Ita/150/2019 Of The Commissioner Of Income Tax v. M/S Acer India Pvt Ltd

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 31ST DAY OF JANUARY 2072)PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE SURAJ GOVINDARA]I1T.A. NO.150 OF 2019 BETWEEN: 1.THE COMMISSIONER OF INCOME-TAX |4TH FLOOR, HMT BHAVAN |4TH FLOOR, HMT BHAVAN | NO.59, BELLARY ROADGANGANAGAR |BENGALURU-5600 32. D2 |THE ASST. COMMISSIONER OF INCOME- TAXCIRCLE-1(1), 4TH FLOORHMT BHAVAN, NO.59, BELLARY ROADGANGANAGAR, BENGALURU-560032.CIRCLE-1(1), 4TH FLOORHMT BHAVAN, NO.59, BELLARY ROADGANGANAGAR, BENGALURU-560032. (BY MR. K.V. ARAVIND, ADVOCATE) .... APPELLANTS AND" M/S. ACER INDIA PVT. LTD., |NO.13, 6TH FLOOR |EMBASSY HEIGHTS |MARGATH ROAD|NEXT TO HOSMAT HOSPITAL |BENGALURU-5600725PAN: BLRAO 1844D. (BY MR. SURYANARAYANA, SR. COUNSEL FOR|MS. MANASA ANANTHAN, ADVOCATE) .., RESPONDENT THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX|ACT 1961, ARISING OUT OF ORDER DATED 14.09.2018 PASSED.IN ITA NO.2570/BANG/2017 FOR THE ASSESSMENT YEAR 2009-10, PRAYING TO: (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW,STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDERS.PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURUIN ITA NO.2570/BANG/2017 DATED 14.09.2018 FOR ASSESSMENTYEAR J2ZOO9-10 ANNEXKURE-C AND CONFIRMING THE ORDER THE APPELLATE COMMISSIONER CONFIRM THE ORDER PASSED BY.THE ASST. COMMISSIONER OF INCOME TAX (TDS), CIRCLE-1(1),.BENGALURU & ETC. THIS I.T.A. COMING ON FOR’ HEARING, THIS’ DAY, |ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260-A of the Income TaxAct, 1961 (hereinafter referred to as ‘the Act’, for short) has| been filed by the revenue. The subject matter of the appealpertains to the Assessment Year 2009-10. The appeal wasadmitted by a Bench of this Court on the _ followinsubstantial questions of law: 1.Whether on the facts and in the)circumstances of the case and in law, the|Tribunal is right in law in holding tnat theprovisions of Section 194H are not attracted inthe case of assessee witn regard to payments|towardsSUpDPIYof.MNldahhpOandflofdeduction of taxes on payments made to'distributors towards price protection and special price clearance discounts even when|the assessing authority rightly held that|assessee was liable to deduct tax on suUC)activities as it attracted Section 194H of the|Act ? 2D.Whether on the facts and in thecircumstances of the case and in law, the|Tribunal is right in confirming the order of theCIT(A) cancelling the order passed under|Section 201(1) and 201(1A) of the Act by'erroneously holding that the said orders are|barred by limitation even though the period oflimitation applicable is 7 years and not 2 yearsas neld by the Tribunal? 5,Whether on the facts and in thecircumstances of the case and in law, the|Tribunal is right in law tn confirming the orderof the CIT(A) cancelling the order passed|under Section 201(1) and 201(1A) of the Act|by erroneously holding tnat said orders are|barred by limitation holding that as per law It prevailed prior to amenament to. Section201(3) by Finance Act No.2 of 2014 Is°considered? 2D.Whether on the facts and in thecircumstances of the case and in law, the|Tribunal is right in confirming the order of theCIT(A) cancelling the order passed under|Section 201(1) and 201(1A) of the Act by'erroneously holding that the said orders are|barred by limitation even though the period oflimitation applicable is 7 years and not 2 yearsas neld by the Tribunal? 5,Whether on the facts and in thecircumstances of the case and in law, the|Tribunal is right in law tn confirming the orderof the CIT(A) cancelling the order passed|under Section 201(1) and 201(1A) of the Act|by erroneously holding tnat said orders are|barred by limitation holding that as per law It prevailed prior to amenament to. Section201(3) by Finance Act No.2 of 2014 Is°considered? 2. Facts leading to filing of this appeal briefly stated arethat assessee iS a company engaged in the business ofproviding Information Technology related services. A surveyunder Section 133A of the Act was conducted by the Revenuein the business premises of the assessee on 17.06.2015 toverify the compliance by the assessee with regard to varioustax deduction at source under the Act. The Assessing Officerinitiated proceeding under Section 201 of the Act and issueda notice on 08.02.2016 to the assessee, for delay on the partof the assessee to deduct tax at source on provisions forexpenses made in the end of the year, snort deduction of taxat source towards supply of manpower and non deduction oftax at source on payments made to the distributors towardsprice protection and special price clearance discounts. Theassessee objected to the proceeding on the ground thatlimitation for passing an order under Section 201(1) and 201(1A) of the Act would be two years from the end of relevantfinancial year as per Section 201(3) of the Act as thnestatement referred to Section 200 of the Act was filed by theaSse@ess€eTne.ASS@SSINGQOfficerDYan)ordercated30.03.2016 rejected the aforesaid contention and held that| Section 201(3) of the Act was’ substituted by Finance Act,2013 with effect from 01.10.2014 and therefore, the|limitation of seven years from the end of the relevant.financial year is applicable. ‘3.The assessee, thereafter, filed an appeal before|the Commissioner of Income Tax (Appeals), who by an orderdated 28.09.2017 allowed the appeal preferred by theassessee and inter alia held that limitation prescribed underSection 201(3) of tne Act as it existed prior to amendment|vide Finance Act No.2/2014 apply to the case of the assesseeand the limitation to pass the orders under Section 201 oftne Act expired prior to coming into force the Amendment. It was further held that amendment Act No.2/2014 wasprospective in nature and therefore, proceeding underSection 201 of the Act was barred by limitation. TheRevenue, thereupon, preferred an appeal before the IncomeTax Appellate Tribunal (hereinafter referred to as ‘thetribunal’ for short). The Tribunal by an order dated|14.09.2018 dismissed the appeal preferred by the Revenue. In the aforesaid factual background, this appeal has beenfiled. 4Learned counsel for the revenue submitted that|tne case of the assessee before tne autnority was that tne|assessee is not liable to deduct tax at source at all andtnerefore, the question of filing the statement as requiredunder Section ZOO of the Act did not arise. It is furtherSubmitted that the statement under Section JOO of the Actnas to De filed in prescribed form. It is further submitted tnatif the limitation is alive the same is can be extended. [t Is|further submitted that Section 201(1A)(3)(il) of the Act]applies to the case of the assessee and therefore, the periodof limitation for initiating the proceeding under Section 201of the Act is 7 years. However, the Tribunal as well as theCommissioner of Income Tax have failed to appreciate theaforesaid aspect of tne matter. In Support of aforesaidSubmissions, reliance has been placed on decision in.‘THEASSISTANTCOMMISSIONEROFINCOMETAX,CHENNAI VS. M/S A.R.ENTERPRISES,, (2013) 3 SCC196, 5.On the other hand, learned Senior counsel for the|assessee submitted that admittediy the assessee in theinstant case had filed the statement under Section 201(3) oftne Act. Therefore, the limitation to pass an order under|Section 201 of the Act expired prior to coming into force ofAmendment Act No.2/2014. It is further submitted that orderpassed under Section 201 of the Act on 30.03.2016 in|respect of assessment year 2008-09 is clearly barred bylimitation. 6.We have considered tne SUDMISSIONS made on!pbotn sides and have perused the record. Section 201(1A)(3)of the Act as it stood prior to its substitution by Finance ActNo.2/2014 with effect from 01.10.2014 reads as under: (3) No order snall be made under sub-Section(1) deeming a person to be an assesee indefault for failure to deduct the whole or anypart of the tax from a person resident in India,_at any time after the expiry of - (i) two years from the end of the financial yearin which the statement referred to In SectionJOO has been filed. (ii) six years from the end of the financial year|in which payment is made or credit is given, inany otner case. The aforesaid provision was amended with effect from.01.10.2014 by Finance Act No.2/2014. /.The issue, which arises for consideration in this|appeal is whether in the facts of the case, Section|201(1A)(3)(i) or (ii) of the Act would apply to the case of theassessee. It iS well settied in law that limitation prescribedunder the Act is not a mere period of limitation but the sameimposes a fetter on the power of the assessing officer to takeaction under the said provision. |See:'S_S,GADGIL VS. LAL|& CO. (1964) 53 ITR 231and"K.M.SHARMA VS. ITO’,(2002) 254 ITR 772|. In tne instant case, admittedly, thestatement referred to under Section ZOO of the Act has beenfiled. A finding of fact in this regard nas been recorded by theCommissioner of Income Tax (Appeals) as well as by theTribunal. The limitation of 2 years as prescribed in Section201(1A)(3) of the Act as it existed prior to its substitution byAct No.2/2014 applies to the facts of the case. The limitationto pass an order under Section 201(1A) of the Act expired| prior to Finance Act No.2/2014, which came into force witheffect from 01.10.2014. Thus, a right accrued to theassessee and the subsequent amendment therefore, couldnot nave revived the period of limitation and take away thevested right accrued to the assessee. Therefore, it is evidenttnat the order passed under Section 201 of the Act dated|30.03.2016 is clearly barred by limitation. 8.Tne first substantial question of law does not|arise for consideration in this case. For the aforementionedreasons, second and third substantial questions of law are|answered in favour of the assessee and against the revenue. In the result, we do not find any merit in this appeal,the same fails and is hereby dismissed. Sd/-JUDGE Sd/-JUDGE