Prima facie after looking at provisions of Section 17 and the concept of Director under the Companies Act and thus has a relationship as an employee to the Company. Besides this, the fees which is termed as sitting fees is the part and parcel of remuneration of the Director and hence has an element of salary for which TDS should be deducted. Thus, the CIT(A) has rightly sustain this addition and there is no need to interfere with the findings of the CIT(A). Ground No. 2 & 2.1 are dismissed.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal is filed by the assessee against order dated 06/04/2017 passed by CIT(A)-16, New Delhi for assessment year 2009-10.
2. The grounds of appeal are as under:-
1. “That the CIT(A) erred on facts of the case and in law in not considering and allowing enhanced claim of deduction of Rs 5,09,98,289 as against Rs 1,52,99,487 claimed by the appellant under section 80-IB of the Income-tax Act, 1961 (‘the Act’), in respect of profits of Agartala unit.
1.1 That the CIT(A) erred on facts of the case and in law in not appreciating on merits that Agartala unit of the appellant being set up in north-eastern region, was eligible deduction @ 100% of the profit of the business, in terms of the second proviso to sub-section (4) of section 80-IB of the Act read with notification No. SO 627 (E) dated 04-08- 1999.
1.2 That the CIT(A) erred on facts of the case and in law in not appreciating that the doctrine of res judicata is not applicable to the tax laws.
1.3 That the CIT(A) erred on facts of the case and in law in not analyzing the eligibility of the appellant for claiming 100% deduction and arbitrarily following the decision in earlier year.
2. That the CIT(A) erred on facts of the case and in law in disallowing an amount of Rs 2,55,000 on account of payment of director sitting fee by holding that no TDS was deducted thereon.
2.1 That the CIT(A) erred on facts of the case and in law in holding that TDS was deductible under section 192(1) of the Act without appreciating that the directors did not have employer – employee relationship with the appellant.”
3. The assessee Company is a public limited company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of Wire line logging, per formation and other related services to oil and gas companies engaged in exploration and or production of oil and gas. The assessee filed return of income declaring an income of Rs. 16,36,66,747/- on 30/09/2009. The assessment was completed on 25/3/2013 thereby assessing the total income of the assessee at Rs.16,84,21,214/-. The Assessing Officer made addition of Rs.1,52,99,487/- towards the disallowance of enhanced claim of deduction u/s 80IB of the Act. The Assessing Officer further made disallowance of Rs. 18,12,000/- in respect of commission of Shri Rajiv Grover Managing Director u/s 36(1)(ii) as well as made addition relating to claim of credit of TDS deducted in Bangladesh.
4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
5. As regards Ground No.1, Ground No. 1.1, 1.2 and 1.3 pertaining to Agartala Unit of assessee which was set up in North East region, the Ld. AR submitted that assessee’s unit was set up at Agartala, Tripura which is specified in the 8th Schedule of Act and accordingly is eligible for deduction as per the provisions of Section 80IB (4) of the Act. The assessee in the aforesaid unit has carried out manufacturing and production of relevant article during Financial Year 2001-02. The relevant Assessment Year falls in the tenure period specified in Section 80IB(4) of the Act. Therefore, the assessee is eligible for deduction u/s 80IB(4) at 100% in the return income for relevant Assessment Year. The Central Government issued Notification No. SO 627 (E) dated 4/8/1999 providing the list of notified industries in the north eastern region. The said Circular also notifies mineral based industry for the purpose of said proviso mentioned in the Circular. The assessee began manufacturing and production of relevant article or thing during Financial Year 2001-02 and is eligible for claiming deduction u/s 80IB (4) of the Act is not under dispute. The Ld. AR further submitted that the only question which arises is whether the assessee can claiming 100% deduction of eligible provides of Agartala undertaking under the aforesaid Notification. The CIT(A) rejected the claim of the for 100% deduction and restricted the deduction 30%of eligible profits relying on the order of his predecessor for Assessment Year 2008-09 stating that it is not a mineral based industry. The Ld. AR submitted that the issue is squarely covered in assessee’s own case for Assessment Year 2008-09 whereby the Tribunal had decided this issue in assessee’s favour.
6. The Ld. DR relied upon the assessment order and the order of the CIT(A).
7. We have heard both the parties and perused the material available on record. It is pertinent to note that the Tribunal in assesse’s own case from Assessment Year 2004-05 to 2008-09 has dealt various issues and more particularly in 2008-09 in ITA No. 5855/del/2011 order dated 24/02/2020. The Tribunal held as under:-
“48. Keeping in view the facts inter alia that the assessee company has been held to be mineral based industry as per our findings returned in the preceding paras, it is prima facie entitled for deduction u/s 80IB; that assessee by raising additional grounds sought deduction under second proviso to section 80IB(4) @ 100% profit of the undertaking set up at Duliajan in terms of Notification No. SO 627 (E) dated 04.08.1999; that applying the ratio of judgment of Hon’ble Apex Court in the case of National Thermal Power Company (supra), the taxmen are required to correctly assess the tax liability of the assessee which includes admissibility of the deductions if any; that rule or procedure are hand-made of justice and merely on the ground that the assessee has omitted to file the appeal or cross objection, the additional grounds raised in the appeal filed by the Revenue are maintainable because ultimately the net result of the assessment proceedings should be correct assessment of the tax liability of the assessee company, the application filed by the assessee company for additional grounds is partly allowed qua grounds no. l & 2, whereas present application qua ground no.3 is dismissed.
49. In view of our findings returned on the additional grounds raised by the assessee company in AYs 2004-05 and 2007-08 decided in preceding paras, additional grounds no. 1 & 2 raised in AY 2006-07 by the assessee company being identical in nature are also required to be decided by the AO by examining the plant and machinery viz. the wireline logging unit set up at Duliajan in terms of Notification No.SO 627 (E) dated 04.08.1999 read with second proviso to sub-section (4) of section 80IB and examine the eligibility of the assessee for deduction @ 100%. So, this issue is remitted back to the A.O to decide afresh after providing an opportunity of being heard to the assessee.”
The Tribunal has remitted back this issue to the file of the Assessing Officer to decide issue afresh. There is no doubt about that the Industry is related to mineral based industry and thus in this context the Assessing Officer should take cognizance of the applicability of deduction u/s 80IB (4) whether eligible 100% or not. We therefore, remand back this issue to the file of the Assessing Officer for proper adjudication in relation to the findings given by us and decide the issue afresh. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground No. 1, 1.1, 1.2 & 1.3 are partly allowed for statistical purpose.
8. As regards Ground No.2 and 2.1, the Ld. AR submitted that the assessee had paid remuneration to the Director including sitting fees for attending the Board Meetings etc. to the extent of Rs. 2,55,000/- as contended by the Assessing Officer and hence, the assessee was liable to deduct TDS as per provisions of Section 194J on the amount pay/credited as Director sitting fee and thus disallowed the same. The Ld. AR submitted that the provisions to deduct TDS Director sitting fee has been made applicable w.e.f. 1st July, 2012. Prior to that there was no provision in the Income Tax Act, 1961 to deduct TDS on amount paid as Director sitting fees. Hence, TDS on the same had not been paid deducted.
9. The Ld. DR submitted that the finding of the CIT(A) is just and proper as the provisions of Section 17 unanimously state that any fee paid to an employee is included the category of salary and there is employer-employee relationship
10. We have heard both the parties and perused the material available on record. Prima facie after looking at provisions of Section 17 and the concept of Director under the Companies Act and thus has a relationship as an employee to the Company. Besides this, the fees which is termed as sitting fees is the part and parcel of remuneration of the Director and hence has an element of salary for which TDS should be deducted. Thus, the CIT(A) has rightly sustain this addition and there is no need to interfere with the findings of the CIT(A). Ground No. 2 & 2.1 are dismissed.
11. In result, appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the Open Court in presence of both the parties on this 24th Day of March, 2021