THE ACIT (INT. TAXA), VADODARA vs. M/S. ALLSCRIPTS (INDIA) PVT.LTD., BARODA

The grounds of appeal raised by the assessee read as under: “1. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in holding that the notice U/s 201 of the Act issued beyond the period of four years deserves to be quashed, relying on the judgment of Hon’ble Gujarat High Court in the case of CIT(TDS) Vs Anagram Wellington Assets Management Company Ltd. 389 ITR 654 (2016) (Guj) without appreciating the fact that the decision of Hon’ble jurisdictional High Court pertains to the resident assessee and for the default committed u/s 194I of the Act rendering the judgment obiter dictum in the case of the assessee under consideration. 2. The Ld. CIT(A) failed to appreciate that the statute defines period of limitation for passing of order u/s 201 or 201(1A) of the Act with respect to

The assessee engaged in the business of software development services and during the year the AO observed that the assessee did not deduct TDS under Section 195 of the Act on international transaction for payment made on account of Data Line Charges amounting to Rs. 2,78,60,362/-. The AO issued show-cause notice dated 28.06.2018 for non-deduction of TDS and further observed that the assessee was rendering software development services to Allscripts US, the ultimate holding company which was non-resident in India and had entered into an agreement for third party services provider for providing end-to-end MPLS network facility (lease line connectivity) to connect development centre offices of the assessee with the offices of Allscripts US to access standard communication line for private and highly secure information and said third party vendor provided the same standard services to its

Being aggrieved by the order under Section 201(1) / 201(1A) of the Act the assessee filed appeal before the CIT(Appeals). The CIT(Appeals) allowed the appeal of the assessee.

The Ld. D.R. submitted that the observation of the CIT(Appeals) that the notice under Section 201 of the Act issued beyond the period of four years is not sustainable in light of the decision of Hon’ble Gujarat High Court in the case of CIT(TDS) vs. Anagram Wellington Assets Management Company Ltd., 389 ITR 654 (2016) (Guj.) without appreciating the fact that the decision of Hon’ble Jurisdictional High Court pertains to the resident assessee and for the default committed under Section 194I of the Act rendering the judgment obiter dictum in the case of the assessee under consideration. The Ld. D.R. further submitted that the statute defines the period of limitation for passing of order under Section 201 / 201(1A) of the Act with respect to payments to resident assessee whereas the assessee made payments to a non-resident and thus, bar of limitation under Section 201(3) of the Act did not apply to the payments to non-resident. The Ld. D.R. further submitted that payment made by the assessee to its holding company was in the nature of reimbursement, therefore, tax was not required to be deducted under

The Ld. A.R. submitted that the notice for non-deduction of TDS was issued after four years from the end of relevant assessment year, thus, the order under Section 201 / 201(1A) is time barred. Section 201(3) did not specify that the limitation will not be applicable to payment to non-resident. The Ld. A.R. further submitted that there was no express provision under Section 201 which prescribes a time frame within which an order has to be passed for failure to deduct appropriate taxes from a person who is a non-resident. Accordingly, principles in this regard have been drawn from the decision of Hon’ble Delhi High Court in the case of CIT vs. NHK Japan Broadcasting Corporation (305 ITR 137) (2008) wherein it was held that action must be initiated by the competent authority under the Act, where no limitation has been prescribed as in Section 201 of the Act within a period of four years. The show-cause notice dated 28.06.2018 received by the assessee on 05.07.2018 have been issued after five years of the said reimbursement of expenditure was made by the assessee to Allscripts USA without

We have heard both the parties and perused all the relevant material available on record. There is delay of 324 days on part of Revenue in filing present appeal which was properly explained by the Revenue through letter dated 22.12.2021. Hence, we are condoning the delay. It is pertinent to note that Section 201(3) specifies the time limit in respect of TDS for residents only. The CIT(A) observed that the order dated 25.03.2019 is beyond four years in light of Hon’ble Delhi High Court decision in case of NHK Japan Broadcasting Corporation (Supra). The decision of Jurisdictional High Court referred by the CIT(A) is opt in present case as regards to limitation. Further on merit, the assessee before the AO as well as before the CIT(A) has given the details as well as agreement between the assessee and Allscripts USA. The agreement between the parties can be specific and its length or pages does not matter. Merely on the length of the agreement, the AO cannot overlook

In the result, the appeal of the Revenue is dismissed. This Order pronounced in Open Court on 12/10/2022