ITO, New Delhi V. M/s. Indian Printing Packaging & Allied Machinery Manufacturers Association, Noida

ITA 2934/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65379 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-08-2012
• Assessment Year: misc
• Appeal Filed On: 12-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Assessee Lawyers: T R TALWAR
• Keywords: Non-deduction of tax
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER ITA NO.2934/DEL/2012 ASSESSMENT YEAR : 2003-04 ITO, WARD 50(1), ROOM NO.504, 5 TH FLOOR, AAYAKAR BHAWAN, LAXMI NAGAR, NEW DELHI. VS. INDIAN PRINTING PACKAGING & ALLIED MACHINERY MANUFACTURERS ASSOCIATION, C-54, SEC.62, INDUSTRIAL AREA, NOIDA. PAN : DELI04128F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI T.R. TALWAR, ADVOCATE REVENUE BY : MRS. ANUSHA KHURANA, SR. DR ORDER PER A.D. JAIN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE DEPARTMENT FOR ASSESSMENT YEAR 2003-04 AGAINST THE ORDER DATED 30.03.2012 PASSED BY T HE CIT (A)- XVII, NEW DELHI. THE DEPARTMENT HAS TAKEN THE FOLL OWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT (A) XVII, NEW DELHI HAS ERRE D IN DELETING THE DEMAND RAISED BY THE A.O. U/S 201/201(1A) RWS 194 -I OF THE IT ACT, HOLDING THAT THE CERTIFICATE U/S 197 OF THE IT A CT WAS VALID FOR THE F.Y. 2002-03 THOUGH THE CERTIFICATE WAS ISSUED O N 23.4.2002. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT (A) XVII, NEW DELHI HAS ERRED I N NOT APPRECIATING THE FACT THAT AS PER THE PROVISIONS OF SE CTION 194-I OF THE IT ACT, TAX IS DEDUCTIBLE AT THE TIME OF CREDIT OF R ENTAL ITA NO.2934/DEL/2012 2 INCOME OR AT THE TIME OF PAYMENT OF RENTAL INCOME WHICH EVER IS EARLIER AND AT THAT TIME NO CERTIFICATE U/S 197 OF IT A CT HAS BEEN GRANTED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WE LL AS IN LAW, THE LD. CIT (A) XVII, NEW DELHI HAS ERRED I N NOT APPRECIATING THE FACT THAT AS PER SUB-SECTION (2) OF S ECTION 197 OF THE IT ACT, THE PERSON RESPONSIBLE FOR PAYING THE IN COME SHALL DEDUCT TDS AT THE RATES SPECIFIED AT THE TIME OF PAYMENT O R RATE SPECIFIED IN CERTIFICATE ISSUED U/S 197 OF THE INCOME TAX ACT. 2. THE FACTS OF THE CASE AS PER THE RELEVANT ORDERS ARE THAT THE ASSESSING OFFICER LEVIED TAX U/S 201(1) OF THE IT ACT ON THE ASSESSEE, FOR THE ASSESSEES FAILURE TO DEDUCT TAX FROM ADVANCE O F RENT PAID TO M/S NESCO LTD. THE ASSESSEE HAD PAID ADVANCE RENT TO M/ S NESCO LTD. ON 01.04.2002 AFTER DEDUCTING TAX AT A LOWER R ATE OF 2%, INSTEAD OF THE HIGHER RATE OF 20%. INTEREST U/S 201(1A) OF THE ACT WAS ALSO LEVIED ON THE SAID TAX BY THE ASSESSING OFFICER, FOR A PERIOD O F 60 MONTHS. 3. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT (A) DELETED THE TAX LEVIED OF ` 3,36,600/- AND THE INTEREST LEVIED OF ` 2,16,720/- 4. AGGRIEVED, THE DEPARTMENT IS IN APPEAL. 5. CHALLENGING THE IMPUGNED ORDER, THE LD. DR HAS CO NTENDED THAT THE LD. CIT (A) HAS ERRED IN DELETING THE DEMAND VA LIDLY RAISED BY THE ASSESSING OFFICER U/S 201/201(1A) (RWS 194-I OF THE IT AC T); THAT IN DOING SO, THE LD. CIT (A) HAS ERRED IN HOLDING THAT T HE CERTIFICATE U/S 197 OF THE ACT WAS VALID FOR THE FINANCIAL YEAR 2002 -03 RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION I.E., A.Y. 2003-04; THAT THIS CONCLUSION WAS WRONGLY ARRIVED AT BY THE LD. CIT (A) IN THE FACE OF THE FACT THAT THE SAID CERTIFICATE HAD BEEN ISSUED ON 23.0 4.2002; THAT THE LD. CIT (A) HAS FURTHER ERRED IN FAILING TO APPRECIA TE THAT AS PER THE PROVISIONS OF SECTION 194-I OF THE ACT, TAX IS DEDUCTI BLE EITHER AT THE TIME OF CREDIT OF THE RENTAL INCOME, OR AT THE TIME OF PAYMENT THEREOF, ITA NO.2934/DEL/2012 3 WHICHEVER IS EARLIER; THE LD. CIT (A) ERRED IN NOT T AKING INTO CONSIDERATION THE FACT THAT AT THAT RELEVANT TIME, T HE CERTIFICATE U/S 197 OF THE ACT HAD NOT BEEN GRANTED; THAT THE LD. CIT ( A) HAS FURTHER ERRED IN NOT TAKING INTO CONSIDERATION THE PROVISIONS OF SEC TION 197 (2) OF THE ACT, AS PER WHICH, THE PERSON RESPONSIBLE FOR PAYING TH E INCOME SHALL DEDUCT TAX AT THE RATES SPECIFIED AT THE TIME OF PAYM ENT, OR THE RATE SPECIFIED IN THE CERTIFICATE ISSUED U/S 197 OF THE ACT; AND THAT THEREFORE, THE ORDER PASSED BY THE LD. CIT (A) BEING UNTENABLE IN LAW BE CANCELLED AND THAT OF THE ASSESSING OFFICER BE REVIV ED BY ALLOWING THE APPEAL FILED BY THE DEPARTMENT. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE H AS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER, CONTENDING TH AT THE LD. CIT (A) HAS CORRECTLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE INASMUCH AS WHILE LEVYING THE TAX, THE ASSESSING OFFICER HAD ILLEGA LLY IGNORED THE FACT THAT THE DEDUCTEE OF TAX HAD APPLIED FOR THE C ERTIFICATE U/S 197 OF THE ACT BEFORE THE PAYMENT HAD BEEN MADE BY THE ASSESSE E COMPANY TO THE DEDUCTEE AND THE SAME HAD BEEN GRANTED IN THE VERY MONTH IN WHICH THE PAYMENT HAD BEEN MADE; THAT IN FACT, THE ASSESSEE COMPANY HAD DEDUCTED THE TAX AT THE APPROPRIATE RAT E IN THE SUBSEQUENT MONTH AND HAD DEPOSITED THE TAX IN ACCORDAN CE WITH THE DIRECTIONS CONTAINED IN THE CERTIFICATE ISSUED U/S 197 OF THE ACT; THAT THIS FACT HAD, HOWEVER, BEEN WRONGLY IGNORED BY THE ASSESSING OFFICER WHILE TRADING, AGAIN ILLEGALLY, THE ASSESSEE AS AN ASSESSEE IN DEFAULT AND LEVYING THE TAX AND INTEREST THEREON; THAT THE A SSESSING OFFICER HAD ERRED IN NOT APPRECIATING THAT THE CERTIFICATE WAS VALID FOR THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER C ONSIDERATION; THAT THE ASSESSING OFFICER HAD FURTHER FAILED TO APPREC IATE THAT IN FACT, NO LOSS WHATSOEVER HAD BEEN OCCASIONED TO THE REVENUE B Y THE DEDUCTION OF THE TAX AT THE APPROPRIATE RATE AS PER THE DIRECTION CONTAINED IN THE CERTIFICATE ISSUED U/S 197 OF THE ACT DURING THE ITA NO.2934/DEL/2012 4 FINANCIAL YEAR UNDER CONSIDERATION, SINCE THE TAX STOO D DULY PAID BY THE DEDUCTEE AND THE ASSESSEE COMPANY REMAINED UNDER NO FUR THER OBLIGATION TO PAY TAX AS DEMANDED; AND THAT THEREFOR E, THERE BEING NOTHING WRONG WITH THE ORDER PASSED BY THE LD. CIT (A ), THE SAME IS ENTITLED TO BE CONFIRMED ON DISMISSAL OF THE APPEAL FILED BY THE DEPARTMENT. 7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MAT ERIAL ON RECORD. THE ASSESSEE HAS ALSO PLACED BEFORE US A CALENDAR OF EVENTS, WHICH IT WOULD BE APPROPRIATE TO REPRODUCE HEREUNDE R:- 01.04.2002 APPLICATION SUBMITTED BY THE PAYEE M/S NESC O LTD. U/S 197 OF THE IT ACT TO THE ITO 01.04.2002 DATE OF PAYMENT OF ADVANCE RENT BY THE ASSES SEE TO THE PAYEE M/S NESCO LTD. OF RS.15 LACS (PB2) 23.04.2002 GRANT OF CERTIFICATE U/S 197 BY THE ITO TO THE PAYEE TO DEDUCT TAX AT SOURCE @ 2% U/S 194 I OF THE IT ACT (PB 4-5). CERTIFICATE VALID UPTO 31.3.2003. 06.05.2002 DEPOSIT OF TDS BY THE ASSESSEE TO THE GOVT. ACCOUNT @ 2% AS ALLOWED BY THE ITO U/S 197 (PB11) 23.10.2002 PAYMENT OF 2 ND INSTALLMENT OF RENT BY THE ASSESSEE TO THE PAYEE M/S NESCO LTD. RENT (-) TDS (PB-2) 9.11.2002 DEPOSIT OF TDS BY THE ASSESSEE TO THE GOVT. A CCOUNT @ 2% AS ALLOWED BY THE ITO U/S 197 (PB 12). 8. FROM THE ABOVE SEQUENCE OF EVENTS, UNDISPUTEDLY, PA YMENT OF ` 15 LACS HAD BEEN MADE BY THE ASSESSEE COMPANY TO M/S NESCO LTD. ON 01.04.2002. THIS IS ALSO CLEAR FROM THE COPY OF ACCO UNT OF M/S NESCO LTD. (COPY AT PAGES 2-3 OF THE ASSESSEES PAPER BOOK) FO R THE PERIOD FROM 01.04.2002 TO 31.03.2003. ON A QUERY AS TO WHY THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE ON SUCH PAYMENT, @ 22.44%, THE ASSESSEE HAD SUBMITTED THAT THE CERTIFICATE U/S 197 OF TH E ACT STOOD ALREADY APPLIED FOR BY M/S NESCO LTD. EVEN BEFORE THE DATE OF PAYMENT, ITA NO.2934/DEL/2012 5 I.E., 01.04.2002. UNDISPUTEDLY, THE CERTIFICATE U/S 197 OF THE ACT WAS GRANTED ONLY ON 23.04.2002, AUTHORIZING THE ASSESSEE TO DEDUCT TAX AT SOURCE @ 2% PLUS SURCHARGE U/S 194 I OF THE ACT FROM THE LICENCE AND MAINTENANCE FEE/RENT COMPENSATION PAYABLE BY THE ASSE SSEE TO M/S NESCO LTD. UPTO 31.03.2003. A COPY OF THE SAID CERTI FICATE IS CONTAINED AT PAGES 4-5 OF THE ASSESSEES PAPER BOOK. THE DATE 26. 04.2002 IS AVAILABLE THEREON. IN THIS DOCUMENT, THE ITO HAS CER TIFIED AS FOLLOWS:- I HEREBY AUTHORIZE M/S INDIAN PRINTING PACKAGING AND ALLIED MACHINERY MANUFACTURERS ASSOCIATION PLOT NO.54, SECTOR- 62, INSTITUTIONAL AREA, NOIDA-201307 TO DEDUCT TAX AT SOURCE @ 2% S.C. U/S 194-I OF THE INCOME TAX ACT, 1961 FROM THE LI CENSE & MAINTENANCE FEES/RENT COMPENSATION PAYABLE BY YOU TO M/S NESCO LIMITED UPTO 31 ST MARCH, 2003. THIS CERTIFICATE SHALL REMAIN IN FORCE UNTIL 31 ST MARCH, 2003 UNLESS IT IS CANCELLED BY ME UNDER INTIMATION TO YOU BEFORE THAT DATE. 9. FROM THE ABOVE CONTENTS OF THE CERTIFICATE, IT IS QUITE CLEAR THAT IT WAS TO REMAIN IN FORCE TILL 31.03.2003, UNLESS CANCELL ED BY THE ITO PRIOR TO THE SAID DATE. 10. IT WAS IN ACCORDANCE WITH THE AUTHORIZATION CONT AINED IN THE AFORESAID CERTIFICATE, THAT THE ASSESSEE DEDUCTED TDS OF ` 31,500/- @ 2% PLUS SURCHARGE AND DEPOSITED IT ON 06.05.2002. SUC H DEPOSIT, UNDISPUTEDLY, WAS WITHIN THE STATUTORY REQUIREMENT O F SECTION 200 OF THE ACT READ WITH RULE 30 OF THE IT RULES, 1962. TH US, THE ASSESSEE HAS NOT BEEN SHOWN TO HAVE COMMITTED ANY DEFAULT IN DEDUCTING THE TAX AND DEPOSITING IT. IT WAS ONLY BECAUSE THE ASSESSEE D ID NOT HAVE THE TDS CERTIFICATE FOR LOW DEDUCTION @ 2% ON 01.04 .2002 WHILE PAYING THE ADVANCE RENT, THAT THE ASSESSING OFFICER TREATED TH E ASSESSEE AS AN ASSESSEE IN DEFAULT FOR NOT DEDUCTING 20% TAX ON 01.04. 2002, ON THE ADVANCE RENT PAID TO M/S NESCO LTD. NOW THIS, AS RIGH TLY CONSIDERED BY THE LD. CIT (A), IF AT ALL, WAS ONLY A VENIAL BREACH OR DEFAULT. ON THE OTHER HAND, SUCH DEFAULT COULD HAVE BEEN ASCRIBED TO THE ASSESSEE ITA NO.2934/DEL/2012 6 ONLY AND ONLY IF NO TAX HAD BEEN DEDUCTED IN ACCORD ANCE WITH THE PROVISIONS OF SECTION 201(1) OF THE ACT. THE ASSESSING O FFICER WHILE DOING SO, ERRED IN NOT TAKING INTO CONSIDERATION THE SPECIFIC RECITAL IN THE CERTIFICATE ISSUED U/S 197 OF THE ACT, TO THE EFFE CT THAT THIS CERTIFICATE SHALL REMAIN IN FORCE UNTIL 31.03.2003 U NLESS IT IS CANCELLED BY ME UNDER INTIMATION TO YOU BEFORE THAT DATE. I T IS SEEN THE CASE OF THE DEPARTMENT IS THAT THE SAID CERTIFICATE HAD BEEN CANCELLED BY THE ITO ON ANY DATE PRIOR TO 31.03.2003. THE VALIDITY OF THE CERTIFICATE DATED 31.03.2003 MEANS THAT THE CERTIFICATE WAS VALID FOR THE WHOLE OF A.Y. 2003-04 AND THEREFORE, HAS CORRECTLY HELD IN TH E IMPUGNED ORDER BY VIRTUE OF THE SAID CERTIFICATE, THERE WAS NO OCCASI ON TO DEEM THE ASSESSEE TO BE AN ASSESSEE IN DEFAULT. THERE IS NO GAINSAYIN G THAT THE ASSESSEE CAN BE DEEMED TO BE AN ASSESSEE IN DEFAULT ONLY IN THE CASE OF NON-PAYMENT OF TAX WITHIN THE PRESCRIBED TIME. I N THE PRESENT CASE, THE TAX HAVING BEEN DEDUCTED @ 2% AND HAVING BEEN D EPOSITED BEFORE THE PRESCRIBED DATE, BY NO STRETCH OF IMAGINATION CAN THE ASSESSEE BE DEEMED TO BE AN ASSESSEE IN DEFAULT. 11. IN VIEW OF THE ABOVE DISCUSSION, WE FIND THE ORDER OF THE LD. COMMISSIONER (APPEALS) TO BE A WELL VERSED ORDER. THE GRIEVANCE SOUGHT TO BE RAISED THEREAGAINST BY THE DEPARTMENT BEF ORE US IS FOUND TO CARRY NO FORCE WHATSOEVER AND THE GROUNDS RAISED BY THE DEPARTMENT ARE, ACCORDINGLY, REJECTED. 12. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 31.08.20 12. SD/- SD/- [A.N. PAHUJA] [A.D. JAIN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 31.08.2012. ITA NO.2934/DEL/2012 7 DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES