THE BHATIA GENERAL HOSPITAL, MUMBAI V. INCOME TAX OFFICER (OSD)(TDS) 3(2), MUMBAI

ITA 7202/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1731 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 20-12-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R V SHAH MS MALLIKA DEVENDRA
• Keywords: Rectification of order; TDS
• Section: 194C; 201(1); 201; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI RAJESH KUMAR , HON'BLE ACCOUNTANT MEMBER ITA NO S . 7202, 7203 & 7205 / MUM/201 7 (A.Y S : 2008 - 09, 2009 - 10 & 2011 - 12) THE BHATIA GENERAL HOSPITAL TARDEO ROAD, NANA CHOWK MUMBAI 400 007 PAN: AAATT 3440 K V. ITO (OSD) (TDS) 3(2) 9 TH FLOOR, K.G. MITTAL AYURVEDIC HOSPITAL BUILDING , CHARNI ROAD, MUMBAI 400 020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.V. SHAH MS. MALLIKA DEVENDRA DEPARTMENT BY : SHRI RAVINDRA DATE OF HEARING : 04 .04.2019 DATE OF PRONOUNCEMENT : 31 .0 5 .2019 O R D E R PER C. N. PRASAD (JM) 1. THESE THREE APPEALS ARE FILED BY THE ASSESSEE AGAINS T DIFFERENT ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 60, MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 28. 09.2017 FOR THE ASSESSMENT YEAR S 2008 - 09, 2009 - 10 AND 2011 - 12 ARISING OUT OF THE ORDERS PASSED BY THE ASSESSING OFFICER LEVYING INTEREST U/S. 201(1A) FOR THE DELAYED PAYMENT OF TDS INTO GOVERNMENT ACCOUNT . 2 ITA NOS. 7202, 7203 & 7205/MUM/2017 (A.YS: 2008 - 09, 2009 - 10 & 2011 - 12) THE BHATIA GENERAL HOSPITAL 2. BRIEFLY STATED THE FACTS ARE THAT, ASSESSEE PUBLIC CHARITABLE HOSPITAL PROVIDING MEDICAL TREATMENT AND MEDI CAL FA C ILITIES TO THE PATIENTS AND IS REGISTERED UNDER PUBLIC CHARIT ABLE TRUST UNDER THE BOMBAY PUBLIC TRUST ACT, 1950. DURING THE A .YS. 2008 - 09, 2009 - 10 AND 2011 - 12 ASSESSEE MADE CERTAIN PAYMENTS TO M/S. BOMBAY MRI PVT. LTD., M/S. METROPOLIS HEALTH SERV ICES (I) PVT. LTD., AND M/S. SRL RANBAXY LTD. TOWARDS LABORATORY EXPENSES. THE ASS ESSEE DEDUCTED TDS @2% U/S. 194C OF THE ACT ON THE PAYMENTS TO THESE PARTIES. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THES E PAYMENTS ARE IN THE NATURE OF PROFESSIONAL CHARGES AND THE ASSESSEE WAS REQUIRED TO DEDUCT TDS U/S. 194J OF THE ACT. ASSESSEE CONTENDED THAT THESE PAYMENTS WERE MADE ONLY UNDER THE CONTRACT FOR SERVICE AND PRINCIPLE TO PRINCIPLE BASIS AND THE PROVISIONS OF SECTION 194J HAVE NO APPLICATION AND THE SERVICES RENDERED BY THESE PARTIES ARE NOT IN THE NATURE OF PROFESSIONAL SERVICES. IT WAS ALSO CONTENDED THAT THE DEDUCTEES /PARTIES HAVE REFLECTED THE RECEIPTS IN T HEIR INCOME AND PAID TAXES AND THEREFORE THE ASSESSEE CANNOT BE TREATED AS DEEMED TO BE IN DEFAULT WITHIN THE MEANING OF PROVISIONS OF SECTION 201 (1) OF THE ACT. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE , THE ASSESSING OFFICER I.E. ITO(OSD)(TDS) 3(2), MUMBAI PASSED O RDERS U/S. 201(1) HOLDING THAT T HE ASSESSEE IS IN DEFAU LT FOR SHORT DEDUCTION OF TDS. 3 ITA NOS. 7202, 7203 & 7205/MUM/2017 (A.YS: 2008 - 09, 2009 - 10 & 2011 - 12) THE BHATIA GENERAL HOSPITAL 3. SUBSEQUENTLY ASSESSEE FILED RECTIFICATION PETITION BEFORE THE INCOME TAX OFFICER(OSD) DEMONSTRATING THAT PAYEE S HAVE PAID TAXES ON THE AMOUNT RECEIVED FROM THE ASSESSEE WITH VARIOUS EVIDENCES LIKE D ECLARATION , COPY OF PAN , RETURN OF INCOME . CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE THE DCIT (TDS) - 2(3) , MUMBAI PASSED RECTIFICATION ORDER U/S.154 OF THE ACT ON 17.0 5.2017 ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE IS NOT IN DEFAULT WITHIN THE PROVIS IONS OF SECTION 201 (1) OF THE ACT AND THE DEMAND RAISED U/S. 201(1) WAS DELETED. 4. SUBSEQUENTLY , ITO(OSD) (TDS) 3(2), PASSED ORDER U/S. 201(1A) OF THE ACT CHARGING INTEREST U/S. 201(1A) F OR THE DELAYED PAYMENT OF TDS. 5. THE ASSESSEE IN APPEAL S BEFORE THE LD.CIT(A) CONTENDED THAT IF THERE IS NO LIABILITY TO PAY TAX BY THE DEDUCTEE THERE CANNOT BE ANY INTEREST CHA RGEABLE U/S. 201(1A) OF THE ACT . IT WAS ALSO CON TENDED THAT IN ANY CASE THE LIAB ILI TY TO PAY INTEREST SHALL BE FOR THE PERIOD STARTING FROM THE DATE OF DEDUCTIBILITY OF THE TAX TILL THE DATE OF PAYMENT OF TAX BY THE DEDUCTEE AND NOT TILL THE DATE OF FILING OF RETURN BY THE DEDUCTEE . NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE , THE LD.CIT(A) HELD THAT INTEREST U/S.201(1A) OF THE ACT IS TO BE CHARGED AND THE PERIOD OF CALCULATION WI LL BE RECK ONED FROM THE DATE ON WHICH TAX WAS FIRST DEDUCTIBLE BY THE DEDUCTEE TO THE DATE OF FILING OF RELEVANT RETURN BY THE RECIPIENT - DEDUCTEE. 4 ITA NOS. 7202, 7203 & 7205/MUM/2017 (A.YS: 2008 - 09, 2009 - 10 & 2011 - 12) THE BHATIA GENERAL HOSPITAL 6. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE B EFORE THE LOWER AUTHORITIES. HE ALSO PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CAS E OF CIT V. ELI LILLY & CO. (INDIA) (P.) LTD. [312 ITR 225] AND HINDUSTAN COCA COLA BEVERAGE (P.) LTD. V. CIT [293 ITR 226] AND THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. RAJASTHAN RAJYA VIDYUT PRASARAM NIGAM LTD., [287 ITR 354]. 7. LD. DR VEHEMENTLY SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE CASE LAWS RELIED ON. THE ONLY DISPUTE BEFORE US IS AS TO WHETHER THE INTEREST U/S. 201(1A) OF T HE ACT IS LIABLE TO BE CHARGED FROM THE DATE OF DEDUCTIBILITY OF TDS TO THE DATE OF PAYMENT OF T AX BY DEDUCTEE OR DATE OF FILING OF RETURN BY THE DEDUCTEE. IF THERE IS NO TAXABLE INCOME OR TAX LIABILITY TO THE DEDUCTEE WHETHER STILL THE INTEREST IS LIABLE TO BE CHARGEABLE OR NOT. 9. THE HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P.) LTD. V. CIT (SUPRA) HELD AS UNDER : - 10. BE THAT AS IT MAY, THE CIRCULAR NO. 275/201/95 - IT(B), DATED 29.01.1997 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, IN OUR CONSIDERED OPINION, SHOULD PUT AN END TO THE CONTROVERSY. THE CIRCULAR DECLARES NO DEMAND VISUALIZED UNDER SECTION 201(1) OF THE IN COME - TAX ACT SHOULD BE 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 UNDER SECTION 201(1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE - ASSESSEE OR THE LIABILITY FOR PENALTY UNDER SECTION 271C OF THE INCOME - TAX ACT. 5 ITA NOS. 7202, 7203 & 7205/MUM/2017 (A.YS: 2008 - 09, 2009 - 10 & 2011 - 12) THE BHATIA GENERAL HOSPITAL 10. THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. ELI LILLY & CO. (INDIA) (P.) LTD. (SUPRA) HELD AS UNDER: - 34. A PERUSAL OF SECTION 201(1) AND SECTION 201(1A) SHOWS THAT BOTH THESE PROVISIONS ARE WITHOUT PREJUDICE TO EACH OTHER. IT MEANS THAT THE PROVISIONS OF BOTH THE SUB - SECTIONS ARE TO BE CONSIDERED INDEPENDENTLY WITHOUT AFFECTING THE RIGHTS MENTIONED IN EITHER OF THE SUB - SECTIONS. FURTHER, INTEREST UNDER SECTION 201(1A) IS COMPENSATORY MEASURE FOR WITHHOLDING THE TAX WHICH OUGHT TO HAVE GONE TO THE EXCHEQUER. THE LEVY OF INTEREST IS MANDATORY AND THE ABSENCE OF LIABILITY FOR TAX WILL NOT DILUTE THE DEFAULT. THE LIABILITY OF DEDUCTING TAX AT SOURCE IS IN THE NATURE OF A VICARIOUS LIABILITY, WHICH PRE - SUPPOSES EXISTENCE OF PRIMARY LIABILITY. THE SAID LIABILITY IS A VICARIOUS LIABILITY AND THE PRINCIPAL LIABILITY IS OF THE PERSON WHO IS TAXABLE. A BARE READING OF SECTION 201(1) SHOWS THAT INTEREST UNDER SECTION 201(1A) READ WITH SECTION 201(1) CAN ONLY BE LEVIED WHEN A PERSON IS DECLARED AS AN ASSESSEE - IN - DEFAULT. FOR COMPUTATION OF INTEREST UNDER SECTION 201(1A) , THERE ARE THREE ELEMENTS. ONE IS THE QUANTUM ON WHICH INTEREST HAS TO BE LEVIED. SECOND IS THE RATE AT WHICH INTEREST HAS TO BE CHARGED. THIRD IS THE PERIOD FOR WHICH INTEREST HAS TO BE CHARGED. THE RATE OF INTEREST IS PROVIDED IN THE 1961 ACT. THE QUANTUM ON WHICH INTEREST HAS TO BE PAID IS INDICATED BY SECTION 201 (1A) ITSELF. SUB - SECTION (1A) SPECIFIES 'ON THE AMOUNT OF SUCH TAX' WHICH IS MENTIONED IN SUB - SECTION (1) WHEREIN, IT IS THE AMOUNT OF TAX IN RESPECT OF WHICH THE ASSESSEE HAS BEEN DECLARED IN DEFAULT. THE OBJECT UNDERLYING SECTION 201(1) IS TO RECOVER THE TAX. IN THE CASE OF SHORT DEDUCTION, THE OBJECT IS TO RECOVER THE SHORTFALL. AS FAR AS THE PERIOD OF DEFAULT IS CONCERNED, THE PERIOD STARTS FROM THE DATE OF DEDUCTIBILITY TILL THE DATE OF ACTUAL PAYMENT OF TAX. THEREFORE, THE LEVY OF INTEREST HAS TO BE RESTRICTED FOR THE ABOVE STATED PERIOD ONLY. IT MAY BE CLARIFIED THAT THE DATE OF PAYMENT BY THE CONCERNED EMPLOYEE CAN BE TREATED AS THE DATE OF ACTUAL PAYMENT. 11. AS COULD BE SEEN FROM THE ABOVE , IT HAS BEEN CATEGORICALLY HELD THAT THE LEVY OF INTEREST U/S. 201(1A) IS CO MPENSATORY MEASURE FOR WITHHOLDING THE TAX WHICH OUGHT TO HAVE G ONE TO THE EX C HEQUER AND T HEREFORE LEVY OF INTEREST IS MANDATORY AND THE ABSENCE OF LIABILITY FOR TAX WILL NOT DILUTE THE DEFAULT. AS FAR AS THE LEVY OF INTE REST U/S. 201(1A) OF THE ACT IS CONCERNED IT IS MANDATORY. 12. NOW THE QUESTION TO BE ADDRESSED IS WHAT IS THE PERIOD FOR WHICH THE INTEREST IS TO BE CALCULATED. ON A READING OF THE PROVISIONS U/S. 201(1) AND 201(1A) OF THE ACT, WE OBSERVE THAT THERE WAS AN AMENDMENT TO THESE 6 ITA NOS. 7202, 7203 & 7205/MUM/2017 (A.YS: 2008 - 09, 2009 - 10 & 2011 - 12) THE BHATIA GENERAL HOSPITAL PROVISIONS WHEREIN THE PROVISOS WERE INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01.07.2012. THE PROVISO TO SECTION 201(1) OF THE ACT STIPULATES THAT ANY PERSON WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF TAX ON THE SUM PAID TO RESIDENT SHALL NOT BE DEEMED TO BE AN AS SESSEE IN DEFAULT IN RESPECT OF SUCH TAX, I F A RESIDENT HAS FILED RETURN U/S. 139(1) OF THE ACT CONSIDERED THE INCOME IN ITS RETURN OF INCOME AND PAID THE TAXES ON SUCH INCOME. SIMILARLY, A PROVISO WAS INSERTED TO SECTION 201(1A) OF THE ACT STATING THAT THE PERSON WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF TAX ON THE PAYMENT MADE TO RESIDENT THOUGH NOT DEEMED TO BE AN ASSESSEE IN DEF AULT UNDER THE FIRST PROVISO TO SUB - SECTION (1) , INTEREST UNDER CL AUSE (I ) OF SECTION 201(1A) SHALL BE PAYABLE FROM THE DA TE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE OF FURNISHING OF RETURN BY THE RESIDENT. THUS, THE PROVISO TO SECTION 201(1A) OF THE ACT IS VERY CLEAR THAT THE INTEREST SHALL BE PAYABLE FROM THE DATE OF THE TAX FIRST DEDUCTIBLE TILL THE DATE OF FURNISHING OF RETURN BY THE PAYEE. 13. IN THE CASE OF RADEUS ADVERTISING (P.) LTD V. ACIT [164 ITD 384] THE MUMBAI BENCH OF THE TRIBUNAL CONSIDERED WHETHER THE FIRST PROVISO INSERTED BY THE FINANCE AC T, 2012 TO SECTION 201(1) W.E.F 01.07.2012 WHICH STATES THAT THE DEDUCTOR SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT OF TAX IF DEDUCTEE FILED RETURN U/S. 139 OF THE ACT, OFFERED INCOME IN RETURN, PAID THE TAX DUE ON SUCH INCOME IS PROSPECTIVE OR RETROSPECTIVE . 7 ITA NOS. 7202, 7203 & 7205/MUM/2017 (A.YS: 2008 - 09, 2009 - 10 & 2011 - 12) THE BHATIA GENERAL HOSPITAL THE COORDINATE BENCH HELD THAT THE AMENDMENT BROUGHT BY THE FINANCE ACT , 2012 W.E.F 01.07.2012 INSERTING PROVISO TO SECTION 201 (1) WOULD APPLY RETROSPECTIVELY. IT HAS BEEN H E LD BY THE COORDINATE BENCH THAT THE AFORESAID PROVISO TO SECTION 201(1) BEING CLARIFICATORY IN NATU RE WOULD ALSO APPLY RETROS PECTIVELY AS HELD BY THE DIFFERENT JUDICIAL AUTHORITIES. SIMILARLY, A P ROVISO HAS BEEN INSERTED TO THE PROVISIONS OF SECTION 201( 1 A ) OF THE ACT BY THE FINANCE ACT, 2012 W.E.F 01.07.2012 WHEREIN IT HAS BEEN CLARIFIED THAT THE INTEREST U/S. 201 (1A) OF THE ACT SHALL BE PAYABLE FROM THE DATE ON WHICH SUCH TAX WAS DEDUCT I BLE TO THE DATE OF THE FURNISHING OF RETURN OF INCOME BY THE DEDUCTEE. T HIS PROVISO TO SECTION 201(1A) OF THE ACT IS ONLY CLARIFICATORY IN NATURE AND WOULD APPLY RETROSPECTIVELY. IN THE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) IN HOLDING THAT THE INTEREST SHALL BE CALCULATED FROM THE DATE ON WHICH TAX WAS FIRST DEDUCTIBLE BY THE DEDUCTOR TO THE DATE OF FILLING OF RETURN BY THE RECIPIENT DEDU CTEE. THUS , WE UPHOLD THE ORDERS OF THE LD.CIT(A) AND REJECT THE GROUNDS OF THE ASSESSEE. 14. THE DECISIONS RELIED ON BY THE ASSESSEE HAVE NO APPLICATION TO T HE FACTS OF THE ASSESSEES CASE AS THEY WERE RENDERED EITHER PRIOR TO INSERTION OF PROVISO TO SECTI ON 201(1A) OF THE ACT OR WITHOUT CONSIDERING THE PROVISO . 8 ITA NOS. 7202, 7203 & 7205/MUM/2017 (A.YS: 2008 - 09, 2009 - 10 & 2011 - 12) THE BHATIA GENERAL HOSPITAL 15. IN THE RESULT, APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 31 ST MAY , 2019 SD/ - SD/ - ( RAJESH KUMAR ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 31 / 0 5 / 2019 GIRIDHAR, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM