2019 (1) TMI 1329 - AT - Income Tax

Rectification of mistake - applicability of section 194J and 195 - short of deduction - Held that - When the payment details are furnished by the assessee vide letter dated 06.07.2012, the Department ought to have taken up the issue of applicability of section 194J and 195 of the I.T.Act before the first appellate authority or before the Tribunal. On perusal of the grounds of appeal, the Department s only plea is provisions of section 194-I has application instead of section 194C of the I.T.Act, as claimed by the assessee. The Revenue does not have the case before the CIT(A) nor before the ITAT that provisions of section 194J and 195 of the I.T.Act has application. The Tribunal is expected only adjudicate the issue that are raised before it. The issue of applicability of section 194J of I.T.Act and 195 of I.T.Act was never subject matter of adjudication before the Tribunal. Since section 194J and 195 of the I.T.Act was not subject matter of adjudication before the Tribunal in the Income Tax Appeal 2015 (11) TMI 1765 - ITAT COCHIN , it cannot be stated that the order of the Tribunal dated 20.11.2015 suffers from a mistake apparent from record, warranting our interference u/s 254(2) of the I.T.Act.

Summary

Issues:
1. Interpretation of sections 194-I and 194C of the Income Tax Act regarding charter hire charges.
2. Determination of whether payments made to foreign entities attract section 195 of the Income Tax Act.

Analysis:

Issue 1: Interpretation of sections 194-I and 194C
The case involved a private limited company engaged in shipping agency services that paid charter hire charges for ships. The Assistant Commissioner of Income Tax (TDS) held that the payments attracted provisions of sec.194-I as tax should have been deducted at source. The CIT(A) partly allowed the appeal, holding that sec.194C applied instead. The Tribunal, after considering the contract between the company and ship owners, found insufficient material to determine the applicable section. The matter was remanded to the ACIT(TDS) for a fresh examination based on the contract terms to decide if it was a case of contract for carrier under sec.194C or hire of ships under sec.194-I.

Issue 2: Application of section 195 to payments made to foreign entities
During the reassessment proceedings, the company introduced new evidence showing payments to foreign companies. The Revenue contended that sec.194J and 195 should also apply, but the Tribunal had not considered these sections. The Tribunal clarified that the issue of sec.194J and 195 was not raised before it during the appeal, and as such, it could not be addressed in the order dated 20.11.2015. The Tribunal dismissed the Revenue's application, stating that since the issue of sec.194J and 195 was not part of the original appeal, it could not be reconsidered.

In conclusion, the Tribunal's decision focused on interpreting the sections 194-I and 194C regarding charter hire charges, remanding the case for further examination based on the contract terms. The issue of applying section 195 to payments made to foreign entities was not considered as it was not raised during the appeal process. The Tribunal dismissed the Revenue's application as the issue of sec.194J and 195 was not part of the original appeal before the Tribunal.