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Judgment
C.M. Application No. 75164 of 2015.
This is an application for condonation of delay. The applicant had explained satisfactorily the delay committed in filing the appeal. Therefore, we hereby condone the delay in filing the appeal.
The application stands allowed.
This appeal is directed against the order dated 20.02.2015 as well as 11.04.2014 passed by the Income Tax Appellate Tribunal. The relevant assessment year is 2005-2006. The assessee is carrying on the profession of Diagnostics of medical nature like C-T Scan, Ultrasound, X-Ray, etc. During the course of assessment on a verification of profit and loss account it was found that the same is debited by an amount of Rs. 33,14,317.00 under the head annual maintenance charges, besides other items and no TDS was made on the amount. Therefore, he was required to explain why the amount of payment of annual maintenance charges be not disallowed as no TDS was made on the amount paid to M/s. Wipro GE Medical Services as AMC.
The assessee submitted reply of show cause notice in his defence, he quoted several decisions rendered on the point. The assessee in his reply has submitted that the annual maintenance charge was not a work as per provisions of Section 194C. The Assessing Officer considered his submission and arrived at conclusion that the amounts payable to a contractor or sub-contractor for carrying out any work, including annual maintenance contract (which may include labour or supply of any thing) is includable in the definition ''work''. Accordingly, the Assessing Officer disallowed the amount of Rs. 33,14,317.00 and added back to the total income of assessee. The amount of Rs. 40,09,368/- was debited to profit and loss account under the head royalty to KGMU, therefore, the assessee required to explain why the royalty debited should not be disallowed. Ultimately, the Assessing Officer disallowed it and added back to the total income of the assessee, to keep the issue alive. Thus the total income of the assessee was computed a sum of Rs. 5561170/-.
The appellant/assessee being aggrieved with the assessment order dated 28.12.2007 filed an appeal on various grounds. The appellate authority allowed the appeal and deleted the disallowance on royalty charges. The Revenue had challenged the order passed by the appellate authority before the Income Tax Appellate Tribunal, Lucknow Bench Lucknow. The learned Tribunal allowed the appeal by setting aside the order impugned i.e. the order passed by the CIT(A) and remanded the issue back to the file of Assessing Officer for fresh adjudication in accordance with law.
After providing due and reasonable opportunity of being heard to the assessee, the learned Tribunal had observed that to resolve this controversy whether the contract between the assessee and M/s. Wipro GE was a work contract or service contract, the documents needed is the agreement entered into by the assessee with M/s. Wipro GE. However, the said agreement was not furnished before us and neither the Assessing Officer nor the learned CIT(A) had thrown any light on the contents of the said agreement. We, therefore, deem it proper to set-aside the impugned order passed by the learned CIT(A) and remand the issue back to the file of Assessing Officer for fresh adjudication in accordance with law after providing due and reasonable opportunity of being heard to the assessee.
Pursuant to the order passed by the Tribunal, the Assessing Officer further examined the matter and passed the following order:-
7.1 In view of the above points emerging after examination of the contract Notes, it is found that the contract of the assessee with the service provided fulfills all the conditions as laid down in Section 194C (Read with explanations iv(e)) and is a contractee who is responsible for paying sums to the contractor M/s. Wipro G.E. Medical Systems for carrying out the work of maintenance services. Hence the payment of Rs. 33,14,317/- paid as AMC is squarely covered under the provisions of Section 194C, accordingly, non-deduction of requisite tax at source for such amounts at the time of credit attracts the provisions of Section 40(a)(ia). Accordingly Rs. 33,14,317/- is disallowed and added to the income of the assessee under Section 40(a)(ia).
