DE BEERS UK LTD ( FORMERLY KNOWN AS THE DIAMOND TRADING CO LTD), MUMBAI V. DDIT (IT) 1(2), MUMBAI

ITA 1531/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78865 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 18-06-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 22-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: DR K SHIVRAM
• Keywords: Double taxation relief
• Section: 234B

Judgement Text

L IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE SHRI I.P. BANSAL, JM AND SHRI D. KARUNAKARA RAO, AM ./I.T.A. NO.1531/M/2011 ( / ASSESSMENT YEAR: 2005 - 2006 ) DE BEERS UK LTD (FORMERLY KNOWN AS THE DIAMOND TRADING CO LTD), 1 ST FLOOR, JALAN MILLS COMPOUND, 905 GANPATRAO KADAM MARG, LOWER PAREL, MUMBAI 400 013. / VS. DDIT (IT) - 1(2), SCINID HOUSE, MUMBAI. ./ PAN : AACCT 5530 B ( / APPELLANT) .. ( / RESPONDENT ) ./I.T.A. NO.1766/M/2011 ( / ASSESSMENT YEAR: 2005 - 2006 ) DDIT (IT) - 1(2), SCINID HOUSE, MUMBAI. / VS. DE BEERS UK LTD (FORMERLY KNOWN AS THE DIAMOND TRADING CO LTD), 1 ST FLOOR, JALAN MILLS COMPOUND, 905 GANPATRAO KADAM MARG, LOWER PAREL, MUMBAI 400 013. ./ PAN : AACCT 5530 B ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : DR. K. SHIVRAM / RESPONDENT BY : SHRI RAVI PRAKASH, DR / DA TE OF HEARING : 05 .05.2014 / DATE OF PRONOUNCEMENT : 05 .05.2014 / O R D E R PER BENCH : THERE ARE TWO APPEALS UNDER CONSIDERATION AND THEY ARE CROSS APPEALS INVOLVING ASSESSMENT YEAR 2005 - 2006. BOTH THE APPEALS ARE FILED AGAINST THE OF THE CIT (A) - 10, MUMBAI DATED 31.12.2010. SINCE THE ISSUES RAISED IN THESE APPEALS ARE CONNECTED, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBE D, HEARD COMBINEDLY AND DISPOSE OF IN THIS CONSOLIDATED ORDER. 2 2. AT THE OUTSET, SHRI VIJAY VAIDYA, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE LETTER DATED 30 TH APRIL, 2014 AND MENTIONED THAT THE ASSESSEE IS NOT WILLING TO PROCEED WITH THE AP PEAL FILED BEFORE THE TRIBUNAL VIDE ITA NO.1531/MUM/2011 AND WISHES TO WITHDRAW THE APPEAL ON WITHOUT PREJUDICE BASIS. IN THIS REGARD, LD COUNSEL READ OUT THE RELEVANT PORTION FROM THE SAID LETTER WHICH READS AS UNDER: ..IN THIS REGARD, WE ON BEHALF AND UNDER INSTRUCTIONS FROM DBUK WISH TO STATE THAT DBUK WISHES TO WITHDRAW THE SUBJECT APPEAL FOR AY 2005 - 2006 ON A WITHOUT PREJUDICE BASIS. WE REQUEST YOU TO ALLOW THE ASSESEE TO WITHDRAW THE APPEAL AND OBLIGE. 3. ON THE OTHER HAND, LD DR HAS NOT OBJECTED THE PRAYER OF THE LD COUNSEL. 4. CONSIDERING THE ABOVE PRAYER OF THE LD COUNSEL TO WITHDRAW THE APPEAL AND NO OBJECTION FROM THE LD DR, WE ALLOW TO WITHDRAW THE APPEAL. ACCORDINGLY, THIS APPEAL IS DISMISSED AS WITHDRAWN. 5. IN THE RESULT, APPEAL OF THE AS SESSEE STANDS DISMISSED AS WITHDRAWN . ITA NO.1766/M/2011 (AY 2005 - 06) (BY REVENUE) 6. THIS APPEAL FILED BY THE REVENUE ON 3.3.2011 AGAINST THE ORDER OF THE CIT (A) - 10, MUMBAI DATED 31.12.2010. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH REA D AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A0 WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE BEING A NON - RESIDENT AND THE ENTIRE INCOME OF THE ASSESSEE WAS SUBJECT TO TDS U/S 195 OF THE IT ACT WAS NOT LIAB LE TO PAY ADVANCE TAX HENCE INTEREST U/S 234B IS NOT CHARGEABLE IN THIS CASE, IGNORING THE FACT (I) THAT HE HIMSELF HAS HELD THAT THE CONSIDERATION RECEIVED BY THE ASSESSEE FROM THE SITE HOLDERS WAS IN THE NATURE OF ROYALTY, WHICH IS CHARGEABLE TO TAX IN INDIA UNDER EXPLANATION 2 OF SECTION 9(1)(VI) OF THE IT ACT, AS WELL AS ARTICLE 13(3) OF INDIA U.K. DTAA. (II) THAT SINCE THE TAX DEDUCTED AT SOURCE WAS NOT ADEQUATE TO MAKE THE ENTIRE TAX LIABILITY, IT WAS OBLIGATION ON THE PART OF THE ASSESSEE TO MAKE THE DEFICI T GOOD BY MAKING THE PAYMENT TOWARDS THE ADVANCE TAX . (III) THAT SINCE THE ASSESSEE FAILED TO PAY THE ADVANCE TAX, THE AO WAS RIGHT IN CHARGING INTEREST U/S 234B OF IT ACT. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD CIT (A) ON THE ABOVE GROUND(S) BE SET ASI DE AND THAT OF THE AO RESTORED. 3 7. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE MENTIONED GROUNDS AND SUBMITTED THAT THE DISPUTE INVOLVED IN THIS APPEAL IS REGARDING THE LEVY OF INTEREST U/S 234B OF THE ACT FOR NON - PAYMENT OF ADVANCE TAX . IN THIS REGARD, LD COUNSEL FILED A COPY OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AYS 2002 - 03 TO 2004 - 05 AND MENTIONED THAT EXACTLY IDENTICAL ISSUES HAVE BEEN RAISED BY THE REVENUE AND CAME UP BEFORE THE TRIBU NAL FOR ADJUDICATION VIDE ITA NO S . 437 TO 439/MUM/2011, ORDER DATED 21.2.2013, WHEREIN THE TRIBUNAL HAS DECIDED THE ISSUES IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE INCOME BEING THE SUBJECT TO DEDUCTION OF TAX AT SOURCE, NO ADVANCE TAX IS LIABLE TO PAY . IN THIS REGARD, HE READ OUT THE RELEVANT PARAS 4 & 4.1 OF THE SAID ORDER OF THE TRIBUNAL DATED 21.2.2013 (SUPRA), WHICH READ AS UNDER: 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING L EVY OF INTEREST UNDER SECTION 234B OF THE ACT FOR NON - PAYMENT OF ADVANCE TAX BY THE ASSESSEE. THE ASSESSEE FOR THE RELEVANT YEAR HAD FILED NIL RETURN INCOME. THE AO HOWEVER TREATED CERTAIN PAYMENTS RECEIVED BY THE ASSESSEE FROM THE SITE HOLDERS AS MARKETING CONTRIBUTION AS RO YALTY WHICH WAS ADDED TO THE TOTAL INCOME. SINCE, THE ASSESSEE HAD NOT PAID ANY ADVANCE TAX, THE AO LEVIED INTEREST UNDER SECTION 234D OF THE INCOME TAX ACT. THE METHOD OF COMPUTATION OF ADVANCE TAX IS PROVIDED IN SECTION 209 AND AS PER CLAUSE (D) OF SUB SECTION - 1 OF THAT SECTION, INCOME TAX CALCULATED FOR THE PURPOSE OF ADVANCE TAX HAS TO BE REDUCED BY THE AMOUNT OF INCOME TAX WHICH IS DEDUCTIBLE OR COLLECTIBLE AT SOURCE DURING THE SAID FINANCIAL YEAR. THEREFORE, IF ANY INCOME IS SUBJECT TO DEDUCTION OF TAX AT SOURCE, SAME HAS TO BE REDUCED FROM THE ADVANCE TAX IRRESPECTIVE OF THE FACT WHETHER TAX HAS BEEN DEDUCTED AT SOURCE OR NOT BECAUSE OF THE WORDS DEDUCTIBLE / COLLECTABLE IN THE PROVISIONS. THE HONBLE HIGH COURT OF BOMBAY IN CASE OF NGC NETWORK ASIA LLC (SUPRA), HAVE ALSO HELD THAT IN CASE DUTY IS CAST ON PAYER TO PAY AT SOURCE THE INTEREST UNDER SECTION 234B CANNOT BE CHARGED IN CASE OF THE PAYEE IN CASE PAYER FAILS TO DEDUCT TAX AT SOURCE . THEREFORE, INTEREST IN THIS CASE IS NOT LEVIABLE. 4.1. THE LD DR HAS PLACED RELIANCE ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF ANJUM GJASWALA (SUPRA). THE SAID CASE IS HOWEVER DISTINGUISHABLE. IN THE SAID CASE, THE HONBLE SUPREME COURT WAS CONCERNED WITH THE POWER OF SETTLEMENT COMMISSION TO REDUCE OR WAIVE INTEREST. IT WAS HELD THAT THE INTEREST WAS MANDATORY AND SETTLEMENT COMMISSION HAD NO POWER OR WAIVE INTEREST. IT WAS ALSO HELD THAT WAIVER OR REDUCTION OF INTEREST WAS PERMISSIBLE ONLY UNDER THE CIRCULAR OF CBDT AND UNDER CONDITIONS PRE SCRIBED THEREIN. THUS, HONBLE SUPREME COURT WAS NOT CONCERNED WHETHER IN A PARTICULAR CASE ADVANCE TAX WAS PAYABLE OR NOT. IT WAS ONLY HELD THAT IN CASE ADVANCE TAX WAS PAYABLE, THE LEVY OF INTEREST WAS MANDATORY . IN THE PRESENT CASE, IN VIEW OF THE IN COME BEING SUBJECT TO DEDUCTION OF TAX AT SOURCE, NO ADVANCE TAX WAY PAYABLE . THEREFORE, NO INTEREST CAN BE LEVIED. WE THEREFORE, SEE NO INFIRMITY IN THE ORDER OF THE CIT (A) IN DELETING INTEREST CHARGED. THE ORDER OF THE CIT (A) IS ACCORDINGLY UPHELD. 8. FROM THE ABOVE IT IS CLEAR THAT T HE METHOD OF COMPUTATION OF ADVANCE TAX AS ENVISAGED IN SECTION 209 AND AS PER CLAUSE (D) OF SUB SECTION - 1 OF THAT SECTION, INCOME TAX CALCULATED FOR THE PURPOSE OF ADVANCE TAX HAS TO BE REDUCED BY THE 4 AMOUNT OF INCOME TAX WHICH IS DEDUCTIBLE OR COLLECTIBLE AT SOURCE DURING THE SAID FINANCIAL YEAR. THEREFORE, IF ANY INCOME IS SUBJECT TO DEDUCTION OF TAX AT SOURCE, SAME HAS TO BE REDUCED FROM THE ADVANCE TAX IRRESPECTIVE OF THE FACT WHETHER TAX HAS BEEN DEDUCTED AT SOURCE OR NOT BECAUSE OF THE WORDS DEDUCTIBLE / COLLECTABLE IN THE PROVISIONS. THE SAME VIEW WAS ALSO SUPPORTED THE JUDGMENT OF THE HONBLE JURISDICTIONAL COURT IN THE CASE OF NGC NETWORK ASIA LLC (313 ITR 197). THEREFORE, CONSIDERING THE S ETTLED NATURE OF THE ISSUE, WE ARE OF THE OPINION THAT THE GROUNDS RAISED BY THE REVENUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 5 TH MAY, 2014. S D / - S D / - (I.P. BANSAL) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 5.5.2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI