TaxTMI 
TaxTMI 
2014 (7) TMI 265
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...., Income Tax Appeal Nos.2607/M/2000 and 2613/M/2000 were filed separately because they pertain to two Euro issues, namely, one in the Financial Year 1993 and other in 1996. It was gathered by the Revenue authorities that the Assessee came out with two Euro issues of the size of US $ 74.75 million and US $ 100 million in November, 1993 and July, 1996 respectively. The Assessee was called upon to furnish the details in connection with the payments made to various nonresident persons who were connected with bringing out these Euro issues. From such details the Assessing Officer, namely, Deputy Commissioner of Income Tax, TDS Circle, Mumbai1, observed that M/s Banque Paribas was paid a sum of Rs. 8,21,00,838/as marketing, underwriting commission and selling commission. A further sum of Rs. 88,74,971/was paid as out of pocket expenses like travelling expenses, fee and disbursement of legal advisors, managers, telex, telephone etc.. The details of these two Euro issues have been more elaborately recorded in the order passed by the Assessing Officer under Section 195 of the Income Tax Act, 1961. As regards the first Euro issue, the Company came out with an Offering Circular dated 30.11.19....
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....ional market for up gradation of its Indian operations, which was permitted by the Government of India subject to certain conditions. After scrutinizing the material before him, the Assessing Officer proceeded to examine the applicability of Section 9(1)(vii) of the Income Tax Act, 1961 (for short, I.T. Act) to see if technical, managerial or consultancy services were rendered by the lead managers in both these Issues by assisting, managing and underwriting. He considered the nature of services rendered by the lead managers. It was noted that the lead managers were closely associated with all the aspects of bringing out the Euro issues including the fixing of the price of the issue, analyzing the accounting results and resource basis of the company with a view to find out the strengths and weakness of the company, presenting them in proper format, updating the accounting results of the Assessee in tune with international Audit practices, getting them printed, putting up road shows and in totality marketing the issue successfully. These activities, in the opinion of the Assessing Officer required vast pool database of information about the potential investors, global trends of the i....
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....g Officer was substantially upheld by the Commissioner of Income Tax (Appeals) resulting in the Assessee approaching the Income Tax Appellate Tribunal. 6 It appears that after the Appeals were filed an additional ground was raised on 18.05.2006 which reads as under: " Whether on the facts and circumstances of the case and in law, the order passed by the Assessing Officer under Section 195 of the Income Tax Act, 1961 is void abinitio being barred by limitation?" 7 It appears that the Revenue made an application on 30.08.2006 before the learned President of Income Tax Appellate Tribunal for constitution of a Special Bench under Section 255(3) of the Income Tax Act, 1961 for consideration of the issue of limitation which was raised by the Assessee as an additional ground. This request of the Revenue was accepted and the learned President constituted a Special Bench for deciding the following question and also disposing of the Appeal:- " Whether on the facts and circumstances and in law, an order under Section 195 r/w Section 201 of the Income Tax Act, 1961 is barred by limitation within four years from the end of the relevant Financial Year in the absence of any express provision ....
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.... from the end of the relevant financial year." 9 It is the correctness of these findings which is an issue before us. 10 Mr.Suresh Kumar, learned counsel appearing in support of this Appeal tendered the reframed questions of law and termed them as substantial. He submits that in relation to questions (1) and (2) the Assessee has challenged the order of the Tribunal in Income Tax Appeal No.1968/2009 filed before this Court. That Appeal has been admitted particularly because it raises the issue of applicability of Section 201(1) and Section 201(1A) of the Income Tax Act, 1961. He submits that selfsame issue and question is raised in the instant Appeal. Therefore, it deserves to be admitted and tagged with the Assessee's Appeal, namely, Income Tax Appeal No.1968/2009. 11 Mr.Suresh Kumar submits that the Revenue has been urging before the Tribunal and equally before this Court that the impugned order and conclusion reached by the Tribunal is exfacie erroneous and vitiated in law. It is submitted that there could not be any time limit leave alone period of limitation for the purpose of exercise of powers by the Authority. In such circumstances the Tribunal should not have fixed a....
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....nitiation and completion of proceedings under subsections (1) and (1A) of Section 201 of the Income Tax Act, 1961 in the absence of any time limit provided under the said Act? (2) Whether the Tribunal was justified in prescribing the time limit statutorily provided for initiation and completion of reassessment proceedings under Section 147 of the Income Tax Act, 1961 for the purposes of subsections (1) and (1A) of Section 201 of the said Act? 15 Upon perusal of the order impugned in this Appeal we are inclined to agree with Mr.Mistry. The bare and essential facts have already been noted by us above. The order of the Assessing Officer passed under Section 201(1) and 201(1A) dated 30.03.1999 treated the Assessee in default for non deduction of tax as per the provisions of Section 195 of the Income Tax Act, 1961 from the payment made to the lead managers and its associates in connection with the services rendered by them for Euro issues. The Assessee filed two Appeals and which were partly allowed by the Commissioner of Income Tax (Appeals) on 01.03.2000. That is how the matter was carried to the Income Tax Appellate Tribunal. 16 True it is that the Tribunal relied upon the order p....
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....the Tribunal examined as to whether Section 201(1) applies to the case of non deduction of tax at source and concluded that there is no substance in the contentions of the Assessee's representative. It held that Section 201 refers to not only the person deducting and failing to deposit tax with the Government, but also encompasses the person failing to deduct tax at source. We do not bother ourselves with this conclusion and for dealing with the only contention raised before us. 19 From paragraph 14.1 onwards of the order under challenge the Tribunal dealt with the issue as to whether any time limit can be prescribed for passing of the order under Section 201(1) of the Income Tax Act, 1961. In relation to that the Tribunal considered the contentions of the Revenue that the Legislature in its wisdom had chosen not to prescribe any time limit for passing an order under Section 201(1) or 201(1A) of the Income Tax Act, 1961. The Revenue contended that the Court or Tribunal should not attempt to lay down any particular time limit as that would amount to placing undue restriction on exercise of power which is legitimately conferred and by law. In relation to that the Tribunal referr....
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.... be a particular time limit say two years or five years or ten years, which can be described as reasonable for all the actions under the Act, when no time limit is prescribed. The reasonable time for taking action under a particular section largely depends on host of factors, inter alia, the nature of proceedings, the character of the order etc.. In order to determine the reasonable time for taking action u/s 201, it is important to have a look at such necessary factors." 22 Thereafter, the Tribunal dealt with the nature of the proceedings under Section 201(1) and type of the order under Section 201(1). The Tribunal relied on the judgment of the Honourable Supreme Court [reported in (2001) 252 ITR 772 (SC) ITO Vs. Delhi Development Authority] approving the view of the Honourable Delhi High Court that the order under Section 201(1) is an order of assessment. 23 The Tribunal then dealt with what would be the reasonable time for passing an order under Section 201(1). The discussion in relation thereto is to be found in paragraph 17.1 onwards of the order under challenge. After referring to the rival contentions the Tribunal concluded in paragraphs 17.9 and 17.10 as under: " 17.9 Se....
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....in full or part then the payer can be treated as assessee in default to the extent of the non payment of tax on the sum paid to him provided the tax is not recovered from the payee. If the payee has furnished the return of income without disclosing the sum paid by the payer on which tax was deductible as per the provisions of the Act then the tax deductible at source can be recovered from the payer by treating him as assessee in default if the income has not been assessed in the hands of the payee. Still in another situation where the payee has not at all filed his return of income again the person responsible can be treated as assessee in default in respect of the tax on the sum paid by him in violation of the provisions of this Chapter. With this discussion there remains no difficulty in answering the question that how much time is available with the Revenue for treating the payer as assessee in default u/s 201(1). The obvious answer is that the maximum time limit available for assessment of the payee is the maximum time limit within which the payer can be treated as assessee in default. With the expansion of the scope of section 147, also roping in the cases of aassessment apart....
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....ated in the extended period of six years from the end of the relevant assessment year if the income by virtue of sum paid without deduction of tax at source by the payer chargeable to tax in the hands of the payee is equal to or more than one lakh rupee. If on the other hand such amount is less than Rs. 1 lakh then the lower period of four years as prescribed u/s 149(1) (a) from the end of the relevant assessment year is available for initiation of proceedings u/s 201(1). Going by the same logic and taking assistance from section 153(2), the completion of proceedings u/s 201(1), that is the passing of the order under this subsection, has to be within one year from the end of the financial year in which proceedings u/s 201(1) were initiated. Same time limits for initiation and passing of orders will be valid for the passing of order u/s 201(1A) also. We hold accordingly." 24 Thereafter, from paragraph 17.11 the Tribunal dealt with the contentions of the Assessee that the time limit for initiation and completion of the proceedings under Section 201(1) ought to be the period of four years. The cases relied upon have been referred to and in paragraph 17.14 it is held that the order pa....
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....tha (supra) and the State of Punjab v/s Bhatinda District Cooperative Milk Producers' Union (supra) and reiterated the principle as referred above. 29 The same view appears to have been taken earlier also in the case of the Government of India v/s Citadel Fine Pharmaceuticals and others reported in 1990 (Vol.184) ITR 467 (SC). 30 Our attention has also been invited to two judgments of the Honourable Delhi High Court which are on the same principle and as to whether in the absence of any time limit the proceedings under Sections 201 and 201(1A) of the Income Tax Act, 1961 could be initiated at any time. In following it's earlier judgment in the case of Commissioner of Income Tax v/s NHK Japan Broadcasting Corporation reported in (2008) 305 ITR 137 (Delhi), the Delhi High Court upheld the view of the Tribunal and dismissed the Revenue's Appeal [Commissioner of Income Tax v/s Hutchison Essar Telecome Ltd. reported in (2010) 323 ITR 230 (Delhi)]. 31 In the case of NHK Japan Broadcasting Corporation (supra), the Honourable Mr. Justice Madan b. Lokur (as His Lordship then was) speaking for the Bench answered the question directly posed before us in the following terms: " ....
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....dings by exercise of jurisdiction by the statutory authority. The Supreme Court held that exercise of jurisdiction must be within a reasonable period of time and considering the provisions of the Punjab General Sales Tax Act, 1948, it was held that a reasonable period of time for initiating proceedings would be five years. There is a qualitative difference between Bharat Steel Tubes Ltd. [1988] 70 STC 122 (SC) and Bhatinda District Coop. Milk Producers Union Ltd. [2007] 9 RC 637 : 11 SCC 363. In the former case, the question pertained to completion of proceedings, while in the latter case is pertained to initiation of proceedings. We are concerned with initiation of proceedings. Insofar as the Income Tax Act is concerned, our attention has been drawn to Section 153(1)(a) thereof which prescribes the time limit for completing the assessment, which is two years from the end of the assessment year in which the income was first assessable. It is well known that the assessment year follows the previous year and, therefore, the timelimit would be three years from the end of the financial year. This seems to be a reasonable period as accepted under Section 153 of the Act, though for comp....
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....roceedings under the special provision, namely, a Reference by the concerned workman under the Industrial Disputes Act, 1947. The judgment of the Honourable Supreme Court deals with a case where any provision in the nature of limitation or outer limit is prescribed for reference under the Industrial Disputes Act, 1947. The Honourable Supreme Court was not dealing with a case of exercise of powers enabling reopening of Assessment under the Income Tax Act, 1961 or any Taxing Statute. In fact, it was not deciding a case concerned with invoking of any suomotu powers or reopening of assessment finalized under the Tax Law. Therefore, this judgment is clearly distinguishable on facts. 33 If one carefully peruses Section 201(1) and 201(1A) of the Income Tax Act, 1961, then, the principle laid down in the Delhi High Court decisions in NHK Japan Broadcasting Corporation and Hutchison Essar Telecom (supra) would squarely apply. 34 The Section 201 of the Income Tax Act, 1961 reads as under: " 201. Consequences of failure to deduct or pay: (1) Where any person, including the principal officer of a company, - (a) who is required to deduct any sum in accordance with the provisions of this Ac....
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....ssee in default under the first proviso to subsection (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident.] (2) Where the tax has not been paid as aforesaid after it is deducted, the amount of the tax together with the amount of simple interest thereon referred to in subsection (1A) shall be a charge upon all the assets of the person, or the company, as the case may be, referred to in subsection (1). [(3) No order shall be made under subsection (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of - (i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed; (ii) [six years] from the end of the financial year in which payment is made or credit is given, in any other case: Provided that such order for a financial year commencing on or before the 1st day of April, 2007 may be passed at any time on or before the 31st day of March, 2011. (4) The provisions of sub cl....