M/s. Foxconn India Developer (P) Ltd., Kancheepuram V. ITO, CHENNAI

ITA 492/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61066 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 24-04-2012
• Assessment Year: misc
• Appeal Filed On: 19-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR YOG ESH KAMAT IRS
• Keywords: Capital asset; Business income; Non-deduction of tax
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 492/MDS/2010 ASSESSMENT YEAR : 2007-08 M/S FOXCONN INDIA DEVELOPER (P) LTD., SIPCOT HI TECH SEZSIPCOT INDUSTRIAL PARK, PHASE II, SUNGUVARCHATRAM TK. KANCHEEPURAM. PAN : AABCF0043Q (APPELLANT) V. THE INCOME TAX OFFICER, TDS WARD II(3), CHENNAI - 600 034 . (RESPONDENT) APPELLANT BY : SHRI VIKRAM VIJAYARAGHAVAN, ADVOCA TE RESPONDENT BY : DR. YOGESH KAMAT, IRS, SR .DR DATE OF HEARING : 24.04.2012 DATE OF PRONOUNCEMENT : 30.04.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEVANC E IS TWO-FOLD. FIRST IS THAT THE CIT(APPEALS) CONFIRMED THE ACTION OF TH E A.O. CONSIDERING UPFRONT CHARGES PAID BY THE ASSESSEE TO SIPCOT FOR ALLOTMENT OF LAND AS RENT ADVANCE, MAKING THE ASSESSEE LIABLE FOR DEDUCT ION OF TAX AT SOURCE UNDER SECTION 194-I OF INCOME-TAX ACT, 1961 (IN SHO RT 'THE ACT'). AS PER THE ASSESSEE, THE PAYEE HAVING SHOWN THE AMOUNT AS A PART OF ITS 2 I.T.A. NO. 492/MDS/10 INCOME, ASSESSEE COULD NOT BE CONSIDERED AS ONE IN DEFAULT NOR COULD BE THERE ANY QUESTION OF LEVY OF INTEREST UNDER SEC TION 201(1A) OF THE ACT. 2. SHORT FACTS APROPOS ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING SPECIAL ECONOMIC ZONE (SEZ) AS PER SP ECIAL ECONOMIC ZONE ACT AND RULES, IN NOTIFIED AREAS. ASSESSEE HA D TAKEN ON LEASE A LAND OF 151.85 ACRES FOR A PERIOD OF 99 YEARS FROM M/S SIPCOT LTD., WHICH IS A COMPANY INCORPORATED BY THE GOVERNMENT O F TAMIL NADU UNDER COMPANIES ACT, 1956. AN AMOUNT OF ` 28.41 CRORES WAS PAID BY THE ASSESSEE-COMPANY TO M/S SIPCOT LTD. AS UPFRONT CHARGES FOR THE LEASE. M/S SIPCOT LTD. IS THE NODAL AGENCY FOR DEV ELOPMENT OF LAND FOR SEZ AT SRIPERUMBUDUR. AS PER THE ALLOTMENT LETTER DATED 11.1.2007 OF M/S SIPCOT AND THE LEASE DEED ENTERED BY THE ASSESS EE WITH M/S SIPCOT LTD. DATED 30.4.2008, THE ANNUAL LEASE RENT WAS ` 1 PER YEAR FOR 98 YEARS AND ` 2 FOR THE 99 TH YEAR. SUCH AMOUNTS WERE ALSO PAID IN ADVANCE. THE UPFRONT FEE WAS NON-REFUNDABLE. SUCH UPFRONT FEE CONSISTED OF ` 27.092 CRORES, NON-REFUNDABLE UPFRONT CHARGES AND ` 1.3215 