Aayush NRI LEPL Health Care Pvt. Ltd., Vijayawada V. THE ACIT, Vijayawada

ITA 11/VIZ/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6593 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 12-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D J P ANAND
• Keywords: Non-deduction of tax; Reasonable cause
• Section: 201(1)

Judgement Text

ITA NOS.10 & 11/VIZAG/2016 AAYUSH NRI LEPL HEALTH CARE PVT. LTD., VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NOS.10 & 11/VIZAG/2016 ( / ASSESSMENT YEARS: 2013-14 & 2014-15) AAYUSH NRI LEPL HEALTH CARE PVT. LTD., VIJAYAWADA ACIT, CIRCLE - 3(1), VIJAYAWADA [PAN NO. AADCN4865 ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI D.J.P. ANAND, DR / DATE OF HEARING : 11.10.2017 / DATE OF PRONOUNCEMENT : 18.10.2017 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AG AINST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) {CIT(A)}, VIJAYAWADA VIDE ITA NO.53&54/CIT(A)/VJA/2014-15 DATED 30.10.2015 FO R THE ASSESSMENT YEARS 2013-14 & 2014-15.SINCE BOTH THE A PPEALS INVOLVE THE SAME ISSUE ON SAME FACTS, BOTH THE APPEALS ARE CLUB BED AND HEARD ITA NOS.10 & 11/VIZAG/2016 AAYUSH NRI LEPL HEALTH CARE PVT. LTD., VIJAYAWADA 2 TOGETHER AND DECIDED IN COMMON ORDER FOR THE SAKE O F CONVENIENCE AS UNDER: 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE LEV Y OF INTEREST U/S 201(1A) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CA LLED AS 'THE ACT'). A SURVEY BY TDS WING OF INCOME TAX DEPARTMENT U/S 133 A OF THE ACT WAS CONDUCTED IN THIS CASE ON 16.10.2011 AND FOUND THAT THE ASSESSEE HAD MADE THE PAYMENTS OF ` 88,43,193/- FOR THE PERIOD ENDING 31.3.2013 AND ` 87,04,620/- FOR THE PERIOD FROM 1.4.2013 TO 31.3.2 013 BUT NOT DEDUCTED THE TDS ON THE ABOVE PAYMENTS. THEREFORE, THE ASSESSING OFFICER (A.O.) HELD THAT THE ASSESSEE REQUIRED TO D EDUCT THE TAX AT SOURCE U/S 194J OF THE ACT AND ACCORDINGLY TREATED THE ASSESSEE AS ASSESSEE IN DEFAULT AND LEVIED INTEREST U/S 201 & 2 01(1A) OF THE ACT TO THE EXTENT OF ` 8,84,319/- FOR THE F.Y. 2012-13 AND ` 8,70,462/- FOR THE F.Y. 2013-14 AND THE INTEREST U/S 201(1A) OF THE AC T OF ` 1,34,566/- FOR THE F.Y. 2012-13 AND ` 51,039/- FOR THE F.Y. 2013-14 RESPECTIVELY FOR THE ASSESSEES FAILURE TO DEDUCT THE TAX AT SOURCE AND NON-REMITTANCE TO GOVT. ACCOUNT. 3. THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AN D THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. IN TREATING THE A SSESSEE AS THE ASSESSE IN DEFAULT AND HELD THAT IT REQUIRED TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE TO DOLPHIN IMAGING SERVICES U/S 194J OF THE ACT. ITA NOS.10 & 11/VIZAG/2016 AAYUSH NRI LEPL HEALTH CARE PVT. LTD., VIJAYAWADA 3 FURTHER, THE CIT(A) HAVING FOUND THAT THE DEDUCTEE HAS FILED THE RETURN OF INCOME AND