ADIT(IT)-3(1), Kolkata, Kolkata V. White Industries Australia Ltd., Kolkata

ITA 507/KOL/2010

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1928 (ITAT-KOLKATA)
• Duration Of Justice: 7 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 30-03-2017
• Assessment Year: 1992-1993
• Appeal Filed On: 11-03-2010
• Court: TRIBUNAL
• Department Lawyers: N B SOM
• Keywords: Business income; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 234B; 201(1); 147; 148; 154

Judgement Text

ITA NO.507,477&478/KOL/2010-M/S. WHITE INDS. AUSTRA LIA LTD. A.Y.1992-93 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH 'C', KO LKATA [BEFORE HON'BLE SRI N.V.VASUDEVAN, JM & HON'BLE SRI M.BALAGANESH, AM] ITA NO.507/KOL/2010 ASSESSMENT YEAR : 1992-93 A.D.I.T., (INTERNATIONAL TAXATION)-3(1) -VS M/S. WHITE INDUSTRIES AUSTRALIA.LTD., KOLKATA KOLKATA (PAN AAACW 2447 C) (APPELLANT) (RESPONDENT) ITA NOS.477 & 478/KOL/2010 ASSESSMENT YEAR : 1992-93 M/S. WHITE INDUSTRIES AUSTRALIA.LTD., A.D.I.T., (IN TERNATIONAL TAXATION)-3(1) KOLKATA KOLKATA (PAN AAACW 2447 C) (APPELLANT) (RESPONDENT) FOR THE DEPARTMENT: SHRI.N.B.SOM, ADDL.CIT, SR.DR FOR THE ASSESSEE : NONE DATE OF HEARING : 30.3.2017 DATE OF PRONOUNCEMENT : 05.04.2017. ORDER PER N.V.VASUDEVAN, JM I.T.A. NO.507/KOL/2010 IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 31.12.2009 OF CIT(A)-IV, KOLKATA RELATING TO A.Y.19 92-93. THIS APPEAL ARISES OUT OF AN ORDER PASSED BY CIT(A) IN APPEAL NO.3A/CIT(A)-VI /08-09/IT-3(1)/KOL. THE FACT THAT THIS APPEAL IS AGAINST THE ORDER PASSED IN APPEAL NO.3A IS CLEAR FROM THE DIRECTION OF THE D.I.T.(INTERNATIONAL TAXATION) KOLKATA DATED 11.03.2010 U/S 253 OF THE ACT. REVENUE HAS FILED THE PRESENT APPEAL BEFORE THE TRI BUNAL. 2. ITA NO.478/KOL/2010 IS AN APPEAL BY THE ASSE SSEE AGAINST THE VERY SAME ORDER OF CIT(A) AGAINST WHICH THE REVENUE HAS FILED ITA NO.5 07/KOL/2010. ITA NO.507,477&478/KOL/2010-M/S. WHITE INDS. AUSTRA LIA LTD. A.Y.1992-93 2 3. ITA NO.477/KOL/2010 IS AN APPEAL FILED BY THE A SSESSEE AGAINST ORDER DATED 31.12.2009 OF CIT(A)-VI, KOLKATA PASSED IN APPEAL NO.3 /CIT(A)-VI/08-09/IT- 3(1)/KOL RELATING TO A.Y.1992-93. 4. A BRIEF HISTORY AS TO HOW ALL THESE APPEALS A RISE FOR CONSIDERATION HAS TO BE EXPLAINED. THE ASSESSEE IS A NON RESIDENT COMPANY I NCORPORATED IN AUSTRALIA. IT ENTERED INTO A CONTRACT ON 28.09.1989 WITH COAL IND IA LTD. (CIL) IN CONNECTION WITH THE PROJECT FOR DEVELOPMENT OF AN OPEN CAST MINE AT PIPARWAR UNDERTAKEN BY CENTRAL COALFIELDS LTD., A SUBSIDIARY OF COAL INDIA LTD. FO R A.Y.1992-93 THE ASSESSEE FILED RETURN OF INCOME DECLARING FEES RECEIVED FOR RENDER ING MANAGERIAL TECHNICAL AND CONSULTANCY SERVICES AT RS.20,33,59,140/- WHICH INC LUDED PROCUREMENT OF FEES OF RS.3,57,35,557/-. 5. IN ACCORDANCE WITH THE PROVISIONS CONTAINED I N SECTION 115A OF THE INCOME TAX ACT (HEREINAFTER REFERRED TO AS THE 'ACT'), TAX @ 3 0% ON THE AFORESAID FEES WAS COMPUTED AT RS. 6,10,07,742/-. THE ENTIRE TAX OF RS . 6,10,07,742/-WAS PAID BY CIL. THE ASSESSING OFFICER VIDE HIS ORDER UNDER SECTION 143(3) OF THE ACT DATED 28TH FEBRUARY, 1995 HELD THAT THE SERVICES RENDERED BY T HE ASSESSEE FOR WHICH PROCUREMENT FEES WERE PAID ARE IN THE NATURE OF AGENT'S SERVICE AND HENCE THE PROCUREMENT FEES PAID BY CIL WERE BASICALLY IN THE NATURE OF COMMISS ION AND COMMISSION CANNOT BE TERMED AS TECHNICAL FEES. AGAINST THE SAID ORDER TH E APPELLANT PREFERRED APPEAL BEFORE THE CII'(APPEALS) AND THE LEARNED CIT(APPEALS) VIDE HIS ORDER DATED 6TH DECEMBER, 1996 DECIDED THE ISSUE AGAINST THE APPELLANT. THE APPELLANT PREFERRED AN APPEAL BEFORE THE HON'BLE TRIBUNAL AGAINST SUCH ORDER OF THE CIT( APPEALS). THE HON 'BLE TRIBUNAL AGREED WITH THE FINDINGS OF THE LOWER AUTHORITIES A ND REGARDED THAT THE PROCUREMENT FEES RECEIVED BY THE ASSESSEE WAS IN THE NATURE OF BUSINESS INCOME AND REMANDED TO THE AO, THE ISSUE RELATING TO THE DETERMINATION OF THE QUANTUM OF SUCH INCOME THAT CAN BE REGARDED AS ACCRUING OR ARISING IN INDIA. TH E ORDER GIVING EFFECT TO THE ORDER OF THE HON'BLE TRIBUNAL WAS PASSED BY THE ASSESSING OF FICER BY THE ORDER UNDER SECTION 143(3)/253 DATED 30TH MARCH 2001. ITA NO.507,477&478/KOL/2010-M/S. WHITE INDS. AUSTRA LIA LTD. A.Y.1992-93 3 6. SUBSEQUENTLY THE ASSESSING OFFICER ISSUED A NOT ICE UNDER SECTION 148, WHICH WAS SERVED ON THE ASSESSEE ON 14TH MARCH 2001. AGAINST THE SAID NOTICE THE ASSESSEE HAD FILED A WRIT PETITION NO. 745 OF 2001 IN THE HIGH C OURT AT KOLKATA. BY ORDER DATED 16TH APRIL 2001, THE HONBLE HIGH COURT STAYED THE PROCEEDINGS PURSUANT TO THE NOTICE U/S.148 OF THE ACT FOR A PERIOD OF FIVE WEEKS FROM DATE I.E. 16TH APRIL 2001. ON EXPIRY OF SUCH PERIOD THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 142(1) AND 143(2) AND ULTIMATELY PASSED AN ORDER UNDER SECTION 147/143(3) DATED 2ND MARCH 2003. IN THE SAID ORDER THE ASSESSING OFFICER MADE AN ADDITION O F RS. 2,32,28,112/- ON THE GROUND THAT PROCUREMENT FEES WERE IN THE NATURE OF COMMISS ION AND THEREFORE TAX PAID BY CIL ON BEHALF OF THE ASSESSEE NEEDS TO GROSSED UP AND H ENCE SUCH TAX PAID BY THE CIL ON BEHALF OF THE ASSESSEE WOULD CONSTITUTE AS THE INCO ME OF THE ASSESSEE. AGAINST THIS IMPUGNED ADDITION THE ASSESSEE PREFERRED AN APPEAL BEFORE CIT(A) IN APPEAL NO.102/04-05 WHO UPHELD THE ORDER OF THE AO IN HIS ORDER DATED 27.01.2005. ON FURTHER APPEAL THE ITAT VIDE ITS ORDER DATED 08-06- 2006 HELD AS FOLLOWS (FOR ITA NO. 8321K0L/05) (RELEVANT PART) - HOWEVER, IN THE INSTANT CASE, WE FIND THAT THE ASS ESSING OFFICER HAS NOT PASSED A SPEAKING ORDER WHILE DISPOSING OF THE REPLY OF THE ASSESSEE FILED BY HIM TO NOTICE ISSUED U/S 148 OF THE IT ACT'61. THEREFORE, RESPECT FULLY FOLLOWING THE SAID DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF GKN DR IVESHAFTS (1) LTD [SUPRA} [259 ITR 19 (SC)} THE MATTER IS RESTORED BACK TO TH E FILE OF THE ASSESSING OFFICER FOR PASSING A SPEAKING ORDER ON THIS ISSUE AFTER GI VING AN OPPORTUNITY OF HEARING TO THE ASSESSEE AS PER LAW. THE ASSESSEE IS DIRECTE D TO COOPERATE WITH THE ASSESSING OFFICER IN PROSECUTING ITS CASE. SINCE WE HAVE REMITTED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER ON TECHNICAL P OINT RAISED BY THE ASSESSEE, THEREFORE, THE OTHER GROUNDS OF THE ASSESSEE DOES N OT REQUIRE ANY ADJUDICATION. 7. AS WE HAVE ALREADY SEEN THAT THE AO PASSED THE ORDER U/S 147 R.W.S. 143(3) OF THE ACT ON 27.03.2003. THE AO BY ANOTHER ORDER DATED 2 7.05.2004 PASSED U/S 154 OF THE ACT LEVIED INTEREST U/S 234B OF THE ACT AND FURTHER HELD THAT THE ASSERSSEE IS ALSO LIABLE TO PAY INTEREST U/S 220(2) OF THE INCOME TAX ACT, 1 961 (ACT.). 8. AGAINST THE AFORESAID ORDER THE ASSESSEE PREFER RED AN APPEAL BEFORE CIT(A) IN APPEAL NO.103/2004-05. BUT CIT(A) VIDE ITS ORDER DA TED 27.01.2005 CONFIRMED THE ORDER OF THE AO. AGAINST THE ORDER OF CIT(A) THE AS SESSEE PREFERRED AN APPEAL BEFORE ITA NO.507,477&478/KOL/2010-M/S. WHITE INDS. AUSTRA LIA LTD. A.Y.1992-93 4 THE TRIBUNAL VIDE ITA NO.831/KOL/2005 DATED 08.06.2 006 WHO RESTORED THE ISSUE TO THE AO FOR FRESH CONSIDERATION. 9. CONSEQUENT TO THE AFORESAID ORDER OF ITAT IN I TA NOS.831 AND 832/KOL/2005 THE AO PASSED ORDER GIVING EFFECT TO THE DIRECTIONS OF THE TRIBUNAL. IN SO FAR AS THE DIRECTION TO CONSIDER THE ISSUE OF VALIDITY OF INIT IATION OF PROCEEDINGS U/S 147 OF THE ACT IS CONCERNED IT WAS THE SUBJECT MATTER OF ITA N O.832/KOL/2005, THE AO BY ITS ORDER DATED 21.01.2009 HELD THAT THE REOPENING OF A SSESSMENT WAS PROPER. THE AO FOUND THAT THE OBJECTIONS TO THE VALIDITY OF INITIA TION OF REASSESSMENT PROCEEDINGS U/S.148 OF THE ACT WERE AS FOLLOWS: 1) ISSUANCE OF NOTICE U/S 148 WITHOUT DISCLOSING TH E REASONS TO BELIEVE (THAT INCOME HAS ESCAPED ASSESSMENT) IN THE NOTICE DOES N OT AUTOMATICALLY CONFER JURISDICTION ON THE ASSESSING OFFICER TO TAKE ACTIO N U/S 147 OF THE ACT. 2) THAT THE ASSESSING OFFICER COULD NOT HAVE HAD AN Y REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX FOR AY 1992-93 HAD ESCAPED ASSESSMENT AND THE NOTICE U/S 148 WAS ISSUED MECHANICALLY AND/OR WITHO UT APPLICATION OF MIND, ARBITRARILY AND WITH A VIEW TO MAKE A FISHING ENQUI RY AND/OR ROVING INVESTIGATION PRESUMABLY ON A MERE CHANGE IN OPINIO N. 3) THAT NO INCOME OF THE ASSESSEE CHARGEABLE TO TAX FOR THE AY 1992-93 HAS OR CAN HAVE ESCAPED ASSESSMENT AND THERE/LIRE THE PRIM ARY CONDITION PRECEDENT FOR ASSUMING JURISDICTION U/S 147 IS NOT SATISFIED. 4) THAT THE ASSESSMENT U/S 143(3) HAD BEEN COMPLETE D FOR THE AY 1992-93 AND REASSESSMENT PROCEEDINGS U/S 147 AND THE NOTICE U/S 148 ARE VOID AB INITIO AS THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED AF TER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WITHOU T FULFILLING THE CONDITIONS LAID DOWN FOR THE SAME IN THE PROVISO TO THE SECTIO N 147 OF THE IT ACT SINCE NEITHER THE ASSESSEE FAILED TO MAKE A RETURN U/S 13 9(1) NOR ANY NOTICE U/S 142(1) OR U/S 148 WAS ISSUED TO THE ASSESSEE REQUIRING THE ASSESSEE TO FILE A RETURN NOR WAS THERE ANY FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY ALL MATERIALS FACT NECESSARY FOR HIS ASSESSMENT FOR THA T ASSESSMENT YEAR. ITA NO.507,477&478/KOL/2010-M/S. WHITE INDS. AUSTRA LIA LTD. A.Y.1992-93 5 10. THE AO HOWEVER REJECTED THE ABOVE CONTENTIONS. HE MADE A REFERENCE TO THE REASONS RECORDED BY THE AO BEFORE ISSUE OF NOTICE U /S.148 OF THE ACT, WHICH READS THUS: REASONS FOR REOPENING THE ASSESSMENT U/S 148: 'ON PERUSAL OF THE RECORD IT IS SEEN THAT THE ASSE SSING OFFICER IN THE YEAR UNDER CONSIDERATION HAS SEGREGATED THE GROSS RECEIPT/RAM COAL INDIA LTD., INTO TWO: (1) TECHNICAL FEE OR, RS.16.76,23,585/- MANAGEMENT FEE (2) PROCUREMENT FEE. RS. 3,57,35.557/- TOTAL: RS.20,33.59.142/- THE TECHNICAL FEE WAS TAXED @ 30% WHEREAS PROCUREME NT FEE WAS TREATED AS COMMISSION AND TAXED AT THE RATE 65%. IT IS RELEVAN T TO NOTE THAT THESE PAYMENTS ARE NET OF TAXES IMPLYING THEREBY THAT THE PAYEE I. E., COAL INDIA LTD., IS REQUIRED TO PAY THE TAX IN RESPECT OF THE SAID I NCOME IN THE HANDS OF THE ASSESSEE M/S WHITE INDUSTRIES LTD. NOW, THE INCOME TAX LIABILITY BEING DISCHARGED BY COAL INDIA LTD., ON BEHALF OF WHITE I NDUSTRIES LTD. SHOULD FORM PART OF THE INCOME IN THE HANDS OF M/S WHITE INDUST RIES LTD. IN OTHER WORDS GROSSING UP IS REQUIRED IN RESPECT OF THE RECEIPT. IN THIS REGARD, IT IS RELEVANT TO NOTE THAT SUCH IN COME TAX LIABILITY IN RESPECT OF TECHNICAL SERVICE IS EXEMPT U/S L0(6A). HOWEVER, NO EXEMPTION HAS BEEN ENVISAGED IN RESPECT OF PROCUREMENT FEEL COMMISSION . THUS GROSSING UP WILL BE REQUIRED AT THE RATE OF 65 % IN RESPECT OF PROCUREMENT FEE OF RS. 3,57,35,557/- WHICH WORKS OUT TO RS. 5,8 9,63.669/-. HENCE, THE DIFFERENCE AMOUNTING TO RS. 2,32,281,112/- REPRESE NTING TAX LIABILITY DISCHARGED! DISCHARGEABLE BY CIL ON BEHALF OF THE 'A' FOR MAKING THE PAYMENT OF RS. 3,57,35.5571- (NET OF LAX) REQUIRES TO BROUG HT TO TAX. SINCE THE SAID INCOME OF RS. 2,32,28, 112/- HAS ES CAPED ASSESSMENT AND THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL/ACTS IN RESPECT OF THE SAID TRANSACTION AND ITS NATURE/MISLEAD THE DEPARTM ENT WHILE MAKING THE CLAIM, I HAVE REASONS TO BELIEVE THAT THIS IS A FIT CASE F OR INVOKING PROVISIONS UNDER SECTION 148 OF THE I. T.ACT, 1961 . 11. ACCORDING TO THE AO, IT WAS CLEAR FROM THE ABO VE THAT THE ASSESSING OFFICER HAD VERY SPECIFIC REASONS TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT AND THAT AFTER RECORDING THESE REASONS AND AFTER TAKING THE NECESSARY APPROVALS THE ASSES SING OFFICER ISSUED THE NOTICE U/S 148 OF THE ACT. THUS IN NO WAY IT CAN BE SAID THAT THE NOTICE U/S 148 WAS ISSUED MECHANICALLY AND/OR WITHO UT APPLICATION OF MIND, ITA NO.507,477&478/KOL/2010-M/S. WHITE INDS. AUSTRA LIA LTD. A.Y.1992-93 6 ARBITRARILY AND WITH A VIEW TO MAKE A FISHING ENQUI RY AND/OR ROVING INVESTIGATION PRESUMABLY ON A MERE CHANGE IN OPINION. HE ALSO HEL D THAT THE QUESTION OF A 'CHANGE IN OPINION' ALSO DOES NOT ARISE IN THE INSTANT CASE AS IT IS EVIDENT FROM THE ORDER U/S 143(3) OF THE ACT THAT THE ASSESSING OFFICER HAD NO WHERE IN THE ORDER FORMED ANY OPINION REGARDING THE FACT OF PAYMENT BEING 'NET OF TAXES' OR THE ISSUE OF' GROSSING UP'. IN FACT THIS ISSUE WAS NEVER DEALT WITH BY THE ASSE SSING OFFICER NOR HAD ANY ANALYSIS OF THE SAME BEEN DONE. THERE HAD BEEN NO CONSCIOUS APP LICATION OF MIND ON THIS ISSUE. 12. IN SO FAR AS THE DIRECTIONS IN ITA NO.831/KOL/ 2005 WITH REGARD TO LEVY OF INTEREST U/S 234B OF THE ACT AND LEVY OF INTEREST U/S 220(2) OF THE ACT, THE AO BY HIS ORDER DATED 29.01.2009 HELD THAT INTEREST U/S 234B OF THE ACT IS LEVIABLE AND THAT INTEREST U/S 220(2) OF THE ACT IS ALSO CHARGEABLE AS DEMAND WAS OUTSTANDING. 13. AGAINST THE ORDER OF AO DATED 21.01.2009 UPHOL DING THE VALIDITY OF INITIATION OF RE-ASSESSMENT PROCEEDINGS THE ASSESSEE FILED AN APP EAL BEFORE CIT(A) WHICH WAS APPEAL NO.3/CIT(A)-VI/08-09/IT-3(1)/KOL. 14. AGAINST THE ORDER DATED 29.01.2009 WHEREBY THE CIT(A) UPHELD THE ORDER OF AO LEVYING INTEREST U/S 234B OF THE ACT AND U/S 220(2) OF THE ACT THE ASSESSEE FILED APPEAL BEFORE CIT(A) WHICH WAS APPEAL NO.3A/CIT(A)-VI/08-0 9/IT-3(1)/KOL. 15. THE CIT(A) PASSED TWO SEPARATE ORDERS BOTH DAT ED 31.12.2009. IN SO FAR AS THE VALIDITY OF INITIATION OF RE-ASSESSMENT PROCEEDINGS IS CONCERNED THE CIT(A) UPHELD THE ORDER OF AO. IN SO FAR AS LEVYING OF INTEREST U/S 2 34B AND U/S 220(2) OF THE ACT IS CONCERNED, THE CIT(A) HELD THAT IN SO FAR AS THE LE VYING OF INTEREST U/S 234B IS CONCERNED SINCE THE ASSESSEE WAS A NON RESIDENT THE KEY PERSON MAKING THE PAYMENT HAS TO DEDUCT TAX AT SOURCE IN TERMS OF SECTION 195 OF THE ACT. SINCE THE PROVISION OF SECTION 209(1)(D) OF THE ACT THE LIABILITY OF THE A SSESSEE TO PAY ADVANCE TAX HAS TO BE COMPUTED AFTER GIVING CREDIT TO THE TAX DEDUCTIBLE (WHERE ACTUALLY DEDUCTED OR NOT) THE ITA NO.507,477&478/KOL/2010-M/S. WHITE INDS. AUSTRA LIA LTD. A.Y.1992-93 7 ASSESSEE CANNOT BE CALLED UPON TO PAY INTEREST U/S 234B OF THE ACT. THUS LEVYING OF INTEREST U/S 234B WAS DELETED BY CIT(A). 16. IN SO FAR AS LEVYING OF INTEREST U/S 220(2) OF THE ACT IS CONCERNED, THE CIT(A) QUOTED CBDT CIRCULAR NO.334 DATED 3.4.1982 WHEREIN IT WAS LAID DOWN AS FOLLOWS: '1. DOUBTS HOVE BEEN RAISED AS TO THE QUANTUM OF IN TEREST CHARGEABLE UNDER SECTION 220(2) WHEN THE ORIGINAL ASSESSMENT ORDER P ASSED BY THE INCOME-TAX OFFICER IS (A) CANCELLED BY HIM UNDER SECTION 146; (B) SET ASIDE/CANCELLED BY AN APPELLATE/REVISIONAL AUTHORITY AND SUCH APPELLATE/REVISIONAL ORDER HAS BECOME FINAL ; OR (C) SET ASIDE BY ONE APPELLATE AUTHORITY BUT, ON FU RTHER APPEAL, THE ORDER SETTING ASIDE THE ASSESSMENT IS VARIED BY THE SECOND APPELL ATE AUTHORITY AND THE DEMAND GETS FINALLY DETERMINED. 2. THESE ISSUES WERE COMPREHENSIVELY EXAMINED IN CO NSULTATION WITH THE MINISTRY OF LAW AND THE BOARD HAS BEEN ADVISED: 1. WHERE AN ASSESSMENT ORDER IS CANCELLED UNDER SEC TION 146 OR CANCELLED/SET ASIDE BY AN APPELLATE/REVISIONAL AUTHORITY AND THE CANCELLATION/SETTING ASIDE BECOMES FINAL (I.E. IT IS NOT VARIED AS A RESULT OF FURTHER APPEALS/REVISIONS), NO INTEREST UNDER SECTION 220(2) CAN BE CHARGED PURSUA NT TO THE ORIGINAL DEMAND NOTICE. THE NECESSARY COROLLARY OF THIS POSITION WI LL BE THAT EVEN WHEN THE ASSESSMENT IS REFRAMED, INTEREST CAN BE CHARGED ONL Y AFTER THE EXPIRY OF 35 DAYS FROM THE DOTE OF SERVICE OF DEMAND NOTICE PURSUANT TO SUCH FRESH ASSESSMENT ORDER. 2. WHERE THE ASSESSMENT MADE ORIGINALLY BY THE INCO ME-TAX OFFICER IS EITHER VARIED OR EVEN SET ASIDE BY ONE APPELLATE AUTHORIT Y BUT ON FURTHER APPEAL, THE ORIGINAL ORDER OF THE INCOME-TAX OFFICER IS RESTOR ED EITHER IN PART OR WHOLLY, THE INTEREST PAYABLE UNDER SECTION 220(2) WILL BE COMP UTED WITH REFERENCE TO THE DUE DATE RECKONED FROM THE ORIGINAL DEMAND NOTICE AND WITH REFERENCE TO THE TAX FINALLY DETERMINED. THE FACT THAT DURING AN INTERVE NING PERIOD, THERE WAS NO TAX PAYABLE BY THE ASSESSEE UNDER ANY OPERATIVE ORDER W OULD MAKE NO DIFFERENCE TO THIS POSITION. 3. THE FOREGOING LEGAL POSITION WILL APPLY MUTATIS MUTANDIS TO THE PROCEEDINGS UNDER OTHER DIRECT TAXES ALSO' 17. THE CIT(A) DIRECTED THE AO TO CALCULATE INTERE ST U/S.220(2) OF THE ACT AS PER CBDT CIRCULAR NO.334 DATED 03-04-1982. ITA NO.507,477&478/KOL/2010-M/S. WHITE INDS. AUSTRA LIA LTD. A.Y.1992-93 8 18. AGGRIEVED BY THE ORDER OF CIT(A) IN UPHOLDING THE VALIDITY OF INITIATION OF RE- ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT THE ASSES SEE HAS PREFERRED ITA NO.477/KOL/2010. AGGRIEVED BY THE ORDER OF CIT(A) I N DELETING THE LEVY OF INTEREST U/S 234B OF THE ACT THE REVENUE HAS FILED AN APPEAL BEFORE THE TRIBUNAL VIDE ITA NO.507/KOL/2010. AGGRIEVED BY THE ORDER OF CIT(A) I N APPEAL NO.3A/CIT(A)- VI/08-09IT-3(1)/KOL LEVYING OF INTEREST U/S 220(2) OF THE ACT THE ASSESSEE HAS FILED ITA NO.478/KOL/2010. 19. THIS APPEAL WAS TAKEN UP FOR HEARING. ATTEMPT S WERE MADE TO SERVICE NOTICE ON THE ASSESSEE M/S. PRICE WATERHOUSE COOPERS PVT. LTD ., FILED APPEALS ON BEHALF OF THE ASSESSEE HAD APPEARED IN THE PROCEEDINGS. LATER THE Y HAVE CHOSEN NOT TO APPEAR IN THESE PROCEEDINGS. M/S. COAL INDIA LTD ARE THE LIMI TED PERSONS WHO HAVE BEEN BEARING THE TAX LIABILITY ALSO APPEARED IN THE PROCEEDINGS AND IN A LETTER DATED 13.05.2015 HAD INFORMED THE BENCH THAT PRICE WATERHOUSE COOPERS WA S NOT THE CONSULTANT AND THAT THE MATTER WAS REFERRED TO THE ASSESSEE FOR ADVICE WHIC H WAS YET TO BE RECEIVED. THEREAFTER CIL ALSO DID NOT APPEAR IN ITS PROCEEDINGS. IN THES E CIRCUMSTANCES TAKING NOTE OF THE FACT THAT THE APPEALS ARE VERY OLD APPEALS PERTAINI NG TO A.Y.1992-93 AND KEEPING IN MIND THE LACK OF INTEREST SHOWN BY THE ASSESSEE TO PROSECUTE THE APPEALS, WE DISMISS THE APPEALS FILED BY THE ASSESSEE FOR NON PROSECUTI ON. FOR DOING SO, WE FIND SUPPORT FROM THE FOLLOWING DECISIONS :- 1. IN THE CASE OF CIT VS B.N.BHATTACHRGEE AND ANOT HER, REPORTED IN 118 ITR 461 [RELEVANT PAGES 477 & 478] WHEREIN THEIR LORDSHIPS HAVE HELD THAT : THE APPEAL DOES NOT MEAN MERELY FILING OF THE APPE AL BUT EFFECTIVELY PURSUING IT. 2. IN THE CASE OF ESTATE OF LATE TUKOJIRAO HOLKAR V S CWT; 223 ITR 480 (MP) WHILE DISMISSING THE REFERENCE MADE AT THE INSTANCE OF THE ASSESSEE IN DEFAULT MADE FOLLOWING OBSERVATION IN THEIR ORDER : IF THE PARTY, AT WHOSE INSTANCE THE REFERENCE IS M ADE, FAILS TO APPEAR AT THE HEARING, OR FAILS IN TAKING STEPS FOR PREPARATION O F THE PAPER BOOKS SO AS TO ENABLE HEARING OF THE REFERENCE, THE COURT IS NOT B OUND TO ANSWER THE REFERENCE. ITA NO.507,477&478/KOL/2010-M/S. WHITE INDS. AUSTRA LIA LTD. A.Y.1992-93 9 3. IN THE CASE OF COMMISSIONER OF INCOME-TAX VS MUL TIPLAN INDIA (P) LTD.: 38 ITD 320(DEL), THE APPEAL FILED BY THE REVENUE BEFOR E THE TRIBUNAL, WHICH WAS FIXED FOR HEARING. BUT ON THE DATE OF HEARING NOBOD Y REPRESENTED THE REVENUE/APPELLANT NOR ANY COMMUNICATION FOR ADJOURN MENT WAS RECEIVED. THERE WAS NO COMMUNICATION OR INFORMATION AS TO WHY THE R EVENUE CHOSE TO REMAIN ABSENT ON THAT DATE. THE TRIBUNAL ON THE BASIS OF I NHERENT POWERS, TREATED THE APPEAL FILED BY THE REVENUE AS UN ADMITTED IN VIEW OF THE PROVISIONS OF RULE 19 OF THE APPELLATE TRIBUNAL RULES, 1963. 20. THE ASSESSEE, IF SO DESIRED, SHALL BE FREE TO MOVE THIS TRIBUNAL PRAYING FOR RECALLING THIS ORDER AND EXPLAINING REASONS FOR NON -COMPLIANCE ETC. THEN THIS ORDER MAY BE RECALLED. IN VIEW OF THE ABOVE ITA NOS. 477 & 478/KOL/2010 FILED BY THE ASSESSEE ARE DISMISSED FOR NON PROSECUTION. 21. IN THE RESULT ITA NOS. 477 & 478/KOL/2010 FILE D BY THE ASSESSEE ARE DISMISSED. ITA NO.507/KOL/2010 : (REVENUES APPEAL) : 22. AS FAR AS THIS APPEAL BY THE REVENUE IS CONCER NED THE PERSON MAKING PAYMENT TO THE ASSESSEE WAS DUTY BOUND TO DEDUCT TAX AT SOURCE U/S.195 OF THE ACT ON PAYMENT MADE TO THE ASSESSEE, AS THE ASSESSEE WAS A NON-RES IDENT. IN ESTIMATING THE ADVANCE TAX PAYABLE, THE ASSESSEE WAS BOUND TO TAKE NOTE (G IVE CREDIT TO) TAX DEDUCTIBLE AT SOURCE (WHETHER ACTUALLY DEDUCTED OR NOT). IF SUCH CREDIT IS GIVEN THEN THERE WOULD BE NO LIABILITY TO PAY ADVANCE TAX OF THE ASSESSEE WOU LD BE LESS THAN RS.5000 AND THEREFORE NO INTEREST U/S.234B OF THE ACT COULD BE LEVIED. IN THIS REGARD REFERENCE MAY BE MADE TO THE DECISION OF THE ITAT DELHI IN THE CA SE OF SEDCO FOREX INTERNATIONAL DRILLING VS. DCIT 72 ITD 415 (DEL). IN THIS REGARD RELIANCE MAY ALSO PLACED ON THE DECISION IN THE CASE OF MOTOROLA INC. AND OTHERS V. DCIT (SUPRA), WHEREIN THE HON'BLE TRIBUNAL HAS HELD THAT NO INTEREST IS PAYABLE BY A TAXPAYER IF HIS ENTIRE TAX WAS DEDUCTIBLE AT SOURCE, AND THIS IS TRUE EVEN IF THE TAX WAS NOT ACTUALLY DEDUCTED. THE RELEVANT EXTRACTS OF THE SAID DECISION IS PRODUCED BELOW:- 'ALL THE PAYMENTS MADE TO THE ASSESSEE ARE TAX DEDU CTIBLE AT SOURCE (EVEN ASSUMING THAT THEY ARE TAXABLE) AS RIGHTLY HELD BY THE CIT(A) AND ALSO ITA NO.507,477&478/KOL/2010-M/S. WHITE INDS. AUSTRA LIA LTD. A.Y.1992-93 10 CONTENDED BEFORE US. IN THAT CASE, HAVING REGARD TO THE PROVISIONS OF SECTION 201(1) & 201(1A) TO WHICH OUR ATTENTION WAS DRAWN O N BEHALF OF THE ASSESSEES. THE ASSESSEES CANNOT BE HELD TO HAVE COMMITTED DEFA ULT IN PAYING THE ADVANCE- TAX. THEY ARE ENTITLED TO TAKE INTO ACCOUNT THE TAX WHICH IS DEDUCTIBLE BY THE PAYER. THOUGH NOT ACTUALLY DEDUCTED. CONSEQUENTLY, THERE IS NO LIABILITY TO PAY INTEREST. THE DECISION OF THE CIT(A) TO CANCEL THE INTEREST U/S 234B IS UPHELD ON MERITS. ' 23. THE ISSUE WAS CONFIRMED BY THE DELHI HC IN THE CASE OF DIT VS. ERICSSON AB [2011] 16 TAXMANN.COM 371 (DELHI). RELIANCE WAS ALSO PLACED ON THE DECISION IN THE CASE OF DIT VS. JACOBS CIVIL INCORPORATED [2010] 194 TAXMAN 495 (DELHI) (PAGE 726 TO 742), WHEREIN THE HON'BLE DELHI HIGH COURT HAS HELD AS U NDER: 'NO DOUBT, IF THE PERSON (PAYER) WHO HAD TO MAKE PA YMENTS TO THE NON-RESIDENT HAD DEFAULTED IN DEDUCTING THE TAX AT SOURCE FROM S UCH PAYMENTS. THE NON - RESIDENT IS NOT ABSOLVED FROM PAYMENT OF TAXES THER EUPON. HOWEVER, IN SUCH A CASE, THE NON-RESIDENT IS LIABLE TO PAY TAX AND THE QUESTION OF PAYMENT OF ADVANCE TAX WOULD NOT ARISE. THIS WOULD BE CLEAR FR OM THE READING OF SECTION 191 OF THE ACT ALONG WITH SECTION 209 (1) (D) OF TH E ACT. FOR THIS REASON. IT WOULD NOT BE PERMISSIBLE FOR THE REVENUE TO CHARGE ANY INTEREST UNDER SECTION 234B OF THE ACT. . 24. RELIANCE MAY ALSO BE PLACED ON FOLLOWING DECIS IONS LAYING DOWN IDENTICAL PROPOSITION AS SET OUT ABOVE. DIT(LNTERNATIONAL TA XATION) V MAERSK CO. LTD. 2011) 198 TAXMAN 518 (UTTARAKHAND) (FB). SEDCO FOREX INTE RNATIONAL DRILLING V DY CLIT [2000] 72 ITD 415 (DEL); RHEINBRAUN ENGG. & WASSER GMBH V DCIT 1. T. A 0.1915/ BORN / 96 DATED 3 OCTOBER 1997 (BOM); M.M. RATNAM V ITO [1997] 62 ITD 21 (BOM);ASIA SATELLITE TELECOMMUNICATIONS CO. LTD V D CIT [2003] 78 TTJ 489 (DEL); DIT V NGC NETWORK ASIA LLC [2009] 313 ITR 187 (BOM) ; CIT V TIDE WATER MARINE INTERNATIONAL INC. [2009] 309 ITR 85 (UTTARANCHAL); AND COMMISSIONER OF INCOME-TAX AND OTHERS V RANCHI CLUB LTD (2001) 247 ITR 209. TH EREFORE, THE PROVISIONS OF SECTION 234B & 234C ARE NOT APPLICABLE TO THE ASSES SEE. 25. UNDER SECTION 209(1)(A)TO (D) LAYS DOWN FOUR SITUATIONS UNDER WHICH ADVANCE TAX PAYABLE BY THE ASSESSEE IS TO BE COMPUTED. IN THE PRESENT CASE WE ARE NOT CONCERNED WITH CLAUSES (A) TO (C). CLAUSE (D) OF SUB-SECTION (1) OF SEC.209 IS RELEVANT FOR THE PRESENT CASE AND IT READS THUS:- ITA NO.507,477&478/KOL/2010-M/S. WHITE INDS. AUSTRA LIA LTD. A.Y.1992-93 11 '(D) THE INCOME-TAX CALCULATED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE(C) SHALL, IN EACH CASE, BE REDUCED BY THE AMOUNT OF INCOME-TA X 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 BEE N 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 REDUC ED SHALL BE THE ADVANCE TAX PAYABLE.' 26. A READING OF THE ABOVE CLAUSE SHOWS THAT THE C LAUSE CATEGORICALLY USES THE EXPRESSION 'DEDUCTABLE OR COLLECTABLE AT SOURCE'. UNDER SEC.195 OF THE ACT, THERE IS AN OBLIGATION ON THE PAYER, I.E. ANY PERSON RESPONS IBLE FOR PAYING TO A NON-RESIDENT, TO DEDUCT INCOME TAX AT SOURCE AT THE RATES IN FORCE F ROM SUCH PAYMENTS EXCLUDING THOSE INCOMES WHICH ARE CHARGEABLE UNDER THE HEAD 'SALARI ES'. THEREFORE, THE ENTIRE TAX IS TO BE DEDUCTED AT SOURCE WHICH IS PAYABLE ON SUCH PAYM ENTS MADE BY THE PAYEE TO THE NON- RESIDENT. SEC.201 OF THE ACT LAYS DOWN THE CON SEQUENCES OF FAILURE TO DEDUCT OR PAY. THESE CONSEQUENCES INCLUDE NOT ONLY THE LIABIL ITY TO PAY THE AMOUNT WHICH SUCH A PERSON WAS REQUIRED TO DEDUCT AT SOURCE FROM THE PA YMENTS MADE TO A NON-RESIDENT BUT ALSO PENALTIES ETC. ONCE IT IS FOUND THAT THE LIABI LITY WAS THAT OF THE PAYER AND THE SAID PAYER HAS DEFAULTED IN DEDUCTING THE TAX AT SOURCE, THE DEPARTMENT IS NOT REMEDY-LESS AND THEREFORE CAN TAKE ACTION AGAINST THE PAYER UND ER THE PROVISIONS OF SEC.201 OF THE INCOME TAX ACT AND COMPUTE THE AMOUNT ACCORDINGLY. NO DOUBT, IF THE PERSON (PAYER) WHO HAD TO MAKE PAYMENTS TO THE NON-RESIDENT HAD DE FAULTED IN DEDUCTING THE TAX AT SOURCE FROM SUCH PAYMENTS, THE NON- RESIDENT IS NOT ABSOLVED FROM PAYMENT 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 WOULD NOT ARISE. THE PROVISIONS OF SEC.209(1)(D) HAVE BEEN AMENDED BY THE FINANCE ACT, 2012 BUT THOS E AMENDMENTS ARE NOT RELEVANT FOR THE PRESENT CASE WHICH RELATES TO AY 1992-92. WE THEREFORE HOLD THAT THE ASSESSEE WAS NOT LIABLE TO PAY ANY INTEREST UNDER SEC.234-B OF THE ACT FOLLOWING THE JUDGMENTS REFERRED TO EARLIER. ITA NO.507,477&478/KOL/2010-M/S. WHITE INDS. AUSTRA LIA LTD. A.Y.1992-93 12 27. WE FIND NO MERITS IN THE RELEVANT GROUNDS OF A PPEAL OF THE REVENUE WHEREIN THE REVENUE HAS CHALLENGED THE ORDER OF THE CIT(A) HOLD ING THAT CHARGING OF INTEREST U/S.234B OF THE ACT IN THE PRESENT CASE WAS NOT IN ACCORDANCE WITH LAW. 28. AS FAR AS THE LEVY OF INTEREST U/S.220(2) OF T HE ACT IS CONCERNED, THE CIT(A) HAS NOT GIVEN ANY FINDING AS TO WHETHER INTEREST IS CHA RGEABLE U/S.220(2) OF THE ACT OR NOT. HE HAS ONLY DIRECTED THE AO TO FOLLOW THE CBDT CIRC ULAR NO.334 DATED 3.4.1982 AND CHARGE INTEREST U/S.220(2) OF THE ACT IN ACCORDANCE WITH THE SAID CIRCULAR. THE ASSESSING OFFICER AND THE ASSESSEE WILL BE AT LIBER TY TO PUT FORTH THEIR CLAIM AS TO WHETHER PARA 2.1 OR 2.2 OF THE CBDT CIRCULAR WILL APPLY. THE CIT(A) OUGHT TO HAVE RENDERED A FINDING ON THIS ASPECT. WE ARE OF THE V IEW THAT THE ORDER OF ASSESSMENT BY THE AO U/S.147 OF THE ACT AS WELL AS THE ORDER U/S. 154 OF THE ACT WERE ONLY SET ASIDE IN APPEAL AND SUCH SETTING ASIDE DID NOT RENDER THE AS SESSMENT FINAL AND ISSUES WERE SET ASIDE FOR FRESH CONSIDERATION BY THE AO. IN SUCH C IRCUMSTANCES, THE CHARGING OF INTEREST WOULD BE GOVERNED BY PARA 2.2 OF THE CIRCU LAR AND CHARGING OF INTEREST U/S.220(2) AS DONE BY THE AO SHOULD BE HELD TO BE P ROPER. WE HOLD ACCORDINGLY. CONSEQUENTLY, THE RELEVANT GROUNDS OF APPEAL REGARD ING LEVY OF INTEREST U/S.220(2) OF THE ACT RAISED BY THE REVENUE IN ITS GROUNDS OF APP EAL ARE ALLOWED. 29. IN THE RESULT THE APPEALS BY THE ASSESSEE ARE DISMISSED, WHILE THE APPEAL BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.04.2017. SD/- SD/- [M.BALAGANESH] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 05.04.2017. R.G.(.P.S.) ITA NO.507,477&478/KOL/2010-M/S. WHITE INDS. AUSTRA LIA LTD. A.Y.1992-93 13 COPY OF THE ORDER FORWARDED TO: 1. M/S. WHITE INDUSTRIES AUSTRALIA LTD., C/O P RICEWATERHOUSE COOPERS PVT. LTD., PLOT-Y-14, BLOCK-EP, SECTOR-V, SALT LAKE, KOLKATA-7 00091. 2. A.D.I.T., (INTERNATIONAL TAXATION)-3(1), KOLKATA 3. CIT(A)-VI, KOLKATA 4. CIT II, KOLKATA. 5. CIT DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR, ITAT, KOLKATA BENCHES