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TMI Blog2015 (3) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... 04 after considering the submissions, had granted relief to the assessee of ₹ 18.74 crores (rounded off) and thus held assessee to be eligible for deduction u/s 42 at ₹ 19.21 crores as against assessee’s claim of ₹ 19.92 crores and which was restricted to ₹ 46.09 lacs by the Assessing Officer meaning thereby that the order of the Assessing Officer on the issue of deduction u/s 42 stood merged with the order of the CIT(A) and thus had no independent existence of its own. We also find that Hon’ble Gujarat High Court in the case of United Phosphorus Ltd vs. ACIT [2011 (3) TMI 1555 - GUJARAT HIGH COURT] has held that when the assessment order in respect of items for which assessment is sought to be reopened has merged with the order of CIT(A), and as such has no independent existence, and therefore, the assessment could not be reopened in respect of the said items. Thus in the present case the assumption of jurisdiction u/s 147 of the Act is not valid - Decided in favour of assessee. . Reopening of assessment - higher depreciation claim in respect of share of investments for exploration of mineral oils in joint venture with Niko Resources Ltd which included t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon’ble Apex Court in the case of GE India Technology Centre P. Ltd. (2010 (9) TMI 7 - SUPREME COURT OF INDIA )wherein held that Section 195(2) is based on the "principle of proportionality". The said sub-Section gets attracted only in cases where the payment made is a composite payment in which a certain proportion of payment has an element of "income" chargeable to tax in India - Decided in favour of assessee for statistical purposes. - ITA Nos. 982, 983 & 984/Ahd/2010 - - - Dated:- 26-2-2015 - Shri Shailendra Kumar Yadav And Shri Anil Chaturvedi JJ. For the Appellant : Shri S.N. Soparkar, AR For the Respondent : Shri M.K. Singh, Sr. DR. ORDER Per Shri Anil Chaturvedi, ACCOUNTANT MEMBER: These three appeals filed by the assessee are against three separate orders of the Commissioner of Income Tax (Appeals), Gandhinagar, Ahmedabad dated 31.12.2009, 15.12.2009 and 31.12.2009 for Assessment Years 2001-02, 2004-05 and 2005-05 respectively. Since common issues are involved in these appeals, they were heard together and are being disposed of by this consolidated order for the sake of convenience. ITA No.982/Ahd/2010 : AY 2001-02 2. The brief fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w may kindly be rejected and the appellant s contention that reassessment proceedings are without jurisdiction, baseless and barred by time limit may kindly be accepted. (ii) The decision of the learned CIT(A) to uphold the decision of the learned A.O. regarding disallowance of claim u/s 42 amounting to ₹ 46,09,847/- be deleted. (iii) Levy of interest under Sections 234C 234D of the Act and recovery of interest u/s 244 may kindly be deleted. (iv) Initiation of penalty proceedings under Section 271(1)(c) be quashed. (v) Such and further relief as the nature and circumstances of the case may justify. 4. Before us, the ld. Authorized Representative submitted that the only issue is with respect to reopening of assessment. Before us, the ld. Authorized Representative of the assessee submitted that during the course of assessment proceedings, the Assessing Officer had noted that the assessee had made a claim of ₹ 19,92,17,457/- u/s 42 of the Act. The Assessing Officer went into the details of the expenditure and held that most of the expenditure were not related to the exploration and drilling activity and accordingly, he disallowed the claim to the extent of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3352/2001, order dated 18.03.2011. He also placed on the record the copies of the aforesaid decisions. He also placed reliance on the decisions of the Hon ble Gujarat High Court in the cases of Austin Engineering Co. Ltd. vs. JCIT, reported in 312 ITR 70 and Sayaji Industries Ltd v. JCIT, reported in (2011) 336 ITR 360 (Guj.). He, therefore, submitted that the reopening is bad. 5. The learned Departmental Representative, on the other hand, supported the order of the Assessing Officer and the ld. CIT(A). 6. We have heard the rival submissions and perused the material available on record. In the present case, notice u/s 148 of the Act has been issued on 24.12.2008 in relation to Assessment Year 2001-02 and hence, reopening of the assessment is beyond the period of four years from the end of the relevant assessment year. To confirm jurisdiction on the Assessing Officer to issue notice of reopening of assessment beyond a period of four years u/s 148, two conditions are required to be simultaneously satisfied. (i) The Assessing Officer must have reason to believe that the income/profits/gains chargeable to tax have been underassessed and (ii) he must also have reason to believe th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 16.07.2004 at paragraph 3.6.2 at page no.79 of his order (which is placed at page no.201 of the paper-book) and after considering the submissions, had granted relief to the assessee of ₹ 18.74 crores (rounded off) and thus held assessee to be eligible for deduction u/s 42 at ₹ 19.21 crores as against assessee s claim of ₹ 19.92 crores and which was restricted to ₹ 46.09 lacs by the Assessing Officer meaning thereby that the order of the Assessing Officer on the issue of deduction u/s 42 stood merged with the order of the CIT(A) and thus had no independent existence of its own. We also find that Hon ble Gujarat High Court in the case of United Phosphorus Ltd vs. ACIT (supra) has at paragraph No.15 of the order has held that when the assessment order in respect of items for which assessment is sought to be reopened has merged with the order of CIT(A), and as such has no independent existence, and therefore, the assessment could not be reopened in respect of the said items. Considering the aforesaid facts, in the light of the decisions relied upon by the assessee and in the absence of any contrary binding decision pointed out by the Revenue or distinguishing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings are without any base and jurisdiction, and it is a change of opinion may kindly be accepted. (ii) The decision of the learned CIT(A) to uphold the decision of the learned A.O. regarding disallowance of claim of depreciation u/s 32 on well cost amounting to ₹ 2, 17, 23,032/- be deleted. (iii) Levy of interest under Sections 234B, 234C 234D of the Act may kindly be deleted. (iv) Initiation of penalty proceedings under Section 271(1)(c) be quashed. (v) Such and further relief as the nature and circumstances of the case may justify. 9. The ld. Authorized Representative submitted that the only effective ground before us is with respect to challenging re-assessment. Before us, the ld. Authorized Representative of the assessee submitted that the reopening in the present case is within four years from the end of the assessment year. He further submitted that while framing the assessment in the original assessment proceedings, the claim of depreciation u/s 32 on the well-cost was allowed. He further submitted that the reason for reopening indicates that it was on account of change of opinion on the part of the Assessing Officer and further, there was no failur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary for completion of the assessment. He further submitted that the disposal of assessee s objection in the assessment order should be considered as compliance with the requirement of the Act. He thus supported the order of the Assessing Officer and CIT(A). 11. We have heard the rival submissions and perused the materials available on record. In the present case, we find that the assessee vide letter dated 11.11.2008 and 26.11.2008 had objected to the reopening before the Assessing Officer. We find that the objections raised by the assessee have been considered by the Assessing Officer while framing the assessment order dated 24.12.2008 itself. We find that the Co-ordinate Bench of the Tribunal in the case of Bharuch Enviro Infrastructure Ltd v. DCIT (supra) on identical facts had decided the appeal of the assessee by holding as under:- 8. We have heard the rival submissions and perused the material on record. It is an undisputed fact that the reasons for re-opening of assessment u/s. 147 of the Act was recorded on 31.03.2005 and the same were communicated to the Assessee by ACIT vide letter dated 09.01.2006. In response to the notice for reopening, Assessee vide its letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Infrastructure Ltd v. DCIT (supra) which has been relied by the ld. Authorized Representative. We, therefore, respectfully following the aforesaid decision of the Tribunal, quash the reassessment and thus the ground of assessee is allowed. In the result, this appeal of the assessee is allowed. ITA No.984/Ahd/2010 : AY 2005-06 13. In this case, it was noted by the Assessing Officer that the assessee had made remittance to non-resident companies/parties. From the remittances made by the assessee, it was also noticed by him that the assessee had deducted tax at lower rate or not deducted the tax without obtaining relevant certificate from the Department. After considering the submissions of the assessee, the Assessing Officer vide a detailed order dated 30.01.2009 passed u/s 201(1) and 201(1A) r.w.s. 195 of the Act, concluded that the payments made by the assessee to Total UAE was taxable as per the provisions of Income-tax Act and Tax Treaty between India UAE. The Assessing Officer also noted that the assessee had already remitted the total payment to the non-resident company and therefore, he was of the view that the tax deducted at source has to be arrived by grossing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee without passing a speaking order. The ld. Authorized Representative of the assessee further submitted that the decision of the Hon ble Karnataka High Court in the case of CIT vs. Samsung Electronics Ltd (supra), which has been relied upon by the ld. CIT(A), has been reversed by the Hon ble Supreme Court in the case of GE India Technology Centre P. Ltd. v. CIT, reported in (2010) 327 ITR 456 (SC). He, therefore, submitted that the matter may be remitted to the ld. CIT(A) to examine and decide the issue on merits. The ld. Departmental Representative did not seriously object to the request of ld. Authorized Representative of the assessee to remit the matter back to the ld. CIT(A). 16. We have heard the rival submissions and perused the material available on record. We find that the issue in the present case is with respect to deduction of tax on the payments made to non-resident company. We find that the ld. CIT(A) had followed the decision of Hon ble Karnataka High Court in the case of CIT vs. Samsung Electronics Ltd (supra). We further find that the aforesaid decision of the Hon ble Karnataka High Court has been reversed by the Hon ble Supreme Court in the case of G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e moment there is remittance the obligation to deduct TAS arises. If we were to accept such a contention it would mean that on mere payment income would be said to arise or accrue in India. Therefore, as stated earlier, if the contention of the Department was accepted it would mean obliteration of the expression sum chargeable under the provisions of the Act from Section 195(1). While interpreting a Section one has to give weightage to every word used in that section. While interpreting the provisions of the Income Tax Act one cannot read the charging Sections of that Act de hors the machinery Sections. The Act is to be read as an integrated Code. Section 195 appears in Chapter XVII which deals with collection and recovery. As held in the case of C.I.T. Vs. Eli Lilly Co. (India) (P.) Ltd. [312 ITR 225] the provisions for deduction of TAS which is in Chapter XVII dealing with collection of taxes and the charging provisions of the I.T. Act form one single integral, inseparable Code and, therefore, the provisions relating to TDS applies only to those sums which are chargeable to tax under the I.T. Act. It is true that the judgment in Eli Lilly (supra) was confined to Section 192 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Department that Section 195(2), as interpreted by the High Court, would plug the loophole as the said interpretation requires the payer to make a declaration before the ITO(TDS) of payments made to nonresidents. In other words, according to the Department Section 195(2) is a provision by which payer is required to inform the Department of the remittances he makes to the non- residents by which the Department is able to keep track of the remittances being made to non-residents outside India. We find no merit in these contentions. As stated hereinabove, Section 195(1) uses the expression sum chargeable under the provisions of the Act. We need to give weightage to those words. Further, Section 195 uses the word `payer' and not the word assessee . The payer is not an assessee. The payer becomes an assessee-in-default only when he fails to fulfill the statutory obligation under Section 195(1). If the payment does not contain the element of income the payer cannot be made liable. He cannot be declared to be an assessee-in-default. The abovementioned contention of the Department is based on an apprehension which is ill founded. The payer is also an assessee under the ordinar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o composite payments which had an element of income embedded or incorporated in them. The controversy before us in this batch of cases is, therefore, quite different. In Transmission Corporation case (supra) it was held that TAS was liable to be deducted by the payer on the gross amount if such payment included in it an amount which was exigible to tax in India. It was held that if the payer wanted to deduct TAS not on the gross amount but on the lesser amount, on the footing that only a portion of the payment made represented income chargeable to tax in India , then it was necessary for him to make an application under Section 195(2) of the Act to the ITO(TDS) and obtain his permission for deducting TAS at lesser amount. Thus, it was held by this Court that if the payer had a doubt as to the amount to be deducted as TAS he could approach the ITO(TDS) to compute the amount which was liable to be deducted at source. In our view, Section 195(2) is based on the principle of proportionality . The said sub-Section gets attracted only in cases where the payment made is a composite payment in which a certain proportion of payment has an element of income chargeable to tax in India. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the cases on merits. The question which the High Court will answer is -whether on facts and circumstances of the case the ITAT was justified in holding that the amount(s) paid by the appellant(s) to the foreign software Suppliers was not royalty and that the same did not give rise to any income taxable in India and, therefore, the appellant(s) was not liable to deduct any tax at source? 13. Subject to what is stated hereinabove, we set aside the impugned judgment(s) and remit these cases to the High Court to answer the question framed hereinabove. Accordingly, the appeal(s) filed by the appellant(s) stands allowed with no order as to costs. 17. In the present case, we find that ld. CIT(A) had not gone into the merits of the case but decided the issue only by relying on the decision of Hon ble Karnataka High Court in the case of Transmission Corporation (supra). Since the matter has not been decided on merit by the CIT(A), we are of the view that the matter needs to be re-examined at his end. We, therefore, restore the issue back to the file of the CIT(A) to decide the issue afresh on merits in accordance with law and in the light of the decision of the Hon ble Apex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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