CRORES BEING PAYMENT TOWARDS PROVISION OF WA TER AND PIPELINE UPTO THE BOUNDARY LIMIT. ASSESSING OFFICER WAS OF THE OPINION THAT SUCH AMOUNTS PAID CAME WITHIN THE DEFINITION OF RENT A S PER THE EXPLANATION TO SECTION 194-I OF THE ACT. ACCORDING TO HIM, ASSE SSEE WAS BOUND TO 3 I.T.A. NO. 492/MDS/10 DEDUCT TAX AT SOURCE AT THE RATE OF 20%, WHICH IT H AD NOT DONE. A.O. ALSO NOTED THAT M/S SIPCOT LTD. THOUGH OWNED BY TAMIL NA DU GOVERNMENT, WAS A COMPANY FORMED UNDER COMPANIES ACT, 1956. HE , THEREFORE, RAISED A DEMAND ON THE ASSESSEE FOR ` 6,43,84,991/- UNDER SECTION 201(1) OF THE ACT, CONSIDERING THE ASSESSEE AS ONE IN DEFAULT AND ALSO LEVIED INTEREST OF ` 1,73,86,623/- UNDER SECTION 201(1A) OF THE ACT. 3. ASSESSEE IN ITS APPEAL BEFORE LD. CIT(APPEALS), SUBMITTED THAT THE AMOUNT PAID WAS FOR ALLOTMENT OF LAND AND THIS WAS A CAPITAL ASSET AND SO CONSIDERED IN ITS BOOKS OF ACCOUNTS. THE AMOUNT PAID FOR PROVIDING WATER PIPELINE WAS ALSO A PART OF CAPITAL COST, AS PER THE ASSESSEE. THEREFORE, ACCORDING TO IT, SUCH PAYMENTS WERE NOT COMING WITHIN THE PURVIEW OF SECTION 194-I OF THE ACT. ASSESSEE ALSO BROUGHT TO THE NOTICE OF LD. CIT(APPEALS) THAT THE RECIPIENT COMPANY, NAM ELY, M/S SIPCOT LTD. HAD OFFERED THE AMOUNT AS ITS BUSINESS INCOME AND P AID TAX THEREON. RELYING ON THE DECISION OF HONBLE APEX COURT IN TH E CASE OF HINDUSTAN COCA COLA BEVERAGES P. LTD. V. CIT (293 ITR 226), A SSESSEE ARGUED THAT NO LIABILITY COULD BE FASTENED ON THE ASSESSEE FOR NON-DEDUCTION OF TAX AT SOURCE SINCE THE RECIPIENT HAD OFFERED THE A MOUNT AS ITS INCOME. RELYING ON THE LEASE AGREEMENT ENTERED WITH M/S SIP COT, ASSESSEE ARGUED THAT THE LEASE WAS FOR PAYMENT OF ANNUAL REN T, AND THE ANNUAL RENT WAS ` 1 FOR 98 YEARS AND ` 2 FOR 99 TH YEAR. RELIANCE WAS PLACED ON 4 I.T.A. NO. 492/MDS/10 THE DECISION OF HONBLE PATNA HIGH COURT IN THE CAS E OF TRADERS AND MINERS LTD. V. CIT (27 ITR 341) FOR ITS SUBMISSION THAT TRANSFER WILL ALSO INCLUDE A LEASE OF LAND. CRUX OF ITS ARGUMENT WAS THAT THE PAYMENT OF LUMP SUM WAS FOR RIGHT OF POSSESSION IN THE IMMOVAB LE PROPERTY AND NOT TOWARDS USE OF SUCH PROPERTY. ASSESSEE ALSO FILED A CERTIFICATE FROM M/S SIPCOT LTD. WHEREIN THEY CERTIFIED THAT THE UPFRONT FEE RECEIVED FROM ASSESSEE WAS SHOWN AS INCOME FROM DEEMED SALE AND O FFERED FOR TAX IN ITS RETURN OF INCOME. RELIANCE WAS ALSO PLACED ON CBDT CIRCULAR NO.275/201/95-IT(B), DATED 29.1.1997 FOR ARGUING TH AT INTEREST COULD BE CHARGED UNDER SECTION 201(1A) OF THE ACT ONLY UPTO THE DATE ON WHICH THE RECIPIENT HAD MADE ARRANGEMENT FOR PAYMENT OF T AX. AS PER THE ASSESSEE, M/S SIPCOT LTD. HAD PAID NECESSARY ADVANC E TAX AND THEREFORE, NO LIABILITY UNDER SECTION 201(1A) OF TH E ACT COULD BE FASTENED ON THE ASSESSEE. 4. AFTER CONSIDERING ABOVE SUBMISSIONS AND ALSO VER IFYING THE LEASE DEEDS, LD. CIT(APPEALS) CAME TO AN OPINION THAT TRU E NATURE OF THE PAYMENT TOWARDS UPFRONT FEE WAS NOTHING BUT RENT. ACCORDING TO LD. CIT(APPEALS), PER YEAR RENT WAS INFINITESIMALLY SMA LL AND THEREFORE, THE HUGE AMOUNT PAID AS UPFRONT FEE WAS ONLY RENT ADVAN CE. AS PER LD. CIT(APPEALS), SUCH PAYMENT OBVIATED THE PROBLEMS FO R M/S SIPCOT LTD. IN COLLECTING THE RENT ANNUALLY. THEREFORE, HE HEL D THAT A.O. WAS JUSTIFIED 5 I.T.A. NO. 492/MDS/10 IN APPLYING SECTION 194-I OF THE ACT AND HOLDING TH AT ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE AS STIPULATED UNDER THE SAI D SECTION. HOWEVER, LD. CIT(APPEALS) NOTED THAT M/S SIPCOT LTD. HAD INC LUDED UPFRONT CHARGES RECEIVED BY IT AS WELL AS WATER CONNECTION CHARGES AS A PART OF ITS INCOME AND PAID TAX THEREON. THEREFORE, ACCORD ING TO HIM, TDS COULD NOT BE RECOVERED FROM THE ASSESSEE THOUGH ASSESSEE WAS ONE IN DEFAULT, IN VIEW OF THE DECISION OF HONBLE APEX CO URT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES P. LTD. (SUPRA). LD. CIT(APPEALS) THUS CONFIRMED THE ORDER OF THE A.O., BUT, NEVERTHELESS, HELD THAT PAYEE HAVING PAID THE TAX, NO TDS CAN BE RECOVERED FROM T HE ASSESSEE. HOWEVER, ACCORDING TO HIM, INTEREST UNDER SECTION 2 01(1A) OF THE ACT COULD BE LEVIED ON THE ASSESSEE IN RESPECT OF TAX D EDUCTIBLE AT SOURCE ON SUCH UPFRONT CHARGES, UPTO THE DATE OF PAYMENT OF FINAL INSTALMENT OF ADVANCE TAX BY M/S SIPCOT LTD. HE, THEREFORE, DIRE CTED THE A.O. TO RE- CALCULATE INTEREST UNDER SECTION 201(1A) OF THE ACT AFTER VERIFYING THE DATES OF PAYMENT OF ADVANCE TAX BY M/S SIPCOT LTD. 5. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDERS OF THE AUTHORITIES BELOW, SUBMITTED THAT WHAT WAS PAID BY THE ASSESSEE WAS AN UPFRONT FEE WHICH WAS A CAPITAL OUTGO. ACCORDING TO HIM, BY SUCH PAYMENT, ASSESSEE HAD DERIVED THE RIGHT OF POSSESSI ON OF LAND FOR 99 YEARS. THIS WAS AN ASSET FOR THE ASSESSEE WHICH GO T AN ENDURING 6 I.T.A. NO. 492/MDS/10 BENEFIT. LEARNED A.R. POINTED OUT THAT ASSESSEE HA D SHOWN SUCH PAYMENT AS AN ASSET IN ITS BALANCE SHEET AND FOR TH IS, RELIANCE WAS PLACED ON PAPER-BOOK PAGE 85, WHICH IS A COPY OF BA LANCE SHEET OF THE ASSESSEE-COMPANY, AS ON 31.12.2007. LEARNED A.R. A LSO POINTED OUT THAT M/S SIPCOT LTD. HAD TREATED THIS AMOUNT AS REV ENUE RECEIPT AND AS A PART OF ITS BUSINESS INCOME AND FOR THIS PURPOSE, HE RELIED ON A LETTER DATED 9.3.2009 OF M/S SIPCOT LTD. PLACED AT PAPER-B OOK PAGE 79. SUCH PAYMENT NO WAY CAN BE TREATED AS RENT, ACCORDI NG TO LEARNED A.R., AND THERE WAS NO QUESTION OF DEDUCTING TAX AT SOURC E ON A CAPITAL OUTGO. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE PATNA HIGH COURT IN THE CASE OF TRADERS AND MINERS LTD. (SUPRA) FOR HIS ARGUMENT THAT LEASE OF THE LAND WAS A TRANSFER OF CAPITAL ASSET. ACCOR DING TO HIM, M/S SIPCOT LTD. HAD PAID TAXES, DULY CONSIDERING THE AM OUNT AS PART OF ITS SALE, AND THEREFORE, ASSESSEE WAS NOT REQUIRED TO D EDUCT ANY TAX AT SOURCE. LIABILITY FOR NON-DEDUCTION OF TAX COULD N OT BE FASTENED ON THE ASSESSEE. IN ANY CASE, ACCORDING TO THE LEARNED A. R., NOTHING MORE THAN INTEREST UNDER SECTION 201(1A) OF THE ACT COUL D HAVE BEEN CHARGED ON THE ASSESSEE. SINCE M/S SIPCOT LTD. HAD PAID AD VANCE TAX ON DUE DATES, EVEN SUCH A LEVY OF INTEREST WAS NOT WARRANT ED, ACCORDING TO HIM. 6. PER CONTRA, LEARNED D.R. SUPPORTED THE ORDER OF LEARNED CIT(APPEALS). 7 I.T.A. NO. 492/MDS/10 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IT IS AN ADMITTED POSITION THAT ASSESSEE HAD TAKEN A LEAS E OF 151.85 ACRES FROM M/S SIPCOT LTD. AND IT HAD PAID A SUM OF ` 27.092 CRORES AS A NON-REFUNDABLE AMOUNT AND A SUM OF ` 1.3215 CRORES AS CHARGES FOR PROVIDING WATER PIPELINE. IT IS ALSO NOT DISPUTED THAT ASSESSEE HAD TREATED THIS PAYMENT AS AN ACQUISITION OF CAPITAL A SSET AND SHOWN ACCORDINGLY IN ITS BALANCE SHEET. THERE IS ALSO NO DISPUTE THAT THE AMOUNT WAS SHOWN BY M/S SIPCOT LTD. AS PART OF ITS BUSINESS REVENUE FALLING UNDER THE HEAD INCOME FROM BUSINESS AND M /S SIPCOT LTD. HAD PAID ADVANCE TAX ON ITS BUSINESS INCOME ON DUE DATE S. LD. CIT(APPEALS) HAS REPRODUCED PORTION OF LETTERS OF M /S SIPCOT LTD. AND THIS IS ONCE AGAIN REPRODUCED HEREUNDER BY US, FOR BREVITY:- I. THE UPFRONT CHARGES PAID BY YOUR COMPANY HAS BEE N TREATED AS DEEMED SALE AND ACCOUNTED AS INCOME FROM AREA DE VELOPMENT ACTIVITY AS DETAILED BELOW: A. RS.1050 LAKHS PAID FOR 100 ACRES OF LAND ALLOTTED ON 11.1.2007 RELATING TO THE FIN. YEAR 2006-07 (ASST. YR.: 2007-08) B. RS. 1659.20 LAKHS PAID FOR 51.85 ACRES OF LAND IN SEZ AREA ALLOTTED ON 10.4.2007 RELATING TO THE FIN. YR: 2007-08 (ASST. YR.: 08-09) IS ACCOUNTED IN THAT YEAR. II. THE WATER CONNECTION CHARGES COLLECTED OF RS.132. 15 LAKHS ON 22.2.08 HAS BEEN TREATED AS MISC. INCOME DURING THE YEAR 2007-08 (A.YR: 2008-09) 8 I.T.A. NO. 492/MDS/10 PLEASE REFER OUR LETTER 1 ST CITED CONFIRMING THAT YOUR COMPANYS PAYMENT OF RS.1050 LAKHS FOR ALLOTMENT OF 100 ACRES OF LAND ON 11.1.2007 WAS ACCOUNTED BY SIPCOT IN THE FINANCIAL YEAR 2006-07 (ASST. YEAR 2007-08). THE ABOVE PAYMENT FORMS PART OF T HE AMOUNT OF RS.25527.52 LAKHS SHOWN UNDER THE HEAD INCOME FROM ARE A DEVELOPMENT ACTIVITY UNDER SCHEDULE M OF THE PRO FIT & LOSS ACCOUNT OF SIPCOT FOR THE YEAR 2006-07 SIPCOT PAID RS.12,25,22,400/- ON 14.3.2007 AS ADVANCE TAX BESIDES THE TDS PAYMENTS OF RS.1,58,82,813/- SINCE THE TAX LIABILITY OF S IPCOT FOR THE A.YR.: 2007-08 WORKED OUT AS RS.2,64,98,0621/- WE HAVE CLAI MED THE REFUND OF RS.11,19,07,150/- AND THE SAME IS PENDING WITH IT DEPT. SIMILARLY YOUR COMPANYS PAYMENT OF RS.1659.20 LAKHS FOR ALLOTMENT OF 51.85 ACRES OF LAND ON 10.4.2007 WAS ACCOUNTED BY SIPCOT IN THE FIN. YR.: 2007-08 (ASST. YEAR 2008-09) THE ABOVE PAYMENT FO RMS PART OF THE AMOUNT OF RS.25590.56 LAKHS SHOWN UNDER THE HE AD INCOME FROM AREA DEVELOPMENT ACTIVITY UNDER SCHED ULE M OF THE PROFIT & LOSS ACCOUNT OF SIPCOT FOR THE YEAR 2007-08. S IPCOT PAID RS.34,13,17,094/- AS INCOME TAX FOR THE ASST. YEAR 2008-0 9 BY WAY OF ADVANCE TAX, TDS AND SELF-ASSESSMENT AS DETAI LED BELOW: DATE OF PAYMENT AMOUNT PAID (RS) ADVANCE TAX 13.06.2007 3,37,85,000 13.09.2007 6,75,70,730 14.12.07 6,75,71,090 13.3.08 1,37,59,830 18,26,86,650 TDS 4,75,70,314 SELF ASST. (26.9.08) 11,10,60,130 34,13,17,094 8. AS PER LEARNED A.R., SINCE ASSESSEE HAD RECEIVED A BENEFIT OF ENDURING NATURE, THE OUTGO WAS ON CAPITAL ACCOUNT A ND IT HAD ACQUIRED AN ASSET BY MAKING SUCH PAYMENT. IN OUR OPINION, T HERE CANNOT BE ANY QUARREL ON THIS ARGUMENT. ASSESSEE HAD DERIVED AN INTEREST IN THE PROPERTY SINCE LEASE HOLD INTEREST IS A VALUABLE RI GHT. BUT, THE QUESTION 9 I.T.A. NO. 492/MDS/10 HERE IS NOT WHETHER THE OUTGO WAS CAPITAL OR REVENU E, THE QUESTION IS WHETHER THE UPFRONT FEE PAID WILL FALL WITHIN THE D EFINITION OF RENT AS GIVEN UNDER EXPLANATION TO SECTION 194-I OF THE ACT . IT IS PERTINENT TO NOTE THAT SECTION 194-I DOES NOT MAKE ANY DIFFERENT IATION BETWEEN CAPITAL OUTGO AND REVENUE OUTGO. EXPLANATION TO TH E SAID SECTION WHICH DEFINES RENT IS REPRODUCED HEREUNDER:- EXPLANATION FOR THE PURPOSES OF THIS SECTION,- (I) RENT MEANS ANY PAYMENT, BY WHATEVER NAME CALLED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF (EITHER SEPARATELY OR TOGETHER) ANY,- (A) LAND; OR (B) BUILDING (INCLUDING FACTORY BUILDING); OR (C) LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDING); OR (D) MACHINERY; OR (E) PLANT; OR (F) EQUIPMENT; OR (G) FURNITURE; OR (H) FITTINGS, WHETHER OR NOT ANY OR ALL OF THE ABOVE ARE OWNED BY THE PAYEE; (II) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT, WHETHE R CALLED SUSPENSE ACCOUNT OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. 9. WHAT THE ASSESSEE HAD PAID TO M/S SIPCOT LTD. WA S UNDER A LEASE AGREEMENT. ONE OF THE ARGUMENTS TAKEN BY LEA RNED A.R. WAS THAT 10 I.T.A. NO. 492/MDS/10 THE LEASE AGREEMENT WAS DATED AFTER THE END OF THE RELEVANT PREVIOUS YEAR AND HENCE THE PAYMENTS MADE OUGHT NOT BE CONSI DERED AS PURSUANT TO THE LEASE AGREEMENT. HOWEVER, IN OUR OPINION, THIS IS NOT RELEVANT. REASON BEING THAT PAYMENTS WERE EFFECTED DURING THE RELEVANT PREVIOUS YEAR AND IT IS AN ACCEPTED POSITION THAT S UCH PAYMENTS WERE FOR THE LEASE OF THE LAND. SO, THE DATE OF THE AGREEME NT DOES NOT MATTER SINCE THE LEASE WAS ALREADY IN CONTEMPLATION AND AS SESSEE WOULD NOT HAVE GIVEN THE MONEY UNLESS THE LEASE WAS ATLEAST O RALLY AGREED BETWEEN THE PARTIES. THIS BEING SO, THE PAYMENT M ADE BY THE ASSESSEE TO M/S SIPCOT LTD., BY WHATEVER NAME CALLED, WAS UN DER A LEASE AGREEMENT. DEFINITION OF RENT GIVEN ABOVE WILL D EFINITELY INCLUDE PAYMENTS OF ANY TYPE UNDER ANY AGREEMENT OR ARRANGE MENT FOR USE OF LAND. ON THE FACE OF SUCH A CLEAR STATUTORY DEFINI TION, WE CANNOT SAY THAT NORMAL MEANING OF RENT HAS TO BE GIVEN WHILE INTE RPRETING SECTION 194-I OF THE ACT. WHILE INTERPRETING RENT AS MENTIONED IN SECTION 194-I, WE HAVE TO APPLY THE DEFINITION GIVEN TO RENT IN THE EXPLANATION THERETO. THE DEFINITION OF RENT GIVEN UNDER EXPLANATION TO SECTION 194-I OF THE ACT WILL SQUARELY COVER THE PAYMENT MADE BY THE ASS ESSEE TO M/S SIPCOT LTD. AND RENDER SUCH PAYMENT AS SOMETHING ON WHICH ASSESSEE WAS OBLIGED TO DEDUCT TAX AT SOURCE. WE A RE, THEREFORE, OF THE OPINION THAT ASSESSEE HAVING NOT DEDUCTED SUCH TAX AT SOURCE, RIGOURS OF SECTIONS 201(1) AND 201(1A) OF THE ACT ARE ATTRACTE D. HOWEVER, THE 11 I.T.A. NO. 492/MDS/10 LETTER OF M/S SIPCOT LTD., REPRODUCED AT PARA 6 ABO VE, CLEARLY STATES THAT IT HAD PAID TAXES IN ADVANCE ON ITS INCOME WHI CH INCLUDED THE UPFRONT CHARGES PAID BY THE ASSESSEE. IN OUR OPINI ON, IN SUCH A SITUATION, DECISION OF HONBLE APEX COURT IN THE CA SE OF HINDUSTAN COCA COLA BEVERAGES P. LTD. (SUPRA) RELIED ON BY LD. CIT (APPEALS) WILL DEFINITELY HELP THE ASSESSEE. SINCE THE PAYEE HAS INCLUDED THE CHARGES IN ITS INCOME AND PAID TAXES THEREON, THERE CANNOT BE ANY DOUBT THAT TDS COULD NOT BE RECOVERED FROM THE ASSESSEE ON SUC H AMOUNTS DESPITE ASSESSEE BEING ONE IN DEFAULT. NEVERTHELES S, ASSESSEE WOULD BE LIABLE FOR INTEREST UNDER SECTION 201(1A) OF THE ACT AND THIS POSITION IS CLEAR FROM PARAS 10 AND 11 OF THE DECISION OF HONB LE APEX COURT, WHICH ARE REPRODUCED HEREUNDER:- 10. BE THAT AS IT MAY, THE CIRCULAR NO.275/201/95-IT(B), DT . 29 TH JAN., 1997 ISSUED BY THE CBDT, IN OUR CONSIDERED OPINIO N, SHOULD PUT AN END TO THE CONTROVERSY. THE CIRCULAR DECLARES NO DEMAND VISUALIZED UNDER S. 201(1) OF THE I.T. ACT SHOULD B E ENFORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE OFFICER-IN-CHARGE OF TDS, THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE-ASSESSEE. HOWEVER, THIS WILL NOT ALTER THE LIABILITY TO CHARGE INTEREST UND ER S. 201(1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTE E-ASSESSEE OR THE LIABILITY FOR PENALTY UNDER S. 271C OF THE I.T. ACT. 11. IN THE INSTANT CASE, THE APPELLANT HAD PAID THE INTEREST UNDER S. 201(1A) OF THE ACT AND THERE IS NO DISPUTE THAT THE T AX DUE HAD BEEN PAID BY DEDUCTEE-ASSESSEE (M/S PRADEEP OIL CORPORAT ION). IT IS NOT DISPUTED BEFORE US THAT THE CIRCULAR IS APPLICABLE TO THE FACTS SITUATION ON HAND. 12 I.T.A. NO. 492/MDS/10 WHAT THE LD. CIT(APPEALS) HAD DONE WAS TO DIRECT TH E A.O. TO CALCULATE INTEREST UNDER SECTION 201(1A) OF THE ACT, AFTER CO NSIDERING THE ADVANCE TAX PAYMENT EFFECTED BY M/S SIPCOT LTD. AND THE TIM E PERIOD INVOLVED IN EFFECTING SUCH PAYMENT WHEN COMPARED TO DATES ON WHICH ASSESSEE WAS TO DEDUCT TAX AT SOURCE IN ACCORDANCE WITH SECT ION 194-I OF THE ACT. IN OUR OPINION, THE ORDER OF LD. CIT(APPEALS) IS WE LL REASONED AND AFTER PROPER APPRECIATION OF FACTS. WE DO NOT FIND ANY R EASON TO INTERFERE. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 30 TH APRIL, 2012. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 30 TH APRIL, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-IV, CHENNAI-34 (4) CIT (TDS), CHENNAI-34 (5) D.R. (6) GUARD FILE