2019 (3) TMI 721 - AT - Income Tax

Rectification of mistake u/s 254(2) - improvement of case through Misc. Petition - question in appeal relates that no taxes being payable to the Government, the question of delay in recovery of taxes and interest for delay u/s 201(1A) does not arise - In MA claim made that remittances made towards purchase of goods and equipment from Panduit Corporation being supply of goods hence no TDS u/s 195 - assessee in default u/s 201 - HELD THAT - The plea with regard to the payment in question being for purchase of tools and consequently there would be liability to deduct tax at source on payment made is a plea which is taken by the assessee for the first time in this misc. petition. The only plea taken by the assessee in the proceeding u/s 201(1A) was that Panduit International Corporation suffered losses and they had included the receipts from the assessee in the return of income and, therefore, no disallowance can be made u/s 40(a)(ia) because ultimately no tax are payable and there is no loss to the Revenue. This is clear from the assessee s submission made before the CIT(A) which is extracted in paragraph 4B of CIT s common order dated 29/4/2016. It is not open to assessee to improve its case through Misc. Petition. Apart from the above, we are of the view that the averments put forth in the Misc. Petition do not give raise to mistake apparent on the face of the orders of the Tribunal. These are debatable issue on which two views are possible, therefore, the same cannot constitute a mistake apparent on the face of the record.

Summary

Issues:
1. Whether the assessee was liable to pay interest under section 201(1A) of the Income-tax Act.

Analysis:
The Appellate Tribunal ITAT Bangalore dealt with misc. applications filed by the assessee under section 254(2) of the Income-tax Act 1961, claiming a mistake apparent in the Tribunal's order dated 4/6/2018. The primary issue was whether the assessee was liable to pay interest under section 201(1A) of the Act. The case revolved around payments made by the assessee to a foreign company's branch office in India without deducting taxes at source. The Assessing Officer (AO) issued a notice under sections 201(1) and 201(1A) of the Act, alleging default in tax deduction. The AO computed interest payable under section 201(1A) at ?10,81,211. The CIT(A) and the Tribunal upheld the AO's decision.

In the misc. applications, the assessee contended that the payments made were not liable to tax as they were for the supply of goods and equipment, exempt from tax deduction at source under section 195 of the Act. The assessee argued that the lower authorities erred in not recognizing this exemption. Additionally, the assessee referred to a decision of the Punjab and Haryana High Court to support its claim that interest under section 201(1A) should not apply if the provisions of section 194C were not applicable to the payments.

During the proceedings, the assessee reiterated its arguments, while the Departmental Representative (DR) pointed out the Tribunal's previous decision and cited a judgment of the Madras High Court. The Tribunal noted that the assessee raised the plea related to tax deduction liability for the first time in the misc. application, which was not part of the original proceedings. The Tribunal emphasized that the assessee could not introduce new arguments through the misc. application and concluded that the issues raised were debatable and did not constitute a mistake apparent on the face of the record. Therefore, the Tribunal dismissed the misc. applications, finding no merit in them.

In summary, the Tribunal rejected the assessee's claim that interest under section 201(1A) should not apply due to the nature of payments made to the foreign company's branch office. The Tribunal held that the issues raised were not new and did not reveal a mistake apparent on record, leading to the dismissal of the misc. applications.