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TMI Blog2010 (12) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... nue in appeals for assessment years 2001-02 and 2002- 03 challenged the order of the learned CIT(A) in canceling the order passed by the AO u/s 201 (1) read with section 201(1A) of the IT Act considering the same as time barred. 2.2 The assessee in both the Cross Objections for assessment years 2001-02 and 2002-03 challenged the order of the learned CIT(A) in holding that the payment of Rs. 19,93,900/- and Rs. 13,71,950/- paid to Mr. James Whitehead, a UK Citizen is liable for payment of tax in India under the provisions of section 195 of the IT Act. 3. We have heard the learned representatives of both the parties, perused the findings of the authorities below and the material available on record. 4. The facts of the case are that during the survey action u/s 133A of the IT Act, it was noticed by the ITO, TDS-3 that the assessee had engaged a UK based Non Resident as Advisor and had paid Rs. 13,93,900/- for assessment year 2001-02, Rs. 13,71,950/- for assessment year 2002-03, Rs. 15,72,800/- for assessment year 2003-04 and Rs. 17,92,230/- for assessment year 2004-05 for advisory services rendered by him. As per clause -3 of the "Advisory Services Agreement" entered by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed the scope of total income as laid down in section 4(2) of the Act and section 9(1) (vii) which creates a deeming fiction and income by way of "fees for technical services" payable by resident person, such fees for technical services shall be deemed to accrue or arise in India. The AO accordingly passed orders u/s 201(1) r. w. s. 201(1A) of IT Act and raised demand against the assessee. 5. The orders of the AO were challenged before the learned CIT(A) and it was submitted as under: "In the present four appeals only common point involved is in respect of not deducting tax at source on payment made to Mr. James Whitehead of U. K. for services rendered by him from outside India. The Learned ITO TDS(3) TDS Range, Ahmedabad has passed necessary orders for A. Y. 2001-02 to 2004-05 on the one day i.e. on 29/3/07. (1) The facts are fully stated in respect of written submissions to the Learned Assessing Officer during the course of assessment proceedings by letters dt. 10/10/06 and 15/11/06 which are annexure in the paper book. (2) Over and above, your appellant respectfully submits that whether amount paid to a Non resident in respect of services rendered from outsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Services. The ld. AO has considered this payment is not towards royalties and the same is towards FTS. In any case as per the definition of FTS as given in the DTAA, technical services has to be "made available" to the assessee so as to be taxable in India. In this regard we rely on the decision of Hon'ble Mumbai Bench of ITAT in the case of Raymond Ltd. V DIT 80 TTJ 120. This has been explained in detail in the written submissions to the Learned Assessing Officer during the course of assessment proceedings by letters dt. 10/10/06 and 15/11/06 which are annexures in the paper book. (4) Without prejudice to what is stated above, your appellant further respectfully submits that the Learned Assessing Officer has passed all the four orders passed u/s. 201 (1) r. w. s. 201 (1A) and section 221 of the Act, on the same day i.e. on 29/03/07. Your appellant respectfully submits that where no statutory time limit has been prescribed, the act required to be done should be done within a reasonable period of time. In the following 4 decisions Hon. ITAT has held that in case of order passed u/s. 201, four years is a reasonable period of time to pass such an order: (a) Raymond Woolen Mills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have deducted TDS. 4.2 The A. R. has made another alternative claim that orde3rs u/s. 201 (1) & 2012(1A) have been passed on 29.303.2007 which is after expiry of 4 years from the end of Financial Years for A. Y.s 2001-02 & 2002-03, so the same should be held void. Relying on the decisions in the case of Century Textiles & Industries Ltd. Vs. DCIT reported in 13 SOT 507 (Mumbai) and State Bank of India Vs. ACIT reported in 106 ITD 589 (Mumbai) and similar decisions cited by the A. R. as I find that for A. Ys. 2001-02 & 2002-03, the orders u/s. 201 (1) & 201 (1A) of the Act have been passed after the expiry of 4 years from the end of the Financial Years, I hold that the orders are time-bared and they are not valid. Accordingly, the orders u/s. 201(1) & 201(1A) for A. Yrs. 2001-02 & 2002-03 are cancelled and thus, the appeals are allowed for these two years. As the orders u/s. 201 (1) & 201 (1A) for A. Ys. 2003-04 and 2004- 05 have been passed within four years from the end of the Financial Year and it is held that there was TDS liability which has been not complied by the appellant, I hold that the A.O. has rightly passed the orders raising demands u/s. 201 (1) & 201 (1A) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xus, the services have to be rendered in India as well as utilized in India. According to the Legislature this interpretation was not in accordance with the legislative intent that the situs of rendering service in India is not relevant as long as the services are utilized in India and therefore, to remove doubts regarding the source rule, an Explanation was inserted below sub-section (2) of section 9 with retrospective effect from 1st June, 1976 vide Finance Act, 2007. The Explanation sought to clarify that where income is deemed to accrue or arise in India under clauses (v), (vi) and (vii) of sub-section (1) of section 9, such income shall be included in the total income of the non-resident, regardless of whether the non-resident has a residence or place of business or business connection in India. Even after that, the Hon'ble Karnataka High Court, in a recent judgment in the case of Jindal Thermal Power Company Ltd. v. Deputy CIT (TDS) [2010] 321 ITR 31 has held that the Explanation, in its present form, does not do away with the requirement of rendering of services in India for any income to be deemed to accrue or arise to a non-resident under section 9. It has been held that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The law itself and its administration is understood to disclaim as it does in its general aphorisms, all intention of compelling impossibilities, and the administration of law must adopt that general exception in the consideration of particular cases.(see U.P.S.R.T.C. v Imtiaz Hussain [2006] 1 SCC 380, Shaikh Salim Haji Abdul Khagumsab v. Kumar [2006] 1 SCC 46, Mohammad Gazi v. State of MP [2000] 4 SCC 342 and Gursharan Singh v. New Delhi Municipal Committee [1996] 2 SCC 459." Similarly, while dealing with a question as to whether an assessee can be penalized for failure to carry out an act prior to its incorporation the apex court in the case of Life Insurance Corp Ltd. v. CIT (1996) 219 ITR 410 made following observations 11. It is obvious that in the surplus or deficit in any inter-valuation period relating to the Corporation which came to be formed only on the appointed day in 1956, this amount could not be reflected since it related to a period prior to the formation of the Corporation. The law does not contemplate or require the performance of an impossible act - Lex non cogit ad impossibilia. It is now to be seen whether the expression "included therein" in rule 2(l)(b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions under section 35DDA, the assessee could have estimated the income legitimately after reducing the expenditure incurred on the VRS. It is a common knowledge that the Finance Bill is introduced on February 28, 2001, and the same is made into the Act after passing the Bill in both the Houses of Parliament and receiving the assent of the hon'ble President of India some where in May or June, which means till that date no assessee can visualize that a new liability would be fastened to him. Normally, new provisions are introduced with effect from the next assessment year, but this provision under section 35DDA was introduced by Parliament in its wisdom with effect from April 1, 2001, i.e., the same year and that is why difficulty has arisen for visualizing the liability and the assessee could not deduct such expenditure. In fact in almost identical circumstances in the Third Member decision by the Delhi Bench in the case of Haryana Warehousing Corporation v. Deputy CIT [2001] 252 ITR (AT) 34 it was held that in such situations the legal dictum ad impossibillia would be attracted. The simple meaning of this dictum is that 'law cannot compel you to do the impossible'. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitation in view of the fact that special audit, which was to precede the assessment order was stayed, for some time by the order of the court. In this connection, the court noted as follows. "In Raj Kumar Dey v. Tarapada Dey AIR 1987 SC 2195, the Supreme Court examined the scope of a stay order on calculation of time/limitation. In this case, an award could not be registered within the time stipulated by the Registration Act owing to an interim injunction and an order directing the award to be deposited in Court. The Supreme Court allowed the entire period during which the stay order was in operation to be excluded while applying the maxim lex non cogit ad impossibilia or the law. does not compel a man to do that which he cannot possibly perform." In the case of Escorts Ltd. v. CIT (2002) 257 ITR 468 (Del), Hon'ble Delhi High Court was concerned with claim of an assessee for grant of refund under section 244 of the Act, which was denied to an assessee by the revenue on the ground that the assessee himself was responsible for delay of refund, and therefore cannot claim the amount of interest. While considering the rights of the assessee to claim interest, the Delhi High Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the said party has accepted the order or the part thereof which was against that party. Any interpretation placed on a provision has to be in harmony with the other provisions of the Act or the connected rules and an interpretation which makes other connected provisions otiose has to be avoided. Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963, is clear and unambiguous." Since the learned CIT(A) has decided the issue of deduction of TDS on merit against the assessee in all the Four years, therefore, even if, the Cross Objections are time barred as held above, the assessee could agitate the addition being the respondent in the departmental appeals. 10. The Hon'ble Delhi High Court in the case of CIT Vs NHK Japan Broadcasting Corporation 305 ITR 137 held as under: "Held, that the date of knowledge was not relevant for the purposes of exercising jurisdiction in so far as the provisions of the Act were concerned. The time limit of four years prescribed by the Tribunal called for no interference and action was to be initiated by the competent authority under the Act where no limitation was prescribed within the period of four years. The acceptance of liability by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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