2020 (2) TMI 1557 - AT - Income Tax

Validity of order u/s. 201(1) and 201(1A) as barred by limitation - treating the assessee as assessee in default for non deduction of tax at source - payments made towards purchase of software treating the same as royalty - HELD THAT - There is no dispute in the instant case that payment for purchase of software was made by the assessee during the financial year 2009-10 relevant to A.Y 2010-11. Hence, six years from the end of the financial year would expire on 31-03-2016, which would be the last date for framing the assessment u/s. 201(1) of the Act in terms of pre-amended provisions of s. 201(3)(ii) - This section was later amended w.e.f 01-10-2014 substituting six years with seven years - CIT(A) simply applied the amended provisions for the A.Y 2010-11 ignoring the fact that the said amendment is applicable only w.e.f 01-10 2014 - Order passed by the Ld. AO u/s. 201(1) and 201(1A) of the Act on 31-03-2017 is barred by limitation and hence, the same is hereby quashed. - Decided against revenue.

Summary

Issues:
1. Assessment framed under sections 201(1) and 201(1A) of the Income Tax Act, 1961 for non-deduction of tax at source.
2. Preliminary objection raised regarding the limitation period for passing the assessment order.
3. Application of pre-amended and amended provisions of section 201(3)(ii) of the Act.
4. Decision on the appeal based on the limitation issue.

Analysis:
1. The appeal before the Appellate Tribunal ITAT Chennai pertained to the assessment framed by the Assessing Officer (AO) under sections 201(1) and 201(1A) of the Income Tax Act, 1961, treating the assessee as 'assessee in default' for not deducting tax at source on payments made for the purchase of software amounting to ?24,95,136. The order of the AO was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)].

2. The Tribunal considered a preliminary objection raised by the AO regarding the limitation period for passing the assessment order. The AO argued that the assessment framed on 31-03-2017 for the Assessment Year 2010-11 was beyond the limitation period prescribed under the pre-amended provisions of section 201(3)(ii) of the Act. The pre-amended provision allowed for passing orders within six years from the end of the financial year in which the payment was made. As the payment for software purchase was made in the financial year 2009-10, the six-year period would have expired on 31-03-2016. The section was later amended, extending the period to seven years from 01-10-2014. The Tribunal held that the order passed by the AO on 31-03-2017 was barred by limitation under the pre-amended provisions and quashed the same.

3. The Tribunal noted that the CIT(A) had erroneously applied the amended provisions of section 201(3)(ii) of the Act for the Assessment Year 2010-11, which came into effect from 01-10-2014. The Tribunal clarified that the amendment was not applicable retrospectively and the assessment order passed by the AO was beyond the limitation period prescribed by the pre-amended provisions. Consequently, the Tribunal allowed the grounds raised by the assessee on the limitation issue, refraining from expressing an opinion on the merits of the case.

4. As the decision on the appeal was primarily based on the technical issue of limitation, the Tribunal refrained from delving into the merits of the case. Therefore, the Tribunal allowed the appeal of the assessee, setting aside the assessment order passed by the AO under sections 201(1) and 201(1A) of the Act for the Assessment Year 2010-11.

This detailed analysis of the judgment provides insights into the legal issues surrounding the assessment order, the application of limitation provisions, and the Tribunal's decision based on the same.