Karnataka High Court
M/S Solar Automobiles India (P) Ltd vs The Deputy Commissioner Of Income Tax ... on 12 September, 2011
Bench: N.Kumar, Ravi Malimath
_ 1 _
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE :12" DAY OF SEPTEMBER 2011
PRESENT
THE HONELE MR. JUSTICE N.KuMA::e.----.['
AND
THE H{}N'BLE MRJUSTECE ¥€AvI1'.'MAVL1MATE
ITA.No.413'T§j"E...2009'- V E
AND T "
BETWEEN:
M,/s.S0iar Automobélves E§':'tfii"a" 'V
No.6,St.John's;"Rc=3d;
Bangaiore--:560_Q3,_7_j_ ' 'i .
(Represented_Vby_§'i;$ CE'za§r_mfejm'&.!V1ar'a§aging
Directoafi, " ' T -
Sri 3.S.Shaun3<ar, 'Agedjab'e._;J't'«7~5 yeays,
S,/0 Ummamaa Poojaré} " ..¢APPELLANT
_ '(By {§fi~=,!thar§y"a.. Advacate)
E
"3;%s--e:' Qae§T£3tT;E"_'*j{ie'é:Ti:T:Essie me r
E"? Encame «"§_"§a<j::»<A {TBS}
; CirCEe'--§,83{2;}g 4*" T-"Toss; §'«§@,S§,
-. '3~E§v'§T Bhafyan, Beéiary Road,
' ufiagég-zgiere -« 3&3 {E321 .=..RE§?{}%'*éDE§~é?
_ Eeevan ."§£\§eer§%g£, Aévccate}
3f<>?<>%>%>§<
These ITAS filed under section 260~A of §,"l'".Act, 1961
arising out of erder dated 27.02.2609 passed--"'----_in
§TA.Nes.13,8§,1198 8: 1191;'Bahg,/2008 for the Assessrt:.er*;t
years 20{}4--{}S,2005-O6 e 2306-07, praying to f;<;>_r'mul~ate"~..
the substantial questloee of law statee therein,l'_ell0*w;-th'e.~V___
appeal and set aside the order passed by"'«.thej*-IT2f\"l',»_'
Bangalore in ITA.N0s.1189,13.9£3 8: $191/Bang;'20l;3*8,"*date£§ V
2T5'.O2.2{}O9.
These ETAS cemlrzg or; forV41ad'rrj.issieh_»_l.Ath.is.«.
KUMAR J., delivered the f0llow*i_hg_;u~
,3T**~W--w~wUDGM,Ew'.%éj%:._
The assessee appeals
challenging theéerder which has
upheld the :j'lVe'h'er"'auth0r:tEes foistmg
hie Income Tax Act,
1961 the
va.s-.:~'selsseVé" is a Private Limited Cemgjany
."<.g3A['l§E3':§E§»€'§'l lhgfche 'l:$Li"s'i'hess of servéeéeg ef Marathi Vehlclee
c:f':.;:_le:*=%§fh.eev:el*s}"_j..es ae autherlsed dealer 0% E'/Eamthi Ueyeg
L:lre4§'§:ee_,..--:?%;,--';lBS eufvey wee eehdeetee es"; ZZSQZZQG?
V'-».unde%W,VS§~ee'E%en 133A at the eeséeess eremises ef the
"'_e;s$eesee eee hie swem eieiezeere wee receeéed,
as M __"l"he;"eefte:, he lssued eemmees re the aesessee Lméer
'-. /
Section :31 ed' the Act on 23,02,200? to produce books ef
accounts and other decuments. Thereafter, a Show cedsde
netéce came to be issued an 27.08.2007 ceiiing
to show cause as to why interest shouid
under Section 201 and 20i(1A) ferV';the'_"a3.sessment--_y.e:eFsj_
2004-05, 2005-96 and 2dos~ti7_. Theessessee.dax}eV'hi§, '
repiy. On receipt ef the said a fdr'thV_er's;1eié~.z eeiuse
notice was issued on seevdndyénotice
aiso, the assessee rei:')lViedV_Viti'giVi§ri'vng.-.:_:"t.j§:er__fciarifications.
However, not Sgivee by the
assessee, the A_s'sessibg 4'/3xé;'s.'jtii"c;v:ri,ity'«';v*.:assed an order under
Section 1156 interest fer the deiayed
payment ofx*§ete.rest. aififitifiil to the creditors. A common
,,ereevr=§§gesi";:vesse§C¥"'ft:;f___el§vthe three years Aggriexsed by the
.erd.ei;,=tfie___assessee preferred an aepeeé :0 the
Ce'ei§m§ssiVen'e:r efvfneeme iex {eeeeaEs}~'ti}, Eengaiere weigh
'eeemeééiite "';be.d%em§ssedt aggrieved egg the seie erder, tee
V' "..es§~:e's*s.ee eseferree ee eeeeei te tee Teeeeei, ezhéeh eése
._iii'.=ee7i1j:e'At0 ee dismissed, eggzieved eg: the seid ezndeag. the
""V_essessee is before this Ceurtt 1::
3. The learned Cenhsei for the assessee assa_i_i%r1g
the impugned order contends that the assesses is
under loss. He has berrewed money from
and was iiabie te pay interest. Ashef{vas_--'%e'nn:ine'V"an'_dVe;-D'
1055, he did not make any paymentloff
purpese of compiying with theier-Qyistieitzsiiof
Act, a credit entry wasmade isfiipaid to
the creditors. On suchventrye t'}.e'§r§g:Vi'.nia§3.e'§'stich payment of
interest shown 35~.,;.;jq e:gp'e':"i.d:i'tr_:Vr'e.;'~::.i:_h'e.i3_gihiaetuaiiy was not
paid and theé.a4id5:a_r'n0:§.nt1*.rgas.__4--a*eai'iyVnet an expenditure.
Therefei"eV;'ViVhe~s7;:_bn{%f§Vs tjhafthe ufiabviiviity to deduct tax arises
only whenthe to pay ta a resident any
income by t?%}a\,{of.e§".i-iteiiesti Therefore, when there was no
"V"'--.,§riC;:§:;<ne:,.,'-ti.n fine ieehéev unaetsteed under the Act, the
.§i§i§i§S;{Vi{':E:"DV'»--.§f'4uu(}§§:§JC§i¥':g the tax eayahie on such iheome
enideit teaifii} does net arise. Seeeeeiy; he
i3"»-w___V'-».eenteni:ieé:§ as the Saw stooe an the date ef the reieeant
u"$:."?I$;€§3?'§'t$%"§":". year, Seetien giijti was aeeiéeaeie eniy ta
eersens referred ta in Seetien 238 at' the net' as the case
i
at/""
M 5 ..,
ef the assessee dees not fat! both under Section 200 and
194 and it falis under 194(1) for net deducting and--not
paying tax, the assessee eaehet be deemed as a
Section 201 (1211) applies to the cases where H
was attracted. That is the provision;wtzicht."ihVtp_oee3T;ax"; V
liability to pay interest on the
deducted and paid to the 1A".Vhe.:fe'foArVe_, eras
no iiability to pay ihtetest. 2088i, which
came into effect frontQ:;{t€}--_.éC:O2{::t»t.e_t:re$.pectEveiy, the
iiabiiity to pay, provision, it is
settled lawzf Vrhade retrospective and
therefore, he the amended provision
is retrespe'e4tévev iVf1_o4Vo.era:tfi'_mé, the liability' to my does not
exis.*.:.{: "taste it contended that even if the Iéabétity is
»heie_Vto.,t3e.%thfier,e, it cat: be ehh; fsrom the eate ef deeuctieh
dtéitézhiex'd'e't'e._ {{l»§;.?u%§§iE'1§ its retere end eeymeet ef the tax.
~V §thte'r:e§"e.e,"'f%t emoemts te deeeie tax; eeece :3 not
xv'heeemigéseidhée in ieeg eed thetefereg. tee eteer ef the
tafitgbdotaet and tower eethorétéee eeédmg tee: the
assesses: is Iiabie te pay interest cm the amount deducted
er not deducted til; the date of order 01' assessmerftpis
EFFOFIEGUS,
5. Per centre, the learn_ecJ_ Cog.2'ris'e§.::'_'»ft§:'*~: 'the!
revenue pointed Get that when once, S€;fC't§ffJt'1"2.C31s:§'§a'$' b'€.$E*ii1;_'&
amended retrospectéveéy ;3iue_g"£--.zf}g the1Qopheie<...QfHeat
Eneieding section 194A wéthihithe-.._vsc:o;5e«--.t)Vf the said
provisiomeven though eh. the 'c1ayj_»'tVhé'--e§'n1ie~:.1»nt was credited
to the account of st-he €:red'é'L'otS aV'r'1c'i"'»e.(}:"':&.ii?_1e«;.."LiV,~F'::§',.! returns were
flied by f~eif«_th-eh re.i.-ev'-aetVV:y'éers, there was no
iiabilityfto ghjéy eththe retrospective effect of
the amehtimeat,._th_e».»hii'at§:i"E"§i:~;" exists and rightty the said
iiabéiity. hasaube.eh'éfaapesehdh. by the tower eutherities 0;: the
"ess"esse3e; in se fates the eeriee for which the érzteeest is
L-eegfahbieV"%s_JC'e%:'£:e_%.?;':ed, he seeméts the matter yeqeétes to he
"'"«_ "-%:f':fe;*reet_§en fears: the Creeiterss
Eeeéazsed _%~;:tei'..-- the euttzeritées eftes' getting reeeésite
K
:3
ya
E». in the fight of the aforesaid facts and the ri<~.za__!_
Cententiens, the foliowieg substantiaf questions
arise for conséderatienr
1.Whether in the facts and céetcytsmstethteesh'bf 'the, case, the authorities were just§f--i'ed'he..i_n'~. interest under Secti§:n4_ 201é"'r_e'ad with V 201(/--\) of the Act? ' " V L
2. Whether the ieyy ofxirt-te"fe.st-».ft0m "the..d.a'te ef defauit téli the"«-date 'tef ;the""vEi§h;jug»eed order is valid and iegai?__ vv
7. Cha«pt_'eJ_'_ £-:'1':'r:::?":V':qfV§'::k'[fl- 'Act ~.c:éT;;v1sy-fith the Coiiectien and recovcfgrx/..t.0f'tethxf;:;5§<.t.3§e_:V'i9{}...,dVe5§Is with deduction at source end ' Section 1940-\) provides for interest offrert than a"In'te.}_i%.est on seCuritfes'i where any ;3ersc:«.r.i}j, neat best:-g__ané, mdividtzei er a Hindu undivided "v__far:r.ri!y, _wi?o'.;'S'-ifespensibie for paying is e resident any z;t2t:<§}z3.e :5§?R.'%;te:2j:=.Ve:f interest ether titer; incdme [by we}; ef
--V ;'n€ereL:;;" es: seeuriéieej', shed, at the ewe es' credit" ef sect:
"_':';f'§<';:t3:':"z;e ed See eecetset ef the egg:/ee er 5: tee §E}"?"?€ ef
- ye-sgefieet tfyereef in Cash er by {seize ef e eiteeee er draft 9:
during the relevant period provided that if any person referred to in Section 200 and in the cases referred {to--_§n Section 194 dees not deduct [the whole or any tax] or after deducting fails to pay the tax or under this Act, he or it shaii, other consequences which he_.o_r it Ariirihr.Er1<:urV,.,'..i2'£tA' 'd€:eroKediVV"
to be an assessee in defauét En 'Eejspect 201(A) provides that sueh,flper_so'r2'/'a--ss'e'sise.e 'd'ef'a£}4it shall pay simoie interest as ,}h,e_'_'..said section. Therefore in only persons referred to were treated as assessee in defaL:.i'tv-..iéJE1.i>C'ii1.stT:were'iiabie to pay the interest. The said p'rc_\/iisiyori' "no'..'aVappiEcation to Section 19403.), Wheh_%jAthe\A.sa§d p'r'ex}:isioo: did not cover a faiiure to deduct at sofairee VA.a--_e'a~se faiiirig under Section 194A, as such a p'e2*s'ori' §é'as"_"_o_oiéavoiiity ts ea'; interest, ":"he said orovésioe seamed" to"--V:«:oe".Vareendedi Though this ameoemeet was they Féoanee eat; 2668; it was given zretrosoeetiase
-'.is'_--e§"§e'et'AA'from {E3-.e§6z2'{3@2a iherefore, evee though prior to this ameedmeot is 2808, there was no iiabiiity to pay 5; «-4 ' is/' .....j_{3.....
interest on a person who falls within the Section 194A, by virtue of the said amendment it is made retrospectliJe.9to all persons who fall under Section 194A were 3 to pay interest if they have not deducted the
8. It is true the payrnent::"'so§ substantive provision. Any'«-Rlialfiliitxf retrospectively on sueh '§?:si'OL,I"i.(j' grave hardship. However, validity of the amendment is not vchall.e--n§e:ci. that the Parliament hag poz;verrto.4.4V any iegisiation malengzlittltetrosgecltnie_§n*..'nature;VVV'By such an amendment, even vevsted rightVs've1n_ti"--s§j3"i>«st'entive rights could be taken awayor mo7diéfied.....'-Thieonly limitation on the Pariiement i,,_8¥'§i};z' SLl€E;§'v§é"i}"».'?v retrospective is that the eerson §.§"'§i;lE§l{§- 'v?§e.:v'%:~';.><po$ed to criminal Eiabiiéty. "léxereferet eve:;4'V%thet:.;e:ti:*.,.at the relevant years, as Section 29% read [7-'«4___"-with Sefiiéon 201 stooe, {here was no iiebiiéty to pay V"'%e:e_:eAst en the essessee by virtue es' §'éi?"G§§3€C€§%£'€ HQ_§€§"3'CiG%"lS, he is iéebie ta peg: interest: Therefore, the sale t ii//, . .
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finding recorded by the authorities Cencurrently cann<_>___t_ be found faufi: with. Hence, the first substantial Eaw is answered in favour of the revenue * assessee. é '
9. In so far as payment:
194A is cencerned, the irztereefi'i--~s. pa§}a~5§e is not paid after deductien. Tf§Ve;'_}:V§5Aari:r}e%Qa1 I.iab:Ei§ey Vcgvi' paying tax is that of the credit'c-eantéiL.aV%V:.e§:£et'e3§e'%y-"duty is east en the debter to éeduet ta:;"'o'e-i1:je."é!T%§3»9?%%';§'§ %¥f.;,/:'ri'1.:erest payable and remit tfje _'..m..V: f7e3_ :Cempéefufi'é:;§?e§pective of Iiabitiizy of the préncipai debtor flies the retL£ re e--ncVi the vécarieus iiabiiéty exists er: t§je.,£eers4 d:2_s{V wee %sm5eu:a have deducted at source or tC;'eV.?2e~xge defifitted at Seuree. The revenue cannot e_z_':eV7zV£e§:t- *ve 'ne.:§;j.:tere$i; fmm been 'me méeeéeai ené the age»:r_'j:€L 1:r:."::EL*2:e;7:{TV'ees":*::ext, the ereer gagged by iize eeiheriiées T '»-v__ '~E*1e§di:"2§'fiat the esseseee is iiebée ta gay éeterest {rem the eefeuét iii? the flare ef tee eraéer is eweeeeeew 4A:.1_§5_€§weverf the eutézeritées have {go fine east wheéher the
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creditor has fried the returns and paid the tax. if he has filed the returns and paid the tax, the Iiabiiity o§.."'the assessee ceases from the day they have eaid.«..t'h_e':'__'L-ex? Thai: exercise is possibie oniy after verifying'.the'-.r.eC:ei=dr3 bath the assessee and the cred'itc{rWe1»' 't'h.e7.asiS'eS$ee;._;"ff? that extent the impugned erder 4';3.aes.ee ésfgsei "asE*.de'.r'V Accordingly, the appeal is partE'y:e'§§owed":.£he':vmetters are remitted back to the'2§\_sse«£;Vé'i§j'gr--:§§:1'f¥:o.rity 'teehdertake the exercise and find out th-TeAV_Eie,b'i:iEiy payabie by the assesssee. f3rz1e Vred a_ccQrd':ingE\j"; --i_"--..r\3_Qj£:ests. r :eeee ee/~ FEEDGE