OFFERED RECEIPTS FROM THE ASSESSEE IN THE RETURNS OF INCOME, THE LD. CIT(A) ALLOWED RELIEF TO THE ASSES SEE FOR THE INTEREST IMPOSED U/S 201(1) OF THE ACT AND FOLLOWING THE DEC ISION OF HONBLE HIGH COURT OF KOLKATA IN THE CASE OF M/S. KANOI INDUSTRI ES PVT. LTD. VS. CIT (261 ITR 488) HELD THAT THE ASSESSEE IS LIABLE FOR INTEREST U/S 201(1A) OF THE ACT FROM THE DATE OF SUCH TAX IS DEDUCTIBLE TO THE DATE OF FURNISHING OF RETURN OF INCOME BY THE DEDUCTEE. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBU NAL. 4. APPEARING FOR THE ASSESSEE, THE LD. A.R. ARGUED THAT THOUGH THE TDS WAS DEDUCTIBLE FROM THE PAYMENTS MADE TO THE DO LPHIN IMAGING SERVICES, THE DEDUCTEE HAS FILED THE RETURNS OF INC OME AND OFFERED THE RECEIPTS IN THEIR INCOME TAX RETURN. THE DEDUCTEES FILED RETURNS OF INCOME ADMITTING THE NIL RETURN. EVEN AFTER ADMITT ING THE RECEIPTS PAID BY THE ASSESSEE, THE INCOME IN THE HANDS OF THE DED UCTEE WAS NIL RESULTING TO NO TAX LIABILITY. THE INTEREST U/S 20 1(1A) OF THE ACT IS COMPENSATORY IN NATURE AND IN THE DEDUCTEES CASE, SINCE THERE WAS NO ADVANCE TAX LIABILITY THUS THE INTEREST UNDER SECTI ON 201(1A) DOES NOT ATTRACT. SINCE THERE WAS NO LOSS OF REVENUE IN THE DEDUCTEES CASE THE INTEREST CHARGEABLE UNDER SECTION 201(1A), WHICH IS COMPENSATORY IN NATURE IS NOT APPLICABLE TO THE ASSESSEE. THE LD. A.R. REFERRING TO THE ITA NOS.10 & 11/VIZAG/2016 AAYUSH NRI LEPL HEALTH CARE PVT. LTD., VIJAYAWADA 4 PROVISIONS OF SECTION 201 & 201(1A) OF THE ACT ARGU ED THAT AFTER THE AMENDMENT OF ACT BY INSERTION OF PROVISO TO SECTION 201 OF THE ACT, ONCE THE DEDUCTEE FILES THE RETURN OF INCOME AND ADMITS THE RECEIPTS, THE DEDUCTOR SHALL NOT BE DEEMED TO BE ASSESSEE IN DEFA ULT IN RESPECT OF THE TAX REQUIRED TO BE DEDUCTED IN THE CASE OF THE DEDU CTEE. THE SIMILAR PROVISION WAS INSERTED IN SECTION 201(1A) OF THE AC T ALSO. THE LD. A.R. FURTHER ARGUED THAT IN CASE THE DEDUCTOR IS NOT TRE ATED AS THE ASSESSEE IN DEFAULT, THE DEDUCTOR IS NOT LIABLE TO PAY INTER EST U/S 201(1A) OF THE ACT. THE LD. A.R. RELIED ON THE ORDER OF THIS TRIB UNAL IN THE CASE OF ITA NO.40/VIZAG/2014 IN THE CASE OF MANNE RAJESH KUMAR DATED 6.9.2017 AND THE DECISION OF ITAT COCHIN BENCH IN THE CASE O F THOMAS MUTHOOT VS. DCIT REPORTED IN (2013) 21 ITR 0133 AND THE DEC ISION OF ITAT LUCKNOW IN THE CASE OF DCIT VS. SAHARA INDIA COMMER CIAL CORPORATION LIMITED REPORTED IN (2015) 67 SOT 0318 LUCKNOW. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE (D.R.) ARGUED THAT THE LD. CIT(A) FOLLOWED THE ORDER OF HO NBLE KOLKATA HIGH COURT IN THE CASE OF M/S. KANOI INDUSTRIES PVT. LTD . 261 ITR 488 AND THE INTEREST U/S 201(1A) OF THE ACT IS MANDATORY AND TH ERE IS NO RESTRICTION SUCH AS REASONABLE CAUSE FOR NON-DEDUCTION OR NON-P AYMENT AND THEREFORE, THE INTEREST U/S 201(1A) OF THE ACT IS A UTOMATIC AND MANDATORY. THE LD. D.R. FURTHER ARGUED THAT THE DE CISION OF HONBLE ITA NOS.10 & 11/VIZAG/2016 AAYUSH NRI LEPL HEALTH CARE PVT. LTD., VIJAYAWADA 5 ITAT IN THE CASE OF MANNE RAJESH KUMAR IN ITA NO.40 /VIZAG/2017 (SUPRA) IS DISTINGUISHABLE FROM THE FACTS OF THE AS SESSEES CASE SINCE THE HONBLE ITAT DECIDED THE ISSUE WITH REGARD TO NON-R ESIDENT U/S 195 OF THE ACT, FOLLOWING THE BOARD CIRCULAR NO.2 OF 2014 WITH REGARD TO THE NON-DEDUCTION OF TAX AT SOURCE IN THE CASE OF NON-R ESIDENTS PARTICULARLY WITH REFERENCE TO SECTION 195 OF THE ACT. THERE IS NO SIMILAR INSTRUCTION IN THE CASE OF RESIDENTS. THEREFORE, THE CASE LAW R ELIED UPON BY THE LD. A.R. IS NOT APPLICABLE IN THE ASSESSEES CASE. FUR THER, THE LD. D.R. ARGUED THAT THE DECISIONS OF ITAT COCHIN BENCH AND THE ITAT LUCKNOW BENCH ARE RELATED TO THE ASSESSMENT YEARS 2003-04 T O 2007-08. A PROVISO HAS BEEN INSERTED IN THE INCOME TAX ACT TO SECTION 201(1A) OF THE ACT ENABLING THE DEPARTMENT TO LEVY INTEREST U/ S 201(1A) OF THE ACT FROM THE DATE OF SUCH THE TAX IS DEDUCTIBLE TO THE DATE OF FURNISHING THE RETURN OF INCOME BY SUCH RESIDENT WITHOUT RELATING TO RESULTANT TAX, THUS WHETHER THE DEDUCTEES CASE RESULTS IN TO TAX OR NO T THE INTEREST U/S 201(1A) OF THE ACT ATTRACT IN DEDUCTORS CASE. IT I S FOR DEDUCTORS FAILURE TO DEDUCT THE TAX AT SOURCE AND REMIT TO GOVERNMENT ACCOUNT AND DOES NOT DEPEND ON THE TAX LIABILITY OF THE DEDUCTEE. TH EREFORE, THE LD. D.R. ARGUED THAT THE CIT(A) HAS RIGHTLY CONFIRMED THE IN TEREST CHARGEABLE U/S 201(1A) OF THE ACT, WHICH REQUIRED TO BE UPHELD. ITA NOS.10 & 11/VIZAG/2016 AAYUSH NRI LEPL HEALTH CARE PVT. LTD., VIJAYAWADA 6 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE REQUIRED TO DEDUCT TAX AT SOURCE ON PAYMEN TS MADE TO THE DOLPHIN IMAGING SERVICES ON THE AMOUNTS OF ` 88,43,193/- FOR THE FINANCIAL YEAR 2012-13 AND ` 87,04,620/- FOR THE FINANCIAL YEAR 2013-14. THE ASSESSEE HAS NOT DEDUCTED THE TAX AT SOURCE AND DID NOT REMIT TO THE GOVERNMENT ACCOUNT. THERE IS NO DISPUTE WITH R EGARD TO THE DEDUCTIBILITY OF TAX AT SOURCE. THE LD. CIT(A) HAS DECIDED IN APPEAL THAT THE ASSESSEE REQUIRED TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE U/S 194J OF THE ACT ,WHICH IS NOT DISPUTED BY THE ASSESSEE. THE ASSESSEES ARGUMENT WAS THE DEDUCTEE HAS ALREADY FI LED THE RETURN OF INCOME AND THE TAX LIABILITY IN THE HANDS OF THE DE DUCTEE WAS NIL, AND NOT LIABLE TO PAYMENT OF ANY TAX, THUS NO LOSS OF R EVENUE AND HENCE, THE INTEREST U/S 201(1A) OF THE ACT DOES NOT ATTRACT IN THE ASSESSEES CASE. THE LD. A.R FURTHER ARGUED THAT THE INTEREST U/S 20 1 & 201(1A) OF THE ACT IS COMPENSATORY IN NATURE. SINCE THE DEDUCTEE S INCOME WAS BELOW TAXABLE LIMIT AND NEED NOT PAY ANY ADVANCE TAX, THE LD. A.R. CONTENDED THAT THERE IS NO LOSS TO REVENUE AND INTEREST NEED NOT BE CHARGED U/S 201(1A) OF THE ACT. THE LD. A.R. TAKEN THE SUPPORT OF THE DECISION OF ITAT COCHIN BENCH IN THE CASE OF THOMAS MUTHOOT VS. DCIT (SUPRA) AND THE DECISION OF SAHARA INDIA COMMERCIAL CORPORATION LIMITED REPORTED IN ITA NOS.10 & 11/VIZAG/2016 AAYUSH NRI LEPL HEALTH CARE PVT. LTD., VIJAYAWADA 7 (2015) 169 TTJ 0292 LUCKNOW BENCH. THE LD. A.R. F URTHER ARGUED THAT THE DECISION OF ITAT LUCKNOW BENCH WAS CONFIRMED BY THE HONBLE HIGH COURT OF ALLAHABAD. THE LD. A.R. ALSO TAKEN THE SU PPORT OF THE DECISION OF THIS TRIBUNAL IN THE CASE OF MANNE RAJESH KUMAR IN ITA NO.40/VIZAG/2017 DATED 6.9.2017 AND ARGUED THAT WHE N THE DEDUCTEE HAS NO TAXABLE INCOME, THE INTEREST U/S 201(1A) OF THE ACT IS NOT EXIGIBLE, ACCORDINGLY, REQUESTED TO ALLOW THE APPEA L OF THE ASSESSEE. WE HAVE GONE THROUGH THE DECISIONS RELIED UPON BY THE LD. A.R. THE DECISION OF THIS TRIBUNAL IN THE CASE OF MANNE RAJE SH KUMAR (SUPRA) IS RENDERED FOLLOWING THE CIRCULAR NO.2 OF 2014 OF CBD T, WHEREIN THE CBDT HAS ISSUED A SPECIFIC CIRCULAR NOT TO TREAT THE ASS ESSEE IN DEFAULT IN THE CASE OF NON-RESIDENT U/S 195 OF THE ACT. IN THE CI RCULAR, THE BENEFIT WAS NOT EXTENDED TO THE RESIDENT. THEREFORE, THE DECIS ION OF THIS TRIBUNAL IN THE CASE OF MANNE RAJESH KUMAR (SUPRA) IS NOT APPLI CABLE IN THE ASSESSEES CASE. THE DECISION OF ITAT COCHIN BENCH WAS RENDERED IN RELATION TO THE ASSESSMENT YEARS 2007-08, 2006-07 & 2005-06 AND THE DECISION OF ITAT COCHIN BENCH WAS RENDERED FOR THE ASSESSMENT YEARS 2003-04 TO 2006-07. THE INCOME TAX ACT HAS BEEN AME NDED BY INSERTING PROVISO TO SECTION 201(1A) OF THE ACT, BY THE FINANCE ACT, 2012, W.E.F. 1-7-2012. WHICH READS AS UNDER: ITA NOS.10 & 11/VIZAG/2016 AAYUSH NRI LEPL HEALTH CARE PVT. LTD., VIJAYAWADA 8 [(1A) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SE CTION (1), IF ANY SUCH PERSON, PRINCIPAL OFFICER OR COMPANY AS IS REFERRED TO IN THAT SUB-SECTION DOES NOT DEDUCT THE WHOLE OR ANY PART OF THE TAX OR AFTER DE DUCTING FAILS TO PAY THE TAX AS REQUIRED BY OR UNDER THIS ACT, HE OR IT SHALL BE LI ABLE TO PAY SIMPLE INTEREST,-- (I) AT ONE PERCENT FOR EVERY MONTH OR PART OF A MONTH O N THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX WAS DEDUCT IBLE TO THE DATE ON WHICH SUCH TAX IS DEDUCTED; AND (II) AT ONE AND ONE-HALF PER CENT FOR EVERY MONTH OR PAR T OF A MONTH ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTED TO THE DATE ON WHICH SUCH TAX IS ACTUALLY PAID, AND SUCH INTEREST SHALL BE PAID BEFORE FURNISHING T HE STATEMENT IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (3) OF SECTION 2 00:] [ PROVIDED THAT IN CASE ANY PERSON, INCLUDING THE PRINCIPAL O FFICER OF A COMPANY FAILS TO DEDUCT THE WHOLE OR ANY PART OF TH E 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 DE EMED 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 WA S DEDUCTIBLE TO THE DATE OF FURNISHING OF RETURN OF INCOME BY SUCH RESIDENT. ] 7. THE PLAIN READING OF THE PROVISO TO SECTION 201( 1A) OF THE ACT MAKES IT VERY CLEAR THAT EVEN THOUGH THE ASSESSEE I S NOT DEEMED TO BE ASSESSEE IN DEFAULT UNDER FIRST PROVISO TO SUB SECT ION (1), THE INTEREST UNDER CLAUSE (I) SHALL BE PAYABLE FROM THE DATE ON WHICH SUCH TAX IS DEDUCTIBLE TO THE DATE OF FURNISHING OF RETURN OF I NCOME BY SUCH A RESIDENT. THEREFORE, THE TAX LIABILITY IN THE HAND S OF THE DEDUCTEE HAS NO RELATION OR CONNECTION FOR CHARGING THE INTEREST U/ S 201(1A) OF THE ACT. MERE NON-DEDUCTION OF TAX AT SOURCE AND NON-REMITTA NCE TO GOVERNMENT OF INDIA ACCOUNT ATTRACTS THE INTEREST U/S 201(1A) OF THE ACT AND THAT IS THE REASON FOR WHICH THE PROVISION HAS BEEN INSERTE D TO CHARGE INTEREST FROM THE DATE OF THE TAX DEDUCTIBLE TO THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT. SINCE THE DECISIONS RELIED UPON BY THE LD. A.R. ITA NOS.10 & 11/VIZAG/2016 AAYUSH NRI LEPL HEALTH CARE PVT. LTD., VIJAYAWADA 9 ARE RELATED PRIOR TO INSERTION OF THE PROVISO U/S 2 01(1A) OF THE ACT, THE DECISIONS RELIED UPON BY THE ASSESSE ARE NOT APPLIC ABLE IN ASSESSEES CASE. THE DECISION OF KOLKATA HIGH COURT IN THE CAS E OF KANOI PROPERTIES PVT. LTD. VS. CIT 261 ITR 488 WHICH WAS FOLLOWED BY THE LD.CIT(A) SQUARELY APPLICABLE EVEN AFTER INSERTION OF PROVISO . AFTER INSERTION OF THE PROVISION, THE CHARGING OF INTEREST FROM THE DATE O F THE TAX REQUIRED TO BE DEDUCTED TILL THE DATE OF FURNISHING OF RETURN O F INCOME BY THE DEDUCTEE IS AUTOMATIC AND MANDATORY. FURTHER THE H ONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. CHENNAI PROPERTIES & INVESTMENTS LTD. (1999) 105 TAXMAN 346 EXPRESSED VIEW THAT THE INTER EST PAID U/S 201(1A) OF THE ACT IS NOT COMPENSATORY BUT PENAL IN NATURE. THEREFORE, WE HOLD THAT THE INTEREST IS CHARGEABLE FROM THE DA TE OF SUCH TAX IS DEDUCTIBLE TO THE DATE OF FURNISHING OF RETURN OF I NCOME AND WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEALS OF THE ASSESSE. 8. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE FOR THE A.YS 2013-14 AND 2014-15 ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 18 TH OCT17. SD/- SD/- ( . ) ( . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 18.10.2017 VG/SPS ITA NOS.10 & 11/VIZAG/2016 AAYUSH NRI LEPL HEALTH CARE PVT. LTD., VIJAYAWADA 10 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT AAYUSH NRI LEPL HEALTH CARE PVT. LTD., D.NO.48-13-3 & 3A, SRI RAMACHANDRA NAGAR, VIJAYAWADA 2. / THE RESPONDENT THE ACIT, CIRCLE-3(1), VIJAYAWA DA 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM