M/S. THE SHIPPING CORPORATION OF INDIA LTD, MUMBAI V. THE CIT -XXXI, MUMBAI

ITA 3672/MUM/2008

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78947 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 05-02-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 26-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR SHRIVASTAVA
• Assessee Lawyers: DINESH VYAS
• Keywords: Recovery proceedings; Double taxation relief; Period of limitation; Non-deduction of tax; Time period of passing order
• Section: 201(1); 147; 148; 28

Judgement Text

L IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI .. , , BEFORE SHRI P.M. JAGTAP, AM AND SHRI. SHRI AMIT SHU KA, JM ./ I.T.A. NO.3672 TO 3674/ MUM/2008 ( / ASSESSMENT YEARS : 2004-05, 2005-06 & 2006-07 DIRECTOR (FINANCE) SECRETARIAT, THE SHIPPING CORPORATION OF INDIA LTD., 10 TH FLOOR, SHIPPING HOUSE, 245 MADAME CAMA ROAD, MUMBAI 400 021. / VS. INCOME TAX OFFICER (IT) (TDS) RANGE 2,, SCINDIA HOUSE, ROOM NO. 7, GROUND FLOOR, NAROTTAM MORARJI ROAD, BALLARD ESTATE, MUMBAI 400038. ./ PAN :AAACT 1524 F ( # / APPELLANT ) .. ( $%# / RESPONDENT ) ./ I.T.A. NO.4142 TO 4144/ MUM/2008 ( / ASSESSMENT YEARS : 2004-05, 2005-06 & 2006-07 INCOME TAX OFFICER (IT) (TDS) RANGE 2,, SCINDIA HOUSE, ROOM NO. 7, GROUND FLOOR, NAROTTAM MORARJI ROAD, BALLARD ESTATE, MUMBAI 400038. / VS. DIRECTOR (FINANCE) SECRETARIAT, THE SHIPPING CORPORATION OF INDIA LTD., 10 TH FLOOR, SHIPPING HOUSE, 245 MADAME CAMA ROAD, MUMBAI 400 021. ./ PAN :AAACT 1524 F ( # / APPELLANT ) . . ( $%# / RESPONDENT ) $% /C.O. NO. 200 TO 202/MUM/2008 ARISING OUT OF ITA NO. 4142 TO 4144/ MUM/2008 ( / ASSESSMENT YEARS : 2004-05, 2005-06 & 2006-07) 9 APPEALS, 3 C.O. SCIL 2 DIRECTOR (FINANCE) SECRETARIAT, THE SHIPPING CORPORATION OF INDIA LTD., 10 TH FLOOR, SHIPPING HOUSE, 245 MADAME CAMA ROAD, MUMBAI 400 021. / VS. INCOME TAX OFFICER (IT) (TDS) RANGE 2,, SCINDIA HOUSE, ROOM NO. 7, GROUND FLOOR, NAROTTAM MORARJI ROAD, BALLARD ESTATE, MUMBAI 400038. ./ PAN : AAACT 1524 F CROSS OBJECTOR .. ( $%# / RESPONDENT ) ./ I.T.A. NO.4319/ MUM/2009 ( / ASSESSMENT YEARS : 2004-05 ./ I.T.A. NO.4767 & 4768/ MUM/2009 ( / ASSESSMENT YEARS : 2005-06 & 2006-07 DIRECTOR (FI NANCE) SECRETARIAT, THE SHIPPING CORPORATION OF INDIA LTD., 10 TH FLOOR, SHIPPING HOUSE, 245 MADAME CAMA ROAD, MUMBAI 400 021. / VS. INCOME TAX OFFICER (IT) (TDS) RANGE 2,, SCINDIA HOUSE, ROOM NO. 7, GROUND FLOOR, NAROTTAM MORARJI ROAD, BALLARD ESTATE, MUMBAI 400038. ./ PAN :AAACT 1524 F ( # / APPELLANT ) .. ( $%# / RESPONDENT ) A SSESSEE BY SHRI DINESH VYAS R E SPONDENT BY : SHRI AJAY KUMAR SHRIVASTAVA = > / DATE OF HEARING : 02-05-2014 = > / DATE OF PRONOUNCEMENT : 30D5D2014 [ 9 APPEALS, 3 C.O. SCIL 3 / O R D E R PER BENCH . : OUT OF THESE NINE APPEALS, THREE APPEALS BEING ITA NO. 3672 TO 3674/MUM/2008 (ASSESSEES APPEALS) AND THREE APPEAL S BEING ITA NO. 4142 TO 4144/MUM/2008 (REVENUES APPEALS) ARE CROSS APPE ALS FOR ASSESSMENT YEARS 2004-05, 2005-06 AND 2006-07 WHICH ARISE FROM THREE SEPARATE ORDERS OF LD. CIT(A) -31, MUMBAI DATED 27-3-2008 PASSED IN THE FIRST ROUND OF LITIGATION WHILE THREE CROSS OBJECTIONS BEING C.O. NO. 200 TO 202/MUM/2009 ARE FILED BY THE ASSESSEE IN RESPECT OF REVENUES A PPEAL BEING ITA NO. 4142 TO 4144/MUM/2008. THE REMAINING THREE APPEALS BEING I TA NO. 4319, 4767 AND 4768/MUM/2009 ARE THE APPEALS FILED BY THE ASSE SSEE AGAINST THREE SEPARATE ORDERS OF LD. CIT(A) -31 MUMBAI DATED 15-5 -2009 FOR ASSESSMENT YEARS 2004-05, 2005-06 AND 2006-07 PASSED IN THE SE COND ROUND OF LITIGATION. SINCE THE ISSUES INVOLVED IN ALL THESE NINE APPEALS AND THREE CROSS OBJECTIONS ARE COMMON AND INTERLINKED, THE SAME HAV E BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO AL L THESE APPEALS AND CROSS OBJECTIONS ARE AS FOLLOWS. THE ASSESSEE M/S SHIPPIN G CORPORATION OF INDIA LIMITED (SCIL IN SHORT) IS A GOVERNMENT OF INDIA EN TERPRISE WHICH IS ENGAGED IN THE BUSINESS OF SHIPPING. IT OWNS AROUND 90 SHIP S WHICH ARE PLIED ALL OVER THE WORLD. IN THE COURSE OF ITS BUSINESS, SCIL IS ALSO REQUIRED TO HIRE SHIPS TO MEET CAPACITY REQUIREMENTS WHERE EXIGENCIES ARISE. SUCH SHIPS ARE TAKEN ON CHARTER FROM THE NON-RESIDENT OWNERS OF THE SHIPS, REGISTERED OUTSIDE INDIA. THE CONTROL AND OPERATION OF ALL THESE SHIPS, WHICH ARE USED IN INTERNATIONAL WATERS, VESTS WITH SCIL. SCIL WAS CALLED UPON BY TH E A.O. VIDE LETTER DATED 9- 11-2006 TO FURNISH THE DETAILS OF SHIPS/OIL TANKERS /VESSELS TAKEN ON HIRE/TIME CHARTER DURING THE PREVIOUS YEARS RELEVANT TO ASSES SMENT YEARS 2004-05, 2005-06 AND 2006-07 ALONG WITH THE NAMES AND ADDRES SES OF THE FOREIGN 9 APPEALS, 3 C.O. SCIL 4 COMPANIES TO WHOM THE PAYMENTS WERE MADE ON ACCOUNT OF HIRE/TIME CHARTER CHARGES. SCIL WAS ALSO REQUIRED BY THE A.O. TO EXPL AIN AS TO WHETHER ANY TAX WAS DEDUCTED AT SOURCE BEFORE MAKING SUCH PAYMENTS TO THE CONCERNED NON- RESIDENT ENTITIES. M/S SCIL VIDE ITS LETTER DATED 2 4-4-2007 FURNISHED ALL THE DETAILS REQUIRED BY THE A.O. WHICH REVEALED THAT NO TAX AT SOURCE WAS DEDUCTED BY SCIL FROM THE PAYMENTS MADE TO THE NON- RESIDENT ENTITIES TOWARDS HIRE/TIME CHARTER CHARGES DURING THE RELEVA NT THREE ASSESSMENT YEARS. THE A.O., THEREFORE, VIDE LETTER DATED 28-6 -2007 REQUIRED SCI TO SHOW CAUSE AS TO WHY IT SHOULD NOT BE TREATED AS THE ASS ESSEE IN DEFAULT U/S 201(1) OF THE INCOME TAX ACT, 1961 FOR ITS FAILURE TO DEDU CT TAX AT SOURCE AND ALSO TO SHOW CAUSE AS TO WHY INTEREST U/S 201(1A) OF THE AC T SHOULD NOT BE CHARGED IN ITS CASE. IN ITS REPLY SUBMITTED TO THE A.O. VID E LETTER DATED 27-7-2007, SCIL EXPLAINED IN DETAIL AS TO HOW THERE WAS NO FAI LURE ON ITS PART TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS MADE TO THE NON-RES IDENT ENTITIES ON ACCOUNT OF HIRE/TIME CHARTER CHARGES AND WHY IT SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT. THIS EXPLANATION OF THE SCI WAS NOT FOUND ACCEPTABLE BY THE A.O. AND HE PROCEEDED TO HOLD, FO R THE REASONS GIVEN IN THE ORDERS PASSED U/S 201(1)/201(1A) OF THE ACT, THAT T HE HIRE/TIME CHARTER CHARGES PAID BY THE ASSESSEE TO THE NON-RESIDENT EN TITIES BEING IN THE NATURE OF ROYALTY (EQUIPMENT ROYALTY TAKING SHIP AS AN EQU IPMENT), SCIL WAS REQUIRED TO DEDUCT TAX AT SOURCE FROM THE SAID PAYM ENT. ACCORDINGLY, HE TREATED SCI AS ASSESSEE IN DEFAULT FOR ITS FAILURE TO DEDUCT TAX AT SOURCE @20% ON THE AMOUNT REMITTED (GROSSED UP) AND ALSO LEVIED INTEREST U/S 201(1) OF THE ACT AS UNDER:- A.YS LIABILITY U/S 201 (1)(RS) INTEREST U/S 201(1A)(RS) 2004-05 23,78,48,333/- 12,44,23,133/- 2005-06 25,00,98,841/- 12,13,85,445/- 2006-07 19,34,91,367/- 5,47,12,451/- 3. AGAINST THE ORDERS PASSED BY THE A.O. U/S 201/20 1(1A) OF THE ACT FOR ALL THE THREE YEARS UNDER CONSIDERATION, SCI PREFERRED ITS APPEALS BEFORE THE LD. CIT(A) CONTENDING THAT THE PAYMENTS IN QUESTION MAD E TO THE NON-RESIDENT 9 APPEALS, 3 C.O. SCIL 5 ENTITIES TOWARDS HIRE/TIME CHARTER CHARGES WERE NOT IN THE NATURE OF ROYALTY WITHIN THE MEANING OF SECTION 9(1)(VI) OF THE ACT R EAD WITH EXPLANATION 2 (IVA) THERETO. THE LD. CIT(A) AGREED WITH THIS CONTENTIO N RAISED ON BEHALF OF SCIL AND HELD THAT THE PAYMENTS MADE BY SCIL TO THE NON- RESIDENT SHIP OWNERS FOR TIME CHARTER COULD NOT BE CONSIDERED AS ROYALTY AS ENVISAGED IN CLAUSE (IVA) OF EXPLANATION 2 TO SECTION 9(1)(VI) OF THE ACT. THE L D. CIT(A), HOWEVER, REFERRED TO SECTION 44B OF THE ACT AND CONCLUDED THAT SCI HAVIN G ENTERED INTO TIME CHARTER ARRANGEMENTS WITH NON-RESIDENT SHIP OWNERS, IT WAS A CASE OF PAYMENT MADE TO NON-RESIDENTS FOR CARRYING OF THE G OODS AND AMOUNT PAID BY SCI TO THE NON-RESIDENT SHIP OWNERS WAS CHARGEABLE TO TAX IN INDIA AS BUSINESS PROFIT U/S 44B OF THE ACT. HAVING HELD SO , THE LD. CIT(A) DIRECTED THE A.O. TO CONSIDER THE RELEVANT DOUBLE TAX AVOIDANCE AGREEMENTS (DTAAS) BETWEEN INDIA AND FOREIGN COUNTRIES OF WHICH THE NO N-RESIDENT SHIP OWNERS WERE RESIDENTS AND ALLOW APPROPRIATE RELIEF, IF ANY , TO SCI AS PER THE SAID DTAA. AGGRIEVED BY THE ORDERS OF THE LD. CIT(A) TAK ING THIS VIEW IN THE FIRST ROUND OF PROCEEDINGS, WHICH IS PARTLY IN FAVOUR OF THE ASSESSEE, BOTH THE ASSESSEE AND REVENUE HAVE PREFERRED THEIR RESPECTIV E APPEALS BEFORE THE TRIBUNAL AND THE SCI HAS ALSO FILED ITS CROSS OBJEC TIONS. 4. MEANWHILE, THE A.O. PROCEEDED TO GIVE EFFECT TO THE ORDERS OF THE LD. CIT(A) PASSED IN THE FIRST ROUND. HE CALLED FOR TH E DETAILS OF PAYMENTS MADE BY SCI TO THE SHIP OWNERS. ON PERUSAL OF THE SAID D ETAILS AS WELL AS THE RELEVANT DTAAS, THE A.O. FOUND THAT THE REMITTANCES MADE TO FRANCE WERE TAXABLE IN INDIA @25% OF THE NORMAL TAX CHARGEABLE UNDER ARTICLE IX OF THE RELEVANT TREATY. HE ALSO FOUND THAT INDIA DID NOT H AVE A DTAA WITH LIBERIA AND HENCE REMITTANCES MADE TO THE SAID COUNTRY WERE CHA RGEABLE AT NORMAL RATE APPLICABLE TO THE FOREIGN COMPANY. THE A.O. ALSO EX AMINED THE DETAILS OF REMITTANCES MADE BY SCI AND HELD ON SUCH EXAMINATIO N THAT THE GROSS AMOUNT OF CHARTER HIRE CHARGES INCLUDING ADDRESS CO MMISSION, LASHING/COMMUNICATION, VISUALIZING AND RADIOGRAPHIC EXPENSES AND WAR RISK 9 APPEALS, 3 C.O. SCIL 6 PREMIUM WERE LIABLE TO BE CONSIDERED FOR THE PURPOS E OF COMPUTATION OF INCOME OF THE NON-RESIDENT AS PER THE PROVISIONS OF SECTION 44-B OF THE ACT. ACCORDINGLY, THE A.O. DETERMINED 7.5% OF THE GROSS AMOUNT AS INCOME OF THE SHIP OWNERS LIABLE TO TAX IN INDIA AS PER THE PROVI SIONS OF SECTION 44B OF THE ACT AND TREATED SCI AS THE ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT TO THAT EXTENT. HE ALSO LEVIED INTEREST U/S 201(1A) OF THE ACT ON THE AMOUNT SO DETERMINED. AGAINST THE ORDERS PASSED BY THE A.O. U/S 201(1)/201(1A) OF THE ACT WHILE GIVING EFFECT TO THE ORDERS OF THE LD. CI T(A) PASSED IN THE FIRST ROUND, SCIL AGAIN PREFERRED ITS APPEAL BEFORE THE LD. CIT( A) AND AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF SCIL AS WELL AS THE M ATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) DISMISSED THE SAID APPEALS O F THE SCIL VIDE THREE SEPARATE ORDERS PASSED ON 15-5-2009. AGAINST THESE ORDERS PASSED BY THE LD. CIT(A) IN THE SECOND ROUND, SCIL HAS AGAIN PREFERRE D ITS APPEAL BEFORE THE TRIBUNAL BEING ITA NO. 4319, 4767 AND 4768/MUM/2009 . 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN ITS APPEA LS BEING ITA NO. 3672 TO 3674/MUM/2008, SCIL, THE ASSESSEE HAS RAISED A SOLI TARY COMMON ISSUE AS TO WHETHER THE LD. CIT(A), ON THE FACTS AND AS PER THE PROVISIONS OF THE ACT, IS JUSTIFIED IN HOLDING A VIEW THAT THE PROVISIONS OF SECTION 44B OF THE ACT ARE DIRECTLY APPLICABLE IN ITS CASE. THE LD. REPRESENT ATIVES OF BOTH THE SIDES AT THE TIME OF HEARING BEFORE US HAVE AGREED THAT THIS ISS UE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBU NAL IN ASSESSEES OWN CASE FOR A.Y. 2003-04 RENDERED VIDE ITS ORDER DATED 15 TH DECEMBER, 2009 PASSED IN ITA NO. 9143/MUM/2004. A COPY OF THE SAID ORDER IS PLACED ON RECORD BEFORE US AND PERUSAL OF THE SAME SHOWS THAT A SIMILAR ISS UE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE VIDE PARA 7 TO 9 OF ITS ORDER WHICH READ AS UNDER:- 9 APPEALS, 3 C.O. SCIL 7 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. SECTIO N 44B READ AS FOLLOWS :- SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS OF SHIPPING BUSINESS IN THE CASE OF NON-RESIDENTS- (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTIONS 28 TO 43A, IN THE CA SE OF AN ASSESSEE, BEING A NON- RESIDENT, ENGAGED IN THE BUSINESS OF OPERATION OF S HIPS, A SUM EQUAL TO SEVEN AND A HALF PER CENT OF THE AGGREGATE OF THE AMOUNTS SPE CIFIED IN SUB-SECTION (2) SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSIN ESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON. (2) THE AMOUNTS REFERRED TO IN SUB-SECTION (1) SH ALL BE THE FOLLOWING, NAMELY : ( I ) THE AMOUNT PAID OR PAYABLE (WHETHER IN OR OUT OF INDIA) TO THE ASSESSEE OR TO ANY PERSON ON HIS BEHALF ON ACCOUNT OF THE CARRI AGE OF PASSENGERS, LIVESTOCK, MAIL OR GOODS SHIPPED AT ANY PORT IN INDIA; AND ( II ) THE AMOUNT RECEIVED OR DEEMED TO BE RECEIVED IN I NDIA BY OR ON BEHALF OF THE ASSESSEE ON ACCOUNT OF THE CARRIAGE OF PASSENGE RS, LIVESTOCK, MAIL OR GOODS SHIPPED AT ANY PORT OUTSIDE INDIA. CHARTERING IS AN ACTIVITY WITHIN THE SHIPPING INDUSTRY. IN SO ME CASES A CHARTERER MAY OWN CARGO AND EMPLOY A SHIPBROKER TO FIND A SHIP TO DELIVER THE CARGO FOR A CERTAIN PRICE, CALLED FREIGHT RATE. A C HARTERER MAY ALSO BE A PARTY WITHOUT A CARGO WHO TAKES A VESSEL ON CHARTER FOR A SPECIFIED PERIOD FROM THE OWNER AND THEN TRADES THE SHIP TO CARRY CARGO AT A PROFIT ABOVE THE HIRE RATE, OR EVEN MAKES A PROFIT IN A RISING MARKET BY RE-LET TING THE SHIP OUT TO OTHER CHARTERERS. A VOYAGE CHARTER IS THE HIRING OF VESSEL AND CREW FOR A VOYAGE BETW EEN A LOAD PORT AND A DISCHARGE PORT. THE CHARTERER PAYS THE V ESSEL OWNER ON A PER-TON OR LUMP-SUM BASIS. THE OWNER PAYS THE PORT COSTS (EXCL UDING STEVEDORING), FUEL COSTS AND CREW COSTS. A BAREBOAT CHARTER IS AN ARRANGEMENT FOR THE HIRING OF A VESSEL WHERE BY NO ADMINISTRATION OR TECHNICAL MAINTENANCE IS INCLUDED AS PART OF THE AGREEMENT. THE CHARTERER PAYS FOR ALL OPERATING EXPENSES, INCL UDING FUEL, CREW, PORT EXPENSES AND HULL. 8. IN THE PRESENT APPEAL, THERE IS NO DISPUTE THAT THE CHARTERING BY SCI WAS A VOYAGE CHARTER. THERE IS ALSO NO DISPUTE THAT THE CHARTERED SHIPS OPERATED IN INTERNATIONAL WATERS AND PAYMENTS WERE MADE TO THE SHIP OWNERS OUTSIDE INDIA IN FOREIGN CURRENCIES. SECTION 44B(1) REFERS TO AN ASSESSEE WHO IS A NON RESIDENT, WHO IS IN RECEIPT OF AMOUNTS SPE CIFIED IN SUB-SECTION (2) OF SECTION 44B. SUB-SECTION (2) OF SECTION 44B REFERS TO TWO SITUATIONS :- (1) THE FIRST SITUATION TALKS ABOUT SHIPPING OF GOODS F ROM A PORT IN INDIA. THE AMOUNT PAID OR PAYABLE (WHETHER IN OR OUT OF IN DIA) TO THE 9 APPEALS, 3 C.O. SCIL 8 ASSESSEE OR TO ANY PERSON, ON HIS BEHALF ON ACCOUNT OF THE CARRIAGE OF PASSENGERS, LIVESTOCK, MAIL OR GOODS SHIPPED AT ANY PORT IN INDIA. ADMITTEDLY IN THE CASE OF SCI, EVEN THE ASSESSING O FFICER HAS ACCEPTED THE FACT THAT CHARTERED SHIPS OPERATED IN INTERNATI ONAL WATERS. IF THAT BE SO THEN THE CONDITION THAT THE PAYMENT SHOULD BE FO R SHIPPING DONE AT ANY PORT IN INDIA IS NOT SATISFIED. (2) THE SECOND SITUATION TALKS ABOUT A CASE WHERE THE G OODS ARE NOT SHIPPED FROM A PORT IN INDIA BUT IN RESPECT OF CHAR TERING ACTIVITY, RECEIPT OF AMOUNTS IS ACTUALLY IN INDIA OR BY FICTION DEEME D TO BE RECEIVED IN INDIA. THE AMOUNT SHOULD BE RECEIVED OR DEEMED TO B E RECEIVED IN INDIA BY OR ON BEHALF OF THE SCI ON ACCOUNT OF THE CARRIA GE OF PASSENGERS, LIVESTOCK, MAIL OR GOODS SHIPPED AT ANY PORT OUTSID E INDIA. ADMITTEDLY IN THE PRESENT THE AMOUNTS WERE PAID BY SCI OUTSIDE IN DIA IN FOREIGN CURRENCY. 9. THUS, THE RECEIPTS IN THE HANDS OF THE RECEIPIEN T COULD NOT BE BROUGHT WITHIN THE FOLD OF SECTION 44B OF THE ACT. THE FIND INGS OF LEARNED CIT(A) WITHOUT TAKING INTO CONSIDERATION THIS FACTUAL ASPE CT IN OUR VIEW CANNOT BE SUSTAINED. WE THEREFORE HOLD THAT THE RECIPIENTS OF THE PAYMENTS FROM SCI CANNOT BE CHARGED TO TAX ON THE RECEIPTS FROM SCI U /S. 44B OF THE ACT. THEREFORE THE PAYMENTS BY THE SCI WERE NOT CHARGEAB LE TO TAX IN INDIA AND THEREFORE THERE WAS NO OBLIGATION ON THE PART OF TH E SCI TO DEDUCT TAX AT SOURCE U/S. 195 OF THE ACT. CONSEQUENTLY THE ORDER OF LEARNED CIT(A) TO THIS EXTENT IS HELD TO BE NOT CORRECT. THE OTHER CONSEQU ENTIAL DIRECTIONS OF LEARNED CIT(A) ARE ALSO THEREFORE HELD TO BE NOT CORRECT. T HE APPEAL OF THE SCI TO THIS EXTENT IS ALLOWED. THE OTHER ISSUES RAISED BY THE S CI IN ITS GROUNDS OF APPEAL ARE NOT BEING ADJUDICATED SINCE THE PRELIMINARY ISS UE IS DECIDED IN FAVOUR OF THE SCI. 6. AS THE ISSUE INVOLVED IN THE YEARS UNDER CONSIDE RATION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO A.Y. 2003-04, WE RESPECTFULLY FOLLOW THE ORDER OF THE CO-ORDINATE BENCH OF THIS T RIBUNAL AND HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE PROVIS IONS OF SECTION 44B OF THE ACT ARE APPLICABLE TO THE PAYMENTS IN QUESTION MADE BY THE ASSESSEE. THE IMPUGNED ORDERS OF THE LD. CIT(A) FOR ASSESSMENT YE ARS 2004-05 TO 2006-07 ON THIS ISSUE ARE ACCORDINGLY SET ASIDE AND THE APP EALS OF THE ASSESSEE BEING ITA NO. 3672 TO 3674/MUM/2008 ARE ALLOWED. 7. AS A RESULT OF OUR DECISION RENDERED ABOVE SETTI NG ASIDE THE ORDERS OF THE LD. CIT(A) ON THE ISSUE OF APPLICABILITY OF PRO VISIONS OF SECTION 44B OF THE ACT TO THE PAYMENTS IN QUESTION MADE BY THE ASSESSE E, THE ORDERS PASSED BY 9 APPEALS, 3 C.O. SCIL 9 THE A.O. GIVING EFFECT TO THE DIRECTIONS OF THE LD. CIT(A) PURSUANT TO THE APPLICABILITY OF SECTION 44B OF THE ACT AND THE FUR THER PROCEEDINGS EMANATING FROM THE SAID ORDERS INCLUDING APPEALS FILED BY SCI L BEING ITA NO. 4319, 4767 & 4768/MUM/2009 HAVE BECOME INFRUCTUOUS. THE SAID A PPEALS ARE ACCORDINGLY DISMISSED AS INFRUCTUOUS. 8. IN ITS APPEALS BEING ITA NO. 4142 TO 4144/MUM/20 08, THE COMMON SOLITARY ISSUE RAISED BY THE REVENUE IS WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A ) IS JUSTIFIED IN HOLDING THAT THE PAYMENTS MADE BY THE ASSESSEE TO THE NON-RESIDE NT SHIP OWNERS SHOULD NOT BE CONSIDERED AS ROYALTY AS ENVISAGED IN CLAUSE (IVA) OF EXPLANATION 2 TO SECTION 9(I)(IV) OF THE INCOME TAX ACT. 9. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L FOR THE ASSESSEE SOUGHT TO SUPPORT THE IMPUGNED ORDERS OF THE LD. CIT(A) ON THIS ISSUE BY RELYING ON THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF MAHINDRA & MAHINDRA VS. DCIT, 30 SOT 374(MUM) [SB] WHEREIN IT WAS HELD THAT NO ASSESSMENT HAVING BEEN MADE IN THE HANDS OF THE PAY EE IN RESPECT OF THE AMOUNT PAID BY THE ASSESSEE AND THERE BEING NO COUR SE LEFT FOR THE REVENUE FOR MAKING SUCH ASSESSMENT OF THE PAYEE ON ACCOUNT OF THE TIME LIMIT FOR ISSUING NOTICES U/S 148 OF THE ACT HAVING COME TO A N END, THE PAYER COULD NOT BE TREATED AS THE ASSESSEE IN DEFAULT BY PASSING OR DER U/S 195 R.W.S. 201(1) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE OF MAHINDRA & MAH INDRA (SUPRA) IS DIRECTLY APPLICABLE IN THE PRESENT CASE AS THERE ARE NO ASSE SSMENT THAT HAVE BEEN MADE IN THE HANDS OF THE PAYEES IN RESPECT OF THE A MOUNT IN QUESTION PAID BY THE ASSESSEE FOR ALL THREE YEARS UNDER CONSIDERATIO N AND EVEN THE TIME LIMIT FOR THE ISSUING THE NOTICES U/S 148 OF THE ACT HAVI NG ALREADY COME TO AN END, THERE IS NO COURSE LEFT TO THE REVENUE FOR MAKING S UCH ASSESSMENTS. HE CONTENDED THAT THE ORDERS PASSED BY THE A.O. U/S 20 1(1) OF THE ACT IN THE PRESENT CASE TREATING SCIL AS THE ASSESSEE IN DEFAU LT THEREFORE CANNOT BE 9 APPEALS, 3 C.O. SCIL 10 SUSTAINED AS PER THE DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA). 10. ALTHOUGH THE LD. D.R. HAS NOT DISPUTED THE POSI TION THAT NO ASSESSMENTS HAVE BEEN MADE IN THE HANDS OF THE PAYE ES IN RESPECT OF THE AMOUNTS IN QUESTION PAID BY THE ASSESSEE FOR ALL TH E THREE YEARS UNDER CONSIDERATION AND EVEN THE TIME LIMIT FOR ISSUING N OTICES U/S 148 OF THE ACT HAVING ALREADY COME TO AN END, THE REVENUE IS LEFT WITH NO COURSE TO MAKE SUCH ASSESSMENTS, HE STRONGLY OBJECTED TO THE CONTE NTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ISSUE UNDER CONSIDERATION IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF SPECIAL BENCH OF ITAT I N THE CASE OF MAHINDRA & MAHINDRA (SUPRA). HE CONTENDED THAT THE PLEA TAKEN BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ORDER PASSED U/S 201(1) OF TH E ACT WITHIN A PERIOD OF SIX YEARS BECOMES INVALID BY THE MERE FACT THAT NO ORDE R OF ASSESSMENT IS PASSED IN CASE OF NON-RESIDENT PAYEE WITHIN SUCH PERIOD OF SIX YEAR AS PER THE RATIO OF MAHINDRA & MAHINDRA (SUPRA) NEEDS TO BE APPRECIATED ON THE FACTS OF EACH CASE AND THE SPECIAL BENCH DECISION IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) CANNOT BE APPLIED IPSO-FACTO TO EACH CASE IN VIEW OF THE SUBSEQUENT AMENDMENTS MADE IN THE INCOME TAX ACT AS WELL AS TH E JUDICIAL PRONOUNCEMENTS OF HONBLE SUPREME COURT AND HIGH CO URT. HE CONTENDED THAT NO DOUBT THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) HAS BEEN SUBSEQUENTLY FOLLOWED BY THE DIVISION BENCHES OF THE TRIBUNAL IN THE CASES CITED BY THE LD. COUNSEL FOR THE ASSESSEE, BUT SOME IMPORTANT ASPECTS RELATING TO THE APPLICATION OF TH E SAID DECISION OF THE SPECIAL BENCH APPARENTLY WERE NOT POINTED OUT ON BE HALF OF THE DEPARTMENT AT THE TIME HEARING OF THE SAID CASES. HE CONTENDED T HAT THE QUESTION BEFORE THE SPECIAL BENCH IN THE CASE OF MAHINDRA & MAHINDRA (S UPRA) WAS RELATING TO THE TIME LIMIT AVAILABLE FOR PASSING ORDER U/S 201(1) O F THE ACT IN THE ABSENCE OF ANY EXPRESS PROVISION IN THE ACT IN THIS REGARD AND THE QUESTION OF TIME LIMIT FOR PASSING AN ASSESSMENT ORDER IN THE CASE OF PAYE E WAS NEVER FOR 9 APPEALS, 3 C.O. SCIL 11 CONSIDERATION BEFORE THE SPECIAL BENCH. HE CONTEND ED THAT THE OBSERVATION RECORDED BY THE SPECIAL BENCH RELATING TO TIME LIMI T AVAILABLE FOR MAKING ASSESSMENT IN THE HANDS OF THE PAYEE THEREFORE WAS OUT OF CONTEXT OF THE QUESTION REFERRED TO IT AND THE SAME THEREFORE WAS IN THE NATURE OF OBITER-DICTA AND NOT THE RATIO-DESCENDI . 11. THE LD. D.R. CONTENDED THAT WHEN THE ORDER U/S 201(1) OF THE ACT IS PASSED WITHIN THE PERMISSIBLE TIME LIMIT, THE SAME CANNOT RENDER INVALID ON THE BASIS OF ANY SUBSEQUENT EVENT SUCH AS NON-PASSI NG OF ASSESSMENT ORDER IN THE CASE OF PAYEE WITHIN THE PRESCRIBED LIMIT. H E REFERRED TO THE AMENDMENT MADE IN SECTION 201 OF THE ACT BY INSERTING SUB SEC TION (3) PRESCRIBING TIME LIMIT FOR MAKING ORDER U/S 201(1) OF THE ACT. HE PO INTED OUT THAT THE TIME LIMIT FOR PASSING ORDER U/S 201(1) OF THE ACT NOW HAS BEE N PRESCRIBED BY WAY OF THE SAID AMENDMENT IN CASE OF PAYMENTS TO BE MADE TO RE SIDENT DEDUCTEE ONLY AND NOT TO NON-RESIDENT DEDUCTEE. HE INVITED OUR AT TENTION TO THE MEMORANDUM EXPLAINING THE SAID AMENDMENT WHEREIN IT IS CLARIFIED THAT NO TIME LIMIT IS PRESCRIBED IN CASE OF PAYMENTS TO BE MADE TO NON-RESIDENT DEDUCTEES AS IT IS ADMINISTRATIVELY DIFFICULT TO RE COVER THE TAX FROM THE NON- RESIDENTS. HE CONTENDED THAT ALTHOUGH THE SAID AME NDMENT HAS BEEN MADE W.E.F. 1-4-2010, THE INTENTION OF THE PARLIAMENT AS EXPLAINED AND CLARIFIED IN THE MEMORANDUM WAS THERE FROM THE BEGINNING ITSELF. HE POINTED OUT THAT THE PAYEES IN THE PRESENT CASE ARE ALSO NON-RESIDENTS W HICH HAVE NOT FILED ANY RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION N OR PAID ANY TAXES. HE CONTENDED THAT THE ORDERS U/S 201(1) OF THE ACT FOR ALL THE THREE YEARS UNDER CONSIDERATION IN THE PRESENT CASE HAVE BEEN PASSED BY THE A.O. WITHIN A PERIOD OF SIX YEARS FROM THE END OF THE RELEVANT AS SESSMENT YEARS AS PRESCRIBED IN THE PROVISIONS OF SECTION 201(3) OF T HE ACT AND SUCH VALID ORDERS PASSED WITHIN THE PRESCRIBED TIME LIMIT COULD NOT B E HELD TO BE INVALID ON THE BASIS OF NON-PASSING OF ASSESSMENT ORDERS IN THE CA SE OF PAYEES WITHIN THE PRESCRIBED TIME LIMIT RELYING ON THE DECISION OF SP ECIAL BENCH OF ITAT IN THE 9 APPEALS, 3 C.O. SCIL 12 CASE OF MAHINDRA & MAHINDRA (SUPRA). HE CONTENDED THAT THE DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE OF MAHINDRA & MAH INDRA (SUPRA) HOLDING THE ORDERS PASSED U/S 201(1) OF THE ACT AS INVALID ON SUCH BASIS IS THUS NEGATED BY THE STATUTE BY MAKING AMENDMENT CLARIFYI NG THAT IN CASE OF NON- RESIDENT DEDUCTEES, THERE IS NO TIME LIMIT FOR PASS ING ORDER U/S 201(1) OF THE ACT. 12. THE LD. D.R. EXPLAINED THE NATURE OF ORDER PASS ED U/S 201(1) OF THE ACT IN THE CASE OF PAYER AND HOW THE SAME IS DISTINCT A ND SEPARATE FROM THE ASSESSMENT MADE IN THE CASE OF PAYEE. HE SUBMITTED THAT THE ORDER U/S 201(1) OF THE ACT IN CASE OF PAYER AND THE ASSESSME NT IN CASE OF PAYEE ARE TWO MUTUALLY EXCLUSIVE INDEPENDENT PROCEEDINGS WHICH OP ERATE IN DIFFERENT SPHERES. ACCORDING TO HIM, SECTION 201 OF THE ACT IS A MACHINERY PROVISION FOR FASTENING THE LIABILITY OF TAX IN CASE OF DEFAULT/M ISCHIEF OF PROVISION OF 195 WHEREAS THE ASSESSMENT OF NON-RESIDENT PAYEE IS DEP ENDENT ON VARIOUS FACTORS INCLUDING THE NATURE OF RECEIPT, NATURE OF ACTIVITY, ITS STATUS, ITS PRESENCE IN INDIA THROUGH PE, PRESENCE OR ABSENCE O F DTAA ETC. HE SUBMITTED THAT SOMETIMES FILING OF RETURN OF INCOME HAS BEEN EXEMPTED BY ACT ITSELF TO SOME NON-RESIDENTS AND HENCE PASSING ASSESSMENT ORD ER IN EACH CASE OF NON- RESIDENT PAYEE IS NOT SINE QUA NON FOR ENFORCING TH E PROVISIONS OF SECTION 195 OR ENFORCING THE LIABILITY U/S 201(1) OF THE ACT. RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ELBEE SERV ICES [247 ITR 109(BOM)], HE CONTENDED THAT ASSESSMENT U/S 195(2) OF THE ACT IS TENTATIVE AND NOT CONCLUSIVE IN SO FAR AS REGULAR ASSESSMENT OF PAYEE IS CONCERNED AND THE A.O. IS NOT PRECLUDED FROM TAKING A DIFFERENT VIEW IN CA SE OF PAYEE. HE CONTENDED THAT ORDER U/S 201(1)/201(1A) IN CASE OF PAYER AND THE ASSESSMENT PROCEEDINGS IN CASE OF PAYEE THUS ARE INDEPENDENT A ND NOT PARALLEL PROCEEDINGS REQUIRED TO BE CARRIED MANDATORILY IN E ACH AND EVERY CASE OF DEFAULT UNDER SECTION 195 OF THE ACT. 9 APPEALS, 3 C.O. SCIL 13 13. RELIANCE WAS PLACED BY THE LD. D.R. ON THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF DELHI DEVELOPMENT AUTHORITY [2 52 ITR 772 (SC)] WHEREIN THE ORDER U/S 201(1) WAS HELD TO BE AN ORDER ASSESS MENT. HE CONTENDED THAT IF THIS IS SO, THEN HOW CAN ONE ORDER OF ASSESSMENT IN HANDS OF PAYER PASSED VALIDLY WITHIN TIME CAN BECOME INVALID BY NON-PASSI NG OF ANOTHER ORDER OF ASSESSMENT IN THE HANDS OF THE PAYEE. HE CONTENDED THAT THE PROPOSITION PROPOUNDED BY THE SPECIAL BENCH OF ITAT IN THE CASE OF MAHINDRA & MAHINDRA THUS IS NOT IN LINE WITH THE VIEWS EXPRESS ED BY THE HONBLE APEX COURT IN THE CASE OF DELHI DEVELOPMENT AUTHORITY (S UPRA) THAT THE TERM ASSESSEE INCLUDES ACTUAL ASSESSEE AS WELL AS DEEMED ASSESSEE. HE CONTENDED THAT IT IS THUS CLEAR THAT ONCE AN ORDER U/S 201 IS PASSED LAWFULLY WITHIN TIME AND WAS VALID AS ON DATE OF PASSING SUCH ORDER, THE N SUBSEQUENTLY ON HAPPENING OR NON-HAPPENING OF ANY OTHER EVENT WILL NOT MAKE SUCH ORDER VOID AB INITIO. HE CONTENDED THAT HOLDING OF VALID ORDE R TO BE INVALID JUST DUE TO PASSAGE OF TIME WHEREIN SOME ACTION IN CASE OF PAYE E HAD NOT BEEN TAKEN WOULD BE AGAINST THE LEGAL PRINCIPLES ESPECIALLY WH EN THE STATUTE DOES NOT PROVIDE SO. HE RELIED ON THE DECISION OF CO-ORDINAT E BENCH OF THIS TRIBUNAL IN THE CASE OF MERCHANT SHIPPING SERVICES LTD. [129 IT D 109 (MUM)] AND SPECIFICALLY REFERRED TO THE OBSERVATIONS RECORDED BY THE TRIBUNAL IN PARA 31 TO 33 OF ITS ORDER TO CONTEND THAT THE TRIBUNAL AFTER TAKING INTO CONSIDERATION THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF MA HINDRA & MAHINDRA (SUPRA) HAS CLARIFIED THE POSITION THAT ASSESSMENT OF PAYEE IS NOT SINE QUA NON FOR HOLDING VALIDITY OF ORDER PASSED U/S 201(1) WITHIN THE TIME. 14. IN THE REJOINDER, THE LD. COUNSEL FOR THE ASSES SEE AT THE OUTSET POINTED OUT THAT THE APPEAL FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE SPECIAL BENCH IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) HA S BEEN ADMITTED BY THE HONBLE BOMBAY HIGH COURT AND THE ISSUE INVOLVED TH EREIN IS NOW PENDING BEFORE THE HONBLE BOMBAY HIGH COURT. AS REGARDS TH E CONTENTION OF THE LD. D.R. THAT A VERY LIMITED ISSUE WAS INVOLVED IN THE CASE OF MAHINDRA & 9 APPEALS, 3 C.O. SCIL 14 MAHINDRA (SUPRA) RELATING TO TIME LIMIT AVAILABLE F OR PASSING ORDER U/S 201(1) OF THE ACT AND THAT THE SPECIAL BENCH HAS GONE BEYO ND THIS ISSUE, HE SUBMITTED THAT THE ENTIRE APPEAL IN THE CASE OF MAH INDRA & MAHINDRA WAS DISPOSED OF BY THE SPECIAL BENCH OF THE TRIBUNAL AN D NOT ONLY A SPECIFIC ISSUE REFERRED TO IT. HE POINTED OUT THAT THE ISSUE RELA TING TO THE REASONABLE TIME LIMIT FOR PASSING ORDER U/S 201(1) OF THE ACT IN TH E ABSENCE OF ANY EXPRESS PROVISION THERE IN THE STATUTE WAS CONSIDERED AND D ECIDED BY THE SPECIAL BENCH INITIALLY AND THIS ISSUE IS NOT INVOLVED IN T HE PRESENT CASE. HE THEN REFERRED TO THE PAGE 309 OF THE RELEVANT REPORT AND POINTED OUT THAT THE NEXT ISSUE CONSIDERED BY THE SPECIAL BENCH WAS WHETHER T HE ORDER PASSED U/S 201(1) OF THE ACT WITHIN THE LIMITATION PERIOD CAN BE SUSTAINED WITHOUT ESTABLISHING THE CHARGEABILITY OF THE RELEVANT AMOU NT TO TAX IN INDIA IN THE HANDS OF THE DEDUCTEE. HE READ OUT THE RELEVANT OB SERVATIONS RECORDED BY THE TRIBUNAL ON THIS ISSUE AT PAGE 313 TO 318 OF THE RE PORT TO SHOW THAT THIS ISSUE WAS DECIDED BY THE SPECIAL BENCH IN PRINCIPLE ON ME RIT HOLDING THAT IF THE CHARGEABILITY OF THE AMOUNT TO TAX IN INDIA IS NOT ESTABLISHED IN THE HANDS OF THE DEDUCTEE BY MAKING AN ASSESSMENT AND THERE IS N O COURSE LEFT TO THE REVENUE TO MAKE SUCH ASSESSMENT, ORDER U/S 201(1) T REATING THE DEDUCTOR AS THE ASSESSEE IN DEFAULT CANNOT BE SUSTAINED. HE CO NTENDED THAT ALL THE ARGUMENTS RAISED BY THE LD. D.R. AS WELL AS CASE LA WS RELIED UPON IN SUPPORT ON THE PROPOSITION THAT ORDER U/S 201(1) PASSED VAL IDLY CANNOT BE HELD TO BE INVALID ON THE BASIS OF SUBSEQUENT EVENT THUS ARE N OT RELEVANT IN THE PRESENT CONTEXT AND ISSUE INVOLVED IS SQUARELY COVERED IN F AVOUR OF THE ASSESSEE BY THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF MA HINDRA & MAHINDRA (SUPRA). HE CONTENDED THAT THE SAID DECISION OF TH E SPECIAL BENCH IS BINDING ON THE DIVISION BENCH AND URGED THAT THE SAME SHOUL D BE FOLLOWED BY THIS DIVISION BENCH. AS REGARDS THE RELIANCE PLACED BY T HE ASSESSEE ON THE AMENDMENTS MADE IN SECTION 201(1) OF THE ACT AND TH E MEMORANDUM EXPLAINING SUCH AMENDMENTS, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE SAID AMENDMENTS FIRST OF ALL ARE MADE EFFECTIVE FROM 1-4-2010 AND THE 9 APPEALS, 3 C.O. SCIL 15 SAME THEREFORE ARE NOT APPLICABLE TO THE YEARS UNDE R CONSIDERATION. HE ALSO CONTENDED THAT THE DEPARTMENT IS SUFFICIENTLY EMPOW ERED TO PROCEED EVEN AGAINST THE NON-RESIDENT TO RECOVER THE TAX, IF ANY , PAYABLE BY HIM IN INDIA EVEN IF THE SAID NON-RESIDENT DOES NOT HAVE ANY EXI STENCE IN INDIA. HE CONTENDED THAT THE AMENDMENTS IN SECTION 201(1) OF THE ACT RELIED UPON BY THE LD. D.R., IN ANY CASE, ARE APPLICABLE IN THE CO NTEXT OF TIME LIMIT AVAILABLE FOR PASSING ORDER U/S 201(1) AND THE SAME ARE NOT R ELEVANT TO THE ISSUE INVOLVED IN THE PRESENT CASE. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN SUPPORT OF THE CA SE OF THE ASSESSEE ON THE ISSUE UNDER CONSIDERATION, THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON THE DECISION OF SPECIAL BENCH OF THE ITAT IN THE CASE O F MAHINDRA & MAHINDRA (SUPRA) WHEREIN IT WAS HELD INTER ALIA THAT NO ORDE R U/S 201(1)/201(1A) OF THE ACT CAN BE PASSED WHERE THE REVENUE HAS NOT TAKEN A NY ACTION AGAINST THE PAYEE AND FURTHER THE TIME LIMIT FOR TAKING ACTION AGAINST THE PAYEE U/S 147 OF THE ACT HAS ALSO EXPIRED. THE LD. D.R. HAS NOT D ISPUTED THE FACT THAT NO ACTION HAS BEEN TAKEN BY THE REVENUE AGAINST THE PA YEES IN THE PRESENT CASE AND THAT THE TIME LIMIT FOR TAKING SUCH ACTION U/S 147 OF THE ACT HAS ALREADY EXPIRED. HE HOWEVER HAS CONTENDED THAT THE ISSUE I NVOLVED FOR CONSIDERATION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) WAS DIFFERENT RELATING TO AVAILABILITY OF T IME LIMIT TO PASS AN ORDER U/S 201(1) OF THE ACT IN THE ABSENCE OF ANY EXPRESS PRO VISION IN THE ACT PROVIDING FOR SUCH TIME LIMIT. HE HAS CONTENDED THAT THE OBSE RVATIONS MADE BY THE SPECIAL BENCH THAT NO ORDER U/S 201(1)/201(1A) OF T HE ACT CAN BE PASSED WHERE THE REVENUE HAS NOT TAKEN ANY ACTION AGAINST THE PAYEE WITHIN THE PERMISSIBLE TIME LIMIT THUS ARE ONLY PASSING OBSERV ATIONS AND THE SAME ARE IN THE NATURE OF OBITER-DICTA WHICH IS NOT BINDING ON THE DIVISION BENCH. IT IS NO DOUBT TRUE THAT THE ISSUE SPECIFICALLY REFERRED FOR CONSIDERATION AND THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MAHIND RA & MAHINDRA (SUPRA) 9 APPEALS, 3 C.O. SCIL 16 WAS WHAT SHOULD BE THE REASONABLE TIME FOR THE PASS ING OF THE ORDER U/S 201(1) OF THE ACT AND IT WAS HELD BY THE SPECIAL BE NCH OF THE ITAT THAT THE REASONABLE TIME FOR INITIATING AND COMPLETING THE P ROCEEDING U/S 201(1) HAS TO BE AT PAR WITH THE TIME LIMIT AVAILABLE FOR INIT IATING AND COMPLETING THE REASSESSMENT AS THE ASSESSMENT INCLUDES REASSESSMEN T. ACCORDINGLY IT WAS HELD BY THE SPECIAL BENCH AFTER ELABORATE DISCUSSIO N AND DELIBERATION ON PAGE 309 OF THE REPORT THAT THE ORDER PASSED U/S 201(1)/ 201(1A) OF THE ACT CANNOT BE HELD TO BE BARRED BY LIMITATION IN LAW IF IT IS NOT PASSED WITHIN FOUR YEARS FROM THE END OF THE RELEVANT FINANCIAL YEAR AND ACC ORDINGLY THIS ISSUE WAS DECIDED BY THE SPECIAL BENCH AGAINST THE ASSESSEE I N THE CASE OF MAHINDRA & MAHINDRA (SUPRA). 16. AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR T HE ASSESSEE, THE ENTIRE APPEAL FILED IN THE CASE OF MAHINDRA & MAHINDRA (SU PRA) WAS BEFORE THE SPECIAL BENCH AND THE SAME INDEED WAS ENTIRELY DISP OSED OF BY THE SPECIAL BENCH. ACCORDINGLY, AFTER DECIDING FINALLY THE ISS UE RELATING TO THE REASONABLE TIME LIMIT AVAILABLE U/S 201(1)/201(1A) OF THE ACT ON PAGE NO. 309 OF THE REPORT, THE SPECIAL BENCH PROCEEDED TO CONSIDER THE NEXT ISSUE INVOLVED IN THE APPEAL OF THE ASSESSEE AS TO WHETHER THERE WAS ANY LIABILITY U/S 201(1) OF THE ACT ON THE ASSESSEE IN THE CASE OF MAHINDRA & MAHIN DRA (SUPRA) AND IT WAS HELD BY THE SPECIAL BENCH IN THIS CONTEXT THAT THE PRE-REQUISITE CONDITION FOR THE APPLICATION OF SECTION 195 AND THEREAFTER SECTI ON 201 IS THAT THE AMOUNT PAID TO THE NON-RESIDENT IS OTHERWISE CHARGEABLE TO TAX UNDER THE PROVISIONS OF THE ACT. IT WAS HELD THAT IF THE AMOUNT PAID OR PA YABLE BY THE NON-RESIDENT IS NOT CHARGEABLE TO TAX UNDER THE REGULAR PROVISIONS OF THE ACT OR SUCH AMOUNT IS NOT TAXABLE BY VIRTUE OF THE PROVISIONS OF THE D TAA ENTERED INTO BY INDIA WITH SUCH OTHER COUNTRY OF WHICH THE NON-RESIDENT I S RESIDENT IN ACCORDANCE WITH CHAPTER IX, THEN THE PROVISIONS OF CHAPTER XVI I ABOUT THE COLLECTION AND RECOVERY OF TAX ARE RULED OUT AND THE PERSON RESPON SIBLE FOR PAYING SUCH SUM CANNOT BE FASTENED WITH ANY LIABILITY FOR DEDUCTION OF TAX AT SOURCE AND CANNOT 9 APPEALS, 3 C.O. SCIL 17 UNDER ANY CIRCUMSTANCES BE TREATED AS THE ASSESSEE IN DEFAULT. IT WAS HELD THAT THE UNDERLYING PRINCIPLE BEHIND THE DEDUCTION OF TAX AT SOURCE IS THE PRESUMPTION THAT THERE WILL BE SOME LIABILITY OF TH E PAYEE TOWARDS TAX ON THE SUM PAID TO HIM. IF THERE IS NO SUCH LIABILITY THEN THE ENTIRE EXERCISE OF FIRSTLY GETTING THE AMOUNT OF TAX COLLECTED/DEDUCTED AT SOU RCE AND THEN REFUNDING TO THE PAYEE WILL BE FUTILE. IF THERE IS NO TAX LIABIL ITY OF THE PAYEE, THEN THERE CANNOT BE ANY QUESTION OF TREATING THE PERSON RESPO NSIBLE FOR PAYING THE SUM WITHOUT DEDUCTING TAX AT SOURCE AS THE ASSESSEE IN DEFAULT. IT WAS HELD THAT THE ESSENCE OF PROVISIONS OF DEDUCTION OF TAX AT SO URCE IS THAT THERE IS A PRESUMPTION OF LIABILITY OF THE PAYEE TO TAX ON THE INCOME. IT WAS HELD BY THE SPECIAL BENCH PRECEDENT THAT IT IS THUS CLEAR THAT THOUGH THE DUTY OF DEDUCTION OF TAX AT SOURCE WAS THERE AT THE TIME OF MAKING THE PAYMENT OR CREDITING THE ACCOUNT OF THE PAYEE, BUT ITS FAILURE WILL NOT LEAD TO ADVERSE CONSEQUENCES BY TREATING THE PERSON PAYING THE INCO ME AS THE ASSESSEE IN DEFAULT IF EVENTUALLY EITHER THE PAYEE IS NOT LIABL E TO TAX ON SUCH SUM OR HE HAS ALREADY PAID THE TAX DUE ON THE AMOUNT OF INCOM E SO RECEIVED. IT WAS HELD THAT THE QUESTION OF TREATING THE PERSON RESPONSIBL E FOR PAYING THE INCOME AS THE ASSESSEE IN DEFAULT BY WAY OF PASSING THE ORDER U/S 201(1) OF THE ACT THUS IS INTER ALIA TIED WITH THE TAX LIABILITY OF THE PA YEE ON SUCH SUM AND IF THE LIABILITY OF THE PAYEE TO TAX DOES NOT EXIST OR THO UGH THE INCOME IS CHARGEABLE TO TAX BUT THE LIABILITY OF THE PAYEE TO TAX HAS NO T BEEN DETERMINED BY PASSING ANY ORDER IN HIS HANDS AND FURTHER THE TIME LIMIT F OR TAKING ACTION ON THE PAYEE UNDER ANY OTHER PROVISION HAS ALSO PASSED OU T, IN SUCH A SITUATION AGAIN THE PASSING OF ORDER U/S 201(1) OF THE ACT WI LL BE MERE RITUAL IN SUCH A SITUATION. THE SPECIAL BENCH HELD THAT WHERE THE P AYEE HAS NOT OFFERED SUCH INCOME FOR TAXATION AND THERE IS NO REMEDY AVAILABL E WITH THE A.O. FOR TAXING SUCH INCOME IN THE HANDS OF THE PAYEE AS A RESULT O F THE TIME LIMIT FOR TAKING ACTION AGAINST THE PAYEE UNDER ANY POSSIBLE PROVISI ONS OF THE ACT HAVING EXPIRED, THE PAYEE CANNOT BE CHARGED ON SUCH INCOME AND CONSEQUENTLY THE 9 APPEALS, 3 C.O. SCIL 18 PERSON RESPONSIBLE FOR PAYING THE INCOME CANNOT BE TREATED AS THE ASSESSE IN DEFAULT. 17. IT IS THUS CLEAR THAT THE ISSUE AS TO WHETHER T HE ORDER PASSED BY THE A.O. U/S 201(1)/201(1A) OF THE ACT TREATING THE ASS ESSEE AS IN DEFAULT WAS SUSTAINABLE WAS DIRECTLY INVOLVED IN THE APPEAL FIL ED IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) AND THE SAME WAS SEPARATELY AND SP ECIFICALLY DECIDED BY THE SPECIAL BENCH HOLDING THAT NO ORDER U/S 201(1)/201( 1A) OF THE ACT CAN BE PASSED WHEN THE REVENUE HAS NOT TAKEN ANY ACTION AG AINST THE PAYEE AND FURTHER THE TIME LIMIT FOR TAKING ACTION AGAINST TH E PAYEE U/S 147 HAS ALSO EXPIRED. IT THEREFORE CANNOT BE SAID THAT THE OBSER VATIONS/FINDINGS RECORDED BY THE SPECIAL BENCH OF THE ITAT IN THIS CONTEXT AR E MERELY PASSING OBSERVATIONS IN THE NATURE OF OBITER-DICTA AS SOUGHT TO BE CONTENDED BY THE LD. D.R. IT ALSO APPEARS THAT THE LD. D.R. HAS MISDIREC TED HIMSELF IN ASSUMING THAT THE PROPOSITION PROPOUNDED BY THE SPECIAL BENC H IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) ON THE ISSUE OF REASONA BLE PERIOD AVAILABLE FOR PASSING ORDER U/S 201(1)/201(1A) OF THE ACT IS BEIN G RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE IN SUPPORT OF THE ASSESSEE S CASE ON THE ISSUE INVOLVED IN THE PRESENT APPEAL AND ACCORDINGLY HAS RAISED HIS CONTENTIONS AND HAS CITED VARIOUS JUDICIAL PRONOUNCEMENTS RELATING TO THIS ISSUE WHICH ACTUALLY ARE NOT RELEVANT IN THE PRESENT CONTEXT AS THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON THE PROPOSITION PROPOUNDED B Y THE SPECIAL BENCH IN THE CASE OF MAHINDRA & MAHINDRA ON THE OTHER ISSUE HOLDING THAT THE ORDER PASSED U/S 201(1)/201(1A) OF THE ACT TREATING THE A SSESSEE AS IN DEFAULT FOR ITS FAILURE TO DEDUCT TAX AT SOURCE CANNOT BE SUSTA INED WHERE THE REVENUE HAS NOT TAKEN ANY ACTION AGAINST THE PAYEE AND THE TIME LIMIT FOR TAKING SUCH ACTION HAS ALREADY EXPIRED. 18. THE LD. D.R. HAS ALSO RAISED AN ARGUMENT BY MAK ING AN ELABORATE SUBMISSION THAT THE ORDER PASSED U/S 201(1)/201(1A) OF THE ACT IS DISTINCT AND SEPARATE FROM THE ASSESSMENT MADE IN THE CASE O F THE DEDUCTEE AND THE 9 APPEALS, 3 C.O. SCIL 19 LIABILITY TO DEDUCT TAX AT SOURCE BEING DE HORS THE EVENTUAL LIABILITY OF THE NONRESIDENT, THE PERSON RESPONSIBLE FOR PAYING OR C REDITING ANY SUM CAN BE TREATED AS THE ASSESSEE IN DEFAULT EVEN WITHOUT THE POSSIBILITY OF FIXING THE LIABILITY TO TAX ON THE NON-RESIDENT. IT IS OBSERVE D THAT A SIMILAR ARGUMENT WAS RAISED ON BEHALF OF THE REVENUE EVEN IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) BUT THE SAME WAS REJECTED BY THE SPECIAL BE NCH HOLDING THE SAME TO BE FALLACIOUS. AS REGARDS THE AMENDMENTS MADE IN SE CTION 201(1) OF THE ACT WHICH HAVE BEEN RELIED UPON BY THE LD. D.R. IN SUPP ORT OF THE REVENUES CASE BY REFERRING TO THE LEGISLATIVE INTENTION EXPLAINED IN THE RELEVANT BOARD CIRCULARS, IT IS OBSERVED THAT THE SAID AMENDMENTS ARE MADE APPLICABLE PROSPECTIVELY W.E.F. 1-4-2010 AND AS RIGHTLY SUBMIT TED BY THE LD. COUNSEL FOR THE ASSESSEE, THE SAME CANNOT BE APPLIED IN THE PRE SENT CASE INVOLVING ASSESSMENT YEARS 2004-05, 2005-06 & 2006-07. 19. AS REGARDS THE RELIANCE PLACED BY THE LD. D.R. ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF BHURA EXPORTS LT D. VS. ITO [246 CTR (CAL). 482], IT IS OBSERVED THAT THE DECISION OF THE SPECI AL BENCH OF THE ITAT IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) HAS NOT BEEN AP PROVED BY THE HONBLE CALCUTTA HIGH COURT IN THE SAID CASE ONLY ON THE IS SUE OF PERIOD OF LIMITATION HOLDING THAT THERE BEING NO PERIOD OF LIMITATION PR ESCRIBED FOR TAKING ANY ACTION U/S 201 OF THE ACT AFTER DELETION OF SECTION 201 W.E.F. 1-4-1989 AND BEFORE INSERTION OF SUB-SECTION (3) IN SECTION 201 WITH EFFECT FROM 1-4-2010, THERE WAS NO QUESTION OF INVOKING REASONABLE PERIOD OF LIMITATION FOR ASSESSMENT YEAR 2002-03. IN SO FAR AS THE OTHER PR OPOSITION PROPOUNDED BY THE SPECIAL BENCH OF ITAT IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) IS CONCERNED, WHICH HAS BEEN RELIED UPON BY THE LD. CO UNSEL FOR THE ASSESSEE IN SUPPORT OF THE ASSESSEES CASE, THE SAME HAS NEITHE R BEEN DISAPPROVED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF BHURA EX PORTS LTD. (SUPRA) NOR IT HAS BEEN ADVERSELY COMMENTED UPON. 9 APPEALS, 3 C.O. SCIL 20 20. THE LD. D.R. HAS ALSO CITED THE DECISION OF CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. MERCHANT SHIPPING SERVICES (P.) LTD. 128 ITD 109 (MUM) AND HAS RELIED ON THE OBSERVATIONS RECORD ED BY THE TRIBUNAL IN PARA 31 TO 33 OF ITS ORDER WHICH READ AS UNDER:- 31 . SECOND GROUND RAISED BY THE ASSESSEE IN ITS CROSS- OBJECTION IS ABOUT THE HOLDING OF THE ORDER PASSED BY THE ASSESSING OFFICE R AS WITHIN REASONABLE TIME. THE LD. AR ARGUED THAT THE ORDER UNDER SECTIO N 201(1) AND 201(1A) WAS PASSED BY THE ASSESSING OFFICER ON 12-12-2008. IN T HE ABSENCE OF ANY TIME- LIMIT PROVIDED IN THE ACT FOR THE PASSING OF SUCH O RDER, THE LD. AR ARGUED, THAT IT OUGHT TO HAVE BEEN PASSED WITHIN A REASONABLE TI ME. IT WAS CONTENDED THAT THE PASSING OF SUCH ORDER AFTER FOUR YEARS FROM THE END OF THE FINANCIAL YEAR BE HELD TO BE TIME-BARRED. ON THE OTHER HAND, THE LD. DR ARGUED THAT THE PERIOD OF A LITTLE MORE THAN FOUR YEARS COULD NOT BE HELD TO BE UNREASONABLE. 32 . WE HAVE HEARD BOTH THE SIDES. THE LIABILITY OF THE PERSON RESPONSIBLE IS DEPENDENT UPON THE DEDUCTEE FAILING OR OTHERWISE TO PAY SUCH TAX DIRECTLY. THUS THE ACTION UNDER SECTION 201(1) IS DEPENDENT O N THE OUTCOME OF THE ASSESSMENT OF THE PAYEE AND THE TIME-LIMIT FOR PASS ING ORDER UNDER SECTION 201(1) HAS TO BE VIEWED IN THE LIGHT OF THE FATE OF THE ASSESSMENT IN THE HANDS OF THE RECIPIENT. LOGICALLY THE PERSON RESPONSIBLE FOR PAYING SUM CHARGEABLE TO TAX CAN BE TREATED AS ASSESSEE IN DEFAULT AT ANY TI ME PRIOR TO THE ASSESSMENT OF THE PAYEE OR THE TIME AVAILABLE FOR THE MAKING O F THE ASSESSMENT OF THE PAYEE. IF THE PERSONS RESPONSIBLE IS DEEMED TO BE A N ASSESSEE IN DEFAULT AFTER THE ASSESSMENT OF THE PAYEE OR THE TIME AVAILABLE F OR MAKING ASSESSMENT HAS EXPIRED THEN SUCH AMOUNT OF TAX WILL BE INCAPABLE O F ADJUSTMENT AGAINST TAX LIABILITY OF THE PAYEE AND WOULD REQUIRE RETURN TO SUCH PERSON WHO HAS BEEN TREATED AS ASSESSEE IN DEFAULT. THUS BOTH THE INITI ATION OF PROCEEDINGS UNDER SECTION 201(1) AS WELL AS THE COMPLETION OF SUCH PR OCEEDINGS BY PASSING ORDER HAVE TO BE PRIOR TO THE TIME-LIMIT WITHIN WHICH THE TAX CAN BE DETERMINED IN THE HANDS OF THE PAYEE. IT CANNOT BE BEYOND SUCH PE RIOD. IF THE PAYEE HAS INCLUDED THE AMOUNT RECEIVED FROM PAYER IN HIS TOTA L INCOME BUT THE TAX HAS NOT BEEN PAID IN FULL OR PART THEN THE PAYER CAN BE TREATED AS ASSESSEE IN DEFAULT TO THE EXTENT OF THE NON-PAYMENT OF TAX ON THE SUM PAID TO HIM PROVIDED THE TAX IS NOT RECOVERED FROM THE PAYEE. I F THE PAYEE HAS FURNISHED THE RETURN OF INCOME WITHOUT DISCLOSING THE SUM PAI D BY THE PAYER ON WHICH TAX WAS DEDUCTIBLE AS PER THE PROVISIONS OF THE ACT THEN THE TAX DEDUCTIBLE AT SOURCE CAN BE RECOVERED FROM THE PAYER BY TREATING HIM AS ASSESSEE IN DEFAULT IF THE INCOME HAS NOT BEEN ASSESSED IN THE HANDS OF THE PAYEE. STILL IN ANOTHER SITUATION WHERE THE PAYEE HAS NOT AT ALL FILED HIS RETURN OF INCOME AGAIN THE PERSON RESPONSIBLE CAN BE TREATED AS ASSESSEE IN DE FAULT IN RESPECT OF THE TAX ON THE SUM PAID BY HIM IN VIOLATION OF THE PROVISIO NS OF THIS CHAPTER. THUS, THERE REMAINS NO DIFFICULTY IN ANSWERING THE QUESTI ON THAT HOW MUCH TIME IS 9 APPEALS, 3 C.O. SCIL 21 AVAILABLE WITH THE REVENUE FOR TREATING THE PAYER A S ASSESSEE IN DEFAULT UNDER SECTION 201(1). THE OBVIOUS ANSWER IS THAT THE MAXI MUM TIME-LIMIT AVAILABLE FOR ASSESSMENT OF THE PAYEE IS THE MAXIMUM TIME-LIM IT WITHIN WHICH THE PAYER CAN BE TREATED AS ASSESSEE IN DEFAULT. WITH THE EXP ANSION OF THE SCOPE OF SECTION 147, ALSO ROPING IN THE CASES OF ASSESSMENT APART FROM REASSESSMENT, IT IS CLEAR THAT THE ASSESSMENT OF PAYEE SHALL ALSO INCLUDE ASSESSMENT MADE UNDER SECTION 147. THUS THE MAXIMUM TIME-LIMIT FOR INITIATING AND COMPLETING THE PROCEEDINGS UNDER SECTION 201(1) HAS TO BE AT P AR WITH THE TIME-LIMIT AVAILABLE FOR INITIATING AND COMPLETING THE REASSES SMENT. THIS IS THE VIEW WHICH HAS BEEN CANVASSED BY THE SPECIAL BENCH OF TH E TRIBUNAL IN MAHINDRA & MAHINDRAS CASE ( SUPRA ). 