Income Tax Appellate Tribunal - Delhi
Expeditors International (India) P. ... vs Department Of Income Tax on 11 November, 2010
BEFORE THE INCOME TAX APPELLATE TRIBUNAL,
"DELHI BENCH - B", NEW DELHI
BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER and
SHRI B.C. MEENA, ACCOUNTANT MEMBER
ITA NO.664/DEL.2011
(ASSESSMENT YEAR : 2005-06)
ACIT, Circle 49 (1), vs. M/s. Expeditors International (India) P. Ltd.,
New Delhi. Block A & D, 5th Floor,
61, Chimes, Plot NO.59 to 62,
Sector 44, Gurgaon - 122 003 (Haryana).
(PAN NO.AAACE1795K)
(APELLANT) (RESPONDENT)
ASSESSEE BY : Shri S.D. Kapila, Advocate and
S/Shri Prakash Sharma & R.R. Mouriya,
Advocates
DEPARTMENT BY : Shri Rohit Garg, DR
ORDER
PER B.C. MEENA, ACCOUNTANT MEMBER :
This is an appeal filed by the Revenue against the order of the CIT (Appeals)-XXX, New Delhi dated 11.11.2010 for the assessment year 2005-06. The grounds of appeal taken by the Revenue are as under :-
"1. Accepting the submission of the assessee that the excess deduction / payment of TDS on Royalty in earlier period amounts to payment in advanced and therefore treating it as short payment now and again amounts to double taxation as there is no provision in the income tax act for adjustment of excess TDS deposited in earlier F.Y. in the succeeding years.
2. Directing the A.O. to delete the charging of TDS of Rs.15,34,059/- and interest thereon of Rs.9,33,622/- ignoring 2 ITA NO.664/DEL/2011 the facts mentioned in the order u/s 201(1)/201(1A) passed by the Assessing Officer."
2. The assessee company is engaged in the business of international freight forwarding and warehousing and distribution services. The service was conducted at the premises of the assessee till 08.09.2008. For the financial year 2004-05 relevant to assessment year 2005-06 which is the year under consideration, the assessee has incurred royalty expenditure to the tune of Rs.13,59,65,489/-. As per the provisions of law, the assessee was liable to deduct TDS of Rs.2,71,93,098/- while the total TDS deducted by the assessee was Rs.2,56,59,520/-. Thus, for the year under consideration, there was a short deduction of TDS by Rs.15,33,578/-. The assessee claimed that he has deducted in excess TDS in the earlier previous years, therefore, the same were adjusted against the current year TDS liability of the deductee. Learned DR submitted that the assessee himself has made an adjustment which is not permitted in law in view of the Board Circular No.7 of 2007 dated 23rd October, 2007. There is no provision for adjustment by deductor. The refund can be granted only after obtaining an undertaking from deductor that no certificate under section 203 of the Income-tax Act has been issued to the non-resident. In cases where such a certificate has been issued, the person making the refund claim under this circular should either obtain it or should indemnify the Income-tax Department from any possible loss 3 ITA NO.664/DEL/2011 on account of any separate claim of refund for the same amount by the non-resident. A refund in terms of this circular should be granted only if the deductee has not filed return of income and the time for filing of return of income has expired. The assessee has made a direct adjustment which is not permitted in the law and there is no provision in the Income- tax Act for making adjustment of excess TDS deposited in earlier years in the subsequent years. Such excess TDS claim can be dealt only in terms of circular No.7 of 2007 dated 23.10.1007. Ld. DR pleaded to set aside the orders of the CIT (A).
3. On the other hand, the learned AR submitted that there was excess deduction of tax under section 195 for the period January 2002 to March, 2004. This excess deduction was adjusted while deducting of TDS for AY 2005-06. It has been adjusted only towards TDS liability. The Assessing Officer has refused to allow to adjust the same under section 201 of the Income-tax Act. Ld. AR also relied on the decision of Hon'ble Supreme Court in the case of Salonah Tea Co. vs. Supt. Of Taxes 173 ITR, 42 (SC) for the proposition that tax collected without authority of law from a citizen should be refunded because no state has right to receive or to retain taxes or monies realized from citizens without authority of law. Ld. AR also relied on CST vs. Auraiya Chamber of Commerce 167 ITR 458 (SC) for the proposition that in interpreting the procedural provisions of an act, fairness and justice should be the 4 ITA NO.664/DEL/2011 approach and even in a fiscal statute, equity should prevail whenever the language permits. Ld. AR vehemently pleaded that when there is no express provision against the granting of refund of tax to deductor then in interpreting the procedural provisions of an Act, fairness and justice should be the approach of revenue authorities. Even in a fiscal statute, equity should prevail whenever the language permits. He also pleaded that the tax collected without the authority of law from a citizen should be refunded because no State has the right to receive or to retain taxes or monies realized from citizens without the authority of law. Ld. AR also relied on the Board's Circular No.7 of 2007 dated 23.10.2007 which provides procedure for refund of tax deducted at source u/s 195 of Income-tax Act to the person deducting tax. The deductee has not filed the return and the time of filing the return has also expired. Therefore, the procedure provide in circular is applicable to this case. He also submitted that the matter may be restored to the file of Assessing Officer to complete the formalities as prescribed in circular like submitting undertaking and the indemnity bonds etc. to the I.T. Department.
4. We have heard both the sides on the issue. There was an excess deduction of TDS from royalty for the period January, 2002 to March, 2004. The total excess TDS was of Rs.15,33,578/-. In view of the Board Circular No.7 of 2007 dated 23.10.2007, the assessee was entitled for the 5 ITA NO.664/DEL/2011 refund but after completing certain legal formalities. Paras 5, 6 & 7 of the said Circular provide as under :-
"5. Refund to the person making payment under section 195 is being allowed as income does not accrue to the non- resident or if the income is accruing no tax is due or tax is due at a lesser rate. The amount paid into the Government account in such cases to that extent, is no longer "tax". In view of this, no interest under section 244A is admissible on refunds to be granted in accordance with this circular or on the refunds already granted in accordance with Circular No.769 or Circular No.790.
6. In case of refund being made to the person who made the payment under section 195, the Assessing Officer may, after giving intimation to the deductor, adjust it against any existing tax liability of the deductor under the Income-tax Act, 1961, Wealth-tax Act, 1957, or any other direct tax law. The balance amount, if any, should be refunded to the person who made such payment under section 195. A separate refund voucher to the extent of such liability under each of the direct taxes should be prepared by the Income-tax Officer or the Assessing Officer in favour of the "Income-tax Department" and sent to the bank along with the challan of the appropriate type. The amount adjusted and the balance, if any, refunded would be debitable under the major head "020-Corporation tax" or the major head "021-Taxes on incomes other than Corporation tax" depending upon whether the payment was originally credited to the major head "020-Corporation tax" or to the major head "021-Taxes on incomes other than Corporation tax".
7. A refund in terms of this circular should be gratned only after obtaining an undertaking that no certificate under section 203 of the Income-tax Act has been issued to the non-resident. In cases where such a certificate has been issued, the person making the refund claim under this circular should either obtain it or should indemnify the Income-tax Department from any possible loss on account of any separate claim of refund for the same amount by the non-resident. A refund in terms of this circular should be 6 ITA NO.664/DEL/2011 granted only if the deductee has not filed return of income and the time for filing of return of income has expired." The assessee (the deductor) has directly adjusted the excess TDS in the year under consideration while making TDS for the month of January, 2005 without complying the procedure in Circular No.7 of 2007. Therefore, for the fairness and justice, we restore the issue to the file of Assessing Officer to decide the same in view of above circular.
5. In the result, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced in open court on the 12th day of August, 2011.
Sd/- sd/-
(C.L. SETHI) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : the 12th day of August, 2011
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT (A)-XXX, New Delhi.
5.CIT(ITAT), New Delhi.
AR/ITAT