2005 (10) TMI 228 - AT - Income Tax

Form Of Appeal And Limitations - condonation of delay - liability to deduct any tax at source - HELD THAT - It is not a case where the assessee could expect to have derived any mileage on account of the matter getting delayed. The delay in filing of appeals has caused prejudice to no one else except the assessee himself. When we keep these facts in mind the bona fide of the assessee is not in doubt. Sufficient cause and bona fide go hand in hand. If the assessee has acted bona fide the reasons for delay in the absence of any material to the contrary should be construed to be reasonable. After having made full payment to Lufthansa A.G. and at the same time met the requirements of the Assessing Officer the assessee obviously put itself in an unenviable position. The argument of the assessee is that it received legal advice that the matter should be approached by seeking to have completion of the assessment of the nonresident on the basis that no part of the income of the non-resident was chargeable to tax in India. It is settled legal position that any delay caused on account of legal advice received or while pursuing an abortive remedy should be treated as sufficient cause. There was change in management there were financial difficulties and so on. On a pragmatic appreciation of the matter we are of the view that the assessee can be said to have been prevented by a sufficient cause from filing the appeals on a date earlier than the same were filed before the learned CIT (Appeals). At the same time we direct that the assessee would not be entitled to payment of any interest etc. for the period of this delay and while calculating interest payable to the assessee if any the period of delay in filing the appeal before the CIT(A) shall be excluded. We therefore hold that as the assessee was prevented by sufficient cause from filing the appeals in time before the learned CIT (Appeals) the learned CIT (Appeals) erred in rejecting the assessee s appeals in limine. We further direct that the assessee shall not be entitled to payment of interest for the period of delay and while calculating interest payable to the assessee if any the period of this delay shall be excluded. Since on merits of the case the issue has been decided by the Tribunal after consideration of the matter at length on more than one occasion and since no distinguishing features have been brought to our notice we hold that no useful purpose would be served to restore the matter for adjudication afresh by the learned CIT (Appeals). We therefore respectfully following the orders of the Tribunal in the assessee s own cases hold that the payments made by the assessee in relation to the appeals in question before us to Lufthansa A.G. are not chargeable to tax in India and accordingly the learned Assessing Officer was not justified in insisting upon the payment of TDS by the assessee before issue of No Objection Certificate. In the result all the 19 appeals are allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeals before the learned CIT (Appeals).
2. Liability of the assessee to deduct tax at source.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing Appeals:

The assessee filed 19 appeals against the consolidated order of the CIT (Appeals) dismissing the appeals as time-barred. The main contention was the delay in filing the appeals, which the assessee sought to condone due to various reasons including operational cessation, change in management, and legal advice. The CIT (Appeals) held that the delay could not be condoned as the assessee did not show sufficient cause beyond its control. The CIT (Appeals) emphasized that the statutory period for filing an appeal is 30 days and sufficient cause must be shown for the entire period of delay. The CIT (Appeals) cited several judgments to support the decision that the assessee had shown utter disregard to the statutory provisions by not filing the appeals in time.

The Tribunal, however, took a liberal view, emphasizing that the provisions for condonation of delay are procedural and should be interpreted to advance substantial justice. The Tribunal noted that the major part of the delay occurred when the assessee's business operations ceased, leading to a breakdown in various activities. The Tribunal found that the assessee acted bona fide and the delay was due to circumstances beyond its control. Thus, the Tribunal concluded that the assessee was prevented by sufficient cause from filing the appeals on time and directed that the delay be condoned, excluding the period of delay from the calculation of any interest payable to the assessee.

2. Liability to Deduct Tax at Source:

The second issue was whether the assessee was liable to deduct tax at source on payments made to Lufthansa A.G. The assessee argued that the payments were exempt under section 10(15A) of the Act and Article III of the Double Taxation Avoidance Agreement (DTAA) between India and Germany. The Assessing Officer, however, held that only the lease payments were exempt under section 10(15A) and other payments for services were taxable as fees for technical services under Article VIIIA of the DTAA. The Assessing Officer directed the assessee to deduct tax at source at the rate of 20%.

The Tribunal noted that the issue had been previously decided in favor of the assessee in several cases, where it was held that the payments made to Lufthansa A.G. were not chargeable to tax in India as Lufthansa A.G. did not have a Permanent Establishment (PE) in India. The Tribunal rejected the arguments of the learned DR that the matter should be sent back to the CIT (Appeals) for a fresh decision, emphasizing that the issue had already been conclusively decided by multiple Tribunal orders. The Tribunal also dismissed the relevance of CBDT Circular No. 790, which the DR argued was not considered in earlier orders, stating that the circular did not apply to the facts of the case.

The Tribunal, therefore, held that the payments made by the assessee to Lufthansa A.G. were not chargeable to tax in India and the Assessing Officer was not justified in insisting on the payment of TDS before issuing the No Objection Certificate.

Conclusion:

The Tribunal allowed all 19 appeals, condoning the delay in filing the appeals and ruling that the payments made by the assessee to Lufthansa A.G. were not chargeable to tax in India. The Tribunal directed that the period of delay be excluded from the calculation of any interest payable to the assessee.