ITO, v. Executive Officer cum Secretary, Faridabad

ITA 1005/DEL/2009 | 2006-2007
Pronouncement Date: 29-04-2010 | Result: Allowed

Appeal Details

RSA Number 100520114 RSA 2009
Assessee PAN DELOF2009A
Bench Delhi
Appeal Number ITA 1005/DEL/2009
Duration Of Justice 1 year(s) 1 month(s) 11 day(s)
Appellant ITO,
Respondent Executive Officer cum Secretary, Faridabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-04-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted E
Tribunal Order Date 29-04-2010
Date Of Final Hearing 29-04-2010
Next Hearing Date 29-04-2010
Assessment Year 2006-2007
Appeal Filed On 18-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E: NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA VICE PRESIDENT AND SHRI C.L. SETHI JM I.T. A. NOS.1005 & 1006/DEL OF 2009 ASSESSMENT YEARS: 2006-2007 & 2007-08 INCOME-TAX OFFICER EXECUTIVE OFFICE R CUM SECRETARY TDS FARIDABAD. VS MARKETING COMMITTEE NEA R DAUBA SUBZI MANDI FARIDABAD. APPELLANT RESPONDENT APPELLANT BY: SHRI SURENDER PAL RESPONDENT BY: SHRI S.K. WADHWA ORDER PER C.L. SETHI JM: THESE TWO APPEALS ARE FILED BY THE REVENUE AGAINST A CONSOLIDATED ORDER DATED 15.1.2009 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF ORDER PASSED BY THE AO U/S 201(1) AND 201(1A) OF THE INCO ME-TAX ACT 1961 (THE ACT) PERTAINING TO THE PERIOD RELEVANT TO THE ASSES SMENT YEARS 2006-07 AND 2007-08 RESPECTIVELY. 2. THE GROUNDS IN BOTH THE APPEALS ARE IDENTICAL AN D DRAFTED IN THE SAME FASHION BY STATING THAT THE LEARNED CIT(A) HAS ERRE D IN LAW AND ON FACTS IN DELETING THE DEMAND RAISED BY THE AO U/S 201 AND 20 1(1A) OF THE INCOME- 2 TAX ACT FOR THE TWO ASSESSMENT YEARS NAMELY ASST T. YEARS 2006-07 AND 2007-08. 3. IN THE GROUNDS OF APPEAL THE REVENUE HAS CONTEN DED THAT LEARNED CIT(A) HAS ERRED IN HOLDING AS UNDER: (I) THE TAX DEDUCTOR IS NOT LIABLE TO DEDUCT TAX ON T HE AMOUNT OF INTEREST PAID/CREDITED IN THE ACCOUNT OF THE DEDUCT EE. (II) THE TAX DEDUCTOR IS MAINTAINING ITS ACCOUNTS ON C ASH BASIS. SO LONG AS THE INTEREST IS CREATED TO THE ACCOUNT OF T HE DEDUCTEE SECTION 194A IS CLEARLY ATTRACTED. (III) HARYANA STATE AGRICULTURE MARKETING BOARD IS COVERE D U/S 194A(3)(III)(F) OF THE INCOME-TAX ACT 1961. (IV) THE AO HAS INCORRECTLY APPLIED THE RATE OF TDS ON T HE APPLICANT. (V) THERE IS NO REVENUE LOSS AS THE INCOME TAX DEDUCTEE VIZ. HARYANA STATE AGRICULTURE MARKETING BOARD WAS NOT TAXABLE. EVEN IF THE INCOME OF HARYANA STATE AGRICULTURE MARKETING BOARD IS TREATED AS NOT TAXABLE (WHICH IS THOUGH NOT A ACCEPTABLE FACT) REVENUE IS DEPRIVED OF UTILIZATION OF THIS ACCOUNT FROM THE DA TE OF ITS DEDUCTION TO THE DATE OF ISSUE OF REFUND. THIS LOSS OF REVENUE 3 HOWEVER GETS COMPENSATED ONLY THROUGH THE LEVY OF INTEREST U/S 201(1A) OF THE I.T. ACT. 4. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. IN THESE TWO YEARS THE AO HAS PASSED THE ORDER U/S 201(1) AND 201(1A) BY HOLDING THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE ON THE INTEREST ACCRUED ON LOAN TAKEN FROM HARYANA STATE A GRICULTURE MARKETING BOARD PANCHKULA. IN THE FINANCIAL YEAR 2005-06 RE LEVANT TO THE ASSTT. YEAR 2006-07 THE AO HAS NOTED THE FOLLOWING ENTRIES MAD E BY THE ASSESSEE IN ITS BOOKS: LOAN FROM BOARDS : O.B. RS.27 62 99 304/- ADD: INTEREST ACCRUED ON LOAN RS 3 40 22 368/- LESS REPAYMENT RS.1 30 00 000/- BALANCE RS.29 73 21 672 /- SIMILARLY IN THE FINANCIAL YEAR 2006-07 PERTAINING TO THE ASSTT. YEAR 2007- 08 THE FOLLOWING ENTRIES WERE MADE: LOAN FROM BOARDS : O.B. RS.29 73 21 672/- ADD: INTEREST ACCRUED ON LOAN RS 1 30 00 000/- TOTAL RS.31 03 21 672/- LESS REPAYMENT ON LOAN RS. 1 60 00 000/- BALANCE RS.29 43 21 672 /- 4 THE AO WAS OF THE OPINION THAT WHEN INTEREST ACCRUE D ON LOAN WAS CREDITED IN THE CREDITORS ACCOUNT THE ASSESSEE WAS SUPPOSE D TO DEDUCT TAX AT SOURCE WITHIN THE MEANING OF PROVISIONS CONTAINED IN SECTI ON 194A OF THE ACT. 5. SINCE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE FR OM THE AMOUNT OF INTEREST CREDITED IN THE CREDITORS ACCOUNT THE AO PASSED THE ORDER U/S 201(1) AND 201(1A) IN BOTH THE ASSTT. YEARS AS UNDER: (A) ASSESSMENT YEAR 2006-07: DEMAND U/S 201 OF THE I.T. ACT 1961 AS ENVISAGED U/S 194-A OF THE I.T. ACT 1961 RS.76 34 620/- ON THE PAYMENT OF INTEREST AMOUNTING TO RS.3 40 22 368/- INTEREST U/S 201(1A) OF THE I.T. ACT 1961 RS.21 37 688/- FOR THE PERIOD OF DELAY FROM 1.4.2006 TO 07/2008 -- ---------------- RS.97 72 308/- ----------------- (B) ASSESSMENT YEAR 2007-08: DEMAND U/S 201 OF THE I.T. ACT 1961 AS ENVISAGED U/S 194-A OF THE I.T. ACT 1961 RS.50 03 923/- ON THE PAYMENT OF INTEREST AMOUNTING TO RS.2 22 99 125/- 5 INTEREST U/S 201(1A) OF THE I.T. ACT 1961 RS.8 0 0 624/- FOR THE PERIOD OF DELAY FROM 1.4.2007 TO 07/2008 -- ---------------- RS.58 04 547/- ----------------- 6. ON APPEAL THE LD. CIT(A) CANCELLED THE AOS ORD ER PASSED U/S 201(1) AND 201(1A) BY THE AO BY GIVING FOLLOWING REASONS: (I) THAT IN THE LIGHT OF EXEMPTION U/S 11 & 12 GRANTED TO M/S HARYANA STATE AGRICULTURE MARKETING BOARD PANCHKULA THERE WAS NO TAX LIABILITY PAYABLE BY THE CREDITOR AND AS SUCH NO D EFAULT CAN BE ENVISAGED WITHIN THE MEANING OF SECTION 201(1) AND 201(1A) OF THE ACT ON THE PART OF THE ASSESSEE INASMUCH AS PRA CTICALLY THERE WAS NO LOSS TO THE REVENUE AND EVEN IF THE DEMAND I S RAISED THAT WOULD TURN OUT TO BE A REDUNDANT. (II) THE ASSESSEE CREDITED MERELY A NOTIONAL INTEREST ON LOAN TAKEN FROM M/S HARYANA STATE AGRICULTURE MARKETING BOARD AND IN THE BOOKS THE ASSESSEE HAS MADE PROVISION OF ACCRUED INTEREST ON LOANS THOUGH IN FACT NO INTEREST WAS ACTUALLY PAID TO CRE DITOR AND THEREFORE THIS NOTIONAL ENTRY WOULD NOT RESULT IN INCOME TO THE CREDITOR WHOSE INCOME IS EXEMPT U/S 11 & 12 OF THE ACT. HENCE THE DEPARTMENT IS IN APPEAL. 6 7. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 8. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS MADE ENTRY OF INTEREST ACCRUED ON LOAN TAKEN FROM M/S HARYANA STATE AGRICULTURE MA RKETING BOARD IN ITS BOOKS OF ACCOUNTS. FOR THE PURPOSE OF SECTION 194A THE TAX ON INTEREST IS DEDUCTIBLE AT SOURCE AT THE TIME OF CREDIT OF SUCH INTEREST TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER. IN SECTION 194A IT HAS BEEN FURTHER PROVIDED UNDER EXPLANATION THERETO THA T EVEN IF INTEREST IS CREDITED IN INTEREST PAYABLE ACCOUNT SUSPENSE A CCOUNT OR BY ANY OTHER NAME ENTERED IN THE BOOKS OF ACCOUNTS THE PERSON LIABLE TO PAY INTEREST SHALL BE COVERED BY SECTION 194A OF THE ACT. THEREFORE MERE BECAUSE THE INTEREST WAS NOT RECEIVED BY HARYANA STATE AGRICULTURE MARKE TING BOARD AND WHEN ASSESSEE MADE A PROVISION OF INTEREST IN ITS ACCOUN T IN THE ACCOUNT OF THE CREDITOR THE PROVISIONS OF SECTION 194A STAND APPL ICABLE WHEN THE AMOUNT WAS CREDITED EITHER IN THE SUSPENSE ACCOUNT OR INTE REST PAYABLE ACCOUNT OR BY ANY OTHER NAME. THEREFORE THE CIT(A)S OBSERVATION THAT THE ENTRY WAS MADE ONLY FOR NOTIONAL INTEREST ACCRUED ON LOAN AND SECTION 194A IN THAT CASE WOULD NOT BE APPLICABLE IS NOT JUSTIFIED. 7 9. NOW COMING TO THE QUESTION AS TO WHETHER THERE I S NO TAX LIABILITY PAYABLE BY THE PAYEE OR THE CREDITOR IN WHOSE ACCOU NT INTEREST WAS CREDITED A DEMAND CAN NOW BE RAISED U/S 201(1) AGAINST THE A SSESSEE FOR FAILURE TO DEDUCT TAX AT SOURCE. IN THIS CONNECTION A REFERE NCE MAY BE MADE TO A DECISION OF HONBLE SUPREME COURT IN THE CASE OF HI NDUSTAN COCA COLA BEVERAGES (P) LTD. VS CIT (2007) 293 ITR 226 (SC) WHERE IT HAS BEEN HELD THAT WHERE THE RECIPIENT HAS ALREADY DISCHARGED HIS TAX LIABILITY AND FILED HIS RETURN OF INCOME THE DEDUCTEE COULD NOT BE CALLED UPON TO PAY THE AMOUNT U/S 201(1) IF THE TAX HAS ALREADY BEEN PAID BY THE RECIPIENT ON SUCH INCOME ON WHICH TAX WAS DEDUCTIBLE AT SOURCE. HOWEVER WH EN THE TAX IS SUBSEQUENTLY PAID BY THE DEDUCTEE THE LIABILITY TO PAY INTEREST WOULD NOT CEASE FOR THE PERIOD FOR WHICH REVENUE REMAINED DEP RIVED OF THE AMOUNT WHICH WAS RIGHTFULLY DUE TO IT AND IN THAT CASE THE DEDUCTOR WOULD BE LIABLE TO PAY INTEREST U/S 201(1A) OF THE ACT. THE CIT(A) HAS ALSO FOLLOWED THIS PRINCIPLE AND THEN HELD THAT SINCE HARYANA STATE AG RICULTURE MARKETING BOARD WAS A TAX EXEMPT ENTITY AND NO TAX WAS PAYABL E ON THE INCOME EARNED BY THE BOARD THE ASSESSEE WAS NOT LIABLE TO PAY EV EN INTEREST U/S 201(1A) SINCE THERE WAS NO SHORTFALL OF THE PAYMENT OF TAX AT ANY POINT OF TIME. IN THIS CONNECTION LEARNED CIT(A) HAS RELIED UPON A D ECISION OF ITAT BENCH 8 BANGALORE IN THE CASE OF MRS. MEENA S. PATIL VS ACI T REPORTED IN (2008) 114 ITD 181 (BANG) BESIDES SOME OTHER DECISIONS. 10. IN THIS CASE IT HAS BEEN CLAIMED BY THE ASSESS EE THAT DEDUCTEE NAMELY HARYANA STATE AGRICULTURE MARKETING BOARD HAS ALREA DY DISCHARGED ITS LIABILITY NO DEMAND AS RAISED BY THE AO U/S 201(1) CAN NOW BE IMPOSED AGAINST THE PRESENT ASSESSEE. IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P) LTD. VS CIT (SUPRA) WE AGREE WITH THE CONTENTION OF THE ASSESSEE THAT N O DEMAND VISUALIZED U/S 201(1) SHOULD BE ENFORCED AFTER THE TAX DEDUCTOR HA S SATISFIED THE AO(TDS) THAT TAX DUE HAVE BEEN PAID BY THE DEDUCTEE. HOWEV ER THIS WILL NOT ALTER THE LIABILITY TO CHARGE TAX U/S 201(1A) TILL THE DATE O F PAYMENT OF TAXES BY THE DEDUCTEE OR THIS WILL NOT ALTER THE LIABILITY OF PE NALTY U/S 271C OF THE ACT. WE THEREFORE RESTORE THE MATTER BACK TO THE FILE OF THE AO TO ASCERTAIN AS TO WHETHER THE TAX LIABILITY OF THE DEDUCTEE HAS BEEN IN THE MEANTIME DISCHARGED IN RESPECT OF THE INCOME ON WHICH TAX WA S DEDUCTIBLE BY THE ASSESSEE. IN CASE IT TRANSPIRES THAT THE TAX DUE FROM THE DEDUCTEE HAVE BEEN PAID BY DEDUCTEE THE DEMAND RAISED BY THE AO U/S 2 01(1) SHALL REMAIN VACATED. HOWEVER THE AO SHALL BE AT LIBERTY TO EX AMINE THE ISSUE AFRESH FROM THE STANDPOINT OF CHARGING INTEREST U/S 201(1A ) AFTER EXAMINING THE FACTS OF THE PRESENT CASE. THE ASSESSEE SHALL PROD UCE ALL NECESSARY DETAILS 9 BEFORE THE AO. THE AO SHALL MAKE NECESSARY ENQUIRY ABOUT THE ASSESSMENT AND RECOVERY OF DEMAND IN THE CASE OF DEDUCTEE NAM ELY HARYANA STATE AGRICULTURE MARKETING BOARD. THE LEARNED CIT(A) HA S STATED THAT THE REGISTRATION U/S 12A HAS BEEN GRANTED TO THE HARYAN A STATE AGRICULTURE MARKETING BOARD AND THEREFORE AO SHALL VERIFY AS TO WHETHER THE INCOME OF DEDUCTEE WAS FULLY EXEMPTED UNDER THE PROVISION S OF SECTION 11 TO 13 OF THE ACT OR WHETHER THERE WAS ANY TAX LIABILITY PAYA BLE BY THE DEDUCTEE I.E. HARYANA STATE AGRICULTURE MARKETING BOARD AND WHETH ER THAT LIABILITY HAS BEEN DISCHARGED BY THAT ASSESSEE. ALL THE FACTS SH ALL BE EXAMINED AND THE MATTER SHALL BE DECIDED IN THE LIGHT OF THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P) LTD. VS CIT (SUPRA). WE ORDER ACCORDINGLY. 11. IN THE RESULT THE PRESENT APPEALS ARE DISPOSED OF IN THE MANNER AS INDICATED ABOVE. 12. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL 2010 IMMEDIATELY AFTER THE HEARING WAS OVER. (G.E. VEERABHADRAPPA) (C.L. SETH I) VICE PRESIDENT JUDICIAL MEMBER DATED: APRIL 2010 VIJAY 10 COPY TO: 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT(A) FARIDABAD 5. DR ASSISTANT REGISTRAR