Cellular Mobile Telecom Services Net Work Operations -CM (wing of BSNL), Trichy V. ITO, Trichy

ITA 1117/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81196 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2014
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 15-10-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 30-04-2014
• Court: TRIBUNAL
• Department Lawyers: N RENGARAJ
• Assessee Lawyers: S SRIDHAR
• Keywords: Non-deduction of tax
• Section: 201(1); 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHE NNAI . . . , ! '# , $ !%' !& BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NOS. 1117 & 1118/MDS/2014 ASSESSMENT YEARS: 2010-11 & 2011-12 CELLULAR MOBILE TELECOM SERVICES NET WORK OPERATIONS CM (WING OF BSNL) AMENITY BLOCK, I FLOOR, NEW CTO COMPOUND, TRICHY-620 001 [TAN: CHEB05105 C] ( #' /APPELLANT) VS INCOME TAX OFFICER, TDS WARD I, 44, WILLIAMS ROAD, TRICHY-620 001 ( ()#' /RESPONDENT) / APPELLANT BY : SHRI S.SRIDHAR, ADVOCATE / RESPONDENT BY : SHRI N.RENGARAJ, CIT / DATE OF HEARING : 15-10-2014 / DATE OF PRONOUNCEMENT : 15-10-2014 %* / O R D E R PER VIKAS AWASTHY, J.M: THE APPEALS HAVE BEEN FILED BY THE ASSESSEE IMPUGNI NG THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS)-VII, C HENNAI DATED 04-03-2014 COMMON FOR THE ASSESSMENT YEARS (AYS) 20 10-11 & 2011-12. THE ORDER HAS BEEN PASSED BY CIT(APPEALS) U/S.201(1) I.T.A. NOS. 1117 & 1118/MDS/14 2 AND SECTION 201(1A) OF THE INCOME TAX ACT, 1961 (HE REIN AFTER REFERRED TO AS THE ACT). 2. THE ISSUE IN BOTH THE APPEALS IS WHETHER THE ASS ESSEE IS TO BE TREATED AS ASSESSEE IN DEFAULT FOR NON-DEDUCTION OF TAX WHEN THE TAX HAS ALREADY BEEN PAID BY THE DEDUCTEE AND H AS BEEN REFLECTED IN ITS RETURN OF INCOME? SIMILAR ISSUE HAD COME UP IN THE APPEAL OF THE ASSE SSEE FOR THE AY.2009-10 IN ITA NO.81/MDS/2013 DECIDED ON 26- 08-2013. THE ASSESSEE IS A GOVT. COMPANY AND IS PROVIDING TE LEPHONY SERVICES BOTH MOBILE AND FIXED LINE. FOR MOBILE PH ONE SERVICES UNDER THE NAME CELLONE, THE ASSESSEE IS SELLING SIM CARDS AND RECHARGE COUPONS FOR POST PAID MOBILE CONNECTIONS T O VARIOUS WHOLE-SALE DEALERS. THE ASSESSEE PAYS COMMISSION T O THE DEALERS ON THE SALE OF SIM CARDS AND RE-CHARGE COUP ONS. UPTO FINANCIAL YEAR (FY) 2007-08, RELEVANT TO THE AY.200 8-09 THE ASSESSEE WAS DEDUCTING TAX AT SOURCE ON THE PAYMENT OF COMMISSION UNDER THE PROVISIONS OF SECTION 194H OF THE ACT. FROM THE AY.2009-10 ONWARDS, THE ASSESSEE STARTED TREATI NG THE COMMISSION AS DISCOUNT AND THUS STOPPED DEDUCTING T AX ON SOURCE. SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESS EE U/S. 201(1) & 201(1A) OF THE ACT CALLING FOR EXPLANATION FOR FAILURE TO I.T.A. NOS. 1117 & 1118/MDS/14 3 DEDUCT TAX AT SOURCE UNDER THE PROVISIONS OF SECTIO N 194H. IN RESPONSE TO THE NOTICE, THE ASSESSEE STATED THAT TH E SALES AND DISTRIBUTION POLICY 2006 OF BSNL WAS AMENDED IN 200 7 TO CONFER THE STATUS OF AGENTS TO ITS DISTRIBUTORS WHO DEAL I N POST-PAID TELEPHONE/MOBILE CONNECTIONS AND TREAT THE TRANSACT IONS WITH THE FRANCHISE/DEALERS WHO DEAL IN PRE-PAID CASH CARDS L IKE RE-CHARGE COUPONS AND TOP-UP CARDS AS PRINCIPAL TO PRINCIPAL . 