Kanpur Electricity Supply Co. Ltd., Kanpur V. DCIT - (TDS), Kanpur

ITA 765/LKW/2010

• Counselvise Citation: 76523714 RSA 2010
• Duration Of Justice: 2 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 28-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK MISHRA
• Keywords: Opportunity of being heard; Reasonable cause
• Section: 6

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.765/LKW/2010 A.Y.:2008 - 09 KANPUR ELECTRICITY SUPPLY CO. LTD., KESCO HOUSE, 14/71, CIVIL LINES, KANPUR. PAN:AACCK3753D VS. D.C.I.T.(TDS), KANPUR. (APPELLANT) (RESPONDENT) I.T.A. NO.145/LKW/2011 A.Y.:2008 - 09 INCOME TAX OFFICER(TDS) - 1, KANPUR. VS. KANPUR ELECTRICITY SUPPLY CO. LTD., KESCO HOUSE, 14/71, CIVIL LINES, KANPUR. PAN:AACCK3753D (APPELLANT) (RESPONDENT) ASSESSEE BY:SHRI RAKESH GARG, ADVOCATE REVENUE BY:SHRI VIVEK MISHRA, CIT, D.R., I.T.A. NOS.615 TO 618/LKW/2011 A.YRS.:2005 - 06 TO 2009 - 10 INCOME TAX OFFICER(TDS) - 1, KANPUR. VS. KANPUR ELECTRICITY SUPPLY CO. LTD., KESCO HOUSE, 14/71, CIVIL LINES, KANPUR. PAN:AACCK3753D (APPELLANT) (RESPONDENT) ASSESSEE BY S/ SRI O.P.SHUKLA/ARVIND SHUKLA, ADV. REVENUE BY SHRI VIVEK MISHRA, CIT, D.R. 2 DATE OF HEARING 27/11/2013 DATE OF PRONOUNCEMENT 23 /12/2013 O R D E R PER BENCH: OUT OF THIS BUNCH OF SIX APPEALS, THERE ARE TWO CROSS APPEALS OF THE ASSESSEE AND REVENUE FOR ASSESSMENT YEAR 2008 - 09, WHICH ARE DIRECTED AGAINST THE ORDER OF CIT(A) - II, KANPUR DATED 29/10/2010. THE REMAINING FOUR APP EALS ARE FILED BY THE REVENUE FOR ASSESSMENT YEAR 2005 - 06, 2006 - 07, 2007 - 08 AND 2009 - 2010, WHICH ARE DIRECTED AGAINST SEPARATE ORDERS OF CIT(A) - II, KANPUR ALL DATED 18/07/2011. ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP THE FIVE APPEALS FILED BY THE REVENUE FOR ASSESSMENT YEAR 2005 - 06 TO 2009 - 2010. IN ALL THESE APPEALS OF THE REVENUE, ONLY TWO ISSUES ARE DISPUTED BY THE REVENUE. FIRST ISSUE IS REGARDING DEDUCTIBILITY OF TDS U/S 194A OF THE ACT ON PAYMENT OF INTEREST TO UPPCL BY THE ASSESSEE. THE SECOND ISSUE IS REGARDING TDS DEDUCTIBILITY U/S 194A OF THE ACT ON ACCOUNT OF CONSUMER SECURITY BY THE ASSESSEE. 3. ON BOTH THESE ISSUES , THE LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). IT IS ALSO SUBMITTED BY LEARNED D.R. THAT INTEREST WAS PAID TO UPPCL AND NOT TO STATE GOVT. AND THERE IS NO EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT THE INTEREST PAID TO UPPCL WAS TRANSFERRED TO STATE GOVT. OF UP. IN REPLY TO THIS, LEARNED A.R. OF THE ASSESSEE SUBMITTED THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION WITH THE 3 DIRECTION THAT IF INTEREST WAS PAID BY THE ASSESSEE OR BY UPPCL TO UP GOVT. THEN NO TDS IS DEDUCTIBLE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT REGARDING THE DEDUCTIBILITY OF TDS FROM INTEREST PAID BY THE ASSESSEE TO UPPCL, IT WAS HELD BY CIT(A) THAT HE PERUSED THE LETTER WRITTEN BY UPPCL DATED 15/10/ 2010 EXPLAINING THE EXACT NATURE OF LOAN AND ALSO THE ALLOWABILITY OF PAYMENT OF INTEREST TO UP GOVT. SINCE THE SECURED LOAN IS LOAN FROM UP GOVT. AND THEREFORE, NO TDS IS DEDUCTIBLE ON THE INTEREST PAYABLE TO GOVT. AS PER SECTION 196 OF THE ACT. IN SPITE OF THIS, WE FIND THAT THERE IS NO FINDING GIVEN BY CIT(A) THAT WHETHER SUCH INTEREST WAS PAID BY THE ASSESSEE TO UP STATE GOVT. OR TO UPPCL AND EVEN IF THE ASSESSEE MADE THE PAYMENT TO UPPCL, WHETHER THE EXACT AMOUNT WAS TRANSFERRED BY UPPCL TO UP STATE G OVT. IN OUR CONSIDERED OPINION, THIS FACT IS VERY ESSENTIAL TO DECIDE THIS ISSUE AND HENCE , WE SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION. WE WOULD LIKE TO MAKE IT CLEAR THAT THE BURDEN IS ON THE ASSESSEE TO BRING EVIDENCE ON RECORD REGARDING THE PARTY TO WHOM PAYMENT OF INTEREST WAS MADE BY THE ASSESSEE AND AS TO WHETHER THE SAME WAS PAID DIRECTLY TO UP STATE GOVT. OR TO UPPCL. IF THE ASSESSEE CAN ESTABLISH THAT THE INT EREST PAYMENT WAS MADE DIRECTLY TO UP STATE GOVT. THEN OBVIOUSLY THERE IS NO REQUIREMENT OF TDS. IF THE ASSESSEE HAS MADE THE PAYMENT OF INTEREST TO UPPCL BUT EXACT AMOUNT OF SUCH INTEREST PAYMENT BY THE ASSESSEE TO UPPCL HAS BEEN PAID BY UPPCL TO UP STAT E GOVT. THEN ALS O IN THE FACTS OF THE PRESENT CASE, NO TDS IS REQUIRED T O BE DEDUCTED FROM SUCH PAYMENT BECAUSE IT IS THE CLAIM OF THE ASSESSEE AND IT IS STATED BY UPPCL ALSO THAT THIS IS A LOAN FROM UP STATE GOVT. AND UPPCL IS ONLY AN INTERMEDIARY. BUT IF THE ASSESSEE FAILS TO ESTABLISH THIS THAT EXACT AMOUNT OF INTEREST PAI D BY THE ASSESSEE TO UPPCL WAS IN TURN PAID BY 4 UPPCL TO UP STATE GOVT. THEN ASSESSEE WAS REQUIRED TO DEDUCT TDS FROM SUCH INTEREST PAYMENT TO UPPCL. THE ASSESSING OFFICER SHOULD PASS NECESSARY ORDER AS PER LAW IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVID ING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS ISSUE IS DECIDED IN THIS MANNER. 5. REGARDING THE SECOND ISSUE, AS TO WHETHER THE ASSESSEE WAS REQUIRED TO DEDUCT TDS OUT OF INTEREST PAYMENT ON CONSUMER SECURITY, WE FIND THAT A CLEAR FINDING IS GIVEN BY CIT(A) THAT SUCH INTEREST PAYMENT DID NOT EXCEED RS.5,000/ - PER PERSON PER YEAR EXCEPT PAYMENT TO GOVT. AND HE HAS HELD THAT NO TDS IS REQUIRED TO BE DEDUCTED IN RESPECT OF PAYMENT MADE TO GOVT. AND IN RESPECT OF PAYMENT TO NON GOVT. ALSO , IF THE AMOUNT PAID PER YEAR PER PERSON DOES NOT EXCEED RS.5,000/ - . THESE FINDINGS OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. AND HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ASPECT. IN THE RESULT, ALL THE FIVE APPEAL S OF THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. NOW WE TAKE UP THE REMAINING APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2008 - 09. GROUND NO. 1 & 2 OF THIS APPEAL ARE AS UNDER: 1. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDI NG THAT THE PROVISIONS OF SECTION 194A ARE APPLICABLE TO THE APPELLANT COMPANY AND IN PARTICULAR ON PAYMENT OF INTEREST ON SECURITY DEPOSITS OF TAKEN FROM MULTIPLE CONSUMERS. 2. BECAUSE THE APPELLANT BEING A GOVERNMENT CO., THE PROVISIONS OF SECTION 194A ARE N OT APPLICABLE TO THE APPELLANT. 2.1 BECAUSE THERE BEING NO ACTUAL PAYMENT OF INTEREST, NOR THERE BEING CREDIT OF INTEREST TO THE ACCOUNT OF THE CONSUMERS, THE PROVISIONS OF SECTION 194A ARE NOT APPLICABLE TO THE APPELLANT COMPANY. 5 2.2 B ECAUSE THE CIT(A) HAS FAILED TO APPRECIATE THAT THERE BEING NO ACTUAL PAYMENT OF INTEREST AND THE APPELLANT COMPANY RUNNING IN LOSS, NO LOSS HAS BEEN CAUSED TO THE REVENUE, HENCE, THERE IS NO DELIBERATE DEFAULT OR MALAFIDE INTENTION. 2.3 BECAUSE THE CIT(A) HAS FAILE D TO APPRECIATE THAT HAD THERE BEEN PAYMENT OF INTEREST EITHER BY WAY OF CREDIT TO THE ACCOUNT OF THE CONSUMER OR BY WAY OF ACTUAL PAYMENT OR ADJUSTMENT, THEN ONLY THERE WOULD HAVE BEEN ANY LOSS TO THE REVENUE. 2.4 BECAUSE THE ENTIRE INTEREST DEBITED TO T HE INCOME AND EXPENDITURE ACCOUNT, BEING DISALLOWED BY THE AO, FOR REASONS OF NON DEDUCTION OF TAX, THERE HAS RESULTED A DOUBLE PENALTY ON THE APPELLANT, ONE BY WAY OF DISALLOWANCE AND AGAIN BY WAY OF FAILURE OF TDS. 7. WE HAVE CONSIDERED THE RIVAL SUBMI SSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THIS YEAR, IT IS HELD BY CIT(A) THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE ON ALL AMOUNTS PAID/PAYABLE EXCEEDING RS.5,000/ - . T HIS ARGUMENT OF THE ASSESSEE THAT THERE WAS A LIQUIDITY CRUNCH AND THERE WAS NO CONSTRUCTIVE PAYMENT OF INTEREST EITHER BY WAY OF CREDIT TO THE CONSUMERS ACCOUNT OR BY WAY OF ACTUAL CASH FLOW, DID NOT FIND FAVOUR OF CIT(A). AS PER THE PROVISIONS OF SECTION 194A OF TH E ACT, THE ASSESSEE IS REQUIRED TO DEDUCT TDS AT THE TIME OF PAYMENT OR CREDIT WHICHEVER IS EARLIER AND FOR THE PURPOSE OF CREDIT ALSO, IT IS NOT NECESSARY THAT THE CREDIT MUST BE TO THE ACCOUNT OF PAYEE AND EVEN IF THE CREDIT IS TO A COMMON ACCOUNT UNDER ANY NAME, SUCH AS INTEREST SUSPENSE ACCOUNT, INTEREST PAYABLE ACCOUNT ETC. THEN ALSO TDS IS REQUIRED TO BE DEDUCTED. THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO EXAMINE THE PARTY - WISE INTEREST PAYABLE AMOUNT AND WHER E THE INTEREST AMOUNT IS MORE THAN RS.5,000/ - , TDS IS REQUIRED TO BE DEDUCTED AND FOR DOING SO, THE ASSESSING OFFICER SHOULD KEEP IN MIND THE 6 PROVISIONS OF SECTION 19 6 ALSO. ON THIS ASPECT , IT WAS THE ARGUMENT OF LEARNED D.R. THAT THE CIT(A) HAS NO POWER T O SET ASIDE THE MATTER TO ASSESSING OFFICER BUT SINCE THERE IS NO FINDING GIVEN BY THE ASSESSING OFFICER OR BY CIT(A) REGARDING THIS ASPECT AS TO HOW MUCH AMOUNT WAS PAID OR WAS PAYABLE IN RESPECT OF THOSE PARTIES TO WHOM THE INTEREST PAYABLE WAS IN EXCESS OF RS.5,000/ - PER PARTY PER YEAR , THIS ISSUE CANNOT BE DECIDED AT OUR LEVEL AND IT HAS TO GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR THIS FACTUAL VERIFICATION. THEREFORE, WE RESTORE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISIO N. THE ASSESSEE HAS TO FURNISH COMPLETE DETAILS REGARDING INTEREST EXPENSES CLAIMED BY THE ASSESSEE IN THE PRESENT YEAR BY WAY OF DEBIT TO PROFIT & LOSS ACCOUNT IRRESPECTIVE OF WHETHER THE CREDIT WAS GIVEN TO THE INDIVIDUAL PAYEE OR TO COMMON ACCOUNT OR W AS PAID OR REMAINED UNPAID . FOR THOSE PARTIES TO WHOM INTEREST PAYABLE IS RS.5000/ - OR MORE PER YEAR , TDS IS REQUIRED TO BE DEDUCTED AFTER KEEPING IN MIND THE PROVISIONS OF SECTION 196 OF THE ACT. THE ASSESSING OFFICER SHOULD PASS NECESSARY ORDER AS PER LAW IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THESE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. 8. GROUND NO. 3 OF THE APPEAL READS AS UNDER: 3. BECAUSE THE I NTEREST CLAIMED HAVING BEEN DISALLOWED U/S 40(A)(IA) AND IS TO BE ALLOWED ONLY WHEN TDS IS DONE, IRRESPECTIVE OF THE YEAR TO WHICH IT RELATES, THE PROVISIONS OF TDS ARE NOT APPLICABLE. 9. ON THIS ASPECT ALSO, THE LEARNED A.R. OF THE ASSESSEE REITERATED THE SAME ARGUMENTS WHICH WERE RAISED BEFORE THE CIT(A). LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ON THIS ASPECT, WE WOULD LIKE TO HOLD THAT BOTH THE PROVISIONS ARE INDEPENDE NT I.E. REQUIREMENT OF TDS AND DISALLOWANCE U/S 40(A)(IA) OF THE ACT. IT CANNOT BE SAID THAT SINCE THE DISALLOWANCE IS MADE U/S 40(A)(IA), NO DEMAND CAN BE RAISED U/S194A OF THE ACT AND VICE VERSA. THEREFORE, THIS GROUND IS REJECTED. 11. GROUND NO. 4 & 5 OF THE APPEAL READ AS UNDER: 4 . BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN L AW IN UPHOLDING THE LEVY O F INTEREST U/S201(1A) OF THE ACT, 1961 BY STATING IT TO BE MANDATORY AND ABSOLUTE IN NATURE. 5 . BECAUSE THE CIT(A) HAS FAILED TO APPRECIATE THE POOR FINANCIAL CONDITION OF THE APPELLANT COMPANY AND HAS UPHELD T HE LEVY OF INTEREST U/S201(1A) OF THE ACT 1961, IGNORING THE FACT THAT THE APPELLANT WAS PREVENTED BY SUFFICIENT AND REASONABLE CAUSE. 1 2 . ON THIS ASPECT ALSO, THE LEARNED A.R. OF THE ASSESSE E REITERATED THE SAME ARGUMENTS WHICH WERE RAISED BEFORE THE CIT(A). AS AGAINST THIS, LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF CIT(A). HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF HINDUSTAN COCA COLA BEV ERAGES (P) LIMITED VS. CIT AS REPORTED IN 293 ITR 226. 1 3 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE DO NOT FIND ANY MERIT IN THESE ARGUMENTS OF LEARNED A.R. OF THE ASSESSEE BECAUSE LIABILITY OF INTEREST U/S201(1A) OF THE ACT IS COMPENSATORY IN NATURE FOR NONPAYMENT/ DELAY OF PAYMENT OF TDS BY THE ASSESSEE. T HIS IS BY NOW A SETTLED POSITION OF LAW THAT PAYMENT OF COMPENSATORY INTEREST IS MANDATORY AND THE SAME IS NOT DEPENDENT ON ANY SUFFICIENT OR REASONABLE CAUSE OR POOR FINANC IAL POSITION OF THE ASSESSEE. IN THE CASE OR HINDUSTAN COCA COLA (SUPRA), IT WAS H ELD BY HON'BLE APEX COURT THAT THE PAYMENT OF INTEREST U/S 201(1A) IS TO BE MADE EVEN IF IT IS ULTIMATELY FOUND THAT THE LIABILITY OF TDS U/S201(1) IS NOT SUSTAINABLE ON THIS BASIS THAT THE 8 PAYEE HAS ALREADY PAID THE TAX ON ITS INCOME AND EVEN IN SUCH CASE , THE PAYER HAS TO MAKE PAYMENT OF INTEREST U/S 201(1A) OF THE ACT FROM THE DATE FROM WHICH THE TDS WAS DEDUCTIBLE TILL THE DATE THE TAX HAS BEEN PAID BY THE PAYEE. THEREFORE, THESE GROUNDS ARE REJECTED. IN THE RESULT, THIS APPEAL IS PARTLY ALLOWED FOR S TATISTICAL PURPOSES. 1 4 . IN THE COMBINED RESULT, THE ASSESSEES APPEAL AS WELL AS ALL FIVE APPEALS OF THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23 /12/2013 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T. ASSTT. REGISTRAR