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TMI Blog2005 (1) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... pon and the amount of guarantee money remitted/paid, the question that arises for consideration is whether the order containing the said permission could be revised or cancelled u/s 263 after almost two years after the money had been paid. A close scrutiny of the provisions of section 263 shows that the Director can pass such order in revision as the circumstances of the case justify . Thus, the power of the Director to pass an order in revision u/s 263 is circumscribed, inter alia, by the circumstances of the case also. He cannot ignore them or be oblivious of them. Circumstances of the case must also justify the order u/s 263. He had the full authority in law to invoke his revisional jurisdiction u/s 263 till the amount of guarantee money was remitted and revise or cancel the order passed by the Assessing Officer u/s 195(2) in accordance with law. Once the amount of guarantee money stood paid/remitted, and that too to a non-resident outside India, on the basis of a subsisting order passed by the Assessing Officer u/s 195(2), it was not possible for the assessee to deduct the tax at source. It is well-settled that a person cannot be asked to do impossible things and this principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from. (E) For that the Director of Income-tax (Exemption) erred in holding that the Board's instruction dated May 17, 1996 was merely a correspondence or was withdrawn or was not binding on the Assessing Officer. (F) For that the Director of Income-tax (Exemption) erred in holding that the Double Taxation Avoidance Agreement with Australia did not cover the payment of guarantee money. (G) For that the purported findings of the Director of Income-tax (Exemption) cancelling the authorization of the Assessing Officer are wholly arbitrary, erroneous, perverse and misconceived. 2. Shri P. J. Pardiwala, advocate appearing for the assessee ( the AR in short) and Shri Rajendra, Commissioner of Income-tax (Departmental Representative) ( the DR in short) appearing for the Department were heard. 3. Briefly stated, the facts of the case as stated by the assessee are that the assessee, i.e., the Board of Control for Cricket in India, is an association registered under the Societies Registration Act with the object of promoting and controlling the game of cricket in India. In the course of carrying out the said activities, the assessee organizes tours by the Indian cricket team to foreign co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with whom India has entered into Double Taxation Avoidance Agreements, no liability of tax arises even under section 115BBA of the Income-tax Act, 1961. 3. It is further stated in the said letter that India has entered into Double Taxation Avoidance Agreement with Australia and no liability to tax arises in respect of payment made to the Australian Cricket Board. India has entered into a Double Taxation Avoidance Agreement with Australia and therefore, it is submitted that no tax is deductible from guarantee money payable to the Australian Cricket Board. Under the circumstances, we request your honour to issue a no objection certificate for remittance of Australian dollars 1,60,548 to the Australian Cricket Board without deduction of tax at source. 5. The Income-tax Officer (E)-I (1), 5th floor, Piramal Chambers, Parel, Mumbai, by his letter dated November 19, 1996, conveyed the following order to the assessee : Please refer to your application dated November 16, 1996, for authorization to remit the sum of Australian dollars 1,60,548 being in the nature of guarantee money to the Australian Cricket Board. 2. You are hereby authorized to make payment of the aforesaid sum to the Aust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Director erred in cancelling the authorization. His fourth submission was that the assessee, acting under the authorization issued by the Income-tax Officer, had already remitted the guarantee money to the Australian Cricket Board much before the impugned order was passed by the learned Director and hence it was no longer possible for the assessee to deduct the tax at source after the remittance of the money to the Australian Cricket Board. Summing up his arguments, he submitted that the impugned order cancelling the authorization issued by the Income-tax Officer was liable to be set aside as the authorization issued by the Income-tax Officer was neither an order nor was the same erroneous or was prejudicial to the interests of the Revenue within the meaning of section 263 of the Income-tax Act, 1961. 8. The learned Authorised Representative placed reliance on the following judicial authorities for the propositions noted against them : (i) CIT v. Paul Brothers [1995] 216 ITR 548 (Bom) for the proposition that an order of the Assessing Officer which is based on a binding decision could not be interfered with in revisional jurisdiction as it could not be said to be erroneo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as prejudicial to the interests of the Revenue and hence the learned Director was justified in exercising the revisional jurisdiction conferred upon him under section 263. He, in particular, invited our attention to a decision of the Calcutta Bench of the Tribunal in Pilcom v. ITO [2001] 77 ITD 218 for the proposition that guarantee money paid by the assessee in that case, i.e., a committee formed by the Cricket Control Boards/Associations of Pakistan, India and Sri Lanka (PILCOM) for the purpose of jointly conducting World Cup Cricket, 1996 to cricket associations of the respective countries which actually played some matches in India could be said to be income accruing or arising in India and hence liable to deduction of tax at source under section 194E read with section 115BBA. Relying upon the said decision, the learned Departmental Representative submitted that the guarantee money was liable to deduction of tax at source in India and hence the authorization issued by the Assessing Officer under section 195 authorizing the assessee to remit the guarantee money without deduction of tax at source was not only erroneous but also prejudicial to the interests of the Revenue and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proportion of the sum which is so chargeable. (emphasis supplied) 263. Revision of orders prejudicial to revenue. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. (emphasis supplied) 12. The first issue for consideration is whether an order, which the learned Authorised Representative describes as authorisation , passed by the Assessing Officer under section 195(2) is an order within the meaning of section 263. The learned Authorised Representative submitted that the authorization issued by the Income-tax Officer under section 195 (2) of the Income-tax Act, 1961 was not an order within the meaning of section 263 and hence was not capable of being revised or cancelled by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 263 of the Income-tax Act, 1961 which confers jurisdiction upon the Commissioner to call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Two important points deserve to be noted in order to appreciate the true meaning of the term order which is open to the revisional jurisdiction of the Commissioner under section 263. One, an order open to revision under section 263 can be an order in any proceeding under the Income-tax Act, 1961 and not necessarily an order in the assessment proceedings alone. Proceedings relating to deduction of tax at source are, in our view, proceedings under the Income-tax Act inasmuch as they determine the liability of the assessee to deduct the tax at source. The term order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application made by the concerned person by determining the appropriate proportion of the sum chargeable to tax, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable. If the Assessing Officer is required to act judicially under section 195(2), he must necessarily exercise the quasi-judicial power in accordance with the well-settled principles of law. He should act fairly not only towards the applicant but also towards the Public Exchequer. He must apply his mind to the facts of the case, make requisite enquiries, consider relevant materials and decide the matter in accordance with law. If he does not act in the aforesaid manner, his order is liable to be corrected or revised under section 263 provided the requisite conditions of section 263 are fulfilled. 15. The second issue that arises for consideration is whether the order passed by the Assessing Officer under section 195(2) in the matter before us was erroneous and prejudicial to the interests of the Revenue within the meaning of section 263. It was argued by the learned Authorised Representative that the order passed by the Assessing Officer was neit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in applying the relevant law or facts or error in selecting a principle which would not govern the fact situation. Likewise arbitrary exercise of quasi-judicial power without due consideration of the relevant aspects of the case would also, in our humble view, render the resultant order erroneous within the meaning of section 263. In this view of the matter, we are unable to uphold the submission of the learned Authorised Representative that the order passed by the Assessing Officer under section 195(2) was not erroneous within the meaning of section 263. In our view, the said order was an erroneous order capable of being revised under section 195(2) provided other conditions of section 263 were also fulfilled. 16. This brings us to the other issue whether the order passed by the Assessing Officer under section 195(2) was also prejudicial to the interests of the Revenue within the meaning of section 263. The learned Authorised Representative contends that the said order was not prejudicial to the interests of the Revenue. In the case before us, the guarantee money was paid by the assessee to a non-resident, i.e., the Australian Cricket Board. The Australian Cricket Board was not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer has committed no error in passing the order under section 195(2) inasmuch as he has followed the binding instructions issued by the Central Board of Direct Taxes. The learned Director has dealt with this issue in his order under section 263 as under : The decision of the hon ble Bombay High Court reported in CIT v. Paul Brothers [1995] 216 ITR 548 is not applicable to the facts of the assessee's case as the Assessing Officer has not issued the authorization under section 195(1) as a follow up action of the Board's instruction dated May 17, 1996 by the Assessing Officer. The Central Board of Direct Taxes letter dated May 17, 1996 quoted as binding on the Assessing Officer is one of the correspondence between the Central Board of Direct Taxes and the Director of Exemption relating to some of the issues attributable to Wills World Cup 1996. This is not an order but one of the views expressed in internal correspondence between Central Board of Direct Taxes and the Director of Incometax. This view of the Central Board of Direct Taxes has been altered later on presentation of full facts. The assessee has quoted from internal correspondence only that is favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing instruction but a mere opinion expressed in the internal correspondence of the Board. Besides, there is no direction in the said letter to the Assessing Officer to allow remittance of guarantee money without deduction of tax at source under section 195. 20. The aforesaid facts indicate that the letter issued by the Central Board of Direct Taxes did not have the sanctity and authority of a circular, instruction or order issued under section 119 of the Income-tax Act, 1961. It was not even intended to be treated as such. The said letter contains only an opinion or administrative instructions outside the authority of section 119 and hence cannot take away the quasi-judicial function and the authority as conferred upon the Assessing Officer by section 195(2) of the Income-tax Act. In Gordhandas Desai P. Ltd. v. V. B. Kulkarni, ITO [1981] 129 ITR 495 (Bom), the hon'ble jurisdictional High Court has held that in exercising his judicial or quasi-judicial functions, an income-tax authority must act in consonance with the statutory provisions ignoring the administrative instructions or directions, and decide the case on the merits. In a catena of cases, e.g., Sirpur Paper Mill Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said letter was actually withdrawn by the Central Board of Direct Taxes later on and lastly that even the letter under consideration does not at all say that there would be no need to deduct tax at source from the payments made by PILCOM. On the other hand, it was stated in the said letter that PILCOM would be subjected to the provisions of section 194C relating to payments of money to contractors, etc., hence, any reliance placed by the assessee on this particular letter is misconceived and does not help the case of the assessee in any manner. 22. A perusal of the aforesaid order of the hon'ble Calcutta Bench shows that the Central Board of Direct Taxes s letter dated May 17, 1996 was subsequently withdrawn by the Central Board of Direct Taxes on November 8, 1996 and hence the said letter could not have formed the basis for passing the order under section 195(2). In any case, the Assessing Officer was duty bound to consider all the relevant materials, legal provisions including all the letters/instructions issued by the Central Board of Direct Taxes before passing the order under section 195(2) which he did not. Besides, the aforesaid decision of the Calcutta Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of section 195(2) and taken a view thereafter, the situation could have been different. But that is not the case here. The Director exercised his revisional jurisdiction as he found that the Assessing Officer had exercised his power mechanically without due examination of all the relevant aspects of the case. 24. The assessee has challenged, vide ground D , the order of the Director that guarantee money was income liable to tax or that tax should have been deducted therefrom . Vide ground F , the assessee has challenged the order of the Director that the Double Taxation Avoidance Agreement with Australia did not cover the payment of guarantee money . The aforesaid two issues have been considered by the Calcutta Bench of the Tribunal in Pilcom [2001] 77 ITD 218. The hon'ble Bench has held as under (page 240) : 18. The same should also be the case with regard to guarantee money paid to the countries, which actually did play in India, so far as the question of applicability of section 9(1)(i) is concerned. In other words, no income can be considered to be deemed to have arisen or accrued to the cricket associations of these countries, merely by their taking part in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tters where the Double Taxation Avoidance Agreement is totally silent, the provisions of Indian Income-tax Act would certainly be applicable. As a test case, learned counsel for the assessee has filed on our record, a copy of the Double Taxation Avoidance Agreement between India and Australia dated July 25, 1991. Reliance has been tried to be placed on article 22 of the said Agreement, which reads as below : Article 22 : Income not expressly mentioned items of income of a resident of one of the Contracting States, which are not expressly mentioned in the foregoing articles of this Agreement shall be taxable only in that State. . . . 22. It is tried to be argued on behalf of the assessee that by virtue of this particular article, even any income accruing or arising to the other Contracting States like Australia, England, New Zealand, Sri Lanka and Kenya, would not be taxable in India, inasmuch as, this type of income as considered herein, is not specifically dealt with in any of the other articles of the Double Taxation Avoidance Agreement and furthermore that the Double Taxation Avoidance Agreements with countries other than Australia also are exactly in the same line. In this conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur which, inter alia, shows transfer of US $ 1,60,548 (Rs. 46,91,213) through lts CA 1869. In the explanatory sheet of paper filed by the assessee before us, it is explained that the said amount of Rs. 46,91,213/- was remitted to the Australian Cricket Board without deduction of tax at source. The said bank slip, however, mentions the amount transferred as US$ 1,60,548 whereas the amount of guarantee money permitted by the Assessing Officer to be remitted was Australian $ 1,60,548. 27. We have given our careful consideration to the submissions of the learned Authorised Representative. It is a fact that the assessee had made the requisite application to the Assessing Officer under section 195(2) for payment/remittance of the guarantee money to the Australian Cricket Board without deduction of tax at source which the Assessing Officer permitted by his order passed under section 195(2). It is in pursuance of the said order of the Assessing Officer under section 195(2) that the amount of guarantee money was remitted on December 3, 1996. Once the permission granted by the Assessing Officer had been acted upon and the amount of guarantee money remitted/paid, the question that arises for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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