THE DDIT (IT)-2(1), MUMBAI vs. M/S. RELIANCE COMMUNICATIOINS LTD. ( FORMERLY KNOWN AS M/S. RELIANCE INFOCOMM LTD), NAVI MUMBAI

आयकर अपीलीय अिधकरण, मुंबई “एल ” खंडपीठ Income-tax Appellate Tribunal “L”Bench Mumbai सव�ी राजे��, लेखा सद�य एवं रिवश सूद, �याियक सद�य Before S/Sh.Rajendra,Accountant Member & Ravish Sood, Judicial Member आयकर अपील सं./I.T.A./4874&4877/Mum/2007; 4902/M/2007; 4904 to 4906/M/2007(3); 4909- 4910/M/2007; 4916/M/2007; 4919/M/2007; 4924 to 4926/M/2007(3); 4928/M/2007; 3438 to 3439/M/2008;4244/M/2008; 4246/M/2008; 4248/M/2008; 4254/M/2008; 4256 to 4260/ M/ 2008 (5);4280/M/2008; 4281/M/80; 4282/M/2008; 4283/M/2008; 4291/M/2008; 4307/M/2008; 4310/M/2008; 5071 to 5073/M/2008(3); 5077/M/2008; 5081/M/2008; 5083/M/2008; 5086 to 5087/M/2008; 5091 to 5092/M/2008; 5474/M/2008 & 5476/M/2008 DDIT(IT) M/s. Reliance Communication Ltd. Room No.120, 1st Floor, Scindia House, (Formerly known as M/s. Reliance Infocomm Limited, H Block 1st Floor) Ballard Estate, N.M. Road Vs. Dhirubhai Ambani Knowledge City, Mumbai-400 038. Navi Mumbai-400 710. PAN:AACCR 4472 J आयकर अपील सं./I.T.A.s/5468/M/2008; 5471/M/2008; 5472/M/2008; 5473/M/2008 & 4501/M/2009 DDIT(IT) Reliance Communication Infrastructure Room No.120, 1st Floor, Scindia House, Ltd. Ballard Estate, N.M. Road H-Block, DAKC Koparkhairane Vs. Mumbai-400 038.. Thane Belapur Road, Navi Mumbai-400 710 PAN:AACCS 2157 H (अपीलाथ� /Appellant) (��यथ� / Respondent) आयकर अपील सं./I.T.A ./730/Mum/2009 DDIT(IT) Reliance BPO Pvt. Ltd. Room No.120, 1st Floor, Scindia House, Reliance Infostream Pvt.Ltd. Ballard Estate, N.M. Road H-Block, DAKC Koparkhairane Vs. Mumbai-400 038. Thane Belapur Road, Navi Mumbai-400 710 PAN:AABCR 7392 A (अपीलाथ� /Appellant) (��यथ� / Respondent) Revenue by:Shri Parag Vyas - DR Assessee by: S/Shri J.D. Mistry/Deepak Jain सुनवाई क� तारीख /Date of Hearing: 11/01/2018 घोषणा क� तारीख / Date of Pronouncement: 02/02/2018 आयकर अिधिनयम,1961 क� धारा 254(1)के अ�तग�त आदेश Order u/s.254(1)of the Income-tax Act,1961(Act) खंडपीठ के अनुसार Per Bench: Challenging the orders of the CIT(A)-XXXI,Mumbai,of various dates,the Assessing Officers (AO.s)have filed above mentioned appeals.Issue involved in all the appeals is identical-relief 1

given by the First Appellate Authorities(FAA.s)to the assessees for the alleged violation of the provisions of section 40(a)(i)of the Act, i.e.their failure to deduct tax at source for the payments made by them to the non-resident-entities.Considering the commonness of the issue,we are adjudicating these appeals together. 1.Assessee-companies are part of Reliance(ADAG)Group.The group consists many an entities including Reliance Communication Ltd.(RCL),Reliance Telecom Ltd.,Reliance BPO Ltd., and Reliance Communication Infrastructure Ltd.RCL. is engaged in business of telecommunication. Other three entities were also connected with wireless telecommunication net-work in India.For that purpose,they entered into various contracts with non-resident-entities and made certain payments.The assessees made applications u/s.195 of the Act,requesting the AO.s to allow them to make payments to non-residents without deducting tax at source.However,the AO.s held that payments made by them to the non residents were taxable in India,that they should deduct tax at source before making such payments.Accordingly,the assessees deducted the taxes.Aggrived by the orders of the AO.s,passed u/s.195(2)of the Act,the assessees filed appeals before the FAA.s, who allowed the same. 2.Before us,the Authorised Representative (AR)raised a preliminary objection about the maintain -ability of above 50 appeals and stated that tax effect in those appeals was less than Rs.10 lakhs, that considering the Circular 21of 2015(Circular),issued by the Central Board of Direct Taxes (CBDT/Board),on10.12.2015(F.No.279/Misc./142/2007-ITJ(Pt.),the appeals deserved to be dis- missed. 2.1.The Departmental Representative(DR)contended that the Circular was not applicable to the appeals dealing with TDS,that it dealt with regular tax appeals only i.e. other than the appeals dealing with TDS matters.He further stated that that even if the Circular was applicable to the appeals of section 195 of the Act,tax-effect in 37 appeals was more than Rs.10 lakhs and therefore same were maintainable.Later on,he stated that in 24 appeals the tax involved was less than the prescribed limit and in 26 cases tax effect was more than the Rs. 10 lakhs.He referred to the cases of Vegetable Products Ltd.(88 ITR 192) and Rishi Roop Chemical Co.(P.)Ltd.(36 ITD 35) 2.2.In his reply,the AR stated that there was no difference between the so called TDS-appeals and Regular-Tax-appeals,that the Circular was applicable to all the appeals filed before the

Tribunal by the Department,that there was no basis for holding that in 30 appeals tax involved was above the threshold limit.He relied upon the cases of Chemoil Adani Pvt. Ltd.(ITA/ 824/ Ahd/2012,dtd.11.04.2010),Mandake Foundation(ITA.s/1419-21/Mum/2013,dtd.16.03.2016), Bigtree Entertainmet,(ITA/1415/Mum/2012,dtd.16.03.2016), M/s.Creative Infocity Ltd. (ITA.s/ 2663-64/ Ahd/2011,dtd.17/02/2016),The Gurgaon Central Co-op.Bank.(ITA/6705/ Del/ 2015 and others dtd.25/ 09/2017,M/s.Areva T & D India Ltd.(ITA/304/Del/ 2014.dtd. 12. 01.2017), M/s.Deutsch Equities India Pvt.Ltd.(ITA/4009/Mum/2016-dtd.17/04/2017),Halonix (ITA/6063- 65/Del/2013,dtd.04/01/2016),Unique Forge (Guj.)(P.)Ltd.(66 taxmann.com.159),NEPC Commu -nications Ltd.(Tax Case Appeal No. 439 of 2005 of Hon’ble Madras High Court dtd. 28/ 11/ 2016)and Ahsok Sahakari Sakhar Karkhana Ltd.( IT Appeal no.2286 of 2009 Hon’ble Bombay High Court). 3.We have heard the rival submissions and perused the material before us.Before proceeding further,we would like to mention that the CBDT has not issued the Circulars/Instruction for the first time in 2015,wherein monetary limits,for filing appeals before the various judicial forums, have been fixed.It had issued Circulars/Instructions in that regard in earlier occasions too. Instruction No.1777,dated 4/11/1987,prescribed a monetary limit of Rs. 25,000/-for the Depart- mental appeals in Income-tax matters before the Appellate Tribunal.Subsequently,the said circular was superseded by the Board's Instruction No.1903,dated28/10/1992.Later on,in super - session of the above instruction,Instruction No. 1979,dated 27/03/2000,was issued revising the monetary limits and prescribing the limit of Rs. 1 lakh for filing appeal before the Tribunal.one more circular was issued on 27/05/ 2004,clarifying certain aspects of Circular No.1979.There - after,in partial modification of the above instructions,on 24/10/2005,Instruction No.2 of 2005 was issued,revising the monetary limit for prescribing appeals before the Tribunal to Rs. 2 lakhs. In supersession of the above instructions,Instruction No. 5 of 2008 was issued wherein concept of composite order was introduced.In order to protect the interests of the Revenue and in order to avoid the plea of res-judicata,clause (6) was introduced.Similarly for the plea of acquiescence or estoppel sought to be set out by the assessee,when either the Revenue did not file appeal or withdrew the appeal,the interests of the Revenue was protected by introducing clause 7. However,the right to prefer an appeal even in cases where the tax effect was less than the monetary limit in certain cases found a place in the Instruction.All these clauses find place in the circular of 2015 also-though under different clauses.

CBDT issued Instruction No.3 of 2011,on 9/02/2011 and fixed the monetary limit for filing appeal before the Tribunal at Rs.3,00,000/-.It is be relevant to note that the Board had also issued a Circular on 5/06/2007,directing the Department to ‘examine’ all the pending appeals on ‘case to case basis’ with a further direction to withdraw cases wherein the criteria of monetary limits,as per the prevailing instruction,was not satisfied.Monetary limit was increased to 4 lakhs,for filing appeals before the Tribunal,by Instruction No.5 of 2014,dtd.10/07/2014.In 2015,limit was enhanced to Rs.10 lakhs,as stated earlier. 4.A perusal of Sub-section (1) of section 268A would be useful,at this juncture,as it indicates that the CBDT has been authorised to issue orders/instructions/directions to the departmental officers laying down the monetary limits for the purpose of filing appeals. Sub-section (5)of the section 268A indicates that earlier instructions issued by the Central Board of Direct Taxes fixing monetary limits for filing an appeal shall be deemed to have been issued u/s. 268A.Section 268A was inserted in the Act by the Finance Act,2008 with retrospective effect from 1/04/ 1999. The objects of the Bill and the notification of the Board,dtd.15/ 05/ 2008, talk of ‘alleviating’ and ‘remedying’ the ‘hardship’ being caused to the assessee as well as ‘to reduce the financial burden’ upon the Department in pursuing appeals where the tax effect was negligible.In short,the intention of the Legislature is very clear-it desired to give statutory effect to all the instructtions issued on the subject of monetary-limits in regulating filing of appeals retrospectively and to reduce the unnecessary litigation having lesser tax effect.We are reproducing relevant portion of the Circular No.21 of 2015 and it reads as under: Reference is invited to Board's Instruction No. 5/2014, dated 10-7-2014 wherein monetary limits and other conditions for filing departmental appeals (in Income-tax matters) before Appellate Tribunal and High Courts and SLP before the Supreme Court were specified. 2. In supersession of the above instruction, it has been decided by the Board that departmental appeals may be filed on merits before Appellate Tribunal and High Courts and SLP before the Supreme Court keeping in view the monetary limits and conditions specified below. 3. Henceforth, appeals/SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder:— S.No. Appeals in Income-tax matters Monetary Limit (in Rs.) 1. Before Appellate Tribunal 10,00,000/- 2. Before High Court 20,00,000/- 3. Before Supreme Court 25,00,000/- It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case. 4. For this purpose, "tax effect" means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed (hereinafter 4

referred to as "disputed issues"). However the tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against. [4.1 Where income is computed under the provisions of section 115JB or section 115JCCfor the purposes of determination of'tax effect', tax on the total income assessed shall be computed as per the following formula— XXXXX 5. The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. If, in the case of an assessee, the disputed issues arise in more than one assessment year, appeal, can be filed in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In other words, henceforth, appeals can be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appellate authority, which involves more than one assessment year and common issues in more than one assessment year, appeal shall be filed in respect of all such assessment years even if the 'tax effect1 is less than the prescribed monetary limits in any of the year(s), if it is decided to file appeal in respect of the year(s) in which 'tax effect' exceeds the monetary limit prescribed. In case where a composite order/ judgment involves more than one assessee, each assessee shall be dealt with separately. 6. In a case where appeal before a Tribunal or a Court is not filed only on account of the tax effect being less than the monetary limit specified above, the Commissioner of Income-tax shall specifically record that "even though the decision is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the monetary limit specified in this instruction". Further, in such cases, there will be no presumption that the Income-tax Department has acquiesced in the decision on the disputed issues. The Income-tax Department shall not be precluded from filing an appeal against the disputed issues in the case of the same assessee for any other assessment year, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits. 7. In the past, a number of instances have come to the notice of the Board, whereby an assessee has claimed relief from the Tribunal or the Court only on the ground that the Department has implicitly accepted the decision of the Tribunal or Court in the case of the assessee for any other assessment year or in the case of any other assessee for the same or any other assessment year, by not filing an appeal on the same disputed issues. The Departmental representatives/counsels must make every effort to bring to the notice of the Tribunal or the Court that the appeal in such cases was not filed or not admitted only for the reason of the tax effect being less than the specified monetary limit and, therefore, no inference should be drawn that the decisions rendered therein were acceptable to the Department. Accordingly, they should impress upon the Tribunal or the Court that such cases do not have any precedent value. As the evidence of not filing appeal due to this instruction may have to be produced in courts, the judicial folders in the office of CsIT must be maintained in a systemic manner for easy retrieval. 8.Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect: (a) Where the Constitutional validity of the provisions of an Act or Rule are under challenge, or (b) Where Board's order. Notification, Instruction or Circular has been held to be illegal or ultra vires, or

(c) Where Revenue Audit objection in the case has been accepted by the Department, or (d) Where the addition relates to undisclosed foreign assets/ bank accounts. 9. The monetary limits specified in para 3 above shall not apply to writ matters and direct tax matters other than Income tax. Filing of appeals in other Direct tax matters shall continue to be governed by relevant provisions of statute & rules. Further, filing of appeal in cases of Income Tax, where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12A of the IT Act, 1961, shall not be governed by the limits specified in para 3 above and decision to file appeal in such cases may be taken on merits of a particular case. 10.This instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts/Tribunals, Pending appeals below the specified tax limits in para 3 above may be withdrawn, not pressed. Appeals before the Supreme Court will be governed by the instructions on this subject, operative at the time when such appeal was filed. 11. This issues under Section 268A (1) of the Income-tax Act 1961. 5.We feel that it would be useful to consider the National Litigation Policy(NLP) also,because the Instructions issued after the policy were the next logical steps of the Policy and the earlier circulars/Instructions were prelude to the Policy.The NLP was formulated with the purpose that the Central Government would be a ‘responsible litigant’ and would not be involved in frivolous litigation,especially where the stakes were not high.The policy aimed to transform the Govern - ment into an ‘efficient and responsible litigant’ and urged every State Government to evolve similar policies.The policy defined the efficient litigant to mean that the litigation should not be resorted to for the sake of litigating and that the Government ceases to a compulsive litigant. The underlying purpose of the policy was to reduce the Government litigation in courts so that valuable court time was spent in resolving other pending issues to enable the average pendency of a case in a court reduced from 15 years to 3 years.(353 ITR 121 of the Hon’ble Karnataka High Court). 5.1.If the NLP and Instruction/Circulars issued by the Board,from time to time,are considered one thing becomes very clear that CBDT is against unnecessary litigation and wants to reduce litigation where tax effect is not very high.All the Circulars and Instructions have provided safeguard to the AO.s.As stated earlier,CBDT has given discretion to the field officers to file appeal in deserving cases even when tax effect is lower than the prescribed limits.The exceptions find place in the Circular.It is not the case of the DR that appeals,filed by the AO,fell within the exceptions. 6.Arguments by the DR.s,that Tax effect would include interest also or that the appeals filed by the AO with regard to section 195 are not covered by Monetary-limit-Circular/Instructions,goes against the basic spirit of NLP and defeats the underlying thought process of the Board.The 6

enhancing of tax limits form time to time and especially the last increase from 25,000/- to Rs.10 lakhs over the years,is testimony of the intention of the Government of India that unnecessary litigation(having small tax effect)should be avoided.The last enhancement from Rs.4 to Rs.l0 lakhs was a clear message that the Board had taken in to consideration the inflation factor with regard to litigation and that it was not interested in challenging the orders of the FAA.s where tax effect was not very high. 6.1.We hold that the clear and affirmative intention of the State must be kept in mind,while filing the appeals before the judicial forums or while arguing the cases.We want emphatically state that we are not at all convinced that there is any distinction between the appeals filed against section 195 orders and other appeals.The Act does not differentiate between them.An appeal is a right to approach the higher judicial forums stating that adjudicating authority was not justified in deciding the matter against the appellant.So,to artificially dividing the appeals in two categories i.e.TDS appeals and non TDS appeals is,in a way,ignoring the message conveyed by the Circular /Instructions dealing with threshold of tax effect for filing appeals.Advancing the argument that for tax effect purposes so-called ‘TDS appeals’should be segregated from the ‘other appeals’ before various bench of the Tribunal(Rajkot,Delhi, Ahmedabad and Mumbai benches)by the DR.s clearly show that the spirit and the real intention of NLP and the Instruction /Circulars have not percolated down to the field-officers.All the cases relied upon by the AR deal with TDS matters and various benches of the Tribunal and two of the Hon’ble High Courts have held that tax effect limits envisaged by the Circulars/Instructions were applicable to the alleged TDS appeals as well.Considering the above,we hold that Circular/Instruction dealing with tax effect threshold are applicable to all the appeals and that there is difference between appeals filed for 195 orders or other appeals. 7.We find that the DR had agreed that in 24 appeals tax involved was less than the prescribed monetary limit.So,at least 24 appeals have to be dismissed. 7.1.Now,we would take up the remaining 26 appeals.We would like to emphasise that the DR did not explain as to how the tax effects in 26 appeals(initially 37 appeals)was more than Rs.10 lakhs? No calculation was filed in that regard till the conclusion of hearing.We have taken note of the fact that the AO had filed each of the appeals separately.Paragraph 5 of the Circular of 2015 also talks of filing of appeal for ‘each assessment year’.So,TDS amounts for more than one

AY.cannot be clubbed for filing appeals.Each and every payment made by the assessee to the non-residents,without deducting tax at source,was dealt by the AO separately.The AO he had passed separate orders,u/s.195(2)of the Act,for all the payments and that is the reason that at the time of filing of the appeals, he did not file club them.In other words,the AO was very clear that all the appeals were distinct and were not to be clubbed.Even till the hearing of the appeals started,no application was moved by the AO to club these appeals together.It is a fact that the FAA has not passed any composite order,as far as the above mentioned 50 appeals are concern - ed.So,there is no basis to argue that tax effect in remaining 26 appeals is more than 10 lakhs.It has not been argued that these appeals are covered by the exceptions mentioned in paragraph 8 of the 2015 Circular.So,we agree with the assessee that all the 50 appeals are not maintainable due to low tax effect and that the same deserve to be dismissed. As a result,all the appeals(50),filed by the AO.s,stand dismissed. प�रणामतः िनधा�रती अिधकारी �ारा दािखल क� ग� सारी अपील�(50)नामंजूर क� जाती ह�.

Order pronounced in the open court on 2nd February, 2018. आदेश क� घोषणा खुले �यायालय म� �दनांक 2 जनवरी , 2018 को क� गई । Sd/- Sd/- (रिवश सूद /Ravish Sood) (राजे�� / RAJENDRA) �याियक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER मुंबई Mumbai; �दनांक/Dated : 02.01.2018. Jv.Sr.PS. आदेश क� �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1.Appellant /अपीलाथ� 2. Respondent /��यथ� 3.The concerned CIT(A)/संब� अपीलीय आयकर आयु�, 4.The concerned CIT /संब� आयकर आयु� 5.DR “L ” Bench, ITAT, Mumbai /िवभागीय �ितिनिध, खंडपीठ,आ.अिध.मुंबई 6.Guard File/गाड� फाईल स�यािपत �ित //True Copy// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अिधकरण, मुंबई /ITAT, Mumbai.