ROTEX MANUFACTURERS AND ENGINEERS PVT LTD, RABALE, NAVI MUMBAI V. DCIT, TDS CIRCLE, THANE, THANE WEST

ITA 4458/MUM/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7180 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-05-2024
• Assessment Year: misc
• Appeal Filed On: 07-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K.P. KAPADIA
• Keywords: Capital asset; TDS
• Section: 154; 194J

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH MUMBAI BEFORE SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER AND SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER ITA No.4458, 4461 & 4464/MUM/2023 Assessment Year: 2014-15 Rotex Manufacturers and Engineers Pvt. Ltd. R-0852/R-0853, TTC Industrial Estate, Rabale, Navi Mumbai – 400 701 (PAN : AAACR2195L) Vs. Deputy Commissioner of Income Tax, TDS Circle, Thane (Appellant) (Respondent) Present for: Appellant by : Shri K.P. Kapadia, CA Respondent by : Smt. Mahita Nair, Sr. DR Date of Hearing : 07.05.2024 Date of Pronouncement : 16.05.2024 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER : The above captioned appeals filed by the assessee are against separate orders passed by Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, vide order nos. ITBA/NFAC/S/250/2023- 24/1056673636(1), dated 29.09.2023, ITBA/NFAC/S/250/2023- 24/1056672552(1), dated 29.09.2023 and ITBA/NFAC/S/250/2023- 24/1056671937(1), dated 29.09.2023, against the assessment orders passed by Assistant Commissioner of Income Tax, CPC-TDS, u/s. 154 of the Income-tax Act (hereinafter referred to as the “Act”), dated 19.02.2018 for AY 2014-15. 2 ITA No.4458, 4461 & 4464/MUM/2023 Rotex Manufacturers and Engineers Pvt. Ltd., AY 2014-15 2. Grounds raised by the assessee in all the three appeals are reproduced as under: ITA No.4458/MUM/2023 “1. The Learned CIT (Appeals) erred in confirming the order passed by Assistant Commissioner of Income Tax, Cetralized Processing Cell-TDS (herein after referred to as 'the Assessing Officer') determining short collection of TDS in case of Your Appellant for the Period 1 st January, 2014 to 31st March, 2014 (Quarter -4) at Rs.29,86,447/- 2. The Learned CIT (Appeals) erred in upholding the action of the Learned Assessing Officer rejecting the application of Your Appellant filed on 17.02.2018, u/s 154 of the Income Tax Act, 1961 when it was a consistent plea of Your Appellant that that having obtained Lower TDS Certificates in case of following parties, there was no short deduction of Tax at Source & no demand should have been raised against Your Appellant. The details of amount paid to deductees & TDS deducted thereon & the amount of Short deduction as computed by the Assessing Officer while processing TDS Return - Form No 260 for the period 1 st January, 2014 to 31st March, 2014 (Quarter -4) are as under: 3. The Learned CIT (Appeals) erred in not appreciating the following facts: a) The TDS Officers of the Deductees have issued certificate under Section 197 of the Act to the Principal Officer of Your Appellant. Such certificates are in terms of clause (iii) of Section 204 of the Income Tax Act, 1961 (hereinafter referred to as the "Act"). b) Such certificate mandates the persons having a Specific PAN to whom such certificate is issued to deduct tax at a raté lower than the prescribed rate under Section 194J & 194H of the Act. c) Merely because the assessee had changed its TAN on account of change of TDS Jurisdiction & that too as per the direction of the TDS Jurisdictional Officer & got two separate TAN for the Financial Year 2013-14 for the same unit, will not render the certificates issued under Section 197(2) as redundant. Such 3 ITA No.4458, 4461 & 4464/MUM/2023 Rotex Manufacturers and Engineers Pvt. Ltd., AY 2014-15 certificates are to be issued to the Principal Officer of the Company having specific PAN as the person responsible for deduction of tax and not to any other person or unit of the assessee based on TAN. 4. The Learned CIT (Appeals) erred in Confirming the action of the Assessing Officer in levying Interest on alleged Short Deduction of TDS of Rs. 14,34,097/- for the period 1" January, 2014 to 31st March, 2014 (Quarter -4).” ITA No.4461/MUM/2023 “1. The Learned CIT (Appeals) erred in confirming the order passed by Assistant Commissioner of Income Tax, Cetralized Processing Cell-TDS (herein after referred to as 'the Assessing Officer') determining short collection of TDS in case of Your Appellant for the Period 1 st October, 2013 to 31st December, 2013 (Quarter -3) at Rs.9,84,564/- 2. The Learned CIT (Appeals) erred in upholding the action of the Learned Assessing Officer rejecting the application of Your Appellant filed on 17.02.2018, u/s 154 of the Income Tax Act, 1961 when it was a consistent plea of Your Appellant that that having obtained Lower TDS Certificates in case of following parties, there was no short deduction of Tax at Source & no demand should have been raised against Your Appellant. The details of amount paid to deductees & TDS deducted thereon & the amount of Short deduction as computed by the Assessing Officer while processing TDS Return-Form No 26Q for the period 1 st October, 2013 to 31st December, 2013 (Quarter -3) are as under: The Learned CIT (Appeals) erred in not appreciating the following facts: a) The TDS Officers of the Deductees have issued certificate under Section 197 of the Act to the Principal Officer of Your Appellant. Such certificates are in terms of clause (iii) of Section 204 of the Income Tax Act, 1961 (hereinafter referred to as the "Act"). 4 ITA No.4458, 4461 & 4464/MUM/2023 Rotex Manufacturers and Engineers Pvt. Ltd., AY 2014-15 b) Such certificate mandates the persons having a Specific PAN to whom such certificate is issued to deduct tax at a raté lower than the prescribed rate under Section 194J & 194H of the Act. c) Merely because the assessee had changed its TAN on account of change of TDS Jurisdiction & that too as per the direction of the TDS Jurisdictional Officer & got two separate TAN for the Financial Year 2013-14 for the same unit, will not render the certificates issued under Section 197(2) as redundant. Such certificates are to be issued to the Principal Officer of the Company having specific PAN as the person responsible for deduction of tax and not to any other person or unit of the assessee based on TAN. 4. The Learned CIT (Appeals) erred in Confirming the action of the Assessing Officer in levying Interest on alleged Short Deduction of TDS of Rs. 5,08,490/- for the period 1 October, 2013 to 31st December, 2013 (Quarter -3).” ITA No.4464/MUM/2023 “1. The Learned CIT (Appeals) erred in confirming the order passed by Assistant Commissioner of Income Tax, Cetralized Processing Cell-TDS (herein after referred to as 'the Assessing Officer') determining short collection of TDS in case of Your Appellant for the Period 1 July, 2013 to 30th September, 2013 (Quarter - 2) at Rs.5,20,214/- 2. The Learned CIT (Appeals) erred in upholding the action of the Learned Assessing Officer rejecting the application of Your Appellant filed on 17.02.2018, u/s 154 of the Income Tax Act, 1961 when it was a consistent plea of Your Appellant that that having obtained Lower TDS Certificates in case of following parties, there was no short deduction of Tax at Source & no demand should have been raised against Your Appellant. The details of amount paid to deductees & TDS deducted thereon & the amount of Short deduction as computed by the Assessing Officer while processing TDS Return -Form No 26Q for the period 1 st July, 2013 to September, 2013 (Quarter 2) are as under: 3. The Learned CIT (Appeals) erred in not appreciating the following facts : a) The TDS Officers of the Deductees have furnished certificate under Section 197 of the Act to the Principal Officer of Your Appellant. Such certificates are in 5 ITA No.4458, 4461 & 4464/MUM/2023 Rotex Manufacturers and Engineers Pvt. Ltd., AY 2014-15 terms of clause (iii) of Section 204 of the Income Tax Act, 1961 (hereinafter referred to as the "Act"). b) Such certificate mandates the persons having a Specific PAN to whom such certificate is issued to deduct tax at a raté lower than the prescribed rate under Section 194J & 194H of the Act. c) Merely because the assessee had changed its TAN on account of change of TDS Jurisdiction & that too as per the direction of the TDS Jurisdictional Officer & got two separate TAN for the Financial Year 2013-14 for the same unit, will not render the certificates issued under Section 197(2) as redundant. Such certificates are to be issued to the Principal Officer of the Company having specific PAN as the person responsible for deduction of tax and not to any other person or unit of the assessee based on TAN. 4. The Learned CIT (Appeals) erred in Confirming the action of the Assessing Officer in levying Interest on alleged Short Deduction of TDS of Rs. 2,78,201/- for the period 1 st July, 2013 to 30 th September, 2013 (Quarter -2).” 3. The issue involved in all the three appeals are common except for variation in the quantum. Accordingly, all the three appeals are heard together and taken up for adjudication by passing this consolidated order. 4. We take up ITA No.4458/Mum/2023 for drawing brief facts of the case. Our observations and findings in this appeal shall apply mutatis mutandis to the other two appeals. 5. Assessee is a manufacturer of pneumatic elements, rotary actuators, control panels, valves, etc., and spares thereof. Registered office of the company was situated at Manpada Road, Dombivli East, District Thane, holding TAN bearing number MUMR05319G. Subsequently, assessee shifted to another location at B-703/4, Western Edge –II of western express highway, Borivali (East), Mumbai. On receipt of a letter from the AO(TDS), Kalyan, dated 08.07.2013 being jurisdictional AO(TDS) for Kalyan, assessee obtained another TAN bearing number PNER14698F, w.e.f. 14.08.2013. 6 ITA No.4458, 4461 & 4464/MUM/2023 Rotex Manufacturers and Engineers Pvt. Ltd., AY 2014-15 6. TAN of the assessee was changed in the intermediary period. For the first two quarters of the year under consideration (from 01.04.2013 to 14.08.2013) assessee had filed its TDS returns and made TDS payments by using TAN:MUMR05319G and for the part of the second quarter and rest of the next two quarters (beginning from 14.08.2013 to 31.03.2014), compliances were done by using TAN : PNER14698F. 7. Certain suppliers of the assessee had applied for lower TDS certificates in advance for the transactions pertaining to FY 2013-14 relevant to AY 2014-15. These lower TDS certificates were issued by the AO(TDS) of respective suppliers directing the assessee to deduct TDS at lower rate. The suppliers had given the lower TDS certificates for the entire year and their respective transactions were included in TDS returns filed for all the four quarters under both the TAN. Though, in all such certificates the AO(TDS) had mentioned the TAN : MUMR05319G. 8. While processing the TDS returns in Form No. 26Q, the Central Processing Centre (CPC), Bengaluru had ignored the lower TDS certificates and the demand of Rs.29,86,447/- for short deduction of tax and interest of Rs.2,20,604/- was raised. The demand so raised is on the ground that lower TDS certificates issued by the TDS officers of the deductees contained TAN : MUMR05319G while the TDS returns were filed under TAN : PNER14698F. Against this order of demand, assessee filed an application for rectification u/s. 154 of the Act which was rejected increasing the demand of interest on TDS to Rs.14,34,097/.Aggrieved, assessee went in appeal before the ld.CIT(A). 9. Before the CIT(A), detailed submissions were made encompassing the provisions of Section 197 and Section 204 of the Act which did not find favour for the assessee. Ld. CIT(A) noted that assessee was duty bound to intimate all its suppliers about the other 7 ITA No.4458, 4461 & 4464/MUM/2023 Rotex Manufacturers and Engineers Pvt. Ltd., AY 2014-15 TAN obtained subsequently and request them to resubmit their lower deduction tax certificate from their respective jurisdictional AO(TDS) quoting the new TAN of the assessee. He thus dismissed the appeal of the assessee by holding that there is a gross mistake on the part of the assessee and CPC has rightly determined the short TDS on processing of the TDS return. Aggrieved, assessee is in appeal before the Tribunal. 10. Before us, ld. Counsel of the assessee referred to the details of the amount paid to the deductees and TDS done thereon which are already tabulated forming part of ground no.2 reproduced above. He deliberated upon the provisions of section 197 and 204 of the Act to demonstrate that, assessee is the person who is responsible for deduction of tax at source at the rate prescribed under the certificate issued by the respective jurisdictional AO(TDS) of each of the supplier and assessee has rightfully deducted TDS at the rates prescribed in those certificates and deposited the same within the due dates. According to him, merely because assessee company has got separate TAN for two locations will not render the certificates issued u/s. 197 as redundant, since such certificates are issued to the Principle Officer of the company as the person responsible for deduction of tax. He placed reliance on the decision of CIT Vs. Parle Biscuits Pvt. Ltd. [2013] 351 ITR 138 (P&H) which squarely covers the case of the assessee. 11. Per contra, ld Sr. DR submitted that the matter may be sent back to the AO for verification of TDS done against the two TANs of the assessee and the respective compliance made thereon after which necessary relief be given to assessee. 12. We have heard the rival contentions and perused the material on record. We have given our thoughtful consideration on the application 8 ITA No.4458, 4461 & 4464/MUM/2023 Rotex Manufacturers and Engineers Pvt. Ltd., AY 2014-15 of the relevant provisions of the Act referred by the ld. counsel in his submission. 12.1 The provisions of Section 197 of the Act are reproduced as under: “197. (1) Subject to rules made under sub-section (2A), where, in the case of any income of any person or sum payable to any person, income-tax is required to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force under the provisions of sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, [194LBA], 194M, 194-O and 195, the Assessing Officer is satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax, as the case may be, the Assessing Officer shall, on an application made by the assessee in this behalf, give to him such certifi- cate as may be appropriate. (2) Where any such certificate is given, the person responsible for paying the in- come shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be. (2A) The Board may, having regard to the convenience of assessees and the in- terests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (1) and the conditions sub- ject to which such certificate may be granted and providing for all other matters connected therewith.” 12.2 From the sub-section (2) of Section 197, it is noted that person responsible for paying the income is entrusted with the responsibility to deduct income tax at the rates specified in the certificate or deduct no tax as the case may be until such certificate is cancelled by the AO. The term “person responsible for paying” is defined in Section 204 of the Act. 12.3 Provisions of Section 204 are reproduced as under: “204. For the purposes of the foregoing provisions of this Chapter and section 285, the expression "person responsible for paying" means— (i) in the case of payments of income chargeable under the head "Salaries", other than payments by the Central Government or the Government of a State, the employer himself or, if the employer is a company, the company itself, including the principal officer thereof; (ii) in the case of payments of income chargeable under the head "Interest on securities", other than payments made by or on behalf of the Central Government or the Government of a State, the local authority, corporation or company, including the principal officer thereof; 9 ITA No.4458, 4461 & 4464/MUM/2023 Rotex Manufacturers and Engineers Pvt. Ltd., AY 2014-15 (iia) in the case of any sum payable to a non-resident Indian, being any sum representing consideration for the transfer by him of any foreign ex- change asset, which is not a short-term capital asset, the authorised per- son responsible for remitting such sum to the non-resident Indian or for crediting such sum to his Non-resident (External) Account maintained in accordance with the Foreign Exchange Management Act, 1999 (42 of 1999), and any rules made thereunder; (iib) in the case of furnishing of information relating to payment to a non- resident, not being a company, or to a foreign company, of any sum, whether or not chargeable under the provisions of this Act, the payer him- self, or, if the payer is a company, the company itself including the prin- cipal officer thereof; (iii) in the case of credit, or, as the case may be, payment of any other sum chargeable under the provisions of this Act, the payer himself, or, if the payer is a company, the company itself including the principal officer the- reof; (iv) in the case of credit, or as the case may be, payment of any sum char- geable under the provisions of this Act made by or on behalf of the Central Government or the Government of a State, the drawing and disbursing of- ficer or any other person, by whatever name called, responsible for credit- ing, or as the case may be, paying such sum; (v) in the case of a person not resident in India, the person himself or any person authorised by such person or the agent of such person in India in- cluding any person treated as an agent under section 163.” 12.4 From clause (iii) of the above section, we note that where the payer is a company, the person responsible for paying is the company itself including the principle office thereof. 13. A specific query was raised by the Bench to the ld. Counsel of the assessee as to whether the certificate issued for lower rate of TDS is qua the assessee or the location. By referring to the aforesaid provisions, it was replied that certificate issued is in reference to the person and not the location from where the person operates, since section 197(2) directs the person responsible for paying the income to do TDS as per the rates prescribed in lower TDS certificates. We referred to the definition of ‘Person’ given in section 2(31) which includes a company. In the present case, assessee is a company and as per clause (iii) of section 204, person responsible for paying is the company itself including the principle officer thereof, if the payer is a company. 10 ITA No.4458, 4461 & 4464/MUM/2023 Rotex Manufacturers and Engineers Pvt. Ltd., AY 2014-15 14. In the light of provisions contained in Section 197(2) and Section 204(iii) of the Act as discussed above, we find that assessee being a company is the person who is responsible for TDS at the rates prescribed in the certificates issued by the respective AO(TDS) of the suppliers of the assessee which were issued in terms of provision of Section 197. It is fact on record that assessee had deducted tax at source at the rates prescribed in the certificates for each of the suppliers and had complied with the necessary requirements of their deposit and filing of returns. The genuineness of issuance of certificate u/s. 197 has not been doubted. Accordingly, there is no justification to hold that the assessee is in default, merely on the ground that the certificates have not been issued on the subsequent TAN obtained by it, though all the necessary compliances had been made by the assessee by using the other TAN, from the date from which it was obtained. 15. It is also worthwhile to take note of the procedure for obtaining certificate for deduction at lower rate prescribed in Rule 28(AA) of the Income tax Rules, 1962 (‘The Rules’). Sub-Rule 4 of the said Rule contemplates that certificate issued in terms of section 197 is valid only with regard to person responsible for deducting the tax and specified therein. Further, Sub-Rule 5 of the same rule contemplates that the certificate shall be valid only with regard to the person responsible for deducting the tax and named therein under advice to the person who made an application for issue of such certificate. Thus in the present case, the certificates are in the name of the assessee company directing it to deduct TDS at lower rates. Merely because, assessee has separate TANs will not render the said certificates issued in terms of Section 197(2) as redundant resulting in tainting the assessee as assessee in default. 11 ITA No.4458, 4461 & 4464/MUM/2023 Rotex Manufacturers and Engineers Pvt. Ltd., AY 2014-15 15.1 Considering the facts of the case, applicable provisions u/s.197 and 204 of the Act and Rule 28AA of the Rules as well as judicial precedent by the Hon’ble High Court of Punjab and Haryana in the case of Parle Biscuits Ltd. (supra), we hold that there is no short deduction of tax at source and therefore the demand so raised both towards tax and interest is deleted. Accordingly, grounds taken by the assessee in this respect are allowed. 16. In the result, appeal of the assessee is allowed. 17. In respect of the other two appeals, i.e., 4461 & 4464/Mum/2023, since identical facts are involved except in change in quantum, our observations and findings arrived at in appeal No.4458/Mum/2023 dealt herein above, applied mutatis mutandis on these two appeals also. Accordingly, two appeals of the assessee are also allowed. 18. In the result, all the three appeals of the assessee are allowed. Order is pronounced in the open court on 16 May, 2024. Sd/- Sd/- (Sunil Kumar Singh) (Girish Agrawal) Judicial Member Accountant Member Dated: 16 May, 2024 MP, Sr.P.S. Copy to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai