DDIT, Dehradun v. M/s Clough Engineering Ltd., Mumbai

ITA NO. 5605/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NO. 5605/DEL/2010 A.Y. : 2004-05 DY. DIRECTOR OF INCOME - TAX INTERNATIONAL TAXATION 13-A- SUBHASH ROAD AAYAKAR BHAVAN DEHRADUN VS. M/S CLOUGH ENGINEERING LTD. C/O DEVESH K SHAH & CO. CAS 106 BANAJI HOUSE FLORA FOUNTAIN MUMBAI-01 (PAN/GIR NO. : AABCC6248C) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. G.C. SRIVASTAVA ADV. DEPARTMENT BY : SH. ASHWANI MAHAJAN C.I.T.(D.R.) ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 16.6.2 010 PERTAINING TO ASSESSMENT YEAR 2004-05 PASSED U/S 154 OF THE IT ACT. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOM E TAX (APPEALS) HAS ERRED IN DELETING THE INTEREST U/S. 234B AND 234D LEVIED BY THE ASSESSING OFFICER . 3. THE ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143( 3). THE ASSESSEES COUNSEL FILED AN APPLICATION U/S 154 STA TING THAT INTEREST U/S 234B SHOULD NOT BE LEVIED AS THE INCOME OF THE ASSES SEE IS DEDUCTIBLE AT SOURCE U/S 195. HENCE HE CLAIMED THAT INTEREST U /S 234B SHOULD BE DELETED. THE ASSESSING OFFICER DID NOT AGREE WIT H THE ASSESSEES CONTENTION HE REFERRED TO THE DECISION OF THE HON BLE APEX COURT IN THE ITA NO. 5605/DEL/2010 2 CASE OF ANJUM M.H. GHASWALA AND OTHERS 252 ITR 1 AN D REJECTED THE ASSESSEES CONTENTION. 3.1 FURTHER ASSESSEE HAD SUBMITTED THAT INTEREST U/S 234D IS TO BE CHARGED ON THE AMOUNT OF REFUND RECEIVED BY THE ASSE SSEE I.E. THE TOTAL REFUND LESS TDS DEDUCTED ON INTEREST GRANTED T O THE ASSESSEE. ASSESSING OFFICER DID NOT AGREE TO THIS. HE HELD THAT REFUND & INTEREST U/S. 244 WAS GRANTED TO THE ASSESSEE AND TDS WAS DE DUCTED FROM INTEREST ALLOWED TO THE ASSESSEE WHICH IS A PART O F THE INCOME OF THE ASSESSEE AS WELL AS THE AMOUNT RECEIVED IN THE FORM OF TDS CERTIFICATE. THEREFORE THE APPLICATION OF THE ASSESSEE WAS REJEC TED BY THE ASSESSING OFFICER . 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ASSESSEE MADE ELABORATE SUBMISSIONS. IN THE SAID ASSESSMENT ORDER AN AMOUNT OF ` 823 81 2/- HAS BEEN CHARGED AS INTEREST UNDER SECTION 234B OF THE ACT. WE WOULD LIKE TO DRAW YOUR ATTENTION TO THE PROVISI ONS OF SECTION 234B: 234B(1) SUBJECT TO THE OTHER PROVISIONS OF THIS SECT ION WHERE IN ANY FINANCIAL YEAR AN ASSESSEE WHO IS LI ABLE TO PAY ADVANCE TAX UNDER SECTION 208 HAS FAILED TO PAY SUCH TAX OR WHERE THE ADVANCE TAX PAID BY SUCH ASSESSEE UNDER THE PROVISIONS OF SECTION 210 IS LESS THAN NINETY PERCENT OF THE ASSESSED TAX THE ASSESSEE SHALL BE LIABLE TO P AY SIMPLE INTEREST AT THE RATE OF ONE PERCENT FOR EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD FROM THE 1 ST DAY OF APRIL NEXT FOLLOWING SUCH FINANCIAL YEAR TO THE DATE OF ITA NO. 5605/DEL/2010 3 DETERMINATION OF TOTAL INCOME UNDER SUB-SECTION (1) OF SECTION 143 AND WHERE A REGULAR ASSESSMENT IS MADE TO THE DATE OF SUCH REGULAR ASSESSMENT ON AN AMOUNT EQUAL TO THE ASSESSED TAX OR AS THE CASE MAY BE ON THE AMOUNT BY WHICH THE ADVANCE TAX PAID AS AFORESAID FALLS SHORT OF THE ASSESSED TAX. HENCE INTEREST SECTION 234B IS LEVIABLE ONLY IF TH E ASSESSEE IS LIABLE TO PAY ADVANCE TAX. IN OUR CLIENTS CAS E THE SAME IS NOT APPLICABLE AS THE ENTIRE AMOUNT IS SUBJECT T O TAX DEDUCTION AT SOURCE. HENCE INTEREST U/S 234B IS NO T LEVIABLE ON OUR CLIENT. IN THE SAID ASSESSMENT ORDER THE ASSESSING OFFICER HAS LEVIED INTEREST UNDER SECTION 234D OF ` 2 715 656/ -. SUBJECT TO OTHER PROVISIONS OF THE ACT WHERE ANY RE FUND IS GRANTED TO THE ASSESSEE UNDER SUB-SECTION (1) OF SE CTION 143 AND A) NO REFUND IS DUE ON REGULAR ASSESSMENT OR B) THE AMOUNT REFUNDED UNDER SUB-SECTION (1) OF THE SECTION 143 EXCEEDS THE AMOUNT REFUNDABLE ON REGULAR ASSESSMENT. THE ASSESSEE SHALL BE LIABLE TO PAY SIMPLE INTEREST AT THE RATE OF ONE HALF PERCENT ON THE WHOLE OR THE EXCESS AMOUNT SO REFUNDED FOR EVERY MONTH OR PART OF A MONTH COMP RISED IN THE PERIOD FROM THE DATE OF GRANT REFUND TO THE DATE OF SUCH REGULAR ASSESSMENT. ITA NO. 5605/DEL/2010 4 SECTION 143(1) OF THE ACT STATES THAT WHEN A RETURN HAS BEEN MADE IF ANY TAX IS DUE EVEN AFTER CONSIDERING AMOUNT OF TDS OR ADVANCE TAX AND SELF ASSESSMENT TAX PAID THEN INTIMATION TO THE SENT ALONG WITH THE NO TICE OF DEMAND U/S 156 AND REFUND SHOULD BE GRANTED IF ANY REFUND IS DUE. HENCE WHILE CALCULATING INTEREST U/S 234D ONLY RE FUND GRANTED ON ACCOUNT OF EXCESS TDS AND ADVANCE TAX AND SELF ASSESSMENT TAX OVER THE TAX LIABILITY TO BE CONSIDE RED AND NOT THE ENTIRE REFUND AMOUNT WHILE INCLUDES INTERES T U/S 244A. AS PER THE INTIMATION AN AMOUNT OF ` 21 118 050 IS REFUNDED TO OUR CLIENT THIS INCLUDES ` 20 112 432/ - ON ACCOUNT OF TDS AND ` 1 005 618/- ON ACCOUNT OF INTER EST U/S 244A. HENCE AS PER SECTION 234D ONLY ` 20 112 432 /- IS TO BE CONSIDERED. 4.1 CONSIDERING THE SAME LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER:- 5. WRITTEN SUBMISSIONS AS REPRODUCED ABOVE HAVE BEEN ATTENTIVELY GONE THROUGH WITH THE ORDER U/S 154 OF THE ACT DATED 26.3.2007 THEREBY REJECTING THE APPLICATI ON OF THE APPELLANT FOR RECTIFICATION. AS THE CONTEN TIONS REPRODUCED ABOVE WOULD SUGGEST THE LD. COUNSEL HAS AGITATED CHARGE OF INTEREST UNDER SECTIONS 234B AND 234D OF THE ACT A DECISION WHICH ACCORDING TO HIM WAS WRONGLY ASSUMED AS COVERED UNDER THE DECISION OF THE HONBLE SUPREME COURT IN C.I.T. VS. ANJUM M.H . ITA NO. 5605/DEL/2010 5 GHASWALA AND OTHERS (252 ITR 1). HE CONTENDED THAT IN THAT JUDGEMENT THE HONBLE SUPREME COURT HELD THAT INTEREST WAS CHARGEABLE BY OPERATION OF LAW AN D THAT NONE HAD DISCRETION TO WAIVE IT EXCEPT IN THE MANNER PROVIDED IN LAW. THE FACTS INVOLVED IN THIS CASE ACCORDING TO LD. A.R. ARE DISTINGUISHABLE IN AS MUCH AS IN THIS CASE NO ADVANCE TAX WAS PAYABLE AND THE ISSUE OF LEVY OF INTEREST U/S 234B DID NOT EVE N ARISE. IN ORDER TO STRENGTHEN THESE ARGUMENTS HE RELIED ON THE DECISION OF HONBLE JURISDICTIONAL HI GH COURT OF UTTARAKHAND IN THE CASE OF SEDCO FOREX IN TL. DRILLING CO. (264 ITR 320) AND C.I.T. V HALLIBURTON OFFSHORE SERVICES (271 ITR 395); BOTH HOLDING THAT INTEREST IS NOT LEVIABLE U/S 234B IN ANY CASE WHERE TAX LIABILITY HAS BEEN DISCHARGED BY WAY OF TDS. THESE DECISIONS OF THE JURISDICTIONAL HIGH COURT HAVE BEE N SUBSEQUENTLY FOLLOWED BY THE HONBLE HIGH COURT OF BOMBAY IN THEIR ORDER DATED 14.1.2009 REPORTED IN 222 CTR 86 DIRECTOR OF INCOME TAX VS. M/S NGC NETWORK ASIA LLC. SINCE THE ISSUE OF CHARGE OF INTEREST U/S 234B IN THE CIRCUMSTANCES OF THE APPELLANT HAS ALREADY BEEN DECIDED BY THE HONBLE HIGH COURT OF UTTARAKHAND IN APPELLANTS FAVOUR T HE DECISION IN THIS APPEAL IS MERE FATE ACCOMPLI AND TH E GROUND TAKEN MERITS TO BE ALLOWED. GROUND NO. (II ) IS THEREFORE ALLOWED. 6. AS REGARDS ANOTHER GROUND WHICH RELATES TO CHARG E OF INTEREST U/S 234D AS SUBMITTED BY THE LD. A.R. IN THE ITA NO. 5605/DEL/2010 6 WRITTEN SUBMISSIONS REPRODUCED ANTE ONLY REFUND GRANTED ON ACCOUNT OF EXCESS TDS ADVANCE TAX AND SELF ASSESSMENT TAX OVER AND ABOVE THE TAX LIABILI TY IS TO BE CONSIDERED FOR THE PURPOSES OF CHARGE OF INTE REST AND NOT THE ENTIRE AMOUNT OF REFUND. ACCORDINGLY THE CONTENTION OF THE LD. A.R. THAT FOR THE PURPOSE S OF SEC. 234D ONLY THE AMOUNT OF TDS OF ` 20 113 432/- COULD BE CONSIDERED IS TO BE TAKEN AS CORRECT AND AFTER VERIFICATION OF THE CLAIM OF THE SAID AMOUNT OF TDS INTEREST U/S. 234D IS TO BE CHARGED AND INTEREST GRANTED U/S 244A IS TO BE EXCLUDED FOR CHARGE OF INTEREST U/S 234D. THE AO SHALL GIVE THE APPEAL E FFECT ACCORDINGLY. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT O F THE MATERIAL PRODUCED AND THE PRECEDENTS RELIED UPON. WE FIND T HAT IT IS THE CONTENTION OF THE ASSESSEE THAT INTEREST U/S 234B A ND 234D HAVE BEEN WRONGLY ASSUMED TO BE COVERED BY THE DECISION OF TH E HONBLE SUPREME COURT IN C.I.T. VS. ANJUM M.H. GHASWALA AND OTHERS (252 ITR 1). IN THE SAID CASE THE COURT HAS HELD THAT INTERE ST WAS CHARGEABLE BY OPERATION OF LAW AND THAT NONE HAD DISCRETION TO WA IVE IT EXCEPT IN THE MANNER PROVIDED IN LAW. HOWEVER THE FACTS IN THE P RESENT CASE ARE DISTINGUISHABLE IN AS MUCH AS NO ADVANCE TAX WAS P AYABLE AND THE ISSUE OF LEVY OF INTEREST U/S 234B DID NOT EVEN AR ISE. MOREOVER THE HONBLE JURISDICTIONAL HIGH COURT OF UTTARAKHAND IN THE CASE OF SEDCO FOREX INTL. DRILLING CO. (264 ITR 320) AND C.I.T. V H ALLIBURTON OFFSHORE SERVICES (271 ITR 395); HAS HELD THAT INTEREST IS NOT LEVIABLE U/S 234B IN ANY CASE WHERE TAX LIABILITY HAS BEEN DISCHARGED BY WAY OF TDS. ITA NO. 5605/DEL/2010 7 HENCE THE ISSUE HAS BEEN COVERED IN FAVOUR OF THE ASSESSEE. HENCE WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE O RDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) RELATING TO NOT CHARGING OF INTEREST U/S 234B. 6.1 AS REGARDS THE CHARGE OF INTEREST U/S 234D ASSE SSEE HAS SUBMITTED ONLY REFUND GRANTED ON ACCOUNT OF EXCES S TDS ADVANCE TAX AND SELF ASSESSMENT TAX OVER AND ABOVE THE TAX LIABILITY IS TO BE CONSIDERED FOR THE PURPOSE OF CHARGE OF INTEREST AN D NOT THE ENTIRE AMOUNT OF REFUND. WE FIND THAT THIS CONTENTION OF T HE ASSESSEE IS VERY COGENT. HENCE LD. COMMISSIONER OF INCOME TAX (APPEA LS)S OBSERVATION IS THAT FOR THAT PURPOSE OF SECTION 23 4D ONLY THE AMOUNT OF ` TDS OF ` 20 112 432/- COULD BE CONSIDERED IS TO BE TAKEN AS CORRECT AND AFTER VERIFICATION OF THE SAID AMOUNT OF TDS I NTEREST U/S 234D IS TO BE CHARGED AND INTEREST GRANTED U/S 244A IS TO BE EXCLUDED FOR CHARGE OF INTEREST U/S 234D. WE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 7. LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTR OVERT THE DECISION OF LD. COMMISSIONER OF INCOME TAX (APPEALS)S AND ASSESSEES SUBMISSIONS IN THIS REGARD. HENCE WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF THE LD. COMMISSIONER OF I NCOME TAX (APPEALS). ACCORDINGLY WE UPHOLD THE SAME. ITA NO. 5605/DEL/2010 8 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/02/2011 UP ON CONCLUSION OF HEARING. SD/- SD/- [ [[ [C.L. SETHI C.L. SETHI C.L. SETHI C.L. SETHI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 15/02/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER A.R. ITAT DELHI BENCHES