Income Tax Appellate Tribunal - Chandigarh
Oriental Bank Of Commerce vs Income Tax Officer on 13 October, 2005
Equivalent citations: (2006)99TTJ(CHD)1235
ORDER
Joginder Singh, J.M.
1. This appeal is by the Revenue (sic-assessee) challenging the order of the learned CIT(A), dt. 29th March, 2004 on the following grounds :
1. That the learned CIT(A) has erred in concurring with TDS/TRO in confirming his action under Section 194-1 r/w 201(1A) of the IT Act, 1961 on the facts and circumstances of the present case.
2. (a) That the learned CIT(A) has further erred in concurring with TDS/TRO by holding that the appellant has made short deduction of TDS under Section 194-1 and thereby taking action under Section 201(1 A).
(b) That without prejudice to above the order passed under Section 201(1A) is bad in law and illegal.
(c) That without prejudice to above the appellant disputes the quantum and the rate of interests levied as excessive.
3. That the learned CIT(A) has erred in concurring with TDS/TRO in holding the appellant in default in respect of TDS on the payments of rent and thereby creating a demand to the extent of Rs. 2,60,954.
4. That without prejudice to above, the learned CIT(A) has erred in concurring with TDS/TRO by holding that even if recipients of income have duly paid their taxes as per law the bank can still be held defaulter for short deduction and alleged less tax still needs to be paid by the appellant-bank.
5. That the learned CIT(A) has erred in concurring with TDS/TRO by holding that the interest under Section 201(1A) for the alleged default of short deduction of TDS is payable even in a case where the tax alleged to be in default cannot be recovered from the appellant as the tax on impugned payment of rent has alieady been paid by the recipient of the income.
6. That the learned CIT(A) has erred in confirming the orders of TDS/TRO being beyond/in excess of jurisdiction and also being barred by limitation.
7. That the TDS/TRO exceeded his jurisdiction by passing an order in excess of jurisdiction as the period covered for inspection by TDS/TRO is beyond his jurisdiction, which is confined to only those years for which the proceedings are pending.
8. That the appellant craves leave to add, amend or delete any ground of appeal before the disposal of the case.
2. The assessee is a bank (which) paid building rent to Sh. Vinod Kumar and Shiv Charan from financial years 1996-97 to 2003-04 below Rs. 1.20 lakhs each w.e.f. 1st April, 1996 till the date of inspection, i.e., 16th Oct., 2003. As per the AO, in view of provisions of Section 194-1 of the Act, the assessee-bank was required to deduct tax at the rate of 20 per cent on the rental payment. The information filed by the bank reveals that either the assessee deducted TDS at lower rate, i.e., 15 per cent or made no deduction of TDS. The AO raised a demand of Rs. 2,60,954 against the assessee. The detail of demand and the relevant period has been detailed at pp. 1-4 of the order under Section 201(1A) of the Act. The assessment order was carried in appeal before the learned CIT(A) where it was partly allowed. Now, the assessee is in further appeal before the Tribunal.
3. During arguments, we have heard Ms. Rimpy Chaudhary, learned chartered accountant for the assessee, and Smt. Preeti Garg, learned Departmental Representative for the Revenue.
4. The gist of arguments on behalf of the assessee is that the provisions of Section 194-1 are not attracted to the facts of the present case. The payment was made through the draft, that there are two co-owners of the building, and the rental amount has been duly declared in their returns which has been accepted by the Department. Ms. Chaudhary contended that their share is definite and ascertainable, rent was less than Rs. 1.20 lakh, so no TDS is to be deducted. Our attention was also invited to Circular No. 715, dt. 8th Aug., 1995 issued by CBDT, that ownership is to be determined as per Section 26 of the Act. It was also contended that both the persons are having separate bank accounts and the rent has been received through banking channel.
5. On the other hand, learned Departmental Representative for the Revenue contended that no least? deed was produced by the assessee, shares are not determinate, thus, the provision of Section 194-1 is applicable. It was also contended that Section 201 is mandatory. Reliance was also placed on the decision pronounced in the oase of Kanoi Industries (P) Ltd. v. Asstt. CIT . In nutshell, learned Departmental Representative for the Revenue defended the order of the AO. We have considered the rival submissions.
6. At the outset, the learned Counsel for the assessee did not argue grounds 2 to 8 in the grounds of appeal, so the same are dismissed as not pressed. The only ground remains for our consideration is that the learned CIT(A) erred in concurring with TDS/TRO in confirming his action under Section 194-1 r/w 201(1 A) of the Act. Undisputedly, the assessee-bank paid building rent to Sh. Vinod Kumar and Sh. Shiv Charan from financial years 1996-97 to 2003-04 and the AO created a demand of Rs. 2,60,954 on account of TDS and interest under Section 201. Before going into much deliberation, we are supposed to see whether Section 194-1 is applicable to the present facts of the case, which is as under :
The principal officer of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, shall, before making any payment in cash or before issuing any cheque or warrant in respect of any dividend or before making any distribution or payment to a shareholder, who is resident in India of any dividend within the meaning of Sub-clause (a) or Sub-clause (b) or Sub-clause (c) or Sub-clause (d) or Sub-clause (e) of Clause (22) of Section 2, deduct from the amount of such dividend, income-tax at the rates in force :
Provided that no such deduction shall be made in the case of a shareholder being an individual, if-
(a) the dividend is paid by the company by an account-payee cheque; and
(b) the amount of such dividend or, as the assessee may be, the aggregate of the amounts of such dividend distributed or paid or likely to be distributed or paid during the financial year by the company to the shareholder, does not exceed two thousand five hundred rupee :
Provided further that the provisions of this section shall not apply to such income credited or paid to-
(a) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), in respect of any shares owned by it or in which it has full beneficial interest :
(b) the General Insurance Corporation of India (hereafter in this proviso referred to as the Corporation) or to any of the four companies (hereafter in this proviso referred to as such company), formed by virtue of the schemes framed under Sub-section (1) of Section 16 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), in respect of any shaies owned by the corporation or such company or in which the Corporation or such company has full beneficial interest :
[Note : Sec. 194 is inadvertently quoted in lieu of Section 194-1-Ed.]
7. If the facts of this appeal are analysed with reference to Section 194-1, it is seen that the rent has been paid by cheque/draft. So the proviso is not applicable. The case of the assessee being co-ownership is to be determined as per Section 26 of the Act. Undisputedly, rent has been received through banking channel. On a specific query from the Bench, the learned Counsel for the assessee has produced the statement of account from OBG for the period between 1st Jan., 2002 to 31st Oct., 2003. The account No. 4653 pertains to Sh. Shiv Charan, S/o Sh. Om Parkash and account No. 4654 pertains to Sh. Vinod Kumar, S/o Sh. Orn Parkash. On perusal of these statements, the rent has been credited in the individual accounts on month-wise basis. The fact that the individual returns of both these petsons, i.e., Sh. Shiv Charan and Sh. Vinod Kumar have been individually filed and accepted by the Department was not controverted by the learned Departmental Representative for the Revenue, Section 26 of the Act deals where the property is owned by co-owners and respective shares which are definite and ascertainable. Explanation to Section 26 clearly says such shares shall be computed as if each such person is individually entitled to the relief provided in that Sub-section. In the present case, both the co-owners have duly declared their income individually and the same has been accepted by the Department. From these facts, it is dearly oozing out that their shares are definite and ascertainable. The CBDT has issued Circular No. 715, dt. 8th Aug., 1995 making clarifications on various provisions relating to tax deduction at source which are available in (1995) 215 ITR (St) 12. In reply to question No. 2, in the said circular where the limit of Rs. 1.20 lakh per annum would apply strictly on each co-owner of a property, it has been pointed out that under Section 194-1, the tax is deductible from payment by way of rent, if such payment to the payee during the year is likely to be Rs. 1.20 lakh or more. If there are number of payees, each having a definite and ascertainable share in the property, the limit of Rs. 1.20 lakh will apply to each oi the payee/co-owners separately. The payer and the payee are advised not to enter in sham agreements to avoid TDS provisions. This is not the case of the Revenue that it is sham transaction or the agreement is bogus one or concocted one. The building is under the ownership of Sh. Shiv Charan and Sh. Vinod Kumar which has been given on rent to the assessee-bank. It is not the case that the payers and the payee are close relatives and some sham transactions might have been entered upon to avoid tax. During argument, the learned Counsel for the Revenue relied upon the decision of the Hon'ble High Court of Calcutta in the case of Kanoi Industries (P) Ltd. v. Asstt. CIT (supra) wherein it was held that failure to deduct tax or failure to pay after deduction, interest under Section 201(l)(a) of the Act is mandatory and automatic, which in our humble opinion, is not going to help the Revenue because the said section postulates liability to pay interest at the rate provided on the amount deductible as tax from the date on which such was deductible until it is actually paid, if the assessee in default does not deduct the tax. Similarly, the assessee in default is liable to pay interest in the same manner if the assessee in default after deducting fails to pay the tax. No payment of tax on account of any other reason after deduction makes the assessee in default liable to pay interest on the amount deductible made recoverable as a charge on the asset of the assessee in default under Sub-section (2) of the said section. The charging of interest has been made continuous till it is actually paid. A legal fiction is created under Section 201 by a deeming clause that person liable to deduct shall be the assessee in default. The expression actually paid is the outer limit for the purpose of calculation of interest but in the present case since the assessee is not liable to deduct tax on the facts and circumstances of the case which have been narrated before us, this judicial pronouncement will not help the Revenue being different on facts. The Hon'ble apex Court in the case of CIT v. Bijoy Kumar Almal has affirmed the decision of the Hon'ble High Court of Calcutta in CIT v. Bejoy Kumar Almal and also approved the cases of CIT v. Smt. Shanti Dew Jalan , CIT v. Sham Sunder and Tulsi Dass Kila Chand v. CIT (1988) 171 ITR (Sh.N) 5. The Hon'ble apex Court held that a co-owner of house property is justified in claiming the deduction provided for by Section 23(2) be allowed to him separately from out of his share in the annual value of the said house property inasmuch as he had definite and ascertainable share therein. The language of Section 26 of the Act inserted w.e.f. 1st April, 1976 even without taking into account the Explanation is clear enough. It provides that (where property consisting of building or building and lands appurtenant thereto) is owned by two or more persons and their respective shares are definite and ascertainable, they shall not, in respect of such property, be assessed as an AOP and that the share of each such person in the income from the property as computed in accordance with Section 22 to 25 shall be included, in his total income. Sections 22 to 25 prescribe the manner in which the income from house property has to be determined. In view of these facts, we fully agree with the contention of the learned Counsel for the assessee.
8. In view of these facts, ground No. 1 raised in the ground of appeal is allowed and ground Nos. 2 to 8 are dismissed as not pressed. Appeal of the assessee is partly allowed.
9. Before we part with, we record our appreciation for the learned Counsel for the assessee, Ms. Rimpy Chaudhary for assisting the Bench in coming to a particular conclusion.