Income Tax Appellate Tribunal - Ahmedabad
Sterling Abrasives Ltd,, Ahmedabad vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "A" AHMEDABAD
(BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM)
ITA No.2243 AND 2244/ Ahd/2008
Assessm ent Year: 2003-04 and 2004-05
Sterling Abrasives Ltd., Vs. The Income Tax Of ficer,
45-46, GIDC, Odhav Road, TDS-3,
Ahmedabad Ahm edabad
PAN No. AACC1266P
(Appellant) .. (Respondent)
IT A No.2247 AND 2248/ Ahd/2008
Assessment Year: 2001-02 and 2002-03
The Income Tax Of ficer, Vs. Sterling Abrasives Ltd., 45-
(Int. Taxn) -II,4 t h floor, 46, GIDC, Odhav Road,
Nature View Building, Ahm edabad
Ashram Road, Ahmedabad
PAN No. AACC1266P
(Appellant) .. (Respondent)
C.O. NO.179 and 180/Ahd/2008
(IN ITA No.2247 AND 2248/Ahd/2008)
Assessment Year: 2001-02 and 2002-03
Sterling Abrasives Ltd., Vs.The Income Tax Of ficer,
45-46, GIDC, Odhav Road, (Int. Taxn) -II,4 t h floor,
Ahmedabad Nature View Building,
Ashram Road, Ahm edabad
PAN No. AACC1266P
(Cross Objector) .. (Respondent)
Assessee by Shri S. N. Soparkar, Sr. AR
Department by Shri R. K. Dhanista, DR
ORDER
PER BENCH: The assessee as well as the revenue in the above matters challenged the common order of the learned CIT(A)-X, Ahmedabad dated 31-03-2008 for assessment years 2001-02, 2002-03, 2003-04 and 2004-05 u/s 201 read with section 201(1A) of the Income Tax Act.
ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 2 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
2. The assessee in its appeals for assessment years 2003-04 and 2004-05 challenged the order of the learned CIT(A) in confirming the order passed u/s 201 (1) read with section 201(1A) of the IT Act and in confirming the order holding that payment of Rs.15,72,800/- and Rs.17,92,230/- paid to Mr. James Whitehead, a UK Citizen is liable to income tax in India and therefore, liable for deduction of tax at source in India u/s 195 of the IT Act.
2.1 The revenue in appeals for assessment years 2001-02 and 2002- 03 challenged the order of the learned CIT(A) in canceling the order passed by the AO u/s 201 (1) read with section 201(1A) of the IT Act considering the same as time barred.
2.2 The assessee in both the Cross Objections for assessment years 2001-02 and 2002-03 challenged the order of the learned CIT(A) in holding that the payment of Rs.19,93,900/- and Rs.13,71,950/- paid to Mr. James Whitehead, a UK Citizen is liable for payment of tax in India under the provisions of section 195 of the IT Act.
3. We have heard the learned representatives of both the parties, perused the findings of the authorities below and the material available on record.
4. The facts of the case are that during the survey action u/s 133A of the IT Act, it was noticed by the ITO, TDS-3 that the assessee had engaged a UK based Non Resident as Advisor and had paid Rs.13,93,900/- for assessment year 2001-02, Rs.13,71,950/- for assessment year 2002-03, Rs.15,72,800/- for assessment year 2003-04 and Rs.17,92,230/- for assessment year 2004-05 for advisory services rendered by him. As per clause -3 of the "Advisory Services ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 3 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
Agreement" entered by the assessee with the advisor, the following services were to be rendered by him:
"i) Advice on marketing, distribution and sales strategies for increasing sales and turnover.
ii) Advice on manufacturing process.
iii) Advice on raw material use, sources of the same, pricing and terms of supply.
iv) Advice on identification of potential markets for abrasive products including new applications.
v) Facilitate formation for long term strategic alliances with prestigious customers(including assistance in discussions, evaluation of proposals and concluding the alliances).
vi) Provide information regarding any developments in the abrasives industry (including industry trends, technological developments etc.) and the steps to be taken to deal with such-changes/developments."
The AO also observed that the advisor, Mr. James Whitehead is a non resident individual and he had acquired knowledge and wide contacts in the abrasive industry because of his long association with the industry as the Managing Director of a company, Unicon Industries Plc, U. K. in U. K. and to utilize his experience, the assessee engaged him as an advisor. From the nature of advisory services given by the advisor, the ITO, TDS observed that they are in the nature of consultancy and technical services and the payment is deemed to be accrued in India by virtue of section 9(1) (vii) of the IT Act and therefore, the assessee was liable for deduction of tax from the payments made to the non resident consultants u/s 195 read with Double Taxation Avoidance Agreement with U. K. As no TDS was deducted from this payment, a show cause ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 4 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
notice was issued by ITO, TDS to the assessee, in response to which the assessee requested for keeping the proceedings pending till the outcome of appeal filed against the assessment order passed by DCIT (OSD) Circle-8, Ahmedabad, as in the assessment, the expenditure was disallowed u/s 40(a) (i) of the IT Act. However, the ITO, TDS observed that the TDS proceedings are separate proceedings. He discussed the provisions of section 195 of the IT Act which casts a responsibility of deduction of tax from a payment to a non resident before making a remittance. As the payment has been made to a non resident and it is covered under "any other sum chargeable under the provisions of the Act", the two conditions are satisfied to attract the provisions of section
195. Further, the AO discussed the scope of total income as laid down in section 4(2) of the Act and section 9(1) (vii) which creates a deeming fiction and income by way of "fees for technical services" payable by resident person, such fees for technical services shall be deemed to accrue or arise in India. The AO accordingly passed orders u/s 201(1) r. w. s. 201(1A) of IT Act and raised demand against the assessee.
5. The orders of the AO were challenged before the learned CIT(A) and it was submitted as under:
"In the present four appeals only common point involved is in respect of not deducting tax at source on payment made to Mr. James Whitehead of U. K. for services rendered by him from outside India. The Learned ITO TDS(3) TDS Range, Ahmedabad has passed necessary orders for A. Y. 2001-02 to 2004-05 on the one day i.e. on 29/3/07.
(1) The facts are fully stated in respect of written submissions to the Learned Assessing Officer during the course of assessment proceedings by letters dt. 10/10/06 and 15/11/06 which are annexure in the paper book.
ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 5 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
(2) Over and above, your appellant respectfully submits that whether amount paid to a Non resident in respect of services rendered from outside India, is taxable in India or not has been dealt by the Hon'ble Supreme Court in the case of Ishikawajma- Harima Heavy Industries Ltd. Vs DIT (158 Taxman 259). Hon'ble Supreme Court has held that, in order to tax payments for services in India, it is necessary that the services provided by non-resident assessee under a contract should not only be utilized within India but should also have been rendered in India. However law has since been amended with retrospective effect but at the relevant point in time when the payment was made, such services were not taxable in India and therefore tax was not deducted and thus no disallowances can be made u/s. 40(a) (i) of the Act, or no liability to make TDS on such payment arises. The assessee has complied with the provisions of law as they were prevailing on the date of payment to Mr. James Whitehead.
Your appellant further respectfully submits that the Learned Assessing Officer ought to have been taken in to consideration the law prevailing at the time of his liability to make TDS and not subsequent amendment in Law.
(3) Without prejudice to what is stated in para (2) above, even if it is felt that such payments in respect of offshore services are liable to tax in India, S. 90 of the Act specifically gives an option to an assessee to adopt provisions of Double Taxation Avoidance Agreement (DTAA) to the extent the same are more beneficial to him. (267 ITR 654) (SC). Now as per DTAA between India and UK, in our opinion the payment made to Mr. James Whitehead would fall within Article 15 i.e. Independent Personal Services. In that case as per provisions of DTAA, the amount paid to Mr. Whitehead is taxable in India only if his stay in India was more than 90 days in the relevant financial year. Reliance is placed on GRAPH ITE INDIA LTD. v. DCIT (2003) 78 TTJ 418 (CAI) = 86 ITR 384 (Cal).
Further, if the payment is considered as Business Profit, provisions of article 7 of the DTAA would apply. In that case also as per provisions of DTAA, the amount paid to Mr. Whitehead is taxable in India only if he has Permanent Establishment in India and the services are rendered through such Permanent Establishment ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 6 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
which is not the case here as Mr. Whitehead did not have any permanent establishment in India.
However, the AO has considered that the payment is Governed by Article 13 of the DTAA i.e. Royalties and Fees For Technical Services. The ld. AO has considered this payment is not towards royalties and the same is towards FTS.
In any case as per the definition of FTS as given in the DTAA, technical services has to be "made available" to the assessee so as to be taxable in India. In this regard we rely on the decision of Hon'ble Mumbai Bench of ITAT in the case of Raymond Ltd. V DIT 80 TTJ 120. This has been explained in detail in the written submissions to the Learned Assessing Officer during the course of assessment proceedings by letters dt. 10/10/06 and 15/11/06 which are annexures in the paper book.
(4) Without prejudice to what is stated above, your appellant further respectfully submits that the Learned Assessing Officer has passed all the four orders passed u/s. 201 (1) r. w. s. 201 (1A) and section 221 of the Act, on the same day i.e. on 29/03/07. Your appellant respectfully submits that where no statutory time limit has been prescribed, the act required to be done should be done within a reasonable period of time. In the following 4 decisions Hon. ITAT has held that in case of order passed u/s. 201, four years is a reasonable period of time to pass such an order:
(a) Raymond Woolen Mills Ltd. Vs. ITO (1996) 57 ITO 536 (Bom.)
(b) Sahara Airlines Lvd. Vs. DY. CIT (2003) 79 TTJ (Del) 2002) 83 ITR 11 (Del)
(c) Mitusbishi Corpn. Vs. Dy. CIT (2004) 86 TTJ (Del) 139:
(2003) 129 Taxman 73 (Del) (Mag)
(d) Asstt. CIT Vs Pepsi Foods Ltd. (2004) 88 TTJ (Del 11:
(2003) 129 Taxman 73 (Del) (Mag)."
6. The learned CIT(A) considering the submissions of the assessee held that the impugned orders for assessment years 2001-02 and 2002- 03 are time bared and accordingly canceled. The appeals for these ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 7 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
years were accordingly allowed. For the remaining years, the learned CIT(A) held that the assessee should have deducted the TDS and confirmed the orders of the AO in raising demand u/s 201 (1) and section 201 (1A) of the IT Act and dismissed the appeals of the assessee for assessment years 2003-04 and 2004-05. The findings of the learned CIT(A) in Para 4.1, 4.2 and 5 are reproduced as under:
"4.1 I have considered the submissions of the A. R. carefully. It is the contention of the learned A. R. that in case of the appellant services have been provided by the foreign consultant from outside India, hence the payment made for offshore services is not taxable in India as held by Hon'ble Supreme Court in the case of Ishikawajma Harima Heavy Industries Ltd. Vs Director of I. T. reported in 288 ITR 408 (SC). Though the law has been amended by Finance Act, 2007, with retrospective effect from 1.4.1976 by inserting explanation to section 9(2) of the Act, after the decision of S.C., the A. R. has claimed that the law prevailing in the years under consideration when the payments were made was that such services rendered from outside India were not taxable in India. As per prevailing law at that time services rendered by Mr. James Whitehead were not taxable in India, so there was no liability to deduct TDS. As alternative submission, the A. R. has argued that Mr. Whitehead had not come to India during these years nor he had any permanent establishment in India during these years, so there was no liability of TDS. I do not agree with the contention of the A. R. that there was no liability for making TDS as I find that technical services have been rendered by Mr. James Whitehead and laws have been amended with retrospective effect from 1.4.1976 and whether he has a permanent office in India or not the consultancy fees are taxable in India and therefore, the appellant should have deducted TDS.
4.2 The A. R. has made another alternative claim that orde3rs u/s. 201 (1) & 2012(1A) have been passed on 29.303.2007 which is after expiry of 4 years from the end of Financial Years for A. Y.s 2001-02 & 2002-03, so the same should be held void. Relying on the decisions in the case of Century Textiles & Industries Ltd. Vs. DCIT reported in 13 SOT 507 (Mumbai) and State Bank of India Vs. ACIT reported in 106 ITD 589 (Mumbai) and similar decisions cited by the A. R. as I find that for A. Ys. 2001-02 & 2002-03, the ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 8 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
orders u/s. 201 (1) & 201 (1A) of the Act have been passed after the expiry of 4 years from the end of the Financial Years, I hold that the orders are time-bared and they are not valid. Accordingly, the orders u/s. 201(1) & 201(1A) for A. Yrs. 2001-02 & 2002-03 are cancelled and thus, the appeals are allowed for these two years. As the orders u/s. 201 (1) & 201 (1A) for A. Ys. 2003-04 and 2004- 05 have been passed within four years from the end of the Financial Year and it is held that there was TDS liability which has been not complied by the appellant, I hold that the A.O. has rightly passed the orders raising demands u/s. 201 (1) & 201 (1A) of the Act for these two years. Thus, the appeals are dismissed for these two years i.e. A. Y. 2003-04 & 2004-05.
5. As a result, the appeals for A. Ys. 2001-02 & 2002-03 are allowed and appeals for A. Ys. 2003-04 & 2004-05 are dismissed."
7. The learned Counsel for the assessee at the outset submitted that the issue is now covered in favour of the assessee by the order of ITAT Ahmedabad "A" Bench in the case of same assessee for assessment year 2004-05 in ITA NO.3928/Ahd/207 vide order dated 02-07-2010. On the other hand, the learned DR relied upon the order of the AO but did not dispute the order of the Tribunal dated 02-07-2010. Copy of the order of the Tribunal dated 02-07-2010 is placed on record.
8. We have heard the rival contentions and the material on record. ITAT Ahmedabad "A" Bench in the case of the same assessee for assessment year 2004-05 vide order dated 02-07-2010 on the similar matter held as under:
"8. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that by amendment in the Finance Act, 2007, the Legislature inserted the explanation retrospectively w.r.e.f.1-6-1976 to Sec. 9 (2) of the Act, whereas the assessment year involved is 2004-05 relevant to previous year 2003-04 and it is impossible for the assessee to deduct tax in the financial year 1-4-2003 to 31-3- 2004, when the obligation to deduct TDS was not on the ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 9 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
assessee during that period. The provision of Section 9 provides for situations where income is deemed to accrue or arise in India to a non-resident. We find that the Legislature Vide Finance Act, 1976, a source rule was provided in section 9 through insertion of clauses, (v), (vi) and (vii) in sub-section (1) for income by way of interest, royalty or fees for technical services respectively and the intention of introducing the source rule was to bring to tax interest, royalty and fees for technical services, by creating a legal fiction in section 9, even in cases where services are provided outside India as long as they are utilized in India but the Hon'ble Supreme Court in the case of Ishikawajima-Harima Heavy Industries Ltd. (supra) held that despite the deeming fiction in section 9, for any such income to be taxable in India, there must be sufficient territorial nexus between such income and the territory of India. It further held that for establishing such territorial nexus, the services have to be rendered in India as well as utilized in India.
According to the Legislature this interpretation was not in accordance with the legislative intent that the situs of rendering service in India is not relevant as long as the services are utilized in India and therefore, to remove doubts regarding the source rule, an Explanation was inserted below sub-section (2) of section 9 with retrospective effect from 1st June, 1976 vide Finance Act, 2007. The Explanation sought to clarify that where income is deemed to accrue or arise in India under clauses (v),
(vi) and (vii) of sub-section (1) of section 9, such income shall be included in the total income of the non-resident, regardless of whether the non-resident has a residence or place of business or business connection in India. Even after that, the Hon'ble Karnataka High Court, in a recent judgment in the case of Jindal Thermal Power Company Ltd. v. Deputy CIT (TDS) [2010] 321 ITR 31 has held that the Explanation, in its present form, does not do away with the requirement of rendering of services in India for any income to be deemed to accrue or arise to a non-resident under section 9. It has been held that on a plain reading of the Explanation, the criteria of rendering services in India and the utilization of the service in India laid down by the Supreme! Court in its judgement in the case of Ishikawajima-Harima Heavy Industries Ltd. (supra) remains untouched and unaffected by the Explanation. Further the Legislature vide Finance Bill, 2010 in order to remove any doubt about the legislative intent of the aforesaid source rule, substituted in place of the existing Explanation a new ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 10 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
Explanation to specifically state that the income of a non- resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) of section 9 and shall be. included in his total income, whether or not,
(a) the non-resident has a residence or place of business or business connection in India; or
(b) the non-resident has rendered services in India.
This amendment was made retrospectively from 1st June, 1976 and will accordingly, apply in relation to the assessment year 1977-78 and subsequent years.
9. In view of the above facts and legal position, whether the assessee can be asked to do impossible Act i.e. to deduct tax for the past period. With the insertion of the explanation retrospectively by the Finance Act, 2007 w.r.e.f.1-6-1976 to Sec. 9 (2) of the Act, whereas the assessment year involved is 2004-05 relevant to previous year 2003-04, it is impossible for the assessee to deduct tax in the financial year 1-4-2003 to 31- 3-2004, when the obligation to deduct TDS was not on the assessee during that period. The argument canvassed by the Ld. counsel on the basis of a legal Maxim lex non cogit ad impossiblia, meaning thereby that the law cannot possibly compel a person to do something which is impossible to perform. This Maxim is accepted by different courts of this country, including the Hon'ble Supreme Court in the case of Krishnaswamy S. PD. And Another .V. Union of India and Others (2006) 281 ITR 305 (SC) made the following observations in relation to the provisions of chapter XX-C of the Act.
The maximum of equity, namely, actus curiae neminem gravabit - an act of court shall prejudice no man, is founded upon justice and good sense which serves a safe and certain guide for the administration of law. The other relevant maxim is, lex non cogit ad impossibilia - the law does not compel a man to do what he cannot possibly perform. The law itself and its administration is understood to disclaim as it does in its general aphorisms, all intention of compelling impossibilities, and the administration of law must adopt that ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 11 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
general exception in the consideration of particular cases.(see U.P.S.R.T.C. v Imtiaz Hussain [2006] 1 SCC 380, Shaikh Salim Haji Abdul Khagumsab v. Kumar [2006] 1 SCC 46, Mohammad Gazi v. State of MP [2000] 4 SCC 342 and Gursharan Singh v. New Delhi Municipal Committee [1996] 2 SCC 459."
Similarly, while dealing with a question as to whether an assessee can be penalized for failure to carry out an act prior to its incorporation the apex court in the case of Life Insurance Corp Ltd. v. CIT (1996) 219 ITR 410 made following observations
11. It is obvious that in the surplus or deficit in any inter-valuation period relating to the Corporation which came to be formed only on the appointed day in 1956, this amount could not be reflected since it related to a period prior to the formation of the Corporation. The law does not contemplate or require the performance of an impossible act - Lex non cogit ad impossibilia. It is now to be seen whether the expression "included therein" in rule 2(l)(b) is alone sufficient to negative the logical legal effect of section 7 of the LIC Act."
While dealing with question as to whether an assessee can be liable to pay interest for failure to pay advance tax during the year when the liability to pay tax had arisen on account of amendment to law which took place after the end of the year, Hon'ble Madras High Court in the case of CIT V. Revathi Equipment Ltd. (2008) 298 ITR 67 (Mad), reproduced and thereafter approved the reasoning contained in the following passage of the Tribunal order.
"We have no doubt in our mind that the levy of interest under sections 234B and 234C are of mandatory nature, but at the same time, if we read sections 234B and 234C carefully, we find that such liability is fastened to those assessees who are liable to pay advance tax. Now, let us see who are liable to pay advance tax and how. Sections 207 and 208 read as under:
'207. Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the total income of the assessee ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 12 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as "current income".
208. Advance tax shall be payable during a financial year in every ;-:;Aj../;. case where the amount of such tax payable by the assessee during that year, as computed in accordance with the provisions of this Chapter, is five thousand rupees or more.'
7. A combined reading of the above provisions makes it clear that the assessee has to pay taxes in advance in respect of the total income of the assessee, which would be chargeable in a particular assessment year. Now before the introduction of section 35DDA, the legal dictum was very clear that the assessee could claim expenditure incurred on account of payment made for the VRS by the assessee in view of the binding decisions of the hon'ble jurisdictional High Court in the case ofCITv. George Oakes Ltd. [1992] 197 ITR 288 (Mad) and CIT v. Simpson and Co. Ltd. (No. 2) [1998] 230 ITR 794 (Mad). In both the decisions, it was clearly laid down by the hon'ble jurisdictional High Court that payments to employees under the VRS were in the nature of business expenditure and was deductible under section 37. Therefore, till the introduction of new provisions under section 35DDA, the assessee could have estimated the income legitimately after reducing the expenditure incurred on the VRS. It is a common knowledge that the Finance Bill is introduced on February 28, 2001, and the same is made into the Act after passing the Bill in both the Houses of Parliament and receiving the assent of the hon'ble President of India some where in May or June, which means till that date no assessee can visualize that a new liability would be fastened to him. Normally, new provisions are introduced with effect from the next assessment year, but this provision under section 35DDA was introduced by Parliament in its wisdom with effect from April 1, 2001, i.e., the same year and that is why difficulty has arisen for visualizing ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 13 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
the liability and the assessee could not deduct such expenditure. In fact in almost identical circumstances in the Third Member decision by the Delhi Bench in the case of Haryana Warehousing Corporation v. Deputy CIT [2001] 252 ITR (AT) 34 it was held that in such situations the legal dictum ad impossibillia would be attracted. The simple meaning of this dictum is that 'law cannot compel you to do the impossible'. In the case before us also, the assessee could not have visualized till the last installment of advance tax, i.e., March 15, 2001, that it would not be entitled to deduct the VRS payments. Therefore, the assessee could not have done anything other than to estimate the liability to pay advance tax on the basis of existing provisions. We are of the considered opinion that in such situation, it cannot be said that the assessee was liable to pay advance tax. Once we come to the conclusion that the assessee was not liable to pay advance tax, there is no question of charging tax under sections 234B and 234C. In similar circumstances in the case of Priyanka Overseas Ltd. v. Deputy CIT [2001] 79 ITD 353 (Delhi) where the assessee had treated the receipt of cash assistance as capital receipts, which was subsequently amended to be business receipt by the Finance Act, 1990, it was held that in such cases interest under sections 234B and 234C was not chargeable. In these circumstances, we think that the assessee was not liable to pay advance tax and therefore levy of interest under sections 234B and 234C is not justified. Further, it is pertinent to note that the assessee by way of abundant caution deposited a sum of Rs. 90,00,000 on August 6, 2001, i.e., much before the due date of filing of the return, which also proves the bona fide credentials of the assessee. In these circumstances, we set aside the order of the learned Commissioner of Income-tax (Appeals) and delete the levy of interest under sections 234B and 234C. "
10. While dealing with the question as to whether an assessee can be faulted for not declaring the amount of capital gain on acquisition of land, when the amount of compensation itself is not determined Hon'ble Allahabad ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 14 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
High Court in the case CIT. V. Premkumar (2008) 214 CTR 452 (All) held as follows.
"'Lex Non Cogit ad impossibilia' is an age old maxim meaning that the law does not compel a man to do which he cannot possibly perform. Requiring the assessee to file a proper and complete return by including the income under the head 'Capital gain' would be impossible for the assessee, in cases of the nature referred above."
In the case of VLS Finance Ltd And Another v CIT And Another (2007) 289 ITR 286 (Del) Hon''ble Delhi High Court was concerned with the question as to whether assessment proceedings were within the period of limitation in view of the fact that special audit, which was to precede the assessment order was stayed, for some time by the order of the court. In this connection, the court noted as follows.
"In Raj Kumar Dey v. Tarapada Dey AIR 1987 SC 2195, the Supreme Court examined the scope of a stay order on calculation of time/limitation. In this case, an award could not be registered within the time stipulated by the Registration Act owing to an interim injunction and an order directing the award to be deposited in Court. The Supreme Court allowed the entire period during which the stay order was in operation to be excluded while applying the maxim lex non cogit ad impossibilia or the law. does not compel a man to do that which he cannot possibly perform."
In the case of Escorts Ltd. v. CIT (2002) 257 ITR 468 (Del), Hon'ble Delhi High Court was concerned with claim of an assessee for grant of refund under section 244 of the Act, which was denied to an assessee by the revenue on the ground that the assessee himself was responsible for delay of refund, and therefore cannot claim the amount of interest. While considering the rights of the assessee to claim interest, the Delhi High Court held as follows:
'Lex non cogit ad impossibilia' is a well-known maxim. It means the law does not compel a man to do that which he cannot possibly perform. If the Assessing ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 15 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
Officer could not perform his duties to complete the order of assessment in the absence of any evidence furnished by the assessee, the Department cannot be blamed therefore.
A law cannot be interpreted in vacuum. It has to be interpreted having regard to the facts and circumstances involved in each case."
11. We find from the above legal position and facts of the case that the assessee acted bona fide in conformity with the provision of act and the legal position as enumerated by Hon'ble apex court in the case of Ishikawajma-Harina Heavy Industries Ltd. (supra). At the relevant point of time it was impossible on the part of the assessee to deduct tax on the income of non-resident. Admittedly, up to the insertion of explanation vide Finance Act, 2007, the assessee was under
bona fide belief not to deduct tax and accordingly he acted as per law. Accordingly we allow the appeal of assessee.
12. In the result, assessee's appeal is allowed."
9. We find that the office has noted that both the Cross Objections of the assessee are time barred by Ten days and no petition is filed for condonation of delay. But the assessee was notified of this defect through notice and the defect in the Cross Objections has not been rectified. It would show that the assessee has no reasonable cause to explain the delay in filing the Cross Objections beyond the period of limitation. The Cross Objections of the assessee are accordingly treated as time barred and accordingly dismissed. However, we may note that Rule 27 of the Appellate Tribunal Rules provides that "the respondent, though he may have not appealed, may support the order appealed against on any of the grounds decided against him". The Hon'ble Gujarat High Court in the case of Dahod Sahakari Kharid Vechan Sangh ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 16 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
Ltd. Vs CIT 282 ITR 321 considering the above provisions observed as under:
"On plain reading of section 253(3) of the Income-tax Act, 1961, it transpires that a party has been granted an option or a discretion to file cross-objections. IN case a party having succeeded before the Commissioner (Appeals) opts not to file cross-objection even when an appeal has been preferred by the other party, from that it is not possible to infer that the said party has accepted the order or the part thereof which was against that party. Any interpretation placed on a provision has to be in harmony with the other provisions of the Act or the connected rules and an interpretation which makes other connected provisions otiose has to be avoided. Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963, is clear and unambiguous."
Since the learned CIT(A) has decided the issue of deduction of TDS on merit against the assessee in all the Four years, therefore, even if, the Cross Objections are time barred as held above, the assessee could agitate the addition being the respondent in the departmental appeals.
10. The Hon'ble Delhi High Court in the case of CIT Vs NHK Japan Broadcasting Corporation 305 ITR 137 held as under:
"Held, that the date of knowledge was not relevant for the purposes of exercising jurisdiction in so far as the provisions of the Act were concerned. The time limit of four years prescribed by the Tribunal called for no interference and action was to be initiated by the competent authority under the Act where no limitation was prescribed within the period of four years. The acceptance of liability by the assessee would not by itself extent the period of limitation nor would it extend the reasonable time that was postulated by the scheme of the Act. Merely because it had admitted its liability and agreed to pay tax voluntarily, the assessee could ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 17 C. O. Nos. 179 and 180/Ahd/e008 Sterling Abrasive Ltd.
not be put in a situation worse than if it had contested its liability".
11. Considering the facts of the case in the light of the above decisions, it is clear that the issue is now covered in favour of the assessee by the order of the Tribunal in the case of the same assessee for assessment year 2004-05 dated 02-07-2010. We have, therefore, no option except to follow the order of the co-ordinate bench of the Tribunal in favour of the assessee. By following the order of the Tribunal dated 02-07-2010, we set aside the order of the learned CIT(A) on merit in all the Four assessment years and quash the impugned order and delete the resultant demand u/s 201 (1) read with section 201(1A) of the IT Act in all assessment years.
12. The learned CIT(A), was however, justified in holding that the impugned orders of the AO for assessment years 2001-02 and 2002- 2003 are time barred. The findings of the learned CIT(A) to that extent are confirmed.
13. In the result, the appeals of the assessee are allowed. The departmental appeals are dismissed. The Cross Objections of the assessee are dismissed being time barred for statistical purposes. Order pronounced in Open Court on 23-12-2010 Sd/- Sd/-
(A. N. PAHUJA) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 23-12-2010
Lakshmikant/
ITA No. 2243, 2244, 2247 and 2248/Ahd/2008 and 18
C. O. Nos. 179 and 180/Ahd/e008
Sterling Abrasive Ltd.
Copy of the Order forwarded to :
1. The Appellant.
2. The Respondent.
3. The CIT(Appeals)-XIV, Ahmedabad
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
Deputy/Asstt. Registrar
ITAT, Ahmedabad