Income Tax Appellate Tribunal - Delhi
Aha Air Hostess Academy P. Ltd., New ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH `A' : NEW DELHI)
BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND
SHRI B.C. MEENA, ACCOUNTANT MEMBER
ITA No.3695/Del./2011
(FINANCIAL YEAR : 2008-09) (A.Y. : 2009-10)
ACIT, Circle 49(1), Vs. M/s AHA Air Hostess Academy (P) Ltd.,
New Delhi. 7, LSC Panchsheel Park,
New Delhi.
(PAN/GIR No.AAGCA1385B)
(Appellant) (Respondent)
Assessee by : None
Revenue by : Shri Bhim Singh, Sr.DR
ORDER
PER U.B.S. BEDI, J.M.
This appeal of the department against the order passed by the CIT(A)-XXX, New Delhi, dated, dated 13.05.2011, relevant to financial year 2007-08, 08-09 & 09- 10 (1.4.2009 to 21.08.2009). But, this appeal concerns to financial year 2008-09, wherein following two effective grounds have been raised:
"1. Deleting the demand raised on account of TDS deducted but not deposited into Govt. account towards the payment of remuneration and rent to the directors of the company.
2. In allowing the appeal of deductor-assessee on the basis of reversing the entries in respect of TDS on the payments made towards remuneration and rent whereas the deductors has the statutory liability to deposit TDS into Govt. account once deducted by the company. None of the provisions of the I.T. Act permit the deductor to reverse the entry in respect of TDS."
2. Facts in brief indicate that in this case, the Assessee-company is engaged in the business of providing training to persons aspirant to become Air-Hostess for taking up jobs in aviation industry. The assessee has corporate office at Panchsheel Park, New Delhi and branches in various other cities of the country. In course of its 2 I.T.A. No.3695/Del./2011 (A.Y. : 2009-10) business, the assessee incurs various expenses under different heads. Many such payments and expenses are liable for deduction of Income Tax at source under different provisions of the Income Tax Act, 1961. In order to check compliance of various TDS provisions, a survey under section 133A was carried out at the assessee's premises on 21/08/2009. During the course of survey and thereafter on enquiry, the AO noticed the following defaults:-
The following amounts of TDS were not paid and were found overdue to be paid to the credit of Central Government:-
Nature of payment Section FY 2008-09 FY 2009-10 Applicable for Up to 30.07.09 TDS . Salary 192 89,85,708/- -
Payment to Contractor 194C 1,57,2591- 69,519/-
Brokerage/Commission 194H 49,098/- 31.251
payment
Payment of Rent
Fee for Professional 194I 1,18,71,772/- 11,65,455
Services 5,95,917/- 3,22,077
Total 2,16,59,754/- 15,88,302
Nature of Payment Section applicable for FY 2009-10 For the
TDS month of Aug., 09
Payment to Contractor 194C 6,969/-
Payment of Rent 1941 11,730/-
Fee for professional 194J 20,477/-
services
Total 39,176/-
The following tax required to be deducted u/s 194A of the I .T. Act, 1961 was not deducted at source and not deposited to the credit of the Central Govt. on interest paid to Kotak Mahindra Prime Limited (KMPL) and Religare Finvest Ltd. (RFL):-
FY 200708 FY 2009-09 FY 2009-10 (up to
21.08.09)
Interest to KMPL 24,887/- 19,013/-
for Honda CRY
Interest to KMPL 7,828/- 1,37,264/- 42,8221-
used car loan
Interest to KMPL 33,712/- 59,452/- 4,712/-
CF-4252816
Interest to RFL 8,229/- 38,593/-
Total 41,540/- 2,29,832/- 1,05,140/-
3 I.T.A. No.3695/Del./2011
(A.Y. : 2009-10)
In the above background, the AO deemed the appellant as assessee in default under section 201(l) of the Income Tax Act, 1961 for the following aggregate amount:-
F.Y.2007-08 41,540
F.Y.2008-09 2,16,59,754
2,29,832 2,18,89,586
F.Y. 2009-10 (01.04.09 to 21.08.09)
15,88,302
39,176
1,05,140 17,32,618
Total: 2,36,63,744
3. Aggrieved by the above action, department has filed this appeal.
4. It was contended before first appellate authority that tax deducted was not deposited as worked out by the Assessing Officer which included TDS of Rs.63,49,200 on remuneration payable to the directors, Mr. Akash Gupta & Mrs. Sapna Gupta for the financial year 2008-09. However, in the fact of financial crisis, these directors had foregone their remuneration for the above financial year and accordingly their above TDS of Rs.63,49,200 were reversed. This resulted I the TDS liabllity of the above amount and therefore, the amount determined should be reduced by the above amount of Rs.63,49,200/-. Ld.AR further submitted before first appellate authority that the liability to be reduced by further amount of Rs.21,34,352 being the amount of TDS payable in respect of rent to the directors of the company, namely Shri Ashok Gupta & Mrs. Sapna Gupta on the ground that these directors had already discharged their tax liability and there is no outstanding liability of tax due to these deductees by reproducing the submissions of the Ld.AR of the assessee, who cited Apex Court decision in the case of Hindusan Coca Cola Beverages P. Ltd. vs. CIT, 293 I.T.R. 226 (SC) and Delhi High Court decision in the case of CIT vs. Hindustan Coca Cola & Beverages Pvt. Ltd., 293 I.T.R. 163 (Del.), assessee has submitted for reduction in tax liability determined by the Assessing Officer by the above amount of Rs.63,49,200/- and Rs.21,34,352/-.
5. Ld.AR further stated to have produced before CIT(A) copy of challans depositing aggregating amount of Rs.1,02,52,430/- deposited by the assessee since the determination of tax liability u/s 201(1) has passed on 14.10.2009. Reliance was also 4 I.T.A. No.3695/Del./2011 (A.Y. : 2009-10) placed on circular No.275/201/95-IT(B) dated January, 29, 1997 issued by CBDT to the fact that no deduction u/s 201(1) of the I.T. Act, 1961 should be imposed after tax deductor had satisfied the officer in charge of TDS that taxes due have been paid by the deductee-assessee. So, CIT(A) while considering such plea of the assessee has concluded to reduce the demand by drawing his conclusion from pages 8-10 of his order as under:
"I have discussed the matter with the AR Sh.R.K.Kumar, CA. The AR argued that the appellant had already paid 201 (1) tax after passing of 201 ( 1 ) order to the extent of Rs.l ,02,52,430/-. The TDS on rent paid to Directors in the financial year 2008-09 is not required to be deposited, as the payee's i.e. Directors have no outstanding income tax liability. But the Directors have to pay 201 (1 A) interest on the rent paid to them or should calculate interest u/s 201(1A) on TDS on rent paid to the directors by the appellant company. There is a reversal on remuneration paid to Directors and also reversal of TDS payable thereon for the F.Y.2008-09 of Rs.63,49,200/-. Thus the net TDS liability as on today i.e. 10th May 2011 is Rs.49,27,762/-. [The AO is directed to compute the interest liability u/s 201(lA) after giving assessee Ld.AR an opportunity of being head so that correct amount interest liability on tax liability can be imposed on the appellant company. At present, the business of the company had gone down compared to earlier years. The returned income of the company for A.Y. 2008-09, 09-10 and 10-11 are as under:
Assessment Years Net Profit/Loss as per Books Returned Income i 2008-09 1,07,39,0801- ! 3,03,16,334/- I 2009-10 (Loss) 6,48,15,3701- 62,51,90~ ! 2010-11 Return not filed till , date The appellant company was doing well and earning profits till financial year 2007- 08 relevant to A.Y. 2008-09 but due to sudden turn of events and recessionary trend incurred heavy losses during the financial year 2008-09 relevant to A.Y. 2009-10 and subsequent years. This led to financial crisis under which the company failed to deposit tax deducted at source. The financial position of the appellant company as under confirms the above facts:-5 I.T.A. No.3695/Del./2011 (A.Y. : 2009-10)
A.Y. Net Profit I Loss Returned
Income
as per Books
2008-09 3,03,16,344/- 1,07,39,0801-
2009-10 (Loss) 6,48,75,3701- 62,51,9001-
Thus the appellant company which earned profit of Rs. 3.03 Crores for the A.Y. 2008-09 incurred heavy losses of Rs. 6.49 Crores for the subsequent year. It could not deposit tax deducted at source leading to heavy disallowance of Rs. 7,31,16,482/- under section 40 of the Income Tax Act, 1961.
Grounds No.3 & 5 are general in nature and do not require any specific findings while ground No.4 has not be pressed upon by the ld AR.
In the result, the appeal is partly allowed. The amount of demand raised u/s 201(1) is directed to be reduced as under:-
Total demand raised u/s 201(1) Rs..2,36,63,744/-
Less relief c1aimed:-
a) Reversal of remuneration to Directors and consequent reversal of TDS payable thereon for the FY 2008-09 Rs.63,49,200/-
b) TDS on rent to Directors for the FY 2008-09 not required to be deposited as payees have no outstanding income tax liability Rs. 21,34,352/-
c) Tax already deposited after passing of Order u/s 201 (l) Rs.1,02,52,430/- Rs.l,87,35,982/- Net TDS Liability Rs. 49,27,762/-
The AO is directed to compute the interest u/s 201(lA) after giving assessee an opportunity of being heard. The AO should recover the TDS and interest as per law.
In the result the appeal is partly allowed"
6 I.T.A. No.3695/Del./2011 (A.Y. : 2009-10)6. Aggrieved by the order of CIT(A), department has come up in appeal and it was strongly contended that CIT(A) was unjustified in deleting the demand raised on account of TDS deducted on not depositing into Govt. account towards the payment of remuneration and rent to the directors of the company. 7 It was also submitted that CIT(A) is not legally correct to allow the appeal of the deductor-assessee on the basis of reversing the entries in respect of TDS on payments made towards remuneration and rent whereas the deductor had the statutory liability to deposit TDS into Government account once deducted by the company. Moreover, none of the provisions of I.T. Act, 1961, permit the deductor to reverse the entry in respect of TDS. It was thus pleaded for reversal of the order of the CIT(A) and restoring that of the Assessing Officer.
8. Despite sending notice to the address given by the assessee in the first appeal proceedings, same could not be served, so notice was directed to be served through Ld.DR who was also unable to serve the same on the assessee at the last known address. So, he got it served through official machinery through affixture and submitted the report to this bench at the time when case was called up for hearing, nobody attended for the assessee. So, we proceeded ex-parte qua-the-assessee and decide the appeal after considering the arguments on record.
9. After hearing Ld. D.R. and considering the material on record, we find that relief has been given by the CIT(A) on the basis of reversing of the entries when law does not permit to reverse the entry in respect of the TDS. Moreover, certain fresh documents have been submitted by the assessee as is apparent from first appellate order and Assessing Officer has not been associated either with the appeal proceedings or any remand report was obtained, therefore, order of CIT(A) being not in conformity with the law is reversed and that of the Assessing Officer is restored.
10. As a result, the appeal filed by the department gets accepted for statistical purposes.
Order pronounced in open court on. 24.01.2013.
Sd/- Sd/-
(B.C. MEENA) (U.B.S. BEDI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : Jan. 24, 2013
SKB
7 I.T.A. No.3695/Del./2011
(A.Y. : 2009-10)
Copy of the order forwarded to:-
1. Appellant
2. Respondent
3. CIT(concerned)
4. CIT(A)-XXV, New Delhi.
5. CIT(ITAT) Deputy
Registrar, ITAT