LABHUBHAI DHARAMSIBHAI LAKHANI, Surat V. THE ITO, WARD-9(2), Surat

ITA 1176/AHD/2009

• Counselvise Citation: 117620514 RSA 2009
• Duration Of Justice: 2 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-04-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 15-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR
• Assessee Lawyers: PF JAIN
• Section: 143(3); 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND SHRI A. MOHAN ALAN KAMONY, AM) ITA NO.1593/AHD/2005, 865 & 2395/AHD/2007, 1716/AHD /2009, 1322 & 1323/AHD/2006 AND 864/AHD/2007 A. Y.: 2002-03,2003-04 &2004-05 ,2005-06, 2000-01& 2001-02 AND 2002-03 OMNIBUS INDUSTRIAL DEVELOPMENT CORPORATION OF DAMN & DIU AND DADRA & NAGAR HAVELI LTD., PRATYAN BHAVAN, NANI DAMAN, DAMAN 396 210 P. A. NO. AAACO 3361 K VS THE A. C. I. T., VAPI (APPELLANT) (RESPONDENT) APPELLANT BY SHRI P. F. JAIN, AR RESPONDENT BY SHRI RAHUL KUMAR, SR. DR DATE OF HEARING: 04-06-2013 DATE OF PRONOUNCEMENT: 31-07-2013 O R D E R PER A. MOHAN ALANKAMONY: ALL THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGGRIEVED BY DIFFERENT ORDERS OF TH E LEARNED CIT(A). FACTS OF THESE CASES ARE SIMILAR AND THE ISSUES INV OLVED ARE IDENTICAL AND HENCE THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . ITA NO.1593/AHD/2005 (ASSESSEES APPEAL FOR AY 2002-03) 2. THIS APPEAL IS PREFERRED BY THE ASSESSEE AGGRIE VED BY THE ORDER OF THE LEARNED CIT(A), VALSAD DATED 21-03-200 5 FOR THE ASSESSMENT YEAR 2002-03 IN APPEAL NO. CIT(A)VLS/213 /04-05/7 PASSED U/S 250 READ WITH SECTION 143(3) OF THE ACT. ITA NO. 1593/AHD/2005, 865 & 2395/AHD/2007, 1716/AHD/2009, 1322 & 1323/AHD/2006 AND 864/AHD/2007 A.Y.: 2002-03, 2003-04 &2004-05, 2005-06, 2000-01& 2001-02 AND 2002-03 OMNIBUS INDUSTRIAL DEVP. CORPN OF DAMAN & DIU AND D ADRA NAGAR HAVELI LTD. 2 3. THE ASSESSEE HAS RAISED THREE GROUNDS IN THIS AP PEAL, WHEREIN GROUND NO.3 IS GENERAL IN NATURE AND DOES NOT SURVI VE FOR ADJUDICATION. SURVIVING GROUNDS NO.1 AND 2 ARE REPR ODUCED HEREIN UNDER:- 1 ACTION OF THE ASSISTANT COMMISSIONER OF INCOME T AX, VAPI IN RE-OPENING THE ASSESSMENT BY ISSUING NOTICE U/S 148 IS WRONG ON FACTS AND IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME TAX, VAPI AND COMMISSIONER OF INCOME TAX (APPEALS), VALSAD IN NOT ALLOWING THE DEDUCTION FOR INTEREST ON ARBITRATION AWARD IN COMPUTATION OF TOTAL INCOME IS WRONG AND ILLEGAL. 4. AT THE TIME OF HEARING, THE LEARNED AR SUBMITTED BEFORE US THAT THE ASSESSEE DO NOT PRESS THE FIRST GROUND RAISED I N THIS APPEAL, THEREFORE WE HEREBY DISMISS THE GROUND AS SUCH. ITA NO.865/AHD/2007 (AY- 2003-04) 5. THIS APPEAL IS PREFERRED BY THE ASSESSEE AGGRIE VED BY THE ORDER OF THE LEARNED CIT(A), VALSAD DATED 30-11-200 6 IN APPEAL NO. CIT(A)/VLS/179/06-07, PASSED U/S 250 READ WITH SECT ION 143(3) OF THE ACT , FOR THE ASSESSMENT YEAR 2003-04. 