TMI Blog2012 (9) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Appellant: P.J. Pardiwala and R. Meenakshisundaram For the Respondent: P.B. Sekaran ORDER George Mathan, Judicial Member. - This is an appeal filed by the assessee against the order of the learned CIT(Appeals)-III, Chennai in ITA No. 646/06-07/A.III dated 23-12-2008 for the assessment year 2004-05. 2. Shri P.J. Pardiwala, Sr. Advocate and Shri R. Meenakshisundaram, Advocate represented on behalf of the assessee and the learned CIT-DR Shri P.B. Sekaran represented on behalf of the revenue. 3. It was submitted by the learned authorised representative that the assessee is a company which is in the business of providing oil field services. The assessee had entered into an agreement with ONGC and M/s. Hardy Exploration Production (India) to drill oil wells in Indian waters. For the purpose of its contract the assessee had taken two drilling units owned by two foreign companies, namely M/s. Frontier Drilling ASA, Bergen, Norway and M/s. Frontier Ice As, Bergan, Norway. The assessee was to pay the hire charges for the drilling units as Bare Boat charges and Ex-pat Crew charges. The assessee had deducted TDS @ 4.1 per cent of the Bare Boat ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 037/Mds./2006 dated 28-2-2007 by following the decision of the Hon ble Supreme Court in the case of Transmission Corpn. of A.P Ltd. v. CIT [1999] 239 ITR 587 had held the issue against the assessee. It was the submission that in view of the decision of the Hon ble Supreme Court in the case of GE India Technology Cen. (P.) Ltd. v. CIT [2010] 327 ITR 456 wherein the decision of the Hon ble Supreme Court in the case of Transmission Corporation of AP Ltd. ( supra ) has been explained. The decision of the co-ordinate Bench of this Tribunal in the case of the assessee for the assessment year 2003-04 was no more good law. It was the submission that as per the decision of the Hon ble Supreme Court in the case of GE India Technology Cen. (P.) Ltd. ( supra ) the obligation to deduct TDS is limited to the appropriate portion of the income chargeable under the Act forming part of the gross sum of money payable to the non-resident. It was the submission that in the present case as per the provisions of section 44BB the maximum appropriated portion of income chargeable under the Act to the Norway companies was 10 per cent of the gross sum payable to the said two Norway companies and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities in connection with, or supply of plant and machinery on hire used or to be used in the exploration or for exploration of mineral oils, because such taxation involved number of complications. However, we have to agree with the learned DR that any party claiming benefit of section 44BB has to file return and then only the income-tax authorities can pronounce whether such party is entitled to the benefit of provisions of section 44BB or not. This issue cannot be decided by a party who is supposed to make payment to non-resident without filing any details in the form of return by such non-resident party with the tax authorities. Therefore, the ld. DR is clearly right that the issue regarding application of section 44BB to the non-resident party to whom payments were made by the assessee company cannot be examined in the case of assessee itself. We are also unable to agree with the submission of the ld. Sr. counsel of the assessee that there is no expression such as existing assessee used by the CIT(Appeals) by holding that provisions of section 44BB were applicable only in the case of existing assessees. In view of the legal situation which we have discussed, perhaps what the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y such sum, tax has been deducted under Chapter XVII-B or paid in any subsequent year, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. 25. A plain reading of the above provision would clearly show that no deduction shall be allowed in terms of sections 28 to 38 for any expenditure, payment for which has been made to a non-resident, on which tax has not been deducted in accordance with the provisions of Chapter XVII-B. A careful reading of the provision would show that it is starting with non obstante clause, which means, it would prevail over sections 30 to 38, which are basically sections dealing with deductions to be given for computing the business profits under various sections. This in turn in plain words means, if some expenditure has been incurred for the purpose of business, where payment for the same has been made to a non-resident and tax to be deducted in accordance with the provisions of Chapter XVII-B has not been deducted, then such deduction cannot be allowed, even if expenditure was incurred for the purpose of business. Because of the wordings in accordance with the provisions of Chapter X ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95(2) cannot attract disallowance under section 40( a )( i ). On the face of it, this argument may look attractive, but when we look at the whole of section 195 and Chapter XVII-B, then the real picture would emerge. As contended by the ld. DR, Chapter XVII-B deals with collection of taxes and Part B of this chapter specifically deals with the provisions of tax to be deducted at source. Section 195 reads as under : 195. (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of this Act (not being income chargeable under the head Salaries shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: Provided. ... Provided further . ... Explanation . ... (2) Where the person responsible for paying any such sum chargeable under this Act (other than salary) to a non-resident considers that the whole of such sum would not be income chargeable in the case of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to determine the appropriate portion of such sum so chargeable and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of sum which is so chargeable, which means, the person responsible for making payment, etc. cannot himself decide what is the appropriate proportion which is chargeable to tax. The expression by general or special order and the appropriate proportion in this sub-section are key words to understand the meaning in the sense that there may be situations where only one particular portion of such sum is taxable in case of similar assessees and the income-tax authorities may make a general order that in such type of assessees that a particular proportion of the sum has to be considered as income chargeable to tax and tax can be deducted accordingly. It seems the Central Board of Direct Taxes has already issued a circular in respect of advertisement income earned by non-resident TV channels etc., where a proportion of income has been fixed to be considered as income. Both the parties had mentioned about this circular in a cursory fashion and the same was not produced before us, so we are not going in detail. But suffice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide as to whether to follow the decision of the co-ordinate Bench of this Tribunal in the assessee s own case for the assessment year 2003-04, supra , or to differ from the same. After a perusal of the decision of the Hon ble Supreme Court in the case of GE India Technology Centre (P.) Ltd. as also taking into consideration the views expressed by the Hon ble jurisdictional High Court in the case of CIT v. Hi Tech Arai Ltd. [2010] 321 ITR 477 (Mad.) we are of the view that the decision of the co-ordinate Bench of this Tribunal in the assessee s own case for the assessment year 2003-04 would no more constitute good law. To err is human. To continue the error is not bravery. If we are to accept the contention of the Revenue that the provisions of section 44BB is relating only to the non-resident for the purpose of his assessment, then one should also keep in mind that the non-resident s assessment comes into play when he files his return. The non-resident would file his return only when the assessee has made the payment and if the assessee has made the payment to the non-resident, where is the question that the assessee is to deduct TDS at a lower rate after the assessment h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 195. It is true that the assessee cannot quantify the income of the non-resident. This is where the special provision of section 44BB comes into play. Where the statute has provided a special provision for dealing with a special type of income such a provision would exclude a general provision dealing with the income accruing or arising out of any business connection. This view of ours finds support from the decision of the Hon ble jurisdictional High Court in the case of Copes Vulcan Inc., referred to supra . Section 44BB is a special provision to the exclusion of all the contrary provisions provided in sections 28 to 41 and 43 and 43A of the Act. Once the provisions of sections 28 to 41 and sections 43 43A stand excluded, the method of computing the business income of the non-resident on the basis of the books of account goes out of the picture. Then it is only the provisions of section 44AD, 44AE 44AF which could be applied and the same obviously do not apply to the income of the non-resident companies. The Hon ble Supreme Court while dealing with its own decision in the case of Transmission Corpn. of A.P. Ltd., ( supra ) has categorically explained that the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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