Delhi High Court
Commissioner Of Income Tax vs Nhk Japan Broadcasting ... on 11 May, 2011
Author: A.K.Sikri
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 164 OF 2011
ITA 168 OF 2011
ITA 169 OF 2011
ITA 188 OF 2011
ITA 189 OF 2011
ITA 190 OF 2011
ITA 186 OF 2011
% JUDGMENT RESERVED ON: 19.04.2011
JUDGMENT DELIVERED ON:11.5.2011
(1) ITA 164 OF 2011
COMMISSIONER OF INCOME TAX . . . APPELLANT
Through : Ms. Rashmi Chopra,
Advocate.
VERSUS
NHK JAPAN BROADCASTING CORPORATION ..RESPONDENT
Through: Mr. Salil Kapoor, advocate
with Mr. Sanat Kapoor,
Advocate.
(2) ITA 168 OF 2011
COMMISSIONER OF INCOME TAX . . . APPELLANT
Through : Ms. Rashmi Chopra,
Advocate.
VERSUS
NHK JAPAN BROADCASTING CORPORATION ..RESPONDENT
Through: Mr. Salil Kapoor, advocate
with Mr. Sanat Kapoor,
Advocate.
(3) ITA 169 OF 2011
COMMISSIONER OF INCOME TAX . . . APPELLANT
Through : Ms. Rashmi Chopra,
Advocate.
VERSUS
ITA 164/2011,ITA 168/2011,ITA 169/2011,ITA 188/2011,
ITA 189/2011,ITA 190/2011,ITA 186/2011 Page 1 of 13
NHK JAPAN BROADCASTING CORPORATION ..RESPONDENT
Through: Mr. Salil Kapoor, advocate
with Mr. Sanat Kapoor,
Advocate.
(4) ITA 188 OF 2011
COMMISSIONER OF INCOME TAX . . . APPELLANT
Through : Ms. Rashmi Chopra,
Advocate.
VERSUS
NHK JAPAN BROADCASTING CORPORATION ..RESPONDENT
Through: Mr. Salil Kapoor, advocate
with Mr. Sanat Kapoor,
Advocate.
(5) ITA 189 OF 2011
COMMISSIONER OF INCOME TAX . . . APPELLANT
Through : Ms. Rashmi Chopra,
Advocate.
VERSUS
NHK JAPAN BROADCASTING CORPORATION ..RESPONDENT
Through: Mr. Salil Kapoor, advocate
with Mr. Sanat Kapoor,
Advocate.
(6) ITA 190 OF 2011
COMMISSIONER OF INCOME TAX . . . APPELLANT
Through : Ms. Rashmi Chopra,
Advocate.
VERSUS
NHK JAPAN BROADCASTING CORPORATION ..RESPONDENT
Through: Mr. Salil Kapoor, advocate
with Mr. Sanat Kapoor,
Advocate.
(7) ITA 186 OF 2011
COMMISSIONER OF INCOME TAX . . . APPELLANT
ITA 164/2011,ITA 168/2011,ITA 169/2011,ITA 188/2011,
ITA 189/2011,ITA 190/2011,ITA 186/2011 Page 2 of 13
Through : Ms. Rashmi Chopra,
Advocate.
VERSUS
NHK JAPAN BROADCASTING CORPORATION ..RESPONDENT
Through: Mr. Salil Kapoor, advocate
with Mr. Sanat Kapoor,
Advocate.
CORAM :-
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MR. JUSTICE M.L. MEHTA
1. Whether Reporters of Local newspapers may be
allowed to see the Judgment?
2. To be referred to the Reporter or not?
3. Whether the Judgment should be reported in the
Digest?
A.K. SIKRI, J.
1. The respondent assessee which is a Public Broadcasting
Company of Japan (and, therefore, naturally a Non-Resident
Company) is treated as an assessee in default under the
provisions of Section 201 and 201 (1) and 201 (1A) of the Income
Tax Act (hereinafter referred to as „the Act‟).
2. Before we spell out the exact nature of default attributed to
the assessee, we deem it apposite to recount the facts in brief.
The respondent, NHK Japan is a government owned public
broadcasting company of Japan having news bureaus in many
countries including India. The respondent had deputed expatriate
ITA 164/2011,ITA 168/2011,ITA 169/2011,ITA 188/2011,
employees from Japan for working in its office in India. The
expatriates were receiving salary in India and a portion of salary
and allowances in Japan. Under the law in Japan, citizens/nationals
of Japan are liable to levy of an annual municipal Citizen Tax also
referred to as Inhabitant tax which is charged on account of being
an inhabitant of Japan. In case a Japanese citizen is rendering
services in an employment in Japan or abroad on a transfer from
Japan for which he receives any salary in Japan, the citizen tax for
a year in which he was in Japan on the first day of January of that
year is required to be withheld by his employer from such
employee‟s salary income in Japan and paid directly to the
concerned Municipality. NHK, was accordingly, withholding and
paying over to the concerned municipal authority in Japan, the
citizen‟s tax levied under the Japanese law, from the salaries
payable by it in Japan to its expatriate employees assigned by it to
its news bureau in India. The citizen tax withheld from the salaries
in accordance with the law in Japan was claimed to be excludible
and deductible in the computation of salary income of the
employees liable to tax in India.
The AO passed order under Section 201 (1) and 201 (1A) of
the Act on 16th December, 1999 for the Financial year 1988-89 to
1998-99. The AO did not accept the claims of deduction and
ITA 164/2011,ITA 168/2011,ITA 169/2011,ITA 188/2011,
made additions by working out the difference of additional tax and
interest taking into account (i) number of work days outside India
(ii) Citizen tax and (iii) Housing norm.
On appeal before the Commissioner of Income Tax (Appeals)
it was held that citizen tax is a statutory levy in Japan on Japanese
citizens and that such tax constitutes an overriding charge on the
salary income and therefore the same had to be excluded in
computation of taxable income. On the issue of assessee being
held to be in default u/s 201 (1) and 201 (1A) and housing norm
deduction, the matter was decided against the assessee. The CIT
(A) decided the appeals for 11 financial years i.e. FY 1988-89 to
1998-99 by way of a common order dated 30th March, 2001.
Against the order of CIT (A), 11 appeals were filed by the
assessee before the ITAT on the grounds of assessee being in
default, housing norm deduction and an additional ground
regarding orders for FY 1988-89 to 1994-95 being barred by
limitation. 11 appeals were filed by the Revenue before the ITAT
on issue of citizen tax deduction. All appeals were decided by a
common order dated 10th March, 2006. The appeals of the
assessee were allowed and those of the Revenue were dismissed.
Orders for FY 1988-89 to 1994-95 were held as invalid on the
ground of limitation and for FY 1995-96 to 1998-99 assessee was
ITA 164/2011,ITA 168/2011,ITA 169/2011,ITA 188/2011,
held not to be in default. The Tribunal upheld the Commissioner‟s
order on citizen tax issue.
The Revenue filed 22 appeals in this Court against the above
mentioned orders of the ITAT, which were all dismissed. This
Court vide orders dated 30th March, 2007 on 11 appeals by the
revenue on citizen tax issue dismissed the same basing its
decision on the judgment of the Supreme Court in the case of CIT
Vs. Sitaldas Tirathdas [1961] 41 ITR 367. Vide a separate
orders dated 23rd April, 2008, other 11 appeals filed by the
Revenue on the issue of order under Section 201 (1) and 201 (1A)
were dismissed on the ground that action was barred by limitation.
The Revenue went in appeal before the Supreme Court in two
batches. In the 1st batch, it agitated the citizen tax issue and in
the 2nd batch, it challenged the issue of limitation. The Supreme
Court vide orders dated 16th March, 2008 in the 1st batch of
appeals directed the Tribunal to consider the matter afresh in
accordance with law as regard citizen tax issue. It would be
pertinent to quote the exact direction given by the Supreme court
in the aforesaid order as much turns on those directions:-
"Without going into the merits of the case,
suffice it to state that in the present case, in
our view, the Commissioner (Appeals) ought
to have examined the scope of the Japanese
ITA 164/2011,ITA 168/2011,ITA 169/2011,ITA 188/2011,
law, namely, Citizens Individual Inhabitant Tax
Act. In the letter of appointment issued, there
is a reference to the words. The relevant
Clause reads as under:
"Tour emoluments shall be subject to
deduction of taxes as per applicable
laws and the tax liability on host
country (India) shall be borne by
NHK-JapanBroadcasting Corporation."
