Income Tax Appellate Tribunal - Chandigarh
M/S Punjab Infrastructure Development ... vs Department Of Income Tax on 27 October, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND MS. RANO JAIN, ACCOUNTANT MEMBER
ITA No.1021/Chd/2013
(Assessment Year : 2012-13)
The A.C.I.T.(TDS), Vs. M/s Punjab Infrastructure
Chandigarh. Development Board, SCO 33-35,
Sector 34-A, Chandigarh.
PAN: PTLP10093G
(Appellant) (Respondent)
Appellant by : Shri S.K. Mittal, DR
Respondent by : Shri Deepak Aggarwal
Date of hearing : 15.10.2015
Date of Pronouncement : 27.10.2015
O R D E R
PER RANO JAIN, A.M. :
This appeal filed by the Revenue is directed against the order of learned Commissioner of Income Tax (Appeals), Chandigarh dated 21.8.2013 relating to assessment year 2012-13.
2. The only issue is against the quashing of order under sections 201(1) and 201(1A) of the Income Tax Act, 1961 (in short 'the Act') made by the Assessing Officer by calculating TDS liability of payments made towards grant for financial support to Public Private Partnership Projects infrastructure development, which was not as per 2 the provisions of section 194C of the Act. Since the issue was same as in assessment year 2007-08, in which the TDS liability was created on similar issue by passing order under sections 201(1) and 201(1A) of the Act. The learned CIT (Appeals) relying on his order for assessment year 2007-08 held that the assessee was not required to deduct tax under section 194C of the Act on the impugned payments and the Assessing Officer was not right in treating the 'person responsible' as 'assessee in default' under sections 201(1) and 201(1A) of the Act. In this way, demands created under section 201(1) and 201(1A) of the Act were deleted by the learned CIT (Appeals).
3. During the course of hearing, our attention was invited to an order of I.T.A.T., Chandigarh Bench in assessee's own case for various assessment years starting from assessment year 2007-08 to 2011-12. While adjudicating the similar issue the Hon'ble I.T.A.T., Chandigarh Bench upheld the order of the learned CIT (Appeals) observing as under :
6. We have heard the rival submissions and have also perused the materials avail able on record. Shri Deepak Aggar wal, Ld. Counsel f or the assessee submitted that in the instant case the Concessionaire / Payee included the amount of grant made by the assessee in his return of income and had already paid taxes on the returned income as per the regularly f ollowed accounting policy and, theref ore, present case is squarely covered by the decision of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd Vs. CIT in [2007] 293 ITR 226 (SC), wherein the Hon'ble Supreme Court held that where the Payee has already paid tax on the 3 income on which there was a short deduction of tax at source, recovery of tax cannot be made once again from the tax deductor. Shri Deepak Aggar wal, Ld. Counsel f or the assessee stated at the Bar that the Payee (M/s Rohan Rajdeep Toll ways Ltd.) - i) has f urnished his return of income under section 139; ( ii) has taken into account such sum f or computing income in such return of income; and (iii) has paid the tax due on the income decl ared by him in such return of income; and he has furnished a certif icate to this eff ect f rom an accountant as per the f irst proviso to section 201(1) of the Act. It is true that in the case of Hindustan Coca Cola Beverage (P) Ltd v CIT (supra), the Hon'ble Supreme Court held that where the assessee has already paid tax on the income on which there was a short deduction of at source, recovery of tax cannot be made once again f rom the tax deductor. The relevant observations of the Hon'ble Supreme Court are as under:-
i) that since the Department did not challenge the order of the Tribunal recalling its earlier order, that order attained f inal ity and the High Court could not interf ere with the f inal order ;
(ii) without deciding the question whether the Appellate Tribunal could have reopened the appeal f or rectif ying an error apparent on the record, that, in vie w of Circular No. 275/201/95-IT(B) dated January 29, 1997, and since the assessee had paid the interest under section 201(1A) and there was no dispute that the tax due had been paid by the deductee (Pradeep Oil), the Appell ate Tribunal came to the right conclusion that the tax could not be recovered once again f rom the assessee.
7. We also observe here that the issue involved is squarely covered by the decision of Hon'ble Delhi High Court dated 26.8.2015 in the case of CIT Vs. Ansal Land Mark Township (P) Ltd in ITA No. 162 of 2015. The issue 4 raised by the Revenue bef ore the Hon'ble Delhi High Court pertain to the retrospectivity of the second proviso to Section 40(a)(ia) of the Act which reads as under:-
"Provided f urther that where an assessee f ails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in def ault under the f irst proviso to sub-section (1) of Section 201, then, f or the purpose of this sub- clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee ref erred to in the said proviso"
The Hon'ble Delhi High Court has held that wh at is common to both the provisos to Section 40(a)(ia) and Section 201 (1) of the Act is that as long as the Payee / resident has f iled its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the assessee would not be treated as a person in def ault. The relevant observations of the Hon'ble Delhi High Court are as under:-
"8. It is seen that the issue in these AYs arises in the context of the disallo wance by the Assessing Off icer of the payment made by the Respondent Assessee to Ansal Properties and Infrastructure Ltd. ("APIL‟) which payment, according to the Revenue, ought to have been made only af ter deducting tax at source under Section 194J of the Act. Bef ore the ITAT, it was urged by the Assessee that in vie w of the insertion of the second proviso to Section 40( a) (ia) of the Act, the payment made could not have been disallo wed. Rel iance was placed on the decision of the Agra Bench of ITAT in ITA No. 337/Agra/2013 (Rajiv Kumar Agar wal v. ACIT ) in which it was held that the second proviso to Section 5 40 (a) (ia) of the Act is decl aratory and curative in nature and should be given retrospective eff ect f rom 1st April 2005.
9. It is seen that the second proviso to Section 40(a) (ia) was inserted by the Finance Act 2012 with eff ect f rom 1st April 2013. The effect of the said proviso is to introduce a legal f iction where an Assessee f ails to deduct tax in accordance with the provisions of Chapter XVII B. Where such Assessee is deemed not to be an assessee in def aul t in terms of the f irst proviso to sub-Section (1) of Section 201 of the Act, ITA No. 160 & 161/2015 Page 5 of 10 then, in such event, "it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee ref erred to in the said proviso".
10. It is pointed out by learned counsel f or the Revenue that the f irst proviso to Section 201 (1) of the Act was inserted with eff ect f rom 1 st July 2012. The said proviso reads as under:
"Provided that any person, including the principal off icer of a company, who f ails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in def ault in respect of such tax if such resident-
(i) has f urnished his return of income under section 139;
(ii) has taken into account such sum f or computing income in such return of income;
and
(iii) has paid the tax due on the income decl ared by him in such return of income;
6And the person f urnishes a certif icate to this effect f rom an accountant in such f orm as may be prescribed.
11. The f irst proviso to Section 201 (1) of the Act has been inserted to benef it the Assessee. It also states that where a person f ails to deduct tax at source on the sum paid to a resident or on the sum credited to the account of a resident such person shall not be deemed to be an assessee in def aul t in respect of such tax if such resident has f urnished his return of income under Section 139 of the Act. No doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in def aul t subject to the fulf ill ment of the conditions as stipulated in the first proviso to Section 201(1). The insertion of the second proviso to Section 40(a) (ia) also requires to be vie wed in the same manner. This again is a proviso intended to benef it the Assessee. The effect of the legal f iction created thereby is to treat the Assessee as a person not in def ault of deducting tax at source under certain contingencies.
12. Relevant to the case in hand, what is common to both the provisos to Section 40 (a) (ia) and Section 201 (1) of the Act is that the as long as the payee/resident (which in this case is ALIP) has f iled its return of income disclosing the payment received by and in which the income ITA No. 160 & 161/2015 Page 7 of 10 earned by it is embedded and has also paid tax on such income, the Assessee would not be treated as a person in def ault. As f ar as the present case is concerned, it is not disputed by the Revenue that the payee has f iled returns and offered the sum received to tax."
78. The Hon'ble Delhi High Court has held insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective eff ect f rom 1st April, 2005, being the date f rom which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004. In the above decision, the Hon'ble High Court has categorically held that no doubt there is a mandatory requirement u/s 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in def ault subject to the f ulf ill ment of the conditions as stipulated in the f irst proviso to Section 201(1). The f irst proviso to section 201(1) of the Act was inserted w.e.f . 1.7.2012. The Hon'ble Delhi High Court has categorically held that insertion of the second proviso to Section 40(a) (ia) also requires to be viewed in the same manner. According to Hon'ble High Court this again is a proviso intended to benef it the Assessee. The Hon'ble High Court ruled that the second proviso to Section 40 (a) (ia) of the Act is decl aratory and curative in nature and should be given retrospective effect f rom Ist April 2005. Respectfully following the judgement of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage P. Ltd Vs. CIT (SC) and also the recent decision of the Hon'ble Delhi High Court in the case CIT Vs. Ansal Land Mark Township (P) Ltd (supra), we do not f ind any merits in the appeal of the Revenue and hence the same is dismissed.
9. As regards the interest u/s 201(1) (1A) of the Act, Shri Deepak Aggar wal, Ld. Counsel f or the assessee submitted that recipient / payee (M/s Rohan Rajdeep Toll ways Ltd has suffered loss in the impugned assessment year. It was claimed bef ore us that the recipient / payee had f iled the return f or the year under consideration declaring loss, theref ore, no interest u/s 8 201(1A) is required to be charged f rom the assessee (Payer) f or not deducing tax at sources. Even if the assessee herein deducts / remit the TDS amount on the income paid to recipient / payee, the same is liable to be ref unded to the said recipient / payee and there is no tax liability in their hands. In our view, there is no loss to the Revenue. While taking such a vie w we are supported by the decision of ITAT, Luckno w Bench in the case of DCIT v Sahara India Commercial Corporation Ltd (2015) 117 DTR (Lucknow)(Trib) 59. In vie w of the above, we do not f ind any merit in the appeal pref erred by the Revenue.
4. Though no distinguishing facts were brought to our notice during the year, we also see that the basis of confirming the order of the learned CIT (Appeals) in the preceding years is the fact that the payee has duly deposited the tax on its income earned from the assessee to the government exchequer. However, in the year under consideration, no such fact and no material relating to the same were brought to our notice and not discussed by the learned CIT (Appeals). In view of this, we restore the issue to the file of the learned CIT (Appeals) for the limited purpose of verifying the fact that the payee has duly added the said amount in its income and has paid due taxes thereon or not.
In case the learned CIT (Appeals) found the same as true, he is directed to delete the demand so raised. No need to add that the assessee may be given proper opportunity to 9 adduce the evidences in this regard.
5. In the result, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced in the open court on this 27th day of October, 2015.
Sd/- Sd/- (BHAVNESH SAINI) (RANO JAIN) JUDICIAL MEMBER ACOUNTANT MEMBER Dated : 27 t h October, 2015 *Rati*
Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.
Assistant Registrar, ITAT, Chandigarh