KARNATAKA URBAN INFRASTRUCTURE DEVELOPMENT FINANCE CORPORATION BANGALORE Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) (THIS I. T. A is filed under Section 260-A of the Income Tax Act, 1961, arising out of order dated 22. 3. 2004 passed in ITA No. 712/bang/2001 for the assessment year 1997-1998 praying to formulate the substantial questions of law stated therein and allow the appeal and set aside the order passed by the Income Tax Appellate Tribunal in ITA No. 712 to 715/bang/2001 in ITA No. 712/bang/2001 dated 22. 3. 2004 and consequently cancel the order passed by the Commissioner of Income Tax (Appeals)and the order passed by the income tax Officer (TDS) III, Bangalore, etc. ,)This appeal is by the assessee, challenging the concurrent findings of the order passed by the Commissioner of Income Tax (Appeals) and the Income Tax Officer and so also by the Income Tax Appellate Tribunal, Bangalore Bench C in ITA No. 712/2001 dated 22. 3. 2004.

(2.) THE facts relevant to this case are as hereunder: the appellant is a public sector company wholly owned by the State of Karnataka. The appellant/company has entrusted certain contracts to a foreign company known as M/s. Louis Berger International Inc. , USA, which is a non resident company to provide technical know how and consultancy to the appellant in terms of the contract. Similarly, it also entered into another contract with a Company situated in UK. As per the terms and conditions of the agreement, the appellant/company in addition to making the payment towards the consultancy fees, the appellant has to reimburse the expenditure that may be incurred by those two companies, when they are in Karnataka. (for the accommodation and conveyance of the staff of these two companies, when they are in India ). In terms of the agreement, the appellant/ company has to take care of the tax liability of the non resident companies. Proceedings were initiated by the Income Tax Officer invoking the provisions of Sections 201 and 201 (1a) of the Income Tax Act on the ground that the appellant/company as required under Section 195 of the Act did not deduct the tax at source and remit the same in accordance with law, in so far as the reimbursement of expenditure portion only. Reply was sent by the assessee stating that it was under bonafide impression that no tax was required to be deducted in regard to the reimbursement since it was only an amount spent by the appellant/company towards the conveyance and accommodation to the officers/employees of non resident companies, when they were in India for the purpose of execution of the agreement. The explanation offered by the assessee was not accepted. Accordingly, an order was or passed under Section 201 and also under Section 201 (1a) of the Income Tax Act. This order was challenged by the assessee by filing an appeal before the Commissioner of Income Tax (Appeals) which appeal came to be dismissed on 15. 6. 2001. Against which, the second appeal filed before the Income Tax Appellate Tribunal also ended in dismissal. Being aggrieved by the concurrent findings of the Courts below, the present appeal is filed.

(3.) AFTER hearing, we have reformulated the questions of law as hereunder: (1) Whether on the facts and in the circumstances of the case, the Assessing Officer, Commissioner of Income Tax (Appeals) as well as the Tribunal were justified in passing an order under Section 201 of the Income Tax Act, without considering the cause and explanation shown by the appellant. (2) Whether the Assessing Officer was justified in levying interest invoking Section 201 (1a) of the Income Tax Act?