ACIT (TDS), Chandigarh V. Canara Bank, Chandigarh

ITA 1128/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90102 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-04-2015
• Assessment Year: 2012-2013
• Appeal Filed On: 19-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K MITTAL
• Keywords: Salary income; Principle of natural justice
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO.1128/CHD/2014 ASSESSMENT YEAR: 2012-13 ACIT(TDS), VS. CANARA BANK CHANDIGARH SCO 117-119 SECTOR 17-C CHANDIGARH PAN NO. PTLC10956B & ITA NO.14/CHD/2015 ASSESSMENT YEAR: 2012-13 CANARA BANK ACIT(TDS) SCO 117-119 CHANDIGARH SECTOR 17-C CHANDIGARH (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. NEERAJ BANSAL RESPONDENT BY : SHRI. S.K. MITTAL DATE OF HEARING : 09/04/2015 DATE OF PRONOUNCEMENT : 15/04/2015 ORDER PER T.R.SOOD, A.M. BOTH THE APPEALS FILED BY THE REVENUE AND ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 31/10/2014 PASSED BY THE CIT(A) CHANDIGARH. ITA NO. 1128/CHD/2014 2. IN THIS APPEAL REVENUE HAS RAISED THE FOLLOWING GROUND: 2 1 . THAT THE LD. CIT(A) HAS ERRED IN DELETING THE AD DITION MADE ON ACCOUNT OF INTEREST PAID ON FDRS WITHOUT DEDUCTION OF TAX AT SOURCE (TDS) U/S 194A. 2. THAT DURING THE RELEVANT PERIOD OF TIME, THE AS SESSEE BANK HAD NO DOCUMENTARY EVIDENCE IN THE FORM OF LOWER DEDUCTION CERTIFICATE U/S 197 ETC. ON THE BASIS OF WHICH THE BANK CAME OT THE CON CLUSION THAT THERE WAS N O REQUIREMENT OF DEDUCTION OF TAX, AS REQUIRED U/S 194A OF THE I.T. ACT. 1961. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT A SU RVEY / TDS INSPECTION WAS CONDUCTED IN THE PREMISES OF ASSESSEE AND IT WAS NO TED THAT INTEREST HAS BEEN PAID TO THE FOLLOWING PARTIES: (I) DIRECTOR, PEC UNIVERSITY OF TECHNOLOGY, CHANDIG ARH (SALARY ACCOUNT) (II) DIRECTOR, PEC UNIVERSITY OF TECHNOLOGY (PF TRUST FU ND) (III) PEC UNIVERSITY OF TECHNOLOGY (PENSION FUND TRUST) (IV) PUNJAB INFRASTRUCTURE DEVELOPMENT BOARD THE AO QUESTIONED THE ASSESSEE FOR NON DEDUCTION OF TAX ON INTEREST PAYMENT TO THE ABOVE NOTED PARTIES. THE ASSESSEE PRODUCED T HE LOWER DEDUCTION CERTIFICATE FOR FY 2012-13. HOWEVER NO SUCH CERTIFI CATE WAS AVAILABLE FOR FY 2011- 12 AND THE CERTIFICATE FOR 2011-12 COULD NOT BE PRO DUCED AFTER GIVING VARIOUS OPPORTUNITIES. IT WAS MAINLY STATED THAT SAME IS NO T TRACEABLE THEREFORE AO HELD THAT ASSESSEE WAS LIABLE TO BE TREATED AS ASSESSEE IN DEFAULT AND LIABILITY FOR TAX WAS DEDUCTED UNDER SECTION 201 AND INTEREST UNDER S ECTION 201(1)(A). 4. FURTHER IT WAS NOTICED THAT ASSESSEE HAS DEDUCTE D LOWER TAX FROM THREE INDIVIDUALS NAMELY MR. A. SAHA, MR. A.R. BHASIN, MR . D.S. THAKUR WHO WERE PAID COMMISSION FOR DAILY COLLECTION PURPOSE IN RESPECT OF PIGMY DEPOSITS. IN RESPONSE TO THE QUERY IT WAS SUBMITTED THAT ASSESSEE HAS DED UCTED TAX AS PER SECTION 192 BY TREATING SUCH INCOME AS SALARY. AO WAS NOT SATIS FIED WITH THIS EXPLANATION AND HE RAISED TAX DEMAND OF RS. 98,944/- UNDER SECTION 201(1)(1A). 5. ON APPEAL IT WAS SUBMITTED AS UNDER: (I) IN CASE OF PEC UNIVERSITY OF TECHNOLOGY (SALARY ACC OUNT) THE RETURN WAS FILED UNDER SECTION 10(23C)(IIIAB) OF THE ACT. (II) IN CASE OF PEC UNIVERSITY OF TECHNOLOGY (PF TRUST F UND) THE FUND IS ALSO RECOGNIZED BY CIT, CHANDIGARH AND THEREFORE INTERES T INCOME WAS EXEMPTED. (III) IN CASE OF PEC UNIVERSITY OF TECHNOLOGY (PENSION FU ND TRUST) THE ASSESSEE HAS ALSO APPLIED FOR EXEMPTION UNDER SECTI ON 10(23AAA). 3 (IV) IN CASE OF PUNJAB INFRASTRUCTURE DEVELOPMENT BOARD ASSESSEE HAS BEEN NOTIFIED UNDER SECTION 10(23C)(IV) SO THE TOTAL INC OME WAS EXEMPTED. IN CASE OF THREE INDIVIDUALS WHOM COMMISSION WAS PA ID FOR DAILY COLLECTION THE SAME WAS TREATED AS SALARY INCOME AND TAX DEDUCTED ACCORDINGLY, IN VIEW OF THE CLARIFICATION ISSUED BY THE CENTRAL BOARD OF DI RECT TAXES. IT WAS FURTHER SUBMITTED THAT IF NO TAX WAS DUE THEN INTEREST COUL D NOT BE CHARGED AND IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION OF HONB LE ITAT, CHANDIGARH IN CASE OF M/S. Q.C. RESIDENTIAL (P) LTD. IN ITA NO. 1 286/CHD/2012. 6. THE LD. CIT(A) CONSIDERED THE ISSUE AND HELD THA T TAX WAS NOT DEDUCTIBLE IN RESPECT OF ALL THESE PARTIES INCLUDING INDIVIDUA LS EXCEPT IN CASE OF PEC UNIVERSITY OF TECHNOLOGY (PENSION FUND TRUST) AND T HE APPEAL OF ASSESSEE WAS ALLOWED PARTLY. 7. BEFORE US THE LD. DR STRONGLY SUPPORTED THE ORDE R OF AO. 8. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE R EITERATED THE SUBMISSION MADE BEFORE LD. CIT(A). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT LD. CIT(A) HAS ADJUDICATED THIS ISSUE VIDE PARA 5 AND PARA 5.1 WHICH IS AS UNDER. 5. I HAVE CONSIDERED FACTS OF THE CASE. AS PER THE DOCUMENTS FILED BY THE APPELLANT, TAX WAS NOT REQUIRED TO BE DEDUCTED AT S OURCE ON INTEREST PAID TO THE FOLLOWING: (I) PEC UNIVERSITY OF TECHNOLOGY (SALARY ACCOUNT), SINCE ITS INCOME IS EXEMPT U/S 10(23C)(IIIAB)OF THE ACT. (II) PEC UNIVERSITY OF TECHNOLOGY (PF TRUST FUND), SINCE THE FUND IS RECOGNIZED BY THE COMMISSIONER OF INCOME TAX, CHANDIGARH. (III) PUNJAB INFRASTRUCTURE DEVELOPMENT BOARD, SINCE ITS INCOME IS EXEMPT U/S 10(23C)(IV) OF THE ACT. 5.1 TAX WAS REQUIRED TO BE DEDUCTED BY TREATING THE PAYMENT AS SALARY IN RESPECT OF THREE INDIVIDUAL NNND AGENTS, HIRED BY B ANKS FOR DAILY COLLECTION PURPOSES IN RESPECT OF PIGMY DEPOSITS, IN VIEW OF T HE LETTER DATED 12.12.2007, ISSUED BY UNDER SECRETARY (ITB) FROM F.NO. 275/75/2 007-ITB. THE ASSESSING OFFICER HAS WRONGLY TREATED THE PAYMENT MADE TO THESE INDIV IDUALS AS COMMISSION U/S 194 H OF THE ACT. IN OUR OPINION THE LD. CIT(A) HAS CORRECTLY DECIDED THE ISSUE BECAUSE IF AN ORGANIZATION IS EXEMPTED THEN SAME IS NOT LIABLE TO TAX AND THEREFORE THERE IS NO NEED FOR DEDUCTION OF TAX. THEREFORE WE FIND NOTHIN G WRONG IN THE ORDER OF LD. CIT(A) AND CONFIRM THE SAME. 10. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. 4 ITA NO. 14/CHD/2015 11. IN THIS APPEAL ASSESSEE HAS RAISED FOLLOWING GR OUNDS: 1. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. VIOLATION OF PRINCIPLES OF NATURAL JUSTICE: THAT ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS NOT JUST IFIED TO NEGATE THE CONTENTION OF THE APPELLANT THAT PRINCIPLES OF NATURAL JUSTICE WERE GROSSLY VIOLATED BY THE AO. NO REASONABLE OPPORTUNITY WAS AFFORDED TO THE APPEL LANT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF AO TREATING THE ASSESSEE AS ASSESSEE IN DEFAULT IN RESPECT OF INTEREST PAID TO PEC UNIVERS ITY OF TECHNOLOGY (PENSION FUND TRUST) WITHOUT APPRECIATING THE PROVISIONS OF SECTI ON 201(1) READ WITH SECTION 191. THE LD. CIT(A0 HAS ERRED BY IGNORING THE JUDGMENT O F HONBLE ALLAHABAD HIGH COURT IN THE CASE OF JAGRAN PRAKASHAN LTD. V. DCIT 345 ITR 288/(2012)21 TAXMANN.COM489. 4. LEVY OF INTEREST TILL DATE OF ORDER & NOT FILING OF RETURN: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A ) HAS ERRED IN UPHOLDING THE ORDER OF AO FOR LEVY OF INTEREST UNDER SECTION 201( 1A) TILL THE DATE OF ORDER. THIS SECTION OF LD. CIT(A)/ASSESSING OFFICER IS AGAINST THE DECISION OF HONBLE SUPREME COURT IN CASE OF HINDUSTAN COCA COLA BEVERAGES PVT. LTD. 293 ITR 226. GROUND NO. 1- THIS GROUND IS OF GENERAL NATURE AND THEN NOT REQUIRED SEPARATE ADJUDICATION. GROUND NO. 2- THOUGH LD. COUNSEL FOR THE ASSESSEE A RGUED THAT PROPER OPPORTUNITY HAS NOT BEEN GIVEN BUT HE COULD NOT POI NT OUT IN WHAT RESPECT THE PROPER OPPORTUNITY HAS NOT BEEN GIVEN AND THEREFORE WE DECLINE TO ENTERTAIN THIS GROUND AND DISMISSED THE SAME. GROUND NO. 3& 4- THE FACTS HAS BEEN DISCUSSED IN TH E APPEAL FILED BY THE REVENUE. IN RESPECT OF THIS ISSUE WHICH WE HAVE ADJ UDICATED IN ABOVE NOTED PARAS AND THE LD. CIT (A) HAS DECIDED THE SAME WHIC H IS AS UNDER: 5.2 PEC UNIVERSITY OF TECHNOLOGY (PENSION FUND TRUS T) IS NOT EXEMPT FROM TAX U/S 10(23AAA) AS ON DATE, AND SO TAX WAS REQUIRED T O BE DEDUCTED ON INTEREST PAID TO THIS PERSON. 5.3 IN VIEW OF THE ABOVE DISCUSSION, PR IS TO BE TREATED AS ASSESSEE IN DEFAULT IN RESPECT OF THE PAYMENT MADE TO PEC UNIV ERSITY OF TECHNOLOGY (PENSION FUND TRUST). THEREFORE, THE DEMAND CREATED U/S 201(1)/1A) OF RS. 12,56,023/- IN RESPECT OF INTEREST PAYMENT TO PEC U NIVERSITY OF TECHNOLOGY (PENSION FUND TRUST) IS CONFIRMED AND THE APPELLANT GETS RELIEF OF REST OF THE DEMAND OF RS. 62,46,541/-(75,02,564 12,56,023). 12. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE UNIVERSITY HAS NOT PROVIDED HIM ANY INFORMATION TO THE FACT WHETHER PE NSION FUND WAS GRANTED APPROVAL OR NOT. HOWEVER STILL HE SUBMITTED THAT TA X WAS NOT DEDUCTIBLE BECAUSE THERE WERE NO PRIMARY LIABILITY ON THE PART OF PEC UNIVERSITY OF TECHNOLOGY (PENSION FUND TRUST). IN VIEW OF THE DECISION OF HO NBLE SUPREME COURT IN CASE OF CIT VS. ELI LILLY AND CO.(INDIA) P. LTD. 312 ITR 22 5 AND IN CASE OF JAGRAN PRAKASHAN LTD. VS. DCIT 345 ITR 288. 5 13. ON THE OTHER HAND LD. DR SUPPORTED THE ORDER OF LD. CIT(A). 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY AND WE DO NOT FIND ANY FORCE IN THE SUBMISSIONS OF LD. COUNSEL FOR THE ASSESSEE. IN CASE OF CIT VS. ELI LILLY AND CO.(INDIA) P. LTD. (SUPRA) THE ISSUE WAS WHETHER PAYMENT MADE OF HOME SALARY ABROAD BY THE FOREIGN COMPANY TO THE EX PATRIATE HAS A CONNECTION WITH SERVICES RENDERED IN INDIA. IT WAS HELD THAT SUCH PAYMENT OF HOME SALARY HAD DEFINITE CONNECTION WITH THE SERVIC ES RENDERED IN INDIA AND THEREFORE ASSESSEE WAS RESPONSIBLE TO DEDUCT TAX. I T WAS FURTHER OBSERVED AS UNDER: THE SCHEME OF THE PROVISIONS FOR DEDUCTION OF TAX A T SOURCE APPLIED NOT ONLY TO THE AMOUNT PAID, WHICH BEARS THE CHARACTER OF INCO ME, SUCH AS SALARIES, DIVIDENDS, INTEREST ON SECURITIES, ETC., BUT ALSO T O GROSS SUMS, THE WHOLE OF WHICH MAY NOT BE INCOME OR PROFITS IN THE HANDS OF THE RE CIPIENT, SUCH AS PAYMENT TO CONTRACTORS OR SUB-CONTRACTORS. THE PURPOSE OF THE PROVISIONS FOR DEDUCTION OF TAX AT SOURCE IN CHAPTER XVII-B OF THE INCOME-TAX ACT, 1961, IS TO SEE THAT FROM THE SUM WHICH IS CHARGEABLE UNDER SECTION 4 FOR LEVY AN D COLLECTION OF INCOME-TAX, THE PAYER SHOULD DEDUCT TAX THEREON AT THE RATES IN FORCE, IF THE AMOUNT IS TO BE PAID TO A NON-RESIDENT. THEY ARE MEANT FOR TENTATIV E DEDUCTION OF INCOME-TAX SUBJECT TO REGULAR ASSESSMENT. THUS FROM ABOVE IT IS CLEAR THAT NORMALLY A PERSON MAKING PAYMENT IS REQUIRED TO DEDUCT THE TAX AS PER THE PROVISIONS OF THE ACT BEC AUSE THIS IS A TENTATIVE DEDUCTION. THE CASE OF JAGRAN PRAKASHAN LTD. VS. DCIT (SUPRA) IS ALSO DISTINGUISHABLE ON FACTS BECAUSE IN THAT CASE THE ISSUE WAS WHETHER TR ADE DISCOUNT ALLOWED BY THE PUBLISHER OF NEWS PAPER TO ADVERTISING AGENCY WAS N OT A DISCOUNT AND WHETHER TAX IS DEDUCTIBLE AT SOURCE ON SUCH DISCOUNT AND IT WAS HELD THAT NO TAX WAS DEDUCTIBLE UNDER SECTION 194H THEREFORE THIS CASE P ROVIDES NO ASSISTANCE TO THE CASE OF THE ASSESSEE. 15. IN THE CASE BEFORE US THE FACT REMAINS THAT PEN SION FUND TRUST OF THE PEC UNIVERSITY OF TECHNOLOGY HAS NOT BEEN APPROVED SO F AR AND INFACT IN REPLY TO QUERY RAISED BY THE BRANCH, IT WAS CLEARLY ADMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT UNIVERSITY HAS NOT BEEN ABLE TO PROVI DE TO THE COUNSEL ANY INFORMATION ON THIS. THEREFORE ONLY PRESUMPTION IS THAT THIS TRUST HAS NOT BEEN RECOGNIZED SO FAR. THE INCOME OF TRUST WHICH IS NOT APPROVED BY THE COMMISSIONER IS NOT EXEMPTED AND THEREFORE TAX WAS REQUIRED TO BE DEDUCTED BY THE BANK. THE LD. CIT(A) HAS ADJUDICATED THIS IS SUE VIDE PARA 5.2 AND 5.3. WHICH HAS ALREADY BEEN REPRODUCED ABOVE. 6 IN OUR OPINION THE LD. CIT(A) HAS CORRECTLY ADJUDIC ATED THE ISSUE AND ACCORDINGLY WE UPHOLD HIS ORDER. 16. IN THE RESULT APPEAL IS DISMISSED. 17. IN THE RESULT BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.04.2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 15/04/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR