TMI Blog2012 (12) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... re-assessment proceedings were initiated. First proviso to Section 147 of the Act clearly applied and Revenue was unable to show any failure on the part of the assessee to disclose materials or particulars relevant to impugned assessment year. Appeal decides in favour of assessee - I.T.A. Nos. 1995 & 1996/Mds/2011 - - - Dated:- 26-7-2012 - SHRI ABRAHAM P. GEORGE AND SHRI S.S. GODARA, JJ. Appellant by : Ms. Anupama Shukla, CIT-DR Respondent by : Shri Vikram Vijayaraghavan, Advocate ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : These are appeals filed by the Revenue for the impugned assessment years, against orders dated 12.9.2011 of Commissioner of Income Tax (Appeals) III, Chennai. First grievance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rival submissions. Only disallowance made by the Assessing Officer and deleted by the CIT(Appeals), on which Revenue is in appeal before us, is the disallowance made under Section 40(a)(i) of the Act for payments made to non-residents, which the A.O. considered to have been made without deducting tax at the rates prescribed under the Act. Assessee had made the offshore payments for machinery repairs and rentals to M/s International Tubular F2E and for drilling services to International Offshore Management, both of which were non-resident entities. Assessee had deducted tax at 4% on such payments considering the services rendered by the non-resident entities as falling under Section 44BB of the Act. However, the A.O. was of the opinion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection with prospecting for, or extraction or production of mineral oil. Hence assessee had sufficient reason to have a bonafide belief that Section 44BB of the Act would apply to M/s International Tubular F2E and M/s International Offshore Management. Subsequent to the decision in the case of Frontier Offshore Exploration (India) Ltd. v. DCIT ( 118 ITD 495) for assessment year 2003-04, which has been heavily relied on by the A.O. for making the disallowance, there was a decision by another co-ordinate Bench in I.T.A. No. 200/Mds/2009 for assessment year 2004-05 where also one of the party was same Frontier Offshore Exploration (India) Ltd. A very similar issue was involved in that case. Tribunal examined the aspect of deduction of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-resident, where is the question that the assessee is to deduct TDS at a lower rate after the assessment has been done on the non-resident? Section 44BB is a special provision as it is mentioned in the cause title to the said provision itself. As per the provisions of sec. 44BB(1) a sum equal to 10% of the aggregate of the amount specified in sub-section (2) is deemed to be the profits and gains of such business chargeable to tax under the head profits and gains of business or profession . It is because the provision of sec.44BB has quantified the deemed income of the non-resident assessee at 10%, it has opened with the clause Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A. The aggregate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Incometax Act, 1961 on which TDS can be made. A question now arises as to how much of the amounts paid by the assessee to the non-resident is the income chargeable to tax under the Income Tax Act, 1961 for the purpose of section 195. It is true that the assessee cannot quantify the income of the nonresident. This is where the special provision of sec. 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. Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) and that of the Assessing Officer stands reversed. 7. We may also mention here that we are not in agreement with the submission of the learned authorised representative that the provisions of sec. 40(a)(i) postulates an absolute failure and not short deduction. This is because a reading of section 201 clearly shows that the portion the whole or any part of the tax is in connection with the words after so deducting fails to pay . It is not in connection with the words does not deduct . 5. In any case, we find that the disallowance was made in a reassessment done when the original assessment was completed under Section 143(3) of the Act. CIT(Appeals) had clearly noted that all the details relating to tax deducted at source on p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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