Madhucon Sino Hydro (JV), Hyd, Hyderabad V. ACIT, Central Cirlce-4, Hyd, Hyderabad

MA 33/HYD/2016

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 5112 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 13 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Assessment Year: 2006-2007
• Appeal Filed On: 29-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Business income; TDS
• Section: 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER M.A.NOS.33 & 34/HYD/2016 ARISING OUT OF ITA.NOS.646 & 701/HYD/2010 ASSESSMENT YEAR 2006-2007 M/S. MADHUCON SINO HYDRO (JV), HYDERABAD. PAN AANFM1451G/M - 378 VS., ACIT, CENTRAL CIRCLE-4 HYDERABAD. (APPLICANT (RESPONDENT) FOR ASSESSEE : MR. P. MURALI MOHAN RAO FOR REVENUE : MR. K.E. SUNIL BABU DATE OF HEARING : 15.07.2016 DATE OF PRONOUNCEMENT : 12.08.2016 ORDER SMT. P. MADHAVI DEVI, J.M. THESE MISCELLANEOUS APPLICATIONS ARE FILED BY THE ASSESSEE UNDER SECTION 254(2) OF THE I.T. ACT, 1961 SEEKING FOR RECTIFICATION/MODIFICATION OF THE ORDER OF THE TRIB UNAL DATED 27.11.2012 IN ITA.NO.646 & 701/HYD/2010. 2. IT IS THE CASE OF THE ASSESSEE THAT THE ASSESSE E IS A JOINT VENTURE (JV) FORMED BY TWO CONSTITUENTS NAMELY MA DHUCON PROJECTS LTD., HYDERABAD AND SINO HYDRO CORPORATION , CHINA. IT WAS SUBMITTED THAT DURING THE YEAR UNDER CONSIDERAT ION THE ASSESSEE HEREIN WAS AWARDED WORKS WORTH RS.135,69,3 7,509 BY 2 M.A.NO.33/HYD/2016 IN ITA.NO.646/H/2010 M/S. MADHUCON SINO HYDRO (JV), HYDERABAD. VARIOUS GOVERNMENT DEPARTMENTS AND THE ENTIRE WORKS WERE SHARED AND EXECUTED BY THE CONSTITUENTS ONLY. HE SUBMITTED THAT THE ISSUE BEFORE THE TRIBUNAL WAS WHETHER THE ASSESSEE WAS LI ABLE TO MAKE TDS BEFORE MAKING PAYMENT TO THE CONSTITUENT COMPAN IES. THE ITAT AFTER CONSIDERING THE ASSESSEES CONTENTIONS A T LENGTH HAS HELD THAT THE ASSESSEE BEING AN AOP IS NOT REQUIRED TO D EDUCT TAX AT SOURCE FOR MAKING PAYMENT TO ITS CONSTITUENT COMPAN IES. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AFTER HOLDI NG SO, AT PARA- 12 OF ITS ORDER, THE TRIBUNAL HAS PROCEEDED TO DIRE CT THE A.O. TO VERIFY WHETHER ONE OF THE CONSTITUENTS I.E., CHINES E CONCERN HAS OFFERED THE INCOME FOR TAX IN INDIA AND FURTHER THA T IF THE CHINESE CONCERN HAS NOT FILED INCOME TAX RETURN AND OFFERED THE AMOUNT AS PART OF THEIR INCOME IN COMPUTING THE TAXABLE INCOM E, THE SAME SHALL BE ASSESSED AS INCOME OF THE ASSESSEE AS THE PERSONS RESPONSIBLE FOR MAKING THE PAYMENT, NON-RESIDENT AN D IF THE CHINESE CONSTITUENT HAS NOT OFFERED THIS AMOUNT AS PART OF THEIR TAXABLE INCOME IN INDIA, THE A.O. MAY TAKE SUITABLE ACTION FOR BRINGING THE AMOUNT TO TAX IN ACCORDANCE WITH THE P ROVISIONS OF THE I.T. ACT, 1961. ACCORDING TO THE LD. COUNSEL FOR TH E ASSESSEE, THESE OBSERVATIONS OF THE TRIBUNAL HAVE BEEN CONSIDERED T O BE DIRECTIONS TO THE A.O. AND THE A.O. HAS ACCORDINGLY REOPENED T HE ASSESSMENT WHICH WAS ULTIMATELY CHALLENGED BEFORE THE ITAT AND THE ITAT HAS HELD THAT THESE ARE NOT DIRECTIONS BUT ONLY OBSERVA TIONS. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE M.A. FILED BY THE REVENUE HAS ALSO BEEN REJECTED BY THE TRIBUNAL. HE SUBMITTED THAT THE FURTHER OBSERVATIONS OF THE ITAT ARE A MIS TAKE APPARENT 3 M.A.NO.33/HYD/2016 IN ITA.NO.646/H/2010 M/S. MADHUCON SINO HYDRO (JV), HYDERABAD. FROM RECORD AS CHINESE COMPANY IS CARRYING ON THE B USINESS OPERATIONS IN INDIA AND THEREFORE, THE INCOME THERE FROM IS ITS BUSINESS RECEIPTS. HE SUBMITTED THAT UNLESS AND UNT IL THE CHINESE CONCERN HAS A PE IN INDIA, ITS INCOME CANNOT BE BRO UGHT TO TAX IN INDIA. ACCORDING TO HIM, BY THE DIRECTIONS OF THE T RIBUNAL, THE A.O. IS DIRECTED TO BRING TO TAX THE INCOME OF THE CHINE SE CONCERN WITHOUT VERIFYING WHETHER THE SAME IS TAXABLE IN IN DIA AND THIS IS CAUSING GREAT HARDSHIP TO THE ASSESSEE SINCE THE A. O. HAS REOPENED THE ASSESSMENTS FOR ALL THE SUBSEQUENT ASSESSMENT Y EARS ON THE BASIS OF THIS OBSERVATION OF THE TRIBUNAL. HE, THER EFORE, PRAYED THAT SUITABLE MODIFICATION MAY BE MADE TO THE ORDER OF T HE ITAT OR TO HOLD THAT THESE ARE ONLY OBSERVATIONS AND ARE NOT D IRECTIONS OF ITAT. 3. THE LD. D.R. ON THE OTHER HAND, SUBMITTED THAT THE TRIBUNAL HAS CONSIDERED THE FACTUAL POSITION BEFORE GIVING SUCH DIRECTION AS ABOVE AND THE PRAYER OF THE ASSESSEE I S ONLY TO REVIEW THE ORDER OF THE ITAT WHICH IS NOT PERMISSIBLE UNDE R SECTION 254(2) OF THE I.T. ACT, 1961. HE, THEREFORE, PRAYED THAT T HE M.AS. OF THE ASSESSEE BE DISMISSED. 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THIS TRIBUNAL HAS GIVEN A F INDING THAT THE ASSESSEE, BEING AN AOP/JV, IS NOT REQUIRED TO DEDUC T TAX AT SOURCE FROM THE PAYMENTS TO THE CONSTITUENTS TOWARDS THEIR SHARE OF WORK CARRIED OUT BY THEM. TAKING THE ABOVE INTO CONSIDER ATION, THE TRIBUNAL THOUGHT IT FIT TO DIRECT THE A.O. TO VERIF Y WHETHER CHINESE 4 M.A.NO.33/HYD/2016 IN ITA.NO.646/H/2010 M/S. MADHUCON SINO HYDRO (JV), HYDERABAD. CONCERN HAS OFFERED ITS INCOME TO TAX IN INDIA AND HAS ALSO DIRECTED THE A.O. TO BRING THE SAME TO TAX IN INDIA IF IT IS FOUND THAT THE NON- RESIDENT HAS NOT OFFERED THIS AMOUNT AS PART OF THE IR TAXABLE INCOME IN INDIA. WE FIND THAT THE ABOVE OBSERVATION OR DIR ECTION IS ONLY MEANS THAT THE A.O. MAY TAKE SUITABLE ACTION FOR BR INGING THE AMOUNT TO TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. WHETHER IT IS ONLY AN OBSERVATION OR A DIRECTION, I N OUR OPINION, TO TAKE A SUITABLE ACTION, A.O. HAS TO FOLLOW THE RELE VANT PROVISION OF LAW. IT IS A SETTLED POSITION THAT BEFORE BRINGING TO TAX ANY INCOME OF A NON-RESIDENT, THE A.O. HAS TO EXAMINE AS TO WHETH ER SUCH INCOME IS TAXABLE IN INDIA. THE CONDITIONS PRECEDENT FOR B RINGING TO TAX SUCH AMOUNT HAVE TO BE SATISFIED BEFORE THE A.O. CA N TAKE RECOURSE TO BRINGING THE SAME TO TAX IN INDIA IN THE HANDS O F THE ASSESSEE. THEREFORE, IN OUR OPINION, THERE IS NO MISTAKE COMM ITTED BY THE TRIBUNAL IN GIVING SUCH OBSERVATION/DIRECTION BUT I N OUR OPINION, IT WOULD BE IN THE FITNESS OF THE CASE AND JUSTICE IF THE FOLLOWING THE WORDS ARE ADDED AT THE END OF PARA-12 : ONLY IF THE SAID INCOME IS CHARGEABLE TO TAX IN I NDIA. 5. IN THE RESULT, M.AS. OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.08. 2016. SD/- SD/- (S. RIFAUR RAHMAN) (SMT. P. MADHAVI DEVI ) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 12 TH AUGUST, 2016 VBP/- 5 M.A.NO.33/HYD/2016 IN ITA.NO.646/H/2010 M/S. MADHUCON SINO HYDRO (JV), HYDERABAD. COPY TO : 1. M/S. MADHUCON SINO HYDRO (JV), 8-2-293/82A, 1129/A, ROAD NO.36, HITECH CITY ROAD, JUBILEE HILLS , HYDERABA D. 2. THE ACIT, CENTRAL CIRCLE - 4 HYDERABAD. 3. CIT(A) - I, HYDERABAD 4. CIT - (CENTRAL), HYDERABAD. 5. D.R. ITAT A BENCH, HYDERABAD. 6. GUARD FILE