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2007 (1) TMI 198 - AT - Income TaxDeduction of tax at Source - Payments made after moving an application u/s 195(2) - No Objection Certificate with regard to remittance of payment - Assessee in default u/s 201 - Charging Of interest u/s 201(1A) - limitation for exercising the powers in passing order u/s 201 - HELD THAT:- This order of the Tribunal was passed on 1-12-1995 and still holding the field on the issue. It is followed recently in the case of Workhardt Life Science Ltd.[2005 (6) TMI 550 - ITAT MUMBAI]. From the order of Workhardt Life Science Ltd. it reveals that ITAT Delhi has also followed the Raymond Woollen Mills order in the case of Sahara Airlines v. Dy. CIT[2002 (2) TMI 319 - ITAT DELHI-E]. In the case of Indian Rayon for assessment year 199495. ITAT, Mumbai again followed the order of M/s. Raymond Woollen Mills and held that an order u/s 201 ought to be passed within 4 years. Thus, respectfully following all these orders we hold that action of Assessing Officer treating the assessee in default for the remittance made prior to 31-3-1998 is barred by limitation. Accordingly we direct the Assessing Officer not to treat the assessee in default for the payments made prior to 31-3-1998. This ground is partly allowed. Since payments have been made after 31-3-1998 hence we have to decide the issue on merit also. No Objection Certificate with regard to remittance of payment of first contract - In the present case the assessee contended that it has obtained a No Objection Certificate from the Assessing Officer u/s 195(2) of the Act for remitting the payment relating to the first contract and, therefore, it believed that for making similar payment it is not necessary to approach the Assessing Officer for similar payments. If this argument is accepted then some other assessee would say that in case of 'A', Assessing Officer has permitted the remittance of payment without deducting the tax his contract is also similar to that of 'A', hence he is not obliged to approach the Assessing Officer. In that situation the very purpose of the section would otiose. The Act imposes the authority for permitting an assessee to remit the payment without deducting tax in the Assessing Officer and not in any other person. The powers and discretions of Assessing Officer cannot be substituted with the belief of an assessee. Therefore, on the basis of this belief we cannot hold that assessee is justified for not deducting the tax while remitting the amount to non-resident. This argument of the assessee is rejected. DDIT of recovering the tax - Here the assessee has not deducted the tax while making the payment for the contracts relating to second phase. Thus assessee cannot draw any benefit from this decision and it is not the duty of the Assessing Officer to ascertain whether the recipient has paid the tax or not before passing order under section 201 read with section 195. More particularly Article 5 of the contract, between assessee M/s. Toyo postulate the mode of payment of the contract price and how to discharge the tax liability etc., it is worth to note this clause (d) of sub-clause (8) of Article 5. Thus it was the obligation of the assessee to ascertain tax liability etc. while making the payments. The assessee has not deducted the TDS, therefore, we do not find any merit in this argument of the assessee and Ground No. 4 is rejected. Determination of appropriate sum chargeable out of remittance - towards contract for offshore design for phase one of the project - No Objection Certificate for payment without deduction of TDS - From the record it revealed that while making payment for the contracts relating to Phase-I assessee has moved an application u/s 195(2) of the Act. The ld. Assessing Officer has issued No Objection Certificate for making the remittance without deducting tax. The ld. D.R. at the time of hearing pointed out that it is not an order passed u/s 195(2) of the Act, it is simply a No Objection Certificate authorizing the assessee to make the payment. It is for facilitating the assessee from rigors of RBI guidelines etc. However, we have gone through the application of the assessee available at the paper book. It is an application moved u/s 195(2) of the Act. It is immaterial how the Assessing Officer processed this application and issued a No Objection Certificate for making the remittance without making TDS. Therefore, as far as for the payment made for Phase-I the assessee cannot be treated in default u/s 201 of the Act because it has applied u/s 195(2) of the Income-tax Act, before the Assessing Officer prior to remitting the payment. The ld. Assessing Officer shall recompute the liability of the assessee and exclude all those amounts for which assessee has moved application u/s 195(2) of the Act and no No Objection Certificate was issued by the Assessing Officer. Hence ground No. 6 is partly allowed, whereas Ground No. 5 is rejected. Non-deduction of TDS in respect of delayed payment charges remitted for crude oil purchase - We find that ld. first appellate authority has recorded a finding of fact that assessee failed to bring any evidence on record to prove that the payments made to the aforesaid parties are in the nature or penalty charges fir delayed payment. The ld. first appellate authority further on the basis of the agreement for supply of crude oil observed that payment of interest is for delay in payment of purchase price. In this connection clause 2(c) of Part-II of the agreement with Texco International has been referred by the ld. CIT(A). Therefore, we do not find any merit in the contention of ld. counsel for the assessee. On facts it has been held that the delayed payment charges are nothing but in the nature of interest. We summarize the result as under:- (i) The action of Assessing Officer for treating the assessee in default for the payments made prior to 31-3-1998 are barred by limitation as provided in the case of Raymond Woollen Mills[1995 (12) TMI 84 - ITAT AHMEDABAD-B], therefore, assessee should not be treated in default qua those payments and necessary relief be granted to the assessee. (ii) The payments made after moving an application u/s 195(2) and on issuance of Certificate of No Objection by the Assessing Officer the assessee should not be treated in default. The ld. Assessing Officer shall carry out this exercise afresh and exclude all those payments for which No Objection Certificates were issued while holding the assessee in default. (iii) With regard to payment made to Core Laboratories, i.e., an amount of Rs. 1,53,665, ld. Assessing Officer shall re-decide this issue in the light of Tribunal's decision rendered in the case of McKinsey & Co. Inc. (Philippines) [2005 (10) TMI 416 - ITAT MUMBAI]. (iv) Except the above modification we uphold the order of ld. CIT(A). (v) As far as the appeal relating to charging of interest u/s 201(1A), it is consequential in nature and after carrying out the above exercise ld. Assessing Officer shall grant consequential relief to the assessee. In the result, both the appeals of the revenue are dismissed for want of COD approval and both the appeals of the assessee are partly allowed.
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