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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI G.S. PANNU & SHRI RAVISH SOOD
PER G.S. PANNU, AM :
The captioned are two appeals by the assessee for Assessment Years 2010-11 & 2011-12, and since they involve common issues, they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
Both the appeals are directed against two separate, but similarly worded orders of CIT(A) dated 22.09.2014 which, in turn, have arisen from the respective orders passed by the Assessing Officer u/s 201(1)/201(1A) of the Income Tax Act, 1961 (in short ‘the Act’) for Assessment Years 2010-11 & 2011-12 dated 18.03.2012 & 26.03.2012 respectively. In substance, assessee has been held to be an assessee in
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default u/s 201(1) & 201(1A) of the Act on two issues, namely, (i) with regard to payment to Nimbus Communication Ltd., assessee has been held liable for interest u/s 201(1A) of the Act; and (ii) with regard to payment to Noida Software Technology Park Ltd., assessee has been held to be in default for short deduction of tax at source.
Before we proceed to adjudicate the dispute on the aforesaid issues, we may deal with a preliminary issue, which is the belated filing of appeals by the assessee. Notably, the captioned appeals have been filed after a delay of 480 days and assessee has moved an application seeking condonation of delay and an Affidavit has been averred by the Director of the assessee-company narrating the sequence of events leading to the delay and contending that it was unintentional and for bona fide reasons.
At the time of hearing, the learned representative pointed out that the delay was neither intentional nor deliberate. Explaining the chronology of events with reference to the Assessment Year 2010-11, the learned representative pointed out that initially the Assessing Officer passed an order on 18.03.2012 holding that assessee was liable to deduct tax at source from such payments @ 2% in terms of Sec. 194C of the Act. Assessee had challenged the said order of the Assessing Officer in appeal before the CIT(A) and during the pendency of such appeal, Commissioner of Income Tax invoked his revisionary jurisdiction u/s 263 of the Act on 10.03.2014 on the ground that tax ought to have been deducted at source @ 10% in terms of Sec. 194A of the Act. Subsequently, the Commissioner passed an order u/s 263 of the Act on
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28.03.2014 holding that tax ought to have been deducted u/s 194A of the Act, and against such an order assessee filed an appeal before the ITAT on 02.06.2014. Subsequently, the CIT(A) adjudicated the appeal filed by the assessee against the order of the Assessing Officer dated 18.03.2012 and dismissed it vide his order dated 22.09.2014 thereby confirming the action of the Assessing Officer that the assessee was to be treated as an assessee in default for non-deduction of tax at source @ 2% in terms of Sec. 194C of the Act. Faced with the order of the Commissioner of Income Tax passed u/s 263 of the Act dated 28.03.2014 as well as the order of CIT(A) dated 22.09.2014, assessee formed a belief that since the Commissioner of Income Tax had already directed for tax to be deducted @ 10% u/s 194A of the Act instead of 2% in terms of Sec. 194C of the Act, the assessee was under a bona fide belief that the order of the Assessing Officer dated 18.03.2012 and the second appellate order passed by the CIT(A) on 22.09.2014 would be rendered infructuous since the Commissioner of Income Tax had already held that assessee was liable to deduct tax at source at a higher rate. For the said reason, and knowing that it had already appealed against the order of the Commissioner of Income Tax passed u/s 263 of the Act to the Tribunal, assessee did not file an appeal against the order of CIT(A), which was received on 20.10.2014. In the meanwhile, the Tribunal vide order dated 19.02.2016 set-aside the order passed by the Commissioner of Income Tax u/s 263 of the Act and thus, assessee succeeded before the Tribunal. After receiving the order of the Tribunal dated 19.02.2016, the assessee made an application to the Assessing Officer on 22.03.2016 requesting him to give effect to the order of the Tribunal. At that stage, the assessee was made clear that since the
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CIT(A) has vide order dated 22.09.2014 already dismissed assessee’s appeal against invoking of Sec. 194C of the Act, assessee would be regarded as an assessee in default with respect to the provisions of Sec. 194C of the Act as was done by the Assessing Officer vide order dated 18.03.2012.
In this background, the learned representative pointed out that right from the date of receipt of the order of CIT(A), i.e. 20.10.2014 and upto 22.03.2016, when it was informed of the correct position, assessee was prosecuting with due diligence the appeal filed before the Tribunal against the order of the Commissioner of Income Tax passed u/s 263 of the Act under the bona fide belief that such proceedings would also cover the dispute which was before the CIT(A) emanating from the order of the Assessing Officer dated 18.03.2012. It was pointed out that after coming to know of the correct position from the Assessing Officer, assessee filed an appeal within 30 days itself, i.e. 11.04.2016, which demonstrates the bona fides of the assessee.
In terms of the aforesaid factual matrix, the learned representative pointed out that the delay in filing of the appeals is for bona fide reasons and that in the interregnum period, assessee was prosecuting the proceedings with due diligence though it was a wrong remedy.
Another aspect which has been highlighted by the learned representative is that if the delay is condoned, and the appeal is heard on merits, it would cause no loss to the Revenue inasmuch as on merits of the issues raised, the Tribunal in assessee’s own case in ITA
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No.2766/Mum/2015 dated 01/04/2016 for assessment year 2010-11 and ITA Nos.4010&4011/Mum/2014 dated 19.02.2016 for assessment years 2010-11and 2011-12 have upheld the plea of the assessee. In fact, it is pointed out that for both the assessment years, the Assessing Officer has given effect to the orders of the Tribunal and assessee has not been held to be an assessee in default u/s 201(1) and 201(1A) of the Act. Copies of the orders have been placed on record.
On the other hand, the ld. DR has opposed the plea of the assessee for condonation of delay by pointing out that the delay was for an extraordinary period and that merely prosecuting a wrong remedy cannot be a ground to seek condonation of delay. The ld. DR relied upon the judgment of the Hon'ble Madras High Court in the case of Inderchand D. Kochar and others vs. ACIT in Tax Case Appeal Nos. 522, 523, 507, 508 and 509 of 2016 and C.M.P Nos. 10444, 10445, 10118 and 10119 of 2016 dated 03.08.2016 to contend that prosecuting a wrong remedy cannot be a good reason to condone the delay.
We have carefully considered the rival submissions. No doubt, the delay in preferring the captioned appeals before the Tribunal in the instant case is quite enormous, i.e. of 480 days. So however, it is judicially well-settled that it is not the length of the delay which is determinative, but the quality of the explanation that is put forth which is determinative as to whether the delay deserves to be condoned or not. The Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji & Ors., 167 ITR 471 (SC) opined that when technical consideration and substantial justice are pitted against each
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other, the courts are expected to further the cause of substantial justice. For the said reason, the Hon'ble Supreme Court has opined that while considering matters relating to condonation of delay, a judicious and liberal approach ought to be pursued. In fact, the Hon'ble Supreme Court in the case of N. Balakrishnan vs. M. Krishnamurthy, (1998) 7 SCC 123 observed that in every case of delay there can be some lapse on the part of the litigant concerned, but that alone is “not enough to turn down his plea and to shut the door against him”. What has been emphasised is that if the explanation furnished by the assessee does not “smack of mala fides or it is not put forth as part of a dilatory strategy”, the delay would deserve to be condoned. In fact, in the context of the length of the delay, we may refer to the judgment of the Hon'ble Madras High Court in the case of United Christmas Celebration Committee Charitable Trust vs. ITO, [2017] 83 taxmann.com 293 wherein the delay of 1631 days in filing of appeal before the Tribunal was condoned. Though the Hon'ble Madras High Court condoned the delay on the ground that assessee did not have the best legal assistance available to it, a ground which is not canvassed before us, so however, we are pointing out the rationale laid down by the Hon'ble High Court to the effect that what is determinative is the quality of explanation and not merely the length of the delay.
In the above background, we may now turn to the reasons advanced by the assessee in the present case for seeking condonation of delay. In the earlier paras we have, in sufficient detail, noted the reasons and the same are not repeated for the sake of brevity. Pertinently, the assessee was faced with two concurrent proceedings
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on the same issue, namely, the appellate proceedings before the CIT(A) emanating from the order of the Assessing Officer dated 18.03.2012 and secondly, the proceedings initiated by the Commissioner of Income Tax u/s 263 of the Act holding that the rate of TDS determined by the Assessing Officer in the order passed on 18.03.2012 was lower. The assessee had appealed before the Tribunal against the order of the Commissioner of Income Tax passed u/s 263 of the Act, and in the meanwhile, when the impugned order was passed by the CIT(A), it took the impression that since the mater was in challenge before the Tribunal, it would also cover the dispute involved in the impugned order of the CIT(A), which was also flowing from the order of the Assessing Officer dated 18.03.2012. It was only after the Tribunal disposed off the appeal of the assessee against the order passed by the Commissioner of Income Tax u/s 263 of the Act and assessee sought to effectuate it, that the Assessing Officer explained that the demand flowing as a consequence of the impugned order of the CIT(A) was alive. Faced with this situation, the assessee preferred appeal against the impugned order of the CIT(A) before the Tribunal, though belatedly. The chronology of events clearly bring out that it is not a case where assessee was not pursuing a remedy, but it is a case where the remedy being pursued was not adequate enough to cover the assessee against the rigours of the impugned order of the CIT(A). In this context, the learned representative has relied upon the judgment of the Hon'ble Supreme Court in the case of M.P. Steel Corporation vs. CCEx, [2015] 319 ELT 373 (SC) and contended that the principle of Sec. 14 of the Limitation Act, 1963 be applied to the tax proceedings also so as to exclude the time taken in prosecuting the proceedings which may
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otherwise not result on decision on merits, to calculate the period of limitation provided the proceedings are pursued bona fidely and with due diligence. In the instant case, it cannot be in dispute that assessee was pursuing its appeal in the Tribunal against the order of the Commissioner of Income Tax passed u/s 263 of the Act and, in fact, there is nothing to challenge the bona fides of the wrong impression carried by the assessee that such proceedings would also encompass the rigours flowing from the impugned order of CIT(A). In our considered opinion, the delay is on account of unintentional and bona fide considerations, which deserve to be condoned. Insofar as the judgment of the Hon'ble Madras High Court in the case of Inderchand D. Kochar (supra) relied upon by the ld. DR is concerned, the same is quite inapplicable to the facts of the present case. In the said case, one of the contentions advanced for seeking condonation of delay was that assessee was availing a wrong remedy. Though the assessee canvassed that a wrong remedy was being diligently pursued, but on facts, the Hon'ble Madras High Court differed and observed that it could not be inferred that assessee was pursuing a wrong remedy with due diligence and care. In the instant case, we have already inferred that the remedy being pursued by the assessee, though wrong, was being pursued with the necessary and required diligence and, therefore, the judgment of the Hon'ble Madras High Court in the case of Inderchand D. Kochar (supra), relied upon by the ld. DR, does not come in the way of condoning the delay in the present case.
In view of the aforesaid discussion, we hereby hold that the delay in filing of the appeal deserves to be condoned. We hold so.
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Insofar as the merits of the issues raised are concerned, it was a common point between the parties that the issues are fully covered by the decisions of the Tribunal dated 01/04/2016(supra) and 19/02/2016(supra) in assessee’s own case for assessment years 2010- 11 and 2011-12. 13. Insofar as the payment to Nimbus Communications Ltd. is concerned, the same comprises of reimbursement of bank guarantee charges of Rs.21,31,28,582/-. As per the Assessing Officer, the said payment was made by the assessee without deduction of requisite tax at source u/s 194C of the Act. In its order dated 01.04.2016 passed by the Tribunal arising from the order of the Commissioner of Income Tax u/s 263 of the Act dated 23/03/2005 for Assessment Year 2010-11, the Tribunal opined that such payment cannot be covered u/s 194C of the Act. The following discussion in the order of the Tribunal is relevant.
We have heard the rival contentions and gone through the facts and circumstances of the case. The above stated facts are undisputed in respect to the first issue of reimbursement of bank guarantee charges. Now the question arises whether the reimbursement of bank guarantee charges paid by assessee to NCL falls under section 194C of the Act or not. We find that bank guarantee charges paid by assessee to NCL was neither payment for carrying out any work nor it is made towards broadcasting and telecasting services. From the agreement entered into by the assessee with NCL, it is clear that bank guarantee is to be provided to BCCI as joint and several liability of both the parties and therefore reimbursement of bank guarantee commission to NCL is with respect to the guarantee provided by the bank to BCCI for which payment is made by NCL and subsequently 80% is reimbursed by the assessee. We find that NCL has not carried out any work for assessee and since the payment is towards reimbursement of actual expenditure and hence the same cannot be presumed to be covered under section 194C of the Act. Even otherwise assessee has reimbursed 80% of bank guarantee commission reflected under the head Financial expenditure of its audited Profit & Loss Account. The assessee relied upon the CBDC circular No. 715 dated 08.08.1995 wherein CBDT, vide question No. 30 answered the proposition as under: -
"Q.30: Whether the deduction of tax at source u/s 194C and 194J has to be made out of the gross amount of the bill including reimbursement or excluding reimbursement for actual expenses?
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Ans: Section 194C and 194J refer to any sum paid. Obviously, reimbursement cannot be deducted out of the total amount for the purpose of tax deduction at source."
In view of these facts and the Board Circular No. 715 and payment made by the assessee of Rs. 21,31,25,582/- to NCL by way of reimbursement of actual expenditure incurred by NCL on payment of bank guarantee commission is merely a reimbursement. In the light of the above, we are of the view that tax is not required to be deducted from bank guarantee commission in the absence of agent/principal relation. Consequently tax is not required to be deducted from reimbursement of actual expenses by assessee as incurred by NCL under any of the provisions of the Act. This issue is squarely covered by the Coordinate Bench decision in assessee's own case, wherein the issue under adjudication was revision proceedings under section 263 of the Act in respect to reimbursement of bank guarantee commission under section 194A of the Act in place of deduction under section 194C of the Act. The Tribunal, vide its order in ITA Nos. 4010 & 4011/Mum/2014 for A.Y. 2010-11 and A.Y. 2011-12 dated 19.02.2016 has considered this issue and held as the issue to be debatable vide para 12 as under: -
"12. In the instant case, there is no money borrowed or debt incurred. Therefore, provisions of sec. 2(28A) and sec. 194A do not apply. Payment made to NCL is not "income by way of interest. The impugned receipt would be in the nature of reimbursement of expenses incurred by it. In view of the above discussion, we do not find any merit in the order passed u/s. 263 in respect of one of the possible view taken by the AO. Even on merit, we found that bank guarantee commission does not come under the purview of interest so as to make assessee liable for TDS u/s. 194A."
In view of the above order of Coordinate Bench in assessee's own case, the issue is covered in favour of the assessee”.
Following the aforesaid decision of the Tribunal, we find no reason to uphold the stand of the Revenue that such payments are liable for deduction of tax at source u/s 194C of the Act. Thus, assessee succeeds on this aspect.
The second issue is with regard to payment made by the assessee to Noida Software Technology Park Ltd. wherein assessee has deducted tax at source @ 2% in terms of section 194C of the Act whereas as per the Assessing Officer such payments were liable for deduction of tax at
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source u/s 194J of the Act. On this aspect also, the Tribunal vide its order dated 01.04.2016 (supra) held as under : “We find that the payment made to Noida Software Technology Park Ltd. is as per the agreement entered into between the assessee and the said party, the assessee has obtained services only for uplinking of two channels owned by assessee on satellite involving no technical services and hence the same is covered under section 194C of the Act and there is no shortfall in tax to be deducted. In this regard the issue of the assessee is very clear on merits also that assessee has rightly deducted tax @ 2% u/s. 194C of the Act on payments made to Noida Software Technology Park Ltd”. Following the aforesaid decision on the aspect of payment to Noida Software Technology Park Ltd. also, we approve the stand of the assessee that tax is deductible at source u/s 194C of the Act. 15. In the result, appeal of the assessee for assessment year 2010-11 is allowed. 16. Since the facts and circumstances and dispute in assessment year 2011-12 are pari-materia to those considered by us in earlier paras for assessment year 2010-11, our decision in the appeal for assessment year 2010-11 shall apply mutatis mutandis to the appeal for assessment year 2011-12 also.
Resultantly, the captioned appeals of the assessee are allowed. Order pronounced in the open court on 04/10/2017.
Sd/- Sd/- (RAVISH SOOD) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER Mumbai, Dated 04/10/2017 Vm, Sr. PS
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Copy of the Order forwarded to : 1. The Appellant , 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai Guard file. 6. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai