Appeal details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 6678 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 4 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-03-2016
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
B
Next Hearing Date
29-02-2016
Assessment Year
misc
Appeal Filed On
03-11-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: B : NEW DELHI BEFORE SHRI R.S. SYAL, AM & SHRI A.T. VARKEY, JM ITA NOS.4791 & 4792/DEL/2011 ASSESSMENT YEAR : 2006-07 ITA NOS.4793 & 4794/DEL/2011 ASSESSMENT YEAR : 2007-08 C.J. INTERNATIONAL HOTELS LTD., HOTEL LE MERIDIAN, 8, WINDSOR PLACE, JANPATH, NEW DELHI. PAN: AAACC0174E VS. ADDL.CIT, RANGE-49, NEW DELHI. ITA NOS.21 & 25/DEL/2015 ASSESSMENT YEAR : 2006-07 ITA NOS.22 & 26/DEL/2015 ASSESSMENT YEAR : 2007-08 ITA NOS.5347/DEL/2011 ASSESSMENT YEAR : 2006-07 ITA NO.5349 /DEL/2011 ASSESSMENT YEAR : 2007-08 ADDL.CIT, RANGE-49(1)/73(1), NEW DELHI VS. C.J. INTERNATIONAL HOTELS LTD., HOTEL LE MERIDIAN, 8, WINDSOR PLACE, JANPATH, NEW DELHI. PAN: DELCO1385G ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 2 ASSESSEE BY : SHRI TARANDEEP SINGH, CA DEPTT. BY : MS SUSAN D. GEORGE, SR. DR DATE OF HEARING : 07.03.2016 DATE OF PRONOUNCEMENT : 10.03.2016 ORDER PER R.S. SYAL, AM: THIS BATCH CONTAINING FOUR APPEALS BY THE ASSESSEE AND SIX BY THE REVENUE RELATING TO FINANCIAL YEARS 2005-06 AND 2006- 07 ARISE OUT OF THE COMMON ORDER PASSED BY THE CIT( A) ON 2.9.2011. SINCE THESE APPEALS ARE BASED ON SIMILAR GROUNDS AND COMMON FACTS, WE ARE, THEREFORE, PROCEEDING TO DISP OSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONV ENIENCE. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF RUNNING A HOT EL UNDER THE NAME AND STYLE OF LE MERIDIAN. A SURVEY OPERAT ION WAS CONDUCTED U/S 133A OF THE INCOME-TAX ACT, 1961 (HER EINAFTER ALSO CALLED THE ACT) AT THE BUSINESS PREMISES OF THE ASSESSEE ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 3 ON 29.9.2006, WHICH HIGHLIGHTED CERTAIN DEFAULTS IN THE MATTER OF DEDUCTION OF TAX AT SOURCE FROM THE PAYMENTS MAD E BY THE ASSESSEE. NOTICE DATED 6.8.2007 U/S 201 WAS ISSUED ON THE PREMISE THAT THE ASSESSEE FAILED TO PROPERLY DEDUCT TAX AT SOURCE IN RESPECT OF CERTAIN PAYMENTS. IN A COMMON ORDER DATED 30.3.2011 PASSED BY THE ADDL. COMMISSIONER OF INCOME- TAX, RANGE 49, NEW DELHI [HEREINAFTER ALSO CALLED ` THE AO(TDS)] U/S 201(1)/(1A) OF THE ACT FOR FOUR YEARS , IT WAS OBSERVED THAT THE ASSESSEE MADE PAYMENTS TO FOUR PA RTIES INCLUDING M/S DIVYA AHUJA AND M/S GLOW SHOW STAGE E VENTS. THE ASSESSEE WAS FOUND TO HAVE DEDUCTED TAX AT SOUR CE ON PAYMENTS MADE TO THESE TWO PARTIES U/S 194C OF THE ACT. THE AO OPINED THAT THE TAX OUGHT TO HAVE BEEN WITHHELD ON SUCH PAYMENTS U/S 194J OF THE ACT INSTEAD OF SECTION 194 C, WHICH RESULTED INTO TREATING THE ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT. CONSEQUENTLY, INTEREST U/S 201(1A) WAS ALSO L EVIED. THE LD. CIT(A) ECHOED THE VIEW OF THE AO(TDS) ON THE PA YMENTS ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 4 MADE TO THESE TWO PARTIES. APART FROM THE ABOVE, T HE ASSESSEE WAS ALSO FOUND TO HAVE MADE PAYMENTS TO AUTH. BRIDG E RESEARCH SERVICES P. LTD. AND WANG PROFESSIONALS, A FTER DEDUCTION OF TAX AT SOURCE U/S 194C. IT IS A MATTE R OF RECORD THAT THE ASSESSEE WAS TREATED IN DEFAULT FOR THE SH ORT DEDUCTION OF TAX AT SOURCE IN RESPECT OF THE PAYMENTS MADE TO THESE TWO DEDUCTEES AS WELL. THE LD. CIT(A) ALLOWED RELIEF I N RESPECT OF THE ALLEGED SHORT DEDUCTION OF TAX AT SOURCE IN RES PECT OF PAYMENT MADE TO THESE TWO PARTIES. ALBEIT, THE REV ENUE HAS PREFERRED APPEALS AGAINST THE IMPUGNED ORDER, BUT, THE DECISION OF THE LD. CIT(A) ON THIS ASPECT HAS NOT BEEN ASSAI LED. 3. IN ADDITION, THE ASSESSEE WAS ALSO FOUND TO HA VE PAID TIPS TO ITS EMPLOYEES DURING THE TWO YEARS UNDER CONSIDE RATION ON WHICH NO DEDUCTION OF TAX AT SOURCE WAS MADE. THE AO TREATED SUCH TIPS TO EMPLOYEES AS PART OF `SALARIES . ON THE FAILURE OF THE ASSESSEE IN DEDUCTING TAX AT SOURCE U/S 192 OF THE ACT ON SUCH TIPS, THE AO TREATED THE ASSESSEE IN DE FAULT. ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 5 INTEREST UNDER SECTION 201(1A) OF THE ACT WAS ALSO LEVIED. THE LD. CIT(A) OVERTURNED THE ORDER OF THE AO (TDS) QUA PAYMENT OF TIPS TO THE EMPLOYEES. BOTH THE SIDES ARE IN APP EAL ON THEIR RESPECTIVE STANDS. COMBINED OR SEPARATE APPEALS AGAINST ORDER U/S 201(1) / (1A) FOR ONE YEAR ? 4.1. THE REVENUE INITIALLY FILED TWO APPEALS, ONE F OR EACH YEAR, AGAINST THE ORDER OF THE LD. CIT(A) AGAINST T HE RELIEF IN FIRST APPEAL. DURING THE COURSE OF HEARING ON AN EA RLIER OCCASION, THE LD. AR ARGUED BEFORE THE BENCH THAT T HE REVENUE OUGHT TO HAVE FILED SEPARATE APPEALS AGAINST THE OR DER U/S 201(1) AND 201(1A) FOR EACH YEAR. THE REVENUE FILED SEPARATE APPEALS STATING TO BE `ON THE ADVICE OF THE BENCH' FOR QUANTUM AND INTEREST IN RESPECT OF EACH OF THE YEARS WITH A CCOMPANYING LETTER FOR CONDONATION OF DELAY. THAT IS HOW, THER E ARE THREE APPEALS BY THE DEPARTMENT FOR EACH OF THE YEARS, NA MELY, ONE ORIGINAL CONSOLIDATED APPEAL BY THE REVENUE UNDER B OTH THE ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 6 SUB-SECTIONS OF SECTION 201 AND THEN SEPARATE APPEA LS FOR QUANTUM AND INTEREST. 4.2. THE LD. AR ARGUED THAT SEPARATE APPEALS FIL ED BY THE REVENUE FOR QUANTUM AND INTEREST HAVE BECOME TIME B ARRED AND ARE LIABLE TO BE DISMISSED. IT WAS FURTHER ARG UED THAT SINCE THE TAX EFFECT IN SOME OF THE SEPARATE APPEALS IS L ESS THAN RS.10 LAC PER APPEAL, THE SAME SHOULD BE DISMISSED IN VIE W OF THE LATEST CIRCULAR ISSUED BY THE CBDT MANDATING NON- FILING/WITHDRAWAL OF APPEALS FILED BY THE REVENUE W ITH TAX EFFECT OF LESS THAN RS.10 LAC. ON A SPECIFIC QUERY, IT WAS CANDIDLY ADMITTED THAT THE TAX EFFECT ON THE CONSOL IDATED APPEALS OF THE REVENUE FOR EACH YEAR IS MORE THAN R S.10 LAC. IN SUPPORT OF THE CONTENTION THAT SEPARATE APPEALS SHO ULD HAVE BEEN FILED, THE LD. AR RELIED ON CERTAIN ORDERS BY LARGELY FOCUSING ON THE DECISION OF MUMBAI BENCH OF THE TRI BUNAL IN ITO VS. VODAFONE ESSAR LTD. (2011) 44 SOT 304 . ON A POINTED QUERY, IT WAS ADMITTED THAT THOUGH THERE IS NO DIRE CT PRECEDENT ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 7 ON THE POINT LAYING DOWN THAT SEPARATE APPEALS SHOU LD BE FILED IN RESPECT OF QUANTUM AND INTEREST U/S 201, THE LD. AR SUBMITTED THAT IN THESE ORDERS SEPARATE APPEALS WER E PREFERRED, WHICH HAS NOT BEEN DISPUTED. THE LD. AR FORTIFIED H IS CONTENTION OF FILING SEPARATE APPEALS BY SUBMITTING THAT IN CERTAIN CASES THERE MAY BE THE ONLY LEVY OF INTERES T UNDER SECTION 201(1A) DE HORS ANY LIABILITY U/S 201(1) BECAUSE OF THE DEDUCTEE INCLUDING THE AMOUNT RECEIVED FROM THE DED UCTOR IN HIS TOTAL INCOME. 4.3. THE PRIMARY QUESTION WHICH ARISES FOR OUR CONS IDERATION IS AS TO WHETHER SEPARATE APPEALS ARE REQUIRED TO B E FILED AGAINST THE ORDER U/S 201(1) [QUANTUM] AND 201(1A) [INTEREST]. IN THIS REGARD, WE FIND THAT SECTION 246A DEALS WIT H APPEALABLE ORDERS BEFORE COMMISSIONER (APPEALS). SUB-SECTION ( 1) PROVIDES THAT ANY ASSESSEE OR ANY DEDUCTOR AGGRIEVE D BY ANY OF THE SPECIFIED ORDERS (WHETHER MADE BEFORE OR AFTER THE APPOINTED DAY) MAY APPEAL TO THE COMMISSIONER (APPE ALS). ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 8 CLAUSE (HA) OF THIS LIST CONTAINING APPEALABLE ORDE RS REFERS TO : `AN ORDER MADE UNDER SECTION 201 . THIS DECIPHERS THAT THE LEGISLATURE HAS MADE AN ORDER U/S 201 APPEALABLE BE FORE THE CIT(A). IT HAS DRAWN NO FURTHER DISTINCTION BETWEEN THE ORDER UNDER SUB-SECTIONS (1) OR (1A) OF SECTION 201. THE ORDER PASSED BY THE CIT(A) AGAINST THE ORDER U/S 201 [COV ERING ORDER PASSED BY THE AO(TDS) UNDER SUB-SECTION (1) AND ALS O (1A)] FALLS U/S 250(6) OF THE ACT. IT MEANS THAT THE AO(T DS) IS REQUIRED TO PASS A COMMON ORDER U/S 201 COVERING SU B-SECTIONS (1) AND (1A) AND ACCORDINGLY, CIT(A) IS ALSO OBLIGE D TO PASS ONE COMMON ORDER U/S 250(6) COVERING THE LIABILITY OF THE ASSESSEE UNDER BOTH THE SUB-SECTIONS OF SECTION 201 . SECTION 253 DEALS WITH APPEALS TO THE APPELLATE TRIBUNAL. T HIS SECTION LISTS THE ORDERS WHICH CAN BE APPEALED BEFORE THE T RIBUNAL. SUB- SECTIONS (1) AND (2) RESPECTIVELY AUTHORIZE ANY ASS ESSEE OR THE DEPARTMENT TO FILE APPEAL BEFORE THE TRIBUNAL AGAIN ST THE ORDERS PASSED UNDER SPECIFIC SECTIONS. IN BOTH THE SUB-SEC TIONS OF ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 9 SECTION 253, THERE IS A MENTION OF AN APPEAL AGAINS T THE ORDER PASSED BY THE CIT U/S 250, WHICH OBVIOUSLY REFERS T O A COMMON APPELLATE ORDER PASSED AGAINST ORDER UNDER S UB- SECTIONS (1) AND (1A) OF SECTION 201 OF THE ACT. TH IS SHOWS THAT THE LAW REQUIRES PASSING OF ONE ORDER BY THE A O(TDS) U/S 201, THEN ONE APPEAL AGAINST SUCH ORDER BEFORE THE CIT(A); AND THEN ONE APPEAL AGAINST THE ORDER OF CIT(A) U/S 250 BEFORE THE TRIBUNAL. THE LD. AR COULD NOT DRAW OUR ATTENTION TOWARDS ANY PROVISION IN THE ACT, MANDATING THE FILING OF SEPAR ATE APPEALS EITHER BEFORE THE CIT(A) OR THE TRIBUNAL AGAINST TH E ORDER COVERING DEFAULTS UNDER SUB-SECTION (1) AND SUB-SEC TION (1A) OF SECTION 201. IN THE ABSENCE OF ANY SUCH PROVISIO N, WE FAIL TO APPRECIATE AS TO HOW SUCH A REQUIREMENT CAN BE IMPO RTED IN THE STATUTE. IF THE CONTENTION OF THE LD. AR IS TAKEN T O ITS LOGICAL CONCLUSION, THEN THAT WOULD AUTOMATICALLY IMPLY THA T IN ALL CASES OF ASSESSMENTS WHERE ADDITIONS ARE MADE AND CONSEQUENTLY INTEREST IS CHARGED, THERE WOULD ARISE A NEED TO ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 10 FILE TWO APPEALS - ONE AGAINST THE ADDITIONS AND AN OTHER AGAINST THE INTEREST - WHICH PROPOSITION IS ABSURD AND ILLO GICAL. WHEN THIS POSITION WAS PUT ACROSS, THE LD. AR WAS FAIR E NOUGH TO CONCEDE THAT NONE OF THE DECISIONS CITED BY HIM HAS A PRECEDENT VALUE OF HAVING A RATIO DECIDENDI BY THE TRIBUNAL REQUIRING SEPARATE FILING OF APPEALS AGAINST LIABIL ITY U/S 201(1) AND INTEREST U/S 201(1A). WE, THEREFORE, JETTISON T HIS CONTENTION URGED ON BEHALF OF THE ASSESSEE. IT IS E RGO HELD THAT TWO ORIGINAL CONSOLIDATED APPEALS FILED BY THE REVE NUE FOR BOTH THE YEARS IN RESPECT OF DEFAULTS U/S 201(1) AN D 201(1A) ARE SUFFICIENT TO PROTECT THE INTEREST OF THE DEPAR TMENT AND THE FOUR SEPARATE APPEALS FILED SUBSEQUENTLY ARE INFRUC TUOUS. IN VIEW OF OUR THIS DECISION, THE QUESTION OF DELAY IN FILING OF SEPARATE APPEALS BY THE REVENUE BECOMES ACADEMIC AN D SO IS THE ARGUMENT OF THE LD. AR FOR DISMISSING SOME OF T HE REVENUES APPEALS, EACH WITH TAX EFFECT OF LESS THA N RS.10 LAC. ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 11 LIMITATION 5.1. THE LD. AR VEHEMENTLY ARGUED THAT THE ORDER PA SSED BY THE AO (TDS) IS BARRED BY LIMITATION IN SO FAR AS THE FINANCIAL YEAR 2005-06 IS CONCERNED. IT WAS PUT FORTH THAT TH E AO (TDS) PASSED ORDER ON 30.3.2011, WHICH IS BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE FINANCIAL YEAR 205-06 AND , HENCE, BARRED BY LIMITATION. IN SUPPORT OF THIS CONTENTION , HE RELIED ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COU RT PASSED IN THE ASSESSEES OWN CASE (COPY PLACED ON RECORD) AND ALSO CIT VS. HUTCHISON ESSAR TELECOM LTD. (2010) 323 ITR 230 (DEL). OUR ATTENTION WAS ALSO DRAWN TOWARDS AN ORDER PAS SED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE FINA NCIAL YEAR 2000-01 TO 2002-03 (IN ITA NO.5204/DEL/2011) IN WHI CH A VIEW FAVOURABLE TO THE ASSESSEE HAS BEEN TAKEN, A C OPY OF SUCH ORDER IS AVAILABLE ON PAGE 54 ONWARDS OF THE PAPER BOOK. THE LD. DR STRONGLY OPPOSED THE CONTENTION RAISED ON BE HALF OF THE ASSESSEE. ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 12 5.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. THERE ARE TWO PRINCIP AL QUESTIONS INVOLVED IN THIS ISSUE. FIRST IS THAT THE PERIOD O F FOUR YEARS AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IS TO BE RECKONED FROM THE END OF THE FINANCIAL YEAR OR THE RELEVANT ASSESSMENT YEAR? AND SECOND IS WHETHER SUCH LIMITAT ION IS FOR INITIATION OF PROCEEDINGS U/S 201(1)/(1A) OR FOR PA SSING OF THE ORDER. 5.3. AS REGARDS THE FIRST QUESTION, WE FIND THAT T HE TRIBUNAL HAS RECORDED ON PAGE 3 OF ITS ORDER PASSED IN THE A SSESSEES OWN CASE (IN ITA NO.5204/DEL/2011) THAT THE PROCEE DINGS CANNOT BE INITIATED AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THE HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE HAS ALSO HELD THAT A PERIOD OF FOUR YEARS IS RELEVANT. THERE IS NOT MUCH DISCUSSION AS TO WHETHER SUCH PER IOD OF FOUR YEARS SHOULD BE COUNTED FROM THE END OF THE RELEVAN T FINANCIAL YEAR OR THE RELEVANT ASSESSMENT YEAR. HOWEVER, WE F IND THAT ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 13 THE HONBLE JURISDICTIONAL HIGH COURT IN HUTCHISON ESSAR (SUPRA) , AND SOME OTHER CASES HAS CATEGORICALLY HELD THAT THE PERIOD OF FOUR YEARS IS FROM THE END OF THE FINANCI AL YEAR OR THREE YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. WHEN WE CONSIDER THE JUDGMENTS OF THE HONBLE JURIS DICTIONAL HIGH COURT ON THIS POINT, IT CLEARLY EMERGES THAT T HE PERIOD OF FOUR YEARS HAS TO BE RECKONED FROM THE END OF THE R ELEVANT FINANCIAL YEAR. 5.4. COMING TO THE SECOND QUESTION AS TO WHETHER SU CH PERIOD OF FOUR YEARS SHOULD BE RECOGNIZED FOR THE PURPOSES OF INITIATION OF PROCEEDINGS U/S 201(1)/(1A) OR FOR PA SSING OF THE ORDER, WE FIND THE CONTENTION OF THE LD. AR FOR APP LYING IT TO THE PASSING OF ORDER, UNACCEPTABLE. NOT ONLY THE T RIBUNAL IN THE ASSESSEES OWN CASE, BUT THE HONBLE JURISDICTI ONAL HIGH COURT HAS ALSO HELD THAT SUCH PERIOD IS ONLY FOR `I NITIATING PROCEEDINGS U/S 201. IT IS APPARENT FROM THE QUEST ION AS REFERRED TO IN PARA 1 OF THE JUDGMENT IN WHICH THE REFERENCE IS ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 14 TO INITIATION OF THE PROCEEDINGS AGAINST THE ASSESS EE IN DEFAULT WHO DOES NOT DEDUCT TAX AT SOURCE. SIMILAR POSITION IS BORNE OUT FROM THE JUDGMENT IN THE CASE OF HUTCHISON ESSAR (SUPRA) , IN WHICH THE ENTIRE DISCUSSION ABOUT THE PERIOD OF LIMITATION HAS BEEN MADE QUA INITIATION OF PROCEEDINGS U/S 201. NOWHERE ANY REFERENCE HAS BEEN MADE TO THE DATE OF PASSING OF ORDER U/S 201 VIS--VIS THE PERIOD OF LIMITATION OF FOUR YEARS. IN VIEW OF THE DIRECT JUDGMENTS OF THE HONBLE DELHI HIGH COUR T INCLUDING ONE RENDERED IN THE ASSESSEES OWN CASE, WE ARE OF THE CONSIDERED OPINION THAT IT IS THE INITIATION OF PROCEEDINGS U/S 201, WHICH HAS BEEN RELATED WITH A PERIOD OF FO UR YEARS FROM THE END OF THE RELEVANT FINANCIAL YEAR. TURNI NG TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THOUGH ORDE R U/S 201 WAS PASSED BY THE AO ON 30.3.2011, BUT THE PROCEEDINGS WERE COMMENCED BY WAY OF NOTICE DATED 6.8.2007, WHICH P ERIOD IS WITHIN FOUR YEARS FROM THE END OF THE RELEVANT FINA NCIAL YEAR 2005-06, WHICH EXPIRES ON 31.3.2010. SINCE THE PRO CEEDINGS ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 15 WERE COMMENCED BEFORE THIS CUTOFF DATE OF 31.3.2010 , WE REJECT THE ARGUMENT OF LIMITATION AS URGED BY THE L D. AR. PAYMENTS TO TWO PARTIES TDS U/S 194J OR 194C ? 6.1. NOW, WE TAKE UP THE NEXT ISSUE RAISED BY THE A SSESSEE IN ITS APPEALS AGAINST THE PAYMENTS MADE TO M/S DIVYA AHUJA FOR THE FINANCIAL YEARS 2005-06 AND 2006-07, ON WHICH I T DEDUCTED TAX AT SOURCE U/S 194C, BUT, THE LD. CIT(A) SUSTAIN ED THE ACTION OF THE AO(TDS) IN REQUIRING DEDUCTION OF TAX AT SOU RCE U/S 194J OF THE ACT AND CONSEQUENTIAL INTEREST THEREON. 6.2. M/S DIVYA AHUJA IS A GAZAL GROUP CONSISTING OF ONE MALE SINGER, ONE FEMALE SINGER AND THREE INSTRUMENTALIST S. WE HAVE GONE THROUGH THE AGREEMENT DATED 1.8.2008 FOR RENDI TION OF GAZALS BETWEEN M/S DIVYA AHUJA GAZAL GROUP AND THE ASSESSEE. THE LD. AR SUBMITTED THAT SIMILAR AGREEM ENTS PREVAILED FOR THE YEARS IN QUESTION, WHICH CONTENTI ON WAS NOT CONTROVERTED BY THE LD. DR. WE HAVE GONE THROUGH T HIS AGREEMENT, A COPY OF WHICH IS AVAILABLE AT PAGE 2 O NWARDS OF ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 16 THE PAPER BOOK. CLAUSE 2 OF THE AGREEMENT SETS OUT OBLIGATIONS OF M/S DIVYA AHUJA TO RENDER AND PERFORM GAZALS DUR ING THE WEEK AT PAKWAN RESTAURANT OF THE ASSESSEE AT THE TIMINGS GIVEN BY THE HOTEL. CLAUSE 2.6 OF THE AGREEMENT PRO VIDES THAT: GAZAL GROUP AGREES TO ALLOW THE HOTEL TO USE GAZAL GROUPS NAME, PHOTOGRAPHS IN PRIMARY ACTIVITIES, AMPLIFY TH E PERFORMANCES AND PLAY THE SAME THROUGHOUT THE PREMI SES OF THE HOTEL. THERE IS A FIXED SUM PAYABLE BY THE ASSESSE E TO GAZAL GROUP AS COMPENSATION FOR PERFORMING AT THE PAKWAN RESTAURANT. UNDER SUCH CIRCUMSTANCES, THE QUESTION ARISES AS TO WHETHER THE PAYMENT MADE TO GAZAL GROUP REQUIRES DE DUCTION OF TAX AT SOURCE U/S 194J OF THE ACT, AS HAS BEEN H ELD BY THE AUTHORITIES BELOW. 6.3. SECTION 194J REQUIRES DEDUCTION OF TAX AT SO URCE FROM FEES FOR PROFESSIONAL OR TECHNICAL SERVICES. SUB- SECTION (1) OF SECTION 194J PROVIDES THAT : `ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESP ONSIBLE FOR ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 17 PAYING TO A RESIDENT ANY SUM BY WAY OF (A) FEES F OR PROFESSIONAL SERVICES, OR (B) FEES FOR TECHNICAL S ERVICES OR . (C) ROYALTY, OR SHALL, DEDUCT AN AMOUNT EQUAL TO TEN PER CENT OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THEREIN. THE TERM PROFESSIONAL SERVICES AS USED IN CLAUSE (A) OF SECTION 194J(1) HAS BEEN DEFINED IN THE EXPLANATION AS UNDER : `(A) 'PROFESSIONAL SERVICES' MEANS SERVICES RENDER ED BY A PERSON IN THE COURSE OF CARRYING ON LEGAL, MEDICA L, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROF ESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR ADVERTISING OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD FOR THE PURPOSES OF SECTION 44AA OR OF THIS SECTION; 6.4. ON GOING THROUGH THE PRESCRIPTION OF FEES FOR PROFESSIONAL SERVICES, IT EMERGES THAT THE DEFINIT ION GIVEN IN CLAUSE (A) OF THE EXPLANATION IS EXHAUSTIVE AND NOT INCLUSIVE. IT IS MANIFEST THAT PAYMENT TO GAZAL GROUP CANNOT BE C ONSIDERED AS A QUID PRO QUO FOR RENDERING SERVICES IN THE CARRYING ON OF ANY LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PR OFESSION OR PROFESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 18 DECORATION OR ADVERTISING. WHAT REMAINS FOR CONSID ERATION IS THE LAST PART OF THE DEFINITION OF PROFESSIONAL SE RVICES BEING: SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD FOR THE PURPOSES OF SECTION 44AA OR OF THIS SECTION. SECTI ON 44AA DISCUSSES ABOUT ANY OTHER PROFESSION AS IS NOTIFIE D BY THE BOARD IN THE OFFICIAL GAZETTE. RULE 6F OF THE INC OME-TAX RULES, 1962 COVERS, INTER ALIA , FILM ARTIST, WHICH TERM HAS BEEN DEFINED IN CLAUSE (C) OF THE EXPLANATION TO RU LE 6F(2) AS UNDER:- (C) 'FILM ARTIST'' MEANS ANY PERSON ENGAGED IN HIS PROFESSIONAL CAPACITY IN THE PRODUCTION OF A CINEMATOGRAPH FILM WHETHER PRODUCED BY HIM OR BY AN Y OTHER PERSON, AS (I) AN ACTOR; (II) A CAMERAMAN; (III) A DIRECTOR, INCLUDING AN ASSISTANT DIRECTOR; (IV) A MUSIC DIRECTOR, INCLUDING AN ASSISTANT MUSIC DIRECTOR; (V) AN ART DIRECTOR, INCLUDING AN ASSISTANT ART DIR ECTOR; ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 19 (VI) A DANCE DIRECTOR, INCLUDING AN ASSISTANT DANCE DIRECTOR; (VII) AN EDITOR; (VIII) A SINGER; (IX) A LYRICIST; (X) A STORY WRITER; (XI) A SCREEN PLAY WRITER; (XII) A DIALOGUE WRITER; AND (XIII) A DRESS DESIGNER. 6.5. A PERUSAL OF THE DEFINITION OF FILM ARTIST G IVEN IN RULE 6F DIVULGES THAT IT REFERS TO ANY PERSON WHO IS ENG AGED IN HIS PROFESSIONAL CAPACITY IN THE PRODUCTION OF A CINEMA TOGRAPH FILM WHETHER OR NOT PRODUCED BY HIM IN THE CAPACITY OF AN ACTOR; A CAMERAMAN; A DIRECTOR, INCLUDING AN ASSIST ANT DIRECTOR; A MUSIC DIRECTOR, INCLUDING AN ASSISTANT MUSIC DIRE CTOR; AN EDITOR ETC. ALSO INCLUDING `A SINGER. NO DOUBT `A SINGER IS ALSO INCLUDED WITHIN THE DEFINITION OF A FILM ARTIST B UT, THE CONDITION PRECEDENT FOR SUCH INCLUSION IS THAT SUCH A SINGER ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 20 SHOULD BE `ENGAGED IN HIS PROFESSIONAL CAPACITY IN THE PRODUCTION OF A CINEMATOGRAPH FILM. UNLESS `A SING ER IS SO `ENGAGED IN HIS PROFESSIONAL CAPACITY IN THE PRODUC TION OF A CINEMATOGRAPH FILM WHETHER OR NOT PRODUCED BY HIM, HE CANNOT BE CONSIDERED AS A FILM ARTIST FOR THE PUR POSES OF RULE 6F AND, IN TURN, SECTION 194J OF THE ACT. 6.6. WHILE ANALYZING THE AGREEMENT BETWEEN THE AS SESSEE AND GAZAL GROUP, WE HAVE NOTICED THAT THERE IS NO PRODU CTION OF ANY CINEMATOGRAPH FILM DURING THE PERFORMANCE BY TH E GAZAL GROUP, WHICH IS SIMPLY A LIVE EVENT AND CAN BE AMPL IFIED THROUGHOUT THE PREMISES OF THE HOTEL. THERE IS NO C LAUSE IN THE AGREEMENT WHICH PERMITS THE ASSESSEE-HOTEL TO SHOOT THE PERFORMANCE GIVEN BY THE GAZAL GROUP AND USE IT FOR ANY PERFORMANCE THEREAFTER. SINCE GAZAL GROUP IS GIVING SIMPLICITOR LIVE PERFORMANCE, WHICH IS NOT EVEN CAP TURED, WHAT TO TALK OF RESULTING INTO ANY PRODUCTION OF CINEMAT OGRAPH FILM, WE HOLD THAT IT CANNOT BE CONSIDERED TO HAVE RENDER ED ANY ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 21 PROFESSIONAL SERVICES REQUIRING DEDUCTION OF TAX AT SOURCE U/S 194J OF THE ACT FROM THE PAYMENTS MADE BY THE ASSES SEE TO THEM. WE, THEREFORE, OVERTURN THE VIEW TAKEN BY THE AUTHORITIES BELOW IN THIS REGARD AND HOLD THAT THE PROVISIONS O F SECTION 194J ARE NOT APPLICABLE. EX CONSEQENTI, THE DEDUCTION OF TAX AT SOURCE U/S 194C IS IN ORDER. THE ASSESSEE SUCCEEDS . 7.1. THE NEXT ITEM UNDER DISPUTE IS PAYMENT BY THE ASSESSEE TO M/S GLOW SHOW STAGE EVENTS WHICH WAS MADE DURING TH E FINANCIAL YEAR 2006-07 AFTER DEDUCTION OF TAX AT SO URCE U/S 194C OF THE ACT. THE AO(TDS) HAS DISCUSSED THE NATU RE OF THIS PAYMENT ON PAGE 2 OF HIS ORDER BY NOTICING THAT THI S AGENCY WAS HIRED AS A `CONSULTANT FOR PROMOTING F&B (FOO D & BEVERAGES) OUTLET OF THE ASSESSEE PROVIDING SERVICE S LIKE ADVISORY SERVICES FOR PRODUCT UPGRADE, ENTERTAINMEN T, CONSULTANCY, SOURCING ENTERTAINMENT FROM WORLDWIDE. SUCH PAYMENT WAS HELD TO BE FALLING WITHIN THE AMBIT OF PROFESSIONAL OR CONSULTANCY SERVICES. THAT IS HOW , SECTION ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 22 194J WAS APPLIED TREATING THE ASSESSEE IN DEFAULT U /S 201(1) AND ALSO 201(1A). THE LD. CIT(A) AFFIRMED THE VIEW TAKEN BY THE AO ON THIS ISSUE. 7.2. WE HAVE GONE THROUGH THE AGREEMENT BETWEEN THE ASSESSEE AND M/S GLOW SHOW STAGE EVENTS, A COPY OF WHICH HAS BEEN PLACED ON PAGE 9 ONWARDS OF THE PAPER BOOK . THIS AGREEMENT IS, AGAIN, DATED 26.8.2008. THE LD. AR C ONTENDED THAT SIMILAR AGREEMENT WAS ENTERED INTO FOR THE YEA R IN QUESTION, WHICH SUBMISSION HAS REMAINED UNCONTROVER TED BY THE LD. DR. AS SUCH, WE ARE ESPOUSING THIS AGREEME NT FOR CONSIDERATION. THIS AGREEMENT PROVIDES THAT M/S GLO W SHOW STAGE EVENTS (CONSULTANT) ARE SPECIALIZED IN PROM OTIONAL AND EVENT HOTEL ACTIVITIES AND ARE WILLING TO HANDLE TH E ENHANCEMENT OF THE BRAND VALUE OF THE ASSESSEES F &B OUTLET. CLAUSE 2 PROVIDES THAT THE `CONSULTANT HAS AGREED TO RENDER SERVICES OF PROMOTING THE F&B OUTLET LE BELVEDERE RESTAURANT BY PROVIDING FOLLOWING SERVICES TO THE H OTEL:- ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 23 A. PROVIDE ADVISORY SERVICES IN TERMS OF THE PRODU CT OFFERING AND ANY UPGRADES THAT MAY HAPPEN FROM TIME TO TIME. B. ENTERTAINMENT CONSULTANCY FOR THE LE BELVEDERE RESTAURANT. C. SOURCING ENTERTAINMENT FROM WORLDWIDE RESOURCES D. OVERSEAS TRAVEL FOR THE SOURCING OF ENTERTAINMEN T. E. COORDINATING THE VISA AND TRAVEL ARRANGEMENTS OF THE ARTISTS BETWEEN THE HOTEL AND THE ARTISTS PRIOR TO THEIR ARRIVAL IN THE COUNTRY. F. ENSURING THAT THE ARTISTS ARE PUNCTUAL AND MAINT AINS THE SCHEDULE OF THE PERFORMANCE. G. COORDINATING WITH THE DIRECTOR OF FOOD & BEVERAG E AND THE CHIEF OPERATING OFFICER OF THE HOTEL IN ENS URING THAT THE RIGHT ENTERTAINMENT IS PROVIDED FOR THE RI GHT VENUE. 7.3. CLAUSE 3 OF THE AGREEMENT PROVIDES THAT IN CON SIDERATION TO THE SERVICES RENDERED BY THE CONSULTANT, THE HOT EL SHALL PAY A CONSOLIDATED AMOUNT OF RS.1 LAC PER MONTH TO THE CONSULTANT SUBJECT TO TDS. A CURSORY GLANCE AT THE NATURE OF SERVICES PROVIDED BY THE CONSULTANT, NAMELY, M/S GLOW SHOW S TAGE EVENTS, DISCERNS THAT THEY SHALL PROVIDE ADVISORY SERVICES AND ENTERTAINMENT CONSULTANCY FOR THE RESTAURANT OF THE ASSESSEE. SUB-CLAUSES (C) TO (F) OF CLAUSE 2 ARE I N THE NATURE ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 24 OF SOURCING ENTERTAINMENT FROM WORLDWIDE RESOURCES BY OVERSEEING THEIR TRAVEL ARRANGEMENTS ETC. THE LARG ER DUTY OF M/S GLOW SHOW STAGE EVENTS IS TO RENDER ADVISORY SE RVICES AND ENTERTAINMENT CONSULTANCY TO THE ASSESSEE. IT I S IN DISCHARGE OF RENDERING SUCH SERVICES THAT M/S GLOW SHOW STAGE EVENTS HAS TO FIND OUT RESOURCES WHICH CAN BE USED IN PROVIDING SUCH ENTERTAINMENT. IN FACT, THE SERVICES REFERRED TO SUB-CLAUSES (C) TO (F) ARE AN ESSENTIAL OUTCOME AND NECESSARILY FLOW FROM THE MAIN SERVICE OF PROVIDING `ENTERTAINM ENT CONSULTANCY. IT IS PERTINENT TO NOTE THAT PAYMENT FOR PERFORMANCE BY THE ACTUAL ENTERTAINERS AND THEIR ST AY ARRANGEMENTS IS THE SOLE RESPONSIBILITY OF THE ASSE SSEE-HOTEL AND M/S GLOW SHOW STAGE EVENTS HAS NOTHING TO DO WI TH IT AS IT IS SIMPLY CONCERNED WITH THEIR FIXED MONTHLY FEE , WHICH IS NOT DEPENDENT ON THE SUCCESSFUL SOURCING OF A PARTI CULAR ENTERTAINMENT FROM WORLDWIDE RESOURCES. IT IS FURTH ER PALPABLE THAT THERE IS NO SEPARATE BIFURCATION OF THE FEE PA YABLE BY THE ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 25 ASSESSEE TO M/S GLOW SHOW STAGE EVENTS QUA THE SERVICES RENDERED UNDER SUB-CLAUSES (A) TO (G) OF CLAUSE 2 O F THE AGREEMENT. TAKING A HOLISTIC VIEW OF THE SERVICES R ENDERED BY M/S GLOW SHOW STAGE EVENTS, THE INESCAPABLE CONCLUS ION WHICH FOLLOWS IS THAT THE NATURE OF SERVICES PROVID ED BY THEM ARE `CONSULTANCY. IN OUR CONSIDERED OPINION, SUCH PAYMENT FALLS WITHIN THE PURVIEW OF SECTION 194J OF THE ACT . THE CONTENTION OF THE ASSESSEE THAT THE PROVISIONS OF S ECTION 194C WERE APPLICABLE, IS HEREBY REPELLED AS SANS MERIT. 7.4. THE NEXT PLANK OF THE ARGUMENTS OF THE LD. AR WAS THAT EVEN IF PAYMENT TO M/S GLOW SHOW STAGE EVENTS WAS CONSIDERED AS COVERED U/S 194J, THE ASSESSEE STILL COULD NOT BE TREATED IN DEFAULT BECAUSE THE RECEIPTS FROM THE AS SESSEE WERE INCLUDED BY THE PAYEE IN ITS TOTAL INCOME. 7.5. IN THIS REGARD, WE FIND THAT THE HONBLE SU PREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES LTD. VS. CIT (2007) 293 ITR 226 (SC) HAS HELD THAT WHERE THE PAYEE HAS ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 26 ALREADY PAID TAX ON THE INCOME ON WHICH THERE WAS A SHORT DEDUCTION OF TAX AT SOURCE, RECOVERY OF TAX CANNOT BE MADE ONCE AGAIN FROM THE TAX DEDUCTOR. GIVING RECOGNITIO N TO THE PRINCIPLE LAID DOWN BY THE HONBLE SUMMIT COURT IN HINDUSTAN COCA COLA BEVERAGES PVT. LTD . (SUPRA) , THE LEGISLATURE HAS NOW INSERTED PROVISO TO SECTION 201(1) BY THE FINANCE A CT, 2012. THIS PROVISO STIPULATES THAT THAT ANY PERSON WHO FA ILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER ON THE SUM PAID/CREDITED TO A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN D EFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT (I) HAS FURN ISHED HIS RETURN OF INCOME UNDER SECTION 139; (II) HAS TAKE N INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETUR N OF INCOME; AND (III) HAS PAID THE TAX DUE ON THE INC OME DECLARED BY HIM IN SUCH RETURN OF INCOME, AND THE PERSON FUR NISHES A CERTIFICATE TO THIS EFFECT. IN VIEW OF THE JUDGMEN T IN HINDUSTAN COCA COLA BEVERAGES PVT. LTD . (SUPRA) , WE HOLD IN PRINCIPLE ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 27 THAT IF DEDUCTEE HAS INCLUDED AMOUNT RECEIVED FROM THE DEDUCTOR IN HIS TOTAL INCOME, THEN, THERE CAN BE NO OBLIGATION U/S 201(1) ON THE PERSON RESPONSIBLE. BUT, IN SUCH CIRCUMSTANCES, IT IS ALWAYS OBLIGATORY ON THE PART OF THE DEDUCTOR TO LEAD EVIDENCE SHOWING THAT THE DEDUCTEE HAS INCLUDED THE AMOUNT RECEIVED FROM HIM IN HIS TOTAL INCOME AND PAID TAX DUE THEREON. THIS RESPONSIBILITY FALLS ON THE ASSESSEE WHO IS OBLIGED TO SHOW IT TO THE SATISFACTION OF TH E DEPARTMENT THAT THE DEDUCTEE INCLUDED THE AMOUNT RECEIVED FROM HIM IN HIS TOTAL INCOME. REVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THOUGH THERE IS A CONTENTION RAISED ON BEHALF OF THE ASSESSEE THAT THE DEDUCTEE, NAMELY, M/S GLOW SHOW S TAGE EVENTS, INCLUDED AN AMOUNT RECEIVED FROM THE ASSESS EE IN ITS TOTAL INCOME, BUT THERE IS NO EVIDENCE WHATSOEVER A VAILABLE IN THIS REGARD. ACCEPTING THE CONTENTION OF THE LD. A R, WE GIVE AN OPPORTUNITY TO THE ASSESSEE TO LEAD EVIDENCE BEF ORE THE AO (TDS) TO DEMONSTRATE THAT M/S GLOW SHOW STAGE EVENT S ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 28 INCLUDED THE AMOUNT RECEIVED FROM THE ASSESSEE IN I TS TOTAL INCOME. IF THE ASSESSEE SUCCESSFULLY SHOWS THAT THE AMOUNTS RECEIVED BY THE DEDUCTEE WERE INCLUDED IN HIS TOTAL INCOME, THEN TO THAT EXTENT, THERE WILL BE NO LIABILITY ON THE ASSESSEE U/S 201(1) OF THE ACT. 7.6. IT IS HOWEVER PERTINENT TO NOTE THAT THE JUDGM ENT HINDUSTAN COCA COLA BEVERAGES PVT. LTD . (SUPRA) DOES NOT DISCHARGE THE OBLIGATION OF THE ASSESSEE TOWARDS IN TEREST U/S 201(1A) NOTWITHSTANDING THE OBLITERATION OF DEMAND U/S 201(1) OF THE ACT. THEIR LORDSHIPS IN PARA 10 OF THIS JUDG MENT HAVE CATEGORICALLY UPHELD THE LIABILITY OF THE ASSESSEE TOWARDS INTEREST BY RELYING ON CIRCULAR NO. 275/201/95-IT(B ), DT. 29TH JAN., 1997 ISSUED BY THE CBDT, DECLARING THAT THIS WILL NOT ALTER THE LIABILITY TO CHARGE INTEREST UNDER S. 201 (1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE. IT IS FURTHER OBSERVED THAT PROVISO TO SUB-SECTION (1A) OF SECTIO N 201 PROVIDES IN UNAMBIGUOUS TERMS THAT IN CASE ANY PERS ON FAILS TO ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 29 DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDAN CE WITH THE PROVISIONS OF THIS CHAPTER ON THE SUM PAID TO A RES IDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT BUT I S NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVIS O OF SUB- SECTION (1), THE INTEREST UNDER CLAUSE (I) SHALL BE PAYABLE FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DA TE OF FURNISHING OF RETURN OF INCOME BY SUCH RESIDENT. TH IS PROVISO REAFFIRMS THE LIABILITY OF THE ASSESSEE TOWARDS INT EREST IRRESPECTIVE OF THE DELETION OF LIABILITY U/S 201(1 ) ON THE REASON OF PAYEE INCLUDING RECEIPTS FROM THE PERSON RESPONS IBLE IN HIS INCOME. 7.7. TO SUM UP, WE HOLD THAT PAYMENT MADE TO M/S GLOW SHOW STAGE EVENTS REQUIRES DEDUCTION OF TAX U/S 194 J OF THE ACT. THERE WILL BE NO LIABILITY OF THE PAYER U/S 2 01(1) TO THE EXTENT OF THE PAYEE INCLUDING THE AMOUNT RECEIVED I N ITS TOTAL INCOME AND PAYING TAX THEREON. HOWEVER, LIABILITY TOWARDS INTEREST U/S 201(1A) WILL STILL BE THERE FROM THE D ATE ON WHICH ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 30 SUCH TAX WAS DEDUCTIBLE TO THE DATE OF FURNISHING O F RETURN OF INCOME BY M/S GLOW SHOW STAGE EVENTS EVEN IF THE AS SESSEE IS NOT TREATED AS IN DEFAULT U/S 201(1). TDS ON TIPS TO EMPLOYEES 8.1. THE SOLITARY GRIEVANCE OF THE REVENUE IN ITS A PPEALS FOR BOTH THE YEARS UNDER CONSIDERATION IS AGAINST THE D IRECTION OF THE LD. CIT(A) IN HOLDING THAT THE ASSESSEE SHOULD NOT BE TREATED IN DEFAULT U/S 201(1) FOR NON-DEDUCTION OF TAX AT SOURCE FROM TIPS MADE TO EMPLOYEES AND CONSEQUENTLY NO INT EREST BE CHARGED UNDER SUB-SECTION (1A). THE FACTS APROPOS T HIS ISSUE ARE THAT THE ASSESSEE WAS FOUND TO HAVE ADDED SOME TIPS FROM ITS CUSTOMERS IN THE BILLS AND THE SAME WERE GIVEN TO EMPLOYEES WITHOUT DEDUCTING ANY TAX AT SOURCE, APAR T FROM CERTAIN TIPS GIVEN DIRECTLY BY THE CUSTOMERS TO THE STAFF. THE AO HELD THAT TIPS INCLUDED IN THE BILLS WERE IN THE NATURE OF SALARIES TO THE EMPLOYEES COVERED U/S 17(1)(IV) R EAD WITH SECTION 17(3)(II) AND HENCE DEDUCTION OF TAX AT SOU RCE WAS ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 31 REQUIRED U/S 192 OF THE ACT. HE DETERMINED SUCH LI ABILITY U/S 201(1) FOR BOTH THE YEARS IN QUESTION AND ALSO WORK ED OUT THE AMOUNT OF INTEREST UNDER SUB-SECTION (1A). THE LD. CIT(A) UPHELD THE VIEW POINT OF THE AO(TDS) ON THIS ISSUE, BUT ALLOWED RELIEF UNDER SUB-SECTIONS (1)/(1A) OF SECTI ON 201 BY TREATING SUCH DEFAULT AS A BONA FIDE BELIEF OF THE ASSESSEE IN NOT DEDUCTING TAX AT SOURCE. THIS WAS SO DECIDED B Y RELYING ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT CAPTIO NED AS CIT VS. ITC LTD. (2011) 338 ITR 598 (DEL) , WHICH ALSO INCLUDE THE ASSESSEE AS ONE OF THE RESPONDENTS. THE REVENUE IS AGGRIEVED AGAINST THE RELIEF ALLOWED IN THE FIRST A PPEAL ON THIS ISSUE. 8.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE O N THE FACT THAT THE AMOUNT IN QUESTION REPRESENTS TIPS ADDED I N THE CUSTOMER BILLS AND IN TURN GIVEN TO STAFF ON REGULA R INTERVAL ON POINT BASIS. INSOFAR AS THE OBLIGATION OF DEDUCTION OF TAX AT ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 32 SOURCE ON THE AMOUNT OF TIPS IS CONCERNED, WE FIND THAT THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE CAP TIONED AS ITC LTD. (SUPRA), IN WHICH IT HAS BEEN CLEARLY HELD THAT ONCE THE TIPS ARE PAID BY THE CUSTOMERS EITHER IN CASH D IRECTLY TO THE EMPLOYEES OR BY WAY OF CHARGE TO THE CREDIT CARDS I N THE BILLS, THE EMPLOYEES CAN BE SAID TO HAVE GAINED ADDITIONAL INCOME. WHEN THE TIPS ARE RECEIVED BY THE EMPLOYEES DIRECTL Y IN CASH, THE EMPLOYER HARDLY HAS ANY ROLE AND IT MAY NOT BE EVEN KNOWING THE AMOUNT OF TIPS COLLECTED BY THE EMPLOYE ES. THAT WOULD RIGHTLY BE OUT OF THE PURVIEW OF RESPONSIBILI TY OF THE EMPLOYER UNDER S. 192 OF THE ACT. BUT, HOWEVER, WHE N THE TIPS ARE CHARGED TO THE BILL EITHER BY WAY OF FIXED PERC ENTAGE OF AMOUNT, SAY 10 PER CENT OR SO ON THE TOTAL BILL, OR WHERE NO PERCENTAGE WAS SPECIFIED AND AMOUNT IS INDICATED BY THE CUSTOMER ON THE BILL AS A TIP, THE SAME GOES INTO T HE RECEIPT OF THE EMPLOYER AND IS SUBSEQUENTLY DISBURSED TO THE E MPLOYEES ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 33 DEPENDING UPON THE NATURE OF UNDERSTANDING AND AGRE EMENT BETWEEN THE EMPLOYERS AND THE EMPLOYEES. IT HAS BE EN HELD BY THE HONBLE HIGH COURT THAT SUCH RECEIPTS AT THE HA NDS OF EMPLOYEES ARE NOTHING BUT THEIR INCOME FOR THE PURP OSE OF S. 15 AND AS SUCH THE EMPLOYER WAS AN ASSESSEE-IN-DEF AULT FOR NON-DEDUCTION OF TAX AT SOURCE ON ACCOUNT OF BANQUE T AND RESTAURANT TIPS COLLECTED AND PAID BY IT TO ITS EMP LOYEES. 8.3. NOW, COMES THE QUESTION OF OBLIGATION OF THE EMPLOYER IN DEDUCTING TAX AT SOURCE ON SUCH TIPS U/S 192 OF THE ACT. AT THIS JUNCTURE, WE CONSIDER IT EXPEDIENT TO DISCUSS THE J UDGMENT DT. 25TH MARCH, 2009 DELIVERED BY THE HONBLE APEX COUR T IN CIT VS. ELI LILLY & COMPANY (INDIA) (P) LTD. (2009) 312 ITR 225 (SC ). IN THIS CASE, THE ISSUE FOR CONSIDERATION WAS AB OUT THE HOME SALARY/SPECIAL ALLOWANCE(S) PAID ABROAD TO EXP ATRIATE EMPLOYEES BY THE FOREIGN COMPANY, PARTICULARLY WHEN NO WORK STOOD PERFORMED FOR THE FOREIGN COMPANY AND THE TOT AL REMUNERATION WAS PAID ONLY ON ACCOUNT OF SERVICES R ENDERED IN ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 34 INDIA DURING THE PERIOD IN QUESTION. THE HONBLE SU PREME COURT HELD THAT SEC. 192(1) HAS TO BE READ WITH S. 9(1)(II) AND THE EXPLANATION THERETO AND THUS THE ASSESSEE WAS D UTY-BOUND TO DEDUCT TAX AT SOURCE UNDER S. 192(1). THEIR LORD SHIPS BIFURCATED THE DECISION PART IN FOUR COMPARTMENTS A ND GAVE SEPARATE DECISION ON EACH OF THEM. THE SECOND PART WAS ON THE SCOPE OF SECTION 192(1). HERE IT WAS HELD THAT : `I N SUCH A CASE THE TAX-DEDUCTOR-ASSESSEE WAS STATUTORILY OBLIGED T O DEDUCT TAX UNDER S. 192(1) OF THE 1961 ACT. THE THIRD PART WA S ON THE SCOPE OF S. 201(1) AND S. 201(1A). IN THIS REGARD, IT WAS HELD THAT THE OBJECT UNDERLYING S. 201(1) IS TO RECOVER TAX. IN THE CASE OF SHORT DEDUCTION, THE OBJECT IS TO RECOVER T HE SHORTFALL. AS FAR AS THE PERIOD OF DEFAULT IS CONCERNED, THE P ERIOD STARTS FROM THE DATE OF DEDUCTIBILITY TILL THE DATE OF ACT UAL PAYMENT OF TAX. THEREFORE, THE LEVY OF INTEREST HAS TO BE REST RICTED FOR THE ABOVE STATED PERIOD ONLY. THE AO WAS DIRECTED VIDE PARA 37 OF THE JUDGMENT : `TO EXAMINE EACH CASE TO ASCERTAIN W HETHER THE ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 35 EMPLOYEE-ASSESSEE (RECIPIENT) HAS PAID THE TAX DUE ON THE HOME SALARY/SPECIAL ALLOWANCE(S) RECEIVED FROM THE FOREIGN COMPANY. IN CASE TAXES DUE ON HOME SALARY/SPECIAL ALLOWANCE(S) STAND PAID THEN THE AO SHALL NOT PROCE ED UNDER S. 201(1). IN CASES WHERE THE TAX HAS NOT BEEN PAID, T HE AO SHALL PROCEED UNDER S. 201(1) TO RECOVER THE SHORTFALL IN THE PAYMENT OF TAX. AS REGARDS THE INTEREST LIABILITY U/S 201 (1A), THEIR LORDSHIPS HELD THAT : `THE AO SHALL EXAMINE AND FIN D OUT WHETHER INTEREST HAS BEEN PAID/RECOVERED FOR THE PE RIOD BETWEEN THE DATE ON WHICH TAX WAS DEDUCTIBLE TILL T HE DATE ON WHICH THE TAX WAS ACTUALLY PAID. IF, IN ANY CASE, I NTEREST ACCRUES FOR THE AFORESTATED PERIOD AND IF IT IS NOT PAID THEN THE ADJUDICATING AUTHORITY SHALL TAKE STEPS TO RECOVER INTEREST FOR THE AFORESTATED PERIOD UNDER S. 201(1A). THE LAST PART TAKEN UP WAS ON THE SCOPE OF PENALTY S. 271C FOR FAILURE TO DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQUIRED BY THE PROVISIONS OF CHAPTER XVII-B. ON THIS SCORE, IT WAS HELD THAT SECTION ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 36 271C IS SUBJECT TO SECTION 273B WHICH PROVIDES THAT NO PENALTY SHALL BE IMPOSED ON THE ASSESSEE FOR FAILURE TO DED UCT TAX AT SOURCE IF HE PROVES THAT THERE WAS A REASONABLE CAU SE FOR THE SAID FAILURE. IT WAS FINALLY HELD THAT NO PENALTY W AS EXIGIBLE UNDER S. 271C AS THE RESPONDENT DISCHARGED ITS BURD EN OF SHOWING REASONABLE CAUSE FOR FAILURE TO DEDUCT TAX AT SOURCE. FROM THE ABOVE DISCUSSION IT TRANSPIRES THAT THE LI ABILITY TO DEDUCT TAX AT SOURCE U/S 192 HAS BEEN SUSTAINED, TH E FAILURE OF WHICH ATTRACTS CONSEQUENCES U/S 201(1)/(1A) SUBJECT TO THE EMPLOYEES INCLUDING THE AMOUNT IN THEIR TOTAL INCOM E AND PAYING DUE TAX THEREON AND ALSO THE PERIOD OF DEFAU LT. IT WAS ONLY ON THE QUESTION OF PENALTY U/S 271C, THAT THEI R LORDSHIPS DELETED THE PENALTY ON THE GROUND OF BONA FIDE BELIEF OF THE ASSESSEE. 8.4. NOW WE TAKE UP THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF T HE ASSESSEE CAPTIONED AS CIT VS. ITC LTD. (SUPRA) . IN THIS CASE, THE ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 37 QUESTION WAS IDENTICAL TO THE ONE BEFORE US, NAMELY , TAXABILITY OF TIPS IN THE HANDS OF THE EMPLOYEES AND LIABILITY OF THE ASSESSEE-EMPLOYER TO DEDUCT TAX AT SOURCE U/S 192 O F THE ACT ON SUCH AMOUNT OF TIPS AND CONSEQUENCES FOR NON-DED UCTION U/S 201(1) AND (1A). WE HAVE DISCUSSED SUPRA THAT SUCH TIPS HAVE BEEN HELD BY THE HONBLE HIGH COURT TO BE CHAR GEABLE TO TAX IN THE HANDS OF EMPLOYEES. HOWEVER, AS REGARDS THE OBLIGATION OF THE EMPLOYER TO DEDUCT TAX AT SOURCE AND THE CONSEQUENTIAL LIABILITY U/S 201(1), THE HONBLE CO URT HELD THAT THE BENEFIT OF BONA FIDE BELIEF BE GIVEN TO THE ASSESSEES. FOLLOWING IS THE RELEVANT EXTRACTION FROM THE JUDGM ENT : - SINCE THE TAXES WERE TO BE DEDUCTED FROM THE AMOUN TS, WHICH WERE THE DUES OF THE EMPLOYEES, NO DISHONEST INTENTIONS COULD BE ATTRIBUTED TO THE ASSESSEES. TH US, WHILE REITERATING THE CONCLUSION THAT THE RECEIPTS OF THE TIPS CONSTITUTE INCOME OF THE RECIPIENTS AND IS CHARGE ABLE UNDER THE HEAD SALARY UNDER S. 15 AND THAT IT WAS OBLIGATORY UPON THE ASSESSEES TO DEDUCT TAXES AT SO URCE FROM SUCH PAYMENTS UNDER S. 192, IN THE GIVEN CIRCUMSTANCES, THE BENEFIT OF BONA FIDE BELIEF TO T HE ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 38 ASSESSEES CAN BE GIVEN FOR THE PERIODS UPTO THE ASSESSMENT YEARS IN QUESTION. IN THE GIVEN CIRCUMSTANCES, THE CAUSE OF NON-DEDUCTION OF TAXES AS SUBMITTED APPEARS TO BE SUFFICIENT BEING ADEQUATE, RELIABLE AND SOUND. BASE D ON THIS REASONING, ONE CANNOT MAKE THEM LIABLE FOR LEVY OF PENALTY AS ENVISAGED UNDER S. 201 . 8.5. HOWEVER, LEVY OF INTEREST UNDER S. 201(1A) H AS BEEN HELD BY THE HONBLE HIGH COURT TO BE MANDATORY AND ACCOR DINGLY THE SAME WAS SUSTAINED BY HOLDING THAT THE SAME IS NEITHER TREATED AS PENALTY NOR THE SAID PROVISION HAS BEEN INCLUDED IN SECTION 273B TO MAKE REASONABLENESS OF THE CAUSE FOR THE FAILURE TO DEDUCT. IT WAS, THEREFORE, HELD THAT : THERE IS, THEREFORE, NO QUESTION OF WAIVER OF SUCH INTEREST O N THE BASIS THAT THE DEFAULT WAS NOT INTENTIONAL OR ON ANY OTHE R BASIS. 8.6. IT CAN BE NOTICED THAT THIS JUDGMENT OF THE HONBLE DELHI HIGH COURT WAS RENDERED ON 11.5.2011, WHICH IS MUCH AFTER THE ADVENT OF THE JUDGMENT OF THE HONBLE SUPREME C OURT IN ELI LILLY & COMPANY (SUPRA) GIVEN ON 25TH MARCH, 2009. IN THE ABSENCE OF THE LD. DR SHOWING THAT SUCH JUDGMEN T OF THE ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 39 HONBLE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE HAS BEEN MODIFIED IN ANY MANNER, WE RESPECTFULLY FO LLOW THE SAME. CONSEQUENTLY, BENEFIT OF BONA FIDE BELIEF WILL BE AVAILABLE TO THE ASSESSEE, INSOFAR AS SECTION 201(1 ) IS CONCERNED, IN THE PERIOD ANTERIOR TO THE DATE OF TH E JUDGMENT, WHICH IS 11.5.2011. AS THE ORDER PASSED BY THE AO(T DS) FOR ALL THE YEARS IN QUESTION IS DATED 30.3.2011, WE HO LD THAT THE LD. CIT(A) WAS JUSTIFIED IN WAIVING THE LIABILITY U /S 201(1) VIS- -VIS TIPS GIVEN TO THE EMPLOYEES. 8.7. HOWEVER, THE OBLIGATION FOR INTEREST U/S 201 (1A) STILL REMAINS AS HAS BEEN CLARIFIED BY THE HONBLE DELHI HIGH COURT IN THE AFORESTATED CASE OF THE ASSESSEE WITH THE CA PTION OF ITC LTD. (SUPRA) . THE ACTION OF THE LD. CIT(A) IN ALSO ERASING THE LIABILITY U/S 201(1A) IS, THEREFORE, SET ASIDE. WE , THEREFORE, HOLD THAT THE ASSESSEE IS LIABLE FOR INTEREST U/S 2 01(1A) IN RESPECT OF NON-DEDUCTION OF TAX AT SOURCE FROM TIPS GIVEN TO ITS STAFF. ITA NOS.4791, 4792, 4793, 4794,5347 & 5349 /DEL/201 1 ITA NOS.21,22, 25&26/DEL/2015 40 9. IN THE RESULT, THE APPEALS OF THE ASSESSEE FOR B OTH THE YEARS UNDER CONSIDERATION ARE PARTLY ALLOWED; TWO S EPARATE APPEALS FOR EACH YEAR FILED BY THE REVENUE ARE DISM ISSED AS INFRUCTUOUS; AND CONSOLIDATED APPEALS OF THE REVENU E FOR EACH OF THE TWO YEARS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.03.2016. SD/- SD/- [A.T. VARKEY] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 10 TH MARCH, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.
