DCIT (IT) - 3(2)(2), MUMBAI vs. ABUDHABI SHIP BUILDING PJSC, MUMBAI

Date of Hearing – 03.10.2019 Date of Order – 25.10.2019

O R D E R PER SAKTIJIT DEY. J.M.

Captioned appeal has been filed by the Revenue challenging the order dated 30th November 2015, passed by the learned Commissioner of Income Tax (Appeals)–55, Mumbai, for the assessment year 2014– 15.

3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating the fact mentioned in para 4 of order u/s. 195(2) that the income is accruing or arising in India".

5. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in not appreciating the fact the consortium is working through 'dependent agent' namely M/s. Abu Dhabi Ship Building PJSC and the dependent agent is a form of Permanent Establishment of Abu Dhabi Ship Building PJSC in India".

3 Abudhabi Ship Building PJSC 4. Brief facts emanating from records are, the respondent is a non– resident. Oil and Natural Gas Co. Pvt. Ltd. entered into an agreement with the respondent company on 25th May 2012 for construction of nine new Immediate Support Vessels (ISVs) at respondent’s Abu Dhabi shipyard. For making payment to the respondent company without deducting tax at source or deducting at a lower rate, the ONGC made an application to the authority concerned under section 195(2) of the Act. However, the authority concerned directed ONGC to withhold tax as per the applicable rate on the payments to be made in financial year 2012–13 relevant to the assessment year 2013–14. Against the order passed directing withholding of tax, ONGC did not prefer any appeal but the respondent company preferred appeal before the first appellate authority, which was decided in its favour by holding that the income of the respondent company is not taxable in India. Based on the aforesaid decision of learned Commissioner (Appeals), ONGC again filed an application seeking an order to allow payment to be made to the respondent company without deducting tax or deducting tax at lower rate for the payments to be made in the financial year 2013–14 corresponding to assessment year 2014–15. However, the Assessing Officer rejected the application filed by the ONGC and directed it to withhold tax as per applicable rate. Against the said order, respondent company preferred appeal before the first appellate authority. The learned Commissioner (Appeals), following the 4 Abudhabi Ship Building PJSC order passed by him in the assessment year 2013–14 in assessee’s own case, allowed the claim of the respondent company holding that its income is not taxable in India, therefore, ONGC is not liable to withhold tax in respect of payments to be made for the financial year 2013–14.

5 Abudhabi Ship Building PJSC assessment year. Notably, while deciding Revenue’s appeal against the order passed by learned Commissioner (Appeals) in assessee’s own case in the assessment year 2013–14, the Tribunal in ITA no.5418/Mum./2013, dated 8th June 2016, has decided the issue in favour of the Revenue with the following observations:– “13. We have considered the submissions of the parties and perused the material available on record as well as the decisions relied upon by both the Counsels. At the outset, we propose to deal with the preliminary objection raised by the Department with regard to maintainability of appeal filed by the respondent assessee purportedly u/s 246A. It is the contention of the learned D.R. that the order passed u/s 195(2), is not an appealable order u/s 246A as there is no mention of such an order u/s 246A.

7 Abudhabi Ship Building PJSC of the provisions contained under section 246A of the Act but other provisions of the Act also. If we read the provisions of section 246A as a whole, it would emerge that the order appealed against must be an order against the assessee determining its liability to be assessed under the Act. In the present case, the order passed u/s 195(2) admittedly is not against the assessee but against ONGC. Moreover, the liability of the assessee to be assessed under the Act can only be determined in an assessment proceeding and not under section 195(2). Therefore, the party which could have challenged the order passed under section 195(2) before the learned CIT(A) u/s 248 is ONGC subject to fulfillment of conditions mentioned therein. Right to appeal under the Income–tax Act is a statutory right. Therefore, right to appeal does not exist unless it is specifically conferred by the statute. On a careful reading of the provisions of the Act, it is found, a specific provision has been engrafted into the Act by way of section 248 under which an appeal against an order under section 195 can be filed that too, by the payer / deductor of tax. Therefore, when there is a specific provision for filing appeal against an order u/s 195(2) by a specified person, the appeal before the first appellate authority can be maintainable only if it is filed in terms of the said provision and in no other manner. In the present case, facts on record indicate that after the order was passed under section 195(2) the payer / deductor i.e., ONGC has deducted tax at source on the payments made to the respondent and has remitted tax to the Government account. This is also evident from the letter dated 29th November 2012 of ONGC a copy of which is at Page–125 of the paper book. Further, at the time of hearing, we were informed by the Counsels appearing for the parties that assessment in case of the respondent has also been made in the meanwhile and the proceedings are pending before the appellate authority. Therefore, in our view, the course open to the assessee is to deny its liability to be assessed under the Act in such proceedings and claim refund of the amount deducted at source from its receipts / income. As far as the decisions relied upon by the learned Authorised Representative regarding the maintainability of appeal under section 246A, on a careful analysis of the decisions, it is noticed that in all these cases, the orders demanding tax or determining liability were directly against the assessee, hence, in that context, the Courts held that appeal before the learned Commissioner (Appeals) is maintainable. However, in the present case, as already stated, the order appealed against before the learned Commissioner (Appeals) was not against the assessee but against ONGC under section 195(2) of the Act. For the sake of completeness, we think it appropriate to deal in nutshell with few of the decisions relied upon by the learned Authorised Representative.

