Oil and Natural Gas Corporation Ltd., Dehradun V. DDIT, Dehradun

ITA 1069/DEL/2011

• Counselvise Citation: 106920114 RSA 2011
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 12-09-2011
• Assessment Year: 2010-2011
• Appeal Filed On: 28-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: KAVEESH SYAL DY MANAGER

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E DELHI) BEFORE SHRI A.D. JAIN AND SHRI A.N. PAHUJA ITA NOS. 1067, 1068 & 1069(DEL)2011 ASSESSMENT YEAR: 2010-11 OIL AND NATURAL GAS CORPORATION LIMITED, DY.DIR ECTOR OF I. TAX, OLD SECRETARIAT BLDG., TEL BHAWAN, V. IN TERNATIONAL TAXATION, DEHRADUN. DEHRADUN. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI KAVEESH SYAL, DY. MANAGER RESPONDENT BY : SHRI N.K. CHAND, SR. DR ORDER PER BENCH THESE ARE ASSESSEES APPEALS FOR ASSESSMENT YEAR 20 10-11. THE COMMON GROUNDS TAKEN ARE AS FOLLOW: 1. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) II, DEHRADUN HAS ERRED IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE CASE IN UPHOLDING THE ORDER PASSED U/S 195(2) OF THE INCOM E TAX ACT, 1961, WHEREBY THE APPELLANT WAS DIRECTED TO DEDUCT TAX @ 10% PLUS SURCHARGE AND EDUCATION CESS ON THE GROSS CONTRACTU AL PAYMENTS INCLUDING THE PAYMENTS ARISING OUT OF REIMBURSEMEN T OF ALL TYPES OF EXPENDITURE TO BE MADE TO THE CONTRACTOR. 2. WITHOUT PREJUDICE TO THE PRECEDING GROUND, THE LD. COMMISSIONER OF INCOME TAX(APPEALS)-II, DEHRADUN HAS ERRED IN LA W AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN QUESTIONING THE MAINTAINABILITY OF THE APPEAL FILED UNDER SECTION 248 OF THE INCOME TAX ACT, 1961. ITA NOS. 1067 TO 1069(DEL)2011 2 2. THE ASSESSEE HAD TAKEN THE FOLLOWING GROUND BEFO RE THE CIT(A) IN ALL THESE CASES:- THE ASSESSING OFFICER HAS ERRED IN LAW, IN FACTS A ND IN THE CIRCUMSTANCES OF THE CASE IN DIRECTING ONGC TO DEDU CT TAX @ 10% PLUS SURCHARGE AND EDUCATION CESS ON THE GROSS CONT RACTUAL PAYMENTS INCLUDING THE PAYMENTS ARISING OUT OF REIMBURSEMEN T OF ALL TYPES OF EXPENDITURE TO BE MADE TO OSRL. 3. THE LEARNED CIT(A) DISPOSED OF THESE APPEALS BY OBSERVING, INTER ALIA, AS FOLLOWS:- 7. SECONDLY AND MORE IMPORTANTLY, SECTION 248 OF THE ACT GETS ATTRACTED ONLY WHERE THE TAX DEDUCTIBLE ON ANY INCO ME U/S 195 OF THE ACT IS TO BE BORNE BY THE PERSON BY WHOM THE INCOME IS PAYABLE AND SUCH TAX HAS ALREADY BEEN PAID BY HIM AND, THEREFOR E, HE INFORMS THAT NO TAX IS REQUIRED TO BE DEDUCTED AND A DECLARATION TO THAT EFFECT IS REQUESTED TO BE MADE. THE TRIGGER, THEREFORE, TO OPERATIONALISE SECTION 248 OF THE ACT IS THE UNDENIABLE LIABILITY OF THE PAYER OF INCOME FOLLOWING AN AGREEMENT TO THE EFFECT THAT TH E PAYER WOULD DISCHARGE THE TAX LIABILITY OF THE PAYEE. THAT ALS O MEANS THAT SECTION 248 IS RELEVANT ONLY IN A CASE WHERE THERE DOES EXI ST A TAX LIABILITY AND SECTION 248 ONLY CRAVES OUT A FACILITY IN RESPECT O F A TAX PROTECTED CONTRACT OR THE LIKE TO ENABLE THE PAYER