I.t.a v. Nhk Japanbroadcasting Corporation, (2008) 3Qo5 Itr 137?

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27 DAY OF AUGUST 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD LT.A. NO.166 OF JZO1L C/W L.T.A.§NO.148 OF JZOL LT.A. NO.166 OF JZO1L BETWEEN: 1.THE DIRECTOR OF INCOME-TAX INTERNATIONAL TAXATION RASHTROTHANA BHAVAN NRUPATHUNGA ROAD BANGALORE. 2 |THE INCOME-TAX OFFICER, INTERNATIONAL TAXATION, WARD1(1) RASHTROTHANA BHAVAN NRUPATHUNGA ROAD, BANGALORE. ... APPELLANTS (BY SRI. K.V. ARAVIND, ADV.,) AND: THE EXECUTIVE ENGINEER|NO.1, CAUVERY DIVISION|M/S. BANGALORE WATER SUPPLY ANDSEWERAGE BOARD|NO.720, 46 CROSS, 8 BLOCK|JAYANAGAR, BANGALORE-560070.| ... RESPONDENT (BY SRI. A. SHANKAR, SR. COUNSEL, A/WSRI. B.S. BALACHANDRAN AND SRI. ANKUR PAI, ADVS.)- THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,1961, ARISING OUT F ORDER DATED 04.01.2011 PASSED IN ITA|NO.1067/BANG/2008, FOR THE ASSESSMENT YEAR 2000-01,|PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: (1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED THEREIN. (1) ALLOW THE APPEAL AND SET ASIDE THE ORDERS)PASSED BY THE ITAT, BANGALORE IN ITA NO.1067/BANG/2008|DATED 04-01-2011 AND CONFIRM THE ORDER OF THE APPELLATE|COMMISSIONER CONFIRMING THE ORDER PASSED BY THE|INCOME TAX OFFICER, INTERNATIONAL TAXATION, WARD-1(1),|BANGALORE IN THE INTEREST OF JUSTICE AND EQUITY. L.T.A.§NO.148 OF JZOL BETWEEN: M/S. BANGALORE WATER SUPPLY AND SEWERAGE BOARD1 FLOOR, KAVERI BHAVAN.KEMPE GOWDA ROAD, BANGALORE-5S60009REP. BY ITS FA AND CAOSRI. C.V. PRASAD, MAJOR|S/O SRI. LATE CHITTETY A. ... APPELLAN ] (BY SRI. A. SHANKAR, SR. COUNSEL, A/WSRI. B.S. BALACHANDRAN AND SRI. ANKUR PAI, ADVS.)- AND: THE INCOME TAX OFFICER|INTERNATIONAL TAXATIONWARD 19(1), No.14/3, R.P. BHAVAN|NRUPATUNGA ROAD, BANGALORE-560001. ... RESPONDENT (BY SRI. K.V. ARAVIND, ADV.) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,1961, ARISING OUT F ORDER DATED 04.01.2011 PASSED IN ITA|NOs.1065 TO 106/7/BANG/2008 FOR THE ASSESSMENT YEAR 2000-01 TO 2002-03, PRAYING THAT THIS HON’BLE COURT MAY|BE PLEASED TO: (1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED THEREIN.» (1) ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THEAPPELLATE TRIBUNAL DATED 04-01-2011 IN ITA NOs.1065 TO|1067/BANG/2008, IN THE INTEREST OF JUSTICE AND EQUITY. THESE ITAS COMING ON FOR’ HEARING, THIS’ DAY, |ALOK ARADHE J.,DELIVERED THE FOLLOWING: COMMON JUDGMENT I.T.A.No.166/2011 under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as ‘theAct’ for snort) has been preferred by the revenue,whereas, I.T.A.No.148/2011 has been preferred by theassessee. Since, both the appeals arise out of commonOrder passed py the Income Tax Appellate Tribunal(hereinafter referred to as ‘the Tribunal’, for short) andon account of similarity of substantial questions of lawinvolved in these appeals, they were heard together andare|being|decidedbythis.commonjudgment. I.T.A.No.148/2011 pertains to the Assessment years2000-O1tO.2002-03,whereas,I.T.A.No.166/2011 pertains to Assessment year 2000-Q1. 2 |I.T.A.No.166/2011 was admitted by a benchof this Court vide order dated 30.01.2012 on thefollowing substantial questions of law: (i) Whether the Tribunal was right in|holding that initiation of proceedings underSection 201(1) and 201(1A) of the Act isbeyond the period of six years of the shortdeduction is above one lakh as in this case,then the same would be barred by limitationas held in the case ofM/S MAHENDRA &MAHENDRA, (2002) 122 TTJ (MUM) (SB)|5//and the decision of the Delhi High Courtin the case. ofCIT VS. NHK JAPANBROADCASTING CORPORATION, (2008) 3QO5 ITR 137? 2 |I.T.A.No.166/2011 was admitted by a benchof this Court vide order dated 30.01.2012 on thefollowing substantial questions of law: (i) Whether the Tribunal was right in|holding that initiation of proceedings underSection 201(1) and 201(1A) of the Act isbeyond the period of six years of the shortdeduction is above one lakh as in this case,then the same would be barred by limitationas held in the case ofM/S MAHENDRA &MAHENDRA, (2002) 122 TTJ (MUM) (SB)|5//and the decision of the Delhi High Courtin the case. ofCIT VS. NHK JAPANBROADCASTING CORPORATION, (2008) 3QO5 ITR 137? (ii) Whether the Tribunal was correct inproceeaing|to.laydowntheperiod|Of|limitation for initiation of proceedings under.Section 201(1) of the Act when the legislationhas specifically omitted such period prescribedUnder tne earlier Section 7231 of the Act andSection 201(3) of the Act proviso clearlyprovide that in respect of any financial year commencing on or before 1.04.2007 can be.passed on or before 31.03.2011? 3.I.T.A.No.148/2011 was admitted by a bench of this court vide order dated 29.08.2011 on thefollowing substantial question of law: (i) What is the reasonable time within|which the proceedings have to be initiatedunder Section 201(1) of the Income Tax Act,as during the relevant period, the statute didnot prescribe any period of limitation? 4Facts leading to filing of these appeals brieflystated are that assessee is a Government of Karnatakaundertaking, which is constituted under the BangaloreWater Supply and Sewerage Act, 1964 to makeprovision.for.supply,|SEWerAZCEandtheSeWagedeposited in Bangalore Metropolitan Area and mattersconnected therewith. The assessee implemented andcommissioned Cauvery Stage - I, II and III waterSupply projects and in order to meet the growingdemand for water, the assessee envisaged a project called ‘Cauvery Stage - IV’ to draw 2/70 litres of waterper day from Cauvery River. In order to get the benefit|of consultancy services of International Standards, theassessee floated global tenders and contract for Stage -I project was awarded to a Consortium, consisting oftwo companies and an agreement was executed on29.11.1996 as per which maximum charges payable for|consultancy|services.We.,rRs.19,64,71,161/-.Thereafter, a supplementary agreement was executed.on 29.03.2002 for enhanced charges. For the.Assessment years 1998-99 to 2005-06, the assessee.remitted the tax deducted at source at tne rate of 30%as the amount paid was in the nature of fee for technicalservices payable by the State Government in pursuanceof an agreement. 5.|The Assessing Officer by an order dated21.11.2006 for all the years under dispute held that theassessee was required to remit tax at the rate of 48%.for the financial years upto 2001-2002 (Assessment years 2002-03) and at the rate of 40% for the.Subsequent years on the ground that the consultant hada permanent establishment in India and therefore, thepayment would be subject to tax at the maximum rateof 40% applicable to any foreign company and theassessee action in remitting tax at the rate of 40% hadresulted in short remittance. The assessee was held asan assessee in default in terms of Section 201(1) of theAct and a demand was also made for interest as per.Section 201(1A) of the Act. Accordingly, a sum ofRs.3,81,21,/97/-WaSdemandedtowardsShortdeduction and a demand for a sum of Rs.2,92,92,842/-was made on account of interest for all the years. Beingaggrieved, the assessee filed an appeal. 6.|The Commissioner of Income Tax (Appeals)by an order dated 13.11.2007 dismissed the appeal. Tribunal. The Tribunal by an order dated04.01.2011 inter alia held that period of limitation for 6.|The Commissioner of Income Tax (Appeals)by an order dated 13.11.2007 dismissed the appeal. Tribunal. The Tribunal by an order dated04.01.2011 inter alia held that period of limitation for initiating proceedings under Section 201(1) and 201(1A)of the Act is four years from the end of relevant.Assessment years, where the tax deducted is less thanRs.1 Lakh and if it is more than Rs.1 Lakh the period oflimitation would be six years. The Tribunal accordinglydirected the Assessing Officer to verify the period oflimitation in the aforesaid case and where the limitationof the proceeding is after six years from the end of.relevant Assessment years, the said proceedings wereheld to be quashed. In the aforesaid factual background,the assessee as well as revenue have approached thiscourt by filing these appeals. JLearned counsel for the revenue submittedthat no time limit can be prescribed for initiation of aproceeding where the statute does not provide thesame. It is further submitted that in any case, it shouldbe held to be six years. On the other hand, learnedSenior counsel for the assessee has held that the issuewith regard to limitation for initiation of proceeding under Section 201(1) and 201(1A) of the Act is nolonger|resintegra. In this connection, reliance has been|placed on decision of the Supreme Court in|‘STATE OFPUNJAB VY. BHATINDA DISTRICT COOPERATIVEMILK PRODUCERS UNIION LTD.’, (2007) 11 SCC36.3as well as decision of this court In‘CIT VS.BHARAT HOTELS LTD.,’, 384 ITR 77 (KARNATAKA),decisions of Delhi High Court in‘CIT V. NHK JAPAN|BROADCASTING CORPORATION’, 305 ITR 137(DELHI), ‘BHARTI AIRTEL LTD VS. UOI’, 245TAXMAN 80 (DELHI), ‘CIT VS. CJ INTERNATIONALHOTELS (P) LTD’, 372 ITR 684 (DELHI),decision of.Andhra Pradesh High Court in‘CIT V. UB ELECTRONICINSTRUMENTS|LTD,371ITTR314(ANDHRAPRADESH),decision of Bombay High Court in —DIT VS,MAHINDRAAND|MAHINDRA“,365ITTR560(BOMBAY)and decision of High Court of HimachalPradesh In.‘CIT V SATLUJ JAL VIDYUT NIGAM LTD,345 ITR 552 (HIMACHAL PRADESH). 8.|We have considered the submissions madeby learned counsel on both the sides and have perusedthe record. The seminal issue, which arises’ forconsideration in these appeals is with regard to thereasonableperiodoflimitation for.initiationofproceeding under Section 201(1) and 201(1A) of theAct. It is not in dispute that for the relevantAssessment years 1.e., 2000-01 to 2002-03, theproceedings were initiated after a period of four years.The aforesaid issue is no longer res integra. TheSupremeCourtIn|BHATINDA DISTRICT|COOPERATIVE MILK PRODUCERS UNION LTD.,(supra)has held as follows: 18. Insofar as the [ncome-lTax Act Isconcerned, our attention has been drawn to.S.153(1)(a) thereof which prescribes the|time fimit for completing the assessment,|whicn is two years from the end of the|Assessment year in wnich the income was|first assessable. It Is well known that the|Assessment year follows the previous year| and, therefore, the time limit would be three.years from the end of the financial years.|This seems to be a reasonable period as|accepted under Section 153 of the Act,|through|forcompletion|ofassessmentproceedings. The provisions of reassessment|are under Sections 14/7 and 148 of the Actand they are on a completely differing|footingand,therefore,doNot|meritconsideration for the purpose of this case.| 19. Even though the period of three.years would be a reasonable period as\prescribed under Section 153 of the Act for|completion of proceedings, we have been|told that Income Tax Appellate Tribunal has,in a series of decisions, some of which have.been mentioned in the order which is under|challenge before us, taken the view that four|years would be a reasonable period of time|for initiating action, In a case where no|limitation is prescribed.| The aforesaid decision was followed by a division|bench of this court in BHARAT HOTELS LTD supra. — 19. Even though the period of three.years would be a reasonable period as\prescribed under Section 153 of the Act for|completion of proceedings, we have been|told that Income Tax Appellate Tribunal has,in a series of decisions, some of which have.been mentioned in the order which is under|challenge before us, taken the view that four|years would be a reasonable period of time|for initiating action, In a case where no|limitation is prescribed.| The aforesaid decision was followed by a division|bench of this court in BHARAT HOTELS LTD supra. — 9 |In view of aforesaid enunciation of law, it isaxiomatic that reasonable period for initiation’ ofproceedings in respect of the Assessment years inquestion, at the time where no limitation was prescribedhas been held to be four years. It is not in dispute thatin the instant case, the proceedings under Section201(1) and 201(1A) of the Act have been initiated aftera period of four years. Therefore, the same cannot be.held to be tnitiated within the reasonable time andconsequently, the proceedings cannot be sustained inthe eye of law. In view of preceding analysis, the substantial|questions of law framed in I.T.A.No.166/2011 areanswered against the revenue and in favour of the.assessee. Ihe substantial question of law framed inassessee’s appeal is answered in favour of the assesseeand against the revenue. The impugned order of the.Tribunal insofar as it pertains to Assessment years2000-01 to 2002-03 is hereby quashed. In the result,