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Income Tax Appellate Tribunal, DELHI BENCH ‘H’, NEW DELHI
ORDER Per Prashant Maharishi, AM:
The above appeal is preferred by assessee against order of CIT (A)-IX, New Delhi dated 21st December, 2012 wherein the CIT (A) dismissed the claim of refund of Rs.1,87,03,000/- holding that same is not emanating from the order u/s 143(3) and it is a fresh claim, which should have been raised only through filing timely revised return. 02. The brief facts as culled out are that M/s Whirlpool of India Limited is an agent u/s 163(3) of the Act of its holding company Whirlpool Corporation, USA. In terms of foreign technical collaboration agreement dated 24th February, 1995 a provision of royalty of Rs. 15,90,62,000/- was made in favour of Whirlpool corporation, US and withholding tax thereon of Rs. 2,38,59,300/- was deposited by Whirlpool of India Limited. Assessee M/s Whirlpool of India Limited as agent of US Holding company filed its return of income showing income of RS 12,46,86,000 and claimed benefit of Indo US DTAA determining tax liability of Rs. 1,87,3000/- @ 15 %. The tax liability was discharged through withholding tax by M/s Whirlpool of India 2 Whirlpool of India Limited as payee in favour of assessee and same was adjusted. Out of the total royalty provision of Rs. 15,90,62,000/- for the relevant previous year, a sum of Rs 3,43,76,000/- being royalty for the period 1-1-1997 to 31-3- 1997 and corresponding TDS amount of Rs 51,56,400/- was reversed in F Y 1997-98 on account of revised agreement and consequent approval of government of India received on 19/01/1998 i.e. after the close of the year. Due to reversal of Royalty provision not receivable, refund arising out of that of Rs 51,56,400/- was claimed. Assessment was framed on 28/03/2000 accepting the returned income but AO did not grant credit of Rs 51,56,400/- being TDS on reversed royalty amount of Rs 3,43,76,000/-. Against this assessee preferred an appeal before CIT (A). Further subsequent to the assessment order Whirlpool of India Limited vide their letter dated 22/03/2005 requested to department of Economic affairs FIPB unit, New Delhi that according to clause 5 of agreement provides for royalty payments only in the year in which the payer i.e. Whirlpool of India Limited will have positive income. Therefore it sought waiver of royalty for calendar year 1996 by way of write back. To this vide letter dated 29/03/2005 Director, Department of Economic affairs, FIPB unit communicated it’s no objection. Therefore now assessee was of the view that amount of income offered in the original return filed by the assessee showing royalty income of Rs. 12,46,86,000/- is not chargeable to tax and TDs there on of Rs 1,87,03,000/- is also becomes refundable. As the appeal of the assessee was pending before CIT (A) at that time for AY 1997-98, assessee raised additional ground of appeal
before CIT (A). CIT (A) decided on issue of credit of Rs 51,56,400/- in favour of the assessee directing the AO to grant credit for this tax, however on Credit and subsequent refund of Rs 1, 87,03,000/-CIT (A) dismissed the additional ground holding that this is a fresh claim made by the assessee without filing revised return of income and also the issue is not emanating from the assessment order. Against dismissal of additional ground assessee is in appeal before us. 3 Whirlpool of India
03. Before Us ld. AR submitted that Ld. CIT (A) in ground 1 has considered identical issue pertaining to the period from 01.01.1997, 21,03,1997, however, the additional ground raised by the assessee which is pertaining to period 1-4-2006 to 31.12.2006 has been dismissed holding that events relating to this ground has arisen subsequent to the passing of order u/s 143(3) and further this ground of appeal is not emanating from the order u/s 143(3). He submitted that Ld. CIT (A) erred in holding that the assessee is seeking a fresh claim that was not considered by AO and assessee could raise such claim only through filing a revise return in time. He stated that claim can be raised by assessee before CIT (A) and the issue is in original order itself as subsequently the amount originally offered to tax has become now not chargeable to tax. He stated that appeal before CIT (A) is extension of assessment proceedings. Therefore, CIT (A) has erred in not consider this ground of appeal.
04. Ld. DR relied on the order of CIT (A) and submitted that in absence of revised return such claim has rightly been rejected by CIT (A).
05. We have considered the rival contention and the reasons given by the CIT (A) for not adjudicating additional ground on merit. The assessee has filed its return of income under the provisions of Section 163 of the Act on 28th April, 1999 showing royalty income receivable from Whirlpool of India Ltd. As per Foreign Technical Collaboration Agreement dated 24th February, 1995 and subsequently amended in December, 1996. Royalty income offered for the period 1-4-1996 to 31-12-1996 for Rs. 12,46,86,000/- and tax thereon is determined as per DTAA with USA at the rate of 15% amounting to Rs. 1,87,03,000/-. The full amount of tax of Rs. 1,87,03,000/- was deducted by M/s Whirlpool India Ltd. and deposited to the credit of Government of India. Form no. 16A for the sum was issued on 30th March, 1998, copy of the same is submitted. Before the CIT(A) an application u/s 250(5) of the Act was made for admission of additional ground of appeal holding that now the royalty would be payable by Whirlpool of India Ltd. only when it had a positive income. Therefore, no ITA No. 1116Del/2013 4 Whirlpool of India royalty would be receivable by the appellant company for this year. For this a CBDT Circular no. 790 dated 20th April, 2000 and Circular no. 7/2007 dated 23rd April, 2007 was cited wherein the Board at clarified that when contract is cancelled and no remittance was made to the non-resident or where the amount has been remitted and return and the contract is cancelled no income accrues in the hands of non-resident and consequently the amount deducted by the payer does not remain the tax and therefore, same is refundable. It was also the contention of the assessee that as the full amount of royalty of Rs. 12,46,86,000/- pertaining to the 1st 3rd Quarters reversed then TDS of Rs. 1,87,03,000/- becomes refundable to the assessee as certificate of TDs has been issued by the deductor. In back ground of this, We disagree with the view of CIT(A) that issue does not emanate from the assessment order as well as the same was not claimed in revised return therefore same cannot be entertained. Hon Bombay high court has considered the powers of CIT (A) regarding admission of claim without filing revised return in case of CIT V M/s. Prithivi Brokers and Shareholders in 349 ITR 336 as under - “23. It is clear to us that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. In fact, the Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the Tribunal under section 254.” Therefore we are of the view that CIT (A) has power to admit the additional claim made by the assessee for first time before him otherwise then by filing revised return. Further the issue involved is pertaining to income of Rs 12,46,86,000/- offered in the return of income and claim of TDs there on of Rs 1,87,03,000/- which is assessed to tax, therefore it cannot be said that it does not emanate from the assessment order. In view of this we set aside issue to the file of CIT (A) with a direction to admit the additional ground of appeal along with 5 Whirlpool of India additional evidence submitted in accordance with rule 46A of the Income tax rules 1962 and decide the issue on merits considering circular no 790 dated 20/4/2000 and Circular no. 7/2007 dated 23rd April, 2007. Needless to say that proper opportunity of hearing should be afforded to both the sides.
06. Appeal is therefore allowed for statistical purposes. (Order Pronounced in the Court on 08/10/2015)
Sd/- Sd/- (G.C.Gupta) (Prashant Maharishi) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 08 /10/2015 *B. Rukhaiyar* Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(Appeals) 5.DR: ITAT ASSISTANT REGISTRAR 6 Whirlpool of India Date Initial 1. Draft dictated on 11/09/2015 2. Draft placed before author 11/09/2015 3. Draft proposed & placed before the second member 4. Draft discussed/approved by Second Member. 5. Approved Draft comes to the Sr.PS/PS 6. Kept for pronouncement on 7. File sent to the Bench Clerk 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order.
Date Initial 1. Draft dictated on 15/09/2015 2. Draft placed before author 15/09/2015 3. Draft proposed & placed before the second member 4. Draft discussed/approved by Second Member. 5. Approved Draft comes to the Sr.PS/PS 6. Kept for pronouncement on 7. File sent to the Bench Clerk 7 Whirlpool of India 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order.