M/S. ADITYA BIRLA NUVO LTD ( EARLIER KNOWN AS INDIAN RAYON AND INDUSTRIES LTD AND NOW AMALGAMATED WITH GRASIM INDUSTRIES LIMITED)),MUMBAI vs. INCOME TAX OFFICER (INTERNATIONAL TAXATION)-2(3)(2), MUMBAI

obtained by the assessee by mis–representation of fact, the Assessing Officer initiated proceedings under section 201 of the Act by issuing show cause notice on 28th March 2013 calling upon the assessee to explain why it should not be treated as an assessee in default for non– deduction of tax at source under section 195(1) of the Act. In response, the assessee made elaborate submissions objecting to the proposed action of the Assessing Officer in declaring the assessee to be an assessee in default. However, the Assessing Officer rejecting the submissions of the assessee passed an order under section 201(1) of the Act treating the assessee as an assessee in default for having not deducted tax at source under section 195(1) of the Act while remitting the amount to the Mauritius company. Accordingly, he raised demand of ` 47,50,17,460, under section 201(1) of the Act and levied interest under section 201(1A) of the Act for an amount of ` 54,62,70,079. The assessee challenged the aforesaid order passed by the Assessing Officer before the first appellate authority.

4 M/s. Aditya Birla Nuvo Ltd. after considering the submissions of the assessee in the light of the provisions contained under section 201 of the Act as well as the ratio laid down in the judicial precedents cited before her, including the decision of the Hon'ble Jurisdictional High Court in DIT v/s Mahindra & Mahindra Ltd., [2014] 365 ITR 560 (Bom.), held that the Assessing Officer could not have passed the order under section 201(1) and 201(1A) of the Act after expiry of six years from the end of the financial year relevant to the impugned assessment year. Accordingly, holding the order passed by the Assessing Officer to be barred by limitation, learned Commissioner (Appeals) quashed the same.

representative assessee. Therefore, the High Court never had an occasion to deal with the issue whether the Assessing Officer can pass an order under section 201(1) and 201(1A) of the Act after the expiry of six years. The learned Authorised Representative submitted, as per the provision of section 201(1) of the Act, no limitation was prescribed prior to insertion of sub–section (3) by Finance Act, 2012, with retrospective effect from 1st April 2010. He submitted, in spite of the fact that no limitation was prescribed under the said provision, the Courts have held that even in the absence of any limitation prescribed under the said provision, an order has to be passed within reasonable period. He submitted, the Courts have interpreted that reasonable period for passing an order under section 201(1) of the Act would be similar to the limitation prescribed for re–opening of assessment under section 147 of the Act. The learned Authorised Representative submitted, after introduction of sub–section (3) of section 201 of the Act, limitation for passing the order is six years from the end of the financial year in which the payment is made. He submitted, it is now well settled that sub–section (3) of section 201 of the Act is also applicable to non–resident companies. Therefore, he submitted, as per the provision of sub–section (3) of section 201 of the Act as is applicable to the impugned assessment year, the order passed after expiry of six years from the end of the relevant financial year is barred

6 M/s. Aditya Birla Nuvo Ltd. by limitation. In support of such contention, he relied upon the following decisions:– i) DIT(IT) v/s Mahindra & Mahindra Ltd., [2014] 365 ITR 560 (Bom.); ii) CIT v/s NHK Japan Broadcasting Corp., [2008] 305 ITR 137 (Del.); iii) CIT v/s Hutchison Essar Telecome Ltd., [2010] 323 ITR 230 (Del.); iv) CIT v/s M/s. Sathuj Jal Vidyut Nigam Ltd., 345 ITR 552 (HP); v) CIT v/s C.J. International Hotels Pvt. Ltd., TS–74–HC–Del), dated 09.02.2015; vi) CIT v/s M/s. U.B. Electronic Instruments Ltd., TS–844–HC– 2014 (Tel & AP) dated 12.11.2014; and vii) Tech Mahindra Ltd. v/s ITO, [2018] 96 taxmann.com 357 (Mum.).

7 M/s. Aditya Birla Nuvo Ltd. connected to the issue in dispute adjudicated by the Hon’ble High Court in the judgment referred to above. When a question was raised, whether during the existence of a certificate issued under section 195(2) of the Act proceedings under section 163 of the Act can be initiated against the assessee, the Hon’ble High Court held that since the certificate issued under section 195(2) of the Act has already expired and remittances have been made without deduction of tax, Revenue can proceed under section 163 of the Act. However, in the present appeal, we are on the issue of validity of the order passed under section 201(1) and 201(1A) of the Act. Undisputedly, the financial year involved in the present appeal is F.Y. 2006–07. The Assessing Officer has issued the show cause notice under section 201(1) and 201(1A) of the Act on 28th March 2013, and passed the order under the said provision on 27th March 2015. Therefore, it has to be examined whether the order passed under section 201(1) and 201(1A) of the Act is barred by limitation. In our view, the issue has now been fairly well settled by a plethora of decisions including the decisions of the Hon'ble Jurisdictional High Court as cited by the learned Authorised Representative. While considering identical issue in Tech Mahindra Ltd. (supra), the Co–ordinate Bench has held that the order passed under section 201(1) and 201(1A) of the Act after expiry of six years from the end of the financial in which payment was made

8 M/s. Aditya Birla Nuvo Ltd. is barred by limitation. The observations of the Bench in this regard are as under:–

“7. We have considered rival submissions and perused materials on record. We have also applied our mind to the decisions cited before us. At the outset, it needs to be observed that the alleged failure on the part of the assessee to deduct tax at source under section 195 of the Act relates to payment made to two non-resident companies in the financial year 2007- 08 relevant to the assessment year 2008-09. It is also a fact on record that the Assessing Officer has initiated proceedings under section 201(1) of the Act by issuance of show cause notice on 27th January 2014. Therefore, admittedly, the proceeding under section 201(1) of the Act was initiated after expiry of four years from the end of relevant assessment year i.e., A.Y. 2008-09. Undisputedly, the provision contained under section 201 of the Act which was applicable to assessment year 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. As per the said provision, in respect of any payment made to a resident if there is failure to deduct tax at source no order shall be passed under section 201(1) of the Act after expiry of two years from the end of the financial year in which the statement under section 200 is filed and in any other case after expiry of six years from the end of financial year in which payment is made and credit is given. However, the proviso to sub-section (3) states that in respect of a financial year commencing on/or before 1st Day of April 2007, an order under section 201(1) of the Act may be passed at any time on/or before 31s March 2011. We propose to deal with the applicability of proviso to sub-section (3) of section 201 of the Act at a later stage. Thus, it is clear from the facts on record as well as the provisions of section 201 of the Act as applicable to the impugned assessment year no limitation period was prescribed under section 201 of the Act either for initiation or for completion of the proceedings. Therefore, as held in judicial precedents, absence of limitation period will not empower the Assessing Officer to pass an order under section 201 of the Act at any time at his sweet will. The Hon'ble Courts have held that, even, in the absence of limitation period prescribed under a particular provision, the order has to be passed within a reasonable period. In the context of section 201 of the Act itself, the Hon'ble Delhi High

9 M/s. Aditya Birla Nuvo Ltd. court in NJK Japan Broadcasting Corpn. (supra) approving the decision of the Tribunal has held that a period of four years would be reasonable period of time for initiation of proceeding under section 201 of the Act. The aforesaid decision of the Hon'ble Delhi High Court has been approved and followed in subsequent decisions of the Hon'ble Delhi High Court in case of Vodafone Essar Mobile Services Ltd. v. Union of India [2016] 67 taxmann.com 124/238 Taxman 625/385 ITR 436 and in CIT v. C.J. International Hotels (P.) Ltd. [2015] 56 taxmann.com 458/231 Taxman 818/372 ITR 684 (Delhi). The Hon'ble Jurisdictional High Court in DIT (IT) v. Mahindra & Mahindra Ltd. [2014] 48 taxmann.com 150/225 Taxman 306/365 ITR 560 (Bom.) also followed the decision in NHK Japan Broadcasting Corpn. (supra). We are also conscious of the fact that the Tribunal, Mumbai Bench, in Vodafone India Ltd. v. ITO [IT Appeal no.4511 (Mum.) of 2012, dated 12-3- 2018] following the decision of Hon'ble Delhi High Court in NJK Japan Broadcasting Corpn. (supra) held that initiation of proceeding under section 201(1) of the Act after expiry of four years from the end of relevant financial year is barred by limitation. Thus, in view of the legal principal laid down in the decisions referred to above, the impugned order passed under section 201(1) / 201(1A) of the Act is clearly barred by limitation as the initiation of proceedings under the said provision was after expiry of four years from the end of the relevant financial year i.e., financial year 2007-08. That being the case, the order passed under section 201(1) and 201(1A) of the Act deserves to be quashed.

8. There is another aspect to this issue. As stated earlier, the provisions of section 201 of the Act was amended by Finance Act, 2009 by insertion of sub-section (3) w.e.f. 1st April 2010. The aforesaid provision prescribes period of limitation for completion of proceedings under section 201 of the Act. The proviso to sub-section (3) of section 201 of the Act provided that in respect of a financial year commencing on/or before 1st April 2007, no order under section 201 of the Act can be passed after 31st March 2011. Though, the language employed in sub- section (3) of section 201 of the Act gives an impression that it is only applicable to resident deductees, however, the Hon'ble Delhi High Court in case of Bharti Airtel Ltd. (supra) have held that the said limitation period even in respect of non-residents can be read into the provision. Thus, going by the proviso to section 201(3) of the Act, in the present case the Assessing Officer could have completed the proceedings under section 201 of the Act not beyond 31st March 2011. The Hon'ble Gujarat High Court in Tata Teleservices Ltd. v. Union of India [2016] 66 taxmann.com 157/238 Taxman 331/385 ITR 497 Guj.) have 10 M/s. Aditya Birla Nuvo Ltd.

held that in respect of financial year 2007-08 and earlier years, only proceedings that were pending could be completed by 31st March 2011 and as such no fresh proceedings to be commenced for the said period. Undisputedly, in the facts of the present case, no proceedings under section 201 of the Act were pending before the Assessing Officer. By the time the proceedings under section 201 of the Act were initiated by issuing notice under section 201 on 27th January 2014, it has already become barred by limitation. That being the case, looked at from any angle, the impugned order passed under section 201(1) and 201(1A) of the Act being barred by limitation has to be quashed. Accordingly, we do so. Consequently, the impugned order of the learned Commissioner (Appeals) is reversed and set aside.”

11 M/s. Aditya Birla Nuvo Ltd.

./2018 Assessee’s Appeal