TMI Blog2020 (4) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is placed on decision in case of Hindustan Coca-Cola Beverages Pvt. Ltd vs CIT [ 2007 (8) TMI 12 - SUPREME COURT] wherein it has been observed that, where tax due has been paid by the deducted, demand under section 201 (1) of the Act cannot be enforced on assessee. In the event, assessee is able to establish that, due tax has been paid by Payee on such payments received, the disallowance made u/s 40 (a) (ia) shall be deleted. Needless to say that assessee shall be granted proper opportunity of being heard as per law. With the above directions we set aside this issue back to Ld. AO. - ITA Nos.1213 to1215/Bang/2018 AND ITA No. 736/Bang/2018 - - - Dated:- 26-2-2020 - Smt. Beena Pillai, Judicial Member And Shri. O.P. Meena, Accountant Member For the Appellant : Shri. Ajay Rotti, C.A For the Respondent : Shri. Muzaffar Hussain CIT DR ORDER PER BEENA PILLAI, JUDICIAL MEMBER : Present appeals have been filed by assessee against order passed dated, 02/01/2018 and consolidated order 02/02/2018 by Ld. CIT (A)-7, Bangalore, for assessment year 2014 15 and 2011 12 to 2013 14 respectively. 2. At the outset, Ld. AR submitted that, facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Addition of difference of receipts appearing in form 26AS to the income of the Appellant as undisclosed income 2.1. The learned AO erred in making an addition to the Appellant on the basis that unreconciled income of ₹ 5,59,513 appearing in Form No. 26AS vis- -vis the books of account represents undisclosed income. The learned CIT(A) erred in upholding the action of the learned AO. 2.2. The learned AO and the learned CIT(A) erred in not appreciating the fact that the amounts appearing in Form 26AS cannot be a legally sustainable basis for making additions to the income of the Appellant. The learned AO and the learned CIT(A) failed to appreciate that the Appellant would be liable to income tax on the income recognized under mercantile basis (as is evidenced by the audited financial statements), whereas amounts appearing in From No. 26AS merely represent amount paid or credited to a taxpayer which has been subjects to deduction of taxes under the Act. 2.3. The learned AO and the learned CIT(A) failed to appreciate that the Appellant recognizes revenue using the proportionate Completion Method in line with the requirements of Accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s entrusted to assessee for rendering TPA services. Ld.AR submitted that assessee has been given license by Insurance Regulatory and Development Authority in May 2002, to operate as a TPA, vide License No.16. Assessee has attached said certification at page 124 of paper book. On perusal of the certificate, it is observed that, license has been renewed from 16/05/14 to 15/05/17. 3.1. Assessee for year under consideration, filed its return of income declaring loss of ₹ 4,49,76,074/-. The case was selected for scrutiny and notices under section 143 (2) and 142 (1) was issued, in response to which, representative of assessee appeared before Ld.AO and filed relevant details, particulars and clarifications as called for. Ld. AO observed that, assessee claimed sum of ₹ 58,80,650/- in respect of toll-free numbers. He observed that assessee did not deduct any TDS on these payments. Ld. AO accordingly, called upon assessee to show cause, as to how provisions of TDS were not applicable to these payments. In response to show cause, assessee submitted that, these payments were not towards professional services rendered, and also that, these payments are not in the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther observed that even if the payment is not treated as one for the use of equipment, the use of the process was provided by the assessee, whereby through the assured bandwidth the customer is guaranteed the transmission of the Tata and voice and thus the consideration being for the use and the right to use of the process, it is royalty . So the decision of Verizon (supra) is squarely applicable to the present case. It also needs to be noted that the decision relied by the appellant have been taken into consideration in the verdict of orderable High Court in the Verizon (supra) case. In the case of Bharat Sanchar Nigam Ltd vs union of India (282 ITR 273) relied by the appellant, the issue under consideration was the nature of the transaction by which mobile phone connections are enjoyed. It is a sale or is it a service or is it both? The question for payment of lease line was not before Hon ble Court for adjudication. Therefore this decision will not be applicable in the case of the appellant. 3.5. Ld. CIT(A) relying on decision of Hon ble Madras High Court in case of Verizon Communications Singapore PTE Ltd vs Income tax Officer, International Taxation (2014) 361 ITR 57 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible act i.e, to comply with a provision not in force at the relevant time but introduced later by retrospective amendment. This is in accordance with the view taken by this court in CIT vs Cello Plast (2012) 209 Taxmann 617-wherein this court has applied the legal maxim, Lex non cogit ad impossibilia (law does not compel a man to do what he cannot possibly perform. (e) In the present facts, the amendment introduced by Explanation-6 to section 9 (1) (vi) of the act took place in the year 2012 with retrospective effect from 1976. This could not have been contemplated by the responded when he made the payment which were subject to tax deduction at source under section 194C of the Act during the subject assessment year, would require deduction under section 194J of the Act due to some future amendment with retrospective effect. 4.3. On the contrary, Ld.CIT DR placed reliance on order passed by authorities below and decision of Hon ble Madras High Court, in case of Verizon Communications Singapore PTE Ltd vs Income tax Officer, International Taxation (supra). 5. We have perused submissions advanced by both sides in light of records placed us. Ld.CIT(A) dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uipment but not including the amounts referred to in section 44BB ; (v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films ; or (vi) the rendering of any services in connection with the activities referred to in sub-clauses (i) to (iv), (iva) and (v).' 5.2. Royalty , as defined herein above, has very wide import. It brings within its ambit payment made for any kind of services received. As can be seen from the above, royalty as per clause (vi) of Section 9 would take within its ambit, rendering of any services in connection with activities referred in sub-clauses (i) to (v). In our view consideration paid by assessee is towards provision of bandwidth/telecommunications services for the use of , or right to use equipment . As we analyse services received by assessee in present facts of case, assessee is assured, bandwidth through which, assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod. Reliance is placed on decision of Hon ble Supreme Court in case of Hindustan Coca-Cola Beverages Pvt. Ltd vs CIT reported in (2007) 163 taxman 355, wherein it has been observed that, where tax due has been paid by the deducted, demand under section 201 (1) of the Act cannot be enforced on assessee. In the event, assessee is able to establish that, due taxe has been paid by Payee on such payments received, the disallowance made under section 40 (a) (ia) shall be deleted. Needless to say that assessee shall be granted proper opportunity of being heard as per law. With the above directions we set aside this issue back to Ld. AO. Accordingly Ground 1 stands dismissed and Ground 2-3 raised by assessee for A.Y 2014 15 stands partly allowed for statistical purposes. A.Y: 2011 12 to 2013 14 Bothe sides submitted that assessee in appeals for A.Y: 2011 12, 2012 13 and 2013 14 has raised same issue in Grounds 1-3, considered herein above. They also submitted that facts and circumstances of the case are similar and identical to facts for A.Y: 2014 15. Both parties rely on arguments advanced herein above. Accordingly, applying view taken herein above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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