M/s H.P. General Industries Corporation Ltd., Shimla V. Income Tax Officer (TDS), Una

ITA 1311/CHANDI/2010

• Counselvise Citation: 131121514 RSA 2010
• Duration Of Justice: 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 18-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: VISHAL MOHAN
• Keywords: Non-deduction of tax; TDS
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES BCHANDIGARH BEFORE MS SUSHMA CHOWLA, JUDICIAL MEMBER & SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1311, 1312 & 1313/CHD/2010 A.Y.: 2007-08, 2008-09 & 2009-2010 H.P.GENERAL INDUSTRIES CORP.LTD., V ITO(TDS), HIMRUS BUILDING, UNA. CIRCULAR ROAD, SHIMLA . PAN NO. AAACH-6125L (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VISHAL MOHAN RESPONDENT BY : SHRI N.K.SAINI ORDER PER SUSHMA CHOWLA, JM THESE THREE APPEALS BY THE SAME ASSESSEE ARE AGAINS T CONSOLIDATED ORDER OF THE CIT(A) DATED 30.08.2010 R ELATING TO ASSESSMENT YEAR 2007-08, 2008-09 AND 2009-2010 AGAI NST THE ORDER PASSED UNDER SECTION 201(1) AND 201(1A) OF THE I.T . ACT, 1961. 2. THE ASSESSEE HAS RAISED COMMON GROUND OF APPEAL IN ALL THE AFORESAID APPEALS, WHICH READ AS UNDER: THAT THE LD. CIT(A), SHIMLA HAS ERRED ON FACTS AND ON LAW BY UPHOLDING THE ORDER PASSED BY THE LD. INCOME TAX OFFICER (TDS) UNA BY CONFIRMING THE DEMAND RAISED U /S 201(1) RS.2,54,444/- AND U/S 201(1A) RS.83,504/-(A. Y. 2007-08)/ U/S 201(1A)RS.36,256/- (A.Y.2008-09) AND U/S 201(1) RS.82,400/- AND U/S 201(1A) RS.12,630/- (A.Y . 2009-2010) IGNORING THE FACTS THAT THE DEDUCTEE/REC IPIENT HAS DULY BEEN ASSESSED TO TAX ON ITS TOTAL INCOME I NCLUDING THE ONES RECEIVED FROM THE APPELLANT. 2 3. THESE THREE APPEALS BY THE SAME ASSESSEE INVOLVI NG SAME ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH E CONSOLIDATED ORDER FOR THE SAME OF CONVENIENCE. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A STATE GOVERNMENT UNDERTAKING AND IS ENGAGED IN THE MANUFA CTURING AND BOTTLING OF COUNTRY LIQUOR. THE ASSESSEE WAS FUNCT IONING FROM RENTAL BUILDING. AS PER THE LEAD DEED, RENT OF RS. 16,00,000/- WAS PAYABLE TO M/S H.P. STATE CORPORATION & CONSUMER FE DERATION LTD. (IN SHORT HIM FED). PURSUANT TO SURVEY OPERATIONS CARR IED OUT U/S 133(1) OF THE INCOME TAX ACT AT THE BUSINESS/OFFICE PREMIS ES OF THE CORPORATION ON 11.08.2009, THE AO FOUND THE ASSESSE E TO HAVE DEFAULTED IN DEDUCTION OF TAX AT SOURCE ON PAYMENT OF SALARY, RENT PAYMENT OF BUILDING AND ALSO COLLECTION OF TAX AT S OURCE ON THE SALE OF LIQUOR. 5. THE ISSUE RAISED BEFORE US IN THE PRESENT APPEAL S IS IN CONNECTION WITH THE DEFAULT IN NON DEDUCTION OF TAX AT SOURCE OUT OF RENTAL PAYMENTS. THE AO NOTED THE ASSESSEE NOT TO HAVE DEDUCTED THE TAX AT SOURCE OUT OF RENT PAID DURING THE FINANCIAL YEARS 2006-07. NO TAX WAS PAID TO THE GOVERNMENT ACCOUNT FOR THE PAYM ENTS OF RENT RELATABLE TO FINANCIAL YEAR 2006-07. HOWEVER, PROV ISION IN PAYMENT OF TAX DEDUCTED ON RENT PAID DURING FINANCIAL YEAR 200 7-08 WAS MADE ON 31.03.2008 AND THE SAME WAS PAID TO THE GOVERNMENT ACCOUNT ON 09.08.2008. NO TAX WAS DEDUCTED ON PAYMENT OF RENT DURING THE FINANCIAL YEAR 2008-09 FOR THE PAYMENT MADE ON 10.0 6.2008. THE AO HELD THE ASSESSEE TO HAVE VIOLATED THE PROVISIONS O F THE ACT AS NO TAX WAS DEDUCTED AT SOURCE. THE ASSESSEE HAD PAID TOTA L RENT OF RS.12,35,165/- DURING THE FINANCIAL YEAR 2006-07 AN D RS.16,00,000/- DURING THE FINANCIAL YEAR 2007-08 AND 2008-09. NO TAX WAS DEDUCTED 3 OUT OF RENT PAID DURING THE FINANCIAL YEARS 2006-07 OUT OF PAYMENT OF RS.12,35,165/- AND 2008-09 OUT OF PAYMENT OF RS.4 L ACS. HOWEVER, PROVISION FOR PAYMENT OF TOTAL TAX OF RS.3,29,600/- DEDUCTIBLE ON PAYMENT OF RENT DURING THE FINANCIAL YEAR 2007-08 W AS MADE ON 31.03.2008 AND THE TAX WAS PAID TO THE GOVERNMENT A CCOUNT ON 09.08.2008. THE AO HELD THE ASSESSEE TO BE IN DEFA ULT UNDER THE PROVISIONS OF SECTION 201(1) AND 201(1A) OF THE ACT AND TABULATED THE TAX AND INTEREST CHARGEABLE FOR THE VARIOUS DEFAULT S. THE ASSESSEE, THUS WAS FOUND IN DEFAULT AND THE UNDER-MENTIONED DEMAND WAS RAISED AGAINST THE ASSESSEE : FINANCIAL YEAR TAX U/S 201(1) INTEREST U/S 201(1A) 2006-07 RS.2,54,444/- RS.83,504/- 2007-08 --- RS.36,256/- 2008-09 RS.82,400/- RS.121,564/- 6. THE CIT(A) UPHELD THE ORDER OF AO. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF THE CIT(A). 7. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE PAYEE OF THE RENT HAD DEPOSITED THE TAX AND AS SUCH THERE WAS NO DEFAULT IN RESPECT OF TAX DEDUCTION AT SOURCE U/S 201(1) OF THE ACT VI Z-A-VIZ THE ASSESSEE. HOWEVER, INTEREST U/S 201(1A) OF THE ACT WAS CHARGE ABLE IN THE HANDS OF THE ASSESSEE FOR THE DEFAULT IN NON-DEPOSIT OF T HE SAID TAX AT SOURCE WITHIN THE PRESCRIBED LIMITS. THE LD. AR FOR THE AS SESSEE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HON'BLE SUPR EME COURT IN HINDUSTAN COCA COLA BEVERAGE P.LTD. V CIT, 293 ITR 226 (S.C) AND POINTED OUT THAT ONLY INTEREST U/S 201(1A) OF THE A CT WAS CHARGEABLE IN THE HANDS OF THE ASSESSEE. THE LD. AR FAIRLY ADMIT TED THAT THE CONTENTION MADE ON BEHALF OF THE ASSESSEE IS OPEN T O VERIFICATION BY 4 THE AO. LD. DR FOR THE REVENUE POINTED OUT THAT IN FACT NO TAX WAS PAID BY THE PAYEE RECIPIENT, AS THE TOTAL INCOME SH OWN BY THE PAYEE WAS BELOW TAXABLE, BEING A LOSS RETURN. LD. DR POIN TED OUT THAT TAX HAD TO BE DEDUCTED IRRESPECTIVE OF ANY TAX BEING PA YABLE BY THE DEDUCTEE. LD. AR FOR THE ASSESSEE IN REJOINDER AGRE ED TO THE PROPOSITION THAT ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE OUT OF THE RENT PAYMENTS AND TO THAT EXTENT THE ASSESSEE WAS A DEFAULTER. HOWEVER, AS THE TAXES DUE HAD BEEN PAID BY THE DEDU CTEE, THERE IS NO PROVISION UNDER THE LAW FOR CHARGING TAX U/S 201(1) OF THE ACT. THE LD. AR FAIRLY ADMITTED THAT INTEREST U/S 201(1A) WA S CHARGEABLE TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE. 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. UNDER THE PROVISIONS OF SECTION 194I OF THE INCOME TAX AC T IT IS PROVIDED THAT ANY PERSON, NOT BEING AN INDIVIDUAL OR HINDU U NDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING ANY INCOME BY WAY OF RENT TO A RESIDENT, SHALL, AT THE TIME OF MAKING THE PAYMENT OR AT THE TIME OF CREDIT OF THE SAID PAYMENT, DEDUCTS TAX AT THE RATES PROVIDED UND ER THE SECTION. THE PROVISO TO SECTION 194I OF THE ACT PROVIDES THAT NO DEDUCTION IS TO BE MADE WHERE THE AGGREGATE OF THE AMOUNT CREDITED OR PAID DURING THE FINANCIAL YEAR DOES NOT EXCEED RS.1,20,000/-. ADMI TTEDLY IN THE FACTS OF THE PRESENT CASE BEFORE US, THE ASSESSEE HAS PAI D RENT OF RS.4,00,000/- PER QUARTER. IN THE FINANCIAL YEAR 2 006-07, THE ASSESSEE HAD PAID RENT TOTALING RS.12,35,165/-, IN FINANCIAL YEARS 2007-08 AND 2008-09, RENT OF RS.16,00,000/- EACH HAD BEEN PAID. THE ASSESSEE HAD NOT DEDUCTED ANY TAX AT SOURCE OUT OF THE PAYMENT O F RENTS DURING THE FINANCIAL YEAR 2006-07. HOWEVER, DURING THE FINANC IAL YEAR 2007-08 THE ASSESSEE HAD MADE PROVISION FOR TAX DEDUCTION A T SOURCE ON 31.03.2008 WHICH IN-TURN WAS DEPOSITED ON 09.08.200 8. IN THE FINANCIAL YEAR 2008-09, THE ASSESSEE HAD NOT MADE A NY PROVISION FOR 5 TAX DEDUCTION AT SOURCE FOR THE PAYMENT OF RS.4,00, 000/- MADE ON 10.06.2008. IN RESPECT OF THE BALANCE PAYMENT, THE ASSESSEE HAD DEDUCTED TAX AT SOURCE AND DEPOSITED THE SAME INTO THE ACCOUNT OF GOVERNMENT. THE ASSESSEE WAS HELD TO BE IN DEFAULT FOR NON DEDUCTION OF TAX AT SOURCE OUT OF PAYMENT OF RS.12,35,165/- I N FINANCIAL YEAR 2006-07 AND RS.4,00,000/- IN FINANCIAL YEAR 2008-09 AND TAX U/S 201(1) OF THE ACT WAS CHARGED AT RS.2,54,444/- IN F INANCIAL YEAR 2006- 07 AND RS.82,400/- IN FINANCIAL YEAR 2008-09. AS T HE ASSESSEE HAD DEDUCTED AND DEPOSITED THE TAX AT SOURCE IN RESPECT OF RENT PAYMENTS RELATABLE TO FINANCIAL YEAR 2007-08, NO DEFAULT WAS ATTRIBUTED U/S 201(1) OF THE ACT. HOWEVER, INTEREST U/S 201(1A) O F THE ACT WAS CHARGED IN THE CAPTIONED YEARS I.E. RS.83,504/- IN FINANCIAL YEAR 2006- 07, RS.36,256/- IN FINANCIAL YEAR 2007-08 AND RS.11 ,064/- IN FINANCIAL YEAR 2008-09. THE ASSESSEE IS IN APPEAL AGAINST TH E ABOVESAID DEMAND RAISED BOTH U/S 201(1) AND 201(1A) OF THE ACT. 10. COMING TO THE DEMAND RAISED UNDER THE PROVISION S OF SECTION 201(1) OF THE ACT, THE PLEA OF THE ASSESSEE IS THAT IT IS NOT IN DEFAULT AS THE TAX DUE ON THE SAID INCOME IS PAID BY THE DEDUC TEE/PAYEE. UNDER THE PROVISIONS OF SECTION 201(1) OF THE ACT IT HAS BEEN PROVIDED THAT WHERE ANY PERSON WHO IS REQUIRED TO DEDUCT TAX AT S OURCE IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, HAS NOT DEDUCTED THE SAME OR AFTER DEDUCTING FAILS TO PAY THE WHOLE OR ANY PA RT OF THE TAX, AS REQUIRED UNDER THE ACT, THEY SUCH PERSON IS DEEMED TO BE IN DEFAULT IN RESPECT OF SUCH NON DEDUCTION. U/S 201(1A) OF THE ACT, IT IS PROVIDED THAT SIMPLE INTEREST AT 1% FOR EVERY MONTH OR PART OF THE MONTH ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH TAX WAS D EDUCTIBLE TO THE DATE OF ACTUAL PAYMENT OF THE TAX, WOULD BE THE LIA BILITY OF THE ASSESSEE IN DEFAULT. U/S 202 OF THE INCOME TAX ACT , IT HAS BEEN PROVIDED THAT THE POWER TO RECOVER TAX BY DEDUCTION UNDER THE 6 FOREGOING PROVISIONS OF THE CHAPTER SHALL BE WITHOU T PREJUDICE TO ANY OTHER MODE OF RECOVERY, MEANING THEREBY THAT TAX DE DUCTED AT SOURCE IS ONE OF THE FORMS OF ADVANCE PAYMENT OF TAX 11. THE ASSESSEE BEFORE US HAS ADMITTEDLY DEFAULTED IN NON- DEDUCTION AND NON PAYMENT OF TAX AT SOURCE OUT OF T HE RELEVANT RENT PAYMENTS AS POINTED OUT IN PARAS HEREIN ABOVE. HOW EVER, THE CLAIM OF THE ASSESSEE IS THAT IT CANNOT BE HELD TO BE IN DEF AULT AS THE TAX DUE ON THE SAID INCOME HAS BEEN DEPOSITED BY THE DEDUCTEE AND FOLLOWING THE RATIO LAID DOWN BY THE APEX COURT IN HINDUSTAN COCA COLA BEVERAGE P.LTD. (SUPRA), THE ASSESSEE CANNOT BE HELD TO BE I N DEFAULT. 12. THE HON'BLE SUPREME COURT IN HINDUSTAN COCA COL A BEVERAGE P.LTD. V CIT, 293 ITR 226 (S.C) HAD HELD AS UNDER : BE THAT AS IT MAY, CIRCULAR NO.275/201/95-IT(B) DA TED JANUARY 29, 1997 ISSUED BY THE CENTRAL BOARD OF DIR ECT TAXES, IN OUR CONSIDERED OPINION, SHOULD PUT AN EN D TO THE CONTROVERSY. THE CIRCULAR DECLARES NO DEMAND VISUA LIZED UNDER SECTION 201(1) OF THE INCOME-TAX ACT SHOULD B E ENFORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE O FFICER-IN- CHARGE OF TDS, THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE-ASSESSEE. HOWEVER, THIS WILL NOT ALTER THE LIABILITY TO CHARGE INTEREST UNDER SECTION 201(1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE-ASSESSEE O R THE LIABILITY FOR PENALTY UNDER SECTION 271C OF THE INC OME-TAX ACT. 13. THE ASSESSEE HAD PAID THE RENT IN THE CAPTIONED YEARS TO M/S HIM FED. THE LD. AR FOR THE ASSESSEE HAS ENCLOSED T HE COMPUTATION OF INCOME ALONGWITH BALANCE SHEET OF M/S HIM FED AT PAGES 5 ONWARDS OF THE PAPER BOOK. THE PERUSAL OF THE SAID STATEMENT OF ACCOUNTS REVEALS THAT FOR THE ASSESSMENT YEAR 1997- 98, RETURN OF INCOME WAS FILED ON 15.10.2000 DECLARING LOSS OF RS .1,54,554/- IN 7 WHICH M/S HIM FED HAD DECLARED INCOME FROM PROPERTY . HOWEVER, M/S HIM FED HAS FILED THE RETURN OF INCOME FOR ASSE SSMENT YEAR 2009- 2010 DECLARING A LOSS OF RS.227.98 LACS IN WHICH AL SO THE ASSESSEE HAD DECLARED INCOME FROM HOUSE PROPERTY. THE ISSUE RAI SED BEFORE US HAS BEEN CONSIDERED BY THE APEX COURT IN HINDUSTAN COCA COLA BEVERAGE P.LTD. WHEREIN IT HAS BEEN HELD THAT WHERE TAXES DU E HAVE BEEN PAID BY THE DEDUCTEE ASSESSEE, THEN NO DEMAND COULD BE RAIS ED U/S 201(1) OF THE INCOME-TAX ACT. IN THE FACTS OF THE PRESENT CAS E BEFORE US, THE DEDUCTEE BEING M/S HIM FED HAD ADMITTEDLY FILED RET URNS OF INCOME SHOWING LOSSES AND ON THE DATE OF FURNISHING THE AF ORESAID RETURNS OF INCOME, A DECLARATION WAS FILED BY THE SAID DEDUCTE E I.E. M/S HIM FED THAT WHATEVER BE THE TAXES DUE FOR THE CAPTIONED YE AR, WERE DISCHARGED BY THE DEDUCTEE ITSELF. FOLLOWING THE RATIO LAID D OWN BY THE HON'BLE SUPREME COURT IN HINDUSTAN COCA COLA BEVERAGE P.LTD . (SUPRA), THE ASSESSEE BEFORE US CANNOT BE HELD TO BE IN DEFAULT FOR NON-DEDUCTION OF TAX AT SOURCE U/S 201(1) OF THE ACT AS THE DEDUCTEE HAD INCLUDED THE INCOME COMPONENT OF THE RECEIPTS RECEIVED FROM THE DEDUCTOR AS PART OF ITS TOTAL INCOME AND COMPUTED ITS TAX LIABILITY, WHICH IN THE PRESENT CASE WAS NIL. ACCORDINGLY, WE REVERSE THE ORDER OF AO IN HOLDING THE ASSESSEE TO BE IN DEFAULT U/S 201(1) OF THE ACT . THE AO IS THOUGH DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE THAT T HE TOTAL RENT PAID BY THE ASSESSEE IS INCLUDED BY THE PAYEE M/S HIM FED I N ITS RETURN OF INCOME AS THE NECESSARY FIGURES ARE NOT RECONCILABL E. ONCE IT IS ESTABLISHED THAT THE RENT PAID BY THE DEDUCTOR ASSE SSEE BEFORE US HAS BEEN INCLUDED AS INCOME IN THE HANDS OF THE DEDUCTE E AND THE SAME HAS BEEN REFLECTED IN THE RETURN OF INCOME FILED BY IT FOR THE CAPTIONED YEARS, NO TAX IS CHARGEABLE U/S 201(1) OF THE ACT. HOWEVER, THE ASSESSEE IS IN DEFAULT AND IS LIABLE FOR THE CHARGI NG OF INTEREST U/S 201(1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXE S BY THE DEDUCTEE 8 ASSESSEE I.E. TILL THE DATE OF FILING OF THE INCOME TAX RETURN BY THE DEDUCTEE IN THE RESPECTIVE ASSESSMENT YEARS. THE A O SHALL RE-WORK THE INTEREST CHARGEABLE U/S 201(1A) OF THE ACT IN L INE WITH OUR DIRECTIONS. THE GROUND OF APPEAL RAISED BY THE ASS ESSEE IN ALL THE CAPTIONED ASSESSMENT YEARS IS, THUS, PARTLY ALLOWED . 14. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF AUGUST, 2011. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 4 TH AUG.,2011 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH