Allahabad High Court
Commissioner Of Income Tax (Tds) ... vs M/S Sahara India Commercial ... on 18 January, 2017
Author: Sudhir Agarwal
Bench: Sudhir Agarwal
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH AFR Court No. - 3 1. Case :- INCOME TAX APPEAL No. - 62 of 2015 Appellant :- Commissioner of Income Tax (TDS) Lucknow Respondent :- M/S Sahara India Commercial Corpn.Ltd.Aliganj Lucknow Counsel for Appellant :- Alok Mathur Counsel for Respondent :- Waseeq Uddin Ahmed 2. Case :- INCOME TAX APPEAL No. - 64 of 2015 Appellant :- Commissioner of Income Tax (TDS) Lucknow Respondent :- M/S Sahara India Commercial Corpn.Ltd.Aliganj Lucknow Counsel for Appellant :- Alok Mathur Counsel for Respondent :- Waseeq Uddin Ahmed 3. Case :- INCOME TAX APPEAL No. - 65 of 2015 Appellant :- Commissioner of Income Tax (TDS) Lucknow Respondent :- M/S Sahara India Commercial Corpn.Ltd.Aliganj Lucknow Counsel for Appellant :- Alok Mathur Counsel for Respondent :- Waseeq Uddin Ahmed 4. Case :- INCOME TAX APPEAL No. - 66 of 2015 Appellant :- Commissioner of Income Tax (TDS) Lucknow Respondent :- M/S Sahara India Commercial Corpn.Ltd.Aliganj Lucknow Counsel for Appellant :- Alok Mathur Counsel for Respondent :- Waseeq Uddin Ahmed 5. Case :- INCOME TAX APPEAL No. - 70 of 2015 Appellant :- Commissioner of Income Tax (TDS) Lucknow Respondent :- M/S Sahara India Commercial Corpn.Ltd.Aliganj Lucknow Counsel for Appellant :- Alok Mathur Counsel for Respondent :- Waseeq Uddin Ahmed Hon'ble Sudhir Agarwal,J.
Hon'ble Ravindra Nath Mishra-II,J.
1. Heard Sri Alok Mathur, learned counsel for appellant and Sri Waseeq Uddin Ahmad, Advocate for respondent.
2. All these appeals have arisen from common judgment and order dated 17.12.2014 passed by Income Tax Appellate Tribunal (hereinafter referred to as the "Tribunal") and, therefore, as agreed by learned counsel for the parties have been heard together and are being decided by this common judgment.
3. In fact Tribunal decided three bunches of appeals pertaining to Assessment Years 2003-04 to 2007-08 by a common judgment in which questions relating to Section 201(1), 201(1A) and 271C of Act, 1961 were raised. In the present appeals we are concerned with that part of judgment which relates to penalty under Section 271C of Act, 1961.
4. Following substantial question of law has raised in these appeals:
"Whether the Tribunal was justified in holding that the deductor had a reasonable cause for not making any TDS when there was no tax liability of the deductee. This cannot be taken as a reasonable cause in view of Supreme Court's decision in M/s Hindustan Coca Cola, where it was held that the deductor cannot escape the penalty under Section 271C of IT Act."
5. Now before discussing issues raised in these appeals it would be appropriate to have a brief facts narration giving rise to present dispute.
6. Respondent-Assessee, M/s Sahara India Commercial Corporation Ltd. (hereinafter referred to as the "Assessee") is engaged in business of real estate development, construction and media activities etc. It entered into business agreement with M/s Sahara Airlines Ltd. (now known as M/s Jetlite (India) Ltd.) (hereinafter referred to as the "SAL") vide agreement dated 30.03.1995 for giving publicity to promote business and area of operation of Assessee. As per agreement, SAL was required to display logo of Assessee on both sides of aircrafts, tickets, boarding passes, baggage tags, newspapers, hoardings, etc. Brochures of Assessee are also to be distributed by SAL with its tickets. Under the said agreement, for Assessment Year 2007-08, Assessee paid Rs. 400/- crores to SAL. Assessee was supposed to deduct tax at source under Section 194C on aforesaid payment made to SAL but as a matter of fact no such deduction was made. Assessing Authority, coming to know about this fault on the part of Assessee, issued notice dated 08.05.2008 giving opportunity of hearing to Directors of Assessee to explain reason of non deduction of tax at source. The representative of Assessee did not accept of entering into an agreement for giving publicity to SAL. Against their passenger's ticket sale and in return of subsidy which was provided to SAL, they were entrusted with the job of printing of logo, colour scheme etc. on boarding card, ticket, baggage tag on board their aircraft so that passengers traveling could know about Company. Hence, SAL has not undertaken any agreement for advertisement activity for and on behalf of Assessee-Company and, therefore, Section 194C was not attracted.
7. Assessee's representative relied on C.B.D.T. circular No. 714 dated 03.08.1995 in respect of meaning of term "advertising", explained therein. Assessee's Representative thus explained arrangement with regard to payment of subsidy towards passengers fair to SAL, in the nature of facilitation arrangement with them for branding reality project undertaken by Assessee-Company. Reliance was also placed on accounting entry made in the books of Assessee as well as SAL. Assessee-Company debited aforesaid payment as :"Work in Progress" while in account of SAL the amount was credited under the head "Passenger Revenue". Assessing Authority thereafter obtained copy of original agreement dated 30.03.1995, on 09.06.2008 through Representative of Assessee and found payments by Assessee to SAL in Financial Years 2002-03 to 2006-07 as under:
F. Year Voucher No. Narration of the voucher as per General Ledger Voucher date Amount in Rs.
2002-03 4000026JV Being Adv. Exp. Debited for the month of April 2002 30.04.2002 215,873,250.00 2002-03 4000028JV Being Adv. Exp. Debited for the month of May 2002 31.05.2002 278,333,550.00 2002-03 6000022JV Being Adv. Exp. Debited for the month of June 2002 30.06.2002 243,605,550.00 2002-03 7000035JV Being Adv. Exp. Debited for the month of July 2002 31.07.2002 212,978,250.00 2002-03 8000023JV Being Adv. Exp. Debited for the month of August 2002 31.08.2002 213,039,300.00 2002-03 9000025JV Being Adv. Exp. Debited for the month of Sept. 2002 30.09.2002 207,457,950.00 2002-03 10000042JV Being Adv. Exp. Debited for the month of Oct. 2002 30.10.2002 251,906,700.00 2002-03 11000027JV Being Adv. Exp. Debited for the month of Nov. 2002 30.11.2002 239,803,950.00 2002-03 12000049JV Being Adv. Exp. Debited for the month of Dec. 2002 31.12.2002 271,206,000.00 2002-03 1000037JV Being Adv. Exp. Debited for the month of Jan. 2003 31.01.2003 273,355,800.00 2002-03 2000031JV Being Adv. Exp. Debited for the month of Feb.2003 28.02.2003 227,501,250.00 2002-03 3000133JV Being Adv. Exp. Debited for the month of Mar.2003 31.03.2003 218,590,800.00 2,853,652,350.00 F. Year Voucher No. Narration of the voucher as per General Ledger Voucher date Amount in Rs.
2003-04 4000166JV Being Entry of Advertisement Passed for the month of April 2003 30.04.2003 196,091,250.00 2003-04 5000037JV Being Entry of Advertisement Passed for the month of May 2003 31.05.2003 207,494,250.00 2003-04 6000055JV Being Entry of Advertisement Passed for the month of June 2003 30.06.2003 185,564,100.00 2003-04 7000039JV Being Entry of Advertisement Passed for the month of July 2003 31.07.2003 175,076,850.00 2003-04 8000024JV Being Entry of Advertisement Passed for the month of August 2003 31.08.2003 163,371,900.00 2003-04 9000042JV Being Entry of Advertisement Passed for the month of Sept.2003 30.09.2003 194,034,300.00 2003-04 10000067JV Being Entry of Advertisement Passed for the month of Oct.2003 31.10.2003 221,721,000.00 2003-04 11000048JV Being Entry of Advertisement Passed for the month of Nov.2003 30.11.2003 229,422,900.00 2003-04 12000053JV Being Entry of Advertisement Passed for the month of Dec.2003 31.12.2003 246,533,850.00 2003-04 1000092JV Being Entry of Advertisement Passed for the month of Jan.2004 31.01.2004 266,269,800.00 2003-04 2000068JV Being Entry of Advertisement Passed for the month of Fab.2004 28.02.2003 258,448,050.00 2003-04 3000117JV Being Entry of Advertisement Passed for the month of March 2004 31.03.2004 273,186,450.00 2003-04 3000120JV Being Entry Passed for Advertisement from April-03 to March-2004 31.03.2004 65,000,000.00 2,682,214,700.00 F. Year Voucher No. Narration of the voucher as per General Ledger Voucher date Amount in Rs.
2004-05 3000201JV Being Entry of WIP of SAL PASS in SICCL 31.03.2005 2,787,243,925.00 F. Year Voucher No. Narration of the voucher as per General Ledger Voucher date Amount in Rs.
2005-06 4000056JV Being Amount for the month of April, 2005 30.04.2005 274,412,050.00 2005-06 5000070JV Being Amount for the month of May, 2005 31.05.2005 296,933,650.00 2005-06 6000089JV Being Amount for the month of June, 2005 30.06.2005 322,441,825.00 2005-06 7000078JV Being Amount for the month of July, 2005 31.07.2005 381,741,875.00 2005-06 8000077JV Being Amount for the month of August, 2005 31.08.2005 410,256,200.00 2005-06 9000110JV Being Amount Debited for the month of Sept., 2005 30.09.2005 409,817,050.00 2005-06 10000085JV Being Amount Debited for the month of Oct., 2005 31.10.2005 472,970,725.00 2005-06 11000076JV Being Amount Debited for the month of Nov., 2005 30.11.2005 422,854,850.00 2005-06 12000088JV Being Amount Debited for the month of Dec., 2005 31.12.2005 514,731,000.00 2005-06 1000093JV Being Amount Debited for the month of Jan., 2006 31.01.2006 316,517,275.00 2005-06 3000119JV Being Amount Transferred SAL 31.03.2006 1,132,281,875.00 4,954,958,375.00 F. Year Voucher No. Narration of the voucher as per General Ledger Voucher date Amount in Rs.
2006-07 3000167JV Being Entry of Brand Promotion made 31.03.2007 4,000,000,000.00
8. Assessee preferred appeal before Commissioner of Income Tax (Appeals) (hereinafter referred to as the "CIT(A)"), challenging demand of tax, interest and penalty. CIT(A) allowed appeals and deleted besides other penalty vide order dated 14.08.2009 on the ground that Assessee is not "Assessee in default", hence no penalty can be levalled. Revenue preferred appeal before Tribunal in respect of order of CIT(A) deleting penalty but same has been confirmed by Tribunal also though on different ground that non deduction of TDS was under bona fide belief that payments made by Assessee were not in the nature of advertisement, therefore, no tax was deductible under Section 194C.
9. In this backdrop we are concerned only with the question of penalty, whether payable by Assessee or has rightly been deleted by Tribunal.
10. In order to attract penalty under Section 271C of Income Tax Act, 1961 (hereinafter referred to as the "Act, 1961") it has been held that Revenue must establish that conduct of Assessee in failing to deduct tax was contumacious and not bona fide. Assessee did not deduct tax treating that payment made under agreement dated 30.03.1995 was not covered by the term "advertisement" and hence Section 194C was not attracted. The view taken by Assessee was not accepted by Assessing Authority but CIT(A) upheld it though again Tribunal reverse the same.
11. In view of difference of opinion amongst various authorities in Department, apparently it cannot be said that issue was straight and simple and Assessee had shown a contumacious conduct or lack of bona fide by not deducting tax.
12. That being so, imposition of penalty under Section 271C of Act, 1961 would not be justified. Tribunal has also taken the view that Assessee for bona fide reasons did not deduct tax and, therefore, penalty under Section 271C of Act, 1961 is not attracted. It has relied on a Delhi High Court's decision in Woodward Governor India P. Ltd. Vs. commissioner of Income-Tax, 2002(253) ITR 745 wherein it was held that Section 273B starts with a non obstante clause which means that it has overriding effect over other provisions of law and initial burden is on the Assessee to show there existed reasonable cause which can be a reason to delete penalty referred to in Section 271C of Act, 1961.
13. Since initial burden was discharged by Assessee in the present case successfully and Revenue failed to show that failure to deduct TDS was for reasons other than bona fide, hence penalty under Section 271C read with Section 273B would not be justified.
14. Learned counsel for appellant relied on the decision of Supreme Court in Hindustan Coca Cola Breweries P Ltd. Vs. CIT, 293 ITR 226 and contended, if there is a default in deduction of tax under Section 194C, Assessee could not have escaped his liability of payment of interest as well as penalty.
15. However, we do not find the aforesaid judgment is helpful in present case for the reason that issue of penalty was not actually raised therein. The only question considered by Court therein is, whether non deducted amount of tax or non deposited amount of tax could have been recovered from "Assessee in default" where recipient-Assessee has already paid tax and answer was given against Revenue. Therefore, reliance placed on aforesaid judgment in Hindustan Coca Cola Breweries P Ltd. (supra) is of no help to Revenue.
16. We find that in Commissioner of Income Tax Vs. Bank of Nova Scotia, 2016(380) ITR 550 (SC) question of assessment of penalty under Section 271C directly came up before Court. Penalty was imposed by Assessing Authority but CIT(A) deleted same and Tribunal confirming deletion of penalty by CIT(A), observed, that to attract penalty under Section 271C it was necessary to establish that there was a contumacious conduct on the part of Assessee. On this aspect it referred to a Delhi High Court's decision in Commissioner of Income Tax Vs. Itochu Corporation, 268 ITR 172 and CIT Vs. Mitsui & Co. Ltd., 272 ITR 545 and confirmed order of CIT(A) regarding deletion of penalty under Section 271C of Act, 1961. Tribunal's order was confirmed by High Court also in appeal preferred by Revenue and Supreme Court also dismissed Revenue's appeal by observing that approach of CIT(A) and Tribunal on the question of law and fact was correct, hence there was no merit in appeal.
17. In Commissioner of Income Tax, New Delhi vs M/s Eli Lilly and Company (India), 2009(312) ITR 225 (SC) Court held that penalty under Section 271C of Act, 1961 can be fastened only on the persons who do not have good and sufficient reasons for not deducting tax at source.
18. Penalty under Section 271C read with Section 201(1) of Act, 1961 could have been charged only if condition precedent in the aforesaid provisions is satisfied. CIT(A) and Tribunal both have found and recorded concurrent finding that aforesaid conditions are not satisfied. Therefore, penalty under Section 271C of Act, 1961 could not have been levied. Nothing has been placed before us to show that findings recorded by authorities below are perverse or contrary to material on record.
19. We, therefore, find no reason to take a different view than that and answer the question formulated above against Revenue.
20. All appeals are dismissed.
Order Date :- 18.01.2017 AK