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Income Tax Appellate Tribunal, MUMBAI BENCH “L”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI MANOJ KUMAR AGGARWAL
ORDER PER MAHAVIR SINGH, J.M:
Out of these three appeals by the Revenue and the Cross Objection by the assessee, the Revenue‟s appeal in and the assessee‟s C.O. No.43/Mum/2015 are arising out of order of CIT (A) -10, Mumbai in appeal No.CIT(A)-10/DDIT(IT)-3(1)/IT-436/11-12 order dated 27/08/2013. The other two appeals of the Revenue i.e. ITA No.7556Mum/2013 and 7557/Mum/2013 are arising out of the order of the CIT (A)-10, Mumbai in appeal No.CIT(A)-10/DDIT(IT)- 3(1)/IT-435/11-12 & IT-69/13-14 both dated 27-08-2013. Assessments were framed by DDIT (IT)-3(1), Mumbai under section 144C(3) r. w. s. 143(3) & 254 of the Income Tax Act, 1961 (in short „the Act‟) for assessment year 2002-03 vide his order dated 08/02/2012, for assessment year 2009-10 u/s 144C (3) r. w. s. 143(3) of the Act dated 08/02/2012 and for assessment year 2010-11, u/s 144C (3) r. w. s. 143(3) of the Act dated 24-05-2013.
2. The only common issue in these appeals of Revenue is against the order of CIT (A) is, whether Patvolk division of Forbes Gokak Ltd. is an independent agent or not? For this Revenue has raised the following ground no. 1:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that income of Rs. 169,08,335/- is not taxable without appreciating the fact that M/s. Patvolk division of Forbes Gokak Ltd. is not an independent agent”.
Brief facts of the case are that the assessee is incorporated in Netherlands and is a tax resident of that country. The assessee is engaged in business of transportation of containerized cargo and it provides tank containers to consigners of the cargo and also arranges for transportation from location of the consigner to the desired destination. The assessee during these years was assisted in its commercial operations in India by Patvolk division of Forbes Gokak Ltd. The assessee claimed that it was entitled to relief under Article 8A of India- Netherland DTAA. Assessee also made alternative claim that its income was not liable to tax in India as there is no PE in India. The AO while completing original assessment under section 143(3) of the Act rejected the claim of relief under Article 8A of the DTAA and also held that there is permanent establishment for the reason that Patvolk division of Forbes Gokak ltd. is dependent agent of assessee. The CIT(A) as well as Tribunal in first round rejected the claim of relief under Article 8A of DTAA but the CIT(A) held that there is no liability to tax assessee as it did not have any PE in India for the reason that Patvolk is independent agent and not dependent on assessee. The Tribunal restored the matter in respect to existence of agency PE to the file of the AO for fresh examination. In second round also the AO has not accepted the contention of the assessee that it does not have a PE in India, and he observed that the assessee is operating in India through an agent who is dependent on assessee and also who acts totally as per the conditions lay down by its principal. According to AO, the assessee is not entitled to act on its own. Therefore, he concluded that the agent is not an agent of independent status. Aggrieved, assessee preferred appeal before CIT(A), who after going through the facts of the case and Article 5(5) and 5(6) of India – Netherlands DTAA held that the assessee is not having any PE in India and Patvolk was an agent of independent status. Accordingly, he held that the assessee doesn‟t have any PE in India and deleted the addition. Aggrieved, now Revenue is in second appeal before the Tribunal.
Before us the learned Counsel for the assessee Shri. Girish Dave narrated the facts that the assessee is a company incorporated in Netherlands and is engaged in the business of transportation of containerized cargo. It arranges for transportation of cargo from the location of the consigner to the desired destination and also provides tank containers to the consigner for carrying out the cargo. The assessee is assisted in its commercial operations by Patvolk who is an independent and unrelated Indian company and thereby it is an agent of independent status. Ld. Counsel claimed that assessee being a resident of Netherlands is entitled to the beneficial provisions of DTAA i.e. Article 5(5) & 5(6). The assessee, according to him rightly claimed that the freight earning in India were not taxable under Article 7 of DTAA as there did not exist PE in India in term of Article 5 of DTAA. Ld. Counsel for the assessee first of all took us through the assessee‟s paper book consisting of pages 1-54 wherein copy of agency agreement with Patvolk division entered is enclosed at pages 19-21. Ld. Counsel for the assessee cited Article 2, 3, 4 & 5 of agreement dated 25/10/1999 which was effective from 01/11/1999. The relevant clauses of the agency agreement read as under:
Agency Agreement Parties Between Hoyer-Odfjell BV Rotterdam, Oude Maasweg 44, Postbus 5025, 3197 X G Botlek RT hereinafter called the Principal‟. And Patvolk,Divn. Of Forbes Gokak Ltd., 19, J.N. Heredia Marg. Ballard Estate, Mumbai 4000001 hereinafter called the Agent‟. Taking in consideration That the agent desires to represent the Principal and the Principal desires to be represented by the agent under the following terms and conditions. This agreement shall become effective on 1st of November 1999 and will prevail earlier agreement made between the parties. This agreement shall continue until or unless terminated by either party giving the other not less than three-months prior notice in writing to the regular office address. Agents shall perform handling activities for the Principal‟s ISO-tank containers in all respect. Have reached the following agreement: Art 1. This agreement shall cover the complete contract between the parties. Modification to the agreement can be made only in writing. Art2. The agent commits himself during the period of this agreement. a. To control and safe guard the principal‟s tank containers and other assets in the territory. b. To bill and collect all revenues including demurrage and to settle properly incurred disbursements and commissions arising from the principal‟s business in the territory: all costs are to be charged to the principal at net costs. c. The Agent is authorized, subject to prior written permission from the Principal, to give guarantees in respect of any debts or other obligations or liabilities of the Principal in favour of any officer or other authorities functioning under the Income Tax Act, Customs Act, Major Port Trust Act or any other Central or State Acts in force in India and in fulfillment of such guarantees to pay the dues payable to authorities out of Principal‟s funds lying with the Agent. In case of any shortfall the Principal will forthwith fully reimburse the Agent through inward remittance through normal banking channels. The agents shall follow specific instructions stated on the nomination telex/fax and shall act on the following basis guidelines. To liaise with Consignees / Shippers with regard to each container and to closely monitor the whereabouts of each container.
To co-ordinate with Shipping Line agents for speedy clearance of the container from the port to the Consignee‟s discharge point and to return the container to the Port yard or the Shipper‟s loading point. The Agents shall utilize services of Cleaning yards, Transport operators, Surveyors and other agencies with whom the Principal may have contracts with. The Agent shall complete and maintain proper expense records and accounts for each container. Any outstanding amounts due either party shall be settled promptly. The agents will follow the procedure as laid down in the operating instruction for these shipments, which have already been surrendered and agreed. Take and react to any instruction that the Principal may give to the agents from time to time. d. To ensure that insurance coverage is in place for containers released to the custody of consignee. Agent to sign Hoyer-Odfjell B/L on behalf of them for all shipments handled from Mumbai, Cochin, Kandla, Madras, Calcutta and JNPT. e. To provide all operational, documentary and logistical services needed to perform the principal‟s business in the territory. Art. The principal commits that during the prod of his agreement: a. To supply suitable containers for business agreed with and contracted by the agent. b. To indemnify and keep indemnified the Agent from and against any and all loss, damage or liability suffered by the Agent in the course of conducting the business and resulting from. Any act, neglect or default of the Principals or its Agents, employees, licenses or customers. Any successful claim by any third party alleging libel or slender in respect of any matter arising from the conduct of the business in the Territory provided that such liability has not been incurred through any default by the Agent in relation to its obligations under this Agreement. c. To provide appropriate guidance and training to the manager appointed by the Agents. Art 4. The agent shall enjoy a handling fee and commissions as specified in the attached remuneration structure, page number 3, for business performed in the Territory, payable upon submission of a detailed commission statement. a. The Principal pay Agent all actual operation costs / expenditure incurred on behalf of them. b. The cost of communication (including Telegrams, Telexes, International telephone calls, faxes, e-mail etc.) relating to the business covered by this agreement, shall be for the account of the Principal and specified as such. c. Manifests, Bills of Lading, shipping permits, delivery orders and all other forms ordered by the agents on behalf of the Principal will be reimbursed by the Principal. Art 5 Arbitration: All disputes arising in connection with the present agreement shall be finally settled under the rules of conciliation and arbitration of the international chamber of commerce, by arbitrators appointed in accordance with the said rules. The place of arbitration shall be in Holland and the arbitration shall be conduced in the English language. Art 6 Notwithstanding anything contained in this Agreement, the operational matters arising out of this agreement shall be subject to current / or future laws of India Agency Remuneration Per tank container (in U.S. Dollars) Exports to Europe (West of Suez) : usd $ 160.00 Indian Ocean, Middle East, S.E. Asia : usd $ 140.00 USA : usd $ 200.00 Imports from Europe : usd $ 135.00 Indian Ocean, Middle East, S.E. Asia : usd $ 105.00 Thus agreed, drawn up in duplicated and signed at For Hoyer-Odfjell BV Rotterdam For Forbes Gokak Limited (Patvolk Divn.) Sd/- Sd/- Frans Kooijmans T.R. Chandran Managing Director Regional Director Sd/- Sd/- Saved Foyn-Bruun V.R Patil Deputy Managing Director Dy. Manager
5. He argued that the commercial agent Patvolk was an independent entity and was neither related to the assessee nor to its other group concerns. It was explained by the learned Counsel that assessee does not have any ownership interest in Patvolk or any share holding or any beneficial interest. In view of the agency agreement, he argued that, the agency services rendered by Patvolk were in the ordinary course of business of Patvolk and in the agency agreement there were detailed instructions and comprehensive controls exercised by assessee that one would expect of any entity carrying on its own business. He explained that the transaction between assessee and Patvolk were made at arm‟s length and there is no charge by Revenue that it is not so. He explained that the Patvolk renders similar services to other foreign principals as well he referred to letter dated 25/02/05 wherein Patvolk has explained the total revenue received is merely 1.14% of the total commission from the assessee. He referred to relevant Para 2 of the letter which is reproduced hereunder:
We are acting as agents in India for a number of principals. The total amount of commission received from our above principals for the above assessment year was Rs. 17,98,842/- while the total commission earned by us was Rs. 157,394,556/-. It is evident therefrom that the percentage of commission earned from our above principal is merely 1.14% of the total commission. Thus we are agents of an independent status and are acting in the ordinary course of our shipping agency business. It is also evident that our activities are not devoted and cannot be said to be wholly or almost wholly devoted for the above principals. In this view of the matter, it is submitted that our principals cannot be said to have a PE in India and therefore profits from the operation of ships is not assessable to tax under the Indian Income-tax Act. To conclude, (a) Our principals are entitled to the benefits of Article 8A relating to profits from the operation of ships and (b) Business profits earned by them in any event are not assessable to tax.
Further, Ld. Counsel for the assessee also explained that Patvolk itself admitted that it is acting as an agent in India for a number of foreign principals.
The learned Counsel for the assessee took us through DTAA Article 5(5) & 5(6) which reads as under:-
5. Notwithstanding the provisions of paragraphs 1 and 2, where a person- other than an agent of an independent status to whom paragraph 6 applies- is acting in one of the States, on behalf of an enterprise of the other State, that enterprise shall be deemed to have a permanent establishment in the first mentioned State, if- (a) he has and habitually exercises in that state an authority to conclude contracts on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise or (b) He has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise for which he regularly delivers goods or merchandise on behalf of the enterprise: 6. An enterprise of one of the States shall not be deemed to have a permanent establishment in the other State merely because it carries on business in that other State through a broker, a general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph if it is shown that the transaction between the agent and the enterprise were not made under arm‟s length conditions.
The learned Counsel for the assessee referred to the decision of Hon‟ble Bombay High Court in the case of DIT Vs. B4U International Holdings Ltd. [2015] 374 ITR 453 (Bom).
On the other hand the learned CIT (DR) Shri. Jasbir Chauhan argued that in view of the agency agreement there are specific clauses wherein the principal specifies so many do‟s and do not‟s to run the business and only the agent works for principal, he cannot be called as independent agent rather he is totally dependent on the assessee and hence assessee has a PE in term of dependent agent. The learned CIT (DR) relied on the order of Tribunal in the case of ACIT vs. DHL operations B.V. (2005) 142 taxmann.com 1 (Mumbai-Trib).
8. In reply Shri. Dave made a statement at Bar that the operation of the order of the Tribunal cited by learned CIT(DR) of DHL operations B.V. dated 03/10/2000 has been stayed by Hon‟ble Bombay High Court but at the moment he could not furnish the order of Hon‟ble Bombay High Court. For this, the learned CIT (DR) was allowed one day‟s time to verify whether the order of Tribunal in DHL operations B.V. has been stayed or not? The learned CIT (DR) could not answer on second day and accordingly the statement made by the learned Counsel for the assessee at Bar is to be taken on face value. Even otherwise the decision of DHL operations B.V. will not of much help to the revenue for the reason that now this issue is settled by Hon‟ble Bombay High Court in the case of B4U International Holdings Ltd.(Supra).
We have heard rival contention and gone through the facts and circumstances of the case. We find from the facts of the case that Patvolk was an independent entity and was neither related to the assessee nor to its group and had no ownership interest in Patvolk. The services that were rendered by Patvolk were in ordinary course of Patvolk‟s business. The assessee, in the agency agreement, had provided a list of activities to be performed by Patvolk, but it lacked the authority expected from an entity carrying on its own business. The transactions made between the assessee and Patvolk were made under arm‟s length. It is evident from the facts that Patvolk provided similar services to other foreign principals as well. The total amount of commission that Patvolk received from the assessee during the year under appeal was Rs. 17,98,842 which is a mere 1.14% of the total commission of Rs. 15.73 crores received by Patvolk during the year from its other principles including assessee. The assessee had engaged Patvolk based on its special skills and experience in rendering such agency services to the other foreign principals. Article 5(5) of the India – Netherlands DTAA covers the situations in which a business being carried on through a dependent agent results in the creation of a PE in the source state. Article 5(6) of the DTAA provides that a PE cannot be deemed to exist just because business is carried on by an agent of independent status. This article further provides that an agent will not be regarded as a dependent agent even when he is wholly or almost wholly acting on behalf of a principal unless it is shown that his transactions with the principal were not made under arm‟s length. Clause (a) of Article 5(5) of the DTAA covers the case of a dependent agent who has and habitually exercises an authority to conclude contracts on behalf of the foreign enterprise only when the agent‟s activities are not limited to the purchase of goods or merchandise for the enterprise.
Further, it is clear from the facts of the case that Patvolk required the assessee‟s express approval for any business contract proposed by Patvolk. Thus, the negotiation rights and decision making as regards the acceptance of contracts and other key decisions rested fully with the assessee. Hence, it cannot be said that Patvolk possessed the authority to conclude contracts and make other key decisions on behalf of the assessee. The learned counsel for the assessee has brought to our attention that Para 37 of the OECD commentary on Article 5 of the Model Tax Convention clarifies that an agent would be an agent of independent status not constituting a PE if he satisfies the following two conditions: - He is independent of the principal, both legally and economically, and - He acts in the ordinary course of his business when acting on behalf of the enterprise. The OECD commentary provides that dependence can be estimated by deciding if the agent‟s commercial activities for the principal were carried in accordance with detailed instructions and full control by the principal. The independence of the agent is reflected from the fact that the principal has relied on the special skills and knowledge of the agent. As mentioned above, the assessee provided Patvolk with a list of activities to be performed by it. These were just broad guidelines as any careful businessman would provide for protecting his own interests and lacked detailed instructions and authority expected from an entity carrying out its own business. It is also true that the assessee engaged Patvolk because of Patvolk‟s own skills and experience in rendering such services to other principals. The learned counsel for the assessee has argued that Patvolk was an independent entity and acted in the ordinary course of its agency business and that it also acted as an agent on behalf of other principals and only 1.14% of its total income was earned from the assessee. The learned counsel has relied on Para 38.6 of the OECD commentary on Article 5 in support of the proposition that the number of principals represented by the agent is one of the factors in determining whether the agent is of independent status or not.
In support of this contention, the learned Counsel has relied on the case of Warner Bros. Distributing Inc. (28 taxmann.com 2), the relevant paras of which have been reproduced hereunder:- “As it can be seen in the case above, the Indian company was not dealing with the assessee exclusively and rendered services to other principals also. The Mumbai Tribunal has held the Indian company to be acting independently and that it did not constitute an agency PE in India”.
We are of the view that Patvolk was neither legally nor economically dependent on the assessee. It was acting in the ordinary course of its business, had not authority to take key decisions for the assessee and the commission it received from the assessee was 1.14% of the total commission it received from all its principals. Therefore, it was an agent of independent status within the meaning of Article 5(5) of the DTAA. Article 5(6) of the DTAA provides that when an agent is wholly or almost wholly acting on behalf of the principal, he will not be regarded as a dependent agent unless it is proved that the transactions between the principal and the agent were not based on the arm‟s length conditions. To provide an explanation to the meaning of the term „wholly or almost wholly‟, the learned counsel has relied on an observation of the Hon‟ble AAR in its ruling in the case of Speciality Magazines P. Ltd (274 ITR 310, relevant Para of which has been reproduced as hereunder:
“The terms “wholly” or “almost wholly” are not technical terms or terms of art. They must receive their ordinary meaning as understood by English speaking people. The word “wholly” means entirely, completely, fully, totally; “almost wholly” would mean very near to wholly, a little less than whole... ...” It is a fact that during the relevant year, Patvolk was rendering agency services to other foreign principals as well. It has been proved from page 35 of the compilation of the assessee paper book that Patvolk provides services to multiple principles. As it has been discussed earlier, Patvolk acted as an agent for other principals as well and its earnings from the assessee formed only a mere 1.14% of Patvolk‟s total income. Thus, it cannot be disputed that Patvolk did not act wholly or almost wholly on behalf of the appellant and was neither legally nor economically dependent on the assessee, the principal. Therefore, it is established that Patvolk was an agent of independent status. Accordingly, we are of the view that the transactions between the assessee and Patvolk were made at arm‟s length. This fact has not been disputed by the DDIT. Therefore, under Article 5(6) of the DTAA, Patvolk cannot constitute an agency PE of dependent status of the assessee in India.
This view of ours is supported by the decision of Hon‟ble Bombay High Court in the case of B4U International Holdings(Supra), wherein it is held as under:-
After hearing both sides and perusing with their assistance all the appeal paper-books, we are inclined to agree with Mr. Mistri. The Tribunal had before it the order passed on 8th November, 2004 by the Commissioner of Income Tax (Appeals). As far as that order is concerned, it is subject matter of the Revenue's Income Tax Appeal No.1599 of 2013. There, the Revenue raised the ground that the assessee was having a dependent agent viz. B4U and that the Commissioner erred in holding that it cannot be treated as such. Further, even if the B4U is held to be a dependent agent, it is being paid remuneration at arm's length. Therefore, further profits cannot be taxed in India. Insofar as these grounds are concerned, the admitted facts are that the assessee is a foreign company incorporated in Mauritius. As noted, it had filed its residency certificate and pointed out that its business is of telecasting of TV channels such as B4U Music, MCM etc. During the assessment year under consideration, its revenue from India consisted of collections from time slots given to advertisers from India. The details filed by the assessee revealed that there is a general permission granted by the Reserve Bank of India to act as advertisement collecting agents of the assessee. The permissions were granted to M/s. B4U Multimedia International Limited and M/s. B4U Broadband Limited. In the computation of income filed along with the return, the assessee claimed that as it did not have a permanent establishment in India, it is not liable to tax in India under Article 7 of the DTAA between India and Mauritius. The argument further was that the agents of the assessee have marked the ad- time slots of the channels broadcasted by the assessee for which they have received remuneration on arm's length basis. Thus, in the light of the Central Board of Direct Taxes Circular No.23 of 1969, the income of the assessee is not taxable in India. The conditions of Circular 23 are fulfilled. Therefore, Explanation (a) to section 9(1)(i) of the IT Act will have no application.
9. The Assessing Officer did not accept the contentions of the assessee. He did not agree on both counts but the Tribunal noted that the DTAA and particularly paragraph 5 of Article 5 indicates that an enterprise of a contracting State shall not be deemed to have a permanent establishment in the other contracting State merely because it carries on business in that State through a broker, general commission agent, or any other agent of independent status, where such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted exclusively or almost exclusively on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph. The Tribunal noted the findings of the Assessing Officer and found that the Commissioner held that the assessee carries out the entire activities from Mauritius and all the contracts were concluded in Mauritius. The only activity which is carried out in India is incidental or auxiliary / preparatory in nature which is carried out in a routine manner as per the direction of the principal without application of mind and hence B4U is not an dependent agent. Nearly 4.69% of the total income of B4U India is commission / service income received from the assessee company and, therefore, also it cannot be termed as an dependent agent. As far as the alternate contentions are concerned, the First Appellate Authority held that the assessee and B4U India were dealing with each other on arm's length basis. 15% fee is supported by Circular No.742. Thus it was held that no further profits should be taxed in the hands of the assessee.
10. This conclusion of the Commissioner has been upheld by the Tribunal. It noted the rival contentions and in great details. The Tribunal concluded that after referring to the clauses in the agreement between the assessee and B4U that B4U India is not a decision maker nor it has the authority to conclude contracts (see paragraph 29). Further, the Revenue has not brought anything on record to prove that agent has such powers and from the agreement any such conclusion could not have been drawn. Barring this agreement, there is no material or evidence with the Assessing Officer to disprove the claim of the assessee that the agent has no power to conclude the contract. This finding is rendered on a complete reading of the agreement. Thereafter Indo-Mauritius DTAA has been referred to and particularly paragraphs 5.4 and 5.5. and the Tribunal concludes that the requirement that the first enterprise in the first mentioned State has and habitually exercised in that State an authority to conclude contracts in the name of the enterprise unless his activities are limited to the purchase of goods or merchandise for the enterprise is a condition which is not satisfied. Therefore, this is not a case of B4U India being an agent with an independent status. This finding is rendered in paragraph 29 and 30 of the order under challenge. We do not find that the Tribunal's order and which also refers to the Hon'ble Supreme Court decision in Morgan Stanley & Co. (supra) can raise any substantial questions of law.
Therefore, under Article 5(6) of the DTAA, Patvolk cannot constitute an agency PE of dependent status of the assessee in India; rather Patvolk is independent agent of the assessee in India. We uphold the orders of the CIT (A) and these appeals of the Revenue are dismissed.
The next common issue of the Revenue and the Cross Objection of the assessee as regards to charging of interest u/s 234B of the Act. The relevant ground raised by the assessee in its cross objection is as under:-
“1. Levy of interest under section 234B: The learned CIT (A) erred in not adjudication on the applicability of interest under section 234B of the Income Tax Act, 1961 („the Act‟). The respondent submits that the provisions of section 234B are not attracted in the case of a non-resident assessee whose income is subject to withholding tax provisions in light of the decision of the Hon‟ble Mumbai Tribunal vide order dated 31 May 2013 in the respondent‟s own case for the assessment year 2008-09.
At the outset, the learned Counsel for the assessee submitted that this issue is covered in favour of the assessee by the decision of the Hon‟ble Bombay High Court in the case of DDIT (IT) Vs NGC Network Asia LLC (2009) 313 ITR 187, wherein it is held that interest u/s 234B of the Act will not apply to non-resident assessee by observing as under:-
Under the provisions of the present Act, the issue had come for consideration in the case of CIT & Anr. vs. Sedco Forex International Drilling Co. Ltd. & Ors. (2004) 186 CTR (Uttaranchal) 144: (2003) 264 ITR 320 (Uttaranchal). One of the questions was, as to whether interest could be levied on the assessee under s. 234B of the Act in respect of tax which was not liable to be deducted at source. A learned Bench of the Uttaranchal High Court, after considering the provisions, held as under: "Secondly, although s. 191 of the Act is not overridden by ss. 192, 208 and 209(1)(a)/(d) of the Act, the scheme of ss. 208 and 209 of the Act indicates that in order to compute advance tax the assessee has to, inter alia, estimate his current income and calculate the tax on such income by applying the rates in force. That under s. 209(1)(d) the income-tax calculated is to be reduced by the amount of tax which would be deductible at source or collectible at source, which in this case has not been done by the employer company according to the law prevailing for which the assessee cannot be faulted."
Relying on the judgment in Sedco Forex International Drilling Co. Ltd. (supra), a learned Bench of this Court was pleased to pass an order dt. 16th July, 2008 in IT Appeal (L) No. 1796 of 2007 in the case of the Director of IT (International Taxation) vs. Morgan Guarantee International Finance Corporation, by applying the ratio of that judgment. Our attention is also invited to the judgment of the Madras High Court in the case of CIT vs. Madras Fertilisers Ltd. (1984) 149 ITR 703 (Mad), where the Madras High Court took the view that the amount of tax deductible at source is to be taken into consideration to determine the liability to pay the interest under s.
In that case, the assessee had not paid advance tax on interest income. The payer of interest had not deducted the tax. The learned Bench of the Madras High Court was of the view that levy of interest under s. 215 on assessee was not justified. We are in respectful agreement with the view taken in the case of CIT & Anr. vs. Sedco Forex International Drilling Co. Ltd. (supra), by the Uttaranchal High Court. We are in respectful agreement with the view taken in the case of CIT & Anr. vs. Sedco Forex International Drilling Co. Ltd. (supra), by the Uttaranchal High Court. We are clearly of the opinion that when a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the payee assessee. Considering the submissions of both parties and the provisions of law, consequently the appeal is dismissed”. Respectfully following the same, we decide this issue in favour of the assessee and against the Revenue. Consequently, this issue of the assessee‟s cross objection is allowed and that of the Revenue‟s appeal is dismissed.
In the result, all the appeals of the Revenue are dismissed and the Cross Objection of the assessee is allowed. Order pronounced in the open court on 21/09/ 2016.