High Court allowed appeal against ITAT order, holding that demand under Sections 201(1) and 201(1A) of Income Tax Act is barred by limitation as proceedings were initiated beyond four years.
The order dated 6.3.2014 by ITI, 15.12.2014 by CIT(A) 12 and 12.8.2016 by ITAT are set aside.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
NC: 2024:KHC:32520-DB ITA No. 84 of 2017
IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF AUGUST, 2024
PRESENT
THE HON'BLE MR JUSTICE S.G.PANDIT
AND
THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO. 84 OF 2017
BETWEEN:
THE NILGIRI DAIRY FARM PRIVATE LIMITED REP BY ITS CFO & AUTHORIZED SIGNATORY, SRI MANOJ KUMAR AGARWAL, MFAR, SILVERLINE TECH PARK, # 180, 1ST FLOOR, EPIP PHSE, II, WHITEFIELD, BENGALURU 560066
…APPELLANT
(BY SRI. A SHANKAR, SENIOR ADVOCATE FOR SRI. M LAVA.,ADVOCATE)
AND:
Digitally signed by BHARATHI S Location: HIGH COURT OF KARNATAKA
THE INCOME TAX OFFICER (INTERNATIONAL TAXATION) WARD-2(1), BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, KORAMANGALA, BENGALURU 560095
…RESPONDENT
(BY SRI. SANMATHI E.I ., ADVOCATE)
THIS ITA / INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AS STATED ABOVE AND ANSWER THE SAME IN FAVOR OF THE APPELLANT, TO ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO THE EXTENT AGAINST THE APPELLANT IN THE ORDER PASSED BY THE ITAT, 'A' BENCH,
NC: 2024:KHC:32520-DB ITA No. 84 of 2017
BENGALURU IN IT(IT)A NOS. 11 TO 13/BANG/2015 DATED 12/08/2016 FOR THE ASSESSMENT YEARS 2007-08 TO 2009-10 (ANNEXURE-A) AND ETC.
THIS APPEAL, COMING ON FOR FINAL HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE S.G.PANDIT and
HON'BLE MR JUSTICE C.M. POONACHA
ORAL JUDGMENT
(PER: HON'BLE MR JUSTICE S.G.PANDIT)
This appeal by the assessee questioning the legality and correctness of order dated 12.8.2016 passed in IT(IT)A Nos.11 to 13/Bang/2015 by the Income Tax Appellate Tribunal, ‘A’ Bench, Bangalore (for short the ‘Tribunal’) for assessment years 2007-08 to 2009-10 (Annexure-A).
“ 1) Whether the Tribunal was justified in law in not holding that the order passed under section 201(1) and 201(1A) of the Income Tax Act, 1961 for all the three Assessment years 2007-09, 2008-09 and 2009-10 are barred by limitation on the facts and circumstance of the case?
2) Whether the Tribunal was right in holding that payment made by the Appellant are fees for
NC: 2024:KHC:32520-DB ITA No. 84 of 2017
technical services and hence the Appellant should have deducted tax at source under section 195 of the Act, even though nothing has been made available to the Appellant from the consultant?
3) Whether the Tribunal was justified in law in not holding that the payment made to the person abroad are for independent business and in the absence of permanent establishment in India the same is not chargeable to tax in India and consequently not liable for tax deducted at source on the facts and circumstance of the case?”
NC: 2024:KHC:32520-DB ITA No. 84 of 2017
Consultancy Pvt. Ltd., during the above stated financial years should not be treated as fees for technical services as per the provisions of Section 9(1)(vii) of the Income Tax Act, 1961 (for
short the ‘Act’). The appellant is said to have submitted its reply. Thereafter, order dated 6.3.2014 was passed under Section 201(1) and 201(1A) of the Act (Annexure-B) and a demand of `50,48,098/- under Section 156 of the Act was issued. Questioning the same, the assessee filed appeal before the Commissioner of Income Tax (Appeals)-12, Bengaluru. The appeal stood dismissed under order dated 15.12.2014. Against which, appeals before the Income Tax Appellate Tribunal ‘A’ Bench, Bangalore (for short ‘ITAT’) were filed in appeal IT(IT)A Nos.11 to 13/Bang/2015. The appeals came to be dismissed under impugned order dated 12.8.2016. Challenging the said order, the assessee is before this Court.
5. Learned Senior Counsel would submit that the order
passed under Section 201(1) and 201(1A) of the Act is barred by limitation. Learned Senior Counsel would submit that though the Section would specifically not prescribe any limitation for non residents or payment made to foreign firm/company towards consultancy fees, the judgments of this
Court passed in the case of Commissioner of Income-tax, TDS v. Bharat Hotels Ltd., reported in (2015) 64 taxmann.com 325 (Karnataka) and in the case of The Director of Income Tax International Taxation & Anr., v. The Execution Engineer, M/s. Bangalore Water Supply and Sewerage Board (ITA No.166/2011 c/w ITA No.148/2011, disposed of on 24.8.2020) would state that to pass order under Section 201(1) and 201(1A) of the Act, four years would be the limitation or reasonable time. Learned Senior Counsel points out that the order passed on 6.3.2014 under Section 201(1) and 201(1A) of the Act relates to financial years 2006-07 to 2008-09. Thus, he submits that order passed on 6.3.2014 is beyond four years from 31.3.2009 i.e., the end of financial year of 2008-09. Thus, learned Senior Counsel would submit that if this Court accepts the contention of the appellant on the question of limitation, in respect of which substantial question of law No.1 is framed, it need not go into other substantial questions of law. Thus, he prays for allowing the appeal.
respect of payment made to Non Resident Indian or to foreign company towards consultancy charges. Thus, he supports the order passed by the Tribunal as well as the authorities.
first substantial question of law in favour of the assessee and against the revenue.
9. Accordingly, the following:
ORDER
i) The appeal is allowed;
ii) The order dated 6.3.2014 passed by the Income Tax Officer, International Taxation, Bangalore; order dated 15.12.2014 passed by the Commissioner of Income Tax (Appeals) 12, Bangalore; and order dated 12.8.2016 passed in IT(IT)A Nos.11 to 13/Bang/2015, are set aside.
Sd/(S.G.PANDIT) JUDGE
Sd/(C.M. POONACHA) JUDGE
ND
List No.: 1 Sl No.: 0
2 issues framed by the court
Whether the order of the Income Tax Officer passing demand under Sections 201(1) and 201(1A) of the Income Tax Act, 1961 for TDS on payments to a non-resident is barred by limitation?
Whether the Tribunal was justified in holding that payments were fees for technical services liable to tax deduction at source without an advance ruling?
Colour shows how this judgement treated each authority
Commissioner of Income-tax, TDS v. Bharat Hotels Ltd.Followed¶38
(2015) 64 taxmann.com 325 (Karnataka)
The Director of Income Tax International Taxation & Anr. v. The Execution Engineer, M/s. Bangalore Water Supply and Sewerage BoardFollowed¶43
ITA No.166/2011 c/w ITA No.148/2011, disposed of on 24.8.2020
2 provisions across 1 enactments
THE NILGIRI DAIRY FARM PRIVATE LIMITED REP BY SRI MANOJ KUMAR AGARWAL
THE INCOME TAX OFFICER INTERNATIONAL TAXATION WARD 2(1)
S.G. PANDIT
C.M. POONACHA
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