6. THE ASSESSEES SOLE SURVIVING GROUND NO.1 IS REP RODUCED HEREIN UNDER FOR REFERENCE:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) VALSAD, IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER I DISALLOWING THE CLAIM OF INTEREST ON ARBI TRATION AWARD OF RS.5,66,808, IS CONTRARY TO LAW AND THE FACTS OF THE CASE. ITA NO. 1593/AHD/2005, 865 & 2395/AHD/2007, 1716/AHD/2009, 1322 & 1323/AHD/2006 AND 864/AHD/2007 A.Y.: 2002-03, 2003-04 &2004-05, 2005-06, 2000-01& 2001-02 AND 2002-03 OMNIBUS INDUSTRIAL DEVP. CORPN OF DAMAN & DIU AND D ADRA NAGAR HAVELI LTD. 3 ITA NO.2395/AHD/2007 (AY 2004-05) 7. THE ASSESSEE HAS PREFERRED THIS APPEAL AGGRIEVED BY THE COMMON ORDER OF THE LEARNED CIT(A), VALSAD DATED 15 -02-2007 IN APPEAL NO. CIT(A)VLS/299/06-07, PASSED U/S 250 READ WITH SECTION 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2004-05. 8. IN THIS APPEAL THE ASSESSEE HAS RAISED THREE GRO UNDS WHEREIN GROUND NO.3 IS GENERAL IN NATURE AND DOES NOT SURVI VE FOR ADJUDICATION AND THE SURVIVING GROUNDS NO.1 AND 2 ARE REPRODUCED HEREIN UNDER FOR REFERENCE:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) VALSAD, IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE CLAIM OF INTEREST ON ARB ITRATION AWARD OF RS.5,66,808, IS CONTRARY TO LAW AND THE FA CTS OF THE CASE 2. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) VALSAD, IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER, IN WITHDRAWING THE CREDIT FOR TAX DEDUCTED AT SOURCE OF RS.301523 ON THE AMOUNT OF INTEREST EARNED ON TH E FIXED DEPOSIT TAKEN OUT OF AMOUNT OF ASIDE SCHEME, IS CON TRARY TO LAW AND THE FACTS OF THE CASE. ITA NO.1716/AHD/2009 (AY 2005-06) 9. THIS APPEAL IS PREFERRED BY THE ASSESSEE AGGRIEV ED BY THE ORDER OF THE CIT(A)-I, SURAT PASSED IN APPEAL NO. C AS-I(V)/60/08-09 DATED 13-03-2009, U/S 250 READ WITH SECTION 143(3) OF THE ACT, FOR THE ASSESSMENT YEAR 2005-06. ITA NO. 1593/AHD/2005, 865 & 2395/AHD/2007, 1716/AHD/2009, 1322 & 1323/AHD/2006 AND 864/AHD/2007 A.Y.: 2002-03, 2003-04 &2004-05, 2005-06, 2000-01& 2001-02 AND 2002-03 OMNIBUS INDUSTRIAL DEVP. CORPN OF DAMAN & DIU AND D ADRA NAGAR HAVELI LTD. 4 10. IN THIS APPEAL, THE ASSESSEE HAS THREE GROUNDS WHEREIN GROUND NO.3 IS GENERAL IN NATURE AND DOES NOT SURVIVE FOR ADJUDICATION AND THE SURVIVING GROUNDS NO.1 AND 2 ARE REPRODUCED HER EIN UNDER FOR REFERENCE:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) VALSAD, IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE CLAIM OF INTEREST ON ARB ITRATION AWARD OF RS.5,66,808, IS CONTRARY TO LAW AND THE FA CTS OF THE CASE 2. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) VALSAD, IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER, IN WITHDRAWING THE CREDIT FOR TAX DEDUCTED AT SOURCE OF RS.63,158/- ON THE AMOUNT OF INTEREST EARNED ON THE FIXED DEPOSIT TAKEN OUT OF AMOUNT OF ASIDE SCHEME, IS CON TRARY TO LAW AND THE FACTS OF THE CASE. ITA NO.1322/ AND 1323/AHD/2006 (ASSESSEES APPEAL FOR AY 2000-01 AND 2001-02) 11. THE ASSESSEE HAS PREFERRED THESE APPEALS AGGRIE VED BY THE COMMON ORDER OF THE LEARNED CIT(A), VALSAD DATED 15 -02-2006 IN APPEAL NO. CIT(A)/VLS/105/05-06, FOR THE ASSESSMENT YEARS 2000-01 AND 2001-02, PASSED U/S 250 READ WITH SECTION 271 ( 1) (C) OF THE INCOME TAX ACT, 1961. 12. THE ASSESSEE HAS RAISED THREE GROUNDS IN EACH O F THE ABOVE TWO APPEALS, WHEREIN GROUND NO.3 IS GENERAL IN NATU RE AND DOES NOT SURVIVE FOR ADJUDICATION. THE SURVIVING COMMON GROU NDS NO.1 AND 2 RAISED IN BOTH THE ABOVE APPEALS ARE REPRODUCED HER EIN UNDER FOR REFERENCE:- ITA NO. 1593/AHD/2005, 865 & 2395/AHD/2007, 1716/AHD/2009, 1322 & 1323/AHD/2006 AND 864/AHD/2007 A.Y.: 2002-03, 2003-04 &2004-05, 2005-06, 2000-01& 2001-02 AND 2002-03 OMNIBUS INDUSTRIAL DEVP. CORPN OF DAMAN & DIU AND D ADRA NAGAR HAVELI LTD. 5 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), VALSAD, IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER, LEVYING THE PENALTY FOR FURNISHING INACCUR ATE PARTICULARS OF ITS INCOME, IS CONTRARY TO LAW AND T HE FACTS OF THE CASE. 2. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), VALSAD HAS NOT CONSIDERED THE FACT OF CL AIMING OF INTEREST ON ARBITRATION AWARD BY YOUR APPELLANT AND ITS DISALLOWANCE BY THE ASSESSING OFFICER, BEFORE COMIN G TO THE CONCLUSION THAT YOUR APPELLANT HAD FURNISHED ANY IN ACCURATE PARTICULARS OF ITS INCOME. ITA NO.864/AHD/2007 (ASSESSEES APPEAL FOR AY 2002-03) 13. THIS APPEAL IS PREFERRED BY THE ASSESSEE AGGRIE VED BY THE ORDER OF THE LEARNED CIT(A), VALSAD DATED 30-11-200 6 IN APPEAL NO. CIT(A)/VLS/158/06-07 PASSED U/S 250 READ WITH SECTI ON 271 (1) (C) OF THE ACT, FOR THE ASSESSMENT YEAR 2002-03. 14. THE ASSESSEES LONE SURVIVING GROUND RAISED IN THIS APPEAL IS REPRODUCED HEREIN UNDER FOR REFERENCE:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), VALSAD, IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN LEVYING PENALTY U/S 271 (1)(C) OF THE AC T OF RS.2,02,350, IS CONTRARY TO LAW AND THE FACTS OF TH E CASE. 15. IN ALL THESE APPEALS THERE ARE ONLY THREE ISSUE S WHICH ARE TO BE ADJUDICATED VIZ. (1) DEDUCTION OF ACCRUED INTEREST PAYABLE DUE TO AR BITRATION AWARD, ITA NO. 1593/AHD/2005, 865 & 2395/AHD/2007, 1716/AHD/2009, 1322 & 1323/AHD/2006 AND 864/AHD/2007 A.Y.: 2002-03, 2003-04 &2004-05, 2005-06, 2000-01& 2001-02 AND 2002-03 OMNIBUS INDUSTRIAL DEVP. CORPN OF DAMAN & DIU AND D ADRA NAGAR HAVELI LTD. 6 (2) LEVY OF PENALTY U/S 271 (1) (C) OF THE ACT FOR WRONGLY DEDUCTING THE ACCRUED INTEREST PAYABLE DUE TO ARBIT RATION AWARD. (3) WITHDRAWING OF CREDIT FOR TAX DEDUCTED AT SOURC E. 16. ISSUE NO.1 DEDUCTION OF ACCRUED INTEREST PAYABLE DUE TO ARBITRATION AWARD: - BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CENTRAL GOVERNMENT UNDERTAKING SITUATED AT DAMAN. T HE ASSESSEES ACCOUNTS WERE DULY AUDITED UNDER THE COMPANIES ACT, 1956 AND ALSO BY C. A. G. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE LEARNED AO NOTICED THAT THE ASSESSEE HAD CLAIMED DE DUCTION FOR THE ACCRUED INTEREST PAYABLE AS PER THE ARBITRATION AWA RD PASSED BY THE ARBITRATOR ON 28-10-1998 AS DETAILED BELOW FOR ALL THE RELEVANT ASSESSMENT YEARS:- SR. NO. ASSESSMENT YEAR AMOUNT (RS.) 01 1999-2000 19,11,786 02 2000-01 05,68,498 03 2001-02 05,66,808 04 2002-03 05,66,808 05 2003-04 05,66,808 06 2004-05 05,66,808 07 2005-06 05,66,808 THE LEARNED AO DISALLOWED THIS CLAIM OF DEDUCTION F OR THE ACCRUED INTEREST ARISING OUT OF ARBITRATION AWARD DUE TO TH E FOLLOWING REASONS:- (I) IN THE INSTANT CASE, THIS EXPENDITURE WAS ONLY A CONTINGENT LIABILITY WHICH IS NOT CERTAIN. ITA NO. 1593/AHD/2005, 865 & 2395/AHD/2007, 1716/AHD/2009, 1322 & 1323/AHD/2006 AND 864/AHD/2007 A.Y.: 2002-03, 2003-04 &2004-05, 2005-06, 2000-01& 2001-02 AND 2002-03 OMNIBUS