Filed On 08-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD A BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND T.K. SHARMA JUDICIAL MEMBER) ITA NO.1069 TO 1072/AHD/2009 [ASSTT. YEAR : 2001-02 TO 2004-2005] STERLING ABRASIVES LTD. PLOT NO.45/46 GIDC IND. ESTATE ODHAV AHMEDABAD. PAN : AACCS 1266 P VS. ADIT(INTL. TAXATION) AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI J.T. SHAH REVENUE BY : SHRI R.K. DHANESTA O R D E R PER BENCH : THESE FOUR APPEALS ARE BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-XXI AHM EDABAD DATED 16.01.2009 ARISING OUT OF THE ORDER OF THE ASSESSIN G OFFICER PASSED UNDER SECTION 271C OF THE INCOME TAX ACT 1961. SINCE C OMMON GROUND IS RAISED IN ALL THE APPEALS WE PROCEED TO DISPOSE OF ALL THESE APPEALS BY THIS CONSOLIDATED ORDER. 2. ONLY GROUND RAISED IN ALL THESE APPEALS IS AGAIN ST THE LEVY OF PENALTY UNDER SECTION 271C AS UNDER: ASSTT.YEAR AMOUNT OF PENALTY 2001-2002 RS.2 53 590/- 2002-2003 RS.2 42 966/- 2003-2004 RS.2 80 024/- 2004-2005 RS.3 17 396/- 3. THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF SURVEY UNDER SECTION 133A THE ITO (TDS) NOTICED THAT THE ASSESS EE MADE PAYMENT OF ITA NO.1069 TO 1072/AHD/2009 -2- FEES FOR TECHNICAL SERVICES TO MR. JAMES WHITEHEAD WHO IS A NON- RESIDENT. IN THE REGULAR ASSESSMENT THE PAYMENT TO MR. JAMES WHITEHEAD WAS DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT. THE AO ALSO LEVIED PENALTY UNDER SECTION 271C FOR THE FAILURE OF THE A SSESSEE TO DEDUCT THE TAX AT SOURCE ON THE PAYMENT OF FEE FOR TECHNICAL S ERVICES TO MR. JAMES WHITEHEAD; THAT IN THE QUANTUM APPEALS THE ITAT VI DE ORDER IN ITA NO.3928/AHD/2007 FOR A.Y.2004-2005 DATED 2-7-2010 D ELETED THE ADDITION WITH THE FOLLOWING FINDINGS: 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT BY AMEN DMENT IN THE FINANCE ACT 2007 THE LEGISLATURE INSERTED THE EXP LANATION RETROSPECTIVELY W.R.E.F.1-6-1976 TO SEC. 9 (2) OF T HE ACT WHEREAS THE ASSESSMENT YEAR INVOLVED IS 2004-05 RELEVANT TO PREVIOUS YEAR 2003-04 AND IT IS IMPOSSIBLE FOR THE ASSESSEE TO DE DUCT TAX IN THE FINANCIAL YEAR 1-4-2003 TO 31-3-2004 WHEN THE OBLI GATION TO DEDUCT TDS WAS NOT ON THE ASSESSEE DURING THAT PERI OD. THE PROVISION OF SECTION 9 PROVIDES FOR SITUATIONS WHER E INCOME IS DEEMED TO ACCRUE OR ARISE IN INDIA TO A NON-RESIDEN T. WE FIND THAT THE LEGISLATURE VIDE FINANCE ACT 1 976 A SOURCE R ULE WAS PROVIDED IN SECTION 9 THROUGH INSERTION OF CLAUSES (V) (VI) AND (VII) IN SUB-SECTION (1) FOR INCOME