IFTHIKAR KARUPPAMVEETIL ABDUL RAHMAN,CHAVAKKAD vs. ITO, INTERNATIONAL TAXATION, KOCHI

This assessee’s appeal, for the assessment year 2018- 2019, arise against the assessment order of the Assessing Officer [Intl. Taxn.], Kochi, Kochi’s order in F.No.BISPA7991M/ IKAR/2018-19, dated 21.12.2023, in in proceedings u/sec.147 r.w.s.144C(3)of the Income Tax Act, 1971 (in short the "Act").

Heard both the parties. Case file perused.

2 ITA.No.119/COCH./2024 2. The assessee pleads the following substantive grounds in the instant appeal :

A. It is an admitted case for the assessing authority that the appellant is a non-resident. The inclusion of non-resident within the purview of eligible assessee' under Section 144C(15)(b)(ii) was vide Finance Act, 2020, operative w.e.f 01.04.2020. Until 31.03.2020, which covers A.Y 2018-19, non-residents were not falling within the purview of 'eligible assessee. The statutory Amendment under Section 144C of the Act, covering non- resident, will be applicable only from Assessment Year 2020-21 onwards, The Legislature has not intended to give retrospectivity to the amended provision. Therefore, the appellant who is admittedly a non-resident will not be covered within the ambit of an 'eligible assessee' under Section 144C(15)(b) of the Act, prior to 31.03.2020, i.e., for the A.Y 2018-19. B. It is also settled that for A.Y 2018-19, the law applicable will be that in operation as on 01.04.2018 There being no coverage of non-resident under Section 144C of the Act, as on 01.04.2018, coupled with the non-retrospectivity of the statutory amendment under Section 144A vide Finance Act, 3 ITA.No.119/COCH./2024 2020; the Assessing Officer should not have been proceeded against by taking recourse to Section 144C of the Act. The invocation of Section 144C against the appellant, for the A.Y 2018-19, is jurisdictionally erroneous. Without the clear authority of law, the appellant is being subjected to proceedings under Section 144C of the Act, which is clearly illegal, arbitrary, unreasonable, and unfair. C. It is submitted that the Amendment to Section 144C (15)(b)(ii) was vide Finance Act, 2020, is by way of a substitution. Non- residents who were not eligible assessees under Section 144C of the Act prior to 31.03.2020, were brought within the ambit of the Section, w.e.f 01.04.2020 only. Insofar as a non- resident is concerned, it is a new imposition/coverage under a taxing provision. It is a well settled principle that statutes should not be construed so as to create new disabilities or obligations or impose new duties in respect of transactions which were completed at the time the Amending Act came into force. (Reference: Vijayalakshmi Rice Mills, New Contractors Co. and others.vs. State of Andhra Pradesh [(1976) 3 Supreme Court Cases 37.

4 ITA.No.119/COCH./2024 D. Without prejudice to the above submission it is respectfully submitted that, On the facts and in the circumstances of the case and in law, theassessment order framed under section 143(3) read with section 144C( 13) of the Income-tax Act, 1961 ('the Act) passed by the Learned Assessing officer dated 21.12.2023 incorporating directions of the Hon'ble Dispute Resolution Panel 2 dated 29.11.2023 is bad in law, contrary to the facts and circumstances of the case and is liable to be quashed. E. On the facts and in the circumstances of the case and in law, the Hon'ble DRP/Learned AO/erred in making an addition of Rs.17,50,000/- being the premium paid component of the Life Insurance Policy. F. On the facts and in circumstances the Hon'ble DRP erred in not considering the report called for from the Assessing Officer in its true perspective. G. On the facts and in the circumstances of the case and in law the Hon'ble DRP/Learned AO/erred in taxing the income of the appellant as income from other sources under section 56 of the Act and applying the deduction available under section 57(iii) of the Act.

5 ITA.No.119/COCH./2024 H. On the facts and in the circumstances of the case and in law, the Learned Assessing Officer erred in hand written the DIN number and not quoting a valid computer-generated DIN on the body of the Assessment Order dated 21.12.2023 under section 147 r.w.s 144C (13) of the Act, in contravention to the circular no. 19/2019 dated 14.08.2019 by the CBDT, thus rendering such an order/direction to be invalid and never to have been issued as per para 4 to the said Circular. I. On the facts and in the circumstances of the case and in law, the final assessment order dated 21.12.2023 under section 147 r.w.s 144C (13 of the Income Tax Act, 1961 passed by the Income Tax Officer, (International Taxation), Kochi, is invalid. J. Appellant craves leave to file additional grounds at the time of hearing.

For these and other grounds that may be urged at the time of hearing the appellant humbly prays that the Hon'ble Income Tax Appellate Tribunal, Cochin Bench may kindly be pleased to set-aside the order passed under section 147 r.w.s 144C (13) of the Income Tax Act 1961 and render justice.”

6 ITA.No.119/COCH./2024 3. Learned counsel’s sole substantive grievance raised during the course of hearing is that the impugned addition had to be restricted only on “netting” basis as per this tribunal’s recent coordinate bench’s decision in ITA.No.425/Kol./2021 dated 04.03.2022 Sandeep Modi vs. DCIT, CPC as under :

“13. Having heard both the parties and after perusal of the records it is noted that the assessee has taken a life insurance policy in AY 2012-13 of the SBI of sum assured to the tune of Rs. 10,88,000/- (along with credit bonus of 3.25%) by paying single premium of Rs. 10,00,000/-. And in this year (AY 2017-18), the assessee received the LIC maturity benefit to the tune of Rs. 13,09,000/-. And the assessee in his Return of Income disclosed the net amount Rs. 3,09,000/- (i.e. total receipt of Rs. 13,09,000/- minus (-) Rs. 10,00,000 premium paid by assessee) as taxable income under the head "Income from Other sources". It is noted that the assesses neither availed any deduction under Sec. 80C of the Act in respect of the premium paid to SBI, [therefore, he did not include redemption payment of premium amount of Rs. 10,00,000/- in his return of income] nor claimed any deduction under section 10(10D) of the Act and offered 7 ITA.No.119/COCH./2024 Rs.3,09,000/- for tax. However, since SBI (Payer) had deducted 1% TDS on the entire receipt of Rs.13,09,000/- and the CPC while processing the ROI, found that out of Rs.13,09,000/- assessee received (total LIC benefit) the assessee has offered for taxation only Rs. 3,09,000/- and therefore added the balance Rs. 10,00,000/- as income of the assessee. On appeal, Ld. CIT(A) has confirmed the action of CPC/AO. Before us the claim of the assessee is that only the net amount i.e. Rs.3,09,000/- is taxable (which assessee has offered in his ROI) and the addition of Rs.10,00,000/- is erroneous because it is the premium amount paid by the assessee in AY 2012-13 and the same is his investment which assessee had in his possession/saving being tax paid amount. So, according to assessee in effect the impugned action tantamount to double taxation. It has been pointed out by the Ld. AR that this confusion happened because SBI (Payer) has deducted tax at source of one (1%) on the entire amount as contemplated u/s.194DA of the Act. And this problem has been taken notice while increasing the TDS rate from 1% to 5% albeit in the Finance Bill 2019 (supra). Having carefully gone through the contents while moving the Bill, I 8 ITA.No.119/COCH./2024 find that the Govt. has taken note of this problem by observing "..... Under section under section 194DA of the Act, a person is obliged to deduct tax at source, if it pays any sum to a resident under a life insurance policy, which is not exempt under sub-section (10D) of section 10. The present requirement is to deduct at the rate of one per cent of such sum at the time of payment. Several concerns have been expressed that deducting tax on gross amount creates difficulties to an assessee who otherwise has to pay tax on net income (i.e. after deducting the amount of insurance premium paid by him from the total sum received). From the point of views of tax administration as well, it is preferable to deduct tax on net Income so that the income as per TDS return of the deductor can be matched automatically with the return of income filed by the assessee. The person who is paying a sum to a resident under a life insurance policy is aware of the amount of Insurance premium paid by the assessee. From a reading of the aforesaid observation as well as taking note of the contention of the assessee, and taking note of the fact that assessee had neither availed any deduction under Sec.80C of the Act in respect of the premium 9 ITA.No.119/COCH./2024 paid to SBI nor claimed any deduction under section 10(10D) of the Act and offered Rs.3,09,000/- for tax in his ROI, according to me, no addition was warranted. Therefore in this case only the net amount that is Rs.3,09,000/- should have been taxed, which assessee has already offered to tax in his ROI. Therefore, in the light of the aforesaid discussions I am of the considered opinion that the assessee's claim is valid and allow the claim of the assessee by directing deletion of the addition of Rs. 10 Lakhs.”

No other ground or argument has been pressed before us during the course of hearing.

10 ITA.No.119/COCH./2024 Order pronounced in the open Court on 25.09.2024.

Sd/- Sd/- [AMARJIT SINGH] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Cochin, Dated 25th September, 2024 VBP/- Copy to 1. The appellant 2. The respondent 3. The CIT(A) concerned. 4. The CIT concerned 5. The D.R. ITAT, Cochin Bench, Cochin. 6. Guard File. //By Order// //True copy// Sr. Private Secretary, ITAT, Cochin Bench, Cochin