The matter was remitted to the CIT(A) for disposal afresh since the CIT(A) had dismissed the assessee’s appeal without adjudicating upon the question as to whether the law to s 248, as amended with effect from 1 June 2007, was applicable or not merely on the ground that it had never approached the AO for a certificate under s 195(2) for the remittance of the amount without the deduction of tax, as held by MumTrib in Jet Air (P) Ltd v CIT — In favour of: Others.
1. All these appeals filed by one assessee are directed against separate orders of
learned CIT(A)-XXXIII, Mumbai, passed on 22-1-2008. Since one common issue is
involved in these appeals, they were heard together and, therefore, a common order is
passed for the sake of convenience.
2. The grounds are common in all these appeals, therefore, the grounds are reproduced
from the ITA No. 2513/M/08 as under:-
"1. On the facts and in the circumstances of the case and in law, the learned
CIT(A) erred in not admitting appeals under section 248 of the Income-tax
Act, 1961 for payments made to non-resident for import of software under
section 195 after deducting tax thereon.
2. Without prejudice to Ground No. 1, on the facts and in the circumstances of
the case and in law, the learned CIT(A) erred in not going to into the case
whether the import of software amounts to purchase and sale of goods and
consequently the payment made for the import of goods are receipts in the
hands of non-resident as their business income and not royalties."
3. To dispose of these appeals, we refer to the facts in ITA No. 2513/M/08.
4. The assessee company entered into a licence agreement for the use of software
known as 'Rapid Passenger' from a company based in Dubai namely DNATA trading
as 'Mercarator'. Mercarator had developed and owns this software known as Rapid
Passenger, mainly, for Passenger Revenue Accounting System and has the absolute
authority to grant the licence to the client. The assessee had made payment of US$
37500 on 24-3-2006 towards licence fee. The assessee denied its liability towards
deduction of tax and had filed the appeal in this office on 28-4-2006 and raised the
following grounds of appeal.
"1. On the facts and in the circumstances of the case and in law, the remittance
made on import of software is not royalty as per provisions of section 9(1)(vi)
of the Income-tax Act read with Article 12(2) of the DTAA between India and
UAE.
The appellant prays that the same may please be held as sales proceeds in the
hands of the non-resident receipt and not royalties."
5. The CIT(A) held that the appeals, in question, are not maintainable for the reason
that the assessee has never approached the Assessing Officer for certificate under
section 195(2) for remittance of the amount without deduction of tax. The learned
CIT(A) relied upon the decision of the jurisdictional Tribunal in the case of Mahindra
and Mahindra Ltd. v. Addl. DIT [2007] 106 ITD 521 (Mum.). Aggrieved by the order
of the CIT(A), the assessee is in appeals before the Tribunal.
6. The learned counsel for the assessee, Mr. Arvind Sonde, submitted that the CIT(A)
was in error in applying the decision of jurisdictional Tribunal in the case of Mahindra
and Mahindra Ltd. (supra), as in that case, appeal was filed by the assessee against the
certificate issued by a Chartered Accountant firm, that too, without deducting the tax
and thereafter remitting the tax deducted at source. He pointed out that in the case of
the assessee the tax has been deducted at source and remitted to the Central
Government Account and thereafter appeals have been filed before the CIT(A). He
relied upon the following case laws to the proposition that an appeal can be filed
directly u/s 248 of the Act, before the CIT(A):-
1. CIT v. Wesman Engg. Co. (P.) Ltd. [1991] 188 ITR 327/55 Taxman 348
(SC)
2. Tata Iron and Steel Ltd. [2001] 116 Taxman 186 (sic)
3. Hindustan Constructions Co. Ltd. [IT Appeal Nos. 5595 (Bom.) of 1995 and
51 to 54 (Mum.) of 2000].
4. Sonata Information Technology Ltd. [IT Appeal Nos. 931 to 941 (Bang.) of
2006 and 672 to 702 (Bang.) of 2007]
5. Mahindra and Mahindra Ltd.'s case (supra).
7. The learned counsel for the assessee, specifically, relied upon the decision of the
Mumbai Bench of the Tribunal in the case of Kotak Mahindra Bank Ltd. v. ITO [IT
Appeal No. 345/Mum./2008 for assessment year 2007-08, order dated 30th June,
2010], and argued that the Tribunal considered the decision in the case of Mahindra
and Mahindra Ltd. (supra) and held:
"That section 248 does not refer to any order being passed by the Assessing
Officer as a condition precedent for filing an appeal by a person who denies
the liability to deduct tax". The Tribunal also found "that in the case of
Mahindra and Mahindra Ltd. (supra), on which reliance placed by the CIT(A),
the controversy was whether it was open to the CIT(A) to entertain an appeal
under section 248 against CA's certificate holding that tax at a particular rate is
required to be deducted by an assessee from a remittance to a non-resident
where the assessee is of the view that no such tax was required to be deducted
by him."
8. In view of the ratio laid down by the co-ordinate Bench (supra), the learned counsel
for the assessee submitted that all these appeals may be remitted to the file of the
CIT(A) for disposing off the same on merits.
9. On the other hand, the learned DR Mr. Jitendra Yadav, opposed the contentions of
the learned counsel for the assessee and pointed out that the order of the Tribunal in
the case of Kotak Mahindra Bank Ltd. (supra) deals with position of law as it stood
prior to the amendment by the Finance Act, 2007 with effect from 1-6-2007. He
invited our attention to section 248 as applicable with effect from 1-6-2007 and
submitted that the section contemplates an agreement or arrangement and a situation
where the tax is to be borne by the person by whom the income is payable. He
submitted that all the assessment years, in question, are subsequent to the amendment
made by the Finance Act, 2007 to section 248. The learned DR further took the Bench
through the Explanatory Memorandum of Finance Act, 2007 to clause (62) to explain
the rationale for the principle and submitted that, though, the CIT(A) based his
decision on the law as existed prior to the amendment, all the appeals under
consideration are to be dismissed for the reason that the assessee has not satisfied the
conditions prescribed in the post amended section 248 with effect from 1-6-2007. The
learned DR pointed out that CA's of the assessee company in his certificate dated 15-
4-2005, which is at pages 47 and 48 of the paper book expressed an opinion that tax is
required to be deducted under the DTAA. Thus, he submitted that on merits, the
assessee has no case.
10. In the rejoinder, the learned counsel Mr. Arvind Sonde invited our attention to a
chart, which has been filed in the paper book of the assessee, wherein remittances in
question were between 15-4-2005 to 24-3-2006 and submitted that section 248 as it
stood prior to 1-6-2007 is applicable.
11. Without prejudice to the above, the learned counsel for the assessee submitted that
the tax in question is to be borne by the assessee as evident from the agreement
between DNATA and Jet Air Pvt. Ltd., a copy of which has been placed at pages 1 to
46 of the paper book of the assessee. He took the Bench through a provision and
submitted that even under the post amendment conditions to section 248, the assessee
is entitled to file an appeal with the CIT(A) directly.
12. On careful consideration of rival submissions, facts and circumstances of the case
and perusal of case laws cited as well as the orders of CIT(A), we hold that whether,
the law as amended with effect from 1-6-2007 to section 248 is applicable or not, has
not been adjudicated by the learned CIT(A) and the facts have not been verified. If it
is concluded that, on the facts and circumstances of the case, the law as existed prior
to the amendment brought on the statute by the Finance Act, 2007, is applicable then,
the learned CIT(A) was in error as his decision is contrary to the decision of the "H"
Bench of the Tribunal in ITA No. 345/M/08 in the case of Kotak Mahindra Bank Ltd.
(supra). In such a situation the CIT(A) is duty bound to admit the appeals and
adjudicate the same on merits, which he has not done.
13. If the post amendment provision in section 248 applies to the facts of the case,
then, the CIT(A) has not examined as to whether, under the agreement or
arrangement, tax deductible is to be borne by the payer. As all these aspects are
required to be looked into, we are of the considered opinion that the issue under
consideration should be set aside to the file of the CIT(A) for fresh adjudication in
accordance with law and after providing reasonable opportunity of hearing to the
assessee in the matter. We order accordingly.
14. In the result, all the appeals filed by the assessee are treated as allowed for
statistical purposes.
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