Sterling Abrasives Ltd, Ahmedabad V. The Income tax Officer,TDS-3, Ahmedabad

ITA 2243/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9149 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-12-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 11-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANISTA
• Assessee Lawyers: S N SOPARKARSR
• Keywords: Business income; Business expenditure; Double taxation relief; Period of limitation; Deemed to accrue or arise in india; Retrospective amendment; Permanent establishment; Competent authority; Capital receipt
• Section: 133A; 234B; 201(1); 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM) ITA NO.2243 AND 2244/AHD/2008 ASSESSMENT YEAR: 2003-04 AND 2004-05 STERLING ABRASIVES LTD., 45-46, GIDC, ODHAV ROAD, AHMEDABAD VS . THE INCOME TAX OFFICER, TDS-3, AHMEDABAD PAN NO.AACC1266P (APPELLANT) .. (RESPONDENT) ITA NO.2247 AND 2248/AHD/2008 ASSESSMENT YEAR: 2001-02 AND 2002-03 THE INCOME TAX OFFICER, (INT. TAXN) II,4 TH FLOOR, NATURE VIEW BUILDING, ASHRAM ROAD, AHMEDABAD VS . STERLING ABRASIVES LTD., 45- 46, GIDC, ODHAV ROAD, AHMEDABAD PAN NO.AACC1266P (APPELLANT) .. (RESPONDENT) C.O. NO.179 AND 180/AHD/2008 (IN ITA NO.2247 AND 2248/AHD/2008) ASSESSMENT YEAR: 2001-02 AND 2002-03 STERLING ABRASIVES LTD., 45-46, GIDC, ODHAV ROAD, AHMEDABAD VS . THE INCOME TAX OFFICER, (INT. TAXN) II,4 TH FLOOR, NATURE VIEW BUILDING, ASHRAM ROAD, AHMEDABAD PAN NO.AACC1266P (CROSS OBJECTOR) .. (RESPONDENT) ASSESSEE BY SHRI S. N. SOPARKAR, SR. AR DEPARTMENT BY SHRI R. K. DHANISTA, DR O R D E R PER BENCH: THE ASSESSEE AS WELL AS THE REVENUE IN THE ABOVE MATTERS CHALLENGED THE COMMON ORDER OF THE LEARNED CIT(A)-X, AHMEDABAD DATED 31-03-2008 FOR ASSESSMENT YEARS 20 01-02, 2002-03, 2003-04 AND 2004-05 U/S 201 READ WITH SECTION 201(1 A) OF THE INCOME TAX ACT. ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 2 2. THE ASSESSEE IN ITS APPEALS FOR ASSESSMENT YEARS 2003-04 AND 2004-05 CHALLENGED THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE ORDER PASSED U/S 201 (1) READ WITH SECTION 201(1A) OF THE IT ACT AND IN CONFIRMING THE ORDER HOLDING THAT PAYMENT OF RS.15, 72,800/- AND RS.17,92,230/- PAID TO MR. JAMES WHITEHEAD, A UK CI TIZEN IS LIABLE TO INCOME TAX IN INDIA AND THEREFORE, LIABLE FOR DEDUC TION OF TAX AT SOURCE IN INDIA U/S 195 OF THE IT ACT. 2.1 THE REVENUE IN APPEALS FOR ASSESSMENT YEARS 200 1-02 AND 2002- 03 CHALLENGED THE ORDER OF THE LEARNED CIT(A) IN CA NCELING THE ORDER PASSED BY THE AO U/S 201 (1) READ WITH SECTION 201( 1A) OF THE IT ACT CONSIDERING THE SAME AS TIME BARRED. 2.2 THE ASSESSEE IN BOTH THE CROSS OBJECTIONS FOR A SSESSMENT YEARS 2001-02 AND 2002-03 CHALLENGED THE ORDER OF THE LEA RNED CIT(A) IN HOLDING THAT THE PAYMENT OF RS.19,93,900/- AND RS.1 3,71,950/- PAID TO MR. JAMES WHITEHEAD, A UK CITIZEN IS LIABLE FOR PA YMENT OF TAX IN INDIA UNDER THE PROVISIONS OF SECTION 195 OF THE IT ACT. 3. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND T HE MATERIAL AVAILABLE ON RECORD. 4. THE FACTS OF THE CASE ARE THAT DURING THE SURVEY ACTION U/S 133A OF THE IT ACT, IT WAS NOTICED BY THE ITO, TDS-3 THAT T HE ASSESSEE HAD ENGAGED A UK BASED NON RESIDENT AS ADVISOR AND HAD PAID RS.13,93,900/- FOR ASSESSMENT YEAR 2001-02, RS.13,7 1,950/- FOR ASSESSMENT YEAR 2002-03, RS.15,72,800/- FOR ASSESSM ENT YEAR 2003-04 AND RS.17,92,230/- FOR ASSESSMENT YEAR 2004-05 FOR ADVISORY SERVICES RENDERED BY HIM. AS PER CLAUSE -3 OF THE ADVISOR Y SERVICES ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 3 AGREEMENT ENTERED BY THE ASSESSEE WITH THE ADVISOR , THE FOLLOWING SERVICES WERE TO BE RENDERED BY HIM: I) ADVICE ON MARKETING, DISTRIBUTION AND SALES ST RATEGIES FOR INCREASING SALES AND TURNOVER. II) ADVICE ON MANUFACTURING PROCESS. III) ADVICE ON RAW MATERIAL USE, SOURCES OF THE SAM E, PRICING AND TERMS OF SUPPLY. IV) ADVICE ON IDENTIFICATION OF POTENTIAL MARKETS FOR ABRASIVE PRODUCTS INCLUDING NEW APPLICATIONS. V) FACILITATE FORMATION FOR LONG TERM STRATEGIC ALL IANCES WITH PRESTIGIOUS CUSTOMERS(INCLUDING ASSISTANCE IN DISCU SSIONS, EVALUATION OF PROPOSALS AND CONCLUDING THE ALLIANCE S). VI) PROVIDE INFORMATION REGARDING ANY DEVELOPMENTS IN THE ABRASIVES INDUSTRY (INCLUDING INDUSTRY TRENDS, TECH NOLOGICAL DEVELOPMENTS ETC.) AND THE STEPS TO BE TAKEN TO DEA L WITH SUCH-CHANGES/DEVELOPMENTS. THE AO ALSO OBSERVED THAT THE ADVISOR, MR. JAMES WH ITEHEAD IS A NON RESIDENT INDIVIDUAL AND HE HAD ACQUIRED KNOWLEDGE A ND WIDE CONTACTS IN THE ABRASIVE INDUSTRY BECAUSE OF HIS LONG ASSOCIATI ON WITH THE INDUSTRY AS THE MANAGING DIRECTOR OF A COMPANY, UNICON INDUSTRI ES PLC, U. K. IN U. K. AND TO UTILIZE HIS EXPERIENCE, THE ASSESSEE E NGAGED HIM AS AN ADVISOR. FROM THE NATURE OF ADVISORY SERVICES GIVEN BY THE ADVISOR, THE ITO, TDS OBSERVED THAT THEY ARE IN THE NATURE OF CO NSULTANCY AND TECHNICAL SERVICES AND THE PAYMENT IS DEEMED TO BE ACCRUED IN INDIA BY VIRTUE OF SECTION 9(1) (VII) OF THE IT ACT AND THER EFORE, THE ASSESSEE WAS LIABLE FOR DEDUCTION OF TAX FROM THE PAYMENTS MADE TO THE NON RESIDENT CONSULTANTS U/S 195 READ WITH DOUBLE TAXATION AVOID ANCE AGREEMENT WITH U. K. AS NO TDS WAS DEDUCTED FROM THIS PAYMENT , A SHOW CAUSE ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 4 NOTICE WAS ISSUED BY ITO, TDS TO THE ASSESSEE, IN R ESPONSE TO WHICH THE ASSESSEE REQUESTED FOR KEEPING THE PROCEEDINGS PENDING TILL THE OUTCOME OF APPEAL FILED AGAINST THE ASSESSMENT ORDE R PASSED BY DCIT (OSD) CIRCLE-8, AHMEDABAD, AS IN THE ASSESSMENT, TH E EXPENDITURE WAS DISALLOWED U/S 40(A) (I) OF THE IT ACT. HOWEVER, TH E ITO, TDS OBSERVED THAT THE TDS PROCEEDINGS ARE SEPARATE PROCEEDINGS. HE DISCUSSED THE PROVISIONS OF SECTION 195 OF THE IT ACT WHICH CASTS A RESPONSIBILITY OF DEDUCTION OF TAX FROM A PAYMENT TO A NON RESIDENT B EFORE MAKING A REMITTANCE. AS THE PAYMENT HAS BEEN MADE TO A NON R ESIDENT AND IT IS COVERED UNDER ANY OTHER SUM CHARGEABLE UNDER THE P ROVISIONS OF THE ACT, THE TWO CONDITIONS ARE SATISFIED TO ATTRACT T HE PROVISIONS OF SECTION 195. FURTHER, THE AO DISCUSSED THE SCOPE OF TOTAL I NCOME AS LAID DOWN IN SECTION 4(2) OF THE ACT AND SECTION 9(1) (VII) WHIC H CREATES A DEEMING FICTION AND INCOME BY WAY OF FEES FOR TECHNICAL SE RVICES PAYABLE BY RESIDENT PERSON, SUCH FEES FOR TECHNICAL SERVICES S HALL BE DEEMED TO ACCRUE OR ARISE IN INDIA. THE AO ACCORDINGLY PASSED ORDERS U/S 201(1) R. W. S. 201(1A) OF IT ACT AND RAISED DEMAND AGAINST T HE ASSESSEE. 5. THE ORDERS OF THE AO WERE CHALLENGED BEFORE THE LEARNED CIT(A) AND IT WAS SUBMITTED AS UNDER: IN THE PRESENT FOUR APPEALS ONLY COMMON POINT INVO LVED IS IN RESPECT OF NOT DEDUCTING TAX AT SOURCE ON PAYMENT M ADE TO MR. JAMES WHITEHEAD OF U. K. FOR SERVICES RENDERED BY H IM FROM OUTSIDE INDIA. THE LEARNED ITO TDS(3) TDS RANGE, AH MEDABAD HAS PASSED NECESSARY ORDERS FOR A. Y. 2001-02 TO 20 04-05 ON THE ONE DAY I.E. ON 29/3/07. (1) THE FACTS ARE FULLY STATED IN RESPECT OF WRITTE N SUBMISSIONS TO THE LEARNED ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY LETTERS DT. 10/10/06 AND 15/11/06 WH ICH ARE ANNEXURE IN THE PAPER BOOK. ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 5 (2) OVER AND ABOVE, YOUR APPELLANT RESPECTFULLY SUB MITS THAT WHETHER AMOUNT PAID TO A NON RESIDENT IN RESPECT OF SERVICES RENDERED FROM OUTSIDE INDIA, IS TAXABLE IN INDIA OR NOT HAS BEEN DEALT BY THE HONBLE SUPREME COURT IN THE CASE OF I SHIKAWAJMA- HARIMA HEAVY INDUSTRIES LTD. VS DIT (158 TAXMAN 259 ). HONBLE SUPREME COURT HAS HELD THAT, IN ORDER TO TA X PAYMENTS FOR SERVICES IN INDIA, IT IS NECESSARY THAT THE SER VICES PROVIDED BY NON-RESIDENT ASSESSEE UNDER A CONTRACT SHOULD NO T ONLY BE UTILIZED WITHIN INDIA BUT SHOULD ALSO HAVE BEEN REN DERED IN INDIA. HOWEVER LAW HAS SINCE BEEN AMENDED WITH RETR OSPECTIVE EFFECT BUT AT THE RELEVANT POINT IN TIME WHEN THE P AYMENT WAS MADE, SUCH SERVICES WERE NOT TAXABLE IN INDIA AND T HEREFORE TAX WAS NOT DEDUCTED AND THUS NO DISALLOWANCES CAN BE M ADE U/S. 40(A) (I) OF THE ACT, OR NO LIABILITY TO MAKE TDS O N SUCH PAYMENT ARISES. THE ASSESSEE HAS COMPLIED WITH THE PROVISIO NS OF LAW AS THEY WERE PREVAILING ON THE DATE OF PAYMENT TO MR. JAMES WHITEHEAD. YOUR APPELLANT FURTHER RESPECTFULLY SUBMITS THAT TH E LEARNED ASSESSING OFFICER OUGHT TO HAVE BEEN TAKEN IN TO CO NSIDERATION THE LAW PREVAILING AT THE TIME OF HIS LIABILITY TO MAKE TDS AND NOT SUBSEQUENT AMENDMENT IN LAW. (3) WITHOUT PREJUDICE TO WHAT IS STATED IN PARA (2) ABOVE, EVEN IF IT IS FELT THAT SUCH PAYMENTS IN RESPECT OF OFFSHORE SERV ICES ARE LIABLE TO TAX IN INDIA, S. 90 OF THE ACT SPECIFICALLY GIVE S AN OPTION TO AN ASSESSEE TO ADOPT PROVISIONS OF DOUBLE TAXATION AVO IDANCE AGREEMENT (DTAA) TO THE EXTENT THE SAME ARE MORE BE NEFICIAL TO HIM. (267 ITR 654) (SC). NOW AS PER DTAA BETWEEN INDIA AND UK, IN OUR OPINION THE PAYMENT MADE TO MR. JAME S WHITEHEAD WOULD FALL WITHIN ARTICLE 15 I.E. INDEPEN DENT PERSONAL SERVICES. IN THAT CASE AS PER PROVISIONS OF DTAA, T HE AMOUNT PAID TO MR. WHITEHEAD IS TAXABLE IN INDIA ONLY IF H IS STAY IN INDIA WAS MORE THAN 90 DAYS IN THE RELEVANT FINANCIAL YEA R. RELIANCE IS PLACED ON GRAPH ITE INDIA LTD. V. DCIT (2003) 78 TTJ 418 (CAI) = 86 ITR 384 (CAL). FURTHER, IF THE PAYMENT IS CONSIDERED AS BUSINESS P ROFIT, PROVISIONS OF ARTICLE 7 OF THE DTAA WOULD APPLY. IN THAT CASE ALSO AS PER PROVISIONS OF DTAA, THE AMOUNT PAID TO MR. WHITEHEA D IS TAXABLE IN INDIA ONLY IF HE HAS PERMANENT ESTABLISHMENT IN INDIA AND THE SERVICES ARE RENDERED THROUGH SUCH PERMANENT ESTABL ISHMENT ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 6 WHICH IS NOT THE CASE HERE AS MR. WHITEHEAD DID NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA. HOWEVER, THE AO HAS CONSIDERED THAT THE PAYMENT IS GOVERNED BY ARTICLE 13 OF THE DTAA I.E. ROYALTIES AND FEES FOR TECHNICAL SERVICES. THE LD. AO HAS CONSIDERED THIS PAYMENT IS NOT TOWARDS ROYALTIES AND THE SAME IS TOWARDS FTS. IN ANY CASE AS PER THE DEFINITION OF FTS AS GIVEN I N THE DTAA, TECHNICAL SERVICES HAS TO BE MADE AVAILABLE TO TH E ASSESSEE SO AS TO BE TAXABLE IN INDIA. IN THIS REGARD WE RELY O N THE DECISION OF HONBLE MUMBAI BENCH OF ITAT IN THE CASE OF RAYMOND LTD. V DIT 80 TTJ 120. THIS HAS BEEN EXPLAINED IN DETAIL IN TH E WRITTEN SUBMISSIONS TO THE LEARNED ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY LETTERS DT. 10/10/06 AND 15/11/06 WHICH ARE ANNEXURES IN THE PAPER BOOK. (4) WITHOUT PREJUDICE TO WHAT IS STATED ABOVE, YOUR APPELLANT FURTHER RESPECTFULLY SUBMITS THAT THE LEARNED ASSES SING OFFICER HAS PASSED ALL THE FOUR ORDERS PASSED U/S. 201 (1) R. W . S. 201 (1A) AND SECTION 221 OF THE ACT, ON THE SAME DAY I.E. ON 29/ 03/07. YOUR APPELLANT RESPECTFULLY SUBMITS THAT WHERE NO STATUT ORY TIME LIMIT HAS BEEN PRESCRIBED, THE ACT REQUIRED TO BE DONE SH OULD BE DONE WITHIN A REASONABLE PERIOD OF TIME. IN THE FOLLOWIN G 4 DECISIONS HON. ITAT HAS HELD THAT IN CASE OF ORDER PASSED U/S . 201, FOUR YEARS IS A REASONABLE PERIOD OF TIME TO PASS SUCH A N ORDER: (A) RAYMOND WOOLEN MILLS LTD. VS. ITO (1996) 57 ITO 536 (BOM.) (B) SAHARA AIRLINES LVD. VS. DY. CIT (2003) 79 TTJ (DEL) 2002) 83 ITR 11 (DEL) (C) MITUSBISHI CORPN. VS. DY. CIT (2004) 86 TTJ (DE L) 139: (2003) 129 TAXMAN 73 (DEL) (MAG) (D) ASSTT. CIT VS PEPSI FOODS LTD. (2004) 88 TTJ (D EL 11: (2003) 129 TAXMAN 73 (DEL) (MAG). 6. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS O F THE ASSESSEE HELD THAT THE IMPUGNED ORDERS FOR ASSESSMENT YEARS 2001-02 AND 2002- 03 ARE TIME BARED AND ACCORDINGLY CANCELED. THE APP EALS FOR THESE ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 7 YEARS WERE ACCORDINGLY ALLOWED. FOR THE REMAINING Y EARS, THE LEARNED CIT(A) HELD THAT THE ASSESSEE SHOULD HAVE DEDUCTED THE TDS AND CONFIRMED THE ORDERS OF THE AO IN RAISING DEMAND U/ S 201 (1) AND SECTION 201 (1A) OF THE IT ACT AND DISMISSED THE AP PEALS OF THE ASSESSEE FOR ASSESSMENT YEARS 2003-04 AND 2004-05. THE FINDINGS OF THE LEARNED CIT(A) IN PARA 4.1, 4.2 AND 5 ARE REPRO DUCED AS UNDER: 4.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE A. R. CAREFULLY. IT IS THE CONTENTION OF THE LEARNED A. R. THAT IN CASE OF THE APPELLANT SERVICES HAVE BEEN PROVIDED BY THE FOREIGN CONSULTA NT FROM OUTSIDE INDIA, HENCE THE PAYMENT MADE FOR OFFSHORE SERVICES IS NOT TAXABLE IN INDIA AS HELD BY HONBLE SUPREME COURT I N THE CASE OF ISHIKAWAJMA HARIMA HEAVY INDUSTRIES LTD. VS DIRECTO R OF I. T. REPORTED IN 288 ITR 408 (SC). THOUGH THE LAW HAS BE EN AMENDED BY FINANCE ACT, 2007, WITH RETROSPECTIVE EFFECT FRO M 1.4.1976 BY INSERTING EXPLANATION TO SECTION 9(2) OF THE ACT, A FTER THE DECISION OF S.C., THE A. R. HAS CLAIMED THAT THE LAW PREVAILING IN THE YEARS UNDER CONSIDERATION WHEN THE PAYMENTS WERE MADE WAS THAT SUCH SERVICES RENDERED FROM OUTSIDE INDIA WERE NOT TAXAB LE IN INDIA. AS PER PREVAILING LAW AT THAT TIME SERVICES RENDERED B Y MR. JAMES WHITEHEAD WERE NOT TAXABLE IN INDIA, SO THERE WAS N O LIABILITY TO DEDUCT TDS. AS ALTERNATIVE SUBMISSION, THE A. R. HA S ARGUED THAT MR. WHITEHEAD HAD NOT COME TO INDIA DURING THESE YE ARS NOR HE HAD ANY PERMANENT ESTABLISHMENT IN INDIA DURING THE SE YEARS, SO THERE WAS NO LIABILITY OF TDS. I DO NOT AGREE WITH THE CONTENTION OF THE A. R. THAT THERE WAS NO LIABILITY FOR MAKING T DS AS I FIND THAT TECHNICAL SERVICES HAVE BEEN RENDERED BY MR. JAMES WHITEHEAD AND LAWS HAVE BEEN AMENDED WITH RETROSPECTIVE EFFEC T FROM 1.4.1976 AND WHETHER HE HAS A PERMANENT OFFICE IN I NDIA OR NOT THE CONSULTANCY FEES ARE TAXABLE IN INDIA AND THEREFORE , THE APPELLANT SHOULD HAVE DEDUCTED TDS. 4.2 THE A. R. HAS MADE ANOTHER ALTERNATIVE CLAIM TH AT ORDE3RS U/S. 201 (1) & 2012(1A) HAVE BEEN PASSED ON 29.303. 2007 WHICH IS AFTER EXPIRY OF 4 YEARS FROM THE END OF FINANCIA L YEARS FOR A. Y.S 2001-02 & 2002-03, SO THE SAME SHOULD BE HELD VOID. RELYING ON THE DECISIONS IN THE CASE OF CENTURY TEXTILES & IND USTRIES LTD. VS. DCIT REPORTED IN 13 SOT 507 (MUMBAI) AND STATE BANK OF INDIA VS. ACIT REPORTED IN 106 ITD 589 (MUMBAI) AND SIMIL AR DECISIONS CITED BY THE A. R. AS I FIND THAT FOR A. YS. 2001-0 2 & 2002-03, THE ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 8 ORDERS U/S. 201 (1) & 201 (1A) OF THE ACT HAVE BEEN PASSED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE FINANCIAL YEARS, I HOLD THAT THE ORDERS ARE TIME-BARED AND THEY ARE NOT VAL ID. ACCORDINGLY, THE ORDERS U/S. 201(1) & 201(1A) FOR A. YRS. 2001-0 2 & 2002-03 ARE CANCELLED AND THUS, THE APPEALS ARE ALLOWED FOR THE SE TWO YEARS. AS THE ORDERS U/S. 201 (1) & 201 (1A) FOR A. YS. 20 03-04 AND 2004- 05 HAVE BEEN PASSED WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR AND IT IS HELD THAT THERE WAS TDS LI ABILITY WHICH HAS BEEN NOT COMPLIED BY THE APPELLANT, I HOLD THAT THE A.O. HAS RIGHTLY PASSED THE ORDERS RAISING DEMANDS U/S. 201 (1) & 20 1 (1A) OF THE ACT FOR THESE TWO YEARS. THUS, THE APPEALS ARE DISM ISSED FOR THESE TWO YEARS I.E. A. Y. 2003-04 & 2004-05. 5. AS A RESULT, THE APPEALS FOR A. YS. 2001-02 & 20 02-03 ARE ALLOWED AND APPEALS FOR A. YS. 2003-04 & 2004-05 AR E DISMISSED. 7. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTS ET SUBMITTED THAT THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF ITAT AHMEDABAD A BENCH IN THE CASE OF SAME ASSESSEE FO R ASSESSMENT YEAR 2004-05 IN ITA NO.3928/AHD/207 VIDE ORDER DATE D 02-07-2010. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDE R OF THE AO BUT DID NOT DISPUTE THE ORDER OF THE TRIBUNAL DATED 02-07-2 010. COPY OF THE ORDER OF THE TRIBUNAL DATED 02-07-2010 IS PLACED ON RECORD. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND THE MATE RIAL ON RECORD. ITAT AHMEDABAD A BENCH IN THE CASE OF THE SAME AS SESSEE FOR ASSESSMENT YEAR 2004-05 VIDE ORDER DATED 02-07-2010 ON THE SIMILAR MATTER HELD AS UNDER: 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND TH AT BY AMENDMENT IN THE FINANCE ACT, 2007, THE LEGISLATURE INSERTED THE EXPLANATION RETROSPECTIVELY W.R.E.F.1-6-1976 TO SEC. 9 (2) OF THE ACT, WHEREAS THE ASSESSMENT YEAR INVOLVED IS 20 04-05 RELEVANT TO PREVIOUS YEAR 2003-04 AND IT IS IMPOSSI BLE FOR THE ASSESSEE TO DEDUCT TAX IN THE FINANCIAL YEAR 1-4-20 03 TO 31-3- 2004, WHEN THE OBLIGATION TO DEDUCT TDS WAS NOT ON THE ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 9 ASSESSEE DURING THAT PERIOD. THE PROVISION OF SECTI ON 9 PROVIDES FOR SITUATIONS WHERE INCOME IS DEEMED TO A CCRUE OR ARISE IN INDIA TO A NON-RESIDENT. WE FIND THAT THE LEGISLATURE VIDE FINANCE ACT, 1976, A SOURCE RULE WAS PROVIDED IN SECTION 9 THROUGH INSERTION OF CLAUSES, (V), (VI) AND (VII) IN SUB-SECTION (1) FOR INCOME BY WAY OF INTEREST, ROYALTY OR FEES FOR TECHNICAL SERVICES RESPECTIVELY AND THE INTENTION OF INTRODUC ING 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 HON'BLE SUPREME COURT IN THE CASE OF ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD. ( SUPRA) HELD THAT DESPITE THE DEEMING FICTION IN SECTION 9, FOR ANY SUCH INCOME TO BE TAXABLE IN INDIA, THERE MUST BE SUFFIC IENT TERRITORIAL NEXUS BETWEEN SUCH INCOME AND THE TERRITORY OF INDI A. IT FURTHER HELD THAT FOR ESTABLISHING SUCH TERRITORIAL NEXUS, THE SERVICES HAVE TO BE RENDERED IN INDIA AS WELL AS UTILIZED IN INDIA. ACCORDING TO THE LEGISLATURE THIS INTERPRETATION WA S NOT IN ACCORDANCE WITH THE LEGISLATIVE INTENT THAT THE SIT US OF RENDERING SERVICE IN INDIA IS NOT RELEVANT AS LONG AS THE SER VICES ARE UTILIZED IN INDIA AND THEREFORE, TO REMOVE DOUBTS R EGARDING THE SOURCE RULE, AN EXPLANATION WAS INSERTED BELOW SUB- SECTION (2) OF SECTION 9 WITH RETROSPECTIVE EFFECT FROM 1ST JUN E, 1976 VIDE FINANCE ACT, 2007. THE EXPLANATION SOUGHT TO CLARIF Y THAT WHERE INCOME IS DEEMED TO ACCRUE OR ARISE IN INDIA UNDER CLAUSES (V), (VI) AND (VII) OF SUB-SECTION (1) OF SECTION 9, SUC H INCOME SHALL BE INCLUDED IN THE TOTAL INCOME OF THE NON-RESIDENT , REGARDLESS OF WHETHER THE NON-RESIDENT HAS A RESIDENCE OR PLAC E OF BUSINESS OR BUSINESS CONNECTION IN INDIA. EVEN AFTE R THAT, THE HONBLE KARNATAKA HIGH COURT, IN A RECENT JUDGMENT IN THE CASE OF JINDAL THERMAL POWER COMPANY LTD. V. DEPUTY CIT (TDS) [2010] 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 BEE N HELD THAT ON A PLAIN READING OF THE EXPLANATION, THE CRITERIA OF RENDERING SERVICES IN INDIA AND THE UTILIZATION OF THE SERVIC E IN INDIA LAID DOWN BY THE SUPREME! COURT IN ITS JUDGEMENT IN THE CASE OF ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD. (SUPRA) R EMAINS UNTOUCHED AND UNAFFECTED BY THE EXPLANATION. FURTHE R THE LEGISLATURE VIDE FINANCE BILL, 2010 IN ORDER TO REM OVE ANY DOUBT ABOUT THE LEGISLATIVE INTENT OF THE AFORESAID SOURCE RULE, SUBSTITUTED IN PLACE OF THE EXISTING EXPLANATION A NEW ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 10 EXPLANATION TO SPECIFICALLY STATE THAT THE INCOME O F A NON- RESIDENT SHALL BE DEEMED TO ACCRUE OR ARISE IN INDI A UNDER CLAUSE (V) OR CLAUSE (VI) OR CLAUSE (VII) OF SUB-SE CTION (1) OF SECTION 9 AND SHALL BE. INCLUDED IN HIS TOTAL INCOM E, 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 1 ST JUNE, 1976 AND WILL ACCORDINGLY, APPLY IN RELATION TO THE ASSE SSMENT 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 RELEVANT TO PREVIOUS YEAR 2003-04, IT IS IM POSSIBLE FOR THE ASSESSEE TO DEDUCT TAX IN THE FINANCIAL YEAR 1- 4-2003 TO 31- 3-2004, WHEN THE OBLIGATION TO DEDUCT TDS WAS NOT O N THE ASSESSEE DURING THAT PERIOD. THE ARGUMENT CANVASSED BY THE LD. COUNSEL ON THE BASIS OF A LEGAL MAXIM LEX NON C OGIT AD IMPOSSIBLIA, MEANING THEREBY THAT THE LAW CANNOT PO SSIBLY COMPEL A PERSON TO DO SOMETHING WHICH IS IMPOSSIBLE TO PERFORM. THIS MAXIM IS ACCEPTED BY DIFFERENT COURTS OF THIS COUNTRY, INCLUDING THE HONBLE SUPREME COURT IN THE CASE OF KRISHNASWAMY S. PD. AND ANOTHER .V. UNION OF INDIA AND OTHERS (2006) 281 ITR 305 (SC) MADE THE FOLLOWING OBSERVATIONS IN RELATION TO THE PROVISIONS OF CHAPT ER XX-C OF THE ACT. 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 IMPOSSIBILIA - THE LAW DOES NO T 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 ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 11 GENERAL EXCEPTION IN THE CONSIDERATION OF PARTICULA R CASES.(SEE U.P.S.R.T.C. V IMTIAZ HUSSAIN [2006] 1 S CC 380, SHAIKH SALIM HAJI ABDUL KHAGUMSAB V. KUMAR [2006] 1 SCC 46, MOHAMMAD GAZI V. STATE OF MP [2000] 4 SCC 342 A ND GURSHARAN SINGH V. NEW DELHI MUNICIPAL COMMITTEE [1 996] 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 OBSERVATI ONS 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, THI S AMOUNT 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 O F THE LIC ACT. 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. SECT IONS 207 AND 208 READ AS UNDER: '207. TAX SHALL BE PAYABLE IN ADVANCE DURING ANY FINANCIAL YEAR, IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS 208 TO 219 (BOTH INCLUSIVE), IN RESPECT OF THE TOTAL INCOME OF THE ASSESSEE ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 12 WHICH WOULD BE CHARGEABLE TO TAX FOR THE ASSESSMENT YEAR IMMEDIATELY FOLLOWING THAT FINANCIAL YEAR, SUCH INCOME BEING HEREAFTER IN THIS CHAPTER REFERRED TO AS 'CURRENT INCOME'. 208. ADVANCE TAX SHALL BE PAYABLE DURING A FINANCIAL 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 I N ADVANCE IN RESPECT OF THE TOTAL INCOME OF THE ASSES SEE, WHICH WOULD BE CHARGEABLE IN A PARTICULAR ASSESSMEN T YEAR. NOW BEFORE THE INTRODUCTION OF SECTION 35DDA, THE LEGAL DICTUM WAS VERY CLEAR THAT THE ASSESSEE C OULD CLAIM EXPENDITURE INCURRED ON ACCOUNT OF PAYMENT MADE FOR THE VRS BY THE ASSESSEE IN VIEW OF THE BINDING DECISIONS OF THE HON'BLE JURISDICTIONAL HIG H COURT IN THE CASE OFCITV. GEORGE OAKES LTD. [1992] 197 ITR 288 (MAD) AND CIT V. SIMPSON AND CO. LTD. (NO. 2) [1998] 230 ITR 794 (MAD). IN BOTH THE DECISIONS, IT WAS CLEARLY LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT THAT PAYMENTS TO EMPLOYEE S UNDER THE VRS WERE IN THE NATURE OF BUSINESS EXPENDITURE AND WAS DEDUCTIBLE UNDER SECTION 37. THEREFORE, TILL THE INTRODUCTION OF NEW PROVISIONS UNDER SECTION 35DDA, THE ASSESSEE COULD HAVE ESTIMATED TH E INCOME LEGITIMATELY AFTER REDUCING THE EXPENDITURE INCURRED ON THE VRS. IT IS A COMMON KNOWLEDGE THAT THE FINANCE BILL IS INTRODUCED ON FEBRUARY 28, 2001 , AND THE SAME IS MADE INTO THE ACT AFTER PASSING THE BILL IN BOTH THE HOUSES OF PARLIAMENT AND RECEIVING THE ASSENT OF THE HON'BLE PRESIDENT OF INDIA 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 PROV ISION UNDER SECTION 35DDA WAS INTRODUCED BY PARLIAMENT IN ITS WISDOM WITH EFFECT FROM APRIL 1, 2001, I.E., TH E SAME YEAR AND THAT IS WHY DIFFICULTY HAS ARISEN FOR VISU ALIZING ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 13 THE LIABILITY AND THE ASSESSEE COULD NOT DEDUCT SUC H EXPENDITURE. IN FACT IN ALMOST IDENTICAL CIRCUMSTAN CES IN THE THIRD MEMBER DECISION BY THE DELHI BENCH IN THE CASE OF HARYANA WAREHOUSING CORPORATION V. DEPUTY CIT [2001] 252 ITR (AT) 34 IT WAS HELD THAT IN SUCH SITUATIONS THE LEGAL DICTUM AD IMPOSSIBILLIA WOULD BE ATTRACTED. THE SIMPLE MEANING OF THIS DICTUM IS THA T 'LAW CANNOT COMPEL YOU TO DO THE IMPOSSIBLE'. IN THE CASE BEFORE US ALSO, THE ASSESSEE COULD NOT HAVE VISUALIZED TILL THE LAST INSTALLMENT OF ADVANCE TAX , I.E., MARCH 15, 2001, THAT IT WOULD NOT BE ENTITLED TO DE DUCT THE VRS PAYMENTS. THEREFORE, THE ASSESSEE COULD NOT HAVE DONE ANYTHING OTHER THAN TO ESTIMATE THE LIABI LITY TO PAY ADVANCE TAX ON THE BASIS OF EXISTING PROVISI ONS. WE ARE OF THE CONSIDERED OPINION THAT IN SUCH SITUA TION, IT CANNOT BE SAID THAT THE ASSESSEE WAS LIABLE TO P AY ADVANCE TAX. ONCE WE COME TO THE CONCLUSION THAT TH E ASSESSEE WAS NOT LIABLE TO PAY ADVANCE TAX, THERE I S NO QUESTION OF CHARGING TAX UNDER SECTIONS 234B AND 234C. IN SIMILAR CIRCUMSTANCES IN THE CASE OF PRIYA NKA OVERSEAS LTD. V. DEPUTY CIT [2001] 79 ITD 353 (DELH I) WHERE THE ASSESSEE HAD TREATED THE RECEIPT OF CASH ASSISTANCE AS CAPITAL RECEIPTS, WHICH WAS SUBSEQUEN TLY AMENDED TO BE BUSINESS RECEIPT BY THE FINANCE ACT, 1990, IT WAS HELD THAT IN SUCH CASES INTEREST UNDER SECTIONS 234B AND 234C WAS NOT CHARGEABLE. IN THESE CIRCUMSTANCES, WE THINK THAT THE ASSESSEE WAS NOT LIABLE TO PAY ADVANCE TAX AND THEREFORE LEVY OF INT EREST UNDER SECTIONS 234B AND 234C IS NOT JUSTIFIED. FURT HER, IT IS PERTINENT TO NOTE THAT THE ASSESSEE BY WAY OF ABUNDANT CAUTION DEPOSITED A SUM OF RS. 90,00,000 O N AUGUST 6, 2001, I.E., MUCH BEFORE THE DUE DATE OF F ILING OF THE RETURN, WHICH ALSO PROVES THE BONA FIDE CREDENTIALS OF THE ASSESSEE. IN THESE CIRCUMSTANCES , WE SET ASIDE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) AND DELETE THE LEVY OF INTERES T UNDER SECTIONS 234B AND 234C. ' 10. WHILE DEALING WITH THE QUESTION AS TO WHETHER A N ASSESSEE CAN BE FAULTED FOR NOT DECLARING THE AMOUN T OF CAPITAL GAIN ON ACQUISITION OF LAND, WHEN THE AMOUN T OF COMPENSATION ITSELF IS NOT DETERMINED HONBLE ALLAH ABAD ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 14 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 MAXIM MEANING THAT THE LAW DOES NOT COMPEL A MAN TO DO WHICH 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 T HE NATURE REFERRED ABOVE. IN THE CASE OF VLS FINANCE LTD AND ANOTHER V CIT AN D ANOTHER (2007) 289 ITR 286 (DEL) HONBLE DELHI HIG H COURT WAS CONCERNED WITH THE QUESTION AS TO WHETHER ASSES SMENT PROCEEDINGS WERE WITHIN THE PERIOD OF LIMITATION IN VIEW OF THE FACT THAT SPECIAL AUDIT, WHICH WAS TO PRECEDE THE A SSESSMENT ORDER WAS STAYED, FOR SOME TIME BY THE ORDER OF THE COURT. IN THIS CONNECTION, THE COURT NOTED AS FOLLOWS . IN RAJ KUMAR DEY V. TARAPADA DEY AIR 1987 SC 2195, THE SUPREME COURT EXAMINED THE SCOPE OF A STAY ORDER ON CALCULATION OF TIME/LIMITATION. IN TH IS CASE, AN AWARD COULD NOT BE REGISTERED WITHIN THE TIME STIPULATED BY THE REGISTRATION ACT OWING TO AN INTE RIM INJUNCTION AND AN ORDER DIRECTING THE AWARD TO BE DEPOSITED IN COURT. THE SUPREME COURT ALLOWED THE ENTIRE PERIOD DURING WHICH THE STAY ORDER WAS IN OPERATION TO BE EXCLUDED WHILE APPLYING THE MAXIM LEX NON COGIT AD IMPOSSIBILIA OR THE LAW. DOES NOT COMP EL A MAN TO DO THAT WHICH HE CANNOT POSSIBLY PERFORM. 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 T HE GROUND THAT THE ASSESSEE HIMSELF WAS RESPONSIBLE FO R DELAY OF REFUND, AND THEREFORE CANNOT CLAIM THE AMOUNT OF INTEREST. WHILE CONSIDERING THE RIGHTS OF THE ASSESSEE TO CLA IM INTEREST, THE DELHI HIGH COURT HELD AS FOLLOWS: 'LEX NON COGIT AD IMPOSSIBILIA' IS A WELL-KNOWN MAXIM. IT MEANS THE LAW DOES NOT COMPEL A MAN TO DO THAT WHICH HE CANNOT POSSIBLY PERFORM. IF THE ASSES SING ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 15 OFFICER COULD NOT PERFORM HIS DUTIES TO COMPLETE TH E ORDER OF ASSESSMENT 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 HAVING REGARD TO THE FACTS AND CIRCUMSTANCES INVOLVED IN EACH CASE. 11. WE FIND FROM THE ABOVE LEGAL POSITION AND FACTS OF THE CASE THAT THE ASSESSEE ACTED BONA FIDE IN CONFORMIT Y WITH THE PROVISION OF ACT AND THE LEGAL POSITION AS ENUMERAT ED BY HONBLE APEX COURT IN THE CASE OF ISHIKAWAJMA-HARIN A HEAVY INDUSTRIES LTD. (SUPRA). AT THE RELEVANT POINT OF T IME IT WAS IMPOSSIBLE ON THE PART OF THE ASSESSEE TO DEDUCT TA X ON THE INCOME OF NON-RESIDENT. ADMITTEDLY, UP TO THE INSE RTION OF EXPLANATION VIDE FINANCE ACT, 2007, THE ASSESSEE WA S UNDER BONA FIDE BELIEF NOT TO DEDUCT TAX AND ACCORDINGLY HE ACTED AS PER LAW. ACCORDINGLY WE ALLOW THE APPEAL OF ASS ESSEE. 12. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. 9. WE FIND THAT THE OFFICE HAS NOTED THAT BOTH THE CROSS OBJECTIONS OF THE ASSESSEE ARE TIME BARRED BY TEN DAYS AND NO PET ITION IS FILED FOR CONDONATION OF DELAY. BUT THE ASSESSEE WAS NOTIFIED OF THIS DEFECT THROUGH NOTICE AND THE DEFECT IN THE CROSS OBJECTIO NS HAS NOT BEEN RECTIFIED. IT WOULD SHOW THAT THE ASSESSEE HAS NO R EASONABLE CAUSE TO EXPLAIN THE DELAY IN FILING THE CROSS OBJECTIONS BE YOND THE PERIOD OF LIMITATION. THE CROSS OBJECTIONS OF THE ASSESSEE AR E ACCORDINGLY TREATED AS TIME BARRED AND ACCORDINGLY DISMISSED. HOWEVER, WE MAY NOTE THAT RULE 27 OF THE APPELLATE TRIBUNAL RULES PROVIDES TH AT THE RESPONDENT, THOUGH HE MAY HAVE NOT APPEALED, MAY SUPPORT THE OR DER APPEALED AGAINST ON ANY OF THE GROUNDS DECIDED AGAINST HIM. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF DAHOD SAHAKARI KH ARID VECHAN SANGH ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 16 LTD. VS CIT 282 ITR 321 CONSIDERING THE ABOVE PROVI SIONS OBSERVED AS UNDER: ON PLAIN READING OF SECTION 253(3) OF THE INCOME-T AX ACT, 1961, IT TRANSPIRES THAT A PARTY HAS BEEN GRAN TED AN OPTION OR A DISCRETION TO FILE CROSS-OBJECTIONS. IN CASE A PARTY HAVING SUCCEEDED BEFORE THE COMMISSIONER (APPEALS) OPTS NOT TO FILE CROSS-OBJECTION EVEN WHE N AN APPEAL HAS BEEN PREFERRED BY THE OTHER PARTY, FROM THAT IT IS NOT POSSIBLE TO INFER THAT THE SAID PARTY HAS AC CEPTED THE ORDER OR THE PART THEREOF WHICH WAS AGAINST THA T PARTY. ANY INTERPRETATION PLACED ON A PROVISION HAS TO BE IN HARMONY WITH THE OTHER PROVISIONS OF THE ACT OR THE CONNECTED RULES AND AN INTERPRETATION WHICH MAKES OTHER CONNECTED PROVISIONS OTIOSE HAS TO BE AVOIDED . RULE 27 OF THE INCOME-TAX (APPELLATE TRIBUNAL) RULE S, 1963, IS CLEAR AND UNAMBIGUOUS. SINCE THE LEARNED CIT(A) HAS DECIDED THE ISSUE OF D EDUCTION OF TDS ON MERIT AGAINST THE ASSESSEE IN ALL THE FOUR YEARS, T HEREFORE, EVEN IF, THE CROSS OBJECTIONS ARE TIME BARRED AS HELD ABOVE, THE ASSESSEE COULD AGITATE THE ADDITION BEING THE RESPONDENT IN THE DE PARTMENTAL APPEALS. 10. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS NHK JAPAN BROADCASTING CORPORATION 305 ITR 137 HELD AS UNDER: HELD, THAT THE DATE OF KNOWLEDGE WAS NOT RELEVANT FOR THE PURPOSES OF EXERCISING JURISDICTION IN SO FAR A S THE PROVISIONS OF THE ACT WERE CONCERNED. THE TIME LIMI T OF FOUR YEARS PRESCRIBED BY THE TRIBUNAL CALLED FOR NO INTERFERENCE AND ACTION WAS TO BE INITIATED BY THE COMPETENT AUTHORITY UNDER THE ACT WHERE NO LIMITATI ON WAS PRESCRIBED WITHIN THE PERIOD OF FOUR YEARS. THE ACCEPTANCE OF LIABILITY BY THE ASSESSEE WOULD NOT B Y ITSELF EXTENT THE PERIOD OF LIMITATION NOR WOULD IT EXTEND THE REASONABLE TIME THAT WAS POSTULATED BY THE SCHE ME OF THE ACT. MERELY BECAUSE IT HAD ADMITTED ITS LIAB ILITY AND AGREED TO PAY TAX VOLUNTARILY, THE ASSESSEE COU LD ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 17 NOT BE PUT IN A SITUATION WORSE THAN IF IT HAD CONT ESTED ITS LIABILITY. 11. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DECISIONS, IT IS CLEAR THAT THE ISSUE IS NOW COVERE D IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE CASE O F THE SAME ASSESSEE FOR ASSESSMENT YEAR 2004-05 DATED 02-07-2010. WE HA VE, THEREFORE, NO OPTION EXCEPT TO FOLLOW THE ORDER OF THE CO-ORDINAT E BENCH OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. BY FOLLOWING THE ORDER O F THE TRIBUNAL DATED 02-07-2010, WE SET ASIDE THE ORDER OF THE LEARNED C IT(A) ON MERIT IN ALL THE FOUR ASSESSMENT YEARS AND QUASH THE IMPUGNED OR DER AND DELETE THE RESULTANT DEMAND U/S 201 (1) READ WITH SECTION 201(1A) OF THE IT ACT IN ALL ASSESSMENT YEARS. 12. THE LEARNED CIT(A), WAS HOWEVER, JUSTIFIED IN H OLDING THAT THE IMPUGNED ORDERS OF THE AO FOR ASSESSMENT YEARS 2001 -02 AND 2002- 2003 ARE TIME BARRED. THE FINDINGS OF THE LEARNED C IT(A) TO THAT EXTENT ARE CONFIRMED. 13. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. THE DEPARTMENTAL APPEALS ARE DISMISSED. THE CROSS OBJEC TIONS OF THE ASSESSEE ARE DISMISSED BEING TIME BARRED FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 23-12-2010 SD/- SD/- (A. N. PAHUJA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23-12-2010 LAKSHMIKANT/ ITA NO. 2243, 2244, 2247 AND 2248/AHD/2008 AND C. O. NOS. 179 AND 180/AHD/E008 STERLING ABRASIVE LTD. 18 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-XIV, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT. REGISTRAR ITAT, AHMEDABAD