2020 (11) TMI 459 - HC - Income Tax

Disallowance of royalty amount without TDS - Whether the ITAT is correct in law in holding that the proviso i to iii of Sec 201 1 and the requirement of furnishing of certificate in Form 26A are independent, and both are to satisfied for an assessee to be treated as an assessee not in default in terms of the provisions of section 201 1 ? - HELD THAT - Tax Case appeals are closed, substantial questions of law are left open. Liberty is granted to the revenue to challenge the impugned order 2019 (1) TMI 1822 - ITAT CHENNAI as well as the order that may be passed in the miscellaneous petitions filed before them. In the event, revenue is unsuccessful, this observation is made because, if the revenue is unsuccessful before the Tribunal, they would be required to file two appeals, for each of the assessment year, one challenging the order impugned in these appeals and another appeal is against the order in the miscellaneous petitions. In such event, this observation would come to the aid of the revenue while explaining the delay that may occasion in filing such appeals. We are inclined to close the appeals, because the revenue cannot maintain parallel proceedings both before the Tribunal as well as before this Court on the same issue and we also find that if the facts are involved, the revenue will be well advised to agitate the same before the Tribunal.

Summary

Issues:
1. Appeal against orders passed by the Income Tax Appellate Tribunal for Assessment Years 2014-2015 and 2015-2016.
2. Substantial Questions of Law raised:
a. Disallowance on royalty payment without TDS.
b. Interpretation of Sec 201(1) of the Income Tax Act regarding non-deduction of tax.
c. Reliance on certificate in Form No.26A for non-deduction of tax.

Analysis:
The High Court of Madras heard appeals filed by the revenue against orders of the Income Tax Appellate Tribunal for the Assessment Years 2014-2015 and 2015-2016. The substantial questions of law raised included whether disallowance could be made on account of the assessee paying royalty without TDS, the interpretation of Sec 201(1) of the Income Tax Act, and the reliance on certificate in Form No.26A for non-deduction of tax.

During the hearing, the senior standing counsel for the appellant informed the Court that the grounds raised before them had also been raised before the Tribunal through Miscellaneous Petitions, which were pending. The revenue sought to present its case before the Tribunal first and then approach the High Court if unsuccessful. The Court closed the Tax Case appeals while leaving the substantial questions of law open. The revenue was granted liberty to challenge the impugned order dated 09.01.2019 and any subsequent orders from the Tribunal. This decision aimed to avoid delays and multiple appeals in case of an unfavorable outcome for the revenue.

The Court further decided to close the appeals as the revenue could not maintain parallel proceedings before both the Tribunal and the High Court on the same issue. It was noted that if the facts were involved, the revenue should address them before the Tribunal. The senior standing counsel highlighted that the revenue was appealing before the Tribunal due to unconsidered grounds. Consequently, the connected miscellaneous petition was also closed without any costs incurred. This comprehensive analysis of the judgment highlights the procedural aspects and the considerations made by the High Court in dealing with the appeals and the substantial questions of law raised.