Dy. Commissioner of Income Tax-VI , Lucknow V. M/s.Sahara Services Ltd., Lucknow

ITA 8/LKW/2013

• Counselvise Citation: 823714 RSA 2013
• Duration Of Justice: 2 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARE BEING DISPOSED OF
• Keywords: Retrospective amendment
• Section: 5(2)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NOS.08 & 61/LKW/2013 A.YRS.:2008 - 09 & 2009 - 10 DY.C.I.T. - VI, LUCKNOW. VS. M/S SAHARA SERVICES LTD., SAHARA INDIA BHAWAN, 1, KAPOORTHALA COMPLEX, ALIGANJ, LUCKNOW. PAN:AAJCS9018A (APPELLANT) (RESPONDENT) O R D E R PER A. K. GARODIA, A.M. BOTH THESE APPEALS ARE FILED BY THE REVENUE, WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LEARNED CIT(A) - II, LUCKNOW DATED 09/11/2012 FOR THE ASSESSMENT YEARS 2008 - 09 AND DATED 18/12/2012 FOR ASSESSMENT YEAR 2009 - 2010. BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GROUNDS RAISED BY THE REVENUE IN I.T.A. NO.08/LKW/2013 FOR ASSESSMENT YEAR 2008 - 09 ARE AS UNDER: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE A.O. OF RS.91,40,265/ - U/S 40A(IA) FOR FAILING TO DEDUCT TAX AT SOURCE U/S 195 OF THE I.T. ACT, ON PAYMENTS MADE TO NON - RESIDENTS. APPELLANT BY SHRI P. K. DEY, D. R. RESPONDENT BY SHRI J. J. MEHROTRA, C. A. DATE OF HEARING 12/01/2015 DATE OF PRONOUNCEMENT 2 4 /02/2015 2 2. THE CIT(A) HAS ERRED IN LAW AND ON FACT S IN FAILING TO APPRECIATE THAT DISALLOWANCE U/S 40A(IA) CANNOT BE RESTRICTED TO THE AMOUNTS OUTSTANDING AS ON THE LAST DATE OF THE ACCOUNTING PERIOD BUT WOULD ALSO INCLUDE ANY SUMS WHICH HAVE ALSO BEEN PAID DURING THE YEAR WITHOUT DEDUCTION OF TDS. 3. TH E CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAILING TO APPRECIATE THAT THE SUMS WHICH HAVE BEEN DISALLOWED BY THE A.O. U/S 40A|IA) CONSTITUTE THE INCOME OF THE PAYEES U/S 9 OF THE I.T. ACT, 1961. 3. THE GROUNDS RAISED BY THE REVENUE IN I.T.A. NO.61/LKW/20 13 FOR ASSESSMENT YEAR 2009 - 10 ARE AS UNDER: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS.44,05,602/ U/S 40A(IA) AS THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE U/S 195 OF THE INCOME TAX ACT ON PAYMENTS MADE TO NON - RESIDENTS. 2. THE CII(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.2,84,838/ - ON ACCOUNT OF 5% DISALLOWANCE OF EXPENSES WHICH ARE NOT FULLY VERIFIABLE. HE FAILED TO APPRECIATE THAT THE ASSESSEE COULD NOT PROVIDE ANY EVIDENCE OF THESE EXPENSES. 4. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER FOR BOTH THE YEARS. HE ALSO SUBMITTED THAT CIT(A) HAS FOLLOWED THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS VS. A CIT, RANGE - 1, VISHAKHAPATNAM IN I.T.A. NO.477/VIZ/2008 AS REPORTED IN 70 DTR 81 BUT THIS JUDGMENT HAS BEEN REVERSED BY SEVERAL HIGH COURT JUDGMENT S AND THEREFORE, THIS DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IS NO MORE A GOOD LAW. HE FURTHER SUBMITT ED THAT IN PARA 4(4) OF HIS ORDER, THE CIT(A) HAS REFERRED TO EXPLANATION 1 TO SECTION 5(2) OF THE ACT BUT HAS NOT MADE ANY REFERENCE TO SECTION 9(1)(VII) OF THE ACT AS PER WHICH THE ASSESSEE IS REQUIRED TO DEDUCT TDS IN RESPECT OF FEES FOR TECHNICAL SERVI CES EVEN IF SUCH NON - RESIDENT PAYEE IS NOT HAVING RESIDENCE OR PLACE OF 3 BUSINESS O R BUSINESS CONNECTION IN INDIA. IN THIS REGARD, HE HAD DRAWN OUR ATTENTION TO SECTION 9(2) OF THE ACT WHICH HAS BEEN INSERTED BY FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 01/06/1976. HE SUBMITTED THAT AS PER THESE PROVISIONS, THE ORDER OF CIT IS NOT SUSTAINABLE. HE SUBMITTED THAT THEREFORE, THE ORDER OF CIT(A) SHOULD BE REVERSED AND THAT OF THE ASSESSING OFFICER SHOULD BE RESTORED. 5. LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). HE ALSO SUBMITTED THAT EVEN IF IT IS HELD THAT THE ORDER OF CIT(A) IS NOT SUSTAINABLE, THE MATTER SHOULD GO TO HIS FILE FOR FRESH DECISION ON THIS ASPECT AS TO WHETHER THE IMPUGNED PAYMENT IS IN THE NATURE OF FEES FO R TECHNICAL SERVICES OR NOT AS PER SECTION 9(1)(VII) OF THE ACT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT CIT(A) HAS FOLLOWED THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS VS. ACIT, RA NGE - 1, VISHAKHAPATNAM IN I.T.A. NO.477/VIZ/2008 AS REPORTED IN 70 DTR 81 AND WE HAVE ALREADY TAKEN A VIEW ON THIS ASPECT THAT THIS DECISION OF SPECIAL BENCH OF THE TRIBUNAL IS NO MORE A GOOD LAW IN VIEW OF SEVERAL DECISIONS OF VARIOUS HIGH COURTS AS PER WH ICH THIS JUDGMENT OF SPECIAL BENCH OF THE TRIBUNAL WAS REVERSED. SECONDLY, WE FIND THAT IN PARA 4(4), THE CIT(A) HAS REFERRED TO EXPLANATION 1 TO SECTION 5(2) OF THE ACT BUT HE HAS NOT EXAMINED THIS ASPECT AS TO WHETHER THE ISSUE IN THE PRESENT CASE IS CO VERED BY SECTION 9(1) OR NOT. HENCE, WE FEEL IT PROPER THAT THE MATTER SHOULD GO TO THE FILE OF CIT(A) FOR FRESH DECISION. ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT(A) IN BOTH THE YEARS AND RESTORE THE MATTER BACK TO HIS FILE FOR FRESH DECISION. THE CI T(A) SHOULD EXAMINE THIS ASPECT THAT THE IMPUGNED PAYMENT IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES OR NOT AND WHETHER THE PROVISIONS OF SECTION 9(1)(VII) AND EXPLANATION TO SECTION 9(2) ARE APPLICABLE OR NOT. HE SHOULD DECIDE THE ISSUE IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF 4 BEING HEARD TO BOTH THE SIDES. NEEDLESS TO SAY, HE SHOULD PASS A REASONED AND SPEAKING ORDER. 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE STAND ALLOWED FOR STATISTICAL PURPOSES. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 4 /02/2015 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR