The ACIT, Cochin V. M/s.Kinship Services india P. Ltd, Cochin

MA 18/COCH/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6630 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 1 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 21-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-01-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 20-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: K P PAULSON
• Keywords: Opportunity of being heard; Retrospective amendment
• Section: 143(3); 194C; 201(1); 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI CHANDRA POOJAR I, AM & SHRI GEORGE GEORGE K, JM MA NO. 17 /COCH/201 7 : ASST.YEAR 2007 - 2008 (ARISING OUT OF ITA NO. 400 /COCH/201 4 ) MA NO. 18 /COCH/201 7 : ASST.YEAR 2008 - 2009 (ARISING OUT OF ITA NO.401/COCH/2014) THE ASST.COMMISSIONER OF INCOME - TAX, (TDS) KOCHI VS. M/S.KINSHIP SERVICES INDIA (P) LIMITED, KINSHIP HOUSE MARAR ROAD, W.ISLAND KOCHI 682 003. PAN : AABCK1973G. ( APPLICANT ) (RESPONDENT) APPLICANT BY : SMT.A.S.BINDHU, SR.DR . RESPONDENT BY : SRI. K.P.PAULSON, CA DATE OF HEARING : 18.01.2019 DATE OF PRONOUNCEMENT : 21 . 01.2019. O R D E R PER GEORGE GEORGE K, JM THESE MISCELLANEOUS APPLICATION S AT THE INSTANCE OF THE REVENUE ARE DIRECTED AGAINST THE CONSOLIDATED ORDER OF THE TRIBUNAL IN ITA NOS.40 0 & 401 /COCH/2004 (ORDER DATED 20.11.2015 ). 2. BRIEF FACTS OF THE CASE ARE AS FOLLOWS: - THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IT IS ENGAGED IN THE BUSINESS OF SHIPPING AGENCY, CLEARING AND FORWARDING, STEVEDORING AND OTHER ALLIED SERVICES. THE ASSESSEE, IN THE M A NO S . 17 & 18 / COCH /201 7 M/S. KINSHIP SERVICES INDIA P.LTD . 2 COURSE OF ITS BUSINESS, HAD TAKEN CERTAIN SHIPS ON HIRE AND HAD PAID CHARTER H IRE CHARGES. FOR THE AY 2007 - 08 THE ASSESSEE HAD MADE TOTAL PAYMENT OF RS. 12,61,18,420/ - AS CHARTER HIRE CHARGES. SIMILARLY FOR THE AY 2008 - 09, THE TOTAL PAYMENT WAS TO THE TUNE OF RS 2,30,34,169/ - AS CHARTER HIRE CHARGES. THE ASSISTANT COMMISSIONER OF IN COME TAX (TDS) WAS OF THE VIEW THAT WHEN CHARTER HIRE CHARGES ARE PAID, THE PAYMENTS ATTRACTED THE PROVISIONS OF SEC.194 - I OF THE ACT AND ASSESSEE HAVING FAILED TO DEDUCT TAX AT SOURCE WAS LIABLE U/S 201(1) AND 201(1A) OF THE ACT. THE ACIT(TDS) WAS OF THE VIEW THAT IT IS NOT A CASE OF SIMPLE CONTRACT FOR TRANSPORT OF GOODS BUT CONTRACT FOR HIRE OF SHIPPING VESSEL. THE ACIT(TDS) REJECTED THE ASSESSEES ARGUMENT THAT SHIPS DO NOT FORM PART OF PLANT AND MACHINERY SO AS TO ATTRACT SECTION 194 - I. ACCORDINGLY, TH E ACIT(TDS) PASSED ORDER FOR THE AY 2007 - 08 AND 2008 - 09 BY HOLDING THAT CHARTER HIRE CHARGES PAID BY THE ASSESSEE ATTRACTED TDS PROVISIONS U/S 194 - I OF THE ACT. 3. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) FOLLOWED THE EARLIER APP ELLATE ORDER DATED 9.4.2012 IN ITA NO. 72/R - 1/E/CIT(A) - II/10 - 11 (APPEAL AS AGAINST THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT). THE CIT(A) HELD THAT EVEN THOUGH THE PROVISIONS OF SECTION 194 - I WOULD NOT BE ATTRACTED, THE PROVISIONS OF SECTION 194C ARE TO BE ATTRACTED AND ACCORDINGLY PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4 . THE DEPARTMENT BEING AGGRIEVED BY THE CONSOLIDATED ORDER OF THE CIT(A) IN HOLDING THAT THE PROVISIONS OF SECTION M A NO S . 17 & 18 / COCH /201 7 M/S. KINSHIP SERVICES INDIA P.LTD . 3 194C OF THE I.T.ACT WOULD BE ATTRACTED INSTEAD OF SECTION 194 - I OF THE I.T.ACT, FILED APPEALS BEFORE THE TRIBUNAL FOR ASSESSMENT YEARS 2007 - 2008 AND 2008 - 2009. THE TRIBUNAL RESTORED THE MATTER TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION. THE RELEVANT OBSERVATION OF THE TRIBUNAL IN RESTORING THE CASE TO THE ASSES SING OFFICER, READS AS FOLLOWS: - 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE FOR OUR CONSIDERATION IS WHETHER IT IS A CASE OF CONTRACT FOR CARRIER COMING WITHIN THE PROVISIONS OF SEC 194C OF THE ACT OR HIRE SIMPLICTEOR COMING WITHIN THE PROVISIONS OF SEC. 194 - I OF THE ACT. FURTHER, THE QUESTION IS WHETHER PAYMENT FOR HIRE OF SHIP SIMPLICITOR COULD COME WITHIN THE AMBIT OF EXTENDED DEFINITION OF RENT U/S 194 - I OF THE ACT. IN ORDER TO EXAMINE WHETHER IT IS A CASE OF CONTRACT OF CARRIER COMING WITHIN THE PROVISIONS OF SEC. 194C OR HIRE SIMPLICTOR OF SHIPS COMING WITHIN THE PROVISIONS OF SEC. 194 - I, READING OF CONTRACT/AGREEMENT ENTERED BETWEEN THE ASSESSEE AND THE OWNER OF THE SHIPS IS MUST. THE CONTRACT ENTERE D BETWEEN THE ASSESSEE AND THE SHIP OWNERS ARE NOT PLACED ON RECORD THOUGH THERE IS A REFERENCE TO SOME OF THE CLAUSES OF CONTRACT IN THE ORDER PASSED U/S 201 (1) AND 201(1A) OF THE ACT. WE FIND THE ISSUE HAS NOT PROPERLY DELIBERATED BY BOTH THE AO AND THE CIT(A) WITH REGARD TO THE CONTRACT ENTERED BETWEEN THE ASSESSEE AND THE SHIP OWNERS. THEREFORE, FOR A PROPER APPRAISAL OF THE ISSUE AND IN THE INTEREST OF JUSTICE AND EQUITY, WE ARE OF THE VIEW THAT THE MATTER NEEDS TO BE EXAMINED BY THE ACIT(TDS) AFRESH. THEACIT(TDS) SHALL EXAMINE THE CONTRACT ENTERED BETWEEN THE ASSESSEE AND THE SHIP OWNERS, WHICH IS THE BASIS FOR MAKING PAYMENT OF CHARTER HIRE CHARGES. THE ACIT(TDS) ON EXAMINATION OF THE AGREEMENT/CONTRACT SHALL DETERMINE WHETHER IT IS A CASE OF CONTRAC T OF CARRIER COMING WITHIN THE AMBIT OF SEC. 194C OR HIRE SIMPLICTOR AND WHETHER SUCH HIRING OF SHIPS COME UNDER THE PROVISIONS OF SECTION 194 - I OF THE ACT. THE ACIT(TDS) SHALL EXPEDITIOUSLY DISPOSE OF THE MATTER IN ACCORDANCE WITH LAW AS INDICATED ABOVE AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IT IS ORDERED ACCORDINGLY. M A NO S . 17 & 18 / COCH /201 7 M/S. KINSHIP SERVICES INDIA P.LTD . 4 5 . AGGRIEVED, THE REVENUE HAS FILED THE PRESENT MISCELLANEOUS APPLICATIONS BEFORE THE TRIBUNAL. THE CONTENTS OF THE MISCELLANEOUS APPLICATIONS READ AS FO LLOWS: - 2. THREE APPEALS WERE F IL ED BY THE REVENUE BEFORE T HE H ON' BLE ITAT AGAINST THE ORDER OF THE CLT [ A ]. THE ASSESSEE ALSO F IL ED CROSS OB J ECTIONS IN 4 5 & 46 / COCH/2014 . THE APPEALS AND CROSS OBJECT I ONS WERE FILED AGA I NST THE ORDERS OF CIT [A] I N I TA - 08 , 09 , 19[A] & 19[B]/ TDS/ EKM/ CIT(A)III/ 2012 - 13 DATED 24.03.2014 FOR A YS 2007 - 08 & 2008 - 09 . [EXHIBIT - 1] 3. THE HON'BLE ITAT ON 20 . 11 . 2015 PASSED AN ORDER IN IT A N UMBERS 302 , 400 & 401/COCH/2014 [EX I HIBIT - II] SETTING ASIDE THE ORDER U/S 201[1] P AS SED BY THE ACIT(TDS) WITH A DIRECTION TO EXAMINE THE AGREEMENT ENTERED IN TO BETWEEN SH I PPING COMPANY/OWNERS FROM WHOM THE VESSELS WERE TAKEN ON HIRE BY T H E ASSESSEE AND ON ITS BASIS TO DETERMINE AS TO WHETHER IT IS A CASE OF CONTRACT OF C AR RI ER COMING WITHIN THE . AMBIT OF SEC.194C OR RENT FALLING UNDER THE PROV I SIONS OF 1941 OF IN C OME TAX ACT 1961. 4. THE ASSESSEE HAD HIRED SHIPS ON TIME - CHARTER BASIS AND M ADE PAYMENT OF RS. 12,61,18 , 420/ - TO VARIOUS COMPANIES W I THOUT DEDUCTION OF TAX, TH EREBY COMMITTING A DEFAULT OF TDS PROVISIONS. THE ACIT[TDS] PASSED AN ORDER U/S 2 01[1] ON 30 - 03 - 2012 [EXHIBIT - III] WHEREIN THE ENTIRE PAYMENTS WERE TREATED AS PAYM EN TS MADE TO RESIDENT COMPANIES ATTRACTING SECTION 194 - 1 AND RAISING A DEMAND OF RS. 1 , 42 ,89, 217/ - . THE ACIT (TDS) IN PARA 2 OF 201(1) ORDER DATED 30 . 03.2012 RECORDED THAT 'TH E DEDUCTOR WAS UNABLE TO PROVIDE THE SPLIT UP OF PAYMENT MADE TO RESIDENTS AND NON - RESID EN TS. FN THE ABSENCE OF NECESSARY INFORMATION FROM THE DEDUCTOR , IT WILL BE PRESUMED T HA T THE WHOLE OF CHARTER HIRE CHARGES OF RS.12,61, 18,420/ - WAS THE PAYMENT MADE TO RESIDE N TS . ' 5. IN THE COURSE OF PROCEEDINGS BEFORE THE CIT(A) TOO, THE ASSE S SEE FA I LED TO PRODUCE THE COMPLETE DETAILS OF CHARTER HIRE CHARGES PAID FOR HIRING SHIPS . IN P ARA 6 OF THE SAID ORDER THE CIT[A] HAS RECORDED THAT 'BEFORE ME THE ASSESSEE HAS N OT LED ANY EVIDENCE TO SHOW THAT THE PAYMENTS HAVE BEEN MADE TO NON - RESIDENTS'. 6. DURING THE COURSE OF SET - ASIDE PROCEEDINGS AS DIRECTED BY TH E HON'BLE ITAT , THE ASSESSEE HAS I NTRODUCED FRESH MATERIALS REGARDING PAYMENTS MADE T O FOREIGN COMPANIES THE ASSESSEE HAS FURNISHED THE BIFURCATION OF THE TIME CHARTER HIRE C HARGES PAID [EXHIBIT - IV] AND CLAIMS THAT RS . 5 , 10,12,348/ - (OUT OF TOTAL PAYMENTS OF RS . 12 , 61,18 , 4 20/ - ) HAVE BEEN MADE TO THE NON - RESIDENT /FOREIGN SHIPPING COMPANIES. TH E ASSESSEE HAS NOT PROPERLY REPRESENTED THE FACTS BEFORE THE ACFT(TDS) DURING THE ORIGINAL PROCEEDINGS U/S . 201(L). HE AGAIN FAILED TO BRING OUT THE COMPLETE FACTS BEFORE TH E APPEAL AUTHORITIES. NOW, SINCE THE I TAT HAS PARTICULARLY INSTRUCTED THAT CONTRACT AGRE E MENT ARE REQUIRED TO BE SCRUTINIZED BEFORE RE - ASSESSMEN T , THE ASSESSEE HAS SUBMIT TE D THE BREAK UP OF EXPENDITURE . M A NO S . 17 & 18 / COCH /201 7 M/S. KINSHIP SERVICES INDIA P.LTD . 5 7 . SINCE THE ASSESSEE HAS SUBMITTED THAT RS.5 , 10,12 , 348/ - H AS BEEN PAID TO NON - RESIDENTS (OUT OF TOTAL PAYMENTS OF RS. 12 , 61 , 18 , 420/ - ), PROVIS ION S OF SECT I ON 195 IS CLEARLY ATTRACTED. 8. THE HONORABLE MADRAS HIGH COURT IN THE POOMPUHAR SHIP PI NG CORPORATION LTD . JUDGMENT DATED 09.10.2013 IN TC(A)NOS . 2206 TO 2208 OF 2006 , & T C( A)NOS . 598 TO 601 OF 2013 HELD THAT THE PAYMENT BY WAY OF CHARTER/TIME CHARTER OF SH I P S F ALLS WITHIN THE AMBIT OF ROYALTY AND THEREFORE, THE PROVISIONS OF SEC.194J/195 ARE ATTR A CTED . IN VIEW OF THE FRESH MATERIALS NOW ADDUCED AND THE PRONOUNCEMENT IN THE P OOMPUHAR SHIPPING CORPORATION LTD., THE TIME - CHARTER HIRE CHARGES PAID TO FOREIGN C OMPAN I ES HAS TO BE CONSIDERED UNDER SECTION 195 READ WITH EXPLANATION TO SEC.9 (VI) (B ) AS AMENDED W . E . F 2010 WITH RETROSPECTIVE EFFECT. FURTHER T HE NATURE OF PAYMENT TO IN DIAN COMPANIES ARE ALSO IN THE NATURE OF ROYALTY AND PROVISIONS OF 194J WILL BE ATT RA CTED AS HELD IN THE REFERRED CASE . 9. IN VIEW OF THE ABOVE DECISION , IN THE PRESENT CASE, PROVISION S OF SEC . 194J AND 195 ARE ATTRACTED. HOWEVER , IN THE ORDER PASSED BY THE HON'BLE IT AT IN ITS ORDER DATED 20 . 11.2015 I T IS STATED THAT ' THE ACIT(TDS) ON EXAMINATION OF TH E AGREEMENT/CONTRACT SHALL DETERMINE WHETHER I T I S A CASE OF CONTRACT OF CARRIER COM I N G WITHIN THE AMBIT OF SEC.194C OR 'HIR E' SIRNPLLCATOR AND WHETHER SUCH HIRING OF SHIPS COME UNDER THE PROVISIONS OF SECTION 194 - 1 OF THE ACT .' 10. IT IS SEEN THAT THE HON ' BLE ITAT HAS OMITTED TO FIND THE F AC T THAT THE ASSESSEE MADE PAYMENTS TO FOREIGN ENTITIES WHICH ATTRACTED SECTION 195 OF T HE INCOME TAX ACT . 11. THERE IS A MISTAKE IN THE ORDER OF HON'BLE ITAT AS BEING THE FA CT FINDING AUTHORITY ERRED I N NOT FINDING THE FACT THAT THE ASSESSE MADE PAYMENTS TO FOR EIGN ENT I TIES WHICH ATTRACT SECTION 195 OF THE INCOME TAX ACT DUE TO THE FAILURE OF THE A SSESSE I N D I SCLOSING THE FULL FACTS BEFORE THE HON ' BLE ITAT . HENCE THE ORDER DATED 20.11.2015 MAY BE RECALLED. GROUNDS AND PRAYER IN THE GIVEN FACTS AND CIRCUMSTANCES, I T I S RESPECTFU L LY PRAYED T HAT : I. THE ITAT MAY KINDLY RECALL THE ORDER DATED 20.11.2015 IN ITA N O: 302/COCH/2014 & 400 &401/COCH/2014 AND CROSS OBJECTION NO . 45 & 46/COCH/2014 . II. RESPECTFULLY PRAYED THAT THERE AFTER THE ITAT MAY SET AS I DE TH E ORDER U/S 201(1) DATED 30.03.2012. III . RESPECTFULLY PRAYED THAT THE ITAT MAY DIRECT THE ASSISTA NT COMMISSIONER OF 1 I NCOME TAX (TDS) KOCHI, TO DEAL WITH THE TDS ASPECT OF THE PAYME N T TO RESIDENTS. IV. RESPECTFULLY PRAYED THAT THE ITAT MAY DIRECT THE ASSISTANT COMMISSIONER OF INCOME TAX, (INTERNATIONAL TAXATION), KOCHI TO DEAL WITH THE PAYM E NTS MADE TO NON - RESIDENTS . M A NO S . 17 & 18 / COCH /201 7 M/S. KINSHIP SERVICES INDIA P.LTD . 6 6 . WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL. T HE ONLY ISSUE RAISED BY THE DEPARTMENT BEFORE THE TRIBUNAL IN TH E INCOME - TAX APPEAL WAS THAT SECTION 194 - I OF THE I.T.ACT HAS APPLICATION TO THE FACTS OF THE INSTANT CASE AND NOT SECTION 194C OF THE I.T.ACT, AS CONTENDED BY THE ASSESSEE. THE TRIBUNAL IN ITS ORDER DATED 20.11 .2015 WAS OF THE VIEW THAT THERE WAS NO SUFFI CIENT MATERIAL ON RECORD TO CONSIDER WHICH OF THE SECTION HAS APPLICATION TO THE FACTS OF THE CASE, WHETHER SECTION 194 - I OR 194C OF THE I.T.ACT. HENCE , THE TRIBUNAL RESTORED THE CASE TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION. 6.1 IN THE PRESENT MISCELLANEOUS APPLICATIONS, THE REVENUE S CONTENTION IS THAT THE TRIBUNAL OUGHT TO HAVE RESTORED THE MATTER TO THE A.O. TO EXAMINE WHETHER THE PROVISIONS OF SECTION 194J OF THE I.T.ACT AND 195 OF THE I.T.ACT IS ALSO APPLICABLE . IT IS TO BE M ENTIONED THAT THE ASSESSING OFFICER NOR THE CIT(A) HAD NOT CONSIDERED THE APPLICABILITY OF PROVISIONS OF SECTION 194J OF THE I.T.ACT AND 195 OF THE I.T.ACT . IN THESE MISCELLANEOUS APPLICATIONS, IT IS CONTENDED AT PARA 3 THAT DURING THE COURSE OF SET ASIDE PROCEEDINGS BEFORE THE A.O., THE ASSESSEE INTRODUCED FRESH MATERIALS REGARDING THE PARTIES TO WHOM THE PAYMENTS HAVE BEEN MADE, WHICH INCLUDES NON - RESIDENT / FOREIGN SHIPPING COMPANIES. THEREFORE, ACCORDING TO THE REVENUE, THE A.O. OR CIT(A) COULD NOT HAV E INVOKED SECTION 194J AND 195 OF THE I.T.ACT. THIS STATEMENT IN THE MISCELLANEOUS APPLICATION IS NOT FACTUALLY CORRECT. THE M A NO S . 17 & 18 / COCH /201 7 M/S. KINSHIP SERVICES INDIA P.LTD . 7 ASSESSEE HAD PRODUCED THE DETAILS OF THE PAYMENT FOR BOTH THE ASSESSMENT YEARS, I.E., 2007 - 2008 AND 2008 - 2009 ON 07.06.2012 AND ON 06.07.2012, IN REPLY TO THE DEPARTMENTS NOTICE U/S 2 21(1) OF THE I.T.ACT. COPIES OF THE LETTERS DATED 06.07.2012 TOGETHER WITH DEPARTMENTS ACKNOWLEDGMENT IN THE LOCAL DELIVERY BOOK IS PLACED ON RECORD IN THE PAPER BOOK FILED BY THE ASSESSEE. WHEN THE PAY MENT DETAILS ARE FURNISHED BY THE ASSESSEE VIDE LETTER DATED 06.07.2012, THE DEPARTMENT OUGHT TO HAVE TAKEN UP THE ISSUE OF APPLICABILITY OF SECTION 194J AND 195 OF THE I.T.ACT BEFORE THE FIRST APPELLATE AUTHORITY OR BEFORE THE TRIBUNAL. HOWEVER, ON PERUSA L OF THE GROUNDS OF APPEAL, THE DEPARTMENTS ONLY PLEA IS PROVISIONS OF SECTION 194 - I HAS APPLICATION INSTEAD OF SECTION 194C OF THE I.T.ACT, AS CLAIMED BY THE ASSESSEE. THE REVENUE DOES NOT HAVE THE CASE BEFORE THE CIT(A) NOR BEFORE THE ITAT THAT PROVISIO NS OF SECTION 194J AND 195 OF THE I.T.ACT HAS APPLICATION . THE TRIBUNAL IS EXPECTED ONLY ADJUDICATE THE ISSUE THAT ARE RAISED BEFORE IT. THE ISSUE OF APPLICABILITY OF SECTION 194J OF I.T.ACT AND 195 OF I.T.ACT WAS NEVER SUBJECT MATTER OF ADJUDICATION BEFOR E THE TRIBUNAL. SINCE SECTION 194J AND 195 OF THE I.T.ACT WAS NOT SUBJECT MATTER OF ADJUDICATION BEFORE THE TRIBUNAL IN THE INCOME TAX APPEAL (ITA NO.400/COCH/2014 & 401/COCH/2014 ORDER DATED 20.11 .2015), IT CANNOT BE STATED THAT THE ORDER OF THE TRIBUNAL DATED 20 .11.2015 SUFFERS FROM A MISTAKE APPARENT FROM RECORD , WARRANTING OUR INTERFERENCE U/S 254(2) OF THE I.T.ACT. IT IS ORDERED ACCORDINGLY. M A NO S . 17 & 18 / COCH /201 7 M/S. KINSHIP SERVICES INDIA P.LTD . 8 7 . IN THE RESULT, THE MISCELLANEOUS APPLICATION S ARE DISMISSED . ORDER PRONOUNCED ON THIS 21 ST DAY OF JANUARY, 2019 . SD/ - SD/ - (CHANDRA POOJARI) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIAL MEMBER C OCHIN ; DATED : 21 ST JANUARY, 2019 . DEVDAS* COPY OF THE ORDER FORWARDED TO : BY ORDER (ASSTT. REGISTRAR) ITAT, COCHIN 1. THE APPELLANT 2. THE RESPONDENT. 3. THE PR.CIT, KOCHI 4. THE CIT(A) - III , KOCHI 5. DR, ITAT, COCHIN 6. GUARD FILE.