Vodafone Essar South Limited, Bangalore V. CIT, Bangalore

ITA 651/BANG/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5532 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 30-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-05-2010
• Court: TRIBUNAL
• Department Lawyers: ETWA MUNDA CITIII
• Assessee Lawyers: RONAK G DOSHI
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL BANGALORE BENCH A, BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER I.T.A. NO.651(BANG.)/2010 (ASSESSMENT YEAR : 2006-2007) M/S VODAFONE ESSAR SOUTH LTD, (EARLIER HUTCHISON ESSAR SOUTH LTD), MARUTHI INFOTECH CENTRE,11/12/1,GROUND FLOOR, KORAMANGALA INTERMEDIATE RIG ROAD, BANGALORE-560 071. APPELLANT VS THE COMMISSIONER OF INCOME-TAX, (A)-IV, BANGALORE RESP ONDENT APPELLANT BY : SHRI RONAK G.DOSHI, CA RESPONDENT BY : SHRI ETWA MUNDA, CIT-III O R D E R PER SMT P. MADHAVI DEVI, JM ; THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-IV, BANGALORE FOR THE ASSESSMENT YEAR 20 06-07. 2. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY TH E ORDER OF THE CIT(A) IN DISMISSING THE ASSESSEES APPEAL ON THE G ROUND THAT; I) THERE WAS A DELAY IN FILING THIS APPEAL BEFORE CIT( A) WHICH CANNOT BE CONDONED II) THAT THE APPEAL FILED U/S 248 IS NO T MAINTAINABLE AND III) THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE ON THE ITA.NO.651(B)/10 2 ARRANGER FEES PAYABLE TO BANC OF AMERICA SECURITIES ASIA LIMITED, HONKONG U/S 195 AND 200 OF THE IT ACT, 1961. 3. THE ASSESSEE COMPANY HAD OBTAINED LOANS FROM BA NC OF AMERICA UNDER AN AGREEMENT DATED 25-11-2005, ACCORD ING TO WHICH THE BANC OF AMERICA, HONKONG WAS ALSO TO ACT AS A FACILITATOR AND ARRANGER FOR THE LOANS TO BE OBTAINED BY THE AS SESSEE. WHILE MAKING THE PAYMENTS OF FEE TO THE BANC OF AMERICA, THE ASSESSEE DEDUCTED TAX AT SOURCE U/S 195 OF THE IT ACT AS AN ABUNDANT PRECAUTION, BUT CHALLENGED THE LIABILITY TO DEDUCT TAX AT SOURCE ON THE GROUND THAT THE SAID AMOUNT IS NOT TAXABLE IN I NDIA. THEREFORE, IT FILED AN APPEAL BEFORE THE CIT(A) U/S 248 OF THE IT ACT. ALONGWITH THE APPEAL, THE ASSESSEE HAS ALSO FILED AN AFFIDAVI T STATING THE REASONS FOR THE DELAY IN FILING THE APPEAL BEFORE T HE CIT(A)). THE CIT(A) HOWEVER, DISMISSED THE SAME, HOLDING THAT TH E APPEAL IS NOT MAINTAINABLE IN THE ABSENCE OF ASSESSMENT ORDER U/S 195 OF THE IT ACT. 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE ITAT AND THE ITAT HELD THAT THE APPEAL IS NOT MAINTAINABLE U/S 2 48 OF THE IT ACT AND REMANDED THE ISSUE TO THE FILE OF AO FOR RECONS IDERATION IN ACCORDANCE WITH LAW. WHILE CONSIDERING THE APPEAL BEFORE THE HIM, THE CIT(A) CONSIDERED THE AFFIDAVIT FILED BY THE AS SESSEE, GIVING THE REASONS THEREIN FOR THE DELAY AND ALSO PETITION FOR THE CONDONATION ITA.NO.651(B)/10 3 OF THE SAME AND HELD THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE WITH EVIDENCE THE REASONABLE CAUSE FOR THE DELAY. HE ACCORDINGLY, DISMISSED THE ASSESSEES APPEAL ON THE GROUND OF DELAY. HOWEVER, HE ALSO DECIDED THE ISSUE ON MERIT S AND FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SAMSUNG ELECTRONICS, WHEREIN IT HAS BEEN HELD THAT IRRESPECTIVE OF TAXABILITY OF THE AMOUNT IN INDIA, THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE U/S 195 OF THE IT ACT, HE HELD THAT T HE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE. THEREAFTER, HE AL SO CONSIDERED THE ISSUE AS TO WHETHER THE PAYMENT OF ARRANGER FEES PA ID BY THE ASSESSEE TO BANC OF AMERICA IS IN THE NATURE OF INT EREST AND HELD IT TO BE SO AND THEREFORE, THE TAX IS DEDUCTIBLE AT SO URCE. 4.1 AGGRIEVED, BY THE ORDER OF THE CIT(A), THE ASSE SSEE IS IN SECOND APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR AT TENTION TO THE AFFIDAVIT FILED BY THE ASSESSEE BEFORE THE CIT( A) IN THE FIRST AND SECOND INSTANCES AND SUBMITTED THAT THE ASSESSEE HA D SOUGHT TO FILE THE APPEAL BEFORE THE CIT(A) U/S 248 OF THE IT ACT, BUT THE CIT(A)-IV DID NOT ACCEPT THE APPEAL ON THE GROUND T HAT THERE WAS NO ORDER AGAINST WHICH THE APPEAL WAS PREFERRED AN D IT WAS ONLY AFTER A PERSONAL HEARING ON ANOTHER ISSUE THAT THE CIT(A) WAS IMPRESSED THAT THE APPEAL U/S 248 OF THE IT ACT AGA INST THE LIABILITY ITA.NO.651(B)/10 4 TO DEDUCT TAX AT SOURCE U/S 195 CAN BE FILED AND TH AT IS HOW THE ASSESSEE HAS FILED THIS APPEAL. 5.1 THE LEARNED DR HOWEVER, OPPOSED THE SAID CONTEN TION OF THE ASSESSEE STATING THAT THE ASSESSEE HAS NOT FILE D ANY EVIDENCE TO SHOW THAT THE CIT(A) DID NOT ACCEPT THE APPEAL DUE TO WHICH THE DELAY HAS OCCURRED. 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEE HAS DE DUCTED TAX AT SOURCE AND THEREAFTER, PREFERRED AN APPEAL U/S 248 OF THE IT ACT. THE FACT THAT THE CIT(A) HAS SUBSEQUENTLY, DISMISSE D THE APPEAL ITSELF SHOWS THAT THE ASSESSEES CONTENTION MIGHT H AVE BEEN CORRECT. THE HONBLE SUPREME COURT IN THE CASE OF M/S VIJAY SHIP BREAKING CORPN. VS CIT 314 ITR 309 (SC) HAS HELD TH AT THE APPEALS SHOULD BE CONSIDERED ON MERITS, RATHER THAN BEING D ISPENSED WITH ON THE ISSUE OF DELAY. IN VIEW OF THE SAME, WE ARE INCLINED TO CONDONE THE DELAY IN FILING THE APPEAL BEFORE THE C IT(A). 6.1 AS REGARDS THE SECOND GROUND OF APPEAL WHICH T HE CIT(A) HAS DISMISSED THE ASSESSEES APPEAL HOLDING THAT IR RESPECTIVE OF THE TAXABILITY OF THE PAYMENTS, THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE U/S 195 OF THE IT ACT, WE FIND THAT THE CIT( A) HAS FOLLOWED THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF M/S SAMSUNG ELECTRONICS. HOWEVER, THE SAID DECISIO N HAS BEEN ITA.NO.651(B)/10 5 REVERSED BY THE HONBLE SUPREME COURT IN THE CASE O F M/S GE INDIA TECHNOLOGY CENTRE P.LTD., VS CIT & ANOTHER 327 ITR 456(SC). THEREFORE, THIS OBJECTION OF THE CIT(A) AL SO HAS TO BE SET ASIDE. 7. COMING TO THE MERITS OF THE ISSUE AS TO WHETHER THE PAYMENT OF ARRANGER FEES IS IN THE NATURE OF INTERE ST, WE FIND THAT THE CIT(A) AT PAGE-8 OF HIS ORDER, OBSERVED THAT TH E ASSESSEE HAS NOT FURNISHED COPIES OF AGENCY FEE LETTERS AND ARRA NGEMENT FEES LETTERS BEFORE HIM. THE ASSESSEE HAS NOW FILED THE SAME DOCUMENTS BEFORE US, STATING THAT THEY WERE NEVER CALLED FOR BY THE CIT(A) AND HENCE, NOT PRODUCED. THE ASSESSEE HAS NOW PRODUCED THE SAME BEFORE US IN THE FORM OF ADDITIONAL PAPER BOOK. 8. HAVING GONE THROUGH THE MATERIAL ON RECORD, WE FIND THAT IT IS VERY ESSENTIAL TO FIND OUT WHETHER THE BANC OF A MERICA HAS INDEED RENDERED ANY SERVICES OTHER THAN LENDING THE FUNDS TO THE ASSESSEE AND WHETHER THE ARRANGEMENT FEES PAID TO B ANC OF AMERICA IS IN THE NATURE OF INTEREST. AS THE DOCUM ENTS FILED BEFORE US GO TO THE ROOT OF THE MATTER, WE DEEM IT FIT AND PROPER TO ADMIT THE SAID EVIDENCES AND REMIT THE FILE TO THE AO TO CONSIDER THE SAME IN ACCORDANCE WITH LAW. NEEDLESS TO MENTION, THAT T HE ASSESSEE SHOULD BE GIVEN A FAIR OPPORTUNITY OF HEARING. ITA.NO.651(B)/10 6 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30 TH JUNE, 2011. (A. MOHAN ALANKAMONY) (SMT. P. MAD HAVI DEVI) ACCOUNTANT MEMBER J UDICIAL MEMBER PLACE: BANGALORE DATED: 30-06-2011. AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) BY ORDER AR, ITAT, BANGALORE