3. THE INCOME TAX OFFICER VIDE SEPARATE ORDERS FOR THE AY.2010-11 & AY.2011-12 BOTH DT.29-03-2012, REJECTE D THE CLAIM OF ASSESSEE AND HELD THE ASSESSEE IN DEFAULT UNDER THE PROVISIONS OF SECTION 201(1) OF THE ACT. THE INCOME TAX OFFIC ER FURTHER LEVIED INTEREST U/S.201(1A) FOR BOTH THE AYS. AGGRIEVED BY THE ORDERS PASSED U/S.201(1) AND 201( 1A), THE ASSESSEE PREFERRED APPEALS BEFORE THE CIT(APPEALS). THE CIT(APPEALS) UPHELD THE FINDINGS OF INCOME TAX OFFI CER AND DISMISSED BOTH THE APPEALS OF THE ASSESSEE. AGGRIEVED BY THE IMPUGNED ORDER OF FIRST APPELLATE AUTHORITY, THE ASSESSEE HAS COME IN SECOND APPEAL BEFORE THE T RIBUNAL. 4. SHRI S.SRIDHAR, APPEARING ON BEHALF OF THE ASSES SEE SUBMITTED THAT THE CASE OF THE ASSESSEE FOR BOTH TH E AYS IS I.T.A. NOS. 1117 & 1118/MDS/14 4 IDENTICAL TO THE ONE ALREADY ADJUDICATED BY THE TRI BUNAL IN ITA NO.81/MDS/2013 (AY.2009-10) DECIDED ON 26-08-2013. THE CIT(APPEALS) HAS NOT FOLLOWED THE DECISION OF THE T RIBUNAL AND REJECTED BOTH APPEALS OF THE ASSESSEE. THE LD.COUN SEL FOR THE ASSESSEE FURTHER CONTENDED THAT THE DEDUCTEES HAVE ALREADY PAID TAX ON THEIR RESPECTIVE INCOMES. THUS, THERE IS NO LOSS TO THE REVENUE. ONCE THE DEDUCTEES HAVE ASSESSED THE INCO ME AND HAVE PAID TAX THEREON, THE ASSESSEE CANNOT BE HELD TO BE ASSESSEE IN DEFAULT. IN ORDER TO SUPPORT HIS CONTE NTIONS, THE LD.COUNSEL PLACED RELIANCE ON THE DECISION OF HON'BL E SUPREME COURT OF INDIA IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES LIMITED VS. CIT REPORTED AS 293 ITR 226 AND THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.81/MDS/20 13 (AY.2009-10) (SUPRA). 5. ON THE OTHER HAND, SHRI N.RENGARAJ, APPEARING ON BEHALF OF THE REVENUE SUPPORTED THE FINDINGS OF CIT(APPEALS) AND PRAYED FOR DISMISSING THE APPEALS OF THE ASSESSEE. 6. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELO W PERUSED. WE FIND THAT THE FACTS OF THE CASE IN HAND ARE EXAC TLY SIMILAR TO THE CASE OF ASSESSEE DECIDED BY THE CO-ORDINATE BENCH I N ITA I.T.A. NOS. 1117 & 1118/MDS/14 5 NO.81/MDS/2013 (AY.2009-10) (SUPRA). THE TRIBUNAL IN THE AFORESAID CASE HELD AS UNDER: 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE JUDGMENT CI TED BY THE LD. COUNSEL FOR THE ASSESSEE. IT IS AN ADMITTED PO SITION THAT THE ASSESSEE HAS PRODUCED CERTIFICATES FROM THE CHA RTERED ACCOUNTANTS OF THE DEDUCTEE TO SHOW THAT THE AMOUNT HAS BEEN ASSESSED TO TAX IN THE RETURN AND TAX HAS BEEN PAID THEREON. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES LIMITED (SUPRA) HAS H ELD THAT ONCE THE DEDUCTEE HAS DISCLOSED THE INCOME AND HAS PAID TAX THEREON, THE DEDUCTOR SHALL NOT BE HELD TO BE ASSES SEE IN DEFAULT UNDER THE PROVISIONS OF SECTION 201(1). HO WEVER, THE ASSESSEE SHALL BE LIABLE FOR DELAYED PAYMENT OF TAX ES UNDER THE PROVISIONS OF SECTION 201(1A). IN THE PRESENT CASE, TAX LIABILITY HAS BEEN DISCHARGED, THEREFORE, THE ASSE SSEE CANNOT BE HELD TO BE AN ASSESSEE IN DEFAULT. IN VIEW OF T HE JUDGMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE O F HINDUSTAN COCA COLABEVERAGES LIMITED (SUPRA), THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. HOWEVER, THE DEPARTMENT IS AT LIBERTY TO RECOVER THE AMOUNT OF I NTEREST, IF ANY, ARISING OUT OF THE DELAYED PAYMENT OF TAXES UN DER THE PROVISIONS OF 201(1A) OF THE ACT FROM THE ASSESSEE. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE AFO RESAID TERMS. I.T.A. NOS. 1117 & 1118/MDS/14 6 7. TAX DEDUCTED AT SOURCE, AS THE NAME IMPLIES AIMS AT COLLECTION OF REVENUE AT THE VERY SOURCE OF INCOME. IT IS THE EARLIEST POINT AT WHICH GOVERNMENT COLLECTS THE TAX AND ENSU RES A REGULAR SOURCE OF REVENUE AND WIDER BASE FOR TAX. THE RECI PIENT OF INCOME FROM WHOSE INCOME, TAX HAS BEEN DEDUCTED AT SOURCE GETS THE CREDIT OF THE AMOUNT DEDUCTED IN HIS PERSONAL ASSES SMENT ON THE BASIS OF THE CERTIFICATE ISSUED BY THE DEDUCTOR. W HERE THERE IS DEFAULT IN DEDUCTION OF TAX AT SOURCE, THE DEDUCTOR ON WHOM THE DUTY HAS BEEN CAST BY THE ACT IS DEEMED TO BE ASSES SEE IN DEFAULT. HOWEVER, THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES LIMITED VS. CIT (SUPRA) HAS HELD THAT WHERE DEDUCTEE, RECIPIENT OF INCOME HAS PAID T AX ON AMOUNT RECEIVED FROM DEDUCTOR, DEPARTMENT CANNOT RECOVER T AX FROM DEDUCTOR ON SAME INCOME BY TREATING DEDUCTOR AS ASS ESSEE IN DEFAULT. THE HON'BLE SUPREME COURT OF INDIA FURTHE R OBSERVED THAT THE CIRCULAR NO.275/201/95 IT(B) DT.29-01-1997 IS SUED BY CBDT PUTS AN END TO THE CONTROVERSY. THE CIRCULAR DECLA RES, NO DEMAND VISUALIZED U/S.201(1) OF THE INCOME TAX ACT SHOULD BE ENFORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE OFFICER IN -CHARGE OF TDS, THAT TAXES HAVE BEEN PAID BY THE DEDUCTEE ASSESSEE . I.T.A. NOS. 1117 & 1118/MDS/14 7 8. AN AMENDMENT HAS BEEN BROUGHT BY THE FINANCE ACT , 2012, WHEREIN PROVISO HAS BEEN INSERTED TO SECTION 201(1) W.E.F. 01-07-2012 WHICH READS AS UNDER: [PROVIDED THAT ANY PERSON, INCLUDING THE PRINCIPAL OFFICER OF A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TA X 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 SECTIO N 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED B Y HIM IN SUCH RETURN OF INCOME, AND THE PERSON FURNISHES A CERTIFICATE TO THIS EFFE CT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED:] THE AMENDMENT BROUGHT IN BY THE LEGISLATURE IS IN L INE WITH THE DECISION OF THE HON'BLE SUPREME COURT OF INDIA IN TH E CASE OF HINDUSTAN COCA COLA BEVERAGES LIMITED VS. CIT (SUPRA). THE SAID AMENDMENT MAY NOT HAVE APPLICATION IN THE AY U NDER CONSIDERATION, BUT, IT CLEARLY SHOWS THE INTENT OF LEGISLATURE, NOT TO TREAT THE ASSESSEE IN DEFAULT WHERE THE INCOME RECE IVED HAS BEEN ASSESSED TO TAX AND THE TAXES HAVE BEEN PAID BY THE DEDUCTEE. I.T.A. NOS. 1117 & 1118/MDS/14 8 9. IN VIEW OF THE ABOVE, WE ACCEPT THE SUBMISSION O F LD.COUNSEL FOR THE ASSESSEE WITH REGARD TO NO LIABILITY OF ASS ESSEE U/S.201 OF THE ACT. HOWEVER, THE DEPARTMENT IS AT LIBERTY TO RECOVER THE AMOUNT OF INTEREST, IF ANY, ARISING OUT OF DELAYED PAYMENT OF TAXES UNDER THE PROVISIONS OF SECTION 201(1A) OF THE ACT FROM ASSESSEE. IN RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY AL LOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON WEDNESDAY, THE 15 TH OCTOBER, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( ! '# ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) / VICE PRESIDENT ! '# / JUDICIAL MEMBER $ /CHENNAI, %'& /DATED: 15 TH OCTOBER, 2014 TNMM ''(!)*+* /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ' ' ,-. /CIT(A) 4. ' ' , /CIT 5. */0!!12 /DR 6. 0345 /GF