TaxTMI 
TaxTMI 
2005 (10) TMI 228
X X X X Extracts X X X X
X X X X Extracts X X X X
....e to deduct any tax at source. The learned counsel argued that the second issue already stood covered in favour of the assessee and against the revenue by several earlier decisions of the Tribunal. 3. Facts of the case leading to these appeals briefly are that the assessee, a domestic company, started airline operations in India in May, 1993. For that purpose the assessee entered into three separate agreements with a foreign company named and styled as M/s. Deutche Lufthansa, Aktiengesellschaft (hereinafter called 'Lufthansa A.G.') for providing aircrafts on lease, for servicing of the aircrafts and for providing crew to fly the aircrafts. These agreements were entered into on 18th March, 1993, 15th February, 1993and5th August, 1993. In pursuance to these agreements, the assessee-company took on lease three aircrafts from Lufthansa A.G. Central Board of Direct Taxes vide its orders dated 8th October, 1993; 5th September, 1993 and 20th August, 1993 granted exemption under section 10(15A) in relation to the assessee's agreements with Lufthansa A.G. dated 18-3-1993 for lease of three aircrafts. According to the assessee the terms of the lease of three aircrafts included....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e aircrafts leased by the assessee-company were operated by the assessee-company for domestic traffic in India. They were not and could not be said to be operated by Lufthansa A.G. It was the assessee who was engaged in the operation of the aircrafts in India and not Lufthansa A.G. Hence the provisions of section 44BBA were not applicable at all. The learned Assessing Officer, therefore, directed the assessee to deduct tax at source at the rate of 20 per cent. In the absence of the approval by the Government of India as required under section 10(6A) of the Act, the tax of 20 per cent was to be grossed up under section 195A. 5. According to the assessee-company, it made remittances to Lufthansa A.G. without deduction of tax at source. However, tax was paid at the rate of 20 per cent by the assessee himself. The tax, thus, paid was shown in the books of account of the assessee-company as tax receivable. 6. These appeals pertain to 18 remittances made by the assessee to Lufthansa A.G. during the financial years 1993-94 and 1994-95. In addition, the assessee also made one remittance on 30th May, 1995 falling in financial year 1995-96. The details of amounts remitted are given at ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ost of the employees of the company including the employees of the Accounts and Finance Department, who were aware of the income-tax matters left the company. The top management of the company became involved in difficulties relating to operations of the company and settlement of disputes with the foreign company as well as with Government departments. Therefore, no attentions could be paid to the matter relating to claim of refund for payment of taxes in respect of remittances already made. The management of the company throughout the intervening period from 1996 to 2000 continued to make efforts to re-launch operations by settling the disputes with Customs Department and other Government authorities. During that period the company was also looking for a suitable collaborator. Towards the end of year 2000 the assessee received fresh FDI after necessary approval from FIPB and other Government agencies. Unfortunately at that juncture some disputes arose between the old management and the subsequent management. Since in the accounts of the company for the year ended 31-5-2003 an amount of Rs. 3.24 crores was being stated to be recoverable in respect of TDS, at the time of finalisatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the instant case, the assessee had submitted that initially on the basis of legal advise it was thought by the company that the foreign company should file the return and claim the refund. The statutory period for riling the return expired on30th November, 1994and as per the assessee's own version Lufthansa A.G. was reluctant in either signing the return of income or authorizing the assessee-company to file the same. Hence even when the assessee came to know that the foreign company was not filing the return and the statutory period had expired, the assessee even thereafter did not file the appeal under section 248 for the denial of tax liability. After the time to file the return by foreign company had expired, the assessee could have filed the appeal under section 248 but he did not do without any reason. It was also admitted position that when the operations of the company were suspended by the end of 1996, no attention could be paid to the matter relating to claim of refund for payment of taxes made during the period 1993-94 to 1995-96. Even after takeover of the company by the new management, no attention was paid for filing of the appeal. The new management also took se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee argued that in the instant case, the delay in filing of appeals originated from entirely bona fide reasons and the circumstances beyond the control of the assessee. The assessee-company itself had a chequered history. Its venture of operating as a domestic airline was short lived. At the material time the assessee received legal advice that the better course would be to file returns of income for the relevant assessment year on behalf of Lufthansa A.G. and obtain the refund of entire tax amount on the ground that no part of the income of Lufthansa A.G. in relation to the payments received from the assessee-company was chargeable to tax in India. The foreign company, however, had reservations in the matter and while discussions were going on, the business of the assessee itself came to a grinding halt. The relationship with Lufthansa A.G. also deteriorated. Having regard to the fact that the assessee was no longer in active business its employees, including the staff in Accounts Department, deserted the assessee. Thereafter there was a change of management and new management was keenly engaged in reviving the company. As a result of the efforts of the new management, si....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of taxes. No assessee in his proper senses would show utter disregard to the statutory provisions resulting into refund of substantial amounts to the assessee. If the assessee would show disregard to those provisions, it was perilous to the assessee alone and no one else. On the facts and circumstances of the case, any disregard to the statutory provisions of the Act or any contumacious conduct on behalf of the assessee was unthinkable. On the contrary the very fact that huge refunds due to the assessee were not claimed would go a long way to show that the assessee was prevented by sufficient cause from lodging its claim in time for recovery of the amounts that rightfully belonged to the assessee. 11. The learned counsel argued that in the instant case, the Tribunal has repeatedly held several times that no part of the payments made by the assessee to Lufthansa A.G. is chargeable to tax in India. The assessee had already made full payment to Lufthansa A.G. and deposited the amounts as directed by the Assessing Officer because there was no other way to facilitate remittances to the foreign company. On these facts substantial justice required that the appeals filed by the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....allen due on November 30, 1994. It was difficult to understand that if the foreign company was reluctant to file return of income, the assessee would neither file its own appeals nor compel the foreign company to file the return of income and instead continue to make remittances for more than one year thereafter. According to the assessee by the end of 1996 operations of the company were suspended. However, the appeals were filed only in the middle of the year 2004. It was difficult to believe that for such a long duration the assessee could not have detected the basis on which huge amounts were shown in its books of account as tax recoverable. The learned D.R. argued that the various case laws relied upon by the assessee were distinguishable on facts. He relied upon the judgment of Hon'ble Supreme Court in P.K. Ramachandran v. State of Kerala AIR1998 SC 2276. He also relied upon the judgments in Vedabai Alias Vaijayantabai Baburao's case and CIT v. Ram Mohan Kabra [2002] 257 ITR 773 (Punj. & Har.). The learned D.R. strongly relied upon CBDT Circular No. 790, dated 20-4-2000. He argued that under this circular two years time-limit had been laid down. In the case of the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rnataka State Warehousing Corpn. Ltd. [1990] 185 ITR 25 (Kar.) in this respect. 16. Secondly, the learned DR argued that in the orders of the Tribunal it was assumed that Lufthansa A.G. did not have a Permanent Establishment in India. The assessee had not conclusively established that the payee did not have Permanent Establishment in India. The Tribunal also did not take into account that out of the three agreements exemption under section 10(15A) was given by CBDT only in respect of one agreement. As a logical corollary the payments made by the assessee to the foreign company in pursuance to other two agreements was chargeable to tax. 17. The learned DR argued that under the Act there was no provision for grant of refund of TDS to the payer. CBDT Circular No. 790 made it very clear that refund could be granted only to the payee. That circular also laid down limit of two years. In that respect the learned D.R. placed reliance on Samcor Glass Ltd. v. Asstt. CIT [2005] 94 ITD 202 (Delhi). He also made an alternative contention that if the refund of TDS was to be granted to the assessee, in that event the assessee should not be allowed to claim the amount of TDS as expenditure i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee could claim refund in its own right. 19. We have carefully considered the rival submissions. The first issue before us is whether the learned CIT (Appeals) is justified in refusing to condone delay, as prayed for by the assessee, in filing the appeals. It is settled legal position that the provisions relating to condonation of delay are procedural provisions. The Courts have, therefore, held that the statutes conferring a right of appeal are in furtherance of justice and the provision limiting the time for bringing an appeal must be liberally interpreted so that the party pursuing remedy allowed to him is not deprived of the same on mere technicalities. It has been held in a number of cases that the words "sufficient cause" should receive liberal construction so as to advance substantial justice. [Mrs. Sandhya Rani Sarkar v. Smt. Sudha Rani Debi AIR 1978 SC 537, Lalta Prasad Singh v. Dy. Director of Consolidation AIR 1982 All. 240, Shakuntala Devi Jain v. Kuntal Kumari AIR 1969 SC 575, Dinabandhu Sahu v. Jadumoni Mangaraj AIR 1954 SC 411 and New India Assurance Co. Ltd v. Punjab Roadways AIR 1964 Punj. 235]. It is true that the period for filing an appeal cannot be extend....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he same time met the requirements of the Assessing Officer the assessee obviously put itself in an unenviable position. The argument of the assessee is that it received legal advice that the matter should be approached by seeking to have completion of the assessment of the nonresident on the basis that no part of the income of the non-resident was chargeable to tax in India. It is settled legal position that any delay caused on account of legal advice received or while pursuing an abortive remedy should be treated as sufficient cause. [AIR 1937 PC 278 (sic), AIR 1923 Pat. 40 (sic), Punjabi University v. Acharaya Swami Ganesh AIR 1972 SC 1973 and 116 STC 324 (Punj.) (sic) etc.] In the instant case, the assessee has pleaded that after cessation of business operations the assessee was deserted by the regular staff. There was change in management, there were financial difficulties and so on. On a pragmatic appreciation of the matter we are of the view that the assessee can be said to have been prevented by a sufficient cause from filing the appeals on a date earlier than the same were filed before the learned CIT (Appeals). At the same time we direct that the assessee would not be enti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the payee had PE in India. He only wants the assessee to prove the negative that the payee did not have PE in India. In our opinion, such negative burden cannot be cast upon the assessee before us. Second reason given by the learned D.R. is that the CBDT Circular No. 790 has not been taken into consideration in the earlier orders of the Tribunal. We have carefully gone into the aforesaid CBDT Circular No. 790. The said Circular issued by CBDT on 20th April, 2000 concerns itself with the situation where after deduction of tax at source and deposit into Government account,- (a) the contract is cancelled and no remittance is made to the non resident; (b) the remittance is duly made to the non-resident, but the contract is cancelled. In both the cases income does not accrue to the non-resident. CBDT has dealt with such a situation and they have come out with certain solutions by way of general instructions to income-tax authorities. The case before us is altogether different. It is not a case where income did not accrue to the non-resident payee. It is very much the case of the assessee that the income did accrue to Lufthansa A.G. and, therefore, was duly paid fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e-tax Officer. Section 251 of the Act provides for the powers of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals). Clause (c) of sub-section (1) of section 251 reads as under: 'In any other case, he may pass such orders in the appeal as he thinks fit.' The above provision gives full power to the appellate authority to pass such orders in the appeal as he thinks fit. There is no controversy before us that an appeal would lie before the Appellate Assistant Commissioner under section 248 of the Act. We are thus in agreement with the view taken by the High Court and the Income-tax Appellate Tribunal. The appeal thus fails and is dismissed with no order as to costs as nobody has appeared on behalf of the respondent." 23. Coming now to the merits of the case, we find that the issue first came to be considered by Income-tax Appellate Tribunal, Delhi Bench "E" in ITA No. 2648 (Del.)/98. In that appeal the Assessing Officer on assessee's application dated 4-9-1995, rejected all the claims of the assessee-company and held that the assessee-company was liable to make payment of US Dollars 2,40,174 (net of taxes) only after d....