ITAT directs CIT(A) to decide appeal on merits observing principle of natural justice

Toshiba JSW Power Systems Private Limited Vs DCIT (ITAT Chennai)

The AO had held that payment made by the assessee to non-resident towards cost of salary of seconded employees is fees for technical services as per section 9(1)(vii) of the Act and also as per Article 12(4) of India & Japan DTAA and held to be liable to tax @ 10% of gross amount on fee for technical services. It was the contention of the assessee before CIT(A) that reimbursement of cost of salary to seconded employees is not fees for technical services and thus, assessee is not liable to deduct TDS as required u/s. 195 of the Act. It was further contended that the assessee had also deducted TDS on such payments and has filed appeals in terms of section 248 of the Act before the CIT(A) to declare that the assessee is not liable to deduct TDS on such payments. However, the CIT(A) has dismissed appeals filed by the assessee on technical grounds, without discussing issue on merits. We find that the sole issue needs to be resolved in the given facts and circumstances of the case is to whether payment made by the assessee to non-resident will come under provisions of section 195 of the Act and the assessee is required to deduct TDS or not. Although, the assessee has filed appeals in terms of provisions of section 248 of the Act, the CIT(A) has dismissed appeals filed by the assessee on technical grounds, without discussing the issue on merit whether the assessee is liable to deduct TDS or not on payments made to non­resident only on the ground that the assessee could not file necessary evidence to prove that there is no such arrangements whereby the tax deductable on said income is payable by the appellate assessee. It was contention of the assessee that in Form No. 35 Column 10, the assessee has specified the details of TDS deducted and reimbursed to Government account. The assessee further contended that it has necessary arrangements with the non- resident as per which the cost of salary of seconded employees should be reimbursed without any mark up or profit. For this, evidences were furnished before the CIT(A). However, the CIT(A) has ignored all the evidences filed by the assessee and dismissed appeals on technical grounds. We find that the appeals of the assessee has been posted for hearing on 15.03.2018. On request of the assessee, the hearing has been adjourned to 24.04.2018. The assessee vide its letter dated 19.04.2018 requested for grant of adjournment for which the CIT(A) has adjourned the case to 16.05.2018, which is evident as per copy of adjournment letter filed by the assessee, where there are acknowledgment from the office of the CIT(A) for adjourning the case to 16.05.2018. However, the CIT(A) has passed an appellate order on 16.05.2018 and has sent orders through e-mail to the assessee, without hearing the assessee on 16.05.2018. From the above, it is abundantly clear that the CIT(A) has disposed off appeals filed by the assessee on technical grounds without observing principle of natural justice by providing reasonable opportunity of hearing to the assessee to justify its case. Therefore, we are of the considered view that the appeals filed by the assessee need to go back to the file of the Ld. CIT(A) to decide the issues involved in these appeals on merits. Hence, we set aside the appeals filed by the assessee for assessment year 2011-12 to 2013-14 to the file of CIT(A), with a direction to decide the issues involved in these appeals on merits after providing reasonable opportunity of being heard to the assessee.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

These three appeals filed by the assessee are directed against separate, but identical orders of the Commissioner of Income Tax (Appeals)-16, Chennai all dated 16.05.2018 and pertains to assessment years 2011-12, 2012-13 & 2013-14. Since, facts and issues are common, for the sake of convenience, these appeals were heard together and are being disposed off by this consolidated order.

2. At the outset, ld. AR for the assessee submitted that all the three appeals filed by the assessee are time barred by one day for which necessary petition for condonation of delay along with affidavit explaining the reasons for the delay has been filed. The AR further submitted that the assessee could not file appeal within the time allowed under the Act, due to the technical reasons as mentioned in petition. The delay in filing appeals is neither intentional nor willful, but for the unavoidable reasons, therefore, delay may be condoned in the interest of advancement of substantial justice. The Ld. DR, on the other hand, has no objection to condone the delay.

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