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TMI Blog2012 (4) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... anner it arises is a question of law and goes to the root of the appeal and jurisdiction of the Tribunal - The liability of the person liable to deduct tax is a vicarious liability and, therefore, he cannot be put in a situation which would prejudice him to such an extent that the liability would remain hanging on his head for all time to come in the event the Income-tax Department decides not to take any action to recover the tax either by passing an order under section 201 of the Income-tax Act, 1961, or through making an assessment of the income of the person liable to pay tax - no period of limitation can be read into the provisions if there is no period of limitation specified in the Act for taking action u/s. 201(1) or 201(1A) then no time limit can be read into those provisions - Decided in favor of the assessee - I T Appeal Nos. 2210 to 2212 (Mum.) of 2000 - - - Dated:- 24-2-2012 - R.S. Syal, N.V. Vasudevan, JJ. Jahangir D. Mistri for the Appellant. Mahesh Kumar for the Respondent. JUDGMENT N.V. Vasudevan, Judicial Member These are appeals field by the assessee against three orders of CIT(A) XXV Mumbai all dated 22/2/2000 relating to A.Y 1998-99. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tside India and as indicated above, the distribution and marketing as also approaching target international investors all necessarily had to be done outside India. The issue proceeds were collected by the Lead Manager in his account outside India and the net proceeds after deducting commissions and out of pocket expenses were deposited into the assessee's account opened for this purpose in New York. The net proceeds were remitted into India in two tranches on July11, and July 12, 1996. The remittance into India was translated into Rupees and the amount so received as was equivalent to the par value of shares comprised in the issue was credited to Share Capital Account and the balance forming part of the Share Premium Account. 3. The AO passed an order u/s. 195 of the Income Tax Act, 1961 (the Act) on 30/3/1995 holding that the payments made by the assessee to the non-resident Lead Manager's was in the nature of fees for Technical Services rendered and therefore, the assessee ought to have deducted tax at source on the payments so made. Consequent to the order passed under section 195 of the Act holding that the assessee was bound to deduct tax at source on the payments made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crued or arisen in India because the services were utilized by the assessee in business which was carried on by it in India. With regard to the arguments that since the Lead Managers appropriated their commission out of the issue proceeds of the GDR and the assessee did not make to Lead Managers and, therefore, the question of deducting tax at source does not arise for consideration, the CIT(A) held that in effect it was a constructive payment by the assessee and, therefore, there was an obligation on the part of the assessee to deduct tax at source while making payments. On the argument that the GDRs were directly sold and that it was only part of the purchase consideration that was paid to the Lead Managers, the CIT(A) held that the payment was for services rendered and that the amount paid to them could not be said to be part of the consideration received for GDRs. On the question whether the services rendered were technical, managerial, consultancy etc. in nature, the CIT(A) held that the services rendered by the Lead Managers that the same were technical and managerial services. On the question of taxing reimbursement of expenses it was held that reimbursement was integral par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me for taking such action against the payee under the Act has also expired. It has also been submitted that the question of limitation in whatever manner it arises is a question of law and goes to the root of the appeal and jurisdiction of the Tribunal. In this regard reference has also made to the decision of the Hon'ble Supreme Court in the case of Union of India v. British India Corpn. Ltd. [2004] 268 ITR 481/140 Taxman 357. The assessee has, therefore, prayed for admission of the additional ground of appeal. 9. Before proceeding further it would be useful to refer to the decision of the Special Bench of the Tribunal in the case of Mahindra Mahindra Ltd. ( supra ). The issue that arose for consideration in the aforesaid case was that as to the requirement of tax deduction at source on payments made to non-residents being Lead Managers to the issue on account of marketing, under writing and selling commission in respect of GDR issue outside India. For the purpose of deciding additional ground of appeal raised by the assessee the following conclusion drawn by the Special Bench are relevant. "We sum up the conclusions as under: ( i ) Any party can raise addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant financial year. ( xii ) The person responsible cannot be treated as the assessee in default in respect of tax under section 201(1) if the payee has paid the tax directly. In such a situation the other consequences shall follow such as liability to interest under section 201(1A). ( xiii ) No order under section 201(l) or (1A) can be passed where the Revenue has not taken any action against the payee and further the time limit for taking action against the payee under section 147 has also expired. ( xiv ) "Payment" to or crediting the account of non-resident under section 195(1) also covers retention of the, amount by non-resident where only net amount is remitted to the Indian party. ( xv ) Fees for technical services under section 9(1) (vii) read with Explanation 2 covers management commission and selling commission allowed to the non-resident in respect of the GDR issue. Underwriting commission does not fall within the definition of "fees for technical services" under section 9(1)(vii). Reimbursement of expenses does not have the income element and hence cannot assume the character of income deemed to accrue or arise in India. ( xvi ) If a particular amount is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied to the facts of the case of present assessee then it may be seen that the default to deduct the TDS was made on 10/7/96 and the amount of default was 3,29,40,882/ therefore as per the decision of special bench the proceedings u/s 195 r/w 201 could be initiated upto 4 years from the end of relevant AY i.e. upto 3 1/3/2002 and the same could be completed upto 31/3/2003, whereas in the instant case the order u/s 195,201(1) 201(IA) were initiated on 26/11/98 and completed by passing orders on 30/3/99 itself which is much before the limitation date of 31/3/2003 treating the assessee in default u/s 201(1) for an amount of Rs. 3.29 Crores and u/s 201(1A) for an amount of Rs. 1.27 crores Hence the time limits prescribed by the special bench in Mahindra Mahindra have been duly adhered and support the case of revenue that the orders are not barred by limitation". From the above submission of the ld. D.R it is clear that no action has been taken against the payee within the time contemplated by the Hon'ble Hon'ble Special Bench. We must also make it clear that D.R's submission that the Special Bench contemplates passing of an order u/s. 201(1) and 201(1A) within certain time limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 201 of the Income-tax Act, 1961, or through making an assessment of the income of the person liable to pay tax. The Hon'ble Court thereafter found that a period of three years for competing assessment u/s.153 of the Act would be a reasonable period, but took note of the fact that Income-tax Appellate Tribunal has, in a series of decisions, taken the view that four years would be a reasonable period of time for initiating action, in a case where no limitation is prescribed. The Hon'ble Court observed that the rationale for holding so was that if there is a time limit for completing the assessment, then the time limit for initiating the proceedings must be the same, if not less. Nevertheless, the Tribunal had given a greater period for commencement or initiation of proceedings, the Hon'ble Court felt that it would not disturb the time limit of four years prescribed by the Tribunal and expressed the view that in terms of the decision of the Supreme Court in State of Punjab v. Bhatinda District Co-op. Milk Producers Union Ltd. [2007] 11 SCC 363 action must be initiated by the competent authority under the Income-tax Act, where no limitation is prescribed as in section 201 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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