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2023 Supreme(Del) 5255
IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Girish Kathpalia, JJ.
The Commissioner of Income Tax-international Taxation – Appellant
Versus
Sumitomo Coporation – Respondent
ITA 276 of 2023
Decided On : 15-05-2023
Mr Ruchir Bhatia, Sr Standing Counsel with Mr Shlok Chandra and Ms Priya Sarkar, Standing Counsel, for the Appellant.
Mr C.S. Aggarwal, Sr Adv with Mr Prakash Kumar, Mr Ravi Pratap Mall and Mr Uma Shankar, Advocates, for the Respondent.
The main legal point established in the judgment is that the grant of credit for tax deducted at source is contingent upon the existence of taxable income, and if no taxable income arises or accrues, the refund or grant of credit cannot be denied.
Headnote:
Tax Credit - Income Tax - Section 195, Section 199 - The judgment discusses the application for condonation of delay in re-filing the appeal and the appeal concerning Assessment Year 2005-06. The court considered the issue of granting credit for tax deducted at source and surcharge amounting to Rs.1,94,54,135/- in the context of off-shore supplies made by the respondent/assessee to an entity located in Japan. The court upheld the Tribunal's finding that no taxable income arose or accrued in India for the respondent/assessee, and therefore, the refund or grant of credit of tax deducted at source could not be denied.
Fact of the Case:
The appeal concerned the Assessment Year 2005-06, and the appellant/revenue sought to challenge the order passed by the Income Tax Appellate Tribunal regarding the grant of credit for tax deducted at source and surcharge amounting to Rs.1,94,54,135/- in the context of off-shore supplies made by the respondent/assessee to an entity located in Japan.
Finding of the Court:
The court found that no taxable income arose or accrued in India for the respondent/assessee, and therefore, the refund or grant of credit of tax deducted at source could not be denied.
Issues: The main issue was whether tax credit could have been given for tax deducted at source in relation to advances received by the respondent/assessee from an entity located in Japan against off-shore supplies made in the succeeding period.
Ratio Decidendi: The court upheld the Tribunal's finding that no taxable income arose or accrued in India for the respondent/assessee, and therefore, the refund or grant of credit of tax deducted at source could not be denied.
Final Decision: The appeal was closed, as no substantial question of law arose for consideration.
JUDGMENT
Rajiv Shakdher, J. (Oral)
CM Appl.24992/2023 [Application filed on behalf of the appellant seeking condonation of delay of 300 days in re-filing the appeal]
1. This is an application filed on behalf the appellant/revenue seeking condonation of delay in re-filing the appeal.
2. According to the appellant/revenue, there is a delay of 300 days.
3. Mr C.S. Aggarwal, learned senior counsel, who appears on behalf of the respondent/assessee, says he does not oppose the prayer made in the application.
4. Accordingly, the delay is condoned. The application is disposed of in the said terms.
ITA 276/2023
5. This appeal concerns Assessment Year (AY) 2005-06.
6. The appellant/revenue seeks to challenge the order dated 25.08.2020 passed by the Income Tax Appellate Tribunal [in short, "Act"].
6.1. The only question which arose for consideration before the Tribunal was whether or not the appellant/revenue was right in refusing to grant credit for tax deducted at source and surcharge amounting to Rs.1,94,54,135/-.
7. The record shows that the respondent/assessee had made off-shore supplies to an entity named Bhakara Beas Management Board [in short, "Board"]. The Board credited to the account of the respondent/assessee, Rs.4,74,51,548 [albeit, before deducing tax at source and surcharge] as advance towards off-shore supplies made by it. However, before remitting the said amount the Board deducted Rs.1,94,55,135/- towards tax at source and surcharge. Thus, the net amount which was remitted by the Board to the respondent/assessee [which is located in Japan] was Rs.2,79,96,414/-.
7.1. It is in this backdrop that the respondent/assessee seeks credit of Rs.1,94,55,135/- deposited on its behalf towards tax at source and surcharge.
8. We may note that Rs.2,79,96,414/[after deducting tax at source at the rate of 40% and surcharge], was remitted to the respondent/assessee in the Financial Year (FY) 2004-05 [AY 2005-06].
9. The Tribunal in this background has returned the following findings of fact, which are recorded in paragraphs 14 to 16 of the impugned order. For the sake of convenience, the same are extracted hereafter:
"14. We have heard the rival submissions and also perused the relevant finding given in the impugned orders. From the detailed discussion as made above, we find that the sole issue is with regard to credit of TDS amounting to Rs.19454135/- which was deducted by M/s. BBMB in respect of off-shore supply received by it from assessee in Japan. The assessee had received advances against off-shore supplies to be made of Rs.4,47,45,548/- to be TDS and against the said advance BBMB had deducted tax at source that the surcharge which aggregated to Rs.1,94,55,135/-. Further the supplies were made against the said advances in the financial year 2006-07 relevant to Assessment Year 2007-08. BBMB before remitting the aforesaid advances made an application u/s. 195(2) seeking exemption from deduction at source on payments made to the Japan for off-shore supply contract. On 25.05.2004, an order u/s. 195(2) was passed the ITO-Ward-3(1), Chandigarh directing BBMB to deduct tax @ 40% and surcharge of 2.5% on the gross payment to be released to the assessee. BBMB later on moved an application to reconsider the order dated 25.05.2004 and on 02.06.2004 order u/s. 195(2) was passed and thus, earlier order dated 25.05.'2004 stood cancelled. Once the earlier order u/s. 195(2) wherein direction was given to deduct tax at source has been canceled that means TDS has wrongly been deducted and then off-course the assessee had become entitled to refund of the said sum. Though, later on, again BBMV was directed to deduct tax @ 4% on the gross payment. Once the request of BBMB for grant of refund of excess TDS was rejected, BBMB had filed an application for revision u/s 264. However, in the order u/s. 264, Ld. CIT simply stated that M/s Sumitomo Corporation has filed income tax return for the said amount of TDS deducted had been claimed and the assessm
