The ACIT,TDS Circle, Baroda V. Oil & Natural Gas Corporation Ltd., Baroda

ITA 611/AHD/2010

• Counselvise Citation: 61120514 RSA 2010
• Duration Of Justice: 5 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 01-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJAY AGA RWAL
• Assessee Lawyers: S N SOPARKAR
• Section: 194C; 201(1)

Judgement Text

I.T.A. NO.: 611/AHD/2010 ASSESSMENT YEAR: 2009 - 10 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD D BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM] I.T.A. NO. : 611/AHD/2010 ASSESSMENT YEAR : 2009 - 10 ASSISTANT COMMISSIONER OF INCOME TAX TDS CIRCLE, BARODA .APPELLANT VS. OIL AN D NATURAL GAS CORPORATION LTD . RESPONDENT WESTERN OFFSHORE BASIN (CONTRACTS) MAKARPURA, BARODA[ TAN: BRDO00134B] APPEARANCES BY: SANJAY AGARWAL FOR THE APPELLANT S N SOPARKAR FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : OCTOBER 01, 2 015 DATE OF PRONOUNCING THE ORDER : DECEMBER 28 , 201 5 O R D E R PER PRAMOD KUMAR AM : 1. IN THIS DEPARTMENTAL APPEAL, THE CORRECTNESS OF LEARNED CIT(A) S ORDER DATED 13 TH NOVEMBER 2009, IN THE MATTER OF DEMAND RAISED UNDER SECTION 201(1) AND 201(1A) FOR THE ASSESSMENT YEAR 2009 - 10, HAS BEEN CHALLENGED ON THE FOLLOWING GROUND: THE LEARNED CIT(A) ERRED IN LAW AS WELL AS ON FACTS OF THE CASE IN DELETING THE DEMANDS RAISED UNDER SECTION 201(1) AND INTEREST CHARGED UNDER SECTION 201(1A) OF THE I NCOME TAX ACT, 1961, OF RS 6,20,14,169 FOR THE ASSESSMENT YEAR 2009 - 10 BY TREATING THE VARIOUS I.T.A. NO.: 611/AHD/2010 ASSESSMENT YEAR: 2009 - 10 PAGE 2 OF 7 CONTRACTS UNDER SECTION 194C OF THE ACT, AS AGAINST 194I AND 194 J OF THE ACT BY THE ASSESSING OFFICER. 2. IT IS A RECALLED MATTER. THE APPEAL WAS ORIGINALLY D ISPOSED OF BY WAY OF ORDER DATED 16 TH NOVEMBER 2012 BUT SUBSEQUENTLY THE ORDER SO PASSED WAS RECALLED WITH THE FOLLOWING OBSERVATIONS: 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN ITS WRITTEN NOTE, AN ALTERNATIVE PLEA WAS MADE WHICH IS REPRODUCED AS UNDER: ALTERNATIVELY AND WITHOUT PREJUDICE, IT IS RESPECTFULLY SUBMITTED THT THE HON BLE SUPREME COURT IN HINDUSTAN COCA COLA BEVERAGES PVT LTD (293 ITR 226) HELD THAT IN CASES WHERE PAYEE HAVING PAID F ULL TAX ON THE CONTRACTUAL AMOUNT RECEIVED. IT IS ONLY INTEREST THAT HAS TO BE PAID BY THE PAYER AND NOT THE DIFFERENTIAL TAX. IT IS SUBMITTED THAT ACCORDING TO THE ONGC, THE PAYEE CONTRACTOR HAS ALREADY PAID TAXES ON THE AMOUNTS PAID BY ONGC TO THEM. IN SUPPORT OF THE SAME, ITR OF THE CONTRACTOR, M/S JAY BHARAT ASSOCIATES FOR THE AY 2009 - 10, IS ATTACHED HEREWITH FOR YOUR KIND PERUSAL OF THE HON BLE MEMBERS. IF NECESSARY, APPROPRIATE DIRECTIONS BE ISSUED TO THE AO TO VERIFY THE FACTS. 4.1 WE FIND THAT TH IS SUBMISSION OF THE ASSESSEE HAS NOT BEEN ADVERTED IN THE ORDER OF THE TRIBUNAL (SUPRA). THEREFORE, WE RECALL OUR ORDER DATED 16/11/2012 IN ITA NO. 611/AHD/2010 FOR AY 2009 - 10 (SUPRA) AND THE REGISTRY IS DIRECTED TO FIX THE APPEAL FOR HEARING ON THIS ISSU E FOR THE LIMITED PURPOSE OF CONSIDERING THE ALTERNATIVE CONTENTION OF THE ASSESSEE. I.T.A. NO.: 611/AHD/2010 ASSESSMENT YEAR: 2009 - 10 PAGE 3 OF 7 3. THAT IS HOW WE HAVE COME TO BE IN SEISIN OF THE MATTER AGAIN. 4. LEARNED COUNSEL S SHORT SUBMISSION BEFORE US IS THAT IN THE LIGHT OF THE SETTLED LEGAL POSITION, BY THE VIRTUE OF HON BLE SUPREME COURT S JUDGMENT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (SUPRA) AND SINCE THE RECIPIENTS OF AMOUNTS PAID BY THE ASSESSEE, ALLEGEDLY WITHOUT PROPER TAX DEDUCTION AT SOURCE, HAVE DULY DISCHARGED THEIR TAX LIABILITIES IN RESPECT OF THESE RECEIPTS, THE DEMANDS UNDER SECTION 201(1) ARE TO BE DELETED TO THAT EXTENT AND FOR THIS SHORT REASON ALONE. IT IS ALSO POINTED OUT THAT SO FAR AS THE INTEREST LIABILITY UNDER SECTION 201(1A) IS CONCERNED, THE SAME SHALL APPLY ONLY TO THE EXTENT THERE HAS BEEN A DELAY IN PAYMENT OF THE RELATED TAX LIABILITY BY THE RECIPIENT , AND THAT PERIOD, IN RESPECT OF THE SELF ASSESSMENT TAX, WILL ONLY BE THE PERIOD FROM THE DATE OF DEDUCTION OF TAX AT SOURCE TILL THE DATE OF PAYMENT OF SUCH SELF ASSESS MENT TAX. WE ARE URGED TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER, FOR NECESSARY FACTUAL VERIFICATIONS IN THIS REGARD. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW BUT HE FAIRLY STA TED THAT HE HAS NO OBJECTION TO THE MATTER BEING REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION IN ACCORDANCE WITH THE LAW. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN T HE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. LEARNED COUNSEL S PLEA IS INDEED CORRECT. . HON BLE SUPREME COURT, IN THE LANDMARK CASE OF HINDUSTAN COCA COLA BEVERAGES (SUPRA), HAVE HELD SO, IN THE LIGHT OF CBDT CIRCULAR ISSUED IN THIS RESPECT, BY OBSERVI NG THAT, BE THAT AS IT MAY, THE CIRCULAR NO. 275/201/95 - IT(B), DT. 29TH JAN., 1997 ISSUED BY THE CBDT, IN OUR CONSIDERED OPINION, SHOULD PUT AN END TO THE CONTROVERSY. THE CIRCULAR DECLARES 'NO DEMAND VISUALIZED UNDER S. 201(1) OF THE IT ACT SHOULD BE ENF ORCED 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 UNDER S. 201(1A) I.T.A. NO.: 611/AHD/2010 ASSESSMENT YEAR: 2009 - 10 PAGE 4 OF 7 OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE - ASSESSEE OR THE LIABILITY FOR PENALTY UNDER S. 271C OF THE IT ACT .' 7. THE EXECUTIVE INSTRUCTIONS APART, EVEN ON THE FIRST PRINCIPLES, THAT IS PRECISELY WHAT THE LEGAL POSITION IS. THE LIABILITY UNDER SECTION 201(1) IS ONLY A VICARIOUS LIAB ILITY IN THE SENSE THAT WHEN THE RELATED INCOME TAX LIABILITIES IN RESPECT OF THE INCOME EMBEDDED IN SUCH PAYMENTS IS DULY DISCHARGED BY RECIPIENTS, NOTHING SURVIVES FOR RECOVERY BY RESORTING TO SECTION 201(1). IT IS ONLY A MODE OF RECOVERY, AND, THEREFORE , ITS SURVIVAL DEPENDS ON THE EXISTENCE OF TAX LIABILITY IN THE HANDS OF THE RECIPIENTS OF INCOME. HON BLE KERALA HIGH COURT S DECISION IN THE CASE OF KANNAN DEVAN HILL PRODUCE CO LTD VS CIT [( (1986) 161 ITR 489 (KER)] , IN A WAY, SUPPORTS THIS APPROACH. TH AT WAS THE CASE IN WHICH THE ASSESSMENT OF THE EMPLOYEE HAD REACHED FINALITY AND NO TAXES WERE DUE ON HIM, YET THE TAX AUTHORITIES PROCEEDED WITH DEMAND UNDER SECTION 201(1) R.W.S. 192. THE TRIBUNAL ALSO PROCEEDED TO DECIDE THE MATTER ON MERITS WITHOUT TA KING INTO ACCOUNT THE FACT REGARDING THE ASSESSMENT OF THE RELATED EMPLOYEE HAVING ACHIEVED FINALITY AND THERE BEING NO OUTSTANDING TAX DEMANDS IN THE HANDS OF THE RECIPIENT OF INCOME. THEIR LORDSHIPS DISAPPROVED THIS APPROACH AND OBSERVED AS FOLLOWS: TH E PURPOSE UNDERLYING THE SCHEME OF SS. 192 AND 201 IS TO SAFEGUARD THE INTERESTS OF THE REVENUE BY ENSURING THAT THE TAX THAT MAY BE ASSESSED AGAINST AN EMPLOYEE IS RECOVERED BY THE PROCESS OF DEDUCTION AT SOURCE FROM THE SALARY PAYABLE TO THE EMPLOYEE AND IN THE EVENT OF FAILURE BY THE EMPLOYER TO EFFECT SUCH DEDUCTION OR TO MAKE PAYMENT TO THE DEPARTMENT AFTER HAVING MADE SUCH DEDUCTION FROM THE SALARY, THE EMPLOYER WILL BE TREATED AS AN ASSESSEE IN DEFAULT. WHEN ONCE THE ASSESSMENT OF THE EMPLOYEE HAS BE EN COMPLETED AND THE TAX PAYABLE HAS BEEN QUANTIFIED AND THE SAID ASSESSMENT PROCEEDING HAS BECOME FINAL, THE AMOUNT THAT OUGHT TO HAVE BEEN DEDUCTED BY THE EMPLOYER FROM THE SALARY OF THE EMPLOYEE MUST NECESSARILY BE TAKEN TO BE REPRESENTED BY THE FINAL S UM FIXED IN THE ASSESSMENT ORDER AS PAYABLE BY THE EMPLOYEE BY WAY OF INCOME - TAX, SURCHARGE, ETC. IN THE PRESENT CASE, IT IS COMMON GROUND THAT THE I.T.A. NO.: 611/AHD/2010 ASSESSMENT YEAR: 2009 - 10 PAGE 5 OF 7 FULL AMOUNT ASSESSED ON MR. MCLEAN FOR THE RELEVANT ASSESSMENT YEAR HAS BEEN DEDUCTED AND PAID OVER TO THE D EPARTMENT BY THE ASSESSEE. THE ASSESSMENT MADE ON MR. MCLEAN HAS BECOME FINAL. THE STATEMENT OF FACTS DOES NOT DISCLOSE THAT ANY ENDEAVOUR HAS BEEN MADE TO REOPEN THE SAID ASSESSMENT. THE QUESTION, THEREFORE, ARISES AS TO WHETHER, IN LAW, THE DEPARTMENT IS ENTITLED TO PROCEED AGAINST THE EMPLOYER UNDER S. 201 OF THE ACT BY GOING BEHIND THE ORDER OF ASSESSMENT AND TREATING THE SUM OF RS. 8,112 PAID TO THE EMPLOYEE AS NOT EXEMPT FROM TAXATION DESPITE THE FACT THAT IN THE ASSESSMENT ORDER MADE ON THE EMPLOYEE, THE SAID AMOUNT WAS TREATED AS NOT INCLUDIBLE IN THE TAXABLE INCOME OF THE ASSESSEE. THIS IS A QUESTION WHICH GOES TO THE VERY ROOT OF THE JURISDICTION OF THE ITO TO PROCEED AGAINST THE ASSESSEE - COMPANY UNDER S. 201 OF THE ACT. BEING A PURE QUESTION OF LA W ARISING OUT OF THE FACTS WHICH WERE AVAILABLE BEFORE IT, THE TRIBUNAL SHOULD HAVE CONSIDERED THIS QUESTION IN THE FIRST INSTANCE BEFORE IT PROCEEDED TO CONSIDER ON THE MERITS THE POINT AS TO WHETHER THE SUM OF RS. 8,112 WAS OR WAS NOT EXEMPT FROM TAXABIL ITY UNDER S. 10(6)(I)(A) OF THE ACT. THE APPROACH MADE BY THE TRIBUNAL TO A CONSIDERATION OF THE MERITS OF THE QUESTION CONCERNING THE TAXABILITY OF THE SUM RS. 8,112 WITHOUT FIRST ADDRESSING ITSELF TO THE CRUCIAL QUESTION AS TO WHETHER THE INITIATION OF T HE PROCEEDINGS AGAINST THE ASSESSEE UNDER S. 201 WAS WARRANTED IN LAW ON THE BASIS OF THE ADMITTED FACTS THAT WERE AVAILABLE BEFORE IT WAS CLEARLY ILLEGAL AND THE ORDER PASSED BY THE TRIBUNAL CANNOT, THEREFORE, BE REGARDED AS EVIDENCING A PROPER AND VALID DISPOSAL OF THE APPEAL. AS ALREADY INDICATED, THE QUESTION REFERRED IN THIS CASE WOULD ARISE FOR CONSIDERATION BY THE TRIBUNAL ONLY AFTER IT ENTERS A FINDING ON THE JURISDICTIONAL POINT AS TO WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE INITIA TION OF PROCEEDINGS AGAINST THE ASSESSEE - COMPANY UNDER S. 201 OF THE ACT WAS LEGAL AND WARRANTED. 8. VIEWED THUS, WHEN THERE IS NO TAX LIABILITY IN THE HANDS OF THE RECIPIENT, RELATED DEMAND RAISED UNDER SECTION 201 MUST ALSO STAND QUASHED. IN THIS, WE A LSO FIND SUPPORT FROM THE JUDGMENT OF HON BLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS DIVISIONAL MANAGER NEW INDIA ASSURANCE CO LTD [(1983) 140 ITR 818 (MP)] WHICH HAS HELD THAT WHERE THE ASSESSMENT OF RECIPIENT IS COMPLETED AND AMOUNT OF TAX FULL Y PAID BY THE RECIPIENT, DEMAND UNDER SECTION 201 IN RESPECT OF SHORTFALL IN TAX DEDUCTIONS FROM PAYMENTS TO SUCH RECIPIENTS I.T.A. NO.: 611/AHD/2010 ASSESSMENT YEAR: 2009 - 10 PAGE 6 OF 7 CANNOT BE MADE. AS REGARDS THE LEVY OF INTEREST UNDER SECTION 201(1A), THIS INTEREST LEVY IS COMPENSATORY IN NATURE INASMUCH AS IT SEEKS TO COMPENSATE THE REVENUE AUTHORITIES FOR DELAY IN REALIZATION OF TAXES. THE LEVY MUST, THEREFORE, STOP WHEN ALL THE TAXES ARE DULY REALIZED. ACCORDINGLY, THE INTEREST LEVY WILL BE APPLICABLE ONLY FROM THE DATE ON WHICH TAX OUGHT TO HAVE BEEN DEDUCT ED TILL THESE TAXES HAVE BEEN PAID AND IT CANNOT EXCEED THE LEVY ON AMOUNT ON WHICH SELF ASSESSMENT TAXES HAVE BEEN PAID. AS WE ARE REMITTING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR RE - COMPUTATION IN ACCORDANCE WITH THE LAW, WE NEED NOT G O ANY FURTHER ON THESE ISSUES. SUFFICE TO SAY THAT THE ASSESSING OFFICER WILL RECOMPUTE THE DEMAND UNDER SECTION 201(1) AND 201(1A) IN ACCORDANCE WITH THE LAW, TAKING INTO ACCOUNT OUR OBSERVATIONS ABOVE, BY WAY OF A SPEAKING ORDER AND AFTER GIVING YET ANOT HER OPPORTUNITY OF HEARING TO THE ASSESSEE. AS FOR THE DOCUMENTS WHICH HAVE BEEN FILED BEFORE US, THE ASSESSEE IS DIRECTED TO PRODUCE THE SAME, AS ALSO ANY OTHER MATERIAL, ON WHICH HE SEEKS TO RELY UPON, AND THE ASSESSING OFFICER WILL DULY CONSIDER THE SAM E. WITH THESE OBSERVATIONS, THE MATTER STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER ON THIS LIMITED ISSUE OF RECOMPUTATION OF DEMAND UNDER SECTION 201(1) AND 201(1A). 9. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS I NDICATED ABOVE. TO THIS EXTENT, OUR EARLIER ORDER STANDS MODIFIED. PRONOUNCED IN THE OPEN COURT TODAY ON 28 TH DAY OF DECEMBER, 2015. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 28 TH DAY OF DECEMBER , 201 5 . I.T.A. NO.: 611/AHD/2010 ASSESSMENT YEAR: 2009 - 10 PAGE 7 OF 7 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD