Income Tax Appellate Tribunal - Mumbai
Asst Cit 10(1), vs Department Of Income Tax on 5 October, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "B", MUMBAI
Before Shri R.S.Syal, AM and Shri V.Durga Rao, JM
S.A.No.149/Mum/2011
(Arising out of ITA No.2276/Mum/2011 : Asst.Year 2007-2008)
M/s.Maharashtra State Electricity The Asstt.Commissioner of Income-tax
Distribution Co. Ltd. Range 10(1)
"Prakashgad" 1st Floor Mumbai.
Vs.
Anant Kanekar Marg, Bandra (East)
Mumbai - 400 051.
PAN : AAECM2933K.
(Applicant) (Respondent)
Applicant by : Shri Arvind Sonde
Respondent by : Shri G.P.Trivedi
Date of Hearing : 30.09.2011 Date of Pronouncement : 05.10.2011
ORDER
Per R.S.Syal, AM :
By means of the present stay application the assessee seeks to get the demand stayed amounting to Rs.840,61,70,960 inclusive of interest u/s 234B, 234D, 220(2) for the assessment year 2007-2008 till the final disposal of the appeal.
2. It is relevant to note that the assessee's stay application was disposed off by the Tribunal vide its order dated 16th September, 2011 rejecting the grant of stay of demand but accepting the plea for early hearing. Thereafter, the assessee approached the Hon'ble High court against this order. Vide judgement dated 21.09.2011, the Hon'ble Bombay High Court has set aside the afore-said order of the Tribunal with a direction to consider the stay application afresh.
3. Before the Tribunal in the original round of stay proceedings, the assessee relied on the decision of the Jaipur Bench in Jaipur Vidyut Vitran Nigam Ltd. Vs. 2 SA No.149/Mum/2011 M/s.Maharashtra State Electricity Distribution Co. Ltd.
DCIT [(2009) 123 TTJ (Jp) 888] for the proposition that no deduction of tax at source was required under Chapter XVII-B on wheeling and transmission charges paid by it and hence disallowance u/s 40(a)(ia) was wrongly made. The Tribunal in the original order also noted the contention raised by the learned Departmental Representative that disallowance u/s 40(a)(ia) was rightly made on the failure of the assessee to deduct tax at source under the relevant provisions. After that the Tribunal recorded that prima facie there was some substance in the arguments advanced by both the sides in favour or against the disallowance u/s 40(a)(ia). After considering the relevant fact that the assessee itself started deducting tax at source on similar payments from assessment year 2009-2010, the Tribunal refused to grant the stay.
3. It was contended before the Hon'ble High Court that the decision of Jaipur Vidyut Vitran Nigam Ltd. (supra) was not properly considered by the Tribunal while evaluating prima facie the merits of applicability of the decision in that case. It was also submitted that the said case has dealt with similar facts in which the Jaipur Bench of the Tribunal held that there was no liability to deduct tax at source. The Hon'ble High Court, after considering the submissions, observed vide para 6 as under:-
"We are inclined to accept the submission made on behalf of the Petitioner that the order of the Tribunal, despite recording the submission which was based on the decision of the Jaipur Bench of the Jaipur In Jaipur Vidyut Vitran Nigam Ltd. (Supra) has not considered the submission while evaluating prima facie the merits of the application before it. All that the Tribunal observed is that prima facie there is some substance in the arguments advanced by both the sides. The Petitioner, it must be noted, had sought to urge before the Tribunal that the issue as to whether tax is liable to be deducted at source under sections 194C and 194J on payments made for transmission and wheeling charges has specifically been determined by a Co-ordinate Bench at Jaipur. The submission deserved application of mind, which we find absent in the order of the Tribunal. Application of mind must in a judicial order emerge from the reasons 3 SA No.149/Mum/2011 M/s.Maharashtra State Electricity Distribution Co. Ltd.
adduced and not merely from recording submissions. A prima facie evaluation of merits is required on an application for stay. In these circumstances, we are of the view that the ends of justice would warrant that there should be an order of remand so as to enable the Tribunal to pass a fresh order on the application for stay."
4. From the above direction of the Hon'ble High Court it is clear that this Bench has been required to decide the stay afresh and in doing so to more specifically record finding on the prima facie applicability of the order in Jaipur Vidyut Vitran Nigam Ltd. (supra) to the facts of the instant case.
5. The learned Counsel for the assessee took us through the relevant parts of the order in Jaipur Vidyut Vitran Nigam Ltd. (supra) by contending that the facts and circumstances in that case were identical to those under consideration. He read various parts of the order and focused his submission on the nature of work done in that case necessitating the making of payment, as recorded in para 3.2 of that order as under:-
"The AO noted that assessee is purchasing power from the generation company and selling it to consumers. The power from the generation point to the consumers is transmitted through the transmission network of RVPN."
6. Thereafter he also read certain other parts of the order to demonstrate the nature of payment made by that assessee. The sum and substance of his submission was that the nature of services received by the present assessee were identical with those in the case of Jaipur Vidyut Vitran Nigam Ltd (supra). In the opposition, the learned Departmental Representative contended that the facts and circumstances of that case were different from those prevailing under consideration.
7. The primary condition for applying decision in one case to another is to first find out whether the facts and the legal position in both the cases is similar. If the 4 SA No.149/Mum/2011 M/s.Maharashtra State Electricity Distribution Co. Ltd.
facts are similar, then there does not arise any problem in adopting the earlier view. If however, the facts are found to be distinguishable, then the earlier view cannot be applied as such. In this direction we shall proceed to examine the facts of both the cases. We have extracted above the nature of work done for which payment was made by Jaipur Vidyut Vitran Nigam Ltd. as for purchasing power from the generation company and transmitting it to consumers. It was the only purpose for which Jaipur Vidyut Vitran Nigam Ltd. made payment to transmission company. Now let us examine the facts of the instant case to determine the nature of work for which the assessee made payment of wheeling and transmission charges. It is borne out from the assessment order and the appellate order that the assessee entered into an agreement called Bulk Power Transmission Agreement (BPTA) with MSETCL and PGCIL. Page 19 of the impugned order sums up the appreciation by the AO of the nature of services provided by these companies to the assessee under BPTA. The relevant part of it is as under:-
"The A.O. further held that upon a review / scrutiny of the BPTA, it was abundantly clear that transmission services not only include technical manpower, but an intricate system of checking, management of transmission losses, metering, management of inter connection points, management of delivery voltages as per the grid code connection conditions, management of protection systems, management of system recording instruments, communication facilities, maintenance of the metering system, noting down meter readings, sealing and resealing of meters were all services provided by PGCIL and MSETCL where technical manpower was invariably involved. The appellant's contentions were thus erroneous."
8. From the assessee's BPTA agreement with MSETCL and PGCIL, it is noticed that the services rendered by the payees not only included the services in connection with transmission of the power but also several other distinct services such as maintenance of metering system, noting down meter reading, sealing and resealing of meters etc. etc. It is thus evident that the nature of services received by the assessee under BPTA are much more than those received in the case of 5 SA No.149/Mum/2011 M/s.Maharashtra State Electricity Distribution Co. Ltd.
Jaipur Vidyut Vitran Nigam Ltd., which were confined only to purchasing power from the generation company and selling it to consumers through transmission network. This factual position, when brought to the notice of the ld. AR, could not be controverted. He chose to stuck to his stand that the services were similar to those in the case of Jaipur Vidyut Vitran Nigam Ltd. without pointing out that the additional services as noted above were present in the case of Jaipur Vidyut Vitran Nigam Ltd. He read major part of the order in Jaipur Vidyut Vitran but failed to prove that such additional services were also there in that case. Since host of other services were provided to the assessee under BPTA, apart from those received by Jaipur Vidyut Vitran Nigam Ltd., it becomes manifest that prima facie the facts of the two cases are not similar, what to talk of identical, as has been projected on behalf of the assessee. In view of difference in the package of services received by the assessee under BPTA and those received in Jaipur Vidyut Vitran Nigam Ltd., it becomes manifest that at this preliminary stage the conclusion drawn in that case cannot be straight away applied to the instant case inasmuch as it is a question of determination of nature of services which decides about the section under which tax is deductible, if required. As such it cannot be held that prima facie the facts of two cases are matching.
9. It is further important to note that after the survey was conducted by the Department at the assessee's premises, it started deducting tax at source on such payments made under BPTA from assessment year 2009-2010 u/s.194-I. A copy of the certificate u/s 197(1) issued to payee for the year financial relevant to assessment year 2010-2011authorising deduction of tax at source at a lower rate of 5.5%, has also been placed on record. It means that in assessment year 2009- 2010, the assessee voluntarily held the opinion that tax at source was required to be deducted at source on wheeling and transmission charges and the same position continued in subsequent year as well. Further the payee applied to the ACIT(TDS) Circle, seeking permission for getting the deduction of tax at source u/s 194-I at a 6 SA No.149/Mum/2011 M/s.Maharashtra State Electricity Distribution Co. Ltd.
lower rate of 5.5% which has been issued and the assessee has admittedly deducted tax at source on wheeling and transmission charges at a lower rate as per the certificate issued u/s.197(1) of the Act. When the payee is treating the receipt of wheeling and transmission charges as liable for deduction of tax at source, it is beyond our comprehension as to how the assessee can contend that such charges are not liable for deduction of tax at source.
10. We want to make it clear that at this initial stage we are examining only the prima facie case sought to be built by the assessee for non-deduction of tax at source. At this juncture, it would be relevant to consider the meaning of prima facie. As per Oxford Dictionary of Law, Prima facie [from Latin prima facies, first appearance] means : At first appearance; on the face of things. Prima facie case has been explained in this dictionary as `a case that has been supported by sufficient evidence for it to be taken as proved in the absence of adequate evidence to the contrary.'
11. From the above it can be seen that a case can be considered as prima facie proved when there is no adequate evidence to the contrary. When we advert to the facts of the instant case, it is noticed that the decision of Jaipur Vidyut Vitran Nigam Ltd. is based on facts which are not wholly similar to those prevailing in the present case. The conduct of the assessee in starting deducting tax at source on wheeling and transmission charges from 2009-2010 also prima facie indicates that such transaction have been perceived by the assessee to be liable for deduction of tax at source. Further the most important factor which cannot be ignored is that even the payee is also treating the payment as liable for deduction of tax at source and in this process, it not only applied but also obtained certificate from ACIT (TDS) Circle, u/s 197(1) for getting tax deducted at source at a lower rate. No other case in favour of the assessee, whether of any Hon'ble High Court or that of the 7 SA No.149/Mum/2011 M/s.Maharashtra State Electricity Distribution Co. Ltd.
tribunal, has been brought to our notice. These are the factors which destroy the prima facie case in favour of the assessee.
12. The learned A.R. vehemently argued that no disallowance u/s 40(a)(ia) was required on the ground that the payee adequately paid the tax on the amount received from the assessee. He further argued that the Department itself was also not clear of its stand as to whether the payments were to be covered u/s 194J or 194C or 194I.
13. We are unable to accept this contention. Section 40(a)(ia), at the material time, reads as under:-
"40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computed the income chargeable under the head `Profits and gains of business or profession'---.
.....
(ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-
section (1) of section 200 :
Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section 200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.
(Emphasis supplied by us) 8 SA No.149/Mum/2011 M/s.Maharashtra State Electricity Distribution Co. Ltd.
14. From the above statutory provision it is clear that no deduction shall be allowed while computing the income under the head `Profits and gains of business or profession' unless tax has been properly deducted at source or paid after due deduction from the specified expenses. These specified expenses and the relevant sections requiring deduction of tax at source , inter alia include Rent [194-I], Fees for technical services [194-J), or for carrying out any work [194C]. The learned Counsel for the assessee has harped on the fact that the stand of the Department itself is not clear as to whether deduction of tax at source is required u/s 194C or 194J or 194-I and as such disallowance u/s 40(a)(ia) was not called for. We are unable to sustain this submission for the reason that section 40(a)(ia) is attracted when the assessee fails to deduct tax at source under Chapter XVII-B on the payments specifically included within the purview of this provision. It is interesting to note that whether it is failure u/s 194C or 194J or 194-I, as canvassed by the ld. AR, all such situations fall within the ambit of section 40(a)(ia) as these three types of payments have been specifically included in it. As such we are not convinced with the submission advanced on behalf of the assessee in this regard. The further argument that since the payee subsequently paid the tax on its income inclusive of the said receipts from the assessee and hence no disallowance can be made under this provision, is also devoid of merits. Here it is relevant to note that failure of the assessee to deduct tax at source or to deposit such tax after deducting within the prescribed time entails several consequences such as applicability of sections 201, 40(a)(ia) and also penalty u/s 271C etc. No doubt the payment of due tax by the payee would exonerate the assessee from being treated as assessee in default u/s 201, but would not obliterate the other statutory consequences for non-deduction of tax deducted at source including the disallowance in terms of section 40(a)(ia). This section is immediately attracted when the assessee fails to deduct tax at source under Chapter XIV-B or pay such tax to the exchequer with in the stipulated period. Payment of due tax by the payee 9 SA No.149/Mum/2011 M/s.Maharashtra State Electricity Distribution Co. Ltd.
is of no consequence when the question of disallowance u/s 40(a)(ia) in the hands of the payer is considered.
15. The above discussion shows that the assessee has failed to prove a prima facie case in its favour.
16. A chart has been filed showing the working of demand after giving effect to the direction of the learned CIT(A). As per this chart, the total amount payable to Income Tax Department now stood at Rs.673,82,35,203. The learned Departmental Representative contended that if the assessee was seeking stay of demand then at least 50% or 40% of the amount be directed to be paid before taking up of the appeal for hearing. On a pertinent query about the willingness of the assessee to answer the Departmental request for part payment, the learned A.R., after consultation with the assessee's representatives, stated that a sum of Rs.5 crore could be paid. It was stated that the assessee's financial position was bad inasmuch as it was incurring losses. One page highlighting the liquidity position of the assessee-company has been placed on record. From that page it can be noticed that overdraft limit enjoyed by the assessee is Rs.1500 crore out of which only a sum of Rs. 1168 crore has been withdrawn, thereby leaving a sum of Rs.332 crore which can still be withdrawn from the bank for meeting its liabilities. Apart from that it is also noticed that the net current assets of the assessee as per the audited statements for the year ending 31.03.2011 stand at Rs.97.96 crore. We are not convinced with the payment of this paltry sum of Rs.5 crore as a pre- condition for the grant of stay of demand of Rs.673.82 crore.
17. At this juncture it would be relevant to note the celebrated judgment of the Hon'ble Supreme Court on the question of exercise of the power of granting stay in the case of ITO VS. M.K. Mohammed Kunhi (1969) 71 ITR 815 (SC), in which it has been held, , as under :-
10 SA No.149/Mum/2011M/s.Maharashtra State Electricity Distribution Co. Ltd.
"It is needless to point out that the power of stay by the Tribunal is not likely to be exercised in a routine way or as a matter of course in view of the special nature of taxation and revenue laws. It will only be when a strong prima facie case is made out that the Tribunal will consider whether to stay the recovery proceedings and on what conditions, and the stay will be granted in most deserving and appropriate cases where the Tribunal is satisfied that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue during the pendency of the appeal."
(Emphasis supplied by us)
18. We are also reminded of the judgment of the Hon'ble Supreme Court in Asstt Collector of Central Excise VS. Dunlop India Ltd. (1985) 154 ITR 172 (SC), in which Their Lordships deprecated the practice of granting interim orders which practically give the principal relief sought in the petition for no better reason than that a prima facie case has been made out, without being concerned about the balance of convenience, the public interest and a host of other relevant considerations. In this case it has been held as under :-
"All this is not to say that interim orders may never be made against public authorities. There are, of course, cases which demand that interim orders should be made in the interests of justice...... But since the law presumes that public authorities function properly and bona fide with due regard to the public interest, a court must be circumspect in granting interim orders ..... There are several other vital considerations apart from the existence of a prima facie case. There was no question of any balance of convenience being in favour of the respondent-company. The balance of convenience was certainly in favour of the Government of India. Governments are not run on 11 SA No.149/Mum/2011 M/s.Maharashtra State Electricity Distribution Co. Ltd.
mere bank guarantees...... No governmental business or for that matter no business of any kind can be run on mere bank guarantees. Liquid cash is necessary for the running of a Government as indeed any other enterprise. We consider that where matters of public revenue are concerned, it is of utmost importance to realise that interim orders ought not to be granted merely because a prima facie case has been shown. ...........We are very sorry to remark that these considerations have not been borne in mind by the High Court and an interim order of this magnitude had been granted for the mere asking."
(Emphasis supplied by us)
19. The above referred two judgments were duly confronted to the ld. AR during the course of hearing.
20. In Sri Balaji Tr. Co. Vs. Deputy CTO & Anr. (1989) 175 ITR 428 (Mad) the Government pleader relied on the decision of the Supreme Court in Assistant Collector of Central Excise v. Dunlop India Ltd. [1985] 154 ITR 172 opposing the grant of stay. However this decision was sought to be distinguished by the appellant by stating that it was rendered under the Excise Act and that it related to stay granted at the time of payment of excise duty. Rejecting this contention advanced on behalf of the appellant, the Hon'ble Court observed:
"I am not able to accept the said contentions, since the Supreme Court did not confine the said observation to the particular facts of that case. It is made clear that it is intended for universal application to matters involving revenue where statutory remedies are available."12 SA No.149/Mum/2011
M/s.Maharashtra State Electricity Distribution Co. Ltd.
21. When we test the facts of the instant case on the touchstone of the ratio decidendi of the above judgments of the highest court of the land, it is noted that the assessee has miserably failed in passing the test for the grant of stay inasmuch as not even a prima facie case has been made out in its favour.
22. In view of the forgoing reasons we are of the considered opinion that it is not a fit case for grant of stay of demand. The contention for early hearing has already been accepted by the bench and the learned AR has informed that the case has been rescheduled for hearing on 20th October, 2011.
23. In the result, the stay application is disposed off in above terms.
Order pronounced on the day of September, 2011.
Sd/- Sd/-
(V.Durga Rao) (R.S.Syal)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai : September, 2011.
Devdas*
Order pronounced on the 05th day of October, 2011.
Sd/- Sd/-
(D.K.Agarwal) (R.K.Panda)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai : Dated 05th October, 2011.
Copy to :
1. The Applicant.
2. The Respondent.
3. The CIT concerned
4. The CIT(A)-XXI, Mumbai.
5. The DR/ITAT, Mumbai.
6. Guard File. TRUE COPY.
By Order
Assistant Registrar, ITAT, Mumbai.
13 SA No.149/Mum/2011
M/s.Maharashtra State Electricity Distribution Co. Ltd.