Analysing the said Clause one finds that the
emoluments paid by the assessee was subject
to deduction of tax as per applicable laws.
Therefore, in our view, Commissioner
(Appeals) ought to have examined the
provisions of Citizens Individual Inhabitant Tax
Act which is a Japanese law and it ought to
have analysed the provisions of that law,
particularly, when it was required to decide
the question as to nature of the levy being an
overriding charge on the salary income, as
stated hereinabove. The controversy in the
present case is that citizens tax is a statutory
levy in Japan on the Japanese citizens
constituting an overriding charge. If it is an
overriding charge then of course the
Commissioner (Appeals) was right in saying
that it would not be an income. However, in
our view, since the provisions of the Act have
not been examined, the matter needs to be
considered afresh by the Tribunal.
Accordingly, we remit the matter to the
Tribunal for fresh consideration in accordance
with law. We express no opinion on the merits
of the case."
It is clear from the above that the Supreme Court was of the
view that issue at hand could not be decided without going into
the specific provisions contained in Citizens Individual Inhabitant
Tax Act (hereinafter referred to as „the Citizens Tax Act‟) of Japan
ITA 164/2011,ITA 168/2011,ITA 169/2011,ITA 188/2011,
and analyzing those provisions. Since the scope of aforesaid
Japanese law was not examined, the Supreme Court remitted the
case back to the Tribunal for fresh consideration "in accordance
with law" and to ascertain from the provisions of the Citizens Tax
Act as to whether the statutory levy in Japan constituted an
overriding charge. The Supreme Court made it clear that if it was
an overriding charge, then it would not be an income.
3. When the matter reached back to Tribunal, the parties were
directed to place on record copy of the aforesaid Citizens Tax Act
duly translated into English vide orders dated 16th March, 2009.
The Counsel for the assessee filed the copy of the aforesaid Act
alongwith its English translation but did not take the responsibility
with respect to the authenticity of its English translation. In such a
situation, the order dated 9th December, 2009 was passed by the
Tribunal directing the Departmental Representative of the
Revenue to place on record the copies of the provisions translated
into English. Even after seeking adjournments, the Revenue failed
to file the translated copy of the relevant provisions of the said
Act. This posed a dilemma in the minds of the Tribunal. On the
one hand, there was a direction given by the Supreme Court to
decide the issue with reference to the provisions of the Citizens
ITA 164/2011,ITA 168/2011,ITA 169/2011,ITA 188/2011,
Tax Act and on the other hand, the Tribunal felt helpless as it was
unable to proceed unless the authenticated copy of the English
translation version of the said Act was produced before it. The
Tribunal was conscious of the directions given by the Supreme
Court which is specifically taken note in para 8 of the impugned
order. However, two reasons prevailed in the mind of the Tribunal
which led to passing of the impugned order dismissing the appeal
of the Revenue namely:
(i) As already pointed out above, the
department failed to place on record the
English version of the Citizens Tax Act in the
absence of which it became impossible for
the Tribunal to decide the issue.
(ii) Another aspect which heavily weigh with
the Tribunal was the subsequent decision of
the Supreme Court itself whereby it had
upheld the quashing of the orders passed
under Section 201 (1) and 201(1A) of the
Act. From this, the Tribunal concluded that
it would be a futile exercise to determine the
issue namely whether the Citizens Tax Act
had an overriding charge over the salary
income of the assessee or not.
4. In so far as first reason given by the Tribunal is concerned,
no doubt, the Tribunal felt helpless to determine the issue as per
direction of the Supreme Court for no fault of its own. Normally, in
such a situation, it could have asked the other party namely the
assessee to approach the Supreme Court for variations of the
ITA 164/2011,ITA 168/2011,ITA 169/2011,ITA 188/2011,
directions given by the Supreme Court in its order dated 16th
March, 2009 inasmuch as, the Tribunal is bound to carry out such
directions. However, if the second ground given by the Tribunal
has merit, there may not be any fault with the impugned order
passed by the Tribunal, therefore, we proceed to examine the
veracity of the second ground taken by the Tribunal.
5. As pointed out above, there were two batches of appeals
before the Supreme Court. 1st batch was concerned with the
Citizens Tax Act in which directions dated 16th March, 2009 were
passed by the Supreme Court, as noted above. The 2nd batch of
appeals was concerned with the issue of limitation. As noted
above, the orders in respect of financial year 1988-89 to 1994-95
were held to be invalid on the ground of limitation by the Tribunal
which order was upheld by this Court and Special Leave Petition
was filed against that order. This batch of appeals was still
pending.
6. In the meantime, the question of non-deduction of tax at
source on overseas payments to expatriate employees came up
for consideration before the Supreme Court in the case of
Commissioner of Income Tax Vs. Eli Lilly & Co. Pvt. Ltd.
ITA 164/2011,ITA 168/2011,ITA 169/2011,ITA 188/2011,
(2009) 312 ITR 22. These cases included the appeal pertaining to
the present assessee also. When the 2nd batch of appeals came
up for hearing before the Supreme Court, going by the aforesaid
orders dated 25th March, 2009 in Eli Lilly & Co. (supra), the
Supreme Court passed the following orders dated 20 th January,
2010:-
"Delay condoned.
Leave granted.
The following substantial question of law arises for
consideration in this batch of civil appeals:-
"Whether the Income Tax Appellate
Tribunal was correct in law in holding
that the orders passed under Sections
201(1) and 201(1A) of the Income Tax
Act, 1961 are invalid and barred by
time having been passed beyond a
reasonable period."
Having heard learned counsel on both sides, we
are of the view that, on the facts and
circumstances of these cases, the question on the
point of limitation formulated by the Income Tax
Appellate Tribunal in the present cases need not
be gone into for the simple reason that, at the
relevant time, there was a debate on the question
as to whether TDS was deductible under the
Income Tax Act, 1961, on foreign salary payment
as a component of the total salary paid to an
expatriate working in India? This controversy
came to an end vide judgment of this Court in the
case of Commissioner of Income Tax Vs. Eli Lilly &
Co. (India) Pvt. Ltd., reported in (2009) 312 ITR
2235. The question on limitation has become
academic in these cases because, even
assuming that the Department is right on the
ITA 164/2011,ITA 168/2011,ITA 169/2011,ITA 188/2011,
issue of limitation still the question would
arise whether on such debatable points, the
assessee (s) could be declared as
assessee9s) in default under Section 192
read with Section 201 of the Income Tax Act,
1961. Further, we are informed that the assessee
have paid the differential tax. They have paid the
interest and they further undertake not to claim
refund for the amounts paid. Before concluding,
we may also state that, in Eli Lilly & Co. (India) Pvt.
Ltd. (supra) vide paragraph 21, this Court has
clarified that the law laid down in the said case was
only applicable to the provisions of Section 192 of
the Income Tax Act, 1961.
Leaving the question of law open on limitation,
these civil appeals filed by the Department are
disposed of with no order as to costs."
It is thus clear that the same Bench of the Supreme Court
which issued direction on 16th March, 2009 passed the aforesaid
order making it emphatically clear that even the issue of
limitation had become academic as the assessee could not be
declared as assessee in default under Section 192 read with
Section 201 of the Act. The fallout of the aforesaid order dated
20th January, 2010 is that the Supreme Court has held that the
assessee for the assessment years in question, cannot be treated
as assessee in default. The consequence would be to quash the
proceeding initiated by the AO treating the assessee to be in
default under Section 201 (1) and 201 (1A) of the Act.
ITA 164/2011,ITA 168/2011,ITA 169/2011,ITA 188/2011,
7. We, thus agree with the Tribunal that the issue had become
academic in nature and there was no reason left to decide this
issue. This happened because of the subsequent order of the
Supreme Court itself. This resulted as a consequence of the
orders passed by the Supreme Court, that too, in the case of this
very assessee pertaining to the appeals of the assessment years
on the same question. We thus find no merit in these appeals
which are dismissed on this ground alone.
(A.K. SIKRI)
JUDGE
(M.L. MEHTA)
JUDGE
MAY 11, 2011
skb
ITA 164/2011,ITA 168/2011,ITA 169/2011,ITA 188/2011,
