1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI A.T.VARKEY, JUDICIAL MEMBER I.T.A .NO. 1575/DEL /2012 (ASSESSMENT YEAR- 2007-08) A CIT, CIRCLE : TDS GURGAON (APPELLANT) VS MOTOROLA INC. USA C/O MOTOROLA INDIA P.LTD. 415/2, M.G.ROAD, SECTOR 14 GURGAON PAN: AACCM 7668 M (RESPONDENT) APPELLANT BY SH. KHIRENDRA MOHAN GUPTA, ADV. ANKUSH KUTHIALA, C.A. RESPONDENT BY SH. KEYUR PATEL, SR. DR ORDER PER J. SUDHAKAR REDDY, A.M. THIS IS AN APPEAL PREFERRED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A), FARIDABAD DATED 16.01.2012 PERTAININ G TO THE AY 2008-09 ON THE FOLLOWING GROUNDS. 2. BRIEF FACTS : THE BRIEF FACTS OF THE CASE AS BROUGHT OUT AT PA RA 4 OF THE LD.CIT(A)S ORDER WHICH IS EXTRACTED FOR READY REFERENCE. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A TAX DEDUCTOR AND HOLDER OF TAX DEDUCTION ACCOUNT NUMBER RTKM 03488 C. THE QUA RTERLY RETURNS IN FORM NO.26Q FOR 1 ST AND 2 ND QUARTERS OF THE FY 2007-08, AS REQUIRED UNDER SUB SECTION (3) OF SECTION 200 OF THE ACT, WERE E-FILED BY THE ASSESSEE. THE PROCESSING OF AFORESAID RETURNS REVEALED CONTRAVENTION OF THE PROVISIONS OF SECTION 201(1)/201(1A) OF THE ACT IN AS MUCH AS THE TDS REQUIRED TO BE DEDUCTED U/S 194J OF THE ACT FROM PAYMENT OF PROFESSIONAL FEES 2 WAS SHORT DEDUCTED. ACCORDINGLY, SHOW CAUSE NOTICE S U/S 201(1) OF THE ACT WERE ISSUED BY THE AO FOR BOTH THE QUARTERS. IN COMPLIANCE, TH E ASSESSEE SUBMITTED THAT FOR DEDUCTION OF TAX AT SOURCE U/S 194J, THE APPLICABLE RATE UPTO MAY,2007 WAS 5.61%. THE SAID SECTION WAS AMENDED BY THE FINANCE ACT, 2007 REVISI NG THE RATE FOR DEDUCTION OF TAX U/S 194J FROM 5.61% TO 11.33% WITH EFFECT FROM 1.6.2007 BUT THE TAX IN THE MONTH OF JUNE AND JULY,2007 WAS INADVERTENTLY DEDUCTED AT PRE AME NDED RATES. SINCE THERE WAS SORT DEDUCTION OF TAX IN THE MONTH OF JUNE AND JULY 2007 , THE AO HAS HELD THE ASSESSEE IN DEFAULT AND PASSED ORDER U/S 201(1)/201(1A) OF THE ACT RAISING THE DEMAND OF RS.5,08,27,288/- ON ACCOUNT OF SHORT DEDUCTION OF T AX AND RS.1,75,00,508/- ON ACCOUNT OF INTEREST. 3. WE HAVE HEARD SHRI KHIRENDRA MOHAN GUPTA (ADV.) , ANKUSH KUTTI ALA, C.A. ON BEHALF OF THE ASSESSEE AND SHRI KEYUR PATEL, SR.D.R . ON BEHALF OF THE REVENUE. 4. THE FIRST APPELLATE AUTHORITY IN OUR CONSIDERED VIEW HAS CORRECTLY ADJUDICATED THE ISSUE. AT PARA 6 OF HIS ORDER HE RECORDED THAT THE ARREAR IN QUESTION HAS ACCRUED SINCE THE ASSESSEE HAS INADVERTENTLY DEDUCTED AND DEPOSIT ED THE TAX U/S 119 J BY APPLYING THE PRE AMENDED RATE OF 5% (+ SURCHARGE AND EDUCATION C ESS). HE FURTHER NOTED THAT THE SOLE DEDUCTEE, DURING THE YEAR FOR THE ASSESSEE COMPANY WAS MOTOROLA INDIA PVT.LTD., WHICH HAD DULY PAID ALL THE TAXES FOR THE AY 2008-09. A COPY OF THE RETURN OF INCOME OF THE DEDUCTEE COMPANY WAS SUBMITTED. THE FIRST APPELLAT E AUTHORITY RIGHTLY APPLIED THE CIRCULAR OF THE CBDT NO.275/201/95 AND IT(B) DT. 2 9.1.1997 AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES P.LTD. VS. CIT, 293 ITR 226 AND GRANTED RELIEF TO THE ASSESSEE . AT PAGE 11 HE HELD AS FOLLOWS: AS PER THE ABOVE STATEMENT, THE APPELLANT HAS DEDU CTED TOTAL TAX OF RS.11,55,68,841/- U/S 194J FROM THE PAYMENTS MADE TO MIPL DURING THE ENTI RE YEAR. HAVING CLARIFIED THE FACTS WHICH WERE ALREADY THERE BEFORE THE AO, OTHER REMAI NS NO DISPUTE THAT THE APPELLANT HAD 3 DEDUCTED MORE TAX IN THE FIRST QUARTER ITSELF THAN WHAT WAS REQUIRED TO BE PAID BY MIPL ON ITS TOTAL INCOME OF THE YEAR. I, THEREFORE, FIN D NO REASON AS TO WHY THE AO SHOULD NOT LOOK INTO SUCH DETAILS, DOCUMENTS AND SUBMISSIONS F ILED BY THE APPELLANT BEFORE PASSING THE ORDER. THE HONBLE SUPREME COURT IN THE CASE O F HINDUSTAN COCA COLA BEVERAGES P.LTD. VS. CIT, 293 ITR 226 HAS HELD THAT THE CIRCU LAR NO.275/201/95-IT(B) DT. JANUARY 29, 1997, ISSUED BY THE CBDT, IN OUR CONSIDERED OPI NION, SHOULD PUT AN END TO THE CONTROVERSY. THE CIRCULAR DECLARES THAT NO DEMAND VISUALIZED U/S 201(1) OF THE ACT SHOULD BE ENFORCED AFTER THE TAX DEDUCTOR HAS SATIS FIED THE OFFICER-IN-CHARGE OF TDS, THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE ASSESSEE. HOWEVER, THIS WILL NOT ALTER THE LIABILITY TO CHARGE INTEREST U/S 201(1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE ASSESSEE OR THE LIABILITY FOR PENALTY U/S 271C OF THE ACT. THE APPELLANT HAS ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF CIT VS. ELI LILLY AND CO.INDIA P.LTD. 312 ITR 225 WHEREIN IT HA S BEEN HELD THAT ONCE THE DEDUCTEES HAVE PAID TAXES ON THEIR SALARY INCOME BY WAY OF SELF ASSESSMENT TAX, TAX COULD NOT BE RECOVERED FROM THE EMPLOYERS U/S 201(1A) OF THE ACT . 5. SIMILARLY ON INTEREST LEVIED U/S 201(1A) OF THE ACT, RELYING ON THE SAME CIRCULAR AND THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES P.LTD. (SUPRA), THE LD.CIT(A) HELD THAT NO INTEREST CAN BE CHARGED UNDER THE PROVISIONS OF S.201(1A) OF THE ACT, WE FIND NO INFI RMITY IN THE SAME, AND DISMISS THIS GROUND OF THE REVENUE. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 21 ST MARCH, 2014. SD/- SD/- (A.T.VARKEY) (J. SUDHAKAR REDDY) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED: 21 ST MARCH, 2014 * MANGA 4 COPY FORWARDED TO: APPELLANT; RESPONDENT; CIT; CIT(APPEALS); DR ASSISTANT REGISTRAR ITAT, NEW DELHI