8 Abudhabi Ship Building PJSC 16. In the case of M. Pyngrope (supra), the assessee had filed return of income under section 139 declaring certain income. The Assessing Officer processed the return of income under section 143(1) of the Act and determined the tax payable. Against the order under section 143(1), assessee filed an appeal before the first appellate authority claiming that his income is exempt under section 10(26). The learned Commissioner (Appeals) entertaining the appeal of the assessee, allowed his claim. The Department challenged the decision of the learned Commissioner (Appeals) before the Tribunal raising the issue of maintainability of the appeal. However, the Tribunal upheld the order of the learned Commissioner (Appeals) by holding that the appeal is in respect of an order against the assessee where the assessee denies his liability to assessee under the Act. In the present case, the order passed under section 195(2) is not against the assessee. Therefore, this decision is not applicable to the facts of the present case.

9 Abudhabi Ship Building PJSC Commissioner (Appeals) or the Tribunal in disposing of the appeal. Facts of the case are, the Assessing Officer made an assessment in the name of an Association Of Persons (AOP). The said AOP filed an appeal before the learned Commissioner (Appeals) claiming that instead of assessing the income at its hand, the Assessing Officer should have assessed the income in the hands of the individual members. Though, the learned Commissioner (Appeals) dismissed the appeal of the assessee. On further appeal before the Tribunal it held that, though, the Income Tax Officer had the power to assess the income of the AOP as such or in the alternative on the individual members thereof in respect of their proportionate shares in the income but the Tribunal had no power under the Act to direct the ITO to exercise his power in one way or other. When the matter went in reference to the High Court, the High Court held that the Appellate Tribunal has jurisdiction to give directions to appropriate authority to cancel the assessment made on the AOP and make a fresh assessment on the members of that association independently. Thus, as could be seen, the issue in the aforesaid decision was in relation to powers of the Appellate Authority. Moreover, the order appealed against before the first appellate authority and the Tribunal was passed against the assessee and not against a third person. Therefore, in these circumstances, we are of the view that these decisions are of no help to the assessee not only because of the fact that in all these cases, orders were passed directly against the assessee determining a liability under the Act but the assessees have denied their liability. Whereas, in the appeal before us, the order appealed against is an order passed under section 195(2) against ONGC requiring it to deduct tax at source on payments made to the assessee. Further, there is no final determination of liability under the Act as far as the assessee is concerned which can only be determined when assessment is framed against the assessee. That besides, there being a specific provision under section 248 of the Act for filing appeal against order passed under section 195(2) of the Act, that too by payer / deductor of tax at source the said order cannot be challenged under section 246A of the Act by the respondent. In the aforesaid view of the matter, we are of the considered opinion that the appeal filed by the respondent assessee before the learned Commissioner (Appeals) against the order passed under section 195(2) in the case of ONGC is not maintainable. The learned Commissioner (Appeals), in our view, was not competent under the provisions of section 246A of the Act to entertain such an appeal. We, therefore, set aside the impugned order passed by the learned Commissioner (Appeals) and restore the order of the Assessing Officer under section 195(2).

10 Abudhabi Ship Building PJSC 21. As we have decided the Department’s appeal in its favour on the issue of maintainability of the appeal, there is no necessity to deal with the other grounds raised on merit in this appeal.”