TO DISCHAR GE THE TAX LIABILITY OF THE PAYEE AS PER THE AGREEMENT AND THEREAFTER THERE REMAINS NO NEED FOR ANY TDS. SINCE THE PAYER HAS UNDERTAKEN TO DI SCHARGE THE TAX LIABILITY, NATURAL COROLLARY IS THAT NO FURTHER TAX SHOULD BE DEDUCTED. RESULTANTLY, THE PAYER IS NOT VISITED BY ANY PENAL ACTION FOR NOT DEDUCTING TAX AT SOURCE. CONTRARY TO THE CONTENTI ON OF THE LD. ARS THE USE OF THE EXPRESSION NO TAX WAS REQUIRED TO BE DE DUCTED ON SUCH INCOME IS WITH REFERENCE TO THE TAX TO BE BORNE B Y THE APPELLANT, ANOTHER EXPRESSION IN THE SECTION. CONTRARY ALSO TO THAT POSITION OF LAW, IN THIS CASE THE APPELLANT IS CLAIMING THAT TH E NON-RESIDENT DOES NOT HAVE A TAX LIABILITY AND, THEREFORE, IT HAS UND ERTAKEN TO MAKE THE PAYMENT OF TAXES. SUCH APPEAL IS, THEREFORE, NOT EVEN MAINTAINABLE U/S 248 OF THE ACT. CIT(A) IS AUTHORIZED TO MAKE A DEDUCTION ONLY IN ITA NOS. 1067 TO 1069(DEL)2011 3 A CASE WHERE THE TAX PAYABLE BY THE PAYEE HAS BEEN UNDERTAKEN TO BE PAID BY THE PAYER AND SHALL CONTINUE TO BE PAID BY THE PAYER IN FUTURE YEARS ALSO. THE PROVISION IS INSERTED TO WARD OFF AN INCONVENIENCE TO THE PAYEE WHICH IF NOT PROVIDED FOR WOULD NECESSAR ILY REQUIRE HIM TO FILE HIS RETURN OF INCOME TO CLAIM REFUND IN A CASE WHERE TAX IS ALREADY AGREED TO BE PAID BY THE PAYER OF INCOME. IF ONGC HAS AGREED TO PAY TAXES IT SHOULD CONTINUE TO MAKE THE PAYMENT OF TAX ES AND THERE IS NO QUESTION OF ANY REFUND. 4. THE LD. CIT(A), THEREFORE, IT IS SEEN. HAS DISM ISSED ALL THE THREE APPEALS FILED BEFORE HIM ON THE GROUND THAT THEY W ERE NOT MAINTAINABLE U/S 248 OF THE INCOME TAX ACT, THOUGH, THE LD. CIT(A) H AS MADE THE FOLLOWING PASSING REMARKS IN PARA 6 OF HIS ORDERS:- THE PARTICIPANTS AGREEMENT HAS BEEN GONE THROUGH VERY CAREFULLY AND THE ARRANGEMENT ENTERED INTO BETWEEN THE PARTIE S IS SEEN TO SUBSTANTIALLY REFLECT THAT THE NON-RESIDENT PAYEE D OES HAVE A BUSINESS CONNECTION IN INDIA. IT WOULD, THEREFORE, BE PREMA TURE TO CONCLUDE THAT THE NON-RESIDENT PAYEE SHALL NEVER HAVE ANY TA X LIABILITY TO BE DISCHARGED IN INDIA. ACCORDINGLY, IN THE CASE OF THE APPELLANT NO APPEAL LIES U/S 248 OF THE ACT AS IT CANNOT BE SAID THAT THE NON-RESIDENT PARTY HAS NO TAX LIABILITY. 5. IT HAS BEEN POINTED OUT ON BEHALF OF THE ASSESSE E THAT THE HONBLE SUPREME COURT, IN CIT V. WESMAN ENGG. CO. PVT. LTD ., 188 ITR 327(SC), HAS HELD AS FOLLOWS:- 5. NORMALLY, THIS CONCESSION WOULD HAVE BEEN ENOUG H FOR US TO HOLD THAT THE APPEAL WAS MAINTAINABLE AND REMIT IT BACK TO THE CIT(A) FOR DISPOSAL ON MERITS. BEFORE WE DO THAT WE WOUL D LIKE TO POINT OUT WHAT EXACTLY S. 248 PROVIDED AND HOW THE PAYMENT OF TAX IS A NECESSARY REQUISITE TO QUALIFY AN ASSESSEE TO FILE AN APPEAL: ITA NOS. 1067 TO 1069(DEL)2011 4 248. ANY PERSON HAVING IN ACCORDANCE WITH THE P ROVISIONS OF SS.195 AND 200 DEDUCTED AND PAID TAX IN RESPECT OF ANY SUM CHARGEABLE UNDER THIS ACT, OTHER THAN INTEREST, WHO DENIES HIS LIABILITY TO MAKE SUCH DEDUCTION, MAY APPEAL TO THE AAC OR, AS THE CASE MAY BE, THE CIT(A), TO BE DECLARED NOT LIA BLE TO MAKE SUCH DEDUCTION. THIS SECTION ON A CAREFUL READING GIVES THE RIGHT T O ANY PERSON WHO HAVING IN ACCORDANCE WITH THE PROVISIONS OF S. 195 DEDUCTED AND PAID TAX IN RESPECT OF ANY SUM CHARGEABLE UNDER THIS ACT AND WHO DENIES HIS LIABILITY TO MAKE SUCH DEDUCTION TO FILE AN APP EAL TO THE AAC OR THE CIT(A), AS THE CASE MAY BE, FOR A DEDUCTION THA T THE ASSESSEE WAS NOT LIABLE TO MAKE SUCH DEDUCTION. IN THIS SECTIO N THE CRUCIAL WORDS ARE WHO DENIES HIS LIABILITY TO MAKE SUCH DEDUCTIO N. IN THIS CLAUSE THE MOST CRUCIAL WORDS ARE SUCH DEDUCTION. SUC H DEDUCTION WOULD MEAN THE DEDUCTION AS REQUIRED OF HIM UNDER THE PR OVISIONS OF SS. 195 AND 200. IF UNDER THOSE PROVISIONS THE ASSESSEE WAS REQUIRED TO DEDUCT CERTAIN AMOUNT OF TAX BUT THE ASSESSEE DISPU TES THE QUANTUM ONLY IF HE DEDUCTS SUCH TAX AND PAYS TO THE GOVER NMENT, HE WILL BE ENTITLED TO CLAIM BEFORE THE APPELLATE AUTHORITY TH AT UNDER THE PROVISIONS OF THE ACT HE WAS NOT LIABLE TO DEDUCT T AX AT SUCH RATE OR ON SUCH AMOUNT OR AS THE CASE MAY BE. THE DENIAL OF LIABILITY TO MAKE SUCH DEDUCTION, THEREFORE, IN THIS CASE, WOULD MEAN DEDUCTION AT THE RATE OF 40 PERCENT WHICH THE ASSESSEE DID IN THIS C ASE, WHICH UNFORTUNATELY MISSED THE ATTENTION OF THE CIT(A), W HICH IS CLEAR FROM THE OBSERVATIONS HE MADE, WHICH WE HAVE EXTRACTED A BOVE. SINCE THE TAX HAS BEEN PAID IN THIS CASE IN ACCORDANCE WITH T HE PROVISIONS OF SC. 195, NAMELY, AT 40 PER CENT, THE APPEAL IS CLEARLY MAINTAINABLE. 6. WE, THEREFORE, DIRECT THE CIT(A) TO ADMIT THE A PPEAL AND GIVE HIS DECISION AS TO WHETHER THE RATE OF TAX TO BE DEDUCT ED AT SOURCE WOULD BE 20 PER CENT OR 40 PER CENT. 6. IN VIEW OF THE ABOVE, IT HAS BEEN CONTENDED ON B EHALF OF THE ASSESSEE THAT SINCE THE MATTER HAS NOT BEEN DECIDED ON MERIT S BY THE CIT(A), IT BE ITA NOS. 1067 TO 1069(DEL)2011 5 REMITTED, IN ALL THESE CASES, TO THE FILE OF THE LD . CIT(A), TO BE DECIDED ON MERITS. 7. THE LD. DR, ON THE OTHER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. EVIDENTLY, THE LD. CIT(A) HAS NOT DECIDED THE MATTE R CONCERNING ALL THESE THREE APPEALS ON MERITS AND HAS DISMISSED THE APPEA LS BEFORE HIM BY OBSERVING THEM TO BE NOT MAINTAINABLE U/S 248 OF TH E ACT. THEREFORE, IN KEEPING WITH WESMAN ENGG. CO. PVT. LTD. (SUPRA), RENDERED BY THE HONBLE SUPREME COURT, WE REMIT THESE CASES TO THE LD. CIT(A), TO BE DECIDED ON MERITS, IN ACCORDANCE WITH LAW, ON AFFOR DING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. 9. IN THE RESULT, FOR STATISTICAL PURPOSES, ALL THE THREE APPEALS FILED BY THE ASSESSEE ARE TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.09.2011. SD/- SD/- (A.N. PAHUJA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12.09.2011 *RM ITA NOS. 1067 TO 1069(DEL)2011 6 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR