Stephen Paul, Coimbatore V. ACIT, Coimbatore

ITA 1715/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57885 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 19-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: G BASKAR
• Keywords: TDS; Set aside
• Section: 234B; 195

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI C BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NOS. 1715, 1716, 1717, 1718 AND 1719/MDS/201 1 ASSESSMENT YEARS: 2003-04, 04-05, 05-06, 07-08, AND 08-09 STEPHEN PAUL, 38, SRI VARIPRATHIST APARTMENT, RED FIELDS, COIMBATORE 18. [PAN:CCXPS9419J] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(1), COIMBATORE. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G. BASKAR, ADVOCATE REVENUE BY : SHRI K.P. GOPAKUMAR, JCIT DATE OF HEARING : 18.01.2012 DATE OF PRONOUNCEMENT : 18.01.2012 ORDER PER BENCH THESE FIVE APPEALS ARE FILED BY THE ASSESSEE AGAIN ST THE DIFFERENT ORDERS OF THE LD. CIT(A) I, COIMBATORE DATED 12.08. 2011 IN APPEAL NOS. 187/10-11, 186/10-11, 185/10-11, 183/10-11 AND 182/ 10-11 IN THE ASSESSMENT YEARS 2003-04, 04-05, 05-06, 07-08 AND 0 8-09. SHRI G. BASKAR, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI K.P. GOPAKUMAR, JCIT REPRESENTED ON BEHALF OF THE REVENUE. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING SIX COMMON GROUNDS OF APPEAL IN ALL THE APPEALS AND THEY ARE AS FOLLOWS: 1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE LEVY OF INTEREST UNDER SECTIONS 234A, 234B AND 234C OF THE IT ACT. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REJECTING THE GROUNDS CHALLENGING THE LEVY OF INTEREST BY OBS ERVING THAT IT IS I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .171 171171 1715 5 5 5 - -- - 1719 1719 1719 1719/M/11 /M/11 /M/11 /M/11 2 DIFFICULT TO DETERMINE WHETHER M/S CORE CARBON PRIVATE LTD. WAS UNDER OBLIGATION TO DEDUCT TAX UNDER THE PROVISIONS OF IT ACT, 1961. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) HIMSEL F HAVING FOUND THAT FOR THE A.Y:2006-07, M/S CORE CARBON PVT. LTD. HAD DEDUCTED TAX IN RESPECT OF THE PAYMENTS MADE BY IT TREATING THE PAYEE AS A NON-RESIDENT, THE CONCLUSION OF THE COMMISSION ER OF INCOME TAX (APPEALS) IS INCORRECT. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE SEEN THAT IF ONLY M/S. CORE CARBON PRIVATE LTD. HAD DEDU CTED TAX AT SOURCE TREATING THE PAYEE AS NON-RESIDENT, THERE WOULD NOT HAVE BEEN ANY LEVY OF INTEREST U/SS.234A , 234B OR 234C OF THE IT ACT; BUT WOULD HAVE RESULTED IN A REFUND OF TAX. 5. THE COMMISSIONER OF INCOME TAX (APPEALS) FURTHE R WENT WRONG IN OBSERVING THAT THE APPELLANT COULD NOT PRODUCE A NY DETAILS REGARDING THE NATURE OF SERVICES RENDERED BY THE ASSESSEE TO M/S CORE CARBON PRIVATE LTD. THIS OBSERVATION IS UNWARRANTED AND IM MATERIAL AS THE PAYEE BEING A NON-RESIDENT TAX OUGHT TO HAVE BEEN D EDUCTED U/S. 195 OF THE IT ACT AS DONE BY M/S CORE CARBON PRIVATE LTD. ITSELF FOR THE A.Y:2006-07. 6. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE THEREFORE DIRECTED THE ASSESSING OFFICER TO RE-COMP UTE THE INTEREST LEVIABLE/LEVIED U/SS . 234A , 234B AND 234C OF THE IT ACT AS IF TAX HAD BEEN DEDUCTED AT SOURCE BY M/S. CORE CARBON PRIVATE LTD. AT RATES APPLICABLE TO A NON-RESIDENT. 3. AT THE TIME OF HEARING, THE LD. AR FOR THE ASSE SSEE SUBMITTED THAT THE ASSESSEE IS IN APPEAL IN THE YEARS UNDER CONSIDERAT ION ON THE ONLY ISSUE OF LEVY OF INTEREST UNDER SECTION 234A, 234B AND 234C OF THE ACT. HE ARGUED THAT RIGHT FROM THE FIRST AGREEMENT, M/S. CORE CARB ON (P) LIMITED HAD DEDUCTED TAX AT SOURCE ON THE COMMISSION PAYMENT AT DIFFERENT RATES. HE ARGUED THAT WHILE COMPUTING THE ADVANCE TAX PAYABLE , THE TAX DEDUCTED AT SOURCE WAS TO BE REDUCED FROM THE TOTAL TAX LIABILI TY. THE LIABILITY TO PAY I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .171 171171 1715 5 5 5 - -- - 1719 1719 1719 1719/M/11 /M/11 /M/11 /M/11 3 ADVANCE TAX WAS ONLY THE REDUCED SUM. HE FURTHER AR GUED THAT ALTHOUGH SECTION 234B REQUIRES COMPUTATION OF INTEREST ON TH E BASIS OF TAX DEDUCTED AT SOURCE (ACTUALLY DEDUCTED), THE LIABILITY TO PAY UN DER SECTION 208 IS AFTER EXCLUDING TAX DEDUCTIBLE AT SOURCE SINCE INTEREST U NDER SECTION 234B CAN BE LEVIED ON THE SHORT PAYMENT OF ADVANCE TAX AND THE ADVANCE TAX PAYABLE AS PER SECTION 208. IT WAS THE FURTHER SUBMISSION OF T HE LD. AR THAT THE INTEREST UNDER SECTION 234B WAS TO BE COMPUTED AFTER TAKING INTO ACCOUNT THE TAX DEDUCTIBLE AT SOURCE AND NOT TAX DEDUCTED AT SOURCE . HE PLACED RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT V. MADRAS FERTILIZERS LIMITED 149 ITR 703. HE ALSO PLA CED RELIANCE ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF TUNERS BROADCASTING SYSTEM VS. ADIT 30 SOT 240 (DEL.) AND SUBMITTED THAT IN THAT CASE, IT HAS BEEN HELD THAT SECTION 209 SPEAKS OF T AX DEDUCTIBLE AT SOURCE AND NOT TAX DEDUCTED AT SOURCE. IT HAS FURTHER BEEN HELD BY THE TRIBUNAL THAT IN THAT CASE, WHAT IS TO BE DEDUCTED FROM THE TAX O N CURRENT INCOME WAS THE AMOUNT TAXABLE AT SOURCE. IT WAS, THEREFORE, HIS SU BMISSION THAT THE TAX DEDUCTIBLE AT SOURCE ALTHOUGH A NOTIONAL FIGURE, OU GHT TO HAVE BEEN DEDUCTED FOR THE PURPOSE OF COMPUTING INTEREST LEVIABLE UNDE R SECTION 234B AND 234A. 4. THE LD. AR FURTHER PLACED RELIANCE ON THE DECIS ION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF LUCENT TECHNOLOGIES INTERNATIONAL INC. VS. DCIT REPORTED IN [2009] 18 DTR 249 AND SUBMITTED THAT TH E TRIBUNAL IN THAT CASE HAS HELD THAT WHERE ENTIRE AMOUNT RECEIVED BY THE N ON-RESIDENT IN INDIA WAS I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .171 171171 1715 5 5 5 - -- - 1719 1719 1719 1719/M/11 /M/11 /M/11 /M/11 4 LIABLE FOR TDS, THERE WAS NO LIABILITY TO PAY ANY A DVANCE TAX AND THEREFORE, THERE WAS NO QUESTION OF LEVY OF INTEREST UNDER SEC TION 234B OF THE INCOME TAX ACT. 5. THE LD. DR FULLY JUSTIFIED THE ORDERS OF LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS IN THE PR ESENT APPEALS ARE THAT THE ASSESSEE EARNED COMMISSION INCOME FROM M/S. CORE CA RBON (P) LIMITED ON WHICH TAX WAS DEDUCTED AT SOURCE AS UNDER: ASST. YEAR COMMISSION INCOME TAX DEDUCTIBLE AS PER PROVISIONS OF CHAPTER XVII OF THE ACT. TAX ACTUALLY DEDUCTED 2003-04 919,875 262,461 81,810 2004-05 772,065 205,620 173,940 2005-06 2,363,165 766,270 156,241 2007-08 412,980 75,372 - 2008-09 2,586,151 821,250 - 7. THE ASSESSING OFFICER CHARGED INTEREST UNDER SE CTION 234A, 234B AND 234C OF THE ACT AFTER CONSIDERING THE ACTUAL AMOUNT OF TAX DEDUCTED AT SOURCE AS UNDER: ASST. YEAR INTEREST UNDER SECTION 234A 234B 234C 2003-04 157,122 170,216 8,348 2004-05 23,384 25,596 1,171 2005-06 396,500 420,900 22,570 2007-08 30,873 33,885 2,787 2008-09 238,148 270,996 30,382 8. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) AND CONTENDED TH AT THE ASSESSING OFFICER SHOULD HAVE TAKEN INTO CONSIDERATION THE AMOUNT OF TAX DEDUCTIBLE AT SOURCE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .171 171171 1715 5 5 5 - -- - 1719 1719 1719 1719/M/11 /M/11 /M/11 /M/11 5 AS PER PROVISIONS OF CHAPTER XVII OF THE ACT FOR CA LCULATING INTEREST UNDER SECTION 234A, 234B AND 234C OF THE ACT. THE LD. CIT (A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER UNDER SECTION 234A, 234B A ND 234C OF THE ACT ON THE BASIS OF THE AMOUNT OF TAX ACTUALLY DEDUCTED AT SOURCE. WE FIND THAT THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF LUCENT T ECHNOLOGIES INTERNATIONAL INC. (SUPRA) HAS HELD THAT, WHERE THE ENTIRE AMOUNT RECEIVED BY THE ASSESSEE WAS LIABLE FOR TDS, THERE WAS NO LIABILITY TO PAY A NY ADVANCE TAX AND THEREFORE, THERE WAS NO QUESTION OF LEVY OF INTERES T UNDER SECTION 234B OF THE ACT. FURTHER, WE FIND THAT SECTION 209(1)(D) READS AS UNDER: 209. COMPUTATION OF ADVANCE TAX. (1) THE AMOUNT OF ADVANCE TAX PAYABLE BY AN ASSESSE E IN THE FINANCIAL YEAR SHALL, SUBJECT TO THE PROVISIONS OF SUB-SECTIONS (2) AND ( 3), BE COMPUTED AS FOLLOWS, NAMELY: - A) XXXXXXX B) XXXXXXX C) XXXXXXX (D) THE INCOME-TAX CALCULATED UNDER CLAUSE (A) OR C LAUSE (B) OR CLAUSE (C) SHALL, IN EACH CASE, BE REDUCED BY THE AMOUNT OF IN COME-TAX WHICH WOULD BE DEDUCTIBLE OR COLLECTIBLE AT SOURCE DURING THE SAID FINANCIAL YEAR UNDER ANY PROVISION OF THIS ACT FROM ANY INCOME (AS COMPUTED BEFORE ALLOWING ANY DEDUCTIONS ADMISSIBLE UNDER THIS ACT) WHICH HAS BEE N TAKEN INTO ACCOUNT IN COMPUTING THE CURRENT INCOME OR, AS THE CASE MAY BE , THE TOTAL INCOME AFORESAID; AND THE AMOUNT OF INCOME-TAX AS SO REDUC ED SHALL BE THE ADVANCE TAX PAYABLE. 9. A READING OF THE ABOVE SHOWS THAT THE ASSESSEE IS NOT LIABLE TO PAY ADVANCE TAX TO THE EXTENT TO WHICH THE AMOUNT IS DE DUCTIBLE AT SOURCE FROM HIM AS PER CHAPTER XVII OF THE ACT. CONSEQUENTLY, T HE ASSESSEE CANNOT BE TREATED AS HAVING MADE ANY DEFAULT IN PAYMENT OF AD VANCE TAX TO THE EXTENT I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .171 171171 1715 5 5 5 - -- - 1719 1719 1719 1719/M/11 /M/11 /M/11 /M/11 6 TO WHICH SUCH AMOUNT WAS DEDUCTIBLE AT SOURCE. WE F IND THAT THE INTEREST UNDER SECTION 234B IS LEVIABLE FOR DEFAULTS IN PAYM ENT OF ADVANCE TAX AND INTEREST UNDER SECTION 234C IS LEVIABLE FOR DEFERME NT OF ADVANCE TAX. IN VIEW OF THE DISCUSSIONS MADE HEREINABOVE, IN OUR CONSIDE RED OPINION FOR CHARGING INTEREST UNDER SECTION 234B AND 234C OF THE ACT, TH E REVENUE SHOULD HAVE TAKEN INTO CONSIDERATION THE AMOUNT OF TAX WHICH WA S ACTUALLY DEDUCTIBLE FROM THE ASSESSEE AT SOURCE AS PER PROVISIONS OF CH APTER XVII OF THE ACT AND SHOULD NOT HAVE CHARGED INTEREST UNDER SECTION 234B AND 234C ON THE SAID AMOUNT. 10. IN RESPECT OF INTEREST UNDER SECTION 234A, WE FIND THAT THE SAME IS CHARGEABLE FOR DEFAULT IN FURNISHING RETURN OF INCO ME. FURTHER THE LANGUAGE EMPLOYED IN SECTION 234A IS DIFFERENT FROM THE LANG UAGE EMPLOYED IN SECTION 234B AND 234C OF THE ACT. SECTION 234C, IN ITS EXPL ANATION CLEARLY STATES THAT TAX DUE ON RETURNED INCOME IS TO BE COMPUTED B Y EXCLUDING THE AMOUNT OF TAX DEDUCTIBLE OR COLLECTABLE AT SOURCE IN ACCOR DANCE WITH THE PROVISIONS OF CHAPTER XVII. SECTION 234B, IN ITS EXPLANATION PROV IDES THAT THE ASSESSED TAX IS TO BE COMPUTED BY EXCLUDING ANY TAX DEDUCTED OR COLLECTED AT SOURCE IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII. IN CONTRAST TO THE ABOVE, SECTION 234A PROVIDES FOR EXCLUSION OF AMOUNT OF AN Y TAX DEDUCTED OR COLLECTED AT SOURCE. THUS, THE WORDS IN ACCORDANCE WITH PROVISIONS OF CHAPTER XVII ARE CONSPICUOUSLY MISSING UNDER SECTI ON 234A OF THE ACT. FURTHER, THE LD. AR COULD NOT CITE ANY AUTHORITY, W HICH PROVIDES THAT IN I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .171 171171 1715 5 5 5 - -- - 1719 1719 1719 1719/M/11 /M/11 /M/11 /M/11 7 CHARGING INTEREST UNDER SECTION 234A ALSO THE AMOUN T OF TAX WHICH WAS DEDUCTIBLE IN ACCORDANCE WITH CHAPTER XVII IS TO BE EXCLUDED AND NOT MERELY THE TAX, WHICH WAS ACTUALLY DEDUCTED FROM THE ASSES SEE IN THE RELEVANT PREVIOUS YEAR. FURTHER, THE INTEREST UNDER SECTION 234A IS NOT LEVIED FOR ANY DEFAULT OF PAYMENT OF ANY ADVANCE TAX, BUT IS LEVIE D FOR DEFAULT IN FURNISHING RETURN OF INCOME WITHIN THE SPECIFIED TIME. THUS, I N OUR CONSIDERED OPINION, THE INTEREST UNDER SECTION 234A IS TO BE COMPUTED B Y EXCLUDING THE AMOUNT OF TAX ACTUALLY DEDUCTED FROM THE ASSESSEE DURING T HE RELEVANT PREVIOUS YEAR AND INTEREST UNDER SECTION 234B AND 234C ARE TO BE CHARGED BY EXCLUDING THE TAX, WHICH WAS DEDUCTIBLE FROM THE ASSESSEE AS PER PROVISIONS OF CHAPTER XVII OF THE ACT. WE, THEREFORE, SET ASIDE T HE ORDERS OF LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO REC OMPUTE THE INTEREST AS PER DISCUSSION MADE HEREINABOVE. THUS, THE GROUND OF AP PEAL OF THE ASSESSEE IS PARTLY ALLOWED. 11. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON THE CLOSE OF HEA RING ON 18.01.2012. SD/- SD/- (GEORGE MATHAN) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER CHENNAI, DATED, THE 18.01.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.