Txa v. M/S. Tumkur Minerals Pvt. Ltd

IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 26 OF 2024 ----------------------------- The Joint Commissioner of Income Tax,Margao Range, Goa (Merged with JointCommissioner of Income Tax, Range-1,Panaji Having office at 2[nd] Floor, AaykarBhavan, Panaji, Goa – 403001.… Appellant V e r s u s M/s. Tumkur Minerals Pvt. Ltd., SalgaocarHouse, Vasco da Gama, Goa. PAN: AACCT… Respondents2057P Ms. Susan Linhares, Senior Standing Counsel with Ms. SwatiKamat Wagh, Advocate for the Appellant. Mr. Ryan Menezes, Advocate with Ms. Neha Shirodkar and Ms.Alvares, Advocates for the Respondents. CORAM:BHARATI DANGRE & NIVEDITA P. MEHTA, JJ. DATE: 25[th] June, 2025 ORAL JUDGMENT (Per Bharati Dangre, J) 1. The appeal came to be admitted on18.10.2024, on the followingsubstantial questions of law : (A) Whether in the facts and circumstances, the ITAT has erredin deleting the dis-allowance u./40(a)(i) of the Income Tax Act,1961 on foreign remittance made to non-residents towards destination sampling charges/ore analysis charges ofRs.10,21,904 for services rendered outside India for non-deduction of tax at source u/s 195 of the Income Tax Act, 1961? (B) Whether in the facts and circumstances, the ITAT is correctin holding that the criterion of the second limb of the exceptionclause in sec. 9(1)(vii)(b) of the Income Tax Act, 1961 wassatisfied in the case of the assessee ? 2. During the pendency of the appeal, the Division Bench of thisCourt to which one of us, (Nivedita Mehta, J), is a party in Tax AppealNo. 47 of 2014 and 49 of 2014, had an opportunity to deal with anexception as contained in clause 3.1(l)(i) and (ii) of the Circular No. 5 of2024 issued by the CBDT fixing the threshold limits for filing of appealsby the Government before the Department of ITAT, High Court andbefore the Apex Court with a view to reduce the litigation. 3.Though, undisputably, the tax limit involved in the appeal isRs.3,06,571/-, however, it is the submission advanced on behalf of Ms.Linhares appearing on behalf of the Revenue, that the present case fallswithin the exception as set out in 3.1(l)(i)-“in respect of litigationarising out of the disputes relating to TDS/TCS matters in bothdomestic and International Taxation charges; (i) where dispute relatesto determination of nature of transaction such that the liability to deduct TDS/TCS thereon or otherwise is under question.” 4.In the appeals decided by the Division Bench on 09.12.2024,when a similar objection was raised and the case of the Revenue wassought to be brought within clause 3.1(l) of Circular No. 5/2024, eventhough the monetary threshold was not crossed, in the backgroundfacts clearly noted in paragraph 12 and 14, the counter arguments cameto be considered. Apart from the issue whether these Circulars wouldhave a retrospective impact, in paragraph 31, the argument of theRevenue that the case would fall within the explanation of 3.1(l) wasspecifically considered and a specific conclusion was reached byinterpreting clause 3.1(l) to the effect that it excludes appeals arisingout of proceedings taken against a deductor for failure to deduct tax atsource and recovery of the tax from the payer that was omitted to bededucted. Construing that if there was an obligation to deduct tax atsource on a payer in terms of the provisions contained in Chapter XVII-B of the Act and the payer fails to discharge such obligation, it is liablefor several consequences. A clear demarcation was noted by the Division Bench in a casewhether it would be treated as a Respondent in default for failing todeduct taxes or whether it would be fair who had failed to pay the taxes.This distinction is succinctly made out in the following words : “14. Countering the submissions of the assessee that afternotification of Circular No.5/2024 and raising of monetary limitto Rs.2 Crores, the present appeals ought to be withdrawn A clear demarcation was noted by the Division Bench in a casewhether it would be treated as a Respondent in default for failing todeduct taxes or whether it would be fair who had failed to pay the taxes.This distinction is succinctly made out in the following words : “14. Countering the submissions of the assessee that afternotification of Circular No.5/2024 and raising of monetary limitto Rs.2 Crores, the present appeals ought to be withdrawn without reference to the exceptions in Circular No.5/2024 andthat only the exceptions as existing on the date of the institutionof the appeals (i.e. Instruction 3/2011 and 5/2014) ought to beconsidered, Ms Razaq urged that the submission ismisconceived for the following reasons:- i) The Board's Instructions no 3/2011 admittedly standsuperseded by the subsequent Circulars. he Circulars no.5/2024 and 9/2024 presently hold the field and govern thesubject matter of filing appeals by the Departmentalauthorities. ii) Without prejudice to the above, apart from theexceptions contained at para 8 of the said Instruction3/2011 (which are referred to by the assessee in its writtensubmissions), the said Instruction 3/2011 at para 5 hadintroduced another exception to the monetary limits asfollows: "...However, in case of a composite order of any HighCourt or appellate authority, which involves morethan one assessment year and common issues in morethan one assessment year, appeal shall be filed inrespect of all such assessment years even if the 'taxeffect' is less than the prescribed monetary limits inany of the year(s), if it is decided to file appeal inrespect of the year(s) in which 'tax effect' exceeds themonetary limit prescribed."Court or appellate authority, which involves morethan one assessment year and common issues in morethan one assessment year, appeal shall be filed inrespect of all such assessment years even if the 'taxeffect' is less than the prescribed monetary limits inany of the year(s), if it is decided to file appeal inrespect of the year(s) in which 'tax effect' exceeds themonetary limit prescribed." iii) The present appeals arise out of a composite order of theITAT for the Assessment Years 2006-07 and 2007-08 andinvolve the question of taxability of the transaction relating topayments made to Marriott International USA by the Assessee,which was an issue of a recurring nature every year and as suchhas a cascading effect; thus coming within the exception laiddown in the said Instruction no. 3/2011. iv) The Boards' Instruction no. 3/2011 was Superseded by theBoard's Instruction no. 5/2014 dated 10th July 2014. However,the appeals filed before 10th July 2014 were saved (vide para11). The present appeals were filed - TXA no. 47/2014 on 7thMay, 2014 and TXA no. 49/2014 also on 7th May, 2014.” 5.With the above specific observation, the Division Bench thereforearrived at a conclusion that what is covered by para 3.1(l) are casesspringing out of a litigation from order passed under Section 201,201(1A). However, in the appeals before the Court, the original orderarises out of an assessment under Section 143(3) and a conclusion wasdrawn that the exclusion contemplated in para 3.1(l) would not applyand, therefore, the appeals came to be dismissed. 6.Ms. Linhares did not dispute before us that the present appealarises out of assessment under Section 143(3) and not under Section201. Hence, the conclusion derived by the Court that 3.1(l) as anexception to Circular no. 5/2024 is not attracted in case of theassessment under Section 143 since one Division Bench of this Court towhich one of us is a party has taken a view as expressed in the orderdated 09.12.2024, it equally binds this bench. 7.In the wake of the above, since admittedly the tax effect in thepresent appeal by the Revenue is less than Rs. 2 Crores, the appeal isdismissed in the wake of Circular no. 9/2024 read with Circular no. 5/2024, which contain the exception in para 3 to the applicability of the circular. 6.Ms. Linhares did not dispute before us that the present appealarises out of assessment under Section 143(3) and not under Section201. Hence, the conclusion derived by the Court that 3.1(l) as anexception to Circular no. 5/2024 is not attracted in case of theassessment under Section 143 since one Division Bench of this Court towhich one of us is a party has taken a view as expressed in the orderdated 09.12.2024, it equally binds this bench. 7.In the wake of the above, since admittedly the tax effect in thepresent appeal by the Revenue is less than Rs. 2 Crores, the appeal isdismissed in the wake of Circular no. 9/2024 read with Circular no. 5/2024, which contain the exception in para 3 to the applicability of the circular. No order as to costs. NIVEDITA P. MEHTA, J. BHARATI DANGRE, J. Signed by: ESHA SAINATH VAIGANKARDesignation: Personal AssistantDate: 02/07/2025 19:18:40