BY WAY OF INTEREST R OYALTY OR FEES FOR TECHNICAL SERVICES RESPECTIVELY AND THE INTENTION O F INTRODUCING THE SOURCE RULE WAS TO BRING TO TAX INTEREST ROYALTY A ND FEES FOR TECHNICAL SERVICES BY CREATING A LEGAL FICTION IN SECTION 9 EVEN IN CASES WHERE SERVICES ARE PROVIDED OUTSIDE INDIA AS LONG AS THEY ARE UTILIZED IN INDIA BUT THE HONBLE SUPREME COURT IN THE CASE OF ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD. (SUPRA) H ELD THAT DESPITE THE DEEMING FICTION IN SECTION 9 FOR ANY S UCH INCOME TO BE TAXABLE IN INDIA THERE MUST BE SUFFICIENT TERRITOR IAL NEXUS BETWEEN SUCH INCOME AND THE TERRITORY OF INDIA. IT FURTHER HELD THAT FOR ESTABLISHING SUCH TERRITORIAL NEXUS THE SERVICES H AVE TO BE RENDERED IN INDIA AS WELL AS UTILIZED IN INDIA. ACC ORDING TO THE LEGISLATURE THIS INTERPRETATION WAS NOT IN ACCORDAN CE WITH THE LEGISLATIVE INTENT THAT THE SITUS OF RENDERING SERV ICE IN INDIA IS NOT RELEVANT AS LONG AS THE SERVICES ARE UTILIZED IN IN DIA AND THEREFORE TO REMOVE DOUBTS REGARDING THE SOURCE RULE AN EXPL ANATION WAS INSERTED BELOW SUB-SECTION (2) OF SECTION 9 WITH RE TROSPECTIVE EFFECT ITA NO.1069 TO 1072/AHD/2009 -3- FROM 1ST JUNE 1976 VIDE FINANCE ACT 2007. THE EXP LANATION SOUGHT TO CLARIFY THAT WHERE INCOME IS DEEMED TO AC CRUE OR ARISE IN INDIA UNDER CLAUSES (V) (VI) AND (VII) OF SUB-SECT ION (1) OF SECTION 9 SUCH INCOME SHALL BE INCLUDED IN THE TOTAL INCOM E OF THE NON- RESIDENT REGARDLESS OF WHETHER THE NON-RESIDENT HA S A RESIDENCE OR PLACE OF BUSINESS OR BUSINESS CONNECTION IN INDIA. EVEN AFTER THAT THE HONBLE KARNATAKA HIGH COURT IN A RECENT JUDGM ENT IN THE CASE OF JINDAL THERMAL POWER COMPANY LTD. V. DEPUTY CIT (TDS) [20101 321 ITR 31 HAS HELD THAT THE EXPLANATION IN ITS PRESENT FORM DOES NOT DO AWAY WITH THE REQUIREMENT OF REND ERING OF SERVICES IN INDIA FOR ANY INCOME TO BE DEEMED TO AC CRUE OR ARISE TO A NON-RESIDENT UNDER SECTION 9. IT HAS BEEN HELD TH AT ON A PLAIN READING OF THE EXPLANATION THE CRITERIA OF RENDERI NG SERVICES IN INDIA AND THE UTILIZATION OF THE SERVICE IN INDIA L AID DOWN BY THE SUPREME! COURT IN ITS JUDGEMENT IN THE CASE OF ISHI KAWAJIMA- HARIMA HEAVY INDUSTRIES LTD. (SUPRA) REMAINS UNTOUC HED AND UNAFFECTED BY THE EXPLANATION. FURTHER THE LEGISLAT URE VIDE FINANCE BILL 2010 IN ORDER TO REMOVE ANY DOUBT ABO UT THE LEGISLATIVE INTENT OF THE AFORESAID SOURCE RULE SU BSTITUTED IN PLACE OF THE EXISTING EXPLANATION A NEW EXPLANATION TO SP ECIFICALLY STATE THAT THE INCOME OF A NON-RESIDENT SHALL BE DEEMED T O ACCRUE OR ARISE IN INDIA UNDER CLAUSE (V) OR CLAUSE (VI) OR C LAUSE (VII) OF SUB- SECTION (1) OF SECTION 9 AND SHALL BE INCLUDED IN H IS TOTAL INCOME WHETHER OR NOT (A) THE NON-RESIDENT HAS A RESIDENCE OR PLACE OF BU SINESS OR BUSINESS CONNECTION IN INDIA; OR (B) THE NON-RESIDENT HAS RENDERED SERVICES IN INDIA . THIS AMENDMENT WAS MADE RETROSPECTIVELY FROM 1ST JU NE 1976 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSME NT YEAR 1977-78 AND SUBSEQUENT YEARS. 9. IN VIEW OF THE ABOVE FACTS AND LEGAL POSITION WHETHER THE ASSESSEE CAN BE ASKED TO DO IMPOSSIBLE ACT I.E. TO DEDUCT TAX FOR THE PAST PERIOD. WITH THE INSERTION OF THE EXPLANATION RETROSPECTIVELY BY THE FINANCE ACT 2007 W.R.E.F.1-6-1976 TO SEC. 9 (2 ) OF THE ACT WHEREAS THE ASSESSMENT YEAR INVOLVED IS 2004-05 REL EVANT TO PREVIOUS YEAR 2003-04 IT IS IMPOSSIBLE FOR THE ASS ESSEE TO DEDUCT TAX IN THE FINANCIAL YEAR 1-4- 2003 TO 31 -3-2004 WHEN THE OBLIGATION TO DEDUCT TDS WAS NOT ON THE ASSESSEE DU RING THAT ITA NO.1069 TO 1072/AHD/2009 -4- PERIOD. THE ARGUMENT CANVASSED BY THE LD. COUNSEL O N THE BASIS OF A LEGAL MAXIM LEX NON COGIT AD IMPOSSIBLIA MEANING THEREBY THAT THE LAW CANNOT POSSIBLY COMPEL A PERSON TO DO SOMET HING WHICH IS IMPOSSIBLE TO PERFORM. THIS MAXIM IS ACCEPTED BY DI FFERENT COURTS OF THIS COUNTRY INCLUDING THE HONBLE SUPREME COUR T IN THE CASE OF KRISHNASWAMY S. PD. AND ANOTHER .V. UNION OF INDIA AND OTHERS (2006) 281 ITR 305 (SC) MADE THE FOLLOWING OBSERVAT IONS IN RELATION TO THE PROVISIONS OF CHAPTER XX-C OF THE A CT. THE MAXIMUM OF EQUITY NAMELY ACTUS CURIAE NEMINEM GRAVABIT - AN ACT OF COURT SHALL PREJUDICE NO MAN IS FOUNDED UPON JUSTICE AND GOOD SENSE WHICH SERVES A SAFE AND CERTAIN GUIDE FOR THE ADMINISTRATION OF LAW. THE OTHER RELE VANT MAXIM IS LEX NON COGIT AD IMPOSSIBIIA - THE LAW DO ES NOT COMPEL A MAN TO DO WHAT HE CANNOT POSSIBLY PERFORM. THE LAW ITSELF AND ITS ADMINISTRATION IS UNDERSTOOD TO DISCLAIM AS IT DOES IN ITS GENERAL APHORISMS ALL INTENTION OF COMPELLING IMPOSSIBILITIES AND THE ADMINISTRATION OF LAW MUST ADOPT THAT GENERAL EXCEPTION IN THE CONSIDERATION OF PART ICULAR CASES. (SEE U. P.S. R. T C. V IMTIAZ HUSSAIN [2006] 1 SCC 380 SHAIKH SALIM HAJI ABDUL KHAGUMSAB V. KUMAR [20 06] 1 SCC 46 MOHAMMAD GAZI V. STATE OF MP [2000] 4 SCC 342 AND GURSHARAN SINGH V. NEW DELHI MUNICIPAL COMMITTEE [1996] 2 SCC 459. SIMILARLY WHILE DEALING WITH A QUESTION AS TO WHET HER AN ASSESSEE CAN BE PENALIZED FOR FAILURE TO CARRY OUT AN ACT PR IOR TO ITS INCORPORATION THE APEX COURT IN THE CASE OF LIFE IN SURANCE CORP LTD. V. CIT(1996) 219 ITR 410 MADE FOLLOWING OBSERV ATIONS: 11. IT IS OBVIOUS THAT IN THE SURPLUS OR DEFICIT IN ANY INTER- VALUATION PERIOD RELATING TO THE CORPORATION WHICH CAME TO BE FORMED ONLY ON THE APPOINTED DAY IN 1956 THIS A MOUNT COULD NOT BE REFLECTED SINCE IT RELATED TO A PERIOD PRIOR TO THE FORMATION OF THE CORPORATION. THE LAW DOES NOT CONT EMPLATE OR REQUIRE THE PERFORMANCE OF AN IMPOSSIBLE ACT - L EX NON COGIT AD IMPOSSIBILIA. IT IS NOW TO BE SEEN WHETHER THE EXPRESSION INCLUDED THEREIN IN RULE 2(L)(B) IS AL ONE SUFFICIENT TO NEGATIVE THE LOGICAL LEGAL EFFECT OF SECTION 7 OF THE LIC ACT. ITA NO.1069 TO 1072/AHD/2009 -5- WHILE DEALING WITH QUESTION AS TO WHETHER AN ASSESS EE CAN BE LIABLE TO PAY INTEREST FOR FAILURE TO PAY ADVANCE T AX DURING THE YEAR WHEN THE LIABILITY TO PAY TAX HAD ARISEN ON ACCOUNT OF AMENDMENT TO LAW WHICH TOOK PLACE AFTER THE END OF THE YEAR HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. REVATHI EQUIPMENT LTD. (2008) 298 ITR 67 (MAD) REPRODUCED AND THEREAFTER APPROVE D THE REASONING CONTAINED IN THE FOLLOWING PASSAGE OF THE TRIBUNAL ORDER. WE HAVE NO DOUBT IN OUR MIND THAT THE LEVY OF INTE REST UNDER SECTIONS 234B AND 234C ARE OF MANDATORY NATUR E BUT AT THE SAME TIME IF WE READ SECTIONS 234B AND 234C CAREFULLY WE FIND THAT SUCH LIABILITY IS FASTENED TO THOSE ASSESSEES WHO ARE LIABLE TO PAY ADVANCE TAX. NOW L ET US SEE WHO ARE LIABLE TO PAY ADVANCE TAX AND HOW. SECTIONS 207 AND 208 READ AS UNDER: 207. TAX SHALL BE PAYABLE IN ADVANCE DURING ANY FINANCIAL YEAR IN ACCORDANCE WITH THE PROVISIONS O F SECTIONS 208 TO 219 (BOTH INCLUSIVE) IN RESPECT OF THE TOTAL INCOME OF THE ASSESSEE WHICH WOULD BE CHARGEABLE TO TAX FOR THE ASSESSMENT YEAR IMMEDIATE LY FOLLOWING THAT FINANCIAL YEAR SUCH INCOME BEING HEREAFTER IN THIS CHAPTER REFERRED TO AS CURRENT INCOME . 208. ADVANCE TAX SHALL BE PAYABLE DURING A FINANCIA L YEAR IN EVERY ;- ;AJ..!;. CASE WHERE THE AMOUNT OF SUCH TAX PAYABLE BY THE ASSESSEE DURING THAT YEAR AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER IS FIVE THOUSAND RUPEES OR MORE. 7. A COMBINED READING OF THE ABOVE PROVISIONS MAKES IT CLEAR THAT THE ASSESSEE HAS TO PAY TAXES IN ADVANCE IN RE SPECT OF THE TOTAL INCOME OF THE ASSESSEE WHICH WOULD BE CH ARGEABLE IN A PARTICULAR ASSESSMENT YEAR. NOW BEFORE THE INT RODUCTION OF SECTION 35DDA THE LEGAL DICTUM WAS VERY CLEAR T HAT THE ASSESSEE COULD CLAIM EXPENDITURE INCURRED ON ACCOUN T OF PAYMENT MADE FOR THE VRS BY THE ASSESSEE IN VIEW OF THE BINDING DECISIONS OF THE HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF CITV. GEORGE OAKES LTD. [1992] 197 ITR 288 (MAD) AND CIT V. SIMPSON AND CO. LTD. (NO. 2)11998] 230 ITA NO.1069 TO 1072/AHD/2009 -6- ITR 794 (MAD). IN BOTH THE DECISIONS IT WAS CLEARL Y LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT THAT PAYMENTS TO EMPLOYEES UNDER THE VRS WERE IN THE NATURE OF BU SINESS EXPENDITURE AND WAS DEDUCTIBLE UNDER SECTION 37. TH EREFORE TILL THE INTRODUCTION OF NEW PROVISIONS UNDER SECTI ON 35DDA THE ASSESSEE COULD HAVE ESTIMATED THE INCOME LEGITI MATELY AFTER REDUCING THE EXPENDITURE INCURRED ON THE VRS. IT IS A COMMON KNOWLEDGE THAT THE FINANCE BILL IS INTRODUCE D ON FEBRUARY 28 2001 AND THE SAME IS MADE INTO THE AC T AFTER PASSING THE BILL IN BOTH THE HOUSES OF PARLIAMENT A ND RECEIVING THE ASSENT OF THE HONBLE PRESIDENT OF IN DIA SOME WHERE IN MAY OR JUNE WHICH MEANS TILL THAT DATE NO ASSESSEE CAN VISUALIZE THAT A NEW LIABILITY WOULD BE FASTENE D TO HIM. NORMALLY NEW PROVISIONS ARE INTRODUCED WITH EFFECT FROM THE NEXT ASSESSMENT YEAR BUT THIS PROVISION UNDER SECT ION 35DDA WAS INTRODUCED BY PARLIAMENT IN ITS WISDOM WI TH EFFECT FROM APRIL 1 2001 I.E. THE SAME YEAR AND THAT IS WHY DIFFICULTY HAS ARISEN FOR VISUALIZING THE LIABILITY AND THE ASSESSEE COULD NOT DEDUCT SUCH EXPENDITURE. IN FACT IN ALMOST IDENTICAL CIRCUMSTANCES IN THE THIRD MEMBER DECISIO N BY THE DELHI BENCH IN THE CASE OF HARYANA WAREHOUSING CORPORATION V. DEPUTY CIT [2001] 252 ITR (A T) 34 I T WAS HELD THAT IN SUCH SITUATIONS THE LEGAL DICTUM AD IM POSSIBILLIA WOULD BE ATTRACTED. THE SIMPLE MEANING OF THIS DICT UM IS THAT LAW CANNOT COMPEL YOU TO DO THE IMPOSSIBLE. IN TH E CASE BEFORE US ALSO THE ASSESSEE COULD NOT HAVE VISUALI ZED TILL THE LAST INSTALLMENT OF ADVANCE TAX I.E. MARCH 15 20 01 THAT IT WOULD NOT BE ENTITLED TO DEDUCT THE VRS PAYMENTS. T HEREFORE THE ASSESSEE COULD NOT HAVE DONE ANYTHING OTHER THA N TO ESTIMATE THE LIABILITY TO PAY ADVANCE TAX ON THE BA SIS OF EXISTING PROVISIONS. WE ARE OF THE CONSIDERED OPINI ON THAT IN SUCH SITUATION IT CANNOT BE SAID THAT THE ASSESSEE WAS LIABLE TO PAY ADVANCE TAX. ONCE WE COME TO THE CONCLUSION THAT THE ASSESSEE WAS NOT LIABLE TO PAY ADVANCE TAX THERE I S NO QUESTION OF CHARGING TAX UNDER SECTIONS 234B AND 23 4 C. IN SIMILAR CIRCUMSTANCES IN THE CASE OF PRIYANKA OVERS EAS LTD. V. DEPUTY CIT [2001] 79 LTD 353 (DELHI) WHERE THE A SSESSEE HAD TREATED THE RECEIPT OF CASH ASSISTANCE AS CAPIT AL RECEIPTS WHICH WAS SUBSEQUENTLY AMENDED TO BE BUSINESS RECEI PT BY THE FINANCE ACT 1990 IT WAS HELD THAT IN SUCH CAS ES INTEREST UNDER SECTIONS 234B AND 234C WAS NOT CHARGEABLE. IN THESE CIRCUMSTANCES WE THINK THAT THE ASSESSEE WAS NOT L IABLE TO ITA NO.1069 TO 1072/AHD/2009 -7- PAY ADVANCE TAX AND THEREFORE LEVY OF INTEREST UNDE R SECTIONS 234B AND 234C IS NOT JUSTIFIED. FURTHER IT IS PERT INENT TO NOTE THAT THE ASSESSEE BY WAY OF ABUNDANT CAUTION D EPOSITED A SUM OF RS. 90 00 000 ON AUGUST 6 2001 I.E. MUC H BEFORE THE DUE DATE OF FILING OF THE RETURN WHICH ALSO PR OVES THE BONA FIDE CREDENTIALS OF THE ASSESSEE. IN THESE CIR CUMSTANCES WE SET ASIDE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) AND DELETE THE LEVY OF INTERES T UNDER SECTIONS 234B AND 234 C. 10. WHILE DEALING WITH THE QUESTION AS TO WHETHER A N ASSESSEE CAN BE FAULTED FOR NOT DECLARING THE AMOUNT OF CAPITAL GAIN ON ACQUISITION OF LAND WHEN THE AMOUNT OF COMPENSATIO N ITSELF IS NOT DETERMINED HONBLE ALLAHABAD HIGH COURT IN THE CASE CIT. V. PREMKUMAR (2008) 214 CTR 452 (ALL) HELD AS FOLLOWS. LEX NON COGIT AD IMPOSSIBILIA IS AN AGE OLD MAXI M MEANING THAT THE LAW DOES NOT COMPEL A MAN TO DO WH ICH HE CANNOT POSSIBLY PERFORM. REQUIRING THE ASSESSEE TO FILE A PROPER AND COMPLETE RETURN BY INCLUDING THE INCOME UNDER THE HEAD CAPITAL GAIN WOULD BE IMPOSSIBLE FOR THE ASSESSEE IN CASES OF THE NATURE REFERRED ABOVE. IN THE CASE OF VLS FINANCE LTD AND ANOTHER V CITAND ANOTHER (2007) 289 ITR 286 (DEL) HONBLE DELHI HIGH COURT W AS CONCERNED WITH THE QUESTION AS TO WHETHER ASSESSMEN T PROCEEDINGS WERE WITHIN THE PERIOD OF LIMITATION IN VIEW OF THE FACT THAT SPECIAL AUDIT WHICH WAS TO PRECEDE THE ASSESSMENT ORDER WA S STAYED FOR SOME TIME BY THE ORDER OF THE COURT. IN THIS CONNEC TION THE COURT NOTED AS FOLLOWS. IN RAJ KUMAR DEY V. TARAPADA DEY AIR 1987 SC 2195 THE SUPREME COURT EXA MINED THE SCOPE OF A STAY ORDER O N CALCULATION OF TIME/LIMITATION. IN THIS CASE AN AW ARD COULD NOT BE REGISTERED WITHIN THE TIME STIPULATED BY THE REGISTRATION ACT OWING TO AN INTERIM INJUNCTION AND AN ORDER DIRECTING THE AWARD TO BE DEPOSITED IN COURT. THE S UPREME COURT ALLOWED THE ENTIRE PERIOD DURING WHICH THE ST AY ORDER WAS IN OPERATION TO BE EXCLUDED WHILE APPLYING THE MAXIM LEX NON COGIT AD IMPOSSIBIIA OR THE LAW. DOES NOT C OMPEL A MAN TO DO THAT WHICH HE CANNOT POSSIBLY PERFORM. ITA