2008 (10) TMI 586 - AT - Income Tax

Summary

Issues Involved:
1. Condonation of Delay in filing the appeal.
2. Liability for Deduction of Tax at Source from expatriate employees' salaries.
3. Application under Section 154 for rectification of the appellate order.
4. Assessment under Section 44BB and its implications.

Detailed Analysis:

1. Condonation of Delay:
The assessee's appeals were filed late by 13 years, one month, and 10 days. The delay was attributed to the non-disposal of a rectification application under Section 154 by the Commissioner of Income-tax (Appeals) (CIT(A)). The assessee argued that the delay should be condoned based on several judicial precedents, including decisions by the Supreme Court, which emphasized liberal construction of "sufficient cause" to advance substantial justice. However, the Tribunal noted that the assessee did not file an appeal within a reasonable time after the decision in the case of Soulier Jean Louis [1996] 220 ITR 220 or after filing an appeal for a subsequent year. Consequently, the Tribunal concluded that the delay was inordinate and without reasonable cause, thus refusing to condone it.

2. Liability for Deduction of Tax at Source:
The main contention was whether the assessee was liable to deduct tax at source from the salaries paid to expatriate employees. The CIT(A) had found that the assessee's income was computed under Section 44BB, which was not disputed. Therefore, the CIT(A) held that the assessee's belief of not being liable to deduct tax at source was not bona fide. The Tribunal upheld this finding, noting that the assessee had accepted the assessment under Section 44BB and thus was liable to deduct tax at source.

3. Application under Section 154:
The assessee filed a rectification application under Section 154, arguing that the CIT(A) did not dispose of ground No. 1 of their appeal, which challenged the assessee being treated as in default under Section 201. The application remained pending for a long time, and the assessee used this as a reason for the delay in filing the appeal. The Tribunal, however, found that the CIT(A) had indeed addressed ground No. 1 in his order. Therefore, the pending rectification application did not justify the delay in filing the appeal.

4. Assessment under Section 44BB:
The assessee's income was assessed under Section 44BB, which involves a presumptive taxation scheme for certain non-residents engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used in, the prospecting for, or extraction or production of, mineral oils. The CIT(A) and the Tribunal both found that the assessment under Section 44BB was appropriate and that the assessee was liable for tax deduction at source on the salaries paid to expatriate employees. The Tribunal noted that the CIT(A) had given a categorical finding on this issue, and the assessee's failure to appeal this finding in a timely manner further weakened their case.

Conclusion:
The Tribunal dismissed the appeals in limine due to the inordinate delay in filing without sufficient cause. The Tribunal upheld the CIT(A)'s findings on the liability for tax deduction at source and the appropriateness of the assessment under Section 44BB. The pending rectification application under Section 154 did not justify the delay in filing the appeal, and the Tribunal emphasized the importance of adhering to the rule of limitation to ensure justice.