The DCIT(OSD), Range-1,, Ahmedabad v. Hydroplus International,

ITA 2690/AHD/2005 | 2002-2003
Pronouncement Date: 26-02-2010 | Result: Allowed

Appeal Details

RSA Number 269020514 RSA 2005
Assessee PAN AAACH5327G
Bench Ahmedabad
Appeal Number ITA 2690/AHD/2005
Duration Of Justice 4 year(s) 2 month(s) 3 day(s)
Appellant The DCIT(OSD), Range-1,, Ahmedabad
Respondent Hydroplus International,
Appeal Type Income Tax Appeal
Pronouncement Date 26-02-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted B
Tribunal Order Date 26-02-2010
Date Of Final Hearing 23-02-2010
Next Hearing Date 23-02-2010
Assessment Year 2002-2003
Appeal Filed On 23-12-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI BHAVNESH SAINI JM & SHRI A.N. PAHUJA A M I.T.A. NO.2690/AHD/2005 (ASSESSMENT YEAR 2002-03) DY.CIT(OSD) RANGE-1 VS HYDROPLUS INTERNATIONAL AHMEDABAD C/O MOHINDER PURI & CO 1 A-D VANDANA BUILDING 11 TOLSTOY MARG NEW DELHI 110 001 [PAN : AAACH5327G] (APPELLANT) (RESPONDENT) C.O. NO.48/AHD/2006 (ARISING OUT OF I.T.A. NO.2690/AHD/2005) (ASSESSMENT YEAR 2002-03) HYDROPLUS INTERNATIONAL VS DY.CIT (OSD) RANGE-1 NEW DELHI AHMEDABAD (CROSS-OBJECTOR) (APPELLANT) REVENUE BY : SMT NEETA SHAH DR ASSESSEE BY : SHRI SN SOPARKAR AND MS. URVASHI SHODHAN ARS O R D E R A.N. PAHUJA : THIS APPEAL BY THE REVENUE AND THE CR OSS-OBJECTION BY THE ASSESSEE DIRECTED AGAINST AN ORDER DATED 04-10-20 05 OF THE LD.CIT(A)-V AHMEDABAD RAISE THE FOLLOWING GROUNDS: I.T.A. NO.2690/AHD/2005 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS ON THE CASE IN DIRECTING TO DELETE THE GROSSING UP OF TAX PAID BY GOVERNMENT GUJARAT OF RS.48 49 788/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 3.THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA 2690/AHD/2005 CO 48/AHD/2006 2 C.O. NO.48/AHD/2006 1. THAT T HE LEARNED CIT(A) HAS ERRED IN NOT DELETING INTERE ST WRONGLY LEVIED U/S 234B & 234C OF THE INCOME-TAX ACT 1961 2. THAT T HE LEARNED CIT(A) HAS ERRED IN OBSERVING THAT THE G ROUND SEEKING DELETION OF INTEREST U/S 234B & 234C WAS NO T PRESSED. 3. THAT T HE RESPONDENT MAY BE ALLOWED TO ADD SUPPLEMENT AL TER MODIFY OR DELETE ANY OF THE GROUNDS OF CROSS OBJECTIONS RA ISED HEREIN ABOVE. 2. FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS. 52 53 937/- FILED ON 31.10.2002 BY THE ASSESSEE WAS SELECTED FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE INCOME-T AX ACT 1961[HEREINAFTER REFERRED TO AS THE ACT] . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT THE ASSESSEE A N ON-RESIDENT COMPANY INCORPORATED IN FRANCE ENTERED INTO AN AGREEMENT W ITH GOVERNMENT OF GUJARAT[GOG] FOR EXECUTING CONTRACT FOR STUDY DESI GN SUPPLY AND INSTALLATION OF FUSEGATE SYSTEMS ON DAMS IN GUJARAT AND HAD ESTABLI SHED A PROJECT OFFICE IN INDIA IN CONNECTION WITH THE EXECUTION OF AFORESAID WORK. AS PER ARTICLE 13.3 OF THE AGREEMENT THE GOG HAD TO BEAR ALL THE INDIAN T AXES LEVIES DUTIES ETC. WHILE ARTICLE 7 STIPULATED THE OBLIGATIONS OF GOG INCLUDING PAYMENT OF APPLICABLE TAXES AND DUTIES IN RESPECT OF HYDROPLUS TAX LIABIL ITY AND OF TAX LIABILITY OF ITS FOREIGN PERSONNEL. TO A QUERY BY THE AO THE ASSESS EE REPLIED VIDE ITS LETTER DATED 08-02-2005 THAT IN TERMS OF ARTICLE 13.3 OF THE AGREEMENT GOG BEING RESPONSIBLE TO BEAR ALL THE INDIAN TAXES DUTIES ET C. DEPOSITED AN AMOUNT OF RS.50 27 685/- TOWARDS INCOME TAX LIABILITY OF HYDR OPLUS FRANCE. THE TAX LIABILITY OF HYDROPLUS WAS ESTIMATED BASED ON PROFITABILITY O F APPROX.6% OF THE CONTRACT RECEIPTS AND BY WAY OF ABUNDANT CAUTION WHILE COMP UTING THE AMOUNT OF TAX LIABILITY GOG GROSSED UP THE AMOUNT OF TAX. HOWEVE R WHILE FINALIZING THE TAX RETURN THE ASSESSEE CLAIMED EXEMPTION FROM GROSSIN G UP UNDER THE PROVISIONS OF SECTION 10(6B) OF THE ACT. IN A NOTE ANNEXED TO LE TTER DATED 28.11.1995 THE EXECUTIVE ENGINEER NADIAD IRRIGATION DIVN. GOVT O F GUJARAT NADIAD STATED AS UNDER: IN THE PREAMBLE TO THE SAID AGREEMENT IT IS CLARI FIED THAT REQUISITE APPROVAL AS PER ARTICLE 10 OF THE AGREEMENT DATED 2 0 TH DEC.1992 (VIZ. AGREEMENT PLACED AT ANNEXURE 1 TO THE SAID AG REEMENT) HAVE ITA 2690/AHD/2005 CO 48/AHD/2006 3 BEEN OBTAINED. THE APPROVAL COVERED UNDER ARTICLE 10 OF THE AGREEMENT OF 20 TH DEC 1992 REFERS TO APPROVAL BY INDIAN AND FRENCH GOVERNMENT OF THE AGREEMENT. IN EFFECT IT MEANS THAT THE APPROVAL BY INDIAN GOVE RNMENT HAS BEEN OBTAINED. THEREFORE THE LAST CONDITION OR OTHER RE PLACED AGREEMENT APPROVED BY THE CENTRAL GOVERNMENT IS ALSO FULFILLE D. 2.1 HOWEVER THE AO DID NOT ACCEPT THE SUBMI SSIONS ON BEHALF OF THE ASSESSEE ON THE GROUND THAT IN TERMS OF PROVISIONS OF SEC. 10(6B) OF THE ACT THE AGREEMENT HAS TO BE ENTERED INTO BY THE CENTRAL GOV ERNMENT WITH THE GOVERNMENT OF FOREIGN STATE WHEREAS IN ASSESSEES C ASE THE AGREEMENT HAS BEEN ENTERED INTO BETWEEN THE ASSESSEE AND THE GOVE RNMENT OF GUJARAT. ACCORDINGLY THE AO DID NOT ALLOW THE EXEMPTION U/S 10(6B) OF THE ACT IN RESPECT OF TAX OF RS.50 27 685/- DEPOSITED BY THE GOG AND M ADE AN ADDITION OF RS. 48 49 788/- TO THE TOTAL INCOME. 3. ON APPEAL THE ASSESSEE SUBMITTED THAT PROVISIONS OF SEC. 10(6B) OF THE ACT STIPULATE AS UNDER: (I) THE ASSESSEE MUST BE A NON RESIDENT OR FOREIGN COMPANY; (II) HE/IT MUST DERIVE INCOME FROM GOVERNMENT OR AN INDIAN CONCERN; (III) INCOME IS DERIVED IN PURSUANCE OF AN AGREEMEN T ENTERED INTO BY INDIAN GOVERNMENT WITH FOREIGN GOVERNMENT OR WIT H INTERNATIONAL ORGANIZATION; (IV) TAX IS PAYABLE ON SUCH INCOME UNDER THE SAID A GREEMENT OR ANY OTHER RELATED AGREEMENT APPROVED BY THE CENTRAL GOVERNMENT. THE ASSESSEE ARGUED THAT IN TERMS OF THEIR AGREEME NT WITH GOG ALL THE AFORESAID STIPULATED CONDITIONS ARE FULFILLED .AS P ER ARTICLE 11 OF THE AGREEMENT THE PRE-CONDITION FOR COMING INTO FORCE OF THE AGRE EMENT WERE AS UNDER: I) APPROVAL BY INDIAN AND FRENCH GOVERNMENT OF AGREEMENT; II) THE FINANCIAL PROTOCOL BETWEEN GOVERNMENT OF INDIA AND THE GOVERNMENT OF FRANCE HAS BEEN IMPLEMENTED AND THE F INANCING OF THE FRENCH PORTION OF THE PROJECT IS INCLUDED IN IT ; ITA 2690/AHD/2005 CO 48/AHD/2006 4 III) ALL THE CREDIT AGREEMENTS (NATEXIS BANQUE AND FRENCH BANK) HAVE BEEN SIGNED. SINCE APPROVAL OF THE INDIAN GOVERNMENT HAS BEEN O BTAINED AND THE CONTRACT FALLS UNDER THE FINANCIAL PROTOCOL BETWEEN GOVERNME NT OF INDIA AND THE GOVERNMENT OF FRANCE THE ASSESSEE IS ELIGIBLE FOR THE BENEFIT OF PROVISIONS OF SEC. 10(6B) OF THE ACT IT WAS PLEADED. INTER ALIA THE ASSESSEE RELIED UPON A DECISION OF THE LD. CIT(A) IN THE ASSESSEES OWN C ASE FOR THE A.Y. 1995-96. IN THE LIGHT OF THESE SUBMISSIONS THE LD. CIT(A) DELE TED THE ADDITION OF RS.48 49 788/- FOLLOWING DECISION OF HIS PREDECESSO R FOR THE AY 1995-96. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGA INST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR WHILE CARRYING US THROU GH THE IMPUGNED ORDER SUBMITTED THAT THE LD. CIT(A) IN HIS ORDER FOR THE AY 1995-96 FOLLOWED IN THE IMPUGNED ORDER DID NOT ADDUCE ANY REASONS FOR DELE TING THE ADDITION . SINCE THE INCOME HAS BEEN DERIVED IN TERMS OF THE AGREEMENT ENTERED IN TO ON 10.12.1998 BETWEEN GOG AND THE ASSESSEE AND THE TAX ON SUCH INCOME HAS NOT BEEN PAID UNDER THE TERMS OF AGREEMENT APPROVED BY THE C ENTRAL GOVERNMENT THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION . SHE ADDE D THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN RELYING UPON THE DECISION OF THE CIT(A ) FOR THE AY 1995-96.ON THE OTHER HAND THE LD. AR ON BEHALF OF THE ASSESSEE W HILE CARRYING US THROUGH THE PAPER BOOK SUBMITTED THAT THE ASSESSEE FULFILLED TH E CONDITIONS STIPULATED U/S 10(6B) OF THE ACT AND IS THUS ELIGIBLE FOR THE EX EMPTION. TO A QUERY BY THE BENCH THE LD. AR SUBMITTED THAT REQUISITE APPROVA L OF THE CENTRAL GOVERNMENT IN RESPECT OF AFORESAID RELATED AGREEMENT IS NOT AV AILABLE WITH THEM AND THEY HAVE ALREADY APPROACHED THE AUTHORITIES UNDER THE PROVISIONS OF RTI ACT 2005. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF TH E CASE WE FIND THAT THE LD. CIT(A) MERELY FOLLOWED DECISION OF HIS PREDECESSOR FOR THE AY 1995-96 AND DELETED THE ADDITION. THERE IS NOTHING TO SUGGEST I N THE IMPUGNED ORDER FOR THE YEAR UNDER CONSIDERATION OR IN THE ORDER OF THE LD. CIT(A) FOR THE AY 1995-96 THAT ITA 2690/AHD/2005 CO 48/AHD/2006 5 THE LD. CIT(A) EXAMINED EITHER THAT THE INCOME IS DERIVED IN PURSUANCE OF AN AGREEMENT ENTERED INTO BY INDIAN GOVERNMENT WITH FO REIGN GOVERNMENT OR WITH INTERNATIONAL ORGANIZATION OR EVEN THE APPROVAL AC CORDED BY THE CENTRAL GOVERNMENT TO THE AFORESAID AGREEMENT WITH THE GOG EVEN WHEN THE ASSESSEE REFERRED TO ARTICLE 11 OF THE AFORESAID AGREEMENT STIPULATING APPROVAL BY INDIAN AND FRENCH GOVERNMENT OF THE SAID AGREEMENT WITH T HE GOG. UNDISPUTEDLY REQUISITE APPROVAL OF THE CENTRAL GOVERNMENT STIPUL ATED IN SEC. 10(6B) IS NOT ON RECORDS NOR HAS BEEN PLACED BEFORE US ON THE GROUN D THAT IT WAS NOT AVAILABLE WITH THE ASSESSEE. IN THESE CIRCUMSTANCES WE CO NSIDER IT FAIR AND APPROPRIATE TO VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTOR E THE MATTER TO HIS FILE WITH THE DIRECTIONS TO RE-ADJUDICATE THE MATTER AFTER EXAM INING THE APPROVAL OF THE CENTRAL GOVERNMENT STIPULATED U/S 10(6B) OF THE ACT KEEPI NG IN MIND OUR AFORESAID OBSERVATIONS AND THEREAFTER PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES . WITH THESE DIRECTIONS GROUND NO. 1 IN THE APPEAL ARE DISPOSED OF. 6. GROUND NOS. 2 & 3 IN THE APPEAL OF THE REVENU E BEING GENERAL IN NATURE DO NOT REQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDI TIONAL GROUND HAVING BEEN RAISED IN TERMS OF RESIDUARY GROUND NO.4 ALL THESE GROUNDS ARE DISMISSED. 7. AS REGARDS GROUNDS RAISED IN THE CROSS OBJECTION THE LD. AR ON BEHALF OF THE ASSESSEE ADMITTED THAT THESE ARE CONSEQUENTIAL IN NATURE. THE LEVY OF INTEREST U/S 234B OF THE ACT BEING MANDATORY [COMM ISSIONER OF INCOME TAX.VS ANJUM M. H. GHASWALA AND OTHERS 252 ITR 1(SC) AFFI RMED BY HON'BLE APEX COURT IN THE CASE OF CIT V. HINDUSTAN BULK CARRIERS [2003] 259 ITR 449 (SC) AND IN THE CASE OF CIT V. SANT RAM MANGAT RAM JEWELLERS [2003] 264 ITR 564 (SC) ] THESE GROUNDS ARE DISMISSED. HOWEVER THE AO MAY A LLOW CONSEQUENTIAL RELIEF IF ANY WHILE GIVING EFFECT TO THIS ORDER. ITA 2690/AHD/2005 CO 48/AHD/2006 6 8. IN THE RESULT APPEAL FILED BY THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSES WHILE CROSS OBJECTION IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THI S 26TH DAY OF FEBRUARY 2010. SD/- SD/- (BHAVNESH SAINI) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 26 TH FEBRUARY 2010 PK/- COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A)-V AHMEDABAD 4. CIT-CONCERNED AHMEDABAD BY ORDER 5. DR B BENCH DEPUTY REGISTRAR ITAT AHMEDABAD