NO.1069 TO 1072/AHD/2009 -8- IN THE CASE OF ESCORTS LTD. V. CIT (2002) 257 ITR 4 68 (DEL) HONBLE DELHI HIGH COURT WAS CONCERNED WITH CLAIM O F AN ASSESSEE FOR GRANT OF REFUND UNDER SECTION 244 OF T HE ACT WHICH WAS DENIED TO AN ASSESSEE BY THE REVENUE ON THE GRO UND THAT THE ASSESSEE HIMSELF WAS RESPONSIBLE FOR DELAY OF REFUN D AND THEREFORE CANNOT CLAIM THE AMOUNT OF INTEREST. WHILE CONSIDER ING THE RIGHTS OF THE ASSESSEE TO CLAIM INTEREST THE DELHI HIGH COUR T HELD AS FOLLOWS LEX NON COGIT AD IMPOSSIBIIA IS A WELL-KNOWN MAXI M. IT MEANS THE LAW DOES NOT COMPEL A MAN TO DO THAT WHIC H HE CANNOT POSSIBLY PERFORM. IF THE ASSESSING OFFICER C OULD NOT PERFORM HIS DUTIES TO COMPLETE THE ORDER OF ASSESSM ENT IN THE ABSENCE OF ANY EVIDENCE FURNISHED BY THE ASSESSEE THE DEPARTMENT CANNOT BE BLAMED THEREFORE. A LAW CANNOT BE INTERPRETED IN VACUUM. IT HAS TO BE INTERPRETED HAV ING REGARD TO THE FACTS AND CIRCUMSTANCES INVOLVED IN EACH CAS E. 11. WE FIND FROM THE ABOVE LEGAL POSITION AND FACTS OF THE CASE THAT THE ASSESSEE ACTED BONA FIDE IN CONFORMITY WITH THE PROVISION OF ACT AND THE LEGAL POSITION AS ENUMERATED BY HONBLE APE X COURT IN THE CASE OF ISHIKAWAJMA-HARINA HEAVY INDUSTRIES LTD. (S UPRA). AT THE RELEVANT POINT OF TIME IT WAS IMPOSSIBLE ON THE PAR T OF THE ASSESSEE TO DEDUCT TAX ON THE INCOME OF NON-RESIDENT. ADMITT EDLY UP TO THE INSERTION OF EXPLANATION VIDE FINANCE ACT 2007 TH E ASSESSEE WAS UNDER BONA FIDE BELIEF NOT TO DEDUCT TAX AND ACCORD INGLY HE ACTED AS PER LAW. ACCORDINGLY WE ALLOW THE APPEAL OF ASSE SSEE. THE SAME ORDER WAS FOLLOWED BY THE ITAT FOR A.Y.200 1-2002 TO A.Y.2003-2004 VIDE ORDER IN ITA NOS.347 TO 349/AHD/ 2010 DATED 11-1- 2011. SINCE IN THE QUANTUM APPEAL IN ASSESSEES OW N CASE IN THE SAME ASSESSMENT YEARS THE ITAT HAS ALREADY HELD THAT UP TO INSERTION OF EXPLANATION VIDE FINANCE ACT 2007 THE ASSESSEE WAS UNDER BONA FIDE BELIEF FOR NON-DEDUCTION OF TAX AT SOURCE. THE ABO VE FINDINGS WOULD BE SQUARELY APPLICABLE SO FAR AS LEVY OF PENALTY UNDER SECTION 271C IS CONCERNED. WE THEREFORE RESPECTFULLY FOLLOWING THE ABOVE FINDINGS OF THE ITA NO.1069 TO 1072/AHD/2009 -9- ITAT IN THE ASSESSEES OWN CASE IN QUANTUM APPEAL CANCEL THE PENALTIES LEVIED UNDER SECTION 271C IN ALL THE YEARS UNDER AP PEALS. 4. IN RESULT ASSESSEES APPEALS ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 14 TH MARCH 2011 SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 14-03-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD