M/s. Power and Control Systems , Bangalore V. The Deputy Commissioner of Income Tax, Circle-1(2), Bangalore

MA 327/BANG/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2186 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 10-10-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Assessee Lawyers: K R VASUDEVAN
• Keywords: Recovery proceedings; Permanent establishment
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER M.P NOS.327 TO 331/BANG/2018 (IN ITA NOS.883 TO 887/BANG/2018 ASSESSMENT YEARS : 2011-12 TO 2015-16 POWER & CONTROL SYSTEMS, D-7, 1 ST FLOOR, UNITY BUILDINGS, J.C ROAD, BENGALURU. VS. THE DY. COMMISSIONER OF INCOME TAX CIRCLE-1(2), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI K. RVASUDEVAN, ADVOCATE RESPONDENT BY : DR. P.V PRADEEP KUMAR, ADDL.CIT DATE OF HEARING : 02.11.2018 DATE OF PRONOUNCEMENT : 16.11.2018 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THESE ARE MISC. APPLICATIONS FILED BY THE ASSESSEE U/S 254(2) OF THE INCOME-TAX ACT 1961 (THE ACT) ON AVERMENT TH ERE IS A MISTAKE APPARENT IN THE ORDER OF THE TRIBUNAL DATED 4/6/201 8 PASSED IN ITA NOS.883 TO 887/BANG/2018. THE ISSUE THAT WAS DECI DED BY THE TRIBUNAL IN THE AFORESAID APPEALS WAS AS TO WHETHE R THE ASSESSE WAS LIABLE TO PAY INTEREST U/S 201(1A) OF THE ACT. THI S ISSUE AROSE FOR CONSIDERATION UNDER THE FOLLOWING FACTS AND CIRCUMS TANCES. DURING THE M.P NOS. 327 - 331/BANG/2018 PAGE 2 OF 7 FINANCIAL YEAR ('FY') 2010-11 RELEVANT TO AY 2011-1 2, THE ASSESSEE HAD PAID AMOUNTS OF RS 1,76,75,754/- TO PANDUIT COR PORATION. TAXES WERE NOT DEDUCTED BY THE ASSESSEE ON THESE PAYMENTS , AS ACCORDING TO THE ASSESSEE IT WAS UNDER THE BELIEF THAT TDS PROVI SIONS WERE NOT APPLICABLE TO THESE TRANSACTIONS. THE LEARNED ASSE SSING OFFICER ('AO') HOWEVER CONFRONTED THE ASSESSEE WITH THE FACT THAT PANDUIT CORPORATION WAS A FOREIGN COMPANY INCORPORATED IN T HE UNITED STATES OF AMERICA WHICH HAD OPENED A BRANCH OFFICE IN BENG ALURU AND THE SUPPLIES MADE TO THE ASSESSEE WERE THROUGH THIS BRA NCH OFFICE. THIS BRANCH OFFICE OF PANDUIT CORPORATION CONSTITUTED IT S PERMANENT ESTABLISHMENT (PE' FOR SHORT) IN INDIA. THE AO FURT HER OBSERVED THAT THE ASSESSEE HAD MADE PAYMENTS TO THE BRANCH OFFICE OF PANDUIT CORPORATION AND THEREFORE THE ASSESSEE OUGHT TO HAV E DEDUCTED TAX AT SOURCE U/S.195 OF THE INCOME TAX ACT, 1961 (ACT). THE AO THEREFORE ISSUED NOTICE DATED OCTOBER 9, 2015 UNDER SECTION 2 01(1) AND 201(1A) OF THE INCOME-TAX ACT, 1961 (ACT' FOR SHORT) TO SHO W CAUSE WHY THE ASSESSEE SHOULD NOT BE TREATED AS AN ASSESSEE IN DE FAULT' FOR NON- DEDUCTION OF TAXES ON THE PAYMENTS MADE TO THE PE O F THE FOREIGN COMPANY. THE ASSESSEE FILED ITS REPLY TO THE SAID SHOW CAUSE NOTICE WHICH WERE REJECTED BY THE AO. THE PETITIONER HAD F ILED THE RETURN OF INCOME OF PANDUIT CORPORATION ALONG WITH THE CERTIF ICATE FROM THE CHARTERED ACCOUNTANT TO DEMONSTRATE THAT PANDUIT CO RPORATION HAD DISCHARGED THE TAX LIABILITY. THE AO ACCEPTED THE S AME AND HENCE NO TAX WAS DEMANDED FROM THE ASSESSEE. HOWEVER IN RES PECT OF INTEREST UNDER SECTION 201(1A) OF THE ACT, THE AO REJECTED T HE ARGUMENTS OF THE M.P NOS. 327 - 331/BANG/2018 PAGE 3 OF 7 ASSESSEE THAT SINCE PANDUIT CORPORATION HAD FILED L OSS RETURNS, INTEREST CANNOT BE LEVIED UNDER SECTION 201(1A) OF THE ACT. THE AO THEREFORE HELD THAT THE ASSESSEE WAS LIABLE FOR PAYMENT OF IN TEREST UNDER SECTION 201(1A) OF THE ACT. THE AO ACCORDINGLY PASSED ORDER DATED MARCH 31, 2016 AND COMPUTED THE INTEREST PAYABLE OF RS 10,81, 211/- UNDER SECTION 201(1A) OF THE ACT. 3. ON APPEAL BY THE ASSESSEE, THE CIT(A) AGREED WIT H THE VIEW TAKEN BY THE AO. ON FURTHER APPEAL, TRIBUNAL UPHE LD THE ORDER OF THE CIT(A). 4. IN THESE MISC. APPLICATIONS, THE ASSESSEE HAS C ONTENDED THAT IN GROUND NO 2.1(C) OF THE APPEAL, THE ASSESSEE HAD CH ALLENGED THE ORDER OF THE LD CIT(A) UPHOLDING CHARGE OF INTEREST FOR T HE DELAYED RECOVERY OF TAXES WHEN IN FACT THE PAYMENTS MADE BY THE PETI TIONER TO PANDUIT CORPORATION WERE NOT LIABLE TO TAX. THE GROUND NO 2.1(C) OF THE APPEAL IS EXTRACTED BELOW FOR EASE OF REFERENCE: 2.1 THE AUTHORITIES BELOW HAVE ERRED IN NOT APPRECIATING THAT: A) B) C) NO TAXES BEING PAYABLE TO THE GOVERNMENT, THE QUESTION OF DELAY IN RECOVERY OF TAXES AND INTEREST FOR DELAY DOES NOT ARISE. AND ERRED IN LEVYING /CONFIRMING THE INTEREST U/S 201(1A) OF THE ACT. THE ACTION OF THE AUTHORITIES B ELOW M.P NOS. 327 - 331/BANG/2018 PAGE 4 OF 7 BEING CONTRARY TO THE FACTS AND CIRCUMSTANCES OF TH E CASE AND THE LAW APPLICABLE IS TO BE NEGATED.' 5. IT HAS FURTHER BEEN CONTENDED THAT THE PAYMENTS MADE BY IT TO PANDUIT CORPORATION WAS TOWARDS THE SUPPLY OF GO ODS AND EQUIPMENT AND THAT IT IS A SETTLED PRINCIPLE THAT T AX DEDUCTION AT SOURCE IS NOT REQUIRED TO BE MADE ON REMITTANCES MA DE TOWARDS PURCHASE/SUPPLY OF GOODS. THE CONTENTION OF THE ASS ESSEE IS THAT THE REMITTANCES MADE BY IT TOWARDS PURCHASE OF GOODS AND EQUIPMENT FROM PANDUIT CORPORATION BEING SUPPLY OF GOODS, NO TAXES ARE REQUIRED TO BE WITHHELD UNDER THE PROV ISIONS OF SECTION 195 OF THE ACT. THE ASSESSEE HAS SUBMITTED THAT THE LOWER AUTHORITIES HAVE ERRED IN NOT APPRECIATING TH AT THE PAYMENTS MADE BY THE PETITIONER TO PANDUIT CORPORAT ION DO NOT ATTRACT THE PROVISIONS OF SECTION 195 OF THE ACT AN D ARE HENCE NOT TAXABLE. 6. IT HAS FURTHER BEEN SUBMITTED THAT THE HON'BLE TRIBUNAL WAS PLEASED TO DISMISS THE APPEAL OF THE ASSESSEE BY FO LLOWING THE DECISION OF THE HON'BLE PUNJAB AND HARYANA HIGH COU RT ('P&H HC') IN THE CASE OF PUNJAB INFRASTRUCTURE DEVELOPME NT BOARD, CHANDIGARH [76 TAXMANN.COM 365 (P&H)]. IT HAS ALSO BEEN CONTENDED THAT IN PARA 24 OF THE SAID DECISION, IT HAS BEEN OBSERVED THAT ASSESSEE WOULD NOT BE LIABLE TO PAY I NTEREST UNDER SECTION 201(1A) OF THE ACT IF THE PROVISIONS OF SEC TION 194C OF THE ACT WERE NOT APPLICABLE TO THE PAYMENTS MADE BY THE ASSESSEE. THE ASSESSEE HAS THEREFORE IN THIS PETITI ON PLEADED M.P NOS. 327 - 331/BANG/2018 PAGE 5 OF 7 THAT SINCE THE PAYMENT MADE BY IT TO PANDUIT CORPOR ATION WARDS PURCHASE OF GOODS AND EQUIPMENT IS NOT CHARGE ABLE TO TAX UNDER SECTION 195 OF THE ACT AND HENCE INTEREST CANNOT BE DEMANDED UNDER SECTION 201(1A) OF THE ACT. 4. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE WHO REITERATED THE AVERMENT MADE IN THE MI SC. PETITIONS. THE LD DR ON THE OTHER HAND BROUGHT TO O UR NOTICE THAT THE TRIBUNAL IN PARAGRAPH 10 & 11 OF THE ORDER DATED 4/6/2018 HAS EXHAUSTIVELY DEALT WITH THIS ASPECT TO COME TO THE CONCLUSION THAT THE TRIBUNAL HAS TAKEN A CONCISE DE CISION BY FOLLOWING THE DECISION OF THE HONBLE MADRAS HIGH C OURT IN THE CASE OF CIT VS. CHENNAI METROPOLITAN WATER SUPP LY AND SEWERAGE BOARD, 348 ITR 530 (MAD). 5. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIV AL SUBMISSIONS. THE PLEA WITH REGARD TO THE PAYMENT I N QUESTION BEING FOR PURCHASE OF TOOLS AND CONSEQUENTLY THERE WOULD BE LIABILITY TO DEDUCT TAX AT SOURCE ON PAYMENT MADE I S A PLEA WHICH IS TAKEN BY THE ASSESEE FOR THE FIRST TIME IN THIS MISC. PETITION. THE ONLY PLEA TAKEN BY THE ASSESSEE IN T HE PROCEEDING U/S 201(1A) OF THE ACT WAS THAT PANDUIT INTERNATION AL CORPORATION SUFFERED LOSSES AND THEY HAD INCLUDED T HE RECEIPTS FROM THE ASSESSEE IN THE RETURN OF INCOME AND, THE REFORE, NO DISALLOWANCE CAN BE MADE U/S 40A(IA) OF THE ACT BEC AUSE ULTIMATELY NO TAX ARE PAYABLE AND THERE IS NO LOSS TO THE M.P NOS. 327 - 331/BANG/2018 PAGE 6 OF 7 REVENUE. THIS IS CLEAR FROM THE ASSESSEES SUBMISS ION MADE BEFORE THE CIT(A) WHICH IS EXTRACTED IN PARAGRAPH 4 B OF CITS COMMON ORDER DATED 29/4/2016. IT IS NOT OPEN TO A SSESSEE TO IMPROVE ITS CASE THROUGH MISC. PETITION. APART FRO M THE ABOVE, WE ARE OF THE VIEW THAT THE AVERMENTS PUT FORTH IN THE MISC. PETITION DO NOT GIVE RAISE TO MISTAKE APPARENT ON T HE FACE OF THE ORDERS OF THE TRIBUNAL. IN OTHER WORDS THESE ARE D EBATABLE ISSUE ON WHICH TWO VIEWS ARE POSSIBLE, THEREFORE, T HE SAME CANNOT CONSTITUTE A MISTAKE APPARENT ON THE FACE OF THE RECORD. WE, THEREFORE, FIND NO MERIT IN THESE MISC PETITION S, HENCE WE DISMISS THE SAME. 6. IN THE RESULT, THE MISC. PETITIONS ARE DISMISSED . SD/- SD/- (JASON P BOAZ) ( N.V. VASUDEVAN) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 16 TH NOVEMBER, 2018. / VMS / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. M.P NOS. 327 - 331/BANG/2018 PAGE 7 OF 7 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WE BSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..