M/s. Shell International B.V., Ahmedabad V. The Dy. CIT, Intl. Taxn.-1, Ahmedabad

ITA 3217/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5084 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2004-2005
• Appeal Filed On: 05-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: MITAL SANGHARAJKA
• Section: 143(3); 234B

Judgement Text

ITA NO. 3217/AHD/2016 SHELL INTERNATIONAL BV VS. DCIT ASSESSMENT YEAR: 2004-05 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR, AM AND MS. MADHUMITA ROY, JM] ITA NO. 3217/AHD/2016 ASSESSMENT YEAR: 2004-05 SHELL INTERNATIONAL B.V. .................. APPELLANT C/O. BSR & ASSOCIATES LLP, 903, COMMERCE HOUSE V, NEAR VODAFONE HOUSE, CORPORATE ROAD, PRAHLADNAGAR, AHMEDABAD-380051 [PAN : AAHCS 9360 D] VS. DY. COMMISSIONER OF INCOME-TAX ...........................RESPONDENT (INTERNATIONAL TAXATION-1), AHMEDABAD APPEARANCES BY: PRASHANT MAHESHWARI & MITAL SANGHARAJKA, FOR THE APPELLANT LALIT P JAIN, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 30.07.2018 DATE OF PRONOUNCING THE ORDER : 01.08.2018 O R D E R PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF LEARNED CIT(A)S ORDER DATED 16 TH SEPTEMBER 2016, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 254 OF THE INCOME-TAX A CT, 1961, FOR THE ASSESSMENT YEAR 2004-05. 2. THE ONLY GRIEVANCE PRESSED BEFORE US, AS SET OUT IN THE SECOND GROUND OF APPEAL, IS AS FOLLOWS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F THE ASSESSING OFFICER IN LEVYING INTEREST UNDER SECTION 234B OF T HE ACT READ WITH SECTION 209 OF THE ACT THOUGH THE APPELLANT IS NOT LIABLE FOR PAYMENT OF ADVANCE TAX AND HENCE, NOT LIABLE TO LEVY OF INTERE ST UNDER SECTION 234B OF THE ACT. 3. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE MA TERIAL FACTS OF THE CASE ARE THE SAME INASMUCH AS IN THE PRESENT CASE ALSO THE ASSES SEE WAS NOT LIABLE FOR ANY ADVANCE TAX LIABILITY IN RESPECT OF THE RECEIPTS IN QUESTION, AND THAT THE ISSUE IN APPEAL IS SQUARELY COVERED, IN FAVOUR OF THE ASSESS EE, IN ASSESSEES OWN CASE VIDE ORDER DATED 9 TH NOVEMBER, 2016. IN THE SAID DECISION, THE CO-ORDI NATE BENCH, SPEAKING THROUGH ONE OF US, HAS OBSERVED AS FOLLOWS :- ITA NO. 3217/AHD/2016 SHELL INTERNATIONAL BV VS. DCIT ASSESSMENT YEAR: 2004-05 PAGE 2 OF 5 2. THIS ISSUE IS NO LONGER RES INTEGRA. AS FAR AS BACK AS IN 2003, A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF FISONS PLC V S DCIT [(2004) 91 ITD 450 (MUM)], A COORDINATE BENCH OF THE TRIBUNAL HAS HELD AS FOLLOWS: 8. SEC. 209(1)(D) OF THE ACT PROVIDES THAT WHILE CO MPUTING ADVANCE- TAX PAYABLE BY THE ASSESSEE, THE INCOME-TAX CALCULATED ON THE ESTIMATED INCOME OF THE ASSESSEE IS TO BE REDUCED BY 'THE AMO UNT OF INCOME-TAX WHICH WOULD BE DEDUCTIBLE OR COLLECTIBLE AT SOURCE DURING THE SAID FINANCIAL YEAR UNDER ANY PROVISION OF THIS ACT FROM ANY INCOME (AS COMPUTED BEFORE ALLOWING ANY DEDUCTIONS ADMISSIBLE UNDER THIS ACT) WHICH HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE CURRENT INCOME OR, AS THE CASE MAY BE, THE TOTAL INCOME AFORESAID AND THE AMOUNT OF INCOME-TAX AS SO REDUCED SHALL BE THE ADVANCE-TAX P AYABLE'. IN PLAIN WORDS, THE AMOUNT OF TAX DEDUCTIBLE AT SOURCE IS TO BE REDUCED FROM THE ESTIMATED TAX LIABILITY, FOR THE PURPOSE OF COMPUTI NG ADVANCE-TAX PAYABLE. 9. THE ASSESSEE BEFORE US IS A NON-RESIDENT, AND, T HEREFORE, THE PROVISIONS OF S. 195 ARE APPLICABLE ON THE PAYMENTS MADE TO THE ASSESSEE. UNDER S. 195, ANY PERSON RESPONSIBLE FOR PAYING TO A NON- RESIDENT ANY OTHER SUM CHARGEABLE UNDER THE PROVISI ONS OF THIS ACT SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, D EDUCT INCOME-TAX THEREON AT THE RATES IN FORCE. THEREFORE, AS PER TH E SCHEME OF S. 195 OF THE ACT, ENTIRE ESTIMATED TAX LIABILITY OF THE ASSE SSEE SHOULD HAVE BEEN DEDUCTED AT SOURCE BY THE PERSONS MAKING PAYMENT TO THIS ASSESSEE. IN OTHER WORDS, ENTIRE TAX LIABILITY OF THE ASSESSE E WAS TAX DEDUCTIBLE AT SOURCE IN THE RELEVANT PREVIOUS YEAR. ACCORDINGLY, THE ASSESSEE DID NOT HAVE ANY LIABILITY TO PAY ADVANCE-TAX IN THE RELEVA NT PREVIOUS YEAR AND AS PER THE SCHEME OF S. 209 OF THE ACT. SINCE THERE WAS NO ADVANCE- TAX LIABILITY ON THE ASSESSEE, THERE WAS NO QUESTIO N OF APPLICATION OF INTEREST UNDER SS. 234B AND 234C OF THE ACT.... 3. THE VIEW SO TAKEN BY THE TRIBUNAL HAS SUBSEQUENT LY BEEN CONFIRMED BY VARIOUS DECISIONS OF HON'BLE HIGH COURTS. HON'BLE B OMBAY HIGH COURT, IN THE CASE OF DIT VS NGC NETWORK ASIA LLC [(2009) 313 ITR 187 (BOM)] HAS HELD THAT THE PROVISIONS OF SECTION 234 B AND 234 C CANN OT BE PRESSED INTO SERVICE WHEN TAX WAS DEDUCTIBLE FROM ALL THE RECEIPTS IN TH E HANDS OF THE NON RESIDENT ASSESSEES. IN THE CASE OF DIT VS JACABS CIVIL INC [ (2011) 330 ITR 578 (DEL)], HON'BLE DELHI HIGH COURT HAS, IN A DETAILED ANALYSI S, OBSERVED AS FOLLOWS: ..............WE ARE NOT PERSUADED BY THIS SUBMISSI ON......... IT IS STATED AT THE COST OF REPETITION THAT THE LIABILITY TO DEDUCT OR COLLECT THE TAX AT SOURCE IS THAT OF THE PAYER. THEREFORE, FOR THE PUR POSES OF S. 234B OF THE ACT, THE QUESTION WOULD BE AS TO WHETHER THE PA YEE, I.E. THE ASSESSEE IN THIS CASE, HAD ANY ROLE IN DEDUCTING OR COLLECTING THE TAX. ONCE THAT IS IN THE NEGATIVE, AND IT WAS NOT DUTY O F THE PAYEE/ASSESSEE, THE QUESTION OF PAYMENT OF ANY INTEREST WOULD NOT A RISE AS IT CANNOT BE SAID, IN SUCH CIRCUMSTANCES, THAT THE ASSESSEE IS I N DEFAULT FOR THE PURPOSES OF S. 234B OF THE ACT. NO DOUBT, AS PER TH E JUDGMENT IN THE ITA NO. 3217/AHD/2016 SHELL INTERNATIONAL BV VS. DCIT ASSESSMENT YEAR: 2004-05 PAGE 3 OF 5 CASE OF ANJUM GHASWALA (SUPRA), IF THERE IS A DEFAU LT IN MAKING THE PAYMENT OF ADVANCE TAX, THE CONSEQUENCE WHICH IS TO FOLLOW IS THAT THE INTEREST BECOMES PAYABLE UNDER S. 234B OF THE ACT. BUT IN THE INSTANT CASE, THE PROVISIONS OF S. 234B OF THE ACT WOULD NO T BE ATTRACTED AT ALL. 7. SEC. 2(1) OF THE ACT DEFINES 'ADVANCE TAX' TO ME AN THE ADVANCE TAX PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF CHAPTE R XVII-C OF THE ACT. THESE PROVISIONS ARE CONTAINED FROM S. 207 ONWARDS. SEC. 209 FALLS UNDER THIS CHAPTER. SUB-S. (1) THEREOF DEALS WITH F OUR SITUATIONS UNDER WHICH THE ADVANCE TAX PAYABLE BY THE ASSESSEE IS TO BE COMPUTED. ADMITTEDLY, THESE CASES DO NOT CONCERN WITH CLS. (A ) TO (C). CLAUSE (D) OF SUB-S. (1) OF S. 209, WHICH IS RELEVANT READS AS UNDER : '(D) THE INCOME-TAX CALCULATED UNDER CL. (A) OR CL. (B) OR CL. (C) SHALL, IN EACH CASE, BE REDUCED BY THE AMOUNT OF IN COME-TAX WHICH WOULD BE DEDUCTIBLE OR COLLECTIBLE AT SOURCE DURING THE SAID FINANCIAL YEAR UNDER ANY PROVISION OF THIS ACT FROM ANY INCOME (AS COMPUTED BEFORE ALLOWING ANY DEDUCTIONS ADMISSIBLE UNDER THIS ACT) WHICH HAS BEEN TAKEN INTO ACCOUNT I N COMPUTING THE CURRENT INCOME OR, AS THE CASE MAY BE, THE TOTA L INCOME AFORESAID; AND THE AMOUNT OF INCOME-TAX AS SO REDUC ED SHALL BE THE ADVANCE TAX PAYABLE.' 8. THIS CLAUSE CATEGORICALLY USES THE EXPRESSION 'D EDUCTIBLE OR COLLECTIBLE AT SOURCE' AND IT IS THIS CLAUSE WHICH IS INCORPORATED BY THE UTTARANCHAL HIGH COURT IN THE SAID JUDGMENT (SUPRA) IN THE MANNER ALREADY POINTED ABOVE. THE SCHEME OF THE ACT IN RES PECT OF NON- RESIDENTS IS CLEAR. SEC. 195 OF THE ACT PUTS AN OBL IGATION ON THE PAYER, I.E. ANY PERSON RESPONSIBLE FOR PAYING TO A NON-RES IDENT, TO DEDUCT INCOME-TAX AT SOURCE AT THE RATES IN FORCE FROM SUC H PAYMENTS EXCLUDING THOSE INCOMES WHICH ARE CHARGEABLE UNDER THE HEAD 'SALARIES'. THEREFORE, THE ENTIRE TAX IS TO BE DEDU CTED AT SOURCE WHICH IS PAYABLE ON SUCH PAYMENTS MADE BY THE PAYER TO THE N ON-RESIDENT. SEC. 201 OF THE ACT LAYS DOWN THE CONSEQUENCES OF F AILURE TO DEDUCT OR PAY. THESE CONSEQUENCES INCLUDE NOT ONLY THE LIABIL ITY TO PAY THE AMOUNT WHICH SUCH A PERSON WAS REQUIRED TO DEDUCT A T SOURCE FROM THE PAYMENTS MADE TO A NON-RESIDENT BUT ALSO PENALTIES ETC. ONCE IT IS FOUND THAT THE LIABILITY WAS THAT OF THE PAYER AND THE SAID PAYER HAS DEFAULTED IN DEDUCTING THE TAX AT SOURCE, THE DEPAR TMENT IS NOT REMEDY LESS AND THEREFORE CAN TAKE ACTION AGAINST THE PAYE R UNDER THE PROVISIONS OF S. 201 OF THE IT ACT AND COMPUTE THE AMOUNT ACCORDINGLY. NO DOUBT, IF THE PERSON (PAYER) WHO HAD TO MAKE PAY MENTS TO THE NON- RESIDENT HAD DEFAULTED IN DEDUCTING THE TAX AT SOUR CE FROM SUCH PAYMENTS, THE NON- RESIDENT IS NOT ABSOLVED FROM PA YMENT OF TAXES THEREUPON. HOWEVER, IN SUCH A CASE, THE NON-RESIDEN T IS LIABLE TO PAY TAX AND THE QUESTION OF PAYMENT OF ADVANCE TAX WOUL D NOT ARISE. THIS WOULD BE CLEAR FROM THE READING OF S. 191 OF THE AC T ALONG WITH S. 209(1)(D) OF THE ACT. FOR THIS REASON, IT WOULD NOT BE PERMISSIBLE FOR THE REVENUE TO CHARGE ANY INTEREST UNDER S. 234B OF THE ACT. 4. LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVER, DO ES NOT GIVE UP. HE PRIMARILY RELIES UPON HON'BLE DELHI HIGH COURT'S JU DGMENT IN THE CASE OF DIT VS ALCATEL LUCENT INC USA [(2004) 45 TAXMANN.COM 42 2 (DEL)] WHICH HOLDS ITA NO. 3217/AHD/2016 SHELL INTERNATIONAL BV VS. DCIT ASSESSMENT YEAR: 2004-05 PAGE 4 OF 5 THAT EVEN IN THE CASE OF NON RESIDENT ASSESSEE, AND EVEN AS TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE FROM THE PAYMENTS RECEIVED BY SUCH AN ASSESSEE, INTEREST UNDER SECTION 234 B CAN BE LEVIED. 5. THIS ARGUMENT, HOWEVER, DOES NOT HAVE LEGALLY SU STAINABLE MERITS. IN THE CASE OF DIT VS G E PACKAGED POWER INC [(2015) 373 I TR 0065 (DELHI)] HON'BLE DELHI HIGH COURT HAD THE OCCASION TO DEAL W ITH THE JUDICIAL PRECEDENT RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTAT IVE, AND THEIR LORDSHIPS WERE PLEASED TO CLARIFY THAT THE DECISION IN THE CA SE OF ALACTEL LUCENT (SUPRA) WAS ON ITS OWN PECULIAR FACTS AND IT CANNOT BE OF U NIVERSAL APPLICATION. THEIR LORDSHIPS, INTER ALIA, OBSERVED AS FOLLOWS: 19. ALCATEL LUCENT (SUPRA), IN ANY EVENT, CAN BE DI STINGUISHED ON THE GROUND THAT THE COURT WAS PERSUADED TO CONFIRM THE LEVY OF INTEREST UNDER SECTION 234B, ONLY ON ACCOUNT OF THE EQUITIES THAT NEEDED TO BE BALANCED IN THOSE PECULIAR FACTS, IN FAVOUR OF TAXA BILITY. THIS IS EVIDENT FROM THE FOLLOWING WORDS OF THE COURT: '26. IT FURTHER SEEMS TO US INEQUITABLE THAT THE AS SESSEE, WHO ACCEPTED THE TAX LIABILITY AFTER INITIALLY DENYING IT, SHOULD BE PERMITTED TO SHIFT THE RESPONSIBILITY TO THE INDIAN PAYERS FOR NOT DEDUCTING THE TAX AT SOURCE FROM THE REMITTANCES, A FTER LEADING THEM TO BELIEVE THAT NO TAX WAS DEDUCTIBLE. THE ASS ESSEE MUST TAKE RESPONSIBILITY FOR ITS VOLTE FACE. ONCE LIABIL ITY TO TAX IS ACCEPTED, ALL CONSEQUENCES FOLLOW; THEY CANNOT BE A VOIDED. AFTER HAVING ACCEPTED THE LIABILITY TO TAX AT THE F IRST APPELLATE STAGE, IT IS UNFAIR ON THE PART OF THE ASSESSEE TO INVOKE SECTION 201 AND POINT FINGERS AT THE INDIAN PAYERS. THE ARG UMENT ADVANCED BY THE LEARNED COUNSEL FOR THE ASSESSEE TH AT THE INDIAN PAYERS FAILED TO DEDUCT TAX AT THEIR OWN RIS K SEEMS TO US TO BE ONLY AN ARGUMENT OF CONVENIENCE OR DESPAIR. A S WE HAVE POINTED OUT EARLIER, IT IS DIFFICULT TO IMAGINE THA T THE INDIAN TELECOM EQUIPMENT DEALERS OF THE ASSESSEE WOULD HAV E FAILED TO DEDUCT TAX AT SOURCE EXCEPT ON BEING PROMPTED BY TH E ASSESSEE. IT MAY BE TRUE THAT THE GENERAL RULE IS T HAT EQUITY HAS NO PLACE IN THE INTERPRETATION OF TAX LAWS. BUT WE ARE OF THE VIEW THAT WHEN THE FACTS OF A PARTICULAR CASE JUSTIFY IT , IT IS OPEN TO THE COURT TO INVOKE THE PRINCIPLES OF EQUITY EVEN IN TH E INTERPRETATION OF TAX LAWS. TAX LAWS AND EQUITY NEED NOT BE SWORN ENEMIES AT ALL TIMES. THE RULE OF STRICT INTERPRETATION MAY BE RELAXED WHERE MISCHIEF CAN RESULT BECAUSE OF THE INCONSISTENT OR CONTRADICTORY STANDS TAKEN BY THE ASSESSEE OR EVEN THE REVENUE. M OREOVER, INTEREST IS, INTER ALIA, COMPENSATION FOR THE USE O F THE MONEY. THE ASSESSEE HAS HAD THE USE OF THE MONEY, WHICH WO ULD OTHERWISE HAVE BEEN PAID AS ADVANCE TAX, UNTIL IT A CCEPTED THE ASSESSMENTS AT THE FIRST APPELLATE STAGE. WHERE THE REVENUE HAS BEEN DEPRIVED OF THE USE OF THE MONIES AND THEREBY PUT TO LOSS FOR NO FAULT ON ITS PART AND WHERE THE LOSS AROSE A S A RESULT OF VACILLATING STANDS TAKEN BY THE ASSESSEE, IT IS NOT EXPECTED OF THE ASSESSEE TO SHIFT THE RESPONSIBILITY TO THE IND IAN PAYERS. WE ARE NOT TO BE UNDERSTOOD AS PASSING A VALUE- JUDGME NT ON THE ASSESSEE'S CONDUCT. WE ARE ONLY SAYING THAT THE ASS ESSEE SHOULD TAKE RESPONSIBILITY FOR ITS ACTIONS. [EMPHASIS ADDED] ITA NO. 3217/AHD/2016 SHELL INTERNATIONAL BV VS. DCIT ASSESSMENT YEAR: 2004-05 PAGE 5 OF 5 THIS COURT FINDS THAT NO NEED IS MADE OUT IN THESE FACTS TO BALANCE ANY EQUITIES IN THESE FACTS, AS THE ASSESSEE HAS NOT VA CILLATED IN ITS STAND AS TO THE EXISTENCE OF A PE IN INDIA OR OTHERWISE. IN ANY EVENT, AS OBSERVED EARLIER, THE POSITION OF LAW ITSELF REQUIR ES THAT THE TAX BE DEDUCTED AT SOURCE, WHATEVER MAY BE THE ASSESSEE'S STANCE, FAILING WHICH THE PAYER IS TREATED AS AN ASSESSEE-IN-DEFAUL T UNDER SECTION 201, AND THE PAYEE IS REQUIRED TO DISCHARGE ITS LIA BILITY TO PAY THE TAX THAT WAS NOT DEDUCTED UNDER SECTION 191. 6. HON'BLE SUPREME COURT'S DECISION IN THE CASE OF CIT VS ANJUM GHASWALA [(2001) 252 ITR 1 (SC)], WHICH HAS ALSO BEEN REFERR ED TO AND RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE AS ALSO IN THE IMPUGNED ORDERS OF THE CIT(A), WAS ALSO TAKE NOTE OF IN THE AFORESAID DECISION OF HON'BLE DELHI HIGH COURT. YET, THEIR LORDSHIPS HELD THE ISSUE UNE QUIVOCALLY IN FAVOUR OF THE ASSESSEE, AND AGAINST APPLICATION OF INTEREST UNDER SECTION 234 B. THE PRINCIPLE ON THE BASIS OF WHICH THIS ISSUE IS DECID ED IN FAVOUR OF THE ASSESSEE, I.E. WORKING OF SECTION 209(1)(D), HAS NOTHING TO D O WITH THE RATIO OF DECISION IN THE CASE OF ANJUM GHASWALA (SUPRA) WHICH HOLDS THAT LEVY OF INTEREST IS MANDATORY. THE LEVY IN MANDATORY IN THE CASES IN WH ICH THE LEVY OF INTEREST IS WORKABLE, BUT WHEN WE APPLY THE FORMULA IN SECTION 209(1)(D), THE AMOUNT ON WHICH INTEREST CAN BE LEVIED IS REDUCED TO NIL AS T HE AMOUNTS ON WHICH TAXES ARE DEDUCTIBLE ARE TO BE REDUCED FROM THE TOTAL AMO UNTS AND THE TAXES ARE DEDUCTIBLE FROM ENTIRE AMOUNTS. NOTHING THUS SURVIV ES FOR THE LEVY OF INTEREST UNDER SECTION 234 B OR, FOR THAT PURPOSE, UNDER SEC TION 234C. 4. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE CO-ORDINATE BENCH. RESPECTFULLY FOLLO WING THE SAME, WE DIRECT THE ASSESSING OFFICER TO DELETE THE LEVY OF INTEREST UN DER SECTION 234B. 5. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNC ED IN THE OPEN COURT TODAY ON THE 1 ST AUGUST, 2018 SD/- SD/- MS. MADHUMITA ROY PRA MOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 1 ST DAY OF AUGUST, 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