Income Tax Appellate Tribunal - Mumbai
Reliance Communications Ltd, Navi ... vs Assessee on 11 April, 2016
1 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012
आयकर अपीलीय अिधकरण "डी" यायपीठ मुब
ं ई म।
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "D", MUMBAI
ी अिमत शु ला, याियक सद य एवं
ी रिमत कोचर, लेखा सद य के सम ।
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND
SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
ITA No. : 2957/Mum/2014
(Assessment year: 2010-11)
ITA No. : 2958/Mum/2014
(Assessment year: 2011-12)
Reliance Communications Limited, Vs ACIT(TDS)-Range 3(2),
BHQ, 5th Floor, Dhirubhai Ambani SMT K G Mittal Ayurvedic Hospital
Knowledge City Thane Belapur Road, Building, Charni Road,
Navi Mumbai -400 710 Mumbai -400 002
थयी लेखा सं.:PAN: AACCR 7832 C
अपीलाथ (Appellant) यथ (Respondent)
Appellant by : ी योगेश थार Shri Yogesh Thar
ी द पक जैन Shri Deepak Jain
Respondent by : ी ए के वासतव Shri A K Srivastava
सुनवाई क तार ख /Date of Hearing : 03-02-2016
घोषणा क तार ख /Date of Pronouncement : 11-04-2016
आदेश
ORDER
अिमत शु ला : या. स.:
PER AMIT SHUKLA, JM:
The aforesaid appeals have been filed by the assessee against impugned common order dated 17.02.2014, passed by CIT(A)-13, Mumbai, in relation to the order passed under section 201(1)/201(1A) for the assessment years 2010-11 and 2011-12. Since, in both the appeal grounds raised are common, arising out identical set of facts, therefore, they are being taken up together. In various grounds of appeal, the assessee has raised mainly following issues:-
"I. Treatment of Roaming charges paid to various telecom operators to be in the nature of Fees for technical services and liable to Tax Deduction at source ('TDS') under Section 194J of the Act.
2 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012II. Treating the Appellant as 'assessee in default' u/s 201(1) by ld. CIT(A) ignoring the declarations obtained from the payees/deductees and accepted by the AO..
III. Levy of interest under Section 201(1A) of the Act".
2. The relevant facts qua the issues involved are that, the assessee company is CDMA service provider offering full telecommunication services to its telecom subscribers across Pan India. Prior to December, 2008, the assessee was exclusive CDMA service provider hence, there was no occasion for making any payment of roaming charges to any other telecom operator. Post December 2008 and January 2009, the assessee company entered into a "Roaming Agreement" with Reliance Telecom Ltd., which provides GSM services in eight telecom circles in the country where assessee-company did not had GSM license. Explaining the nature of roaming facility, the assessee's contention, in brief, before the AO was as under:-
(i) Roaming is defined as the ability for a telecom subscribers to automatically make and receive voice calls, send and receive data, or access other services, including home data services, when travelling outside the geographical coverage area of his telecom operator's network (termed as "home network") by means of using the network of another operator having coverage in such geographical (termed as "visiting network").
In order to cater to the roaming requirements of such telecom subscribers moving out of their home network to other geographical areas, where the home network is not available, the telecom operator has to enter into Roaming Agreements with the telecom operators having network in such geographical areas/circles, that is, in the visiting network. This enables the telecom subscribers of a particular telecom operator while travelling away from home network, to switch over automatically from the home network to the visiting network to avail uninterrupted telecommunication 3 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012facility. This automatic switchover of telecom network is termed as 'roaming facility'.
(ii) The roaming facility of the visiting network is used by the telecom subscriber and not the telecom operator (the Company in the instant case). In turn, the visiting network telecom operator charges 'Roaming Charges' depending upon the usage of airtime by the roaming subscribers. The Company, being the home network operator, only collects the roaming charges from the subscribers availing the roaming network facility and passes on to the visiting network telecom operator. Thus, the home network telecom operator pays 'roaming charges' to the visiting network telecom operator for the services availed by its subscribers, who actually becomes a pseudo subscriber of the visiting network telecom operator while roaming. Roaming is nothing but the use of standard telecom infrastructure facilities provided by telecom operator of the visiting network to the subscribers. It is not a payment in lieu of rendering or receiving of any services or discharge of any contractual obligation of technical service enjoyed by the Company and hence, question of applicability of TDS provisions u/s 194J does not arise.
(iii) The call carriage during the roaming process is fully automated by virtue of sophisticated and technically advanced telecom equipments/machines and does not require any human intervention for rendering of technical services as defined in Explanation 2 to clause (vii) of sub- section (1) of section 9.
From narration of above facts, it was thus submitted that the visiting network operator does not provide any technical service to the home network operator so as to deduct TDS for rendering of technical services within the ambit and scope of the provisions of Section 194 J of the Act.
4 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/20123. In support of the above contentions that such kind of automated standard facility cannot be reckoned as rendering of technical services because it is without much human intervention, strong reliance was placed on following decisions, which has been incorporated and discussed by the AO at pages 2 to 4 of the order:-
Name of the Case Citation
a) Skycell Communications Ltd. 251 ITR 53(Mad)
b) Idea Cellular Ltd. 2008-TIOL 739(Del)
c) Bharati Cellular Ltd (2011) 330 ITR 239(SC)
4. By way of an alternative argument, the assessee company further submitted that, the payee company, that is, Reliance Telecommunication Ltd. to whom the roaming charges were paid is regularly assessed to tax and furnished their declarations along with their PAN details and the jurisdiction of the AO in which they were assessed. Thus, it was submitted that in view of the decisions of Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt Ltd. vs CIT, reported in 293 ITR 226 and also in the case of Bharati Cellular Ltd.(supra) if the recipient payee has paid the taxes or shown it as their income, then assessee (payer) could not be treated as "assessee-in-default" under section 201(1). The assessee's detail explanation before the AO in respect of all the contentions raised has been extensively incorporated and dealt by the Ld. AO from pages 1 to 7 of the impugned order.
5. However, so far as primary contention that is not in the nature of 'fees for technical services', the AO held that, in the case of M/s. Bharati Cellular Ltd. (SC) (supra) the issue of involvement of human element in the process of roaming charges has been set aside to the file of the AO to examine, whether any human intervention is involved in the process of roaming charges or not and this aspect needs to be examined with technical data and aid of experts. The AO noted that, in line with such a mandate of Hon'ble Apex Court, in one of the case, Vodafone Essar Mobile Services Ltd. vs ACIT, Circle -51(1), Delhi, the AO has passed the order after obtaining technical advice from the experts. He 5 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012thereafter incorporated the relevant portion of the order under section 201(1) r.w.s. 201(1) passed in the case of M/s Vodafone Essar Mobile Services (order dated 31.12.2010). In the said order, question and answers in the form of statement on oath of certain employees of Vodafone and technical persons have been incorporated. In reply to various questions, they have elaborated the functions of the network system of the Cellular Operators at the time of receiving or providing interconnected services to each other and also how the systems works automatically. The sum and substance of the answers given by these experts were that, when the call gets connected by one operator to other, per se, it is an automatic connection, but when there are certain problems in the call-connect then certain human intervention is required, that is, if there are some technical snags in software or hardware or in the fiber optic cable etc. In the event of such technical snags and problems human effort is required to rectify the same. However, the entire systems works automatically albeit it cannot be 100% fully automated because for some faults which incur during the course of transmission it does require some corrections by human interventions. The questions and answers in detail has been incorporated in the said order extensively by the AO. Thereafter the AO drew his own conclusion that, human intervention is required in the process and therefore, it is rendering of technical services. He went a step further in holding that, each machine requires human intervention without which no machines can operate. Even Robots also require human makers. Thus, machines operating automatically require human intervention right from installation, activation, maintenance to up-gradation and decision making. Therefore, the payments made has to be reckoned in the nature of "fees for technical services" in terms of Explanation 2 to section 9(1)(vii) and hence liable for deduction of tax under section 194J.
6. However, he accepted the assessee's alternate submission that in view of the decision of Hon'ble Apex court in the case of Bharati Cellular Ltd. (supra) and Hindustan Coca Cola Beverages 6 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012Pvt Ltd. (supra), assessee cannot be treated as assessee-in-default under section 201(1), because the assessee has furnished the declaration from the payees and has also furnished the PAN and the jurisdiction details of the AOs. Thus, so far as liability u/s 201(1), the same is not enforceable. But, he held that the assessee would be liable for payment of interest under section 201(1A) which he worked out at Rs.78,58,690/- for the assessment year 2010-11 and Rs.1,04,57,967/- for the assessment year 2011-12. The relevant finding and observation of the AO in this regard is as under:-
"I have also considered the assessee's submissions and agree with its contentions having regard to pronouncements of the Hon'ble Apex Court in case of Bharti Cellular Ltd that taxes cannot be again recovered from the assessee. In this regard, considering that the assessee has furnished the declarations from various payees and has also furnished the PAN and AO jurisdictional details in respect of the balance payee, no recovery is being made from the assessee. Also in this regard, relying n the decision of the Apex Court in Hindustan Coca Cola Beverage Pvt ltd vs CIT (293 ITR 226) wherein it has been held that if the recipient/payee have paid taxes on their income, the Income-tax Department cannot recover the same once again from the payee. It was held that the assessee could not be treated as in default under section 201(1).
However the assessee is held liable for interest u/s 201(1A) on account of non deduction of taxes and interest under Section 201(1A) on account of non deduction of taxes and interest under Section 201(1A) has been levied on the non deduction of TDS from the date on which when the tax was deductible to the date on which return has to be filed by the payees".
7. In the first appeal, the Ld. CIT(A) confirmed the order of the AO in so far as the issue, whether the payment made to the telecom operators on account of "roaming charges" is in the nature of 'fees for technical service' on which assessee was liable to deduct TDS under section 194J. However on the issue that assessee cannot be treated as 'assessee in default' under section 201(1) the Ld. CIT(A) made an uncorroborated and incorrect observation that the AO has held that the assessee has not furnished any declaration from the deductees or about their status of their return of income having already filed, wherein the said payments have already incorporated in their return of income and hence, the 7 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012assessee remained in default for levy of tax under section 201(1). This observation, though on the face of it was erroneous. Regarding interest under section 201(1A) the assessee had taken a specific plea that deductees have incurred huge losses during the year and thus, there was no loss to the revenue on account of non- deduction of TDS, because in any case, no tax was payable by these deductees. In support, the assessee had relied upon the decision of Hon'ble Allhabad High Court in the case of CIT vs ITC Ltd. [albeit no citation or reporting or Appeal number of this case is given in the order]. The Ld. CIT(A), though accepted the assessee's plea in principle, but, finally dismissed the ground of the assessee after observing and holding as under:-
"Alternatively appellant has also taken a plea that as the deductees have incurred use losses during the year under review there was no loss to revenue on account of non- deduction of TDS by the appellant while making the payment, as in any case no tax was payable by these deductees. For the same appellant has cited decision given by Honorable High Court of Allahabad in the case of CIT versus ITC Ltd. I have gone through the same and having read the same I am in agreement with appellant that if deductees income itself was not taxable, the appellant cannot be held as an assessee in default for non-deduction of tax for the amount paid to that deductees. Thus in principle I am in agreement with the appellant on the same following the decision, however it is noted that appellant has not furnished any declaration from the deductee in support of this fact and hence the plea taken by the appellant remains only an academic plea in absence of any factual support in form of documentary evidence/declaration/confirmation to that effect. In view of this the plea of appellant remains only an academic plea which is unsupported for want of any documentary evidence in this regard and hence has to be rejected. Accordingly the plea taken by the appellant against levy of tax and interest under section 201(1)/201(A) for assessment year 2010-11 as well as for assessment year 2011-12 for an amount to Rs.78,58,690/- and Rs.1,04,57,967/- respectively is rejected. The grounds taken in both these appeals are dismissed".
8. Before us the Ld. Counsel for the assessee, Mr. Yogesh Thar, submitted that, so far as the issue whether the roaming charges paid to other telecom operators is in the nature of 'fee for technical services' or not, is now covered by series of decisions of the 8 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012Tribunal and High Courts, wherein it has been held that, payment for use of standard facility does not amount to fees for technical services and also for the proposition that, if there is no human intervention during the roaming process, the payment is not in the nature of FTS. The lists of such citations are as under:-
Thus, the main issue involved here in these appeals are covered by series of decisions, and therefore, same should be followed.
9. So far as the issue, whether the assessee can be treated as 'assessee'-in-default when declarations/certificates have been 9 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012obtained from the deductees and filed before the AO, he submitted that the finding and observation of the ld. CIT(A) is contradictory to the finding of the AO, because the AO in the order himself has noted and held that, assessee has furnished the declaration from various payees and also furnished the PAN details and the jurisdiction of the AO thereof. In wake of this finding and background, the AO himself has not treated the 'assessee-in- default' for the purpose of section 201(1). Thus, such a finding of the CIT(A) is completely erroneous which deserves to be reversed. Regarding levy of interest under section 201(1A) also, he submitted that, firstly, the deductees have incurred huge loss during the year under consideration and hence, there was no loss to the revenue on account of non-deduction of TDS, and secondly, finding of CIT(A) on this score is also diverse from her own observation. If she had any doubt, then clarification should have been sought. Therefore, no interest under section 201(1A) can be levied.
10. On the other hand, Ld. DR strongly relied upon the order of the AO as well as CIT(A). On the main issue he submitted that, now in the background of the Supreme Court decision in the case of Bharti Cellular Ltd (supra) and in line of Supreme Court direction the AO in the case of Vodafone Essar Mobile Services Ltd. (supra) had carried out cross examination of technical experts/ employees which has been elaborately discussed in the order of the AO. In light of this fact, the entire perspective will get changed and matter can be restored back to the file of the AO as all the decisions relied upon by the Ld. Counsel in the course of hearing have not taken into account the outcome of the Supreme Court decision after the matter has been restored back. Regarding 201(1) and 201(1A), he submitted that the matter can be verified again by the AO.
11. We have heard the rival submissions put forth by the parties and also gone through the relevant findings given in the impugned orders. The main issue involved here in these appeals are, firstly, 10 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012whether the roaming charges paid by the assessee to other telecom operator is in the nature of 'fees for technical services', as defined under section 9(1)(vii) r.w. Explanation 2 thereto and thus, was liable for deduction of tax-at-source under section 194J; secondly, whether the assessee can be treated as 'assessee-in-default' when assessee has furnished the declaration from various payees and has also furnished the PAN details and jurisdiction in which payees are assessed to tax; and lastly, whether the assessee can be held liable for payment of interest under section 201(1A). The total payment for roaming charges on which the authorities below have held that the assessee was liable to deduct TDS under section 194J is, Rs.38,07,27,640/- for the assessment year 2010-11 and Rs.58,09,98,180/- for the AY 2011-12. As stated in the foregoing paragraphs, the assessee had entered into "roaming agreement"
with Reliance Telecom Ltd. for providing GSM services in the 8 telecom circles in the country where the assessee company does not have GSM licenses. In a nutshell, the roaming charges are paid for the roaming facility provided to the telecom subscribers to automatically make and receives voice calls, send and receive data or access other services, including home-data services when travelling outside the geographical coverage area of a given operators' network (i.e. home network) by means of using the network of other operators having coverage in such geographical area (i.e. "visiting network"). In order to cater to such roaming requirements of telecom subscribers moving out of their home net work to visiting network where the home network is not available, these telecom operator enter into "Roaming agreements", that is, telecom operators having their network in that circle. Thus, the subscribers who are traveling beyond geographical areas switch over automatically from home network to the visiting network to avail uninterrupted telecom facility. This switch from one network to another network is automatic through Cell towers, fiber optic cables, etc. The home network operators collects the 'roaming charges' from the home subscribers and in turn make the payment
11 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012or rather passes on to the visiting network telecom operator. It has been the contention of the assessee that, roaming facility is nothing but use of standard telecom infrastructure facilities provided by telecom operator of the visiting network. It is a standard facility provided through Cell towers or cable network, etc. There is no technical service provided by any human per se who is giving constant services through his technical skills or experience. The call carriage during the roaming process is fully automated by virtue of sophisticated technological advanced telecom network.
12. The concept of human intervention/involvement stems from the meaning assigned for "income by way of fees for technical services" in section 9(1)(vii) read with Explanation 2. The explanation envisages, "------------any consideration for rendering of any managerial, technical or consultancy services -----------------------." Here the word "technical services" is preceded by the word "managerial" and succeeded by the word "consultancy". It cannot be read in isolation as it takes colour from the words "managerial" and "consultancy" between which it is sandwiched. In such a case principle of "noscitur a sociis" gets attracted, that is, the meaning of the word or expression is to be gathered from the surrounding word i.e., from the context. Coupling of the words together shows that they are to be understood in the same sense. The phrase "managerial" and "consultancy" is a definite indicative of the involvement of human element. The rendering of managerial services or consultancy services can be given by human only and not by any machines or equipments. The word "rendering of" used here again signifies through human skill or experience. Therefore, the phrase "rendering of technical services" has to be construed in same sense involving direct human involvement, without which technical services cannot be rendered. This controversy of roaming charges qua the rendering of the technical services, was first deliberated from legal perspective by the Hon'ble Delhi High Court in the case 12 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012of CIT vs Bharti Cellular Ltd., reported in [2009] 319 ITR 258 which dealt with the issues of involvement of human element and whether it is essential part for rendering of technical services, because, in Explanation 2 to section 9(1)(vii), the word "technical service" takes colour from the expression "managerial services" and "consultancy services" which necessarily involves human element. This decision of the Hon'ble High Court also came for consideration before the Hon'ble Supreme Court in the same case, since reported in [2011] 330 ITR 239, wherein the Hon'ble apex court held that, there is no expert report from the side of the Department that how the human intervention takes place during the process. Accordingly, the issue was set aside to the file of the AO to examine the technical report from the side of the Department to decide the matter. However, Hon'ble Supreme Court has not reversed or adversely noted otherwise the legal views enunciated with regard to the concept of necessity of human involvement in rendering of technical services by the Hon'ble Delhi High Court.
13. Now, in the present cases, the AO in the impugned orders has taken note of order passed under section 201(1)/201(1A) by the AO case of M/s Vodafone Essar Mobile Services Ltd., wherein there has been reference to statement of oath of certain experts/employees. From the perusal of the entire statement, we find that at the face of it, nothing conclusive finding or view can be drawn that there is constant human endeavor or involvement of human interface throughout the process. In answer to certain questions, these experts have admitted that when call is connected from one operator to other, it is an automatic connection and there is no human intervention or involvement in the process of carriage of calls, however, certain human intervention is required in case there are some technical snags or fault in the hardware or software or snapping of fiber optic cables, either at the time of installation, testing, maintenance etc. Hence, for these purpose only certain element of human intervention is required. In wake of these circumstances, whether it can be held that, there is an element of 13 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012human intervention or personalized human skills is involved to cater to the roaming facilities availed by the subscribers are not very clear. The AO has tried to further stretch these observations of the technical experts to the extent of holding that, each machine requires some kind of human intervention, because they have been created by the human only. However, we are too skeptical to endorse this view of the AO. If any person delivers any services through his skills, or experience, or make available any such services either through aid of any machines, equipment or any kind of technology, then rendering of such services can be reckoned as "technical services". There should be a constant human endeavor or involvement of the human interface during the process of rendering of technical services. On the contrary, if any technology or machine developed by human is put to operation automatically, wherein it operates without much human interface or human intervention, then usage of such technology or machine cannot per se be held as rendering of "technical services" by human skills. It is obvious that in such a situation some human involvement could be there but it is not a constant endeavour of the human in the process. Our view also gets endorsed by the latest Supreme Court decision in the case of CIT vs M/s Kotak Securities Ltd in Civil Appeal No. 3141 of 2016 arising out of SLP 14907 of 2012 vide judgment and order dated 29th March, 2016, ( which has come post hearing of the case) wherein the Hon'ble Supreme Court in the context of transaction charges paid to the stock-exchange for facilities of transaction of business of sale and purchase of shares through automated services of online trading, whether amounts to rendering of technical services or not. The Hon'ble Supreme Court held that, there is nothing especially exclusive or customized services rendered by Stock Exchange catering to the special case of the customer, albeit, it is making available these services everyone in general. Their Lordships have laid down the test of specialized, exclusively and individual requirements for rendering of services with general or standard 14 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012facilities provided to everybody. If the services provided are exclusively catering to the individual requirement then only it can be reckoned as rendering of technical services. Here in this case, post Bharati Cellular Ltd., decision by the Supreme Court, whereby, AO was required to examine the technical experts cannot be held to be conclusive at this stage qua the concept of human involvement in the process of roaming, because in such cross examinations, as incorporated by the AO in the impugned order, there is inherent contradiction and if we go by the latest principle laid down by the Hon'ble Supreme Court in the case of Kotak Securities Ltd (supra), then the whole test of constant human intervention and human interface fails in the case of roaming charges. However, we are not entering into the semantics of the controversy whether human involvement / intervention is there qua the payment of roaming charges. We are keeping this issue open and our observations made above are not final conclusion on this matter, because in the case of Vodafone Essar Mobile Services Ltd., which order has been quoted by the AO extensively has not stood scrutiny or concluded by any appellate authorities or any court, especially in light of any rebuttal which may come from the side of assessee. Thus, we are refraining from deciding the first issue before us.
14. Now coming to the issue, whether assessee can be treated as 'assessee-in-default' under section 201(1) in wake of declaration furnished by the payee and also the details of their income-tax returns, PAN, etc., we find that Ld. CIT(A) without perusing the finding of the AO as noted in the order, has recorded a wrong finding of fact that assessee has not filed any declaration of the deductees and the details of their income in their return of income, wherein, the said payments have been incorporated. From the perusal of the assessment order, especially, in the second last page, as noted above the AO himself has held that, the assessee could not be treated as 'assessee-in-default' in terms of section 201(1) in wake of assessee having furnished declaration from the 15 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012payee in this regard. Once there is a categorical finding by the AO, then without any contrary material on record to rebut his finding or notice by the CIT(A), such a finding of the CIT(A) is wholly erroneous, which cannot be sustained. Thus, we hold that when the AO himself has held that assessee is not in default in terms of section 201(1) in wake of evidences filed before him, then without any defect or any material to rebut, there cannot be any deviation from the order of the AO and accordingly, observation and finding of the CIT(A) with regard to section 201(1) is set aside and is hereby reversed. Assessee's ground on this score is thus treated as allowed. Accordingly, second issue is decided in favour of the assessee and against the revenue.
15. So far as the liability of interest under section 201(1A), the assessee before the CIT(A) has taken a specific plea that, deductees have incurred huge losses during the year under consideration and, therefore, there is no loss to the revenue on account of non- deduction of TDS by the assessee while making the payment as no tax was payable by these deductees. Once that is so, then there is no question of levying of interest under section 201A. We find that now in view of proviso to sub-section (1) of section 201, if assessee is not deemed to be assessee in default in terms of sub-section (1) of section 201, then interest shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident. Relevant Proviso inserted under section 201(1) and 201(1A) reads as under:-
201(1) xxxxxxxxxxxxxxxxxxx...
"Provided that any person, including the principal officer of a company, who fails 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 default in respect of such tax if such resident -
(i) has furnished his return of income under section 139;
(ii) has taken into account such sum for computing income in such return of income; and
16 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012(iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed".
(1A) xxxxxxxxxxxx ...
"Provided that in case any person, including the principal officer of a company fails 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 but is not deemed to be an assessee in default under the first proviso to sub-section (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident".
In view of the aforesaid provisos, the levy of interest in the cases where assessee has not been deemed to be in default by virtue of first proviso to section 201(1), then levy of interest is only from the date on which tax was deducible to the date of furnishing of return of income by such payee. Though these provisos have been inserted w.e.f. 01.07.2012, however, now there are judicial consensuses that these provisos will have retrospective effect, especially in wake of Hon'ble Delhi High Court decision in the case of CIT vs Ansal Land Mark Township (P) Ltd. ITA No. 160 of 2015 order dated 26.08.2015. However, if deductees have themselves incurred huge losses and have shown these losses in their return of income on which no income-tax is payable then, there is no occasion to pay tax by the deductees and hence, in such a situation, neither the assessee can be held to be assessee-in- default for nor non-deduction of the tax for amount paid by the deductees would entail levy of interest under section 201(1A). However, this fact as stated by the assessee needs verification from the end of the AO, whether the deductees have incurred losses during the year and whether they were not required to pay any taxes on such payments. If contention of the assessee as raised before the CIT(A) is found to be correct then no interest under section 201(1A) should be charged and accordingly relief should be 17 Reliance Share & Stock Brokers P Ltd.
ITA No. 7637 /Mum/2012given. We order accordingly. Thus, with this direction, the third issue stands partly allowed for statistical purposes.
16. In the result, both the appeals filed by the assessee are treated as partly allowed for statistical purposes.
Order pronounced in the open court on 11th April, 2016.
Sd/- Sd/-
(रिमत कोचर) (अिमत शु ला)
लेखा सद य याईक सद य
(RAMIT KOCHAR) (AMIT SHUKLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Date: 11th April, 2016.
त/Copy to:-
1) अपीलाथ /The Appellant.
2) यथ /The Respondent.
3) The CIT(A) -13, Mumbai.
4) The Commissioner of Income Tax(TDS)/Concerned__, Mumbai.
5) िवभागीय ितिनिध "डी", आयकर अपीलीय अिधकरण, मुंबई/ The D.R. "D" Bench, Mumbai.
6) गाड फाईल \ Copy to Guard File.
आदे शानस ु ार/By Order / / True Copy / / उप/सहायक पंजीकार आयकर अपील य अ धकरण, मब ुं ई Dy./Asstt. Registrar I.T.A.T., Mumbai *च हान व.िन.स *Chavan, Sr.PS