The appellant/Assessee challenged the order of assessment dated 23.12.2010 in appeal. The appellate authority allowed the appeal and set aside the order passed by the Assessing Office. Then the Revenue preferred an appeal against the appellate order dated 03.12.2012 before the Income Tax Appellate Tribunal Lucknow Bench Lucknow. The learned Tribunal adjudicated upon the issue and arrived at conclusion that ''since no finding was given by the CIT(A) on merit with regard to the nature of payments, we, therefore set aside the order of CIT(A) and reverse the finding of CIT(A) given following the order of the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports. Since the CIT(A) has not given any finding on merit, we restore the matter to his file with the direction to adjudicate the issue on merit as to whether the provisions of section 194C are applicable to the present case.
Further the assessee moved an application for rectification in the order of the Tribunal dated 11.04.2014 on the ground that Tribunal had not followed the judgment of the High Court in the case of CIT Vs. Vector Shipping Services (P) Ltd. in ITA No. 1220 of 2013 and has taken a contrary view while rejecting the claim of the assessee. The learned Tribunal dismissed the appellants Misc. Application by means of order dated 20.02.2015. The appellant has filed the instant Appeal against the order dated 20.02.2015 as well as 11.04.2014 passed by the Income Tax Appellate Tribunal by raising the following substantial questions of law.
Whether, the learned Income Tax Appellate Tribunal is correct in Law and has acted Ex-Juris, is not following the judgment of this Hon''ble Court in the case of M/s. Vector Shipping Services (P) Ltd. Income Tax Appeal No. 122 of 2013, in identical facts and circumstances?
Whether, without prejudice, in view of the 2nd proviso to Section 40(a)(ia), the impugned order of the Income Tax Appellate Tribunal is in accordance with law and not perverse, particularly as the assessee has not been classified as an Assessee in default?
Learned counsel for the Revenue has raised objection against the maintainability of the appeal at the stage of admission with the submission that Coordinate Bench of this Court has dealt with an identical issue in Income Tax Appeal No. 26 of 2014 and declined to interfere in the order passed by the Tribunal with the observation that ''since the Tribunal, at this stage, merely restored the proceedings back to the CIT(A) for determination of this question as no substantial question of law would arise.''
In reply, the learned Counsel for the appellant has submitted that ''since the Tribunal has formed its conclusive opinion with regard to the application under Section 40(a)(ia) and held that the provision of Section 40(a)(ia) would cover not only to the amount which are payable as on 31 March of a particular year, but also which are payable at any time during the year, the CIT (A) would have no jurisdiction to interfere with the conclusive opinion of the Tribunal and if this Court does not interfere in the order impugned and dismiss the appeal at admission stage, the appellant would be remediless. He further cited a case decided by this Court in Income Tax Appeal No. 122 of 2013 (Commissioner of Income Tax, Muzaffarnagar Vs. M/s. Vector Shipping Services (P) Ltd. Muzaffarnagar) and submitted that the Tribunal has given his opinion contrary to the aforesaid decision of the High Court.
Upon perusal of the order impugned we find that the learned Tribunal has observed that the revenue has challenged the order of CIT(A) on merit also, but no finding was given by the CIT(A) on merit with regard to the nature of payments, therefore, the learned Tribunal set aside the order of CIT(A) and reversed the finding of CIT(A) given following the order of the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports (Supra). Since the CIT(A) has not given any finding on merit, the learned Tribunal restored the matter to his file with the direction to adjudicate the issue on merit as to whether the provisions of Section 194C are applicable to the present case.
We also do not find any discussion on merit of the case with regard to application under Section 194C of the Income Tax Act. Therefore, we are of the view that no substantial question of law would arise at this stage to consider the applicability of Section 194C of the Act. Under these, circumstances, we do not find it appropriate to entertain the appeal on the substantial question law raised by the appellant. In so far as, the applicability of Section 40(a)(ia) is concerned. We are of the view that the stage of consideration of this question would arise after determination of the case with regard to applicability of Section 194C of the Act, by the Tribunal. Therefore, we keep open the issue as to whether a dis-allowance was warranted under the provisions of Section 40(a)(ia) of the Act be raised by the Appellant after determination of the applicability of Section 194C of the Act.
With the aforesaid observations, we dismiss the appeal at admission stage.