2020 (3) TMI 1460 - AT - Income Tax

Limitation period for initiating action u/s 201(1) and 201(1A) - non deduction of TDS u/s 195 on payments made to international telecom operators - HELD THAT - The Hon ble Jurisdictional High Court in the case of UB Electronic Instruments Ltd. ( 2014 (12) TMI 635 - ANDHRA PRADESH HIGH COURT ) has considered that there is no limitation period prescribed for initiating action u/s 201(1) and 201(1A) of the Act, but after considering case law on the subject clearly held that 4 years is to be treated as the reasonable period within which any penal action can be initiated against the assessee and failure to initiate steps within that period would disable the department to proceed against the assessee. This decision has been relied upon by the CIT(A) to grant relief to the assessee. Since the decision relied upon by the CIT(A) is of jurisdictional High Court, this Tribunal is bound to follow - Decided against revenue.

Summary

Issues:
Revenue appeals against CIT(A) order for AYs 2006-07 to 2010-11 regarding TDS on payments to international telecom operators.

Analysis:
1. TDS Liability: The assessee, a telecom operator, did not deduct TDS u/s 195 of the IT Act on payments to international telecom operators. The AO issued show cause notices, treating the assessee as "an assessee in default." The assessee argued that the payments did not fall under "fees for technical services." The AO disagreed, holding the assessee liable for TDS and interest u/s 201(1A).

2. CIT(A) Relief: The CIT(A) granted relief to the assessee, citing a High Court decision that show cause notices for proceedings u/s 201(1) were time-barred. The revenue appealed, arguing that no time limit is prescribed for such proceedings for non-residents and challenging the CIT(A)'s reliance on certain judgments.

3. Grounds of Appeal: The revenue raised several grounds of appeal, including challenging the CIT(A)'s decision on limitation, failure to consider amendments in the IT Act, and reliance on judgments related to residents' payments.

4. Tribunal Decision: The Tribunal noted that the show cause notices were issued after four years from the relevant financial years. Citing the High Court decision, the Tribunal held that a 4-year period is reasonable for initiating penal action. The Tribunal upheld the CIT(A)'s decision based on the jurisdictional High Court ruling, dismissing the revenue's appeals.

5. Conclusion: The Tribunal dismissed all revenue appeals, emphasizing the importance of the 4-year limitation period for initiating actions under sections 201(1) and 201(1A) of the IT Act. The decision highlighted the binding nature of the jurisdictional High Court's ruling and the inapplicability of other judgments cited by the revenue.

This detailed analysis outlines the key legal issues, arguments presented, relevant judgments cited, and the final decision rendered by the Tribunal in the case of revenue appeals against the CIT(A) order regarding TDS on payments to international telecom operators for the specified assessment years.