33. THE LEARNED A.R., WHEN CONFRONTED WITH THE ABOVE R EFERRED SPECIAL BENCH ORDER, CANDIDLY ADMITTED THAT THE ORDER PASSED BY T HE ASSESSING OFFICER IS WITHIN THE PERIOD OF SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. RESPECTFULLY FOLLOWING THE SPECIAL BENCH ORDER IN MAHINDRA & MAHINDRAS CASE ( SUPRA ), WE HOLD THAT THE ORDER PASSED BY THE ASSESSING O FFICER IS NOT TIME- BARRED. THIS GROUND IS NOT ALLOWED. 21. A PERUSAL OF THE ABOVE OBSERVATIONS RECORDED BY THE TRIBUNAL CLEARLY SHOWS THAT AN ENTIRELY DIFFERENT ISSUE WAS INVOLVED FOR THE CONSIDERATION OF THE TRIBUNAL IN THE CROSS OBJECTION FILED BY THE ASSESS EE. THE CASE OF THE ASSESSEE BEFORE THE TRIBUNAL WAS THAT THE ORDER U/S 201/201( 1A) OF THE ACT HAVING BEEN PASSED BEYOND A REASONABLE PERIOD OF SAY FOUR YEARS, THE SAME WAS BARRED BY LIMITATION. IN THIS REGARD, IT WAS HELD BY THE TRIBUNAL RELYING ON THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF MA HINDRA & MAHINDRA (SUPRA) THAT THE TIME LIMIT FOR PASSING ORDER U/S 201 OF TH E ACT HAS TO BE VIEWED IN THE LIGHT OF THE FATE OF THE ASSESSMENT IN THE HANDS OF THE RECIPIENT. IT WAS HELD THAT LOGICALLY THE PERSON RESPONSIBLE FOR PAYING SU M CHARGEABLE TO TAX CAN BE TREATED AS ASSESSEE IN DEFAULT AT ANY TIME PRIOR TO THE ASSESSMENT OF THE PAYEE OR THE TIME AVAILABLE FOR MAKING OF THE ASSESSMENT OF THE PAYEE. IT WAS HELD BY THE TRIBUNAL THAT BOTH THE INITIATION OF PROCEED INGS U/S 201(1) OF THE ACT AS WELL AS THE COMPLETION OF SUCH PROCEEDINGS BY PASSI NG ORDER HAVE TO BE PRIOR TO THE TIME LIMIT WITHIN WHICH THE TAX CAN BE DETER MINED IN THE HANDS OF THE PAYEE AND ACCORDINGLY THE ORDER PASSED BY THE A.O. U/S 201(1)/201(1A) OF THE 9 APPEALS, 3 C.O. SCIL 22 ACT WITHIN A PERIOD OF SIX YEARS WAS HELD TO BE NO T BARRED BY TIME BY THE TRIBUNAL FOLLOWING THE DECISION OF THE SPECIAL BENC H IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA). THE ISSUE RAISED IN ITS CROSS O BJECTION FILED BY THE ASSESSEE COMPANY IN THE CASE OF MERCHANT SHIPPING S ERVICES P. LTD. (SUPRA) THUS WAS ENTIRELY DIFFERENT FROM THE ISSUE INVOLVED IN THE PRESENT CASE AND THE RELIANCE OF THE LD. D.R. ON THE DECISION RENDERED B Y THE TRIBUNAL IN THE SAID CASE IS CLEARLY MISPLACED. 22. THE LD. D.R. HAS RELIED ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF DELHI DEVELOPMENT AUTHORITY (SUPRA) WHEREIN A PERSON TREATED AS ASSESSEE IN DEFAULT U/S 201(1)/201(1A) WAS HELD TO BE ALSO AN ASSESSEE. IT IS OBSERVED THAT THIS DECISION WAS RENDERED BY THE HON BLE APEX COURT IN ALTOGETHER DIFFERENT CONTEXT INASMUCH AS THE ISSUE INVOLVED BEFORE THE HONBLE APEX COURT WAS WHETHER INTEREST U/S 244(1A) COULD B E DENIED ON THE REFUND OF AMOUNT COLLECTED U/S 201(1)/201(1A) SIMPLY ON TH E GROUND THAT THE PAYMENT WAS NOT MADE IN PURSUANCE OF ANY ORDER OF A SSESSMENT OR THAT THE REFUNDEE WAS NOT AN ASSESSEE. IN THIS CONTEXT, IT W AS HELD BY THE HONBLE SUPREME COURT THAT THE ASSESSEE INCLUDES ACTUAL ASS ESSEE AS WELL AS DEEMED ASSESSES UNDER THE PROVISION OF THE ACT AND A PERSO N TREATED AS ASSESSEE IN DEFAULT U/S 201(1)/201(1A) OF THE ACT IS ALSO AN AS SESSEE. IN OUR OPINION, THIS DECISION RENDERED BY THE HONBLE SUPREME COURT IS N OT RELEVANT IN THE CONTEXT OF ISSUE INVOLVED IN THE PRESENT CASE AND THE RELIA NCE OF THE LD. D.R. ON THE SAID DECISION IN SUPPORT OF THE REVENUES CASE IS C LEARLY MISPLACED. 23. IN OUR OPINION, THE DECISION OF THE SPECIAL BEN CH OF THE ITAT IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) THUS IS CLEARLY APPL ICABLE IN THE FACTS OF THE PRESENT CASE AND ATLEAST IN THREE CASES CITED BY TH E LD. COUNSEL FOR THE ASSESSEE NAMELY BOMBAY DYEING & MANUFACTURING CO. L TD. VS. DCIT (ITA NO. 1622/MUM/2000 DTD. 14-9-2012), CROMPTON GREAVES LTD . VS. DCIT (ITA NO. 2210 TO 2212/MUM/2000 DTD. 24-2-2012), & M/S AMERIC AN SCHOOL OF BOMBAY EDUCATION TRUST VS. DCIT (ITA NO. 3625 TO 36 27/MUM/07 DTD. 20- 9 APPEALS, 3 C.O. SCIL 23 10-2009), THE DIVISION BENCH OF THIS TRIBUNAL HAS F OLLOWED THE SAME TO DECIDE A SIMILAR ISSUE INVOLVING IDENTICAL FACTS IN FAVOUR OF THE ASSESSEE. AS SUCH, RESPECTFULLY FOLLOWING THE DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) WE HOLD THAT THE ORDERS PASSED BY THE A.O. U/S 201(1)/201(1A) OF THE ACT IN THE PRESENT CASE FOR A LL THE THREE YEARS UNDER CONSIDERATION TREATING SCIL AS THE ASSESSEE IN DEFA ULT CANNOT BE SUSTAINED AS THERE ARE NO ASSESSMENTS WHICH HAVE BEEN MADE IN TH E HANDS OF THE PAYEES IN RESPECT OF THE AMOUNTS PAID BY THE ASSESSEE AND EVEN THE TIME PERIOD FOR ISSUING NOTICES U/S 148 FOR MAKING SUCH ASSESSMENTS HAVE ALREADY COME TO AN END. WE ACCORDINGLY UPHOLD THE IMPUGNED ORDERS OF THE LD. CIT(A) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE ALTHOUGH ON DI FFERENT GROUNDS AND DISMISS THE APPEALS OF THE REVENUE BEING ITA NO. 4142, 4143 & 4144/MUM/2008. 24. AS A RESULT OF OUR DECISION RENDERED ABOVE WHIL E DISPOSING OF THE CROSS APPEALS FILED FOR ALL THE THREE YEARS UNDER CONSIDE RATION I.E ASSESSMENT YEARS 2004-05, 2005-06 & 2006-07, THE CROSS OBJECTIONS FI LED BY THE ASSESSEE BEING C.O. NO. 200 TO 202/MUM2009 HAVE BECOME INFRUCTUOUS AND THE SAME ARE ACCORDINGLY DISMISSED. 25. IN THE RESULT, APPEALS OF THE ASSESSEE BEING IT A NO. 3672/MUM/2008, ITA NO. 3673/MUM/2008 & ITA NO. 3674/MUM/2008 ARE A LLOWED, APPEALS OF THE REVENUE BEING ITA NO. 4142/MUM/2008, ITA NO. 41 43/MUM/2008 & ITA NO. 4144/MUM/2008 ARE DISMISSED WHILE THE APPEALS OF THE ASSESSEE BEING ITA NO. 4319/MUM/2009, ITA NO. 4767/MUM/2009 & ITA NO. 4768/MUM/2009 AND C.O. NO. 200 TO 202/MUM/2009 ARE DISMISSED AS INFRUCTUOUS. 9 APPEALS, 3 C.O. SCIL 24 ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MAY, 2014 MAY, 2014.. = H I 30-05-2014 = SD/- SD/- (AMIT SHUKLA) (P.M. JAGTAP ) JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; I DATED 30D5D2014 [ .../ RK , SR. PS ' #%& '& / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $%# / THE RESPONDENT. 3. () / THE CIT(A)29, MUMBAI. 4. / CIT 17, MUMBAI 5. N $P , > P , / DR, ITAT, MUMBAI D BENCH 6. S / GUARD FILE. / BY ORDER, %N $ //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI