9911796707
TMI Blog2004 (2) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... from the asst. yrs. 1982-83 to 1993-94 that the profit or loss will be ascertained and assessed on the completion of the entire contract work and the assessment was closed as N.A. (no assessment) on no loss or no income basis on all the assessment years. This was accepted by the assessee without dispute. But for this assessment year the assessee was asked to submit the consolidated P L a/c for the period from 1st Jan., 1981 to 31st March, 1994, in which the assessee has shown a net loss. In that P L a/c the following payments made by the NLC were also shown: Income Amount Erection payments from NLC 4,13,32,672 Specialist services 4,57,943 Service charges 8,40,000 Miscellaneous receipts 12,44,317 Difference in exchange 11,70,200 4,90,45,132 The AO was of the view that 10 per cent of the above from the contract was liable to be assessed in this assessment year under the provisions of s. 44BBB. He, accordingly, brought to tax Rs. 49,04,510. 4. On appeal to the CIT(A), the assessee contended that provisions of s. 44BBB will not be applicable as the provisions cam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly assessed by the AO in his order. However, the CIT(A) has set aside the order of the AO on the ground that s. 44BBB is not applicable to the case present as according to the CIT(A) the said unit s were completed before the applicability date of s. 44BBB. In other words, the CIT(A) found that the works in respect of the contract were completed by the assessee by 30th April, 1989, i.e., prior to the date of coming to the force of the s. 44BBB. 6. The learned counsel for the assessee opposed the appeal of the Revenue. The learned counsel for the assessee submitted that the assessee itself got confused over the taxation laws prevailing in India. By inviting the memorandum and certificate of the provisional taking over of the various unit s as available in the paper book including the statement of details of receipts of the contractors, specialisits payments including the complete details of the bills and payments in respect of the erection bills raised and the letter dt. 24th Jan., 1995, the consolidated P L a/c for the period 1st Jan., 1981 to 31st March, 1994 and referring to all the above cited materials, the learned counsel for the assessee contended particularly with referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r relevant to asst. yr. 1994-95. He then pointed out to the letter dt. 24th Jan., 1995, which had been filed before the AO and was referred to by the learned Departmental Representative in which the assessee has stated that the contract had come to an end on 5th Nov., 1993. At p. 3 of the letter, the facts regarding the generator rotor of the second unit having certain vibration problems was mentioned. It was also pointed out that the delay in carrying out the said repairs was due to the fact that NLC could not make arrangements for releasing the rotor to the assessee. The rotor has been purchased from a different company and the obligation to repair the same was primarily on that company. The rotor had to be sent to Italy for carrying out the necessary repairs and due to this there was delay in reinstalling the same. Even though this obligation was that of the manufacturer company and only a vicarious liability of the assessee herein it cannot be said that the contract did not come to an end because as per cl. 31.1 the contract is deemed to have been completed at the expiry of the guarantee period. Therefore, the subsequent period cannot be considered as an extension of the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture a loss was returned. This would show that the income from these two units, viz., unit II and unit I had suffered tax already. 9. With regard to the year ending 31st March, 1990, i.e., asst. yr. 1990-91 no amounts were received towards the erection work and, therefore, no income was returned for this year and the assessment was completed on a "no income or no loss" basis even though the guarantee period with regard to unit I expired during this period. However, in the next asst. yr. 1991-92, the assessee had received its last instalment of erection charges and it had filed a return declaring a profit of Rs. 6,82,224 and claimed a set off with regard to the carried forward losses of the earlier years. However, the then AO closed this assessment also on a "no income or no loss" basis. Subsequent to this and prior to and including the asst. yr. 1994-95 the assessee has not received any amount from NLC towards any of the heads shown in the tabular statement. He, therefore, submitted that in the asst. yrs. 1988-89 and 1989-90 an amount of Rs. 3,02,10,878.21 had already been subjected to assessment proceedings and the income earned in respect of unit II and unit I had already bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant to the asst. yr. 1994-95. He submitted that this was what the Department was seeking to do. The learned counsel for the assessee also submitted that even in respect of all these years the assessments have ultimately been completed on a 'no income no loss' basis and the orders have been passed under s. 143(3) and, therefore, the assessment orders determining the income at 'NIL' for those years. Therefore, even of this account the amounts received during these assessment years and the income or loss accruing during these years cannot once again be taxed. He also pointed out that in the asst. yr. 1994-95 the assessee had filed a return declaring a loss of Rs. 5,80,69,876 even on the basis of a consolidated P L a/c. This return was filed even though no amounts were paid or payable by NLC during the previous year relevant to this assessment year. As regards the contentions of the senior Departmental Representative that the provisions of s. 44BBB being procedural and would have retrospective effect, he submitted that neither the notes on clauses nor the memorandum explaining the provisions of Finance Bill, 1989 gave any indication that the provisions are to be applied retrospect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el has put the facts relating to the issue before us. These facts have not been disputed by the senior Departmental Representative and we proceed to dispose of the matter on the basis of these admitted facts. The matter raised in the appeal before us needs consideration of the provisions of s. 44BBB, its implications and the manner of its application to the facts of the case of the assessee before us. At the outset, we have to agree with the learned senior Departmental Representative that the provisions of s. 44BBB which came into effect from 1st April, 1990, would be applicable to the previous year 1st April, 1989 to 31st March, 1990, i.e., the asst. yr. 1990-91 and subsequent years. To this, even the learned counsel for the assessee has no serious contest. However having said that, the matter before us for consideration is whether the AO was correct in bringing to tax the sum of Rs. 49,04,510 as the income of the assessee for the asst. yr. 1994-95. 11. In order to decide this issue it would be necessary to consider the provisions of s. 44BBB and to find out the ambit and scope of the application of the section. The section would be applicable to the line of business in which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of orders passed under ss. 143(1) and 143(1)(a), respectively. It has not been brought to our notice that these orders are not final and it is an accepted fact that they are final. In view of this, the grounds raised by the Department in ground No. 2.3 of the grounds of appeal are not factually correct and have to be rejected. We had perused the assessment orders for the asst. yrs. 1988-89 and 1989-90 found at pp. 70 and 75 of the paper book and note that these two assessments have not been completed on a "No Income No Loss" basis and computation of loss returned by the assessee is accepted. We have not been shown by the Departmental Representative that these two assessments are not final. As pointed out by the learned counsel for the assessee, the assessee has declared in these two assessment years the proportionate income that pertained to two of the unit s as the work relating to these two unit s had been completed during the relevant periods. The income, which includes loss, arising from these two unit s has therefore undergone the process of assessment. The Department having thus accepted the returns filed we have to agree with the learned counsel's submission that the turnov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, as has been mentioned earlier all the assessments have been completed under s. 143(3) and closed "No Income No Loss". We are of the view that these orders would also amount to assessment orders and if their finality has to be upset the same can be done only in a manner available under the Act for recomputation. Therefore, on this ground also the amount of Rs. 1,88,34,254.51 cannot be taxed in the asst. yr. 1994-95. 14. The next aspect of the matter to be considered is the contentions of the learned senior Departmental Representative that the provisions of s. 44BBB are procedural and therefore, has retorspective effect. The introduction of s. 44BBB brought into the IT Act, for the first time as a new procedure for taxing the income of foreign companies operating in India. Prior to this all assessees operating in India were governed by the normal procedure of following the income as disclosed in the P L a/c subject to the application of the provisions of the IT Act in computing the taxable income. By the introduction of s. 44BBB there was a complete departure from this procedure and a substitution by a new procedure. Now it is no doubt true that the process of computation of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax amounts paid or which were payable in earlier years, for which the assessment proceedings have been completed, in a subsequent year in which the section is applicable we are unable to uphold such an action on the ground that the principle of retrospectivity is not meant to be applicable in that manner. Retrospective application would mean that a section brought on the statute in a subsequent assessment year is sought to be applied to income earned in an earlier assessment year and in the assessment proceedings of that earlier assessment year as such. That is not what the AO in this case is seeking to do. For all these reasons abovementioned we hold that s. 44BBB is not applicable retrospectively and more essentially so to the facts of this case. 17. Finally, we will take up for decision the contention of the learned senior Departmental Representative relying on ground No. 2.2 regarding the impact of the letter dt. 24th Jan., 1995. The only submission of the Departmental Representative is that the assessee had itself informed the Department in its letter dt. 24th Jan., 1995, that the contract was completed in November, 1993. The assessee's counsel vehemently argued that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed set off of carried forward loss but the Department completed the assessment for this year as "No Income No Loss". This was done despite the fact that from the asst. yr. 1990-91 s. 44BBB was applicable. Therefore, the letter dt. 24th Jan., 1995, must be considered in the above context in which it was written and also keeping in mind the actions of both the Department and the assessee in the earlier years. We do not read any admission as alleged by the Department that the assessee has consented to be assessed to tax under s. 44BBB in the asst. yr. 1994-95. In fact the assessee has already stated that it has considered as its income the amounts received from time to time in the years 1986, 1987 and 1988. In any event, any concession, if made, which is contrary to the legal rights of an assessee cannot be binding on the assessee. The assessee's counsel has in the paper book filed given elaborate details of the bills raised in respect of specialist service during the guarantee period which is at p. 43 and it is in this sheet that we find reference to the bill dt. 26th April, 1980, which relates to the period of work carried out during the period 23rd March, 1989 to 22nd April, 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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