Tribunal affirms default for not deducting tax on share value. Assessee's appeals dismissed.

The tribunal upheld the orders of the CIT(A), confirming that the assessee was in default for not deducting tax at source on the value of shares issued to CIMAB. The appeals of the assessee were dismissed.

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Issues Involved:
1. Applicability of Section 195(1) of the Income-tax Act, 1961 for issuing shares to a non-resident.
2. Validity of the order under Section 195(2) concerning shares issued before the order.
3. Estoppel and delay in disposing of applications under Section 195(2).
4. Application of the principle "Actus Curle Neminem Gravabit".
5. Classification of the issue of shares as "Royalty" or "Capital Gains".

Issue-wise Detailed Analysis:

Issue No.1: Applicability of Section 195(1) of the Act

The primary argument was whether issuing shares to a non-resident constitutes a payment of "any other sum chargeable under the provisions of this Act" under Section 195(1). The tribunal held that Section 195(1) applies even when payment is made by issuing shares, as the term "by any other mode" includes non-monetary payments. Thus, the assessee was required to deduct tax at source on the value of shares issued to CIMAB.

Issue No.2: Validity of the Order under Section 195(2)

The assessee argued that the shares issued on 30.03.2004 and 30.09.2004 were covered by the order dated 22.02.2005 under Section 195(2). However, the tribunal noted that the application for the order was made after these shares were issued, and the order did not reference these prior issuances. Therefore, the order did not cover the shares issued before its date, and the assessee was liable for not deducting tax at source for those shares.

Issue No.3: Estoppel and Delay in Disposing Applications

The assessee contended that the principle of estoppel should apply since it relied on the AO's previous order and the delay in disposing of subsequent applications. The tribunal rejected this, stating that the assessee cannot claim estoppel against statutory obligations. Moreover, the order dated 22.02.2005 was not in force when the shares were issued, and the applications made after issuing shares did not justify non-deduction of tax.

Issue No.4: Application of the Principle "Actus Curle Neminem Gravabit"

The assessee argued that the principle "Actus Curle Neminem Gravabit" (an act of the court shall prejudice no man) should apply due to reliance on the AO's order. The tribunal dismissed this argument, emphasizing that tax laws do not accommodate equitable considerations, and the statutory provisions of Section 195 are clear and unambiguous. The tribunal reiterated that the order dated 22.02.2005 was valid only for a limited period and did not cover the issue of shares in question.

Issue No.5: Classification as "Royalty" or "Capital Gains"

The tribunal examined whether the issue of shares constituted "Royalty" or "Capital Gains". The definition of "Royalty" under Explanation 2 to Section 9(1)(vi) excludes consideration chargeable under the head "Capital Gains". The tribunal analyzed the Joint Venture Agreement (JVA) and Technology Transfer Agreement (TTA), concluding that the agreements provided only a right to use the technology, not an outright transfer. Therefore, the consideration paid was classified as "Royalty" under Section 9(1)(vi), and the assessee was liable to deduct tax at source.

Conclusion:

The tribunal upheld the orders of the CIT(A), confirming that the assessee was in default for not deducting tax at source on the value of shares issued to CIMAB. The appeals of the assessee were dismissed.

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