CIT(A) cannot dismiss 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

ORDER

PER BENCH.

All these appeals filed by one assessee are directed against separate orders of learned CIT(A)-XXXIII, Mumbai, passed on 22/01/2008. 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 u/s 248 of the Income Tax Act, 1961 for payments made to non-resident for import of software u/s 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 non­resident as their business income and not royalties. “.

3. To dispose of these appeals, we refer to the facts in ITA No. 25 13/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 24/03/2006 towards licence fee. The assessee denied its liability towards deduction of tax and had filed the appeal in this office on 28/04/2006 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 r.w. 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 AO for certificate u/s 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 & Mahindra Ltd. Vs. DCIT, 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 Mahindra & 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. Wesman Engineering Co. P. Ltd., 188 ITR 327

2. Tata Iron & Steel Ltd.[2001] 116 Taxman 186

3. M/s Hindustan Constructions Co. Ltd., ITA Nos

4. M/s Sonata Information Technology Ltd., ITA Nos. 931 to 941/Bag/06 & 672 to 702/Bang/07

5. Kotak Mahindra Bank Ltd., 106 ITD 521.

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. Vs. ITO in ITA No. 345/Mum/2008 for AY 2007- 08, order dated 30^th June, 2010, and argued that the Tribunal considered the decision in the case of Mahindra & 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 & 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 u/s 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 01/06/2007. He invited our attention to the section 248 as applicable with effect from 01/06/2007 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 the 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 01/06/2007. The learned DR pointed out that CA’s of the assessee company in his certificate dated 15/04/05, which is at pages 47 & 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 assesssee 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^th April, 2005 to 24/03/06 and submitted that section 248 as it stood prior to 01/06/2007 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 01/06/2007 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.