M/S SERVALL ENGINEERING WORK vs. THE DEPUTY COMMISSIONER OF I

TCA.Nos.992 & 993 of 2018 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 24.11.2020 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MRS.JUSTICE PUSHPA SATHYANARAYANA Tax Case Appeal Nos.992 & 993 of 2018

M/s.Servall Engineering Works Pvt. Ltd., Coimbatore-11 ...Appellant Vs The Deputy Commissioner of Income Tax, Company Circle 1(3), Coimbatore ...Respondent APPEALS under Section 260A of the Income Tax Act, 1961 against the common order dated 12.9.2016 passed by the Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai made in I.T.A.Nos. 1250/Mds/2012 and 45/Mds/2013 respectively for the assessment years 2008-09 and 2009-10. For Appellant: Mr.R.Vijayaraghavan for M/s.Subbaraya Aiyer Padmanabhan For Respondent: Mr.T.R.Senthilkumar, SSC assisted by Ms.K.G.Usha Rani, JSC 1/8 http://www.judis.nic.in TCA.Nos.992 & 993 of 2018 COMMON JUDGMENT (Judgment was delivered by

T.S.SIVAGNANAM

,J)

These appeals have been filed by the assessee under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity) challenging the common order dated 12.9.2016 made in I.T.A.Nos. 1250/Mds/ 2012 and 45/Mds/2013 on the file of the Income Tax Appellate Tribunal, Chennai, 'C' Bench ('the Tribunal' for brevity) respectively for the assessment years 2008-09 and 2009-10. 2. The above appeals were admitted on 13.10.2020 on the following substantial questions of law: “T.C.A.No.992 of 2018: 1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in disallowing the travel expenses incurred wholly and exclusively for the purposes of business? 2. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in disallowing the travel expenses incurred when the appellant has paid fringe benefit tax on the same? 3. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that tax is required to be 2/8 http://www.judis.nic.in TCA.Nos.992 & 993 of 2018 deducted at source from the payment for fees for technical services when the services were rendered to Appellant outside India and utilized outside India and the nonresident entity had no permanent establishment in India? 4. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that technical knowledge, skills, etc., were made available to the assessee and therefore, the disallowance under Section 40(a)(i) of the Act was warranted? 5. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the disallowance under Section 40(a)(i) of the Act on the basis of retrospective amendments, without appreciating that the Assessee at the time of remittance could not have anticipated such subsequent amendments and hence, the impossibility of performance at the time of making such payments. 6. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the addition of advances under Section 28(iv) of the Act, when the advances were received from various 3/8 http://www.judis.nic.in TCA.Nos.992 & 993 of 2018 parties against supplies made to the parties? T.C.A.No.993 of 2018: 1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that tax is required to be deducted at source from the payment for fees for technical services when the services were rendered to Appellant outside India and utilized outside India and the nonresident entity had no permanent establishment in India? 2. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that technical knowledge, skills, etc., were made available to the assessee and therefore, the disallowance under Section 40(a)(i) of the Act was warranted? 3. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the disallowance under Section 40(a)(i) of the Act on the basis of retrospective amendments, without appreciating that the Assessee at the time of remittance could not have anticipated such subsequent amendments and hence, the impossibility of performance at the time of making such payments?” 4/8 http://www.judis.nic.in TCA.Nos.992 & 993 of 2018 3. We have heard Mr.R.Vijayaraghavan,, learned counsel appearing on behalf of the appellant/assessee and Mr.T.R. Senthilkumar, learned Senior Standing Counsel assisted by Ms.K.G. Usha Rani, learned Junior Standing Counsel appearing for the respondent/Revenue. 4. The learned counsel for the appellant/assessee, on instructions, submits that the appellant/assessee intends to avail the benefit of Vivad Se Vishwas Scheme ('VVS Scheme' for brevity) and in this regard, the assessee is taking steps to file the applications/ declarations in Form No.I. 5. It may not be necessary for this Court to decide the substantial questions of law framed for consideration on account of certain subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) to provide for resolution of disputed tax and for matters connected therewith or incidental thereto. The Act of the Parliament received the assent of the President on 17th March 2020 and published in the Gazette of India on 17th March 2020. 5/8 http://www.judis.nic.in TCA.Nos.992 & 993 of 2018 6. In terms of the said Act, the assessee has been given an option to put an end to the tax disputes, which may be pending at different levels either before the First Appellate Authority or before the Tribunal or before the High Court or before the Hon'ble Supreme Court of India. Under Section 2(j) “disputed tax” has been defined. In terms of Section 3, where a declarant means a person, who files a declaration under Section 4 on or before the last date files a declaration to the designated authority in accordance with the provisions of Section 4 in respect of tax arrears, then, notwithstanding anything contained in the Income Tax Act or any other law for the time being in force, the amount payable by the declarant shall be determined in terms of Section 3(a-c) thereunder. 7. The First Proviso to Section 3 states that in case, where an appeal or writ petition or special leave petition is filed by the Income Tax authority on any issue before the Appellate Forum, the amount payable shall be one-half of the amount in the table stipulated in Section 3 calculated on such issue, in such a manner as may be prescribed. The Second Proviso deals with the cases, where the matter is before the Commissioner (Appeals) or before the Dispute Resolution Panel. The Third Proviso deals with cases where the issue is pending 6/8 http://www.judis.nic.in TCA.Nos.992 & 993 of 2018 before the Income Tax Appellate Tribunal. The filing of the declaration is as per Section 4 of the Act and the particulars to be furnished are also mentioned in the Sub-Sections of Section 4. Section 5 of the Act deals with the time and manner of the payment and Section 6 deals with immunity from initiation of proceedings in respect of offence and imposition of penalty in certain cases. Section 9 of the Act deals with cases, where the Act 3 of 2020 will not be applicable. 8. As observed, the assessee is given liberty to restore these appeals in the event the ultimate decision to be taken on the declarations to be filed by the assessee under Section 4 of the said Act is not in favour of the assessee. If such a prayer is made, the Registry shall entertain the prayer without insisting upon any application to be filed for condonation of delay in restoration of the appeals and on such request made by the assessee by filing a miscellaneous petition for restoration, the Registry shall place such petition before the Division Bench for orders. 9. In the light of the above, we direct the appellant/assessee to file Form No.I on or before 21.12.2020 in the respective cases and the Competent Authority shall process the applications/declarations in 7/8 http://www.judis.nic.in TCA.Nos.992 & 993 of 2018 T.S.SIVAGNANAM,J AND PUSHPA SATHYANARAYANA,J RS accordance with the Act and pass appropriate orders as expeditiously as possible preferably within a period of six (6) weeks from the date, on which, the declarations are filed in proper form. 10. With this direction, the tax case appeals stand disposed of with the aforementioned liberty. Consequently, the substantial questions of law framed are left open. No costs. 24.11.2020 To 1.The Income Tax Appellate Tribunal, 'C' Bench, Chennai. 2.The Deputy Commissioner of Income Tax, Company Circle 1(3), Coimbatore. TCA.Nos.992 & 993 of 2018 8/8 http://www.judis.nic.in