Steelco Gujarat Ltd., Vadodara V. The Asstt. Commissioner of Income Tax, Circle-4, Vadodara

ITA 1800/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5946 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 04-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Recovery proceedings
• Section: 143(3); 194C

Judgement Text

ITA NO. 1800/AHD/2016 STEELCO GUJARAT LTD VS. ACIT ASSESSMENT YEAR: 2011-12 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND RAJPAL YADAV JM] ITA NO. 1800/AHD/2016 ASSESSMENT YEAR: 2011-12 STEELCO GUJARAT LTD ................ ..APPELLANT 4 TH FLOOR, MARBLE ARCH, RACE COURSE CIRCLE, VADODARA 390 007 [PAN : AADCS 0880 L] VS. THE ASSTT. COMMISSIONER OF INCOME-TAX ...........................RESPONDENT CIRCLE-4, VADODARA APPEARANCES BY: MUKUND BAKSHI FOR THE APPELLANT MUDIT NAGPAL FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 06.03.2018 DATE OF PRONOUNCING THE ORDER : 07.03.2018 O R D E R PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 29 TH MARCH 2016 PASSED BY THE CIT(A)-2, VADODARA, IN TH E MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX A CT, 1961, FOR THE ASSESSMENT YEAR 2011-12. 2. THE GRIEVANCES RAISED BY THE APPELLANT ARE AS FO LLOWS:- 1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-2 , VADODARA HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD. AO IN THE DISALLOWANCE OF THE EXPENSE OF RS.4,64,617/- BEING THE AMOUNT PAID TO THE AGENTS OF FOREIGN SHIPPING COMPANIES INVOKING T HE PROVISIONS OF SEC. 40(A)(IA). THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE AMOUNTS PAID BEING NOT LIABLE TO TAX IN INDIA, THE PROVISIONS RE LATING TO DEDUCTION OF TAX AT SOURCE DID NOT APPLY AND CONSEQUENTLY THE PROVIS IONS OF SEC. 40(A)(IA) COULD NOT HAVE BEEN INVOKED. THE AMOUNT AS CLAIMED MAY PLEASED BE ALLOWED. 2. THE LD. CIT(A)-2, VADODARA HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD. AO IN THE DISALLOWANCE OF RS. 18,25,779/- OUT OF ITA NO. 1800/AHD/2016 STEELCO GUJARAT LTD VS. ACIT ASSESSMENT YEAR: 2011-12 PAGE 2 OF 4 EXPORT COMMISSION PAID TO VARIOUS PARTIES LOCATED O UTSIDE INDIA FOR RENDERING SERVICES OUTSIDE INDIA INVOKING THE PROVI SIONS OF SEC. 40(A)(I). 3. THE LD. CIT(A)-2, VADODARA HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT THE AMOUNTS PAID BEING NOT LIABLE TO TAX IN INDIA, THE PROVISIONS RELATING TO DEDUCTION OF TAX AT SOURCE D ID NOT APPLY AND CONSEQUENTLY THE PROVISIONS OF SEC. 40(A)(I) COULD NOT HAVE BEEN INVOKED. 3. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE AF ORESAID ISSUE IS COVERED, IN FAVOUR OF THE ASSESSEE, BY THE ORDER DATED 20.01.20 17 PASSED BY THE COORDINATE BENCH, IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2 008-09, WHEREIN THE TRIBUNAL HAS HELD AS UNDER:- 5. WE FIND THAT THE CBDT VIDE CIRCULAR NO.723 HAS INTER ALIA OBSERVED AS FOLLOWS :- TAX DEDUCTION AT SOURCE FROM PAYMENT MADE TO FOREI GN SHIPPING COMPANIES NON-RESIDENTS, TDS SECTION 194C, SECTION 195, SECTION 172 1. REPRESENTATIONS HAVE BEEN RECEIVED REGARDING THE SCOPE OF SECTIONS 172, 194C AND 195 OF THE INCOME-TAX ACT, 1961, IN C ONNECTION WITH TAX DEDUCTION AT SOURCE FROM PAYMENTS MADE TO THE FOREI GN SHIPPING COMPANIES OR THEIR AGENTS. 2. SECTION 172 DEALS WITH SHIPPING BUSINESS OF NON- RESIDENTS. SECTION 172(1) PROVIDES THE MODE OF THE LEVY AND RECOVERY O F TAX IN THE CASE OF ANY SHIP, BELONGING TO OR CHARTERED BY A NON-RESIDE NT, WHICH CARRIES PASSENGERS, LIVESTOCK, MAIL OR GOODS SHIPPED AT A P ORT IN INDIA. AN ANALYSIS OF THE PROVISIONS OF SECTION 172 WOULD SHO W THAT THESE PROVISIONS HAVE TO BE APPLIED TO EVERY JOURNEY A SH IP, BELONGING TO OR CHARTERED BY A NON-RESIDENT, UNDERTAKES FROM ANY PO RT IN INDIA. SECTION 172 IS A SELFCONTAINED CODE FOR THE LEVY AND RECOVE RY OF THE TAX, SHIP- WISE, AND JOURNEY WISE, AND REQUIRES THE FILING OF THE RETURN WITHIN A MAXIMUM TIME OF THIRTY DAYS FROM THE DATE OF DEPART URE OF THE SHIP. 3. THE PROVISIONS OF SECTION 172 ARE TO APPLY, NOTW ITHSTANDING ANYTHING CONTAINED IN OTHER PROVISIONS OF THE ACT. THEREFORE , IN SUCH CASES, THE PROVISIONS OF SECTIONS 194C AND 195 RELATING TO TAX DEDUCTION AT SOURCE ARE NOT APPLICABLE. THE RECOVERY OF TAX IS TO BE RE GULATED, FOR A VOYAGE UNDERTAKEN FROM ANY PORT IN INDIA BY A SHIP UNDER T HE PROVISIONS OF SECTION 172. 4. SECTION 194C DEALS WITH WORK CONTRACTS INCLUDING CARRIAGE OF GOODS AND PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN RAILWAYS. THIS SECTION APPLIES TO PAYMENTS MADE BY A PERSON REFERR ED TO IN CLAUSES (A) TO (J) OF SUB-SECTION (1) TO ANY 'RESIDENT' (TE RMED AS CONTRACTOR). IT IS CLEAR FROM THE SECTION THAT THE AREA OF OPERATION O F TDS IS CONFINED TO ITA NO. 1800/AHD/2016 STEELCO GUJARAT LTD VS. ACIT ASSESSMENT YEAR: 2011-12 PAGE 3 OF 4 PAYMENTS MADE TO ANY 'RESIDENT'. ON THE OTHER HAND, SECTION 172 OPERATES IN THE AREA OF COMPUTATION OF PROFITS FROM SHIPPING BUSINESS OF NON-RESIDENTS. THUS, THERE IS NO OVERLAPPING IN THE AREAS OF OPERATION OF THESE SECTIONS. 5. THERE WOULD, HOWEVER, BE CASES WHERE PAYMENTS AR E MADE TO SHIPPING AGENTS OF NON-RESIDENT SHIP-OWNERS OR CHAR TERERS FOR CARRIAGE OF PASSENGERS ETC., SHIPPED AT A PORT IN INDIA. SIN CE, THE AGENT ACTS ON BEHALF OF THE NON-RESIDENT SHIP-OWNER OR CHARTERER, HE STEPS INTO THE SHOES OF THE PRINCIPAL. ACCORDINGLY, PROVISIONS OF SECTION 172 SHALL APPLY AND THOSE OF SECTIONS 194C AND 195 WILL NOT A PPLY. 6. IN VIEW OF THE ABOVE CIRCULAR, AS LONG AS THE PAYMENT IS MADE TO A NON- RESIDENT IN RESPECT OF SHIPPING BUSINESS, THE TAX D EDUCTION REQUIREMENT UNDER SECTION 194C AND 195 DO NOT COME INTO THE PLAY. IT IS SO THAT THE REASON THAT CBDT IN ITS WISDOM HAS BEEN CONSIDERATE ENOUGH TO R EALIZE THAT THERE IS A STRONG AND EFFECTIVE MECHANISM FOR RECOVERING TAX DUES IN RESPECT OF INCOME EMBEDDED IN FREIGHT PAYMENT MADE TO THE NON-RESIDEN T SHIPPING COMPANY. THE SCHEME OF SECTION 172 PERMITS A VESSEL OWNED BY NON-RESIDENT OWNER OR CHARTERER TO LEAVE INDIAN PORT ONLY UPON TAKING CAR E OF DUES OF INDIAN AUTHORITIES IN RESPECT OF TAX ON INCOME EMBEDDED IN FREIGHT RECEIPTS. IT IS ALSO ELEMENTARY THAT UNDER SECTION 119 OF THE ACT THE CB DT HAS THE POWERS TO RELAX RIGOR OF LAW IN APPROPRIATE CASES AND ONCE TH E CBDT DOES SO THE RELAXATION SO GIVEN IS TO BE IMPLEMENTED BY THE FIE LD AUTHORITIES IN LETTER AND IN SPIRIT. IN EFFECT THUS, EVEN IF THERE IS A DEVIATIO N FROM THE STRICT LEGAL PROVISIONS BY THE VIRTUE OF A CBDT CIRCULAR, SUCH PERMITTED DE VIATIONS ARE TO BE DULY RESPECTED AND HONOURED BY THE FIELD AUTHORITIES. IN VIEW OF THIS ANALYSIS, WHEN WE GO THROUGH THE CIRCULAR NO.723 (SUPRA) WE FIND T HAT IT IS A CONSCIOUS DECISION OF THE BOARD THAT SECTION 194C AND 195 WIL L NOT APPLY TO THE SITUATIONS WHICH ARE COVERED BY SECTION 172. IN CAS E OF A SHIP OWNED OR CHARTERED BY NON-RESIDENT COMPANY, PROVISIONS OF SE CTION 172 UNDISPUTEDLY COME INTO PLAY. ACCORDINGLY, AS LONG AS THE SHIP, I N RESPECT OF WHICH FREIGHT PAYMENTS ARE MADE, IS OWNED OR CHARTERED BY NON-RES IDENT OR ENTITY WHICH IS WHERE PROVISIONS OF SECTION 172 ARE APPLICABLE, THE PROVISIONS OF SECTION 195 OR 194C CANNOT BE INVOKED. UPON OUR CAREFUL PERUSAL OF THE AFORESAID BOARD CIRCULAR, WE ARE UNABLE TO FIND ANY REFERENCE TO SU GGEST THAT THIS RELAXATION IS CONTINGENT UPON THE ASSESSEE BEING ABLE TO PRODUCE EVIDENCE OF ASSESSMENT UNDER SECTION 172 IN RESPECT OF SUCH NON-RESIDENT. TO THAT EXTENT, THEREFORE, WE ARE UNABLE TO APPROVE THE STAND OF THE CIT(A). W E ARE OF THE CONSIDERED VIEW THAT AS LONG AS THE ASSESSEE CAN DEMONSTRATE T HAT THE PAYMENT IS MADE IN RESPECT OF FREIGHT TO NON-RESIDENT SHIPPING COMP ANIES, THE ASSESSEE DOES NOT HAVE ANY TAX WITHHOLDING OBLIGATION UNDER SECTI ON 195 OR SECTION 194C. HOWEVER, IN THE PRESENT CASE, IT APPEARS THAT COMPL ETE DETAILS OF INVOICES TO THE SATISFACTION OF THE ASSESSING OFFICER HAVE NOT BEEN FURNISHED BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A) ALSO. THERE IS AT BEST PARTIAL COMPLIANCE OF THIS REQUIREMENT. IN VIEW OF THESE DI SCUSSIONS AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDE RED VIEW THAT THE MATTER DESERVES TO BE REMITTED TO THE FILE OF ASSESSING OF FICER WITH THE DIRECTION THAT AS LONG AS THE ASSESSEE CAN DEMONSTRATE THAT THE PA YMENT IS MADE TO A NONRESIDENT DIRECTLY OR THROUGH AUTHORIZED AGENTS A ND THE PAYMENT IS IN RESPECT OF THE FREIGHT, THE ASSESSING OFFICER SHALL NOT MAKE ANY DISALLOWANCE UNDER SECTION 40(A)(IA) ON ACCOUNT OF SUCH PAYMENTS . WE ALSO MAKE IT CLEAR, ITA NO. 1800/AHD/2016 STEELCO GUJARAT LTD VS. ACIT ASSESSMENT YEAR: 2011-12 PAGE 4 OF 4 AT THE COST OF REPETITION THAT THE ASSESSEE IS NOT UNDER ANY OBLIGATION TO GIVE EVIDENCE IN RESPECT OF ACTUAL COLLECTION OF TAX FRO M THE NON-RESIDENT SHIPPING COMPANY UNDER SECTION 172 OF THE ACT. ALL OTHER CON TENTIONS, NOT SPECIFICALLY ADJUDICATED UPON ABOVE, REMAIN OPEN. WITH THESE DIR ECTIONS, MATTER STANDS RESTORED TO THE ASSESSING OFFICER. 4. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE CO-ORDINATE BENCH. RESPECTFULLY FOLLOW ING THE VIEWS SO TAKEN BY THE CO- ORDINATE BENCH (SUPRA) IN ASSESSEES OWN CASE FOR A SSESSMENT YEAR 2008-09, THE MATTER STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE-EXAMINATION OF THE ISSUE AS PER THE ORDER OF THE CO-ORDINATE BENCH (SU PRA). 5. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF MARCH, 2018. SD/- SD/- RAJPAL YADAV PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 7 TH DAY OF MARCH, 2018 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ......06.03.2018 ..COVERED. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ... 07.03.2018........ 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: .07.03.2018...... . 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: .. 07.03.2018..... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : ... 07.03.2018... 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER : ....