Tribunal Rules Assessing Officer's Actions Barred by Time Limits; Revenue Appeals Dismissed, Assessee Appeals Partly Allowed.

The tribunal determined that the Assessing Officer's action was barred by limitation for payments made before 31-3-1998. Payments made after obtaining an NOC under section 195(2) were not in default. The issue concerning Core Laboratories was remanded for re-adjudication. The tribunal upheld the CIT(A)'s order with specified modifications. Interest under section 201(1A) was deemed consequential, requiring appropriate relief. Both revenue appeals were dismissed due to lack of COD approval, while the assessee's appeals were partly allowed.

---

---

Issues Involved:
1. Jurisdiction of the Assessing Officer under section 201.
2. Limitation period for passing an order under section 201.
3. Deduction of tax at source (TDS) on payments to non-residents.
4. Recovery of tax from the assessee without ascertaining if the recipient paid the tax.
5. Grossing up of tax rate under section 195A.
6. Non-deduction of TDS on miscellaneous remittances.
7. Non-deduction of TDS on delayed payment charges.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer under section 201:
The assessee contended that the DDIT, Mumbai, had no jurisdiction to pass an order under section 201. This contention was rejected by the Assessing Officer and upheld by the CIT(A). During the hearing, the assessee did not press this ground, so the tribunal did not delve into it further.

2. Limitation period for passing an order under section 201:
The assessee argued that any order under section 201 must be passed within a reasonable time, citing the ITAT decision in Raymond Woollen Mills v. ITO, which suggested a four-year limitation. The CIT(A) partly accepted this, applying a six-year limitation based on current provisions. The tribunal, following the Raymond Woollen Mills decision, held that the action of the Assessing Officer was barred by limitation for remittances made prior to 31-3-1998, directing not to treat the assessee in default for those payments.

3. Deduction of tax at source (TDS) on payments to non-residents:
The assessee argued that it had obtained a No Objection Certificate (NOC) from the Assessing Officer for payments under the first contract phase, believing it was not required to deduct TDS for similar payments under the second phase. The tribunal rejected this, stating that only the Assessing Officer could permit payments without TDS, not the assessee's belief. However, for payments under the first phase where an NOC was obtained, the tribunal directed the Assessing Officer to exclude those amounts from default.

4. Recovery of tax from the assessee without ascertaining if the recipient paid the tax:
The assessee argued that the Assessing Officer should have verified if the recipient (M/s. Toyo) paid the tax before treating the assessee in default. The tribunal held that it was the assessee's duty to demonstrate that the tax was paid on the remittance, not the Assessing Officer's duty to ascertain these facts.

5. Grossing up of tax rate under section 195A:
The tribunal noted that this issue was consequential in nature and rejected the ground.

6. Non-deduction of TDS on miscellaneous remittances:
The tribunal addressed payments to Niigata Engineering Co., Japan, and Core Laboratory Inc., U.S. The assessee did not press the issue for Niigata Engineering. For Core Laboratory, the tribunal set aside the issue for re-adjudication in light of the ITAT decision in McKinsey & Co. Inc. (Philippines).

7. Non-deduction of TDS on delayed payment charges:
The tribunal upheld the CIT(A)'s finding that delayed payment charges were in the nature of interest, based on the agreement's terms and the Gujarat High Court decision in CIT v. Vijay Ship Breaking. The tribunal held that the assessee should have deducted TDS on these payments.

Summary of Results:
1. The tribunal held that the action of the Assessing Officer for treating the assessee in default for payments made prior to 31-3-1998 was barred by limitation.
2. Payments made after moving an application under section 195(2) and obtaining an NOC should not be treated in default.
3. The issue regarding payment to Core Laboratories was set aside for re-adjudication.
4. The tribunal upheld the CIT(A)'s order except for the modifications mentioned.
5. Interest under section 201(1A) is consequential, and the Assessing Officer should grant relief accordingly.

Conclusion:
Both appeals of the revenue were dismissed for want of COD approval, and both appeals of the assessee were partly allowed.

---