INDUSTRIAL DEVP. CORPN OF DAMAN & DIU AND D ADRA NAGAR HAVELI LTD. 7 (II) THE ASSESSEE ITSELF WAS DISPUTING THE PAYMENT OF INTEREST AND THEREFORE, IT CANNOT BE CONSTRUED AS AN ASCERTAINED LIABILITY. (III) THIS LIABILITY WAS PENDING FOR ADJUDICATION I N APPEAL BEFORE HIGHER AUTHORITIES AND, THEREFORE, THE EXPENDITURE HAS NOT CRYSTALLIZED. (IV) UNTIL THE FINAL VERDICT, THIS EXPENDITURE WILL REMAIN AS CONTINGENT LIABILITY AND ONLY IF, THE ASSESSEE FAILS IN APPEAL THE EXPENDITURE WILL CRYSTALLIZE AND THEN THE ASSESSEE WOULD BE ENT ITLED TO CLAIM THE EXPENDITURE. (V) THIS INTEREST LIABILITY IS NOT PAID BY THE ASSE SSEE FOR THE RELEVANT ASSESSMENT YEARS. 17. WHEN THE MATTER REACHED BEFORE THE LEARNED CIT( A), THE LEARNED CIT(A) CONFIRMED THE FINDINGS OF THE LEARNE D AO STATED HEREIN ABOVE AND ALSO OBSERVED AS UNDER:- (I) THE ARBITRATION AWARD WAS PASSED ON 28-10-1998 RELEVANT TO THE ASSESSMENT YEAR 1999-2000. HOWEVER, THE ASSESSE E HAD NOT CLAIMED INTEREST FOR THE ASSESSMENT YEAR 1999-2 000 AND 2002-03. (II) THE CLAIM OF DEDUCTION OF INTEREST WAS MADE ON LY FOR THE ASSESSMENT YEAR 2000-01 AND 2001-02. (III) THE ENTIRE MATTER HAS BEEN CONTESTED BY THE A SSESSEE IN APPEAL. (IV) THE ASSESSEE HAD NOT MADE ANY PROVISIONS FOR S UCH EXPENDITURE IN ITS BOOKS OF ACCOUNTS. 18. THE LEARNED AR SUBMITTED BEFORE US THAT AS PER THE ARBITRATION AWARD PASSED BY THE ARBITRATOR ON 28-10-1998, THE A SSESSEE WAS ITA NO. 1593/AHD/2005, 865 & 2395/AHD/2007, 1716/AHD/2009, 1322 & 1323/AHD/2006 AND 864/AHD/2007 A.Y.: 2002-03, 2003-04 &2004-05, 2005-06, 2000-01& 2001-02 AND 2002-03 OMNIBUS INDUSTRIAL DEVP. CORPN OF DAMAN & DIU AND D ADRA NAGAR HAVELI LTD. 8 REQUIRED TO PAY RS.35,42,548/- ALONG WITH INTEREST @16% PER ANNUM FROM 15-08-1995 TILL THE DATE OF PAYMENT. THE ASSES SEE IN ITS AUDITED ACCOUNTS DISCLOSED THE SAME IN THE NOTES FORMING PA RT OF ACCOUNTS. ACCORDINGLY, THE INTEREST PAYABLE FOR THE ABOVE YEA RS WAS CLAIMED AS EXPENDITURE IN THE COMPUTATION OF TOTAL INCOME. THE REFORE, IT WAS PLEADED THAT DEDUCTION MAY BE GRANTED FOR THE ACCRU ED INTEREST PAYABLE FOR THE RELEVANT ASSESSMENT YEAR WHICH HAS ARISEN DUE TO THE ARBITRATION AWARD PASSED BY THE ARBITRATOR. THE LEA RNED AR FURTHER RELIED ON THE DECISION IN THE CASE OF NAVJIVAN ROLL ER FLOUR & PULSE MILLS LTD. VS DCIT REPORTED IN 315 ITR 190. 19. THE LEARNED DR RELIED ON THE ORDERS OF THE REVE NUE AND ARGUED IN SUPPORT OF THE SAME. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS ON RECORD. FURTHER, ON PERUSING THE CASE CITED BY THE LEARNED AR WE FIND THAT THE ISSUE IS SQUARELY COVER ED IN FAVOUR OF THE ASSESSEE THE GIST OF WHICH IS REPRODUCED HEREIN BEL OW FOR REFERENCE:- HELD: THE TRIBUNAL HAS CATEGORICALLY FOUND THAT ON THE BA SIS OF MATERIAL AVAILABLE ON RECORD, IT WAS CLEAR THAT THE CONTRACT DID NOT PROVIDE FOR PAYMENT OF ANY PARTICULAR AMOUNT AS DAMAGES IN CASE OF BREACH OF CONTRACT AND THE CLAIM BY THE OTHER PARTY WAS FOR U NLIQUIDATED DAMAGES. THEREFORE, IT IS NOT POSSIBLE TO ACCEPT TH E CONTENTION THAT THE LIABILITY IS CONTRACTUAL IN NATURE, VIZ., ONE W HICH HAS ARISEN ON THE BASIS OF THE TERMS OF THE CONTRACT. IN MERCANTI LE SYSTEM OF ACCOUNTING IT IS WELL SETTLED THAT BOTH RECEIPT AND LIABILITY ACCRUE AT THE EARLIEST POINT OF TIME AND ARE NOT POSTPONED ME RELY ON THE BASIS OF AN ENTRY MADE OR ABSENCE OF AN ENTRY. ADMITTEDLY , THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. ON 28 TH MAY, 1987 WHEN THE TRADE ASSOCIATION MADE AN AWARD FOR DAMAGES FOR BREACH OF ITA NO. 1593/AHD/2005, 865 & 2395/AHD/2007, 1716/AHD/2009, 1322 & 1323/AHD/2006 AND 864/AHD/2007 A.Y.: 2002-03, 2003-04 &2004-05, 2005-06, 2000-01& 2001-02 AND 2002-03 OMNIBUS INDUSTRIAL DEVP. CORPN OF DAMAN & DIU AND D ADRA NAGAR HAVELI LTD. 9 CONTRACT THE LIABILITY TO PAY SUCH DAMAGES HAD ALRE ADY BEEN INCURRED BY THE ASSESSEE. MERELY BECAUSE THE AWARD WAS CHALLENGED IN APPEAL BY THE ASSESSEE CANNOT BE A GR OUND FOR HOLDING THAT THE LIABILITY HAD NOT BEEN INCURRED. IN THE RE SULT, FOR THE REASONS AFORESTATED, IT IS NOT POSSIBLE TO HOLD THAT THE IM PUGNED ORDER OF TRIBUNAL IS CORRECT IN LAW. THE LIABILITY TO MAKE P AYMENT OF RS.7,14,824 ARISING UNDER THE ARBITRATION AWARD DEC LARED IN THE RELEVANT ACCOUNTING PERIOD FOR ASST. YR. 1988-89 HA D ACCRUED IN THAT YEAR. 21. SIMILARLY, IN THE ASSESSEES CASE ALSO ON PASSI NG OF THE ARBITRATION AWARD, THE LIABILITY OF PAYMENT OF INTE REST HAS ACCRUED TO THE ASSESSEE AND WILL REMAIN IN FORCE UNTIL REVERSE D ON APPEAL. FOR THE PERIOD TILL THE AWARD IS REVERSED ON APPEAL, TH E ACCRUED INTEREST WILL REMAIN AS EXPENDITURE FOR THE ASSESSEE AND, TH EREFORE, DEDUCTIBLE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE RATIO SET BY THE JURISDICTIONAL HONBLE GUJARAT HIGH COURT, CITED SUPRA, WE HOLD THIS ISSUE IN FAVOUR OF THE ASSESSEE AND HEREBY DIRECT THE LEARNED AO TO ALLOW THE CLAIM OF THE ASSESSEE F OR DEDUCTING ACCRUED INTEREST ARISING OUT OF THE ARBITRATION AWA RD FOR ALL THE RELEVANT ASSESSMENT YEARS. THUS, THIS ISSUE IS DECI DED IN FAVOUR OF THE ASSESSEE. 22. ISSUE NO.2 LEVY OF PENALTY U/S 271 (1) (C) OF THE ACT FOR WRONGLY DEDUCTING THE ACCRUED INTEREST PAYABLE DUE TO ARBITRATION AWARD:- THE LEARNED AO HAD LEVIED PENALTY FOR WRONGLY CLAIMING THE ACCRUED INTEREST ARISEN DUE TO ARBITRA TION AWARD AS DEDUCTIBLE EXPENDITURE WHICH THE LEARNED CIT(A) CON FIRMED. HOWEVER, SINCE WE HAVE ALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTING THE ACCRUED INTEREST ARISEN DUE TO THE ARBITRATION AWAR D AS DEDUCTIBLE ITA NO. 1593/AHD/2005, 865 & 2395/AHD/2007, 1716/AHD/2009, 1322 & 1323/AHD/2006 AND 864/AHD/2007 A.Y.: 2002-03, 2003-04 &2004-05, 2005-06, 2000-01& 2001-02 AND 2002-03 OMNIBUS INDUSTRIAL DEVP. CORPN OF DAMAN & DIU AND D ADRA NAGAR HAVELI LTD. 10 EXPENDITURE FOLLOWING THE DECISION OF THE JURISDICT IONAL GUJARAT HIGH COURT, THE PENALTY LEVIED BY THE LEARNED AO DOES NO T SURVIVE. THEREFORE, WE HEREBY DELETE THE PENALTY LEVIED BY T HE LEARNED AO. THIS ISSUE IS ALSO DECIDED IN FAVOUR OF THE ASSESSE E. 23. ISSUE NO.3 WITHDRAWING OF CREDIT FOR TAX DEDUCTED AT SOURCE:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2004-05, THE LEARNED AO NOTICED THA T THE TOTAL INTEREST INCOME ACCRUED TO THE ASSESSEE WAS RS.1,70 ,99,368/-, HOWEVER, THE ASSESSEE HAD OFFERED ONLY RS.1,52,52,4 68/-. IT WAS EXPLAINED BY THE ASSESSEE THAT THE DIFFERENCE OF RS .18,47,000/- OF INTEREST WAS TRANSFERRED TO THE ASIDE SCHEME OF TH E UNION TERRITORY ADMINISTRATION OF DAMAN & DIU AND THE ASSESSEE WAS A NODAL AGENCY FOR THE SCHEME. BRUSHING ASIDE THE CONTENTIO N OF THE ASSESSEE, THE LEARNED AO WITHDREW THE CREDIT OF TDS AMOUNT OF RS.3,01,523/- PERTAINING TO THE DIFFERENTIAL INTERE ST FOR THE ASSESSMENT YEAR 2004-05. SIMILAR WERE THE FACTS FOR ASSESSMENT YEAR 2005-06. 24. THE LEARNED AR QUOTING THE DECISION OF THE CASE ESCORTS LTD. VS DCIT REPORTED IN [2007] 15 SOT 368 (DEL) ARGUED THAT WITHDRAWING OF THE CREDIT OF TDS IS NOT JUSTIFIED A ND BAD IN LAW AND, THEREFORE, PRAYED THAT THE SAME MAY BE ALLOWED. 25. THE LEARNED DR RELIED ON THE ORDERS OF THE REVE NUE AUTHORITIES AND ARGUED IN SUPPORT OF THE SAME. ITA NO. 1593/AHD/2005, 865 & 2395/AHD/2007, 1716/AHD/2009, 1322 & 1323/AHD/2006 AND 864/AHD/2007 A.Y.: 2002-03, 2003-04 &2004-05, 2005-06, 2000-01& 2001-02 AND 2002-03 OMNIBUS INDUSTRIAL DEVP. CORPN OF DAMAN & DIU AND D ADRA NAGAR HAVELI LTD. 11 26. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS ON RECORD. ON PERUSING THE DECISION OF TH E HONBLE DELHI HIGH COURT CITED BY THE LEARNED AR IN THE CASE OF E SCORTS LTD. VS DCIT, SUPRA, IT IS EVIDENT THAT THE ISSUE IS COVERE D AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. THE GIST OF THE ORDER OF THE HONBLE HIGH COURT IS REPRODUCED HEREIN BELOW FOR R EFERENCE:- HELD: IT IS QUITE EVIDENT FROM THE TDS CERTIFICATE DT. 2 9 TH MARCH, 2004 ISSUED BY THE DEDUCTION THAT THE TAX WAS ACTUA LLY DEDUCTED AND PAID INTO GOVERNMENT TREASURY ONLY ON 29 TH MARCH, 2004. PRIOR TO 29 TH MARCH, 2004, NEITHER THE TAX WAS DEDUCTED AT SOURC E NOR ANY AMOUNT WAS DEPOSITED IN THE GOVERNMENT TREASURY, NO R ANY CERTIFICATE WAS ISSUED TO THE ASSESSEE WITH RESPECT TO THE TAX ALLEGED TO BE DEDUCTED AT SOURCE. FROM THE RECORD, WE FOUND THAT ASSESSEE HAS DISCLOSED INTEREST INCOME RECEIVABLE FROM TWO C OMPANIES. HOWEVER, DURING THE YEARS UNDER CONSIDERATION, THE ASSESSEE NEITHER ACTUALLY RECEIVED ANY INTEREST, NOR ANY CER TIFICATE WAS GIVEN FOR DEDUCTION OF TAX AT SOURCE. IT APPEARS THAT THE RE WAS SOME DISPUTE BETWEEN THE ASSESSEE AND ITS ASSOCIATES CON CERNS TO WHOM LOANS WERE GIVEN ON INTEREST. WHEN THE DISPUTE WAS RESOLVED, THE TAX WAS DEDUCTED AT SOURCE FOR THE PERIOD 1 ST APRIL, 2002 TO 31 ST MARCH, 2003 AT THE RATE OF 2196 ON THE AMOUNT CREDI TED TO THE ASSESSEES ACCOUNT, THE TAX SO DEDUCTED WAS ALSO DE POSITED IN THE GOVERNMENT TREASURY ON 29 TH MARCH, 2004 THROUGH ITNS NO.209 AND A CERTIFICATE DT. 29 TH MARCH, 2004 WAS ALSO ISSUED TO THE ASSESSEE. SINCE PRIOR TO THE DATE OF ISSUE OF THIS CERTIFICAT E, AS THE AO HAS PROCESSED THE RETURNS FOR ALL THE THREE EARS PENDIN G BEFORE HIM, THERE WAS NO OCCASION FOR GIVING ANY CREDIT FOR THE TAX C LAIMED TO BE DEDUCTED. THE APPLICATION FILED BY THE ASSESSEE UND ER S. 154 AFTER RECEIPT OF TDS CERTIFICATE DT. 29 TH MARCH, 2004 WAS ALSO DECLINED BY THE AO. AS PER PROVISIONS OF S. 199, THE CREDIT FOR TDS HAS TO BE GIVEN IN THE ASSESSMENT YEAR IN WHICH THE INCOME RE LATING TO THE TAX DEDUCTED IS ASSESSED TO TAX. IT ALSO STIPULATES FOR GIVING CREDIT TO THE ASSESSEE ONLY ON THE PRODUCTION OF CERTIFICATE FURN ISHED UNDER S. 203 OF THE IT ACT, 1961. IN THE INSTANT CASE, THE TDS C ERTIFICATE FURNISHED BY THE ASSESSEE CLEARLY INDICATED THAT IT PERTAINS TO THE PERIOD 1 ST APRIL, 2002 TO 31 ST MARCH, 2003 IN RESPECT OF AMOUNT PAID/CREDITED, ON WHICH THE DEDUCTION HAS DEDUCTED TAX AT SOURCE O N 29 TH MARCH, 2004. UNDER THE PROVISIONS OF SS. 194B, 199, 201, 2 03 AND 205, A ITA NO. 1593/AHD/2005, 865 & 2395/AHD/2007, 1716/AHD/2009, 1322 & 1323/AHD/2006 AND 864/AHD/2007 A.Y.: 2002-03, 2003-04 &2004-05, 2005-06, 2000-01& 2001-02 AND 2002-03 OMNIBUS INDUSTRIAL DEVP. CORPN OF DAMAN & DIU AND D ADRA NAGAR HAVELI LTD. 12 PERSON RESPONSIBLE FOR MAKING THE PAYMENT TO THE AS SESSEE IS UNDER A STATUTORY OBLIGATION TO DEDUCT TAX AT SOURCE AND AFTER DEDUCTION OF THE AMOUNT OF TAX, HE IS REQUIRED TO DEPOSIT THE SA ME TO THE CREDIT OF THE CENTRAL GOVERNMENT AND TO ISSUE A CERTIFICATE O F DEDUCTION. ONCE TAX IS DEDUCTED ON THE INCOME CREDITED BY THE ASSES SEE IN ITS BOOKS OF ACCOUNT AND A REQUISITE CERTIFICATE TO THIS EFFE CT IS ISSUED BY DEDUCTION AFTER DEPOSIT OF TAX AMOUNT IN THE GOVERN MENT TREASURY, THE ASSESSEE BECOMES ENTITLED FOR THE CREDIT OF SUC H TDS WHILE COMPUTING THE TAX LIABILITY FOR THE RELEVANT PERIOD . (PARA 5) CREDIT FOR TDS MUST IN EVERY CASE BE GIVEN TO THE A SSESSEE FROM WHOSE INCOME TAX WAS DEDUCTED AT SOURCE AND PAID TO THE CREDIT OF THE CENTRAL GOVERNMENT. IF THE RECIPIENT OF THE INC OME CONSIDERS THAT HE IS NOT LIABLE TO TAX IN RESPECT OF THE INCOME, W HOLLY OR PARTLY, THEREFORE, DOES NOT DISCLOSE THE AMOUNT OF SUCH INC OME IN HIS RETURN, THE IT DEPARTMENT CANNOT REFUSE TO GIVE CREDIT MERE LY BY CONTENDING THAT THE INCOME HAD NOT BEEN DISCLOSED IN THE RETUR N FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR. THE ASSESSEE MAY AS PER RELEVANT PROVISIONS OF IT ACT, CONSIDER THE INCOME EITHER AS NOT TAXABLE IN HIS HANDS OR AS BEING RELATABLE TO A DIF FERENT ASSESSMENT YEAR AND HE MAY EVEN CLAIM SET OFF OF LOSS OR OTHER DEDUCTIONS AGAINST SUCH INCOME. THE ASSESSEE MAY ALSO BE NOT C HARGEABLE TO TAX ON THE INCOME BECAUSE OF THE OVERRIDING PROVISI ONS OF DOUBLE TAXATION AVOIDANCE AGREEMENT AND/OR BECAUSE OF THE PROVISIONS FOR EXEMPTION OF SUCH INCOME, WHETHER WHOLLY OR PARTLY, UNDER SOME PROVISIONS OF THE IT ACT. IT WOULD BE, THEREFORE, I MPROPER AND EVEN IMPERMISSIBLE FOR THE REVENUE TO SWALLOW THE AMOUNT OF TDS AFTER HAVING RECEIVED AND ENJOYED THE SAME. IT CANNOT BE IGNORED THAT EVERY ITEM OF TDS CARRIED WITH IT AN OBLIGATION OF TRUST AND ACCOUNTABILITY TO RETURN THE AMOUNT AND/OR GIVE CRE DIT FOR THE AMOUNT SO DEDUCTED DEPENDING UPON THE TAX LIABILITY OF THE RECIPIENT TO BE DETERMINED IN THE COURSE OF HIS ASSESSMENT. I F A WRONG ASSESSMENT IS MADE FOR WHATEVER REASONS, THE DEPART MENT HAS ALL THE POWERS TO RECTIFY THE SAME BY RESORT TO RECTIFI CATION OF MISTAKES, REVISION AND/OR OTHER PROCEEDINGS, LEGALLY AVAILABL E UNDER THE STATUE. ASSESSEES INCOME FOR WHICH TAX IS DEDUCTED AT SOURCE SHOULD NOT BE REFUSED TO BE GIVEN CREDIT. BEING A C ASE OF DIRECT TAX, THERE IS ALSO NO QUESTION OF UNJUST ENRICHMENT BEIN G CLAIMED SO AS TO TAKE THE CREDIT OF TAX WITHOUT AN OBLIGATION TO RET URN THE SAME TO THE ASSESSEE. THE PAYER DOES T PAY THE AMOUNT OF TDS AS HIS OWN LIABILITY AD HE ONLY ACTS AS THE AGENT O THE GOVERN MENT OR AS TRUSTEE TO COLLECT THE TDS FOR THE GOVERNMENT, FREE OF COST . IF NO CREDIT IS TO BE ITA NO. 1593/AHD/2005, 865 & 2395/AHD/2007, 1716/AHD/2009, 1322 & 1323/AHD/2006 AND 864/AHD/2007 A.Y.: 2002-03, 2003-04 &2004-05, 2005-06, 2000-01& 2001-02 AND 2002-03 OMNIBUS INDUSTRIAL DEVP. CORPN OF DAMAN & DIU AND D ADRA NAGAR HAVELI LTD. 13 GIVEN TO THE PAYER AND/OR TO THE PAYEE, THE GOVERNM ENT WOULD HAVE NO AUTHORITY TO TREAT THE SAME AS TAX AND ARTICLE 2 65 DOES NOT EMPOWER THE GOVERNMENT TO MAKE ANY LEVY OR COLLECTI ON OF TAX NOT AUTHORIZED BY LAW. THERE MAY BE CASES IN WHICH THE ASSESSEE IS NOT IN A POSITION TO HAVE THE RECORDS AND MAKE COMPLETE CLAIM OF CREDIT FOR TDS DUE TO MANY FACTORS BEYOND HIS CONTROL, THE REFORE, PROVISIONS RELATING TO TIME-LIMIT FOR CLAIMING CREDIT OF TDS S HOULD ALSO BE LIBERALLY CONSTRUED. IF THE TAX DUE TO THE GOVERNME NT IS NOT BARRED BY LIMITATION FOR COLLECTION OR RECOVERY, THE REFUND O F TDS DUE TO THE ASSESSEE SHOULD NOT BE EQUALLY HIT BY ANY BAR OF LI MITATION NOR SHOULD THERE BE ANY FETTER ON THE ASSESSEE TO CLAIM CREDIT FOR TDS AT ANY TIME. WHEN ONCE DEDUCTION OF TAX AT SOURCE HAS BEEN MADE AND THAT AMOUNT HAD BEEN CREDITED/PAID TO THE GOVERNMEN T, THERE IS NO JUSTIFICATION FOR TREATING THE ASSESSEE AS IN DEFAU LT FOR THAT AMOUNT BY DENYING THE CREDIT NOR SHOULD ANY DEMAND OF TAX OR INTEREST BE RAISED AGAINST THE ASSESSEE. LOWE AUTHORITIES WERE AT ALL NOT JUSTIFIED IN GIVING CREDIT FOR TDS AT LEAST IN THE ASST. YR. 2003-04. ACCORDINGLY, THE AO IS DIRECTED TO ALLOW CREDIT OF TAX DEDUCTED AT SOURCE IN THE ASST. YR. 2003-04 RELEVANT TO THE FIN ANCIAL YEAR 2002- 03, BY PASSING A SUITABLE ORDER. 27. FROM THE ABOVE, IT IS CLEAR THAT ONCE TDS IS DE DUCTED IN THE NAME OF THE ASSESSEE AND REMITTED TO THE GOVERNMENT TREASURY, THEN THE ASSESSEE WILL GET CREDIT OF THE SAME AND THAT C ANNOT BE WITHDRAWN BY THE REVENUE. CONSIDERING THE FACTS AND CIRCUMSTA NCES OF THE CASE BEFORE US, WHICH IS IDENTICAL TO THE ISSUE INVOLVED IN THE CASE DISCUSSED SUPRA, WE HEREBY DIRECT THE LEARNED AO TO GRANT CREDIT TO THE ASSESSEE FOR THE TAX DEDUCTED AT SOURCE IN ITS NAME FOR WHICH THE ASSESSEE HOLDS VALID AND REQUISITE CERTIFICATE. THU S, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE FOR ALL THE RELEVANT ASS ESSMENT YEARS IN APPEAL. ITA NO. 1593/AHD/2005, 865 & 2395/AHD/2007, 1716/AHD/2009, 1322 & 1323/AHD/2006 AND 864/AHD/2007 A.Y.: 2002-03, 2003-04 &2004-05, 2005-06, 2000-01& 2001-02 AND 2002-03 OMNIBUS INDUSTRIAL DEVP. CORPN OF DAMAN & DIU AND D ADRA NAGAR HAVELI LTD. 14 28. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR T HE ASSESSMENT YEAR 2002-03 IS PARTLY ALLOWED AND THE APPEALS FOR THE ASSESSMENT YEARS 2000-01, 2001-02, 2002-03, 2003-04, 2004-05 A ND 2005-06 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31-07-2013 SD/- SD/- (D. K. TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANTA DEKA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 10-07-13/18-07-13/25-07-13 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 26-07-213 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: