Dy.CIT, Circle-16(1), Hyderabad V. M/s. NMDC Limited, Hyderabad

ITA 292/HYD/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2941 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 06-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MADHUVANI
• Assessee Lawyers: LAXMINIWAS SHAR MA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER. ITA NO.292/HYD/13 : ASSESSMENT YEAR 2008-09 ITA NO.293/HYD/13 : ASSESSMENT YEAR 2009-10 DY. COMMISSIONER OF INCOME - TAX CIRCLE 16(1), HYDERABAD V/S. M/S. NMDC LIMITED, HYDERABAD ( PAN - AAACN 7325 A) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. MADHUVANI, CIT - DR RESPONDENT BY : SHRI LAXMI NIWAS SHARMA DATE OF HEARING 30.5. 2013 DATE OF PRONOUNCEMENT 31.05. 2013 O R D E R PER B.RAMAKOTAIAH, ACCOUNTANT MEMBER: THESE TWO APPEALS BY REVENUE ARE AGAINST THE ORD ERS OF THE COMMISSIONER OF INCOME-TAX(APPEALS) V, HYDERABA D FOR ASSESSMENT YEARS 2008-09 AND 2009-10. SINCE COMMON ISSUES ARE INVOLVED, THESE ARE HEAD TOGETHER AND DECIDED BY TH IS COMMON ORDER. NEITHER PARTY HAS INFORMED US WHETHER ANY CROSS-AP PEAL IS PENDING ON THE ORDERS OF THE CIT(A). THEREFORE, REVENUE APP EALS ARE HEARD. ITA NO.292 AND 293/ HYD/2013 M/S. NMDC LIMITED, HYDERABAD 2 2. COMMON ISSUE IN BOTH THE APPEALS IS ABOUT LEVY OF INTEREST UNDER S.115P OF THE ACT. ASSESSEE PUBLIC LIMITED CO MPANY SET ASIDE AMOUNT FOR DECLARATION OF DIVIDEND AS ON 31 ST OF MARCH OF THE RELEVANT YEAR. CONSEQUENT TO FINALISATION OF ACCOUNTS AND AP PROVAL BY THE BOARD, THE COMPANY DECLARED FINAL DIVIDEND AND PAID THE NECESSARY TAX WITHIN 14 DAYS OF THE SAID DECLARATION/PAYMENT. IT WAS THE CONTENTION OF THE ASSESSING OFFICER THAT HAVING PROVIDED FOR T HE AMOUNT ON 31 ST MARCH OF EVERY YEAR, IT IS DEEMED TO HAVE BEEN DECL ARED AND ASSESSEE SHOULD HAVE REMITTED TAX BY 14 TH OF APRIL AND ACCORDINGLY, HE LEVIED INTEREST OF RS.1,33,98,180 (WITHOUT ANY DISCUSSION IN THE ORDER) AND RS.3,82,15,542 (VIDE PARA 9 OF THE ORDER IN ASSESS MENT YEAR 2009- 10). THE LEARNED CIT(A) FOLLOWING THE ORDER OF IT AT IN ASSESSMENT YEAR 2003-04, DELETED THE SAID LEVY OF INTEREST. 3. AT THE OUTSET, BOTH COUNSELS AGREED THAT THE I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF I TAT IN ASSESSMENT YEAR 2003-04 IN ITA NO.1791/HYD/2011 DATED 3.8.201 2, WHEREIN VIDE PARA 10, IT WAS HELD AS UNDER- 10. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MA TERIALS ON RECORD. WE FULLY AGREE WITH THE CIT (A) THAT DECLAR ATION OF DIVIDEND IS NOT AUTOMATIC UPON FINALISATION OF ACCO UNTS AND PRESENCE OF PROFITS AND RESERVES. THE DECLARATION O F DIVIDEND IS WITHIN THE DOMAIN OF BOARD OF DIRECTORS AND THE MAN AGEMENT AND THE DATE OF DECLARATION OF DIVIDEND IS WHEN IT IS ACTUALLY DECLARED BY THE BOARD. FROM THE MATERIALS ON RECORD IT IS VERY MUCH CLEAR THAT THE DECLARATION OF DIVIDEND WAS MAD E ON 24-9- 2003 AND THE TAX ON DIVIDEND WAS PAID ON 3-10-2003 WHICH IS WITHIN THE TIME LIMIT PRESCRIBED U/S 115-O(3). THER E BEING NO FAILURE ON THE PART OF THE ASSESSEE IN COMPLYING TO THE PROVISION OF SECTION 115-O(3) LEVY OF INTEREST U/S 115P WAS N OT JUSTIFIED. ITA NO.292 AND 293/ HYD/2013 M/S. NMDC LIMITED, HYDERABAD 3 WE THEREFORE UPHOLD THE ORDER OF CIT (A) AND DISMIS S THE GROUND RAISED BY THE REVENUE. 4. SINCE FACTS ARE SIMILAR IN THESE YEARS AS WELL, WE UPHOLD THE ORDER OF THE CIT(A), WHO FOLLOWED THE ORDER OF THE ITAT ON THIS ISSUE. THERE CAN NOT BE ANY DECLARATION OF DIVIDEND UNLESS THE SAME IS APPROVED BY BOARD AND BY GENERAL BODY OF THE COMPAN Y. THERE IS NO MERIT IN THE ACTION OF AO IN LEVYING INTEREST ON NO TIONAL BASIS. REVENUES GROUNDS ON THIS ISSUE ARE ACCORDINGLY REJ ECTED. 5. THE OTHER ISSUE CONTESTED IN REVENUES APPEAL I N ASSESSMENT YEAR 2008-09 IS ON THE DELETION OF DIS ALLOWANCE MADE UNDER S.40(A)(IA) OF THE ACT. ON THE REASON THAT T HE ASSESSEE WAS EXPORTING THE IRON ORE THROUGH MMTC, ANOTHER GOVERN MENT ORGANISATION AND ON THE BASIS OF STATEMENTS OF SOME PERSONNEL OF MMTC, ASSESSING OFFICER ESTIMATED 2.8% OF THE SALES DECLARED BY THE MMTC AS COMMISSION PAYABLE AND SINCE ASSESSEE HAS N OT DEDUCTED TAX ON THE SO CALLED COMMISSION, ASSESSING OFFICER DISA LLOWED THE QUANTIFIED AMOUNT UNDER S.40(A)(IA) OF THE ACT. CO NSEQUENT TO THE ORDER OF THE ITAT, VISAKHAPATNAM IN ASSESSEES OWN CASE IN THE PROCEEDINGS INITIATED ON THE SAME ISSUE UNDER S.201 AND S.201(1A), THE LEARNED CIT(A) DELETED THE SAID DISALLOWANCE. REVENUE IS AGGRIEVED. 6. BOTH THE COUNSELS ADMITTED THAT THIS ISSUE IS C OVERED BY THE DECISION OF THE VISAKHAPTNAM BENCH OF THE TRIBU NAL, IN ASSESSEES ITA NO.292 AND 293/ HYD/2013 M/S. NMDC LIMITED, HYDERABAD 4 OWN CASE IN ITA NOS.145, 146 AND 147/VIZAG/2006, WH EREIN THE TRIBUNAL VIDE PARA 4.4 OF ITS ORDER DATED 20.07.200 9, HELD AS FOLLOWS- 4.4 IT IS VERY PERTINENT TO NOTE THAT THE LEARNED CIT(A) HAS NOTED THE FACT THAT THE ASSESSEE HAS ROUTED THE TRA NSACTION OF EXPORT THROUGH MMTC ONLY BECAUSE THE ASSESSEE WAS N OT ALLOWED TO EFFECT THE EXPORT ON ACCOUNT OF GOVERNME NT REGULATIONS. IT IS THE MOST STRIKING FEATURE IN TH E IMPUGNED TRANSACTIONS WHICH WAS NOT AT ALL CONSIDERED BY THE TAX AUTHORITIES. IT IS WELL SETTLED LAW THAT IN ANY AG ENCY AGREEMENT, AN AGENT CAN ACT ON BEHALF OF THE PRINCI PAL ONLY IN RESPECT OF THOSE TRANSACTIONS WHICH THE PRINCIPAL I S ENTITLED TO CARRY ON DIRECTLY WITHOUT THE ASSISTANCE/HELP OF TH E AGENT, I.E. EVEN IN THE ABSENCE OF AN AGENT, THE PRINCIPAL SHOU LD BE ENTITLED TO CARRY ON THE SAID TRANSACTION. IN THE INSTANT CASE THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT HE ASSESSEE HEREIN IS NOT ENTITLED TO EXPORT THE IRON ORE WITH FE CONTENT OF 64% AND ABOVE. SINCE THE ASSESSEE IS DISENTITLED TO EXPORT THESE GOODS, IT CANNOT BE POSSIBLE TO SAY THAT THE GOODS WERE EXPORTED BY MMTC ON BEHALF OF THE ASSESSEE ON A PRI NCIPAL TO AGENT BASIS. AS CONTENDED BY THE ASSESSEE, IT CAN ONLY BE HELD THAT THE MMTC HAS EXPORTED THE GOODS ON ITS OWN AND NOT ON BEHALF OF THE ASSESSEE HEREIN. BY VIRTUE OF THE GOV ERNMENT REGULATIONS, BOTH THE COMPANIES HAD TO REACH AN AGR EEMENT WITH REGARD TO THE MODALITIES OF THE INCURRING EXPE NSES AND PAYMENT AND IN OUR OPINION, THE SAID MODALITIES OF PAYMENT ARE NOT THE DECIDING FACTOR TO DETERMINE THE NATURE OF TRANSACTION. IN VIEW OF THE FOREGOING, WE SET ASIDE THE ORDERS O F THE LD. CIT(A) AS WELL AS THAT OF THE ASSESSING OFFICER . SINCE WE HAVE DECIDE D THE FIRST ISSUE IN FAVOUR OF THE ASSESSEE, THE SECOND ISSUE URGED BY THE ASSESSEE BECOMES INFRUCTUOUS. 7. RESPECTFULLY FOLLOWING THE DECISION, WE HOLD TH AT SINCE THE ASSESSEE IS NOT ENTITLED TO EXPORT DIRECTLY AND EX PORT BY THE MMTC WAS ON PRINCIPAL-PRINCIPAL BASIS, THERE CAN BE NO C OMMISSION PAYMENT TO MMTC, AS SUCH THE QUESTION OF SUSTAINING THE ORD ER OF THE ASSESSING OFFICER IN ESTIMATING THE COMMISSION AND DISALLOWIN G THE SAME UNDER S.40(A)(IA) DOES NOT ARISE. INFACT THERE IS NO CLAI M OF COMMISSION BY ASSESSEE. SO QUESTION OF DEDUCTION OF TAX DOES NOT ARISE AND ITA NO.292 AND 293/ HYD/2013 M/S. NMDC LIMITED, HYDERABAD 5 CONSEQUENTLY DISALLOWANCE U/S 40(A)(IA). ACCORDING LY, THE ORDER OF THE CIT(A) IS UPHELD AND REVENUES GROUND ON THIS ISSUE IS REJECTED. 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 31.05.2013 SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 31 ST MAY, 2013 COPY FORWARDED TO: 1. M/S. NMDC LIMITED, KHANIJ BHWAN 10-3-311/A, ASTE L HILL, MASAB TANK, HYDERABAD 500 028. 2 . DY. COMMISSIONER OF INCOME - TAX CIRCLE 16( 1 ), HYDER ABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) V HYDERABAD COMMISSIONER OF INCOME-TAX IV HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S