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TMI Blog2022 (8) TMI 1360X X X X Extracts X X X X X X X X Extracts X X X X ..... eorge K., Judicial Member And Ms. Padmavathy S, Accountant Member For the Appellant : Shri Percy Pardiwala, Sr. Advocate, Shri Anmol Anand & Ms. Priya Tandon, Advocates & Shri Vinay Mangla, CA. For the Respondent : Shri K V Aravind, Standing Counsel. ORDER PER PADMAVATHY S., ACCOUNTANT MEMBER These appeals of the assessee were initially disposed of by the common order of the Tribunal dated 23.10.2017 for AYs 2007-08 to 2012-13 in ITA Nos.1511 to 1516/Bang/2013 dismissing all the appeals. On further appeal by the assessee, the Hon'ble High Court of Karnataka vide its judgment dated 17.04.2021 in ITA No. 502/2018 and connected appeals has remanded all the appeals including the connected appeals to the Tribunal for fresh adjudication. 2. The relevant observations of the Hon'ble High Court insofar as the appeals of the assessee for AYs 2007-08 & 2008-09 are as follows:- "19. In the considered opinion of this Court, keeping in view Rule 29 of the income Tax (Appellate Tribunal) Rules, 1963 and also keeping in view the fact that the material on the basis of which the order has been passed was not furnished to the appellant at any point time, the order passed by the Tribunal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnology enabled Services [ITeS] to its group companies. The assessee has entered into Google Adword Program Distribution Agreement dated 12.12.2005 with Google Ireland Ltd. ['GIL' for short]. As per the agreement, the assessee is appointed as a non-exclusive authorized distributor of Adword Programs to the advertisers in India. As per the agreement, the assessee is liable to pay distribution fees to GIL as follows:- AY Amount in Rs. 2007-08 42,57,53,347 2008-09 1,19,82,61,982 5. The aforesaid payment was made without deduction of tax at source. According to the assessee, it was mere reseller of the advertising space made available under the Adword Program distribution agreement and the assessee is distributor of advertising space with no access or control over the infrastructure or the process that is involved in rendering the Adword Program. Therefore, the sums so paid were not chargeable to tax under the relevant Double Taxation Avoidance Agreement [DTAA]. Accordingly, there was no deduction of tax on such payments in the absence of primary charge of tax. The AO issued notice u/s. 201(1) of the Income-tax Act, 1961 [the Act] to the assessee to show cause why the distributi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other aspects of the case relating to other assessment years concerning this assessee, which are to be considered separately and independently. With these remarks, we proceed to decide the question of limitation of the impugned order insofar as it relates to AYs 2007-08 and 2008-09 only. 9. On the preliminary issue of limitation, the ld. AR drew our attention to para 2.1 of the assessment order where it is mentioned that the proceedings u/s. 201(1) were initiated by issuing notice on 20.11.2012 asking the assessee to show cause why it should be treated as an assessee in default in respect of tax not deduced at source on the sums payable to GIL. He submitted that the notice issued for AYs 2007-08 & 2008-09 was beyond the time limit specified in sub-section (3) of section 201 i.e., beyond 4 years from the end of the financial year in which payment is made or credit is given. Therefore, the assessments are barred by limitation and liable to be quashed. In this regard, he placed reliance on the decision of the coordinate Bench of the Tribunal in the case of Mphasis Ltd. v. DDIT (IT), [2022] 136 taxmann.com 160 (Bang. Trib). 10. The ld. DR argued that the aforesaid decision of the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial on record. We notice that show cause notice to initiate proceedings u/s. 201(1) is issued on 20.11.2012 which is beyond four years with respect to assessment years 2007-08 & 2008-09. Further, the coordinate Bench of this Tribunal in the case of Mphasis Ltd. (supra) has considered similar issue and held as follows:- "11. We have carefully considered the rival submissions. Section 201(1) & 201(1A) of the Act provides as follows : "201. Consequences of failure to deduct or pay.--(1) Where any person, including the principal officer of a company,-- (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: ............" 12. Prior to the decision of the Special Bench of ITAT Mumbai in the case of Mahindra & Mahindra Ltd. v. Dy. CIT [2009] 30 SOT 374 there was no period of li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case where the statement referred to in section 200 has been filed; (ii) four years from the end of the financial year in which payment is made or credit is given, in any other case : Provided that such order for a financial year commencing on or before the 1st day of April, 2007 may be passed at any time on or before the 31st day of March, 2011." 15. CIRCULAR NO. 05/2010 F.No.142/13/2010-SO (TPL) Government of India, Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) Dated, the 3rd June, 2010 gave explanatory notes to the provisions of the Finance (No.2) Act, 2009, and the relevant paragraphs with regard to the aforesaid amendment read as follows : '50. Providing time limits for passing of orders u/s. 201(1) holding a person to be an assessee in default 50.1 Currently, the Income Tax Act does not provide for any limitation of time for passing an order u/s. 201(1) holding a person to be an assessee in default. In the absence of such a time limit, disputes arise when these proceedings are taken up or completed after substantial time has elapsed. In order to bring certainty on this issue, specific time limits is provided in the Act wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, in the financial years 2005-06 to 2007-08 relevant to the assessment years 2006-07 to 2008-09. The provision contained under section 201 of the Act which was applicable to assessment years 2006-07 to 2008-09 did not prescribe any period of limitation either for initiation or for completion of proceedings under the said provision. The limitation period was prescribed under section 201 of the Act by insertion of sub-section (3) for the first time by Finance Act, 2009 w.e.f. 1st April 2010, prescribed periods of limitation but those provisions were applicable only when payments are made to "resident in India". In respect of payments made to non-residents, as in the present case of the appellants in this appeal, no period of limitation is laid down in the Act. 19. In such circumstances, there are two ways of addressing the issue of limitation when payments are made to non-residents for passing order u/s.201(1) & 201(1A) of the Act. 20. Firstly, it can be held that as held in judicial precedents, absence of limitation period to pass an order u/s.201(1) of the Act where the payee is a non-resident, will not empower the Assessing Officer to pass an order under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, even then as rightly pointed out by the learned counsel for the Assessee, the Hon'ble Delhi High Court in case of Bharti Airtel Ltd. (supra) has held that the said limitation period even in respect of non-residents can be read into the provision of sec.201(3) of the Act. The following were the relevant observations of the Court : '12. When NHK Japan (supra) and Hutchinson (supra) were decided, the amendment was not brought about and therefore the issue of existence of a period of limitation, did not arise. The court therefore, considered, on the basis of available authority, that a four year period was "reasonable period" as the outer limit for issuance of notice under section 201. However, in the present case, Parliament consciously amended the Act. In doing so, it prescribed a limitation only for residents. Instead of actively barring the applicability of the provision on non-residents, did the Parliament choose to passively do so by remaining silent on nonresidents and only amending the provision, for residents. The question is, whether the petitioner is right in contending that if the Act does not specify a time period, then a reasonable time period sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 15. This court is of opinion that the latest judgment, in Vodafone Essar Mobiles Ltd. (supra) provides a complete answer to the revenue's contentions. The Court had then ruled as follows : 9. More recently in CIT v. Calcutta Knitwears [2014] 362 ITR 673, the Supreme Court had the occasion to deal with the correct, position in law as to the initiation of Income-tax proceedings. Although, the context of the dispute was in respect of recording of a satisfaction note as to the initiation of proceedings against third parties under the erst while section 158BD of the Act which did not prescribe the period of limitation and left it to the discretion of the Assessing Officer to decide on being satisfied that such proceedings were required to be initiated, the court limited such discretion in the following terms (page 691 of 362 ITR) : '44. In the result, we hold that for the purpose of section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the Assessing Officer before he transmits the records to the other Assessing Officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages ..... X X X X Extracts X X X X X X X X Extracts X X X X
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