M/s. VIDESH SANCHAR NIGAM LTD., MUMBAI V. ADIT (IT) Rg. 2, MUMBAI

ITA 5564/MUM/2004

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79086 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 04-02-2014
• Assessment Year: 1999-2000
• Appeal Filed On: 28-07-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY 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

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.6899 /MUM/2003 ( / ASSESSMENT YEAR : 1999-2000 DY. DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION 2(1),R. NO. 523, 5 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020. / VS. M/S VIDESH SANCHAR NIGAM LTD., VIDESH SANCHAR BHAVAN, M.G. ROAD, MUMBAI - 400001. ./ PAN : AAACV2808C ( # / APPELLANT ) .. ( $%# / RESPONDENT ) ./ I.T.A. NO.7082 /MUM/2003 ( / ASSESSMENT YEAR : 1999-2000 M/S VIDESH SAN CHAR NIGAM LTD., VIDESH SANCHAR BHAVAN, M.G. ROAD, MUMBAI - 400001. / VS. DY. DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION 2(1),R. NO. 523, 5 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020. ./ PAN : AAACV2808C ( # / APPELLANT ) .. ( $%# / RESPONDENT ) ./ I.T.A. NO.7083 /MUM/2003 ./ I.T.A. NO.5564 /MUM/2004 ( / ASSESSMENT YEAR : 1999-2000 M/S VIDESH SANCHAR NIGAM LTD., VIDESH SANCHAR BHAVAN, M.G. ROAD, MUMBAI - 400001. / VS. DY. DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION 2(1),R. NO. 523, 5 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020. ./ PAN : AAACV2808C 4 APPEALS VIDESH SANCHAR NIGAM 2 A SSESSEE BY SHRI DINESH VYAS DEPARTMENT BY : SHRI AJAY SHRIVASTAVA ) * / DATE OF HEARING : 23-04-2014 ) * / DATE OF PRONOUNCEMENT : 04-06-2014 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THESE FOUR APPEALS FILED IN THE CASE OF ONE ASSES SEE INVOLVE COMMON AND INTERLINKED ISSUES AND THE SAME THEREFORE HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS SINGLE CONSOLIDATED O RDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE SHALL TAKE UP THE CROSS APPEALS FILED FOR A.Y. 1999-2000 BEING ITA NO. 6899/MUM/2003 AND ITA NO. 7082/MUM/2003 WHI CH ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) XXXI, MUMBAI DATED 14-7-2003 WHEREBY HE DISPOSED OF THE APPEAL FILED BY THE ASSESSEE AGAINS T THE ORDER PASSED BY THE A.O. U/S 201(1)/201(1A) R.W.S. 195 OF THE INCOME TA X ACT, 1961 TREATING THE ASSESSEE AS IN DEFAULT FOR ITS FAILURE TO DEDUCT TA X AT SOURCE FROM THE PAYMENTS MADE TO LEAD MANAGERS/MANAGERS IN CONNECTI ON WITH THE SERVICES RENDERED FOR GDR ISSUE. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH BROUGHT OUT AN ISSUE OF 3,21,30,000 GLOBAL DEPOSITARY RECEIPTS (GD RS) PRICED AT US$ 13.93 PER GDR. FOR BRINGING OUT GDR ISSUE, THE ASSESSEE EMPLOYED SERVICES OF LEAD MANAGERS, VIZ. DRESDNER KLEINWORT BENSON, JARD INE FLEMING, SALOMON BROTHERS INTERNATIONAL LTD. AND OTHERS FOR ASSISTIN G IT IN ALL ASPECTS OF CONSULTANCY FOR PREPARING DOCUMENTS CONNECTED WITH BRINGING OUT THE ISSUE, DEALING WITH VARIOUS REGULATORY AUTHORITIES IN INDI A AND ABROAD, DUE DILIGENCE CERTIFICATE, ARRANGING ROAD SHOWS AND ALL OTHER SUC H CONNECTED MATTERS 4 APPEALS VIDESH SANCHAR NIGAM 3 INCLUSIVE OF MANAGING AND UNDER-WRITING THE ISSUE. FOR THESE SERVICES, THE LEAD MANAGERS WERE ENTITLED TO A COMMISSION NOT EXC EEDING 2.7% OF THE AGGREGATE PRINCIPAL AMOUNT OF THE ISSUE IN ADDITION TO THE REIMBURSEMENT OF OUT OF POCKET EXPENSES. AS AGREED BETWEEN THE PART IES, THE LEAD MANAGERS WERE TO COLLECT THE PROCEEDS OF GDR ISSUE ON BEHALF OF THE ASSESSEE AND REMIT THE NET PROCEEDS TO THE ASSESSEE AFTER DEDUCTION OF ITS MANAGEMENT FEES AND OUT OF POCKET EXPENSES. AFTER THE SUCCESSFUL ISSUE OF GDRS, TOTAL AMOUNT OF RS. 43,69,48,526/- WAS COLLECTED/RECOVERED BY THE L EAD MANAGERS FROM THE ASSESSEE COMPANY ON ACCOUNT OF UNDER-WRITING COMMIS SION, MANAGEMENT COMMISSION, SELLING CONCESSION AND REIMBURSEMENT OF EXPENSES. NO TAX AT SOURCE, HOWEVER, WAS DEDUCTED BY THE ASSESSEE FROM THE SAID PAYMENT MADE TO THE LEAD MANAGERS ON THE GROUND THAT THE AMOUNT PAID TO THE LEAD MANAGERS WAS NOT CHARGEABLE TO TAX IN THEIR HANDS I N INDIA EITHER UNDER THE DOMESTIC LAW OR UNDER THE RELEVANT DTAA. THIS ISSUE WAS EXAMINED BY THE A.O. WHILE PASSING THE ORDER U/S 195 OF THE ACT. I N THIS REGARD, HE IDENTIFIED THE BASIC ISSUES INVOLVED IN THE MATTER AS UNDER:- (A) WHETHER THE SERVICES BEING RENDERED BY THE NON -RESIDENT LEAD MANAGERS TO THE APPELLANT COMPANY, BEING IN THE NAT URE OF THE UNDERWRITING, MANAGING THE ISSUE AND OTHER ALLIED F INANCIAL SERVICES CONSTITUTE TECHNICAL, MANAGERIAL AND/OR CONSULTANCY SERVICES IN TERMS OF THE LANGUAGE USED IN SECTION 9(1)(VII) OF THE AC T AND THE CLAUSES DEALING WITH FEES FOR TECHNICAL SERVICES IN THE R ELEVANT DOUBLE TAXATION AVOIDANCE AGREEMENT (TAX TREATY)? (B) IF THE ANSWER TO THE FIRST QUESTION IS YES, WHE THER SUCH SERVICES FALL WITHIN THE AMBIT OF TAXABILITY IN TERMS OF THE READING OF SECTION 9(1)(VII) ALONG WITH THE RELEVANT TAX TREATY? (C) WHETHER SOME SERVICES CONNECTED WITH MANAGING A ND UNDERWRITING THE ISSUE ARE RENDERED IN INDIA? (D) WHETHER IT IS RELEVANT FOR SOME OF THEIR SERVI CES TO BE RENDERED IN INDIA TO DETERMINE THE TAXABILITY OF ITS PAYMENT ? (E) WHETHER IT WOULD BE APPROPRIATE TO CALL THE CO NSIDERATION AS SALES COMMISSION IN PLACE OF THE MANAGING FEE? 4 APPEALS VIDESH SANCHAR NIGAM 4 (F) WHETHER THE PROVISIONS OF SECTION 9(1)(VII) AN D SECTION 9(1)(I) ARE TO BE INVOKED IN EXCLUSION TO ONE ANOTHER OR WHETHE R SECTION 9(1)(VII) IS A SUB-SET OF SECTION 9(1)(I) OF THE ACT ? AFTER IDENTIFYING THE BASIC ISSUES, THE A.O. PROCEE DED TO DISCUSS AND DEAL WITH THE SAME IN THE LIGHT OF THE SUBMISSIONS MADE ON BE HALF OF THE ASSESSEE AS WELL AS THE RELEVANT PROVISIONS OF THE DOMESTIC LAW AND DTAA AND HELD THAT KEEPING IN VIEW THE MEANING OF THE WORDS TECHNICAL AND CONSULTANCY AS PER THE DICTIONARY AS WELL AS THE JUDGMENT OF THE SUPRE ME COURT IN THE CASE OF CIT VS. OBEROI HOTELS PVT. LTD. 231. ITR 148; CIT V S. GVK INDUSTRIES 228 ITR 564 (AP) AND EVANS MEDICAL SUPPLY LTD. 36 ITR 4 18; 425 (BOM.), THE SERVICES RECEIVED BY THE APPELLANT WERE NOTHING BUT TECHNICAL AND CONSULTANCY SERVICES IN THE FINANCIAL FIELD. THIS APART, THE A. O. HELD THAT THE VERY FACT OF ENGAGING THE SERVICES OF GLOBAL MERCHANT BANKERS ES TABLISHED THAT THESE FINANCIAL SKILLS/TECHNIQUES/ANALYTICAL TOOLS/TRAINE D MANPOWER ARE OF TECHNICAL NATURE, WHICH WERE NOT AVAILABLE LOCALLY. 4. WITH REGARD TO THE SECOND BASIC ISSUE, THE A.O. HELD THAT THE APPELLANT IS NOT COVERED UNDER THE TWO EXCEPTIONS PROVIDED IN SECTION 9(1)(VII). AS FAR AS THE TAX TREATY BETWEEN INDIA AND U.K. IS CONCERNED, HE HELD THAT THE PROVISIONS OF ARTICLE-13 ARE APPLICABLE. THE DEFINI TION OF FEES FOR TECHNICAL SERVICES AS APPEARING IN ARTICLE 13(4) OF THE TAX TREATY IS IDENTICAL TO THE DEFINITION AS PER EXPLANATION 2 OF SECTION 9(1)(VII ) OF THE ACT. HE HELD THAT THE FEES FOR TECHNICAL, MANAGERIAL AND CONSULTANCY SERV ICES THEREFORE WERE COVERED WITHIN THE PURVIEW OF EXPLANATION 2 OF SECTION 9(1) (VII) AND ARTICLE 13(4) OF THE TAX TREATY BETWEEN INDIA AND THE U.K. WITH REGARD T O THE THIRD AND FOURTH ISSUE, THE A.O. HELD THAT AS PER THE PROVISIONS OF SECTION 9(1)(VII), IT IS NOT REALLY NECESSARY FOR THE SERVICES TO BE RENDERED IN INDIA. HE FURTHER HELD THAT SOME OF THE SERVICES HAD BEEN RENDERED IN INDIA ALS O. WITH REGARD TO THE QUESTION ON THE BASIC ISSUE NARRATED IN ITEM NO. (E ), THE A.O. HELD THAT IT IS NOT CORRECT TO DESCRIBE THE CONSIDERATION RECEIVED FOR THE ABOVE MENTIONED SERVICES AS SELLING COMMISSION BECAUSE THE SERVICES ARE RENDERED FOR 4 APPEALS VIDESH SANCHAR NIGAM 5 TECHNICAL, MANAGERIAL AND CONSULTANCY SERVICES AND NOT FOR TRADING IN GDRS. WITH REGARD TO THE ISSUE NUMBERED AS (F), THE A.O. HELD THAT SPECIFIC PROVISIONS OVERRIDE THE GENERAL PROVISIONS. IN THE PRESENT CASE, WHAT HAS BEEN PAID IS A COMPENSATION/PAYMENT AGAINST TECHNICAL AN D MANAGERIAL CONSULTANCY. THEY ARE WIDE ENOUGH TO COVER MANAGING FEES FOR MANAGING AND UNDERWRITING THE ISSUE. FOR THIS PROPOSITION, HE RE LIED ON THE RATIO OF THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CA SE OF CIT V. COPS VULCAN INC. 167 ITR 884. CONSEQUENTLY, HE HELD THAT THE PR OVISIONS OF SECTION 9(1)(VII) OVERRIDE THE PROVISIONS OF SEC 9(1) OF THE ACT, WHI CH ARE GENERAL IN NATURE. AFTER DISCUSSING AN IN-DEPTH ANALYSIS OF THE SCHEME OF TDS AS MADE IN THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF TRANSM ISSION CORPORATION OF A.P. LTD. VS. CIT239 ITR 587, THE A.O. CONCLUDED T HAT THE SERVICES, WHICH HAD BEEN RENDERED BY THE INTERNATIONAL LEAD MANAGER S TO THE INDIAN COMPANY, ARE VERY MUCH IN THE NATURE OF FEES FOR T ECHNICAL SERVICES AND HENCE TAXABLE IN INDIA. ACCORDINGLY, THE A.O. HELD VIDE HIS ORDER PASSED U/S 195 THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX FROM THE ENTIRE AMOUNT OF RS. 43,69,48,526/- PAID TO THE LEAD MANAGERS AND WORKED OUT THE AMOUNT OF SUCH TAX THAT THE ASSESSEE SHOULD HAVE DEDUCTED AFT ER GROSSING UP AT RS. 18,72,63,653/-. CONSEQUENTLY, HE PASSED AN ORDER O N 4-1-2000 U/S 201(1) OF THE ACT TREATING THE ASSESSEE AS IN DEFAULT FOR THE AMOUNT SO DEDUCTIBLE AND ALSO HELD THE ASSESSEE AS LIABLE FOR INTEREST THERE ON U/S 201(1A) OF THE ACT TO THE EXTENT OF RS. 8,05,23,370/- FOR THE PERIOD FROM MARCH, 1997 TO DECEMBER, 1999. 5. AGAINST THE ORDER PASSED BY THE A.O. U/S 201(1)/ 201(1A) OF THE ACT, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND THE FOLLOWING SUBMISSIONS WERE MADE ON ITS BEHALF BEFORE THE LD. CIT(A) IN SUPPORT OF ITS CASE THAT THE AMOUNT PAID TO THE LEAD MANAGERS FOR THE SERVICES RENDERED IN RELATION TO GDR ISSUE NOT BEING CHARGEABLE TO TAX I N THEIR HANDS IN INDIA AS 4 APPEALS VIDESH SANCHAR NIGAM 6 PER THE DOMESTIC LAW OR THE RELEVANT TREATIES, THER E WAS NO LIABILITY TO DEDUCT TAX AT SOURCE FROM THE AMOUNT PAID TO THEM FOR SUCH SERVICES. 1. IN THE EARLIER PROCEEDINGS, SUBMISSIONS HAVE BE EN MADE FROM TIME TO TIME CONTESTING THE DEPARTMENTS VIEW REGAR DING APPLICABILITY OF SEC. 9(1)(VII) OF THE ACT TO THE PAYMENTS MADE TO L EAD MANAGERS AND CO- MANAGERS TOWARDS UNDERWRITING COMMISSION, SELLING C ONCESSION AND MANAGEMENT COMMISSION AS ALSO TOWARDS REIMBURSEMENT OF EXPENSES. 2. HOWEVER, ALL THE ISSUES NEED A FRESH LOOK IN VIE W OF THE DECISION OF THE I.T.A.T. IN THE CASE OF RAYMONDS LIMITED (IT A NOS. 1225 AND 1226/M/2000 DATED APRIL 24, 2002). 3. THESE SUBMISSIONS ARE, THEREFORE, MADE IN THE LI GHT OF RAYMONDS CASE WITHOUT PREJUDICE TO THE APPELLANTS RIGHT TO KEEP THE ISSUES ALIVE IN SO FAR AS THE RATIO OF RAYMONDS CASE IS ADVERSE TO THE PROPOSITIONS CANVASSED BY THE APPELLANT IN THE EARLIER PROCEEDIN GS. APPLICABILITY OF RAYMONDS CASE 1. SO FAR AS APPLICABILITY OF SEC. 9(1)(VII) IS CON CERNED, THE TRIBUNAL HAS SUMMARISED THE CONCLUSION IN PARA 64 OF THE ORD ER IN TERMS OF WHICH IT IS HELD THAT UNDERWRITING COMMISSION DOES NOT FALL WITHIN THE SCOPE OF THE SAID SECTION WHEREAS THE COMMISSION BY WAY OF SELLING CONCESSION AND MANAGEMENT SERVICES ARE COVERED WITH IN ITS SCOPE THOUGH SUBJECT TO THE APPLICABILITY OF THE RELEVANT D.T.A.A. 2. ADVERTING TO THE IMPLICATIONS ARISING OUT OF THE APPLICATION OF DTAA WITH UK (SAME AS IN APPELLANTS CASE), THE TRI BUNAL HAS CONCLUDED THAT THE COMMISSION BY WAY OF SELLING CON CESSION AND FOR MANAGEMENT SERVICES ARE NOT TAXABLE IN VIEW OF THE PROVISIONS OF THE SAID D.T.A.A. THE TRIBUNAL HAS REACHED THE SAID CON CLUSION IN PARA 103 OF THE ORDER PRECEDED BY PARAS 98, 99 AND 102. 3. ATTENTION IS NEXT INVITED TO THE STATEMENT OF FA CTS ANNEXED WITH THE APPEAL MEMORANDUM WHEREIN THE BREAK-UP OF THE COMMI SSION PAID TO THE LEAD MANAGERS AND CO-MANAGERS HAS BEEN PROVIDED . FROM THIS BREAK-UP IT WILL BE OBSERVED THAT A/L THE PAYMENTS ARE NOT LIABLE TO BE TAXED IN INDIA EITHER UNDER SECTION 9(1)(VII) OR IN TERMS OF THE DTAA WITH UK EXCEPT THE PAYMENT OF RS. 10,43,44,200/- MADE TO JARDINE FLEMING, HONGKONG WHERE THERE IS NOT APPLICABLE DTAA. 4. HOWEVER, OUT OF THE AFORESAID PAYMENT TO JARDINE FLEMING, 20% TOWARDS UNDERWRITING COMMISSION AND, THEREFORE, THE SAME IS LIABLE TO BE TAXED UNDER SECTION 9(1)(VII) AS HELD BY THE IN RAYMONDS CASE. ONLY THE BALANCE 80% IS LIABLE TO BE SO TAXED SINCE IT I S COVERED UNDER SEC. 4 APPEALS VIDESH SANCHAR NIGAM 7 9(1)(VII) AS HELD BY THE TRIBUNAL WITHOUT ANY MITIG ATING EFFECT OF THE DTAA. 5. SO FAR AS OTHER EXPENSES ARE CONCERNED, REFERENC E MAY KINDLY BE MADE TO PARA 5 OF THE AOS ORDER. SUBMISSION IN RES PECT THEREOF ARE AS UNDER: (A) IN SO FAR AS REIMBURSEMENT OF EXPENSES OF RS. 2 ,24,33,597/- IS CONCERNED, RELIANCE IS PLACED ON THE DECISION IN RAYMONDS CASE, PARA 130(4), FOR THE PROPOSITION THAT REIMBUR SEMENT OF EXPENSES CANNOT BE CONSIDERED AS TAXABLE IN INDIA E VEN UNDER SECTION 9(1)(VII). WITHOUT PREJUDICE, ONLY SUCH PORTION OF REIMBURSEME NT OF EXPENSES CAN BE BROUGHT TO TAX WHICH ARE RELATABLE TO JARDINE FLEMING. IN THIS BEHALF, REFERENCE IS INVITED TO TH E STATEMENT ALREADY PLACED ON RECORD IN TERMS OF WHICH IT WILL BE SEEN THAT REIMBURSEMENT TO ALL THE LEAD MANAGERS, EXCLUDING J ARDINE FLEMING, AMOUNT TO RS. 2,00,64,609/-. THAT IS TO SA Y THE SURVIVING AMOUNT REIMBURSED TO JARDINE FLEMING WILL BE RS. 23,68,988/-. (B) OTHER PAYMENTS TO ALLEN AND OVERY AND LAW DEBEN TURE TRUST ARE TOWARDS CONSULTANCY AND AGENCY FEES WHEREIN DTA A WITH UK IS APPLICABLE AND, THEREFORE, THE SAME CANNOT BE TA XED UNDER SEC. 9(1)(VII). (C) THE LAST TWO PAYMENTS ARE TOWARDS PRINTING EXPE NSES WHICH CANNOT BE BROUGHT TO TAX IN INDIA IN VIEW OF THE FA CT THAT THE RECIPIENTS DO NOT HAVE ANY BUSINESS CONNECTION OR P ERMANENT ESTABLISHMENT IN INDIA. A STATEMENT IN THIS BEHALF ADDRESSED BY THE APPELLANT IS ENCLOSED. APPLICABILITY OF SECTION 1O(6A) IT IS OUR SUBMISSION THAT THIS PROVISION IS APPLICA BLE SO AS TO AVOID ANY GROSSING UP IN CASE IT IS HELD THAT PAYMENTS MADE T O JARDINE FLEMING TOWARDS SELLING CONCESSION OR MANAGEMENT SERVICES A RE LIABLE TO BE TAXED IN INDIA UNDER SEC. 9(1)(VII). WE ARE ENCLOSING HEREWITH THE APPROVAL OF THE GOVER NMENT OF INDIA FOR PAYMENT OF AGGREGATE SUM OF 2.7% WHICH COMPRISES OF ALL THE COMPONENTS OF THE SERVICES, NAMELY, UNDERWRITING, S ELLING CONCESSION AND MANAGEMENT SERVICES. 6. AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. C IT(A) FOUND HIMSELF IN 4 APPEALS VIDESH SANCHAR NIGAM 8 AGREEMENT WITH THE STAND OF THE ASSESSEE THAT THE U NDER-WRITING COMMISSION PAID TO THE LEAD MANAGERS WAS NOT COVERED WITHIN TH E SCOPE OF SECTION 9(1)(VII) OF THE ACT. HE HELD THAT THE MANAGEMENT AND SELLING COMMISSION PAID BY THE ASSESSEE TO THE LEAD MANAGERS, HOWEVER, WAS SUBJECTED TO TAX IN INDIA. HE NOTED IN THIS CONTEXT THAT THE CONCEPT OF MAKE AVAILABLE WAS THERE IN THE RELEVANT ARTICLE OF INDIA-UK DTAA DEALING WITH FEE S FOR TECHNICAL SERVICES AND AS HELD BY THE TRIBUNAL IN THE CASE OF RAYMOND LTD. VS. DCIT (ITA NO. 1225AND 1226/MUM/2000), THE MANAGEMENT AND SELLING COMMISSION PAID BY THE ASSESSEE TO THE NON-RESIDENT LEAD MANAGERS AND MANAGERS, WHO WERE RESIDENT OF UK, WAS NOT LIABLE TO TAX IN INDIA UNDE R THE INDIA-UK DTAA. HE THEREFORE HELD THAT ONLY THE MANAGEMENT AND SELLING COMMISSION PAID BY THE ASSESSEE TO ONE LEAD MANAGER JARDINE FLEMING, HONGK ONG AMOUNTING TO RS. 8,34,75,360/- WAS CHARGEABLE TO TAX IN INDIA AND TH E ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE TO THE EXTENT OF TAX PAYABLE O N THE SAID AMOUNT. HE HELD THAT THE ASSESSEE WAS ALSO LIABLE TO DEDUCT TA X AT SOURCE FROM THE SUM OF RS. 23,68,988/- PAID TO JARDINE FLEMING, HONGKONG T OWARDS REIMBURSEMENT OF EXPENSES AS THE SAID AMOUNT, ACCORDING TO THE LD . CIT(A), WAS CHARGEABLE TO TAX IN INDIA IN THE HANDS OF JARDINE FLEMING, HONGK ONG. ACCORDINGLY, THE LD. CIT(A) DIRECTED THE A.O. TO COMPUTE THE TAX LIABILI TY WITH REFERENCE TO THE AMOUNT OF RS. 8,34,75,360/- PAID FOR THE SERVICES R ENDERED BY JARDINE FLEMING, HONGKONG AND REIMBURSEMENT OF EXPENSES OF RS. 23,68,988/- PAID TO THE SAID NON-RESIDENT AND TREAT THE ASSESSEE AS IN DEFAULT ONLY TO THE EXTENT OF TAX SO CALCULATED. HE ALSO DIRECTED THE A.O. TO CHARGE INTEREST U/S 201(1A) OF THE ACT ONLY WITH REFERENCE TO TAX SO CALCULATED . AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE AS WELL THE ASSESSEE BO TH ARE IN APPEAL BEFORE THE TRIBUNAL. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF MAHIN DRA & MAHINDRA VS. DCIT 4 APPEALS VIDESH SANCHAR NIGAM 9 30 SOT 374 (MUM.)(SB) WHEREIN A SIMILAR ORDER PASSE D U/S 201(1) WAS HELD TO BE UNSUSTAINABLE BY THE SPECIAL BENCH OF THE TRI BUNAL IN THE SIMILAR FACTS AND CIRCUMSTANCES. AS EXPLAINED BY HIM, THE ASSESSE E IN THE SAID CASE WAS A COMPANY WHICH CAME OUT WITH TWO EURO ISSUES OFFERIN G CERTAIN GLOBAL DEPOSITORY RECEIPTS (GDRS). IT HAD APPOINTED TWO FO REIGN LEAD MANAGERS FOR THE SAID ISSUES WHO WERE PAID MANAGEMENT COMMISSION , SALES COMMISSION AND UNDERWRITING COMMISSION. A FURTHER SUM WAS PAID AS OUT OF POCKET EXPENSES. THE AO CONSIDERED THE NATURE OF SERVICES RENDERED BY THE LEAD MANAGERS AND NOTED THAT THEY WERE CLOSELY ASSOCIATE D WITH ALL THE ASPECTS OF BRINGING OUT THE EURO ISSUES. KEEPING IN VIEW THE S ERVICES RENDERED BY THE LEAD MANAGERS, THE AO WAS OF THE OPINION THAT THE S AME WERE PRIMA FACIE IN THE NATURE OF TECHNICAL SERVICES COVERED U/S 9(L)(V II). AS THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE WHILE MAKING PAYMENT S TO NON RESIDENTIAL LEAD MANAGERS IN RESPECT OF THE SAID SERVICES, THE AO TR EATED IT TO BE AN ASSESSEE IN DEFAULT. ACCORDINGLY THE AMOUNT OF SUCH TAX WAS DEMANDED BY THE AO FROM THE ASSESSEE U/S 195 BY AN ORDER 201(1) ALONG WITH INTEREST CHARGED U/S 201(IA). THE CIT(APPEALS) UPHELD THE ORDER OF THE A O. ON FURTHER APPEAL, THE SPECIAL BENCH OF ITAT HELD THAT AS PER EXPLANATION TO SECTION 191, BOTH THE CONDITIONS VIZ, FAILURE OF THE PERSON RESPONSIBLE TO PERFORM HIS OBLIGATION AND NON-PAYMENT OF TAX BY THE PAYEE DIRECTLY SHOULD HAV E BEEN CUMULATIVELY SATISFIED SO AS TO TREAT THE PERSON RESPONSIBLE AS THE ASSESSEE IN DEFAULT. IT WAS HELD THAT IF ONLY ONE OF THESE TWO CONDITIONS I S SATISFIED, THEN THE PERSON RESPONSIBLE CANNOT BE TREATED AS ASSESSEE IN DEFAUL T. IT WAS HELD THAT IF THERE IS NO OR LOWER LIABILITY OF THE PAYEE TO TAX ON THE INCOME RECEIVED WITHOUT DEDUCTION OF TAX AT SOURCE, THE PAYER CANNOT BE TRE ATED AS THE ASSESSEE IN DEFAULT FOR THE WHOLE OR THAT PART OF THE AMOUNT, A S THE CASE MAY HE. IT WAS HELD THAT THE QUESTION OF TREATING THE PERSON RESPO NSIBLE FOR PAYING THE INCOME AS AN ASSESSEE IN DEFAULT THUS IS, INTER ALI A, TIED WITH THE TAX LIABILITY OF THE PAYEE ON SUCH SUM AND IF NO LIABILITY OF THE PAYEE TO TAX EXISTS AT THE RELEVANT TIME OR THE LIABILITY OF THE PAYEE TO TAX HAS NOT BEEN DETERMINED BY 4 APPEALS VIDESH SANCHAR NIGAM 10 PASSING ANY ORDER IN HIS HANDS AND THE TIME LIMIT F OR TAKING ACTION ON THE PAYEE UNDER ANY PROVISION HAS BEEN PASSED OUT, THE PAYER CANNOT BE TREATED AS THE ASSESSEE IN DEFAULT. AS HELD BY THE SPECIAL BENCH OF THE TRIBUNAL, THIS IS SO BECAUSE THE TAX COLLECTED FROM THE PAYER OF I NCOME UNDER SUCH ORDER WOULD BE INCAPABLE OF ADJUSTMENT AGAINST THE LIABI LITY OF THE PAYEE AS SUCH LIABILITY CANNOT BE CREATED AFTER THE EXPIRY OF TIM E LIMIT. IN THE CASE BEFORE THE SPECIAL BENCH, NO ASSESSMENT HAD BEEN MADE IN THE H ANDS OF THE PAYEE IN RESPECT OF THE AMOUNT PAID BY THE ASSESSEE AND THER E WAS NO COURSE LEFT TO THE REVENUE FOR MAKING THE ASSESSMENT OF THE PAYEE AS THE TIME LIMIT FUR ISSUING NOTICE U/S 148 HAD ALSO COME TO AN END AND IN THESE FACTS AND CIRCUMSTANCES OF THE CASE, IT WAS HELD BY THE SPECI AL BENCH OF THE TRIBUNAL THAT THE PAYER COULD NOT HE TREATED AS THE ASSESSEE IN DEFAULT BY PASSING ORDER U/S 195 READ WITH SECTION 201(1 ). 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE OF MAHINDRA & MAH INDRA LTD. (SUPRA) IS DIRECTLY APPLICABLE IN THE PRESENT CASE AS THERE IS NO ASSESSMENT THAT HAS BEEN MADE IN THE HANDS OF PAYEES IN RESPECT OF THE AMOUNT PAID BY THE ASSESSEE AND EVEN THE TIME LIMIT FOR ISSUING NOTICE U/S 148 HAVING ALREADY COME TO AN END, THERE IS NO COURSE LEFT TO THE REVE NUE FOR MAKING SUCH ASSESSMENT. HE CONTENDED THAT THE ORDER PASSED BY T HE AO U/S 201(1) IN THE PRESENT CASE TREATING THE ASSESSEE AS IN DEFAULT, T HEREFORE, CANNOT BE SUSTAINED AS PER THE SAID DECISION OF SPECIAL BENCH OF ITAT. 9. ALTHOUGH THE LD. D.R. HAS NOT DISPUTED THE POSIT ION 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 4 APPEALS VIDESH SANCHAR NIGAM 11 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 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 . 10. 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 4 APPEALS VIDESH SANCHAR NIGAM 12 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 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. 11. 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 4 APPEALS VIDESH SANCHAR NIGAM 13 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. 12. 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 4 APPEALS VIDESH SANCHAR NIGAM 14 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. 13. 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 & 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 4 APPEALS VIDESH SANCHAR NIGAM 15 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 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. 4 APPEALS VIDESH SANCHAR NIGAM 16 14. 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) 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 4 APPEALS VIDESH SANCHAR NIGAM 17 DECIDED BY THE SPECIAL BENCH AGAINST THE ASSESSEE I N THE CASE OF MAHINDRA & MAHINDRA (SUPRA). 15. 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 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 4 APPEALS VIDESH SANCHAR NIGAM 18 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 PERSON RESPONSIBLE FOR PAYING THE INCOME CANNOT BE TREATED AS THE ASSESSE IN DEFAULT. 16. 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 4 APPEALS VIDESH SANCHAR NIGAM 19 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. 17. 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 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 4 APPEALS VIDESH SANCHAR NIGAM 20 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 YEAR 1999-2000. 18. 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. 19. 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 4 APPEALS VIDESH SANCHAR NIGAM 21 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 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 ). 4 APPEALS VIDESH SANCHAR NIGAM 22 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. 20. 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 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. 4 APPEALS VIDESH SANCHAR NIGAM 23 21. 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. 22. IN OUR OPINION, THE DECISION OF SPECIAL BENCH O F ITAT IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) THUS IS SQUARELY APPLIC ABLE IN THE FACTS OF THE PRESENT CASE AND RESPECTFULLY FOLLOWING THE SAME, W E HOLD THAT THE ORDER PASSED BY THE AO U/S 201(1)/201(1A) OF THE ACT TREA TING THE ASSESSEE AS IN DEFAULT CANNOT BE SUSTAINED AS THERE IS NO ASSESSME NT WHICH HAS BEEN MADE IN THE HANDS OF THE PAYEE IN RESPECT OF THE AMOUNT PAID BY THE ASSESSEE AND EVEN THE TIME LIMIT FOR ISSUING NOTICE U/S 148 FOR MAKING SUCH ASSESSMENT HAS ALREADY COME TO AN END. 23. IN THE RESULT, APPEAL OF THE ASSESSEE BEING ITA NO. 7082/MUM/2003 IS ALLOWED WHILE THAT OF THE REVENUE BEING ITA NO. 68 99/MUM/2003 IS DISMISSED. 4 APPEALS VIDESH SANCHAR NIGAM 24 24. THE APPEAL FILED BY THE ASSESSEE BEING ITA NO. 7083/MUM/2003 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) XXXI, MUM BAI DATED 14-7-2003 WHEREBY HE DISMISSED THE APPEAL FILED BY THE ASSESS EE AGAINST THE ORDER PASSED BY THE A.O. U/S 195 OF THE ACT HOLDING THAT THE SAID APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER U/S 195 IS NOT MAINTAINA BLE U/S 246A OF THE ACT. 25. AS ALREADY HELD BY US WHILE DISPOSING OF THE CR OSS APPEALS BEING ITA NO. 7082/MUM/2003 AND 6899/MUM/2003, THE ORDER PASSED B Y THE A.O. U/S 201(1)/201(1A) R.W.S. 195 OF THE ACT TREATING THE A SSESSEE AS IN DEFAULT FOR NON-DEDUCTION OF TAX AT SOURCE FROM THE PAYMENTS MA DE TO THE LEAD MANAGERS FOR THE GDR ISSUE IS NOT SUSTAINABLE. CON SEQUENTLY, THIS APPEAL FILED BY THE ASSESSEE ARISING OUT OF THE ORDER PASS ED BY THE A.O. U/S 195 HAS BECOME INFRUCTUOUS AND WE DO NOT CONSIDER IT NECESS ARY OR EXPEDIENT TO ADJUDICATE UPON THE SAME. 26. THE APPEAL FILED BY THE ASSESSEE BEING ITA NO. 5564/MUM/2004 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) XXXI, MUMBAI DATED 23-3-2004 WHEREBY HE CONFIRMED THE PENALTY OF RS. 2,57,53,304 /- IMPOSED BY THE A.O. FOR THE FAILURE OF THE ASSESSEE TO DEDUCT TAX AT SO URCE FROM THE PAYMENT OF RS. 8,34,75,360/- AND RS. 23,68,988/- MADE TO JARDINE F LEMING, HONGKONG ON ACCOUNT OF MANAGEMENT AND SELLING COMMISSION AND R EIMBURSEMENT OF EXPENSES. AS ALREADY HELD BY US WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE, THE ORDER PASSED BY THE A.O. U/S 201(1)/2 01(1A) R.W.S. 195 OF THE ACT TREATING THE ASSESSEE AS IN DEFAULT FOR ITS FAI LURE TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS MADE TO THE LEAD MANAGERS IS NOT SUSTAINABLE. CONSEQUENTLY THE VERY BASIS OF THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT NO MORE SURVIVES AND THE SAME IS LIABLE TO BE CANCELLE D HAVING NO LEGS TO STAND. WE ORDER ACCORDINGLY AND ALLOW THIS APPEAL OF THE A SSESSEE. 4 APPEALS VIDESH SANCHAR NIGAM 25 27. IN THE RESULT, ASSESSEES APPEAL BEING ITA NO. 7082/MUM/2003 AND 5564/MUM/2004 ARE ALLOWED WHEREAS REVENUES APPEAL BEING ITA NO. 6899/MUM/2003 AND ASSESSEES APPEAL BEING ITA NO. 7 083/MUM/2003 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.06.2014. ) / 0 04.06.2014 ) SD/- SD/- (AMIT SHUKLA) (P.M. JAGTAP ) JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 0 DATED 04.06.2014 [ .../ RK , SR. PS ' #%& '& / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $%# / THE RESPONDENT. 3. () / THE CIT(A)XXX1, MUMBAI. 4. / CIT CONCERNED. MUMBAI 5. 5 $7 , * 7 , / DR, ITAT, MUMBAI L BENCH 6. : / GUARD FILE. / BY ORDER, %5 $ //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI