Sify Technologies Ltd., CHENNAI V. ITO, CHENNAI

ITA 806/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9087 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 31-03-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH J
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Retrospective amendment
• Section: 201(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.806/MDS./2016 / ASSESSMENT YEAR :2008-09 M/S.SIFY TECHNOLOGIES LTD., TIDEL PARK, 2 ND FLOOR, 4, CANAL BANK, TARAMANI, CHENNAI 600 113. VS. THE INCOME TAX OFFICER, INTERNATIONAL TAXATON-11(1), CHENNAI -34. [PAN AAACS 9032 R ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MR.R.VIJAYARAGHAVAN,ADVOCATE /RESPONDENT BY : MR.A.V.SREEKANTH,JCIT,DR / DATE OF HEARING : 01 - 06 - 201 6 / DATE OF PRONOUNCEMENT : 17 - 06 - 2016 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-16,CHENNA I DATED 11.01.2016 PERTAINING TO ASSESSMENT YEAR 2008-09. ITA NO.806/MDS./2016 :- 2 -: 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS. 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS)-16, CHENNAI IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CAS E. 2. THE COMMISSIONER OF INCOME TAX (APPEAS) ERRED IN CONFIRMING THE DECISION OF THE ASSESSING OFFICER LEVYING TAX UNDER SECTION 201(1) OF RS.4,36,62,927/- AND INTEREST UNDER SECTION 201 (L ) OF RS.80,28,162/- 3 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT INTERNET BANDWIDTH AND COMMUNICATION CHARGES PAYABL E BY THE COMPANY FOR EXPENDITURE INCURRED TOTALLY OUTSIDE INDIA WITH NOT LEG OF TRANSACTION HAPPENING IN INDIA WOULD NOT CONSTITUTE ROYALTY OR FEES FOR TECHNICAL SERVICES. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT T O HAVE APPRECIATED THAT IN VIEW OF THE DECISION OF THE TRIBUNAL IN ASS ESSEES OWN CASE FOR THE VERY SAME ASSESSMENT YEAR IN ITA NO. 1076/MDS/11 DA TED 04.10.2013 HOLDING THAT NO DISALLOWANCE CAN BE MADE IN RESPECT OF VERY SAME PAYMENT FOR NON DEDUCTION OF TAX. AS THE ISSUE OF TAXABILIT Y OF THIS AMOUNT HAS BEEN DECIDED BY THE TRIBUNAL, THERE IS NO QUESTION OF AS SESSING OFFICER LEVYING TAX UNDER SECTION 201(1) ON THE GROUND THAT THERE IS SH ORT FALL IN DEDUCTION OF TAX. 5 WITHOUT PREJUDICE, THE CIT(A) OUGHT TO HAVE APPRE CIATED THAT IN VIEW OF THE RETROSPECTIVE AMENDMENT THE ASSESSEE COULD NOT HAVE ANTICIPATED THE AMENDMENT AND DEDUCTED TAX AT SOURCE AT THE RATE AP PLICABLE FOR DISALLOWANCE UNDER SECTION 40(A)(I) WOULD BE EQUALL Y APPLICABLE FOR TDS UNDER SECTION 201(1). 6 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT AT THAT WHEN THE ORDER UNDER SECTION 201 (1) WAS PA SSED VIZ 28.03.2014 UNDER SECTION 201(3) ORDER PASSED BY THE ASSESSING OFFICER IS TIME BARRED. 7 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT PRIOR TO THE AMENDMENT EFFECTIVE FROM 01.10.20 14, UNDER SECTION 201(3) NO ORDER DEEMING THE PERSONS TO BE ASSESSEE IN DEFAULT CAN BE PASSED AFTER EXPIRY OF THE TWO YEARS, FROM THE END OF THE FINANCIAL YEAR IN ITA NO.806/MDS./2016 :- 3 -: WHICH STATEMENT UNDER SEC.200 IS FILED, HENCE THE O RDER UNDER SECTION 201(1) AND 201 (LA) IS TIME BARRED AND WITHOUT JURI SDICTION. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY, ENGAGED IN THE BUSINESS OF INTERNET, CORPORATE CONN ECTIVITY AND DATA CENTRE MANAGEMENT, PROVIDING INTERNATIONAL DATA AND VOICE COMMUNICATION SERVICES TO ITS CUSTOMERS. THE BUSINESS OF THE APPELLANT IS DIVIDED INTO TWO BROAD CATEGORIES: A) SERVICES RENDERED WITHIN INDIA: FOR THE SERVICES RENDERED IN INDIA THE APPELLANT USES ITS OWN PIPELINE FOR TRANSMISSIO N OF DATA & PROVISION OF SERVICES. B) CONNECTIVITY SERVICES RENDERED ABROAD: FOR THE C ONNECTIVITY SERVICES PROVIDED ABROAD, THE APPELLANT CONTRACTS WITH OTHER CONNECTIVITY PROVIDERS ABROAD & THE SERVICES ARE USED WHOLLY OUT SIDE INDIA. THE HEAD OFFICE OF THE APPELLANT BEING SITUATED IN INDI A, THE REMITTANCE FOR THE CONNECTIVITY SERVICES ARE MADE FROM INDIA. THE CALLS PRIMARILY ORIGINATE ABROAD AND TERMINATE ABROAD AND HENCE THE WHOLE ACTIVITY CONSTITUTES BUSINESS OPERATIONS CARR IED ON OUTSIDE INDIA. ON RECEIPT OF NOTICE FOR THE ASSESSMENT YEARS 2011- 12 AND 2012-13, THE ASSESSEE FILED WITH THE INTERNATIONAL TAXATION OFFI CE THE ANNUAL REMITTANCE MADE FOR NON-RESIDENT PARTIES. THE LAO BASED ON THE INFORMATION SUBMITTED IN RESPONSE TO SURVEY CONDUCTED BY THE DEPARTMENT V IDE ITS POWER U/S 133A, ISSUED SHOW CAUSE NOTICE ON 18.03.2O14 CALLING FOR EXPLANATIONS FOR NON DEDUCTION OF TDS U/S 201(1) AND 201(1A). THE ASSES SEE RESPONDED TO THE ITA NO.806/MDS./2016 :- 4 -: NOTICE & SUBMITTED THE DETAILS REQUESTED, ALONG WIT H ITS OBJECTION TO THE SHOW CAUSE NOTICE. FURTHER, LD.A.R SUBMITTED BEFORE THE LD. ASSESSING OFFICER THAT THE ITAT IN THE CASE OF APPELLANT FOR THE ASSE SSMENT YEAR IN QUESTION HAD ALREADY HELD THAT THE REMITTANCES DO NOT CONSTI TUTE ROYALTY. THE LAO, HOWEVER PASSED AN ORDER HOLDING THAT THE REMITTANCE S TOWARDS INTERNATIONAL BANDWIDTH AND COMMUNICATION CHARGES AGGREGATED TO ` 4,36,62,827/- CONSTITUTE ROYALTY FOLLOWING THE DECISION OF THE V ERIZON COMMUNICATION SINGAPORE PTE LTD- (TAX CASE APPEAL NOS 147 OF 149 OF 201 K AND 230 OF 2012) AND THE LD. ASSESSING OFFICER DISALLOWED THE REMITTANCE TOWARDS INTERNATIONAL BANDWIDTH AND COMMUNICATION CHARGES. AGGRIEVED WITH THE ORDER OF LD. ASSESSING OFFICER, THE ASSESSEE CARRIE D THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, THE LD.CIT(A) CONFIRMED THE ORDER OF AO ON BOTH LEGAL ISSUE AS WELL AS MERIT. AGAINST THIS, THE AS SESSEE IS IN APPEAL BEFORE US. 4. THE LD.A.R SUBMITTED THAT THE ORDER PASSED U/S. 201 (1) & 201(1A) IS BARRED BY LIMITATION IN VIEW OF THE PROVISIONS OF T HE SECTION 201(3) OF THE ACT. 5. ON THE OTHER HAND, THE LD.D.R SUBMITTED THAT OR DER PASSED U/S.201(1) & 201(1A) HAS BEEN WELL WITHIN THE TIME LIMIT ALLOW ED U/S.201(3) OF THE ACT. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE PROVISIONS OF THE SECTION 201 PRIOR TO ITS SUBS TITUTION, SUB-SECTION(3) AMENDED BY FINANCE ACT,2012 WITH RETROSPECTIVE EFFE CT OF 01.04.2010 READ AS UNDER:- ITA NO.806/MDS./2016 :- 5 -: S.201(3) NO ORDER SHALL BE MADE UNDER SUB-SECTIO N(1) DEEMING A PERSON TO BE AN ASSESSEE IN DEFAULT FOR FAILURE TO DEDUCT THE WHOLE OR ANY PART OF THE TAX FROM A PERSON RESIDENT IN INDIA, AT ANY TIME AF TER THE EXPIRY OF- (I) TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH HE STATEMENT IS FILED IN A CASE WHERE THE STATEMENT REFERRED TO IN SECTION 200 HAS BEEN FILED; II) FOUR YEARS FROM THE END OF THE FINANCIAL YEAR I N WHICH PAYMENT IS MADE OR CREDIT IS GIVEN, IN ANY OTHER CASE. PROVIDED THAT SUCH ORDER FOR A FINANCIAL YEAR COMMENCING ON OR BEFORE THE 1 ST DAY OF APRIL,2007 MAY BE PASSED AT ANY TIME OR OR BEFORE THE 31 ST DAY OF MARCH, 2011. 6.1 NOW, THE CONTENTION OF ASSESSEES COUNSEL IS TH AT SINCE THE FINANCIAL YEAR INVOLVED HEREIN IS 2007-08, WHICH IS COMMENCING FROM FIRST APRIL,2007 AND ENDING ON 31.03.2008, AS SUCH THE PROVISO TO SECTION IS APPLICABLE AND THE ORDER U/S.201(1) AND THE ORDER U/S.201(1A) SHALL BE PASSED ON OR BEFORE MARCH 31 ST DAY OF 2011. ACCORDING TO THE LD.A.R., IN THIS CASE THE ORDER U/ S.201 WAS PASSED ON 28.03.2014, WHICH IS BAD IN LAW AND ALSO TIME BARRE D. 6.2 WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF THE SECTION 201(3) OF THE ACT. AS PER PROVISO DISCUSSED IN EAR LIER, THE TIME LIMIT AVAILABLE TO THE AO TO PASS ORDER U/S.201(1) AND 20 1(1A) IS AS PER ITA NO.806/MDS./2016 :- 6 -: PROVISIONS OF THE SECTION 201(3)(I) I.E. TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE STATEMENT IS FILED IN A CASE WHERE THE STATEMENT REFERRED TO IN SECTION 200. IN THIS CASE , THE ASSESSEE FILED THE QUARTERLY RETURN FOR THE FINANCIAL YEAR 2007-08 AS FOLLOWS. 1 ST QUARTER 12.07.2007 2 ND QUARTER 15.10.2007 3 RD QUARTER 11.01.2008 SECOND RETURN FOR 3 RD QUARTER 29.03.2008 4 TH QUARTER 12.06.2008 AS PER THIS TIME LIMIT TO PASS ORDER U/S.201(1) & 2 01(1A) OF THE ACT IS TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHI CH THE ABOVE STATEMENT IS FILED. SINCE THE LAST QUARTER I.E. 4 TH QUARTER RETURN FILED ON 12.06.2008, THE FINANCIAL YEAR RELEVANT TO THIS MON TH JUNE, 2008 WHICH ENDED ON 31.03.2009. HENCE, TWO YEARS FROM THE END OF THE FINANCIAL YEAR WOULD BE OVER OF 31.03.2011. IF THE AO WANTS TO PASS ANY ORDER U/S.201(1) AND 201(1A) TO BE PASSED WITHIN 31.03.20 11. IN THE PRESENT CASE, THE SAID IMPUGNED ORDER PASSED ON 28. 03.2014, I.E. AFTER THE TIME LIMIT AVAILABLE TO PASS THE ORDER U/S.201 & U/S.201(1A) OF THE ACT. IN OUR OPINION, THE SAID ORDER IS BARRED BY L IMITATION, CANNOT STAND OF ITS OWN LEG. ACCORDINGLY WE ANNUL THE IMP UGNED ORDER WHICH IS BAD IN LAW. ITA NO.806/MDS./2016 :- 7 -: 7. THE ASSESSEE RAISED VARIOUS OTHER GROUNDS ALSO, WHICH ARE NOT CONSIDERED FOR ADJUDICATION, SINCE WE HAVE QUASHED THE ASSESSMENT ORDER PASSED U/S.201(1) AND 201(1A) OF THE ACT. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE, 2016, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 17 TH JUNE, 2016 K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF