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TMI Blog2010 (12) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... 01(1A) and raised demand against the assessee. HELD THAT:- Considering the facts of the case, it is clear that the issue is now covered in favour of the assessee by the order of the Tribunal in the case of the same assessee for AY 2004-05 dated 02-07-2010. We have, therefore, no option except to follow the order of the co-ordinate bench of the Tribunal in favour of the assessee. By following the order of the Tribunal dated 02-07-2010, we set aside the order of the learned CIT(A) on merit in all the Four assessment years and quash the impugned order and delete the resultant demand u/s 201 (1) read with section 201(1A) in all assessment years. The learned CIT(A), was however, justified in holding that the impugned orders of the AO for AY 2001-02 and 2002- 2003 are time barred. The findings of the learned CIT(A) to that extent are confirmed. - S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM For the Appellant : Shri S. N. Soparkar , Sr. AR For the Respondent : Shri R. K. Dhanista, DR O R D E R PER BENCH: The assessee as well as the revenue in the above matters challenged the common order of the learned CIT(A)-X, Ahmedabad dated 31-03-2008 for asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e information regarding any developments in the abrasives industry (including industry trends, technological developments etc.) and the steps to be taken to deal with such-changes/developments. The AO also observed that the advisor, Mr. James Whitehead is a non resident individual and he had acquired knowledge and wide contacts in the abrasive industry because of his long association with the industry as the Managing Director of a company, Unicon Industries Plc, U. K. in U. K. and to utilize his experience, the assessee engaged him as an advisor. From the nature of advisory services given by the advisor, the ITO, TDS observed that they are in the nature of consultancy and technical services and the payment is deemed to be accrued in India by virtue of section 9(1) (vii) of the IT Act and therefore, the assessee was liable for deduction of tax from the payments made to the non resident consultants u/s 195 read with Double Taxation Avoidance Agreement with U. K. As no TDS was deducted from this payment, a show cause notice was issued by ITO, TDS to the assessee, in response to which the assessee requested for keeping the proceedings pending till the outcome of appeal filed agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore tax was not deducted and thus no disallowances can be made u/s. 40(a) (i) of the Act, or no liability to make TDS on such payment arises. The assessee has complied with the provisions of law as they were prevailing on the date of payment to Mr. James Whitehead. Your appellant further respectfully submits that the Learned Assessing Officer ought to have been taken in to consideration the law prevailing at the time of his liability to make TDS and not subsequent amendment in Law. (3) Without prejudice to what is stated in para (2) above, even if it is felt that such payments in respect of offshore services are liable to tax in India, S. 90 of the Act specifically gives an option to an assessee to adopt provisions of Double Taxation Avoidance Agreement (DTAA) to the extent the same are more beneficial to him. (267 ITR 654) (SC). Now as per DTAA between India and UK, in our opinion the payment made to Mr. James Whitehead would fall within Article 15 i.e. Independent Personal Services. In that case as per provisions of DTAA, the amount paid to Mr. Whitehead is taxable in India only if his stay in India was more than 90 days in the relevant financial year. Reliance is pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) held that the assessee should have deducted the TDS and confirmed the orders of the AO in raising demand u/s 201 (1) and section 201 (1A) of the IT Act and dismissed the appeals of the assessee for assessment years 2003-04 and 2004-05. The findings of the learned CIT(A) in Para 4.1, 4.2 and 5 are reproduced as under: 4.1 I have considered the submissions of the A. R. carefully. It is the contention of the learned A. R. that in case of the appellant services have been provided by the foreign consultant from outside India, hence the payment made for offshore services is not taxable in India as held by Hon ble Supreme Court in the case of Ishikawajma Harima Heavy Industries Ltd. Vs Director of I. T. reported in 288 ITR 408 (SC). Though the law has been amended by Finance Act, 2007, with retrospective effect from 1.4.1976 by inserting explanation to section 9(2) of the Act, after the decision of S.C., the A. R. has claimed that the law prevailing in the years under consideration when the payments were made was that such services rendered from outside India were not taxable in India. As per prevailing law at that time services rendered by Mr. James Whitehead were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the AO but did not dispute the order of the Tribunal dated 02-07-2010. Copy of the order of the Tribunal dated 02-07-2010 is placed on record. 8. We have heard the rival contentions and the material on record. ITAT Ahmedabad A Bench in the case of the same assessee for assessment year 2004-05 vide order dated 02-07-2010 on the similar matter held as under: 8. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that by amendment in the Finance Act, 2007, the Legislature inserted the explanation retrospectively w.r.e.f.1-6-1976 to Sec. 9 (2) of the Act, whereas the assessment year involved is 2004-05 relevant to previous year 2003-04 and it is impossible for the assessee to deduct tax in the financial year 1-4-2003 to 31-3- 2004, when the obligation to deduct TDS was not on the assessee during that period. The provision of Section 9 provides for situations where income is deemed to accrue or arise in India to a non-resident. We find that the Legislature Vide Finance Act, 1976, a source rule was provided in section 9 through insertion of clauses, (v), (vi) and (vii) in sub-section (1) for income by way of interest, royal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) of section 9 and shall be. included in his total income, whether or not, (a) the non-resident has a residence or place of business or business connection in India; or (b) the non-resident has rendered services in India. This amendment was made retrospectively from 1st June, 1976 and will accordingly, apply in relation to the assessment year 1977-78 and subsequent years. 9. In view of the above facts and legal position, whether the assessee can be asked to do impossible Act i.e. to deduct tax for the past period. With the insertion of the explanation retrospectively by the Finance Act, 2007 w.r.e.f.1-6-1976 to Sec. 9 (2) of the Act, whereas the assessment year involved is 2004-05 relevant to previous year 2003-04, it is impossible for the assessee to deduct tax in the financial year 1-4-2003 to 31- 3-2004, when the obligation to deduct TDS was not on the assessee during that period. The argument canvassed by the Ld. counsel on the basis of a legal Maxim lex non cogit ad impossiblia, meaning thereby that the law cannot possibly compel a person to do something which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have no doubt in our mind that the levy of interest under sections 234B and 234C are of mandatory nature, but at the same time, if we read sections 234B and 234C carefully, we find that such liability is fastened to those assessees who are liable to pay advance tax. Now, let us see who are liable to pay advance tax and how. Sections 207 and 208 read as under: '207. Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as current income . 208. Advance tax shall be payable during a financial year in every ;-:;Aj../;. case where the amount of such tax payable by the assessee during that year, as computed in accordance with the provisions of this Chapter, is five thousand rupees or more.' 7. A combined reading of the above provisions makes it clear that the assessee has to pay taxes in advance in respect of the total income of the assessee, which would be chargeable in a particular as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce tax, there is no question of charging tax under sections 234B and 234C. In similar circumstances in the case of Priyanka Overseas Ltd. v. Deputy CIT [2001] 79 ITD 353 (Delhi) where the assessee had treated the receipt of cash assistance as capital receipts, which was subsequently amended to be business receipt by the Finance Act, 1990, it was held that in such cases interest under sections 234B and 234C was not chargeable. In these circumstances, we think that the assessee was not liable to pay advance tax and therefore levy of interest under sections 234B and 234C is not justified. Further, it is pertinent to note that the assessee by way of abundant caution deposited a sum of ₹ 90,00,000 on August 6, 2001, i.e., much before the due date of filing of the return, which also proves the bona fide credentials of the assessee. In these circumstances, we set aside the order of the learned Commissioner of Income-tax (Appeals) and delete the levy of interest under sections 234B and 234C. 10. While dealing with the question as to whether an assessee can be faulted for not declaring the amount of capital gain on acquisition of land, when the amount of compensation itself is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal position and facts of the case that the assessee acted bona fide in conformity with the provision of act and the legal position as enumerated by Hon ble apex court in the case of Ishikawajma-Harina Heavy Industries Ltd. (supra). At the relevant point of time it was impossible on the part of the assessee to deduct tax on the income of non-resident. Admittedly, up to the insertion of explanation vide Finance Act, 2007, the assessee was under bona fide belief not to deduct tax and accordingly he acted as per law. Accordingly we allow the appeal of assessee. 12. In the result, assessee s appeal is allowed. 9. We find that the office has noted that both the Cross Objections of the assessee are time barred by Ten days and no petition is filed for condonation of delay. But the assessee was notified of this defect through notice and the defect in the Cross Objections has not been rectified. It would show that the assessee has no reasonable cause to explain the delay in filing the Cross Objections beyond the period of limitation. The Cross Objections of the assessee are accordingly treated as time barred and accordingly dismissed. However, we may note that Rule 27 of the Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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