FSL Projects Limited V. The Deputy Commissioner of Income Tax, Circle 14 (3) (TDS), Hyderabad

ITTA/321/2007

AI Insights

The case involves M/s. FSL Projects Limited, formerly known as Frontline Soft Limited, which appealed against the orders of the Income Tax Appellate Tribunal, Hyderabad, and the Commissioner of Income Tax (Appeals), Hyderabad. The core issue was the denial of exemption under Section 195(3) of the Income Tax Act, 1961, for tax deductions on remittances made to a US-based company, M/s. IGTL Solutions. The appellant argued that they had obtained a certificate from the Joint Director of Income Tax-IV (International Taxation), Mumbai, which permitted the remittances without tax deductions. However, the tax authorities deducted TDS contrary to this certificate. The High Court found that the lower appellate forums had not adequately considered the exemption certificate and thus remitted the matter back to the Tribunal for a thorough reconsideration.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 797595 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 21-09-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: A RAMAKRISHNA REDDY
• Assessee Lawyers: S RAVI
• Keywords: Exemption; Income Tax; Remittances; TDS; Section 195(3)
• Section: 195(1); 260-A; 195(3)

Judgement Text

"[ 3386 I IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD THURSDAY, THE TWENTY FIRST DAY OF SEPTEMBER TWO THOUSAND AND TWENTY THREE PRESENT THE HON'BLE SRI JUSTICE P.SAM KOSHY AND THE HON'BLE SRI JUSTICE LAXMI NARAYANA ALISHETTY INCOME TAX TRIBUNAL APPEAL No: 321 ot 2OO7 lncome Tax Tribunal Appeal Under Section 260-A of the Income Tax Act, 1961 arising out of the order of the lncome{ax Appellate Tribunal, Hyderabad Bench ' B ' Hyderabad, in ITA Nos.1080/Hyd/03, for assessment Year 20O2-O3 dated 03-08- 2007 preferred against the Order of the Commissioner of lncome Tax (Appeals)-V, Hyderabad, ITA Nos.0397 & 0398/DC-14(3)/ClT(A)-Vl2002-03 dated.27-06-2003, preferred against the Order of the of Deputy Commissioner of lncome Tax 14(3)(TDS), Hyderabad in HYDF00191F/DCIT 14(3XTDS)/02-03 dated 10-02-2003. Between: M/s. FSL Projects Limited (formerly Frontline Soft Limited), A Public Limited Company, Having its registered office at 602, Lake Shore Towers, Rajbhavan Road, Somajiguda, Hyderabad. Represented by its Director Mr. Mir Hussain AIi, S/o.Sri Mir Yousuf Ali Khan. 44 Years. ...A''ELLANT AND The Deputy commissioner of lncome Tax, Circle 14 (3) (rDS), T.lfl\"JSB?i\"o.*, ITTAMP. NO: 304 OF 2007 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased stay the collection of tax of Rs.10,03,459.501 disputed in the appeal for the assessment y ear 2402-2003. Counsel for the Appellant: SRI S. RAVI Counsel forthe Respondent: SRI A. RAMAKRISHNA REDDY The Court delivered the following: JUDGMENT I I / /,i./, / l/ tll t . ) J)l t)t :tn|- HO]{OURABLE SRI JUSTICE P.SAM KCISHY AND HON'BLE SRI JUSTICE LAXMI NARAYA,NA ALISHETTY INCOMI)TAX TRIBUNAL APPEAL NO.32 1 <'I; 2OO7 JUDGMENT: per l-lon'ble Sri Justrce P.Sam Roshg) The pre:;ent appeal has been filed under Se(:tion 260-A of Income Tax A::t, 1961 (for short, the \"Act\") assailin g the order passed by lnc rme Tax Appellate Tribunal, Br:nch- 3, Hlderabad (for short \"Tril;rrnsl\"1 in ITA No.lOSlHyd/03, dated 03 08.2007 for the Assesr;ment Year 2002 O3. Vide impugnt:d order, the order preferred by the appellant stood rejected irnd in the process, the order passed by the Commissioner o[ income Tax (Appeals), Hyc erabad, for the assessment l,ear :2C'02-03 was affrrmed. 2. The u,hole issue raised by the appellant in the present appeal is so far as the denial of exemption unrler Se,cl.ion 195 (3) of the Act in spite ol there being an order passed by the Joint Director in this regard so far as the deduction of TI)S, in respect of remittances made by the appellant to US bzrsed <:omprrny i.e., M/s.IGTL Solur ions (U.S.A.). I _- I' K,J & I,N,I.J Il-1 ,1 . 'o I I oJ 2007 J 3. At the outset, learned counsel for appellant drew the attention of this Court to the documents, which were furnished before the Appellate Tribunal i.e., the order dated 18.02.2003 passed by the Joint Director of Income Tax-lV (lnternational Taxation), Ayakar Bhavan, Mumbai, whereby the Joint Director had permitted the authorities in India to receive sums without deduction of income tax as is required under Section 195(1) of the Act. 4. Learned counsel for the appellaxt contended that in spite of specific certihcate have not been issued under Section 195(3) of the Act by the Joint Director of the Department, the authorities concerned have made the remittances after deduction of tax at source in contravention to the aforesaid Circular dated 18.O2.2003. This granting of exemption under Section 195(3) of the Act in spite of its appraisal to the authorities beiow, ignoring the same, the Commissioner of Income Tax (Appeals), so also the Tribunal have decided the matter against the assessee. 5. Today, when the matter is taken up for hearing, learned counsel for appellant strongly contended that once when the certificate was obtained from the Joinl-Director so far as the r I ,.4. /,{ /. l / .'lit t:l,ii :it- 6. Perusal rf the pleadings would go to sh()v' t:rat the appellant had ceen all :rlong talremption from deductiorr of tax at source was permissible tLnder Section 195 (3) of the Act, which appellant had availed and wfiich was also granted bl,the respondent, but when it c;1me fi)r deCuction, they had made the remittances only after deduction ,:f l'DS was made. I P.t/(.J 4 L U.J I7-l A no 12l oJ 20i' 5 document therein is the certifircate so issued under Section 195(3) of the Act, granting exemption to M/s.lGTL Solutions (USA) so far as receiving of remittances without deduction of income tax at source. If the contents of the said document is to be accepted and on veri{ication, found to be genuine, the consequences would be that the entire remittances that have been made to M/s. IGTL Solutions (USA) would be non-taxable so far as TDS is concerned. Further, if the contents of the said letter stands accepted, then the action on the part of the respondent in carrying out deduction at source on the remittances made to M/s.IGTL Solutions (USA) would be per se bad. B. [n view of the aforesaid factual matrix ol the case, more particularly, taking note of the fact that there is a non-reference or non-deliberation of the exemption so obtained under Section 195(3) of the Act by the two forums below, we are of the considered opinion that it is a frt case where matter can be remitted back to the Tax Tribunal for considering the contentions raised by the appellant so far as exemption that they have got under Section 195(3) of the Act insofar as the remittances that have been made to M/s.lGTL Solutions (USA) is ./: ,/ -= , ^.//rl I/ , I-l 1 ,.1)1ol)oti- l) concerned. C:nsidering the fact that the ord(tr of tht: Tribunal is one, which wirs passed as earh as on 03.08.12007, i1 is expected that the Trit unal shall reconsider this matter, oarticlrlarlv, taking into < orrsideration the exemption rio grarltecl to the appellant on 1O.O2.2003. l.et the Tribune,l nor,\" decide the matter on pri )rlty basis ri,ithin the outer lirrrit of 9O days from the date of rec eipt of copl, of this order. 9. Accordir gly, Appeal stan