Uttar Pradesh Financial Corporation, Kanpur V. Income Tax Officer-(TDS-II), , Kanpur

ITA 296/LKW/2013

• Counselvise Citation: 29623714 RSA 2013
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-05-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 26-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.296/LKW/2013 ASSESSMENT YEAR:2004 - 05 UP FINANCIAL CORPORATION, 14/88, CIVIL LINES, KANPUR. PAN:AAAJU0012A VS. INCOME TAX OFFICER (TDS - II), KANPUR. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI ABHINAV MEHROTRA, ADVOCATE , RESPONDENT BY SHRI ALOK MITRA, D. R. DATE OF HEARING 27/05/2014 DATE OF PRONOUNCEMENT 1 3 /06/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT (A) - II, KANPUR DATED 22/02/2013 FOR ASSESSMENT YEAR 2005 - 2006. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING CASE LAWS CITED BEFORE HIM OF AC I T V. CATHOLIC RELIEF SERVICES (ITAT DELHI) 28 TAXMANN.COM 168 & ITO V. G.D. GOENKA PUBLIC TRUST; [DELHI] 115 ITD 395 (DELHI ) AND NOT GIVING ANY DECISION ON THE GROUND OF APPEAL FILED BEFORE HIM THAT THE ORDER PASSED BY THE LEARNED INCOME TAX OFFICER (TDS) WAS TIME BARRED HAVING BEEN PASSED AFTER THE PASSAGE OF MORE THAN 4 YEARS FROM THE CLOSE OF THE FINANCIAL YEAR 2004 - 05. 2 2. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING AND NOT GIVING ANY DECISION ON THE GROUND OF APPEAL FILED BEFORE HIM THAT INTEREST PAYABLE BY THE APPELLANT ON SLR / NON SLR BONDS IS IN THE NATURE OF INTEREST ON GOVERNMENT SECURITIES ON WHICH NO TDS IS REQUIRED TO BE MADE UNDER SECTION 193 OF THE INCOME TAX ACT, 1961. 3. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING AND NOT GIVING ANY DECISION ON THE GROUND OF APPEAL FILED BEFORE HIM THAT IN CASE THE INTEREST PAID BY THE APPELLANT IS NOT CONSIDERED TO BE INTEREST PAID ON GOVT. SECURITIES THEN AS PER THE PROVISIONS OF CLAUSE (III) - OF SUB SECTION (3) OF SECTION 194A OF THE INCOME TAX ACT,1961 NO TDS WAS REQUIRED TO BE MADE AS AIL THE RECIPIENTS OF INTEREST WERE BANKS WHICH ARE EXEMPTED F ROM TDS. 4. BECAUSE WITHOUT PREJUDICE TO GROUNDS OF APPEAL NO.1 , 2 AND 3 ABOVE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING AND NOT GIVING ANY DECISION ON T HE GROUND OF APPEAL FILED BEFORE HIM THAT THE LEARNED INCOME TAX OFFICER (TD S ) ERRED IN HOLDING THE APPELLANT AS DEFAULTER FOR NOT DEDUCTING TDS ON INTEREST PAID ON SLR BONDS TO CO - OPERATIVE BANKS AND GRAMIN BANKS THE INCOME OF WHICH WAS EXEMPT FROM TAX UNDER SECTION SOP OF THE INCOME TAX ACT, 1961. 5. BECAUSE THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING AND NOT GIVING ANY DECISION ON THE GROUND OF APPEAL THAT THE AMOUNT AND DETAILS OF PAYEE BANKS MENTIONED BY THE LEARNED INCOME TAX OFFICER AS INTEREST PAID BY THE APPELLANT ON NON - SLR BONDS OF RS.43242400 WE RE WRONG AND EXCESSIVE. 6. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) II, KANPUR ERRED IN IGNORING THE FACT AND ALSO THE CASE LAWS CITED BEFORE HIM OF CIT V. ELI LILY & CO. 178 TAXMAN 505 (SC), HINDUSTAN COCA COLA BEVERAGE P. LTD. V. CIT 163 TAXMAN 355 (SC), CIT V. RISHIKESH APARTMENTS; HOUSING - SOCIETY. 119 TAXMAN 239 (GUJ.) AND CIT V. RAJASTHAN RAJYA VIDYUT PRASARAN NIGAM LTD. 161 TAXMAN 133 (RAJ.), C I T V. RISHIKESH APARTMENTS 3 CO - OP HOUSING SOCIETY LTD. (GUJ.) 119 TAXMAN 239 CITED BEFORE HI M THAT SINCE THE INCOME OF THE RECIPIENTS OF THE INTEREST PAID BY THE APPELLANT WERE CO - OPERATIVE BANKS AND GRAMIN BANKS WHOSE INCOME WAS ENTITLED FOR DEDUCTION UNDER SECTION 80P OF THE INCOME TAX ACT, 1961 VIDE CIRCULAR NO. 319 DATED 11.1.1982 THEREFORE N OT LIABLE TO PAY TAX HENCE, NO INTEREST SHOULD HAVE BEEN CHARGED AT ALL UNDER SECTION 201 (1A) OF THE INCOME TAX ACT, 1961 EVEN IF THE APPELLANT WAS HELD TO BE A DEFAULTER FOR NOT HAVING MADE TDS ON INTEREST PAID BECAUSE THERE BEING NO LOSS TO THE EXCHEQUE R AS INTEREST IS HELD TO BE COMPENSATORY IN NATURE. 7. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACTS AND ALSO CASE LAW CITED BEFORE HIM OF ITO V. HOTEL PARAG LTD. 24 TAXMANN.COM 90 ON SIMILAR FACTS THAT THE INTEREST AMOUNT PROVIDED FOR IN THE BOOKS OF ACCOUNT WAS IN THE NATURE OF 'INTEREST NEITHER ACCRUED NOR DUE' AS THE APPELLANT HAD APPROACHED THE BANKS / OTHER HOLDERS HOLDING SLR BONDS FOR REDUCTION OF COUPON RATES OF INTEREST / WAIVER OF INTEREST PAYABLE ON THESE BONDS AND THE BANKS/ OTHER HOLDERS HOLDING THESE BONDS WERE YET TO AGREE AND FINALIZE A FINAL REDUCTION COUPON RATES OF INTEREST /WAIVER OF INTEREST PAYABLE ON THOSE BONDS THUS, THERE WAS NO NEED OR OCCASION TO DEDUCT TDS ON MAKING A MERE A PROVISION OF TH E INTEREST. 8. BECAUSE WITHOUT PREJUDICE GROUNDS OF APPEAL TO ABOVE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACTS AND NOT GIVING ANY DECISION ON WRITTEN SUBMISSIONS FILED BEFORE HIM THAT LEARNED INCOME TAX OFFICER (TDS) NOT GIVEN THE CREDIT OF TDS MADE AND DEPOSITED BY THE APPELLANT WITH THE DEPARTMENT SUBSEQUENTLY AFTER THE FINANCIAL YEAR 2004 - 05, AT THE TIME OF ACTUAL PAYMENT OF INTEREST PAID TO BOND HOLDERS ON ARRIVAL OF FINAL NEGOTIATIONS/ ONE TIME SETTLEMENT WITH THEM AG AINST THE INTEREST AMOUNT PROVIDED IN THE BOOKS OF ACCOUNT AS MENTIONED IN THE GROUND OF APPEAL NO.7 ABOVE . 9. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT AND ALSO THE CASE 4 LAW CITED BEFORE HIM IDBI V. ITO , MUMBAI [ 2007] 107 ITD 45 (MUMBAI) THAT THESE BONDS WERE TRANSFERABLE BONDS AND TILL SUCH TIME THE EXACT AMOUNT OF INTEREST PAYABLE ON THESE AND THE NAME AND ADDRESS OF THE HOLDERS OF THESE BONDS WAS NOT DETERMINED NO TDS COULD HAVE BEEN MADE. 10. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT OF CHARGING OF TDS AND INTEREST EVEN IN SUCH CASES WHERE TDS EXEMPTION FORMS ISSUED BY THE TAX AUTHORITIES TO THE RECIPIENT BOND HOLDERS UNDER SECTION 197 OF THE INCOME TAX ACT,1961 WE RE OBTAINED BY APPELLANT FROM THEM AND FILED BEFORE THE LEARNED INCOME TAX OFFICER BY THE APPELLANT . 11. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACT THAT THE INTEREST CHARGED BY THE LEARNED INCOME TAX OFFICER ON THE AMOUNT OF TDS TO BE MADE WAS MOST UNREASONABLE AND EXCESSIVE. 12. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE CITATION OF FOLLOWING CASE LAWS MADE BEFORE HIM AND GIVING ANY FINDING THEREON: A. J AGRAN PRAKASHAN LTD. V. DCIT (TDS) (ALLAHABAD) 21 TAXMANN.COM 489 IN WHICH THE JURISDICTIONAL HIGH COURT HAS HELD THAT UNDER SECTION 191 IT IS CONDITION PRECEDENT THAT BEFORE HOLDING DEDUCTOR AS AN ASSESSEE IN DEFAULT IT SHOULD BE CONFIRMED THAT THE DEDUCTEE HAS ALSO FAILED TO P AY TAX DIRECTLY. B. THOMAS MUTHOOT V. DCIT TDS 28 TAXMANN.COM 25 (ITAT COCHIN) IN WHICH IT HAS BEEN HELD THAT IF DEDUCTEE DID NOT HAVE ANY TAX LIABILITY, THE DEDUCTOR WAS NOT LIABLE FOR INTEREST OR PENALTY ON HIS FAILURE TO DEDUCT TDS. C. RAMAKRISHNA VEDANTA MATH V. ITO , KOLKATA [2012] 24 TAXMAN.COM 29 ( ITAT KOLKATA) IN WHICH IT HAS BEEN HELD THAT ASSESSING OFFICER SHOULD FIRST ASCERTAIN FACTS ABOUT PAYMENT OF TAXES DIRECTLY FROM RECIPIENTS BEFORE INVOKING SECTION 201(1 ) 5 13. BECAUSE WITHOUT PREJUDI CE TO GROUNDS OF APPEALS MENTIONED ABOVE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACTS & NOT GIVING ANY DECISION ON WRITTEN SUBMISSION FILED BEFORE HIM THAT WHEN THE LEARNED INCOME TAX OFFICER (TDS) PASSED THE IMPUGNED ORDER ON 10.03.2011, BY THAT TIME THE APPELLANT HAD CEASED THE LENDER - BORROWER RELATIONSHIP WITH THE MOST OF THE BOND HOLDERS THROUGH ONE TIME SETTLEMENT/COMPROMISE WITH THEM AND THE APPELLANT ON ARRIVAL OF FINAL NEGOTIATIONS ON INTEREST / PRINCIPAL AMOUNT PAY ABLE ON BONDS , HAD MADE THE PAYMENT OF SETTLED AMOUNT WITH MUCH REDUCED INTEREST OR WITH NO INTEREST AGAINST THE INTEREST AMOUNT PROVIDED IN THE BOOKS OF ACCOUNT AS MENTIONED IN THE GROUND OF APPEAL NO.7 ABOVE ALONG WITH PRINCIPAL AMOUNT. 14. BECAUSE WITHOUT PREJUDICE TO GROUNDS OF APPEAL AS ABOVE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE FACTS THAT INTEREST AMOUNT PROVIDED FOR IN THE BOOKS OF ACCOUNT WAS NOT CLAIMED AS EXPENDITURE IN THE ASSESSMENT BY THE APPELLANT AS IT F OLLOWED THE CASH BASIS OF ACCOUNTING AND ALSO THE APPELLANT HAD ALREADY MADE THE REVERSAL ENTRY IN ITS BOOKS OF ACCOUNT IN THE FINANCIAL YEAR 2006 - 07 AS MENTIONED IN THE GROUND OF APPEAL NO.7 ABOVE. 15. BECAUSE WITHOUT PREJUDICE TO GROUNDS OF APPEALS MENT IONED ABOVE, EVEN IF THE APPELLANT WAS HELD TO BE A DEFAULTER, ANY AMOUNT OF TDS IS RECOVERED /RECOVERABLE FROM THE APPELLANT BY THIS TIME , THEN IN THIS JUNCTURE NEITHER THE APPELLANT AS DEDUCTOR WOULD BE ABLE TO GET BACK THE REFUND OF SUCH IDS AMOUNT NOR THE BOND HOLDERS AS DEDUCTEE WOULD BE ABLE TO TAKE CREDIT OF SUCH TDS AMOUNT SINCE THE APPELLANT HAD NEVER PAID THE AMOUNT OF INTEREST PAYABLE ON BONDS PROVIDED IN THE BOOKS OF ACCOUNT IN VIEW OF ONE TIME SETTLEMENT MADE WITH THE BOND HOLDERS BY THE APPEL LANT MUCH BEFORE THE IMPUGNED ORDER PASSED BY LEARNED INCOME TAX OFFICER (TDS ). 16. BECAUSE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS, NOT TENABLE IN WELL SETTLED LAW & JUDICIAL PRONOUNCEMENTS AND PASSED THE 6 IMPUGNED ORDE R WITHOUT DEALING ON THE GROUND OF APPEALS / WRITTEN SUBMISSIONS FILED BEFORE HIM. 17. BECAUSE THE FINDINGS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ARE ARBITRARY, ILLEGAL, UNLAWFUL, AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 18. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY / ALL OF THE GROUND OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL.' 3. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT GROUND NO. 1 RAISED BY THE ASSESSEE BEFORE THE CIT(A) WAS REGARDING THIS CONTENTION OF THE ASSESSEE THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS TIME BARRED HAVING BEEN PASSED AFTER THE PASSAGE OF MORE THAN 4 YEARS FROM THE CLOSE OF THE FINANCIAL YEAR. HE SUBMITTED THAT THIS ISSUE WAS NOT DECIDED BY CIT (A). HE SUBMITTED THAT UNDER THESE FACTS, THE MATTER SHOULD GO BACK TO THE FILE OF CIT(A) FOR DECISION ON THIS ISSUE. 4. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN FAC T , THE CIT(A) HAS NOTED IN HIS ORDER THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE BEFORE HIM AND AS PER SAME , THE ISSUE RAISED BY THE ASSESSEE AS PER GROUND NO.1 RAISED BEFORE THE CIT(A) WAS ON THE ASPECT THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS T IME BARRED. WE FIND THAT THIS ISSUE HAS NOT BEEN DECIDED BY LEARNED CIT(A). UNDER THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE MATTER SHOULD GO TO THE FILE OF CIT(A) FOR DECISION ON THIS ISSUE. SINCE THIS IS A TECHNICAL ASPECT ON WHICH THE VAL IDITY OF THE ORDER PASSED BY THE ASSESSING OFFICER IS DEPENDENT, THE ISSUE ON MERIT CANNOT BE DECIDED BEFORE DECIDING THIS TECHNICAL ASPECT. HENCE, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER BACK TO HIS FILE WITH THE DIRECTION TO DECIDE GROUN D NO. 1 RAISED BY THE ASSESSEE BEFORE HIM. IF IT IS FOUND THAT IN FACT THE ORDER PASSED BY THE ASSESSING OFFICER IS TIME 7 BARRED THEN THE ASSESSMENT ORDER ITSELF WILL NOT SURVIVE AND THERE WILL BE NO OTHER MATTER LEFT TO BE DECIDED. BUT IF IT IS FOUND BY CIT(A) THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS VALID THEN HE SHOULD DECIDE THE ISSUE ON MERIT ALSO AFRESH. IN VIEW OF THE DECISION WITH REGARD TO GROUND NO. 1 OF THE ASSESSEE, THE ISSUE ON MERIT DOES NOT CALL FOR ANY ADJUDICATION AT THIS STAGE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 3 /06/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR