ITO, Bangalore V. M/s CEE AAR Exports, Bangalore

ITA 838/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60752 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 26-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Double taxation relief; Deemed to accrue or arise in india
• Section: 201(1)

Judgement Text

PAGE 1 OF 7 ITA NOS.835 TO 838 /BANG/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NOS.835 TO 838/BANG/2011 (ASSESSMENT YEARS 2007-08 TO 2010-11) THE INCOME TAX OFFICER, (INTERNATIONAL TAXATION), WARD-1(1), BANGALORE-1. VS M/S CEE AAR EXPORTS, NO.215, 1 ST FLOOR, 4 TH CROSS,. CUBBONPET, BANGALORE-2. PA NO.AABFC9476F (APPELLANT) (RESPONDENT) DATE OF HEARING : 21.06.2012 DATE OF PRONOUNCEMENT : 21.06.2012 APPELLANT BY : SHRI SARAVANAN B, JCIT RESPONDENT BY : SMT. SHEETAL, ADVOCATE ORD ER PER BENCH : THESE APPEALS INSTITUTED BY THE DEPARTMENT ARE DIR ECTED AGAINST THE CONSOLIDATED ORDER OF THE CIT(A)-IV, BA NGALORE DATED 28 TH JULY, 2011. THE RELEVANT ASSESSMENT YEARS ARE 2007-08 TO 2010-11. 2. IDENTICAL GROUNDS HAVE BEEN RAISED IN THESE APP EALS AND THEY READ AS FOLLOWS:- I) THE LEARNED CIT(A) HAS ERRED IN INVOKING THE PROVIS IONS OF SECTION 251(1)(C) OF THE ACT IN SETTING ASIDE THE ASSESSMENT MADE UNDER SECTION 201 OF THE ACT. PAGE 2 OF 7 ITA NOS.835 TO 838 /BANG/2011 2 II) THE LEARNED CIT(A) HAS ERRED IN NOT FOLLOWING THE J UDICIAL PRINCIPLE LAID DOWN BY THE HONBLE ITAT MUMBAI BENCH IN THE CASE OF MAHINDRA & MAHINDRA LTD. V DEPUTY COMMISSIONER OF INCOME-TAX, TDS RANGE-1(1), MUMBAI (2009) 30 SOT 374 (MUM.)(SB) AND ORDERS OF THE HONBLE APEX COURT IN ITO V DELHI DEVELOPMENT AUTHO RITY (2001) 252 ITR 772 (2002) WHEREBY THE ORDERS UNDER SECTION 201 ARE TO BE HELD AS ORDER OF ASSESSMENT A ND DEALT WITH ACCORDINGLY. III) THE LEARNED CIT(A) HAS ERRED IN NOT GIVING A FINDIN G BOTH IN LAW AND ON MERITS RESTORING THE MATTER TO THE FI LE OF THE ASSESSING OFFICER. IV) FOR THE AFOREMENTIONED GROUNDS, THE ORDER OF THE LE ARNED CIT(A) IS TO BE SET ASIDE AND THAT THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 3. BRIEF FACTS OF THE CASE ARE AS FOLLOWS:- THE ASSESSEE, A PARTNERSHIP FIRM, IS ENGAGED IN T HE BUSINESS OF MANUFACTURE AND SALE OF SILK FABRICS AND EXPORTING THE FABRICS TO VARIOUS EUROPEAN COUNTRIES APART FROM USA, CHINA, AUSTRALIA AND NEW ZEALAND. THE ASSESSEE IN THE RETURN OF INCOME FILED IN THE ABOVE ASSESSMENT YEARS CLAIMED THE DEDUCTION ON ACCOUNT OF THE COMMISSION TO THE A GENCY AS UNDER:- SL. NO. ASSESSMENT YEAR COMMISSION PAID/PAYABLE 1. 2006-07 RS.27,14,192/- 2. 2007-08 RS.22,98,688/- 3. 2008-09 RS.28,01,428/- 4. 2009-10 RS.16,63,132/- THE ASSESSING OFFICER IN A COMMON ORDER PASSED FO R THE ABOVE ASSESSMENT YEARS HELD THAT THE COMMISSION PAID/PAYABL E TO THE AGENCY IS DEEMED TO ACCRUE OR ARISE IN INDIA AS PER THE PROVI SIONS OF SECTION 9 OF THE ACT AND THEREFORE, CONSTITUTE AN INCOME CHARGEABLE TO TAX UNDER THE ACT. PAGE 3 OF 7 ITA NOS.835 TO 838 /BANG/2011 3 HENCE, THE TAX WAS DEDUCTIBLE AT SOURCE AS PER THE PROVISIONS OF SECTION 195 OF THE ACT. FURTHER, THE ASSESSING OFFICER APPLIED THE RATE OF DEDUCTION @ 40% BY STATING THAT THE STATUS OF THE AGENCY IS NOT KNOWN. ACCORDINGLY, HE PASSED ORDERS UNDER SECTION 201 AND 201(1A) OF THE ACT AS UNDER:- FINANCIAL YEAR ASSESSMENT YEAR AMOUNT PAID/ PAYABLE (RS.) TAX U/S 201(1) (RS.) INTEREST U/S 201(1A) (RS.) TOTAL (RS.) 2006-07 2007-08 27,14,192 10,85,677 6,40,549 17,26, 726 2007-08 2008-09 22,98,688 9,19,475 4,32,154 13,51 ,629 2008-09 2009-10 28,01,428 11,20,571 3,92,200 15,12, 771 2009-10 2010-11 16,63,132 6.65,253 1,53,008 8,18 ,261 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER IMPOSING LIABILITY UNDER SECTION 201 AND 201(1A) OF THE ACT, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORI TY. 5. THE FIRST APPELLATE AUTHORITY DISPOSED OF THE MA TTER VIDE HIS ORDER DATED 28 TH JULY, 2011 BY REMITTING THE ISSUE TO THE ASSESSING O FFICER FOR FURTHER INVESTIGATION. THE CIT(A) HELD THAT EX CEPT FOR FURNISHING THE AGREEMENT, THE ASSESSEE HAS NOT PRODUCED ANY EVIDENC E TO PROVE THE ACTUAL PAYMENT OF COMMISSION TO THE AGENTS AND THE NATURE O F THE PAYMENTS. DIRECTION WAS ALSO GIVEN TO THE ASSESSING OFFICER T O EXAMINE WHETHER THE SAID PAYMENT, IF ANY, WAS LIABLE FOR DEDUCTION OF TAX UNDER SECTION 195 OF THE ACT. THE RELEVANT PORTION OF THE CIT(A)S ORDER R EADS AS FOLLOWS:- FROM THE FACTS DISCUSSED ABOVE, IT IS CLEAR THAT T HE ASSESSING OFFICER HAS PASSED THE ORDERS UNDER SECTI ON 201(1) AND 201(1A) OF THE ACT FOR THE ABOVE ASSESSM ENT YEARS WITHOUT PROPERLY INVESTIGATING THE FOLLOWING ASPECTS: PAGE 4 OF 7 ITA NOS.835 TO 838 /BANG/2011 4 (1) WHETHER THE DEDUCTION CLAIMED AS COMMISSION IS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS?, IF SO, (I) WHETHER THE PAYMENT CLAIMED TO HAVE BEEN MADE TO THE NON RESIDENT IS RECEIVED IN INDIA AS PER CLAUSE (A) OF SUB- SECTION (2) OF SECTION 5 OF THE IT ACT? (II) WHETHER THE PAYMENTS HAVE ANY ELEMENT OF THE INCOME CHARGEABLE TO TAX IN INDIA, CONSIDERING THE PROVISIONS OF THE ACT AND THE DTAA? (2) IF THE PAYMENTS DO NOT REPRESENT THE EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, WHETHER SUCH PAYMENTS CAN BE HELD AS THE PAYMENT OF THE SUM WHICH IS CHARGEABLE TO TAX IN INDIA AS PER THE PROVISIONS OF SECTION 195 OF TH E ACT? THEREFORE, IN VIEW OF THE POWERS CONFERRED UNDER CL AUSE (C) OF SUB-SECTION (1) OF SECTION 251 OF THE INCOME TAX ACT, THE UNDERSIGNED HEREBY DIRECTS THE ASSESSING OFFICER TO CARRY OUT FURTHER INVESTIGATION ON THE AB OVE ASPECTS AND THEREAFTER PASS THE ORDER AFRESH IN REG ARD TO THE APPLICABILITY OF SECTION 201(1) AND 201(1A) O F THE ACT OR OTHERWISE AFTER ALLOWING PROPER OPPORTUNITY O F BEING HEARD TO THE APPELLANT TO PRODUCE NECESSARY EXPLANATION ALONG WITH THE EVIDENCES IF ANY, TO ARRI VE AT A CORRECT CONCLUSION FOR ALL THE ABOVE FOUR ASSESSMEN T YEARS UNDER APPEAL. 6. THE REVENUE BEING AGGRIEVED BY REMANDING THE MAT TER TO THE ASSESSING OFFICER IS IN APPEAL BEFORE US. 7. THE LEARNED DR SUBMITTED THAT THE ORDER PASSED UNDER SECTION 201 AND 201(1A) IS AN ORDER OF ASSESSMENT. FOR THE ABOVE PROPOSITION, THE PAGE 5 OF 7 ITA NOS.835 TO 838 /BANG/2011 5 LEARNED DR RELIED ON THE ORDER OF THE SPECIAL BENCH IN THE CASE OF MAHINDRA AND MAHINDRA LTD. V DCIT (313 ITR 263) (SB) (MUM.). IT WAS CONTENDED THAT, IF THE ORDER PASSED UNDER SECTION 201 AND 201 (1A) IS AN ORDER OF ASSESSMENT, THEN THE FIRST APPELLATE AUTHORITY HAS T O DISPOSE OFF THE SAME UNDER SECTION 251(1)(A) INSTEAD OF 251(1)(C) OF THE ACT. UNDER SECTION 251(1)(A), THE CIT(A) DOES NOT HAVE THE POWER TO SE T ASIDE THE MATTER TO THE ASSESSING OFFICER FOR MAKING AFRESH THE ASSESSMENT. IT WAS SUBMITTED BY THE LEARNED DR THAT THE CIT(A) HAS TO NECESSARILY CO NSIDER THE ISSUE ON MERITS INSTEAD OF REMANDING THE MATTER TO THE ASSES SING OFFICER. IT WAS STATED THAT THE CIT(A), IF NEEDED, COULD CALL FOR A REMAND REPORT FROM THE ASSESSING OFFICER FOR FACILITATING HIM TO DECIDE TH E ISSUE ON MERITS. 8. THE LEARNED AR PRESENT WAS DULY HEARD. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE HONBLE SPECIAL BENCH OF THE TRIBUN AL IN THE CASE OF MAHINDRA AND MAHINDRA LTD. (CITED SUPRA), FOLLOWING THE JUDGEMENT OF THE HONBLE APEX COURT IN THE CASE OF ITO V DELHI DEVEL OPMENT AUTHORITY, HELD THAT THE ORDER PASSED UNDER SECTION 201 IS TO BE TR EATED AS AN ORDER OF ASSESSMENT OR ATLEAST AKIN TO THE ASSESSMENT ORDER. THE RELEVANT FINDING OF THE HONBLE SPECIAL BENCH (313 ITR 263 AT PAGE 297) READS AS FOLLOWS:- IN VIEW OF THE FOREGOING DISCUSSION WE FIND THAT W HEREAS IN SOME CASES IT HAS BEEN HELD THAT THE ORDER UNDER SECTION 201(1) IS NOT AN ORDER OF ASSESSMENT, ON TH E OTHER HAND, THE HONBLE SUPREME COURT IN THE CASE O F DELHI DEVELOPMENT AUTHORITY (2001) 252 ITR 772 HAS APPROVED THE VIEW TAKEN BY THE HONBLE DELHI HIGH CO URT HOLDING THAT IT IS AN ORDER OF ASSESSMENT. AS PER ARTICLE PAGE 6 OF 7 ITA NOS.835 TO 838 /BANG/2011 6 141 OF THE CONSTITUTION OF INDIA THE LAW DECLARED BY THE SUPREME COURT SHALL BE BINDING ON ALL COURTS WITHIN THE TERRITORY OF INDIA. IT IS MORE THAN OBVIOUS THAT T HE ENUNCIATION OF LAW BY THE APEX COURT IS BINDING ON ALL THE HIGH COURTS AND THE LOWER AUTHORITIES. NO ONE CAN DATE TO BRUSH ASIDE THE VERDICT OF THE SUPREME COURT BY A SIMPLE ASSERTION THAT IT DOES NOT CONFORM TO STATUT ORY PROVISION AS HAS BEEN HELD IN THE CASE OF LT. COL. P R CHAUDHARY V MUNICIPAL CORPORATION OF DELHI (2000) 4 SCC 577. IT IS, THEREFORE, VIVID THAT ANY JUDGEMENT REN DERED BY THE HONBLE SUPREME COURT HAS THE BINDING FORCE O N ALL THE LOWER COURTS, AUTHORITIES OR FOR THAT MATTER AN YBODY ELSE IN INDIA. IT IS TRITE LAW THAT THE COURTS DECL ARE THE LAW AND DO NOT LEGISLATE. HENCE PRONOUNCEMENT OF L AW BY THE COURTS IS ALWAYS RETROSPECTIVE AND IS CONSIDERED AS THE INTERPRETATION SINCE INCEPTION. IN THAT VIEW O F THE MATTER, IT IS MANIFEST THAT ONCE A PARTICULAR VIEW HAS BEEN EXPRESSED BY THE HONBLE SUPREME COURT ON AN ISSUE, THEN ANY CONTRARY VIEW TAKEN BY THE OTHER HIGH COURTS HAS TO BE CONSIDERED AS EXPRESSLY OR IMPLIEDL Y OVERRULED. WE ARE THUS OF THE CONSIDERED OPINION T HAT THE ORDER UNDER SECTION 201(1) IS TO BE TREATED AS AN ORDER OF ASSESSMENT OR AT LEAST AKIN TO THE ASSESSM ENT ORDER. 9.1 THE FIRST APPELLATE AUTHORITY, WHILE REMITTING THE CASE TO THE ASSESSING OFFICER, PROCEEDED BY EXERCISING HIS POWER UNDER SECTION 251(1)(C) OF THE ACT. THE ORDER OF THE SPECIAL BENCH OF THE MUMBAI TRIBUNAL CITED SUPRA WAS NOT CONSIDERED BY THE CIT(A). THE HONBLE SPECIAL BENCH HAD CATEGORICALLY HELD THAT ORDER PASSED UNDER SECTION 2 01 & 201(1A) IS AN ORDER OF ASSESSMENT; THEREFORE, THE CIT(A) HAS ERRED IN I NVOKING THE PROVISIONS OF SECTION 251(1)(C) OF THE ACT AND IN SETTING ASIDE T HE ASSESSMENT MADE UNDER SECTION 201 OF THE ACT. HENCE, THE MATTER IS REMIT TED TO THE FILE OF THE PAGE 7 OF 7 ITA NOS.835 TO 838 /BANG/2011 7 FIRST APPELLATE AUTHORITY TO CONSIDER THE ORDER OF T HE SPECIAL BENCH CITED SUPRA AND TAKE APPROPRIATE DECISION. 10. IN THE RESULT, THE APPEALS FILED BY THE DEPARTM ENT ARE ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED ON THE 21 ST DAY OF JUNE, 2012 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BA NGALORE.