Itta/321/2007 Of M/S.fsl Projects Limited [Formerly Frontline Soft Limited] v. The Deputy Commissioner Of Income Tax

IN THE HIGH COURT FOR THE STATE OF TELANGANAAT HYDERABAD THURSDAY, THE TWENTY FIRST DAY OF SEPTEMBERTWO THOUSAND AND TWENTY THREE PRESENT THE HON'BLE SRI JUSTICE P.SAM KOSHYANDTHE HON'BLE SRI JUSTICE LAXMI NARAYANA ALISHETTY INCOME TAX TRIBUNAL APPEAL No: 321 ot 2OO7 lncome Tax Tribunal Appeal Under Section 260-A of the Income Tax Act, 1961arising out of the order of the lncome{ax Appellate Tribunal, Hyderabad Bench ' B 'Hyderabad, in ITA Nos.1080/Hyd/03, for assessment Year 20O2-O3 dated 03-08-2007 preferred against the Order of the Commissioner of lncome Tax (Appeals)-V,Hyderabad, ITA Nos.0397 & 0398/DC-14(3)/ClT(A)-Vl2002-03 dated.27-06-2003,preferred against the Order of the of Deputy Commissioner of lncome Tax14(3)(TDS), Hyderabad in HYDF00191F/DCIT 14(3XTDS)/02-03 dated 10-02-2003. Between: M/s. FSL Projects Limited (formerly Frontline Soft Limited), A Public LimitedCompany, Having its registered office at 602, Lake Shore Towers, RajbhavanRoad, Somajiguda, Hyderabad. Represented by its Director Mr. Mir Hussain AIi,S/o.Sri Mir Yousuf Ali Khan. 44 Years. ...A''ELLANT AND The Deputy commissioner of lncome Tax, Circle 14 (3) (rDS), T.lfl"JSB?i"o.*, ITTAMP. NO: 304 OF 2007 Petition under Section 151 CPC praying that in the circumstances stated inthe affidavit filed in support of the petition, the High Court may be pleased staythe collection of tax of Rs.10,03,459.501 disputed in the appeal for theassessment [y ]ear 2402-2003.the affidavit filed in support of the petition, the High Court may be pleased staythe collection of tax of Rs.10,03,459.501 disputed in the appeal for theassessment [y ]ear 2402-2003. Counsel for the Appellant: SRI S. RAVI Counsel forthe Respondent: SRI A. RAMAKRISHNA REDDY The Court delivered the following: JUDGMENT I I HO]{OURABLE SRI JUSTICE P.SAM KCISHYAND HON'BLE SRI JUSTICE LAXMI NARAYA,NA ALISHETTY INCOMI)TAX TRIBUNAL APPEAL NO.32 1 <'I; 2OO7 JUDGMENT: [per ]l-lon'ble Sri Justrce P.Sam Roshg) The pre:;ent appeal has been filed under Se(:tion 260-A ofIncome Tax A::t, 1961 (for short, the ["Act") ]assailin g the orderpassed by lnc rme Tax Appellate Tribunal, Br:nch- 3, Hlderabad(for short "Tril;rrnsl"1 in ITA No.lOSlHyd/03, dated 03 08.2007for the Assesr;ment Year 2002 O3. Vide impugnt:d order, theorder preferred by the appellant stood rejected irnd in theprocess, the order passed by the Commissioner o[ income Tax(Appeals), Hyc erabad, for the assessment l,ear :2C'02-03 wasaffrrmed. 2. The u,hole issue raised by the appellant in the presentappeal is so far as the denial of exemption unrler Se,cl.ion 195 (3)of the Act in spite ol there being an order passed by the JointDirector in this regard so far as the deduction of TI)S, in respectof remittances made by the appellant to US bzrsed <:omprrny i.e.,M/s.IGTL Solur ions (U.S.A.). J 3. At the outset, learned counsel for appellant drew theattention of this Court to the documents, which were furnishedbefore the Appellate Tribunal i.e., the order dated 18.02.2003passed by the Joint Director of Income Tax-lV (lnternationalTaxation), Ayakar Bhavan, Mumbai, whereby the Joint Directorhad permitted the authorities in India to receive sums withoutdeduction of income tax as is required under Section 195(1) ofthe Act. 4. Learned counsel for the appellaxt contended that in spiteof specific certihcate have not been issued under Section 195(3)of the Act by the Joint Director of the Department, theauthorities concerned have made the remittances afterdeduction of tax at source in contravention to the aforesaidCircular dated 18.O2.2003. This [granting ]of exemption underSection 195(3) of the Act in spite of its appraisal to theauthorities beiow, ignoring the same, the Commissioner ofIncome Tax [(Appeals), ]so also the Tribunal have decided thematter against the assessee. 4. Learned counsel for the appellaxt contended that in spiteof specific certihcate have not been issued under Section 195(3)of the Act by the Joint Director of the Department, theauthorities concerned have made the remittances afterdeduction of tax at source in contravention to the aforesaidCircular dated 18.O2.2003. This [granting ]of exemption underSection 195(3) of the Act in spite of its appraisal to theauthorities beiow, ignoring the same, the Commissioner ofIncome Tax [(Appeals), ]so also the Tribunal have decided thematter against the assessee. 5. Today, when the matter is taken up for hearing, [learned]counsel for appellant strongly contended that [once ][when ][the]certificate was obtained from the Joinl-Director so far as the l waiver of dedtLction of TDS in respect of remrttancesr [is ][made ][to]M/s.lGTL Sohrtions (USA) has not been considered. discussed,referred to eitlrer by the Commissioner of Income lax [(Appeals)]or by the Trit unal. According to the appell€tnt. the [e>remption]from deductiorr of tax at source [was ][permissible tLnder ][Section]195 (3) of the Act, which appellant had availed and wfiich [was]also granted bl,the respondent, but when it c;1me fi)r deCuction,they had made the remittances only after deduction [,:f ]l'DS wasmade. 6. Perusal rf the pleadings would go to sh()v' t:rat theappellant had ceen all :rlong tal<ing this star:d both belore theCommissioner rf Income Tax (Appeals) and b,:fore the ['l'ribunal]that they are nlt liable to make deductions fo: the reasc,ns thatthey have an e xemption already obtained by way cf certilicateunder Section 195(3) of the Act. In spite of the catelloriczLl standbeing taken, t 1e two appellate forums for the ree sons bestknown have not discussed, deliberated or relied u;ron tee saidcertificate at all 7. Today, wLen the matter is taken up for hearing, tht: entirepaper-book thr t was hled before the Tribunal vras madeavailable by th,: learnedcounsel for appellant anrl onr: such-/ -/ document therein is the certifircate so issued under Section195(3) of the Act, granting exemption to M/s.lGTL Solutions(USA) so far as receiving of remittances without deduction ofincome tax at source. If the contents of the said document is tobe accepted and on veri{ication, found to be genuine, theconsequences would be that the entire remittances that havebeen made to M/s. IGTL Solutions (USA) would be non-taxableso far as TDS is concerned. Further, if the contents of the saidletter stands accepted, then the action on the part of therespondent in carrying out deduction at source on theremittances made to M/s.IGTL Solutions (USA) would be per sebad. B. [n view of the aforesaid factual matrix ol the case, moreparticularly, taking note of the fact that there is a non-referenceor non-deliberation of [the ]exemption so obtained under Section195(3) of the Act by the two forums below, we are of theconsidered opinion that it is a frt case where matter can beremitted back to the Tax Tribunal for considering thecontentions raised by the [appellant ]so far as exemption [that]they have got under Section 195(3) of the Act insofar as theremittances that have been made to M/s.lGTL Solutions [(USA) ]is ./: ,/ -= l) concerned. C:nsidering the fact that the ord(tr of tht: Tribunal isone, which wirs passed as earh as on 03.08.12007, i1 is expectedthat the Trit unal shall reconsider this matter, oarticlrlarlv,taking into < orrsideration the exemption rio grarltecl to theappellant on 1O.O2.2003. l.et the Tribune,l nor," decide thematter on pri )rlty basis ri,ithin the outer lirrrit of 9O days fromthe date of rec eipt of copl, of this order. 9. Accordir gly, Appeal stan<is allou'ed to the afort:said extent.There sha-ll be no order as to costs. 1O. Pending nriscellaneous applications, i' any shzLll standclosedclosed //TRUE COPY// SD/. Ei.S. CHIRANJEEVIJ.]INI REGIST To, sEclloN OFFTCER 2. 1. The lncome tax Appeltate Tribunat, Hyderabad Hyderabad [[-n]lfraOai.]]Bench ,B , l-.lyderrabad. ./: ,/ -= l) concerned. C:nsidering the fact that the ord(tr of tht: Tribunal isone, which wirs passed as earh as on 03.08.12007, i1 is expectedthat the Trit unal shall reconsider this matter, oarticlrlarlv,taking into < orrsideration the exemption rio grarltecl to theappellant on 1O.O2.2003. l.et the Tribune,l nor," decide thematter on pri )rlty basis ri,ithin the outer lirrrit of 9O days fromthe date of rec eipt of copl, of this order. 9. Accordir gly, Appeal stan<is allou'ed to the afort:said extent.There sha-ll be no order as to costs. 1O. Pending nriscellaneous applications, i' any shzLll standclosedclosed //TRUE COPY// SD/. Ei.S. CHIRANJEEVIJ.]INI REGIST To, sEclloN OFFTCER 2. 1. The lncome tax Appeltate Tribunat, Hyderabad Hyderabad [[-n]lfraOai.]]Bench ,B , l-.lyderrabad. Appeltate Tribunat, Hyderabad Hyderabad The Commi,;sioner of tncome rax feppeallV- feppeallV- [[-n]lfraOai.]] rax feppeallV- feppeallV- 4. 3. One The Deputy CC to { Commissioner Rt S. RAV|. Advocate of tncome IOpUci tax Crrcle i ils) \0 D S), Hyderabad 5. One CC to S Rt A. RAMAKRTSHNA heObi 6. Two CD Two CD CD Col iesiesAdvor;ate [Op(JC]6. Two CD Two CD CD Col iesiesAdvor;ate [Op(JC] 6. Two CD Two CD CD Col iesies kam/SP c\\( HIGH COURT DATED:21 t0912023 JUDGMEN'I' lTTA.No.32'l of 2007 THE APPEALIS ALLOWEI) @ruu,,\,.r/ €OA)L/'.'i$0ti?sB\,';\.-.:\.'7 !:.\'\ _\.- -:i .el: ^F -.i!r.--I:,