ITO, Gurgaon v. Jay Bharat Maruti Ltd, Gurgaon

ITA 938/DEL/2009 | 2008-2009
Pronouncement Date: 25-02-2011 | Result: Dismissed

Appeal Details

RSA Number 93820114 RSA 2009
Assessee PAN RTKJO1324B
Bench Delhi
Appeal Number ITA 938/DEL/2009
Duration Of Justice 1 year(s) 11 month(s) 13 day(s)
Appellant ITO, Gurgaon
Respondent Jay Bharat Maruti Ltd, Gurgaon
Appeal Type Income Tax Appeal
Pronouncement Date 25-02-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 25-02-2011
Date Of Final Hearing 31-01-2011
Next Hearing Date 31-01-2011
Assessment Year 2008-2009
Appeal Filed On 13-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER I.T.A. NOS.937 & 938/D/2009 ASSESSMENT YEARS: 2007-08 & 2008-09 INCOME TAX OFFICER VS. JAY BHARAT MARUTI LTD. TDS WARD GURGAON PLOT NO.5 MARUTI JOINT VENTURE COMPLEX GURGAON (APPELLANT) (RESPONDENT) PAN NO. RTKJO 1324B APPELLANT BY : SHRI A.K. MONGA DR RESPONDENT BY: SHRI R. SANTHANAM ADVOCATE ORDER PER K.G. BANSAL: AM: THE SOLITARY GROUND TAKEN BY THE REVENUE IN BOTH THESE APPEALS IS T O THE EFFECT THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE BY RELYING O N VARIOUS DECISIONS WITHOUT VERIFYING THE FACT THAT PAYMENT HAD BEE N CREDITED TO THE ACCOUNTS OF THE DIRECTORS AS COMMISSION DURING THE FINAN CIAL YEAR. IT MAY BE MENTIONED HERE THAT THE ASSESSING OFFICER CHARGED INTEREST OF `48 4 90/- FOR 937-938-09-JBML 2 FINANCIAL YEAR 2006-07 AND `2 41 477/- FOR FINANCIAL YEAR 2007-0 8 IN RESPECT OF LATE DEDUCTION OF TAX AT SOURCE. THESE AMOUNTS WERE DELETED BY THE C IT(A) PANCHKULA IN THE CONSOLIDATED ORDER PASSED ON 01.12.2008 IN APP EAL NO.40 43/GGN/08-09. 2. THE FACTS ARE THAT THE ASSESSEE DEBITED COMMISSION TO THE ACCOUN TS DURING BOTH THE FINANCIAL YEARS. THE COMMISSION PAID TO THE DIRECT ORS IS ADMITTEDLY TAXABLE UNDER THE HEAD SALARIES. ALTHOUGH THE AMOUNTS WER E DEBITED IN BOTH THE FINANCIAL YEARS ON THREE DIFFERENT DATES THE TAX WAS DEDUCTED AT SOURCE IN THE MONTH OF APRIL FOLLOWING THE ASSESSMENT YEARS. THE DETAILS OF THE DEBITS ARE AS UNDER:- FINANCIAL YEAR: 2006-07 `4 00 000/- ON 30 JUNE 2006 `4 00 000/- ON 30 SEPTEMBER 2006 `4 00 000/- ON 31 DECEMBER 2006 FINANCIAL YEAR: 2007-08 `10 00 000/- ON 30 JUNE 2007 `12 00 000/- ON 30 SEPTEMBER 2007 `21 00 000/- ON 31 DECEMBER 2007 2.1 IT WAS SUBMITTED THAT THE COMMISSION IS ASCERTAINED ON THE BAS IS OF AUDITED ACCOUNTS AS APPROVED BY THE BOARD. THIS HAPPENS IN TH E MONTH OF APRIL IMMEDIATELY AFTER THE CLOSE OF THE FINANCIAL YEAR. ALTHOUGH THE AM OUNT OF COMMISSION WAS DEBITED ON DIFFERENT DATES AS ABOVE IN THE FINANCIAL YEAR 937-938-09-JBML 3 THE PAYMENT WAS MADE TO THE DIRECTORS IN THE MONTH OF APRIL FOLLOW ING THE FINANCIAL YEAR. IN SUCH A CASE THERE IS NO LEGAL NECESSITY TO DEDUCT T AX AT SOURCE AT THE TIME OF DEBITING THE AMOUNT TO THE ACCOUNTS. TAX HAS TO BE DEDUCTED AT THE TIME OF ACTUAL PAYMENT IN TERMS OF SECTION 192(1) OF THE INCOME-TAX ACT 1961. THIS HAS BEEN DONE. THEREFORE THERE WA S NO LIABILITY TO PAY INTEREST AS NO DEFAULT HAS BEEN COMMITTED. THE ASSESSING OF FICER DID NOT ACCEPT THIS CONTENTION AND CHARGED INTEREST FOR TWO YEARS AS MENTIONED ABOVE. HOWEVER IN APPEAL THE LEARNED CIT(A) ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AND DELETED THE INTEREST FOR BOTH THE YEARS BY INTER ALIA F OLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. TEJ QUEBECOR PRINTER LIMITED (2006) 200 CTR 447. 3. BEFORE US THE LEARNED DR RELIED ON THE DISCUSSION ON PAGE 2 OF THE ASSESSMENT ORDER FOR FINANCIAL YEAR 2006-07. IT IS MENTIONED THAT T HE COMMISSION OF `34 04 680/- WAS DEBITED AS DIRECTOR COMMISSION . THE TAX DEDUCTED AT SOURCE AMOUNTING TO `15 00 745/- WAS DEPOSITED IN THE GOVERNMENT ACCOUNT IN THE MONTH OF APRIL 2006. THIS SHOWS THAT THE TAX WAS DEDUCTED IN THE MONTH OF APRIL ALTHOUGH THE COMMISSION WAS DEB ITED IN THE MONTHS OF JUNE SEPTEMBER AND DECEMBER 2006. THUS IT WAS HELD THAT THE ASSESSEE IS LIABLE TO PAY INTEREST U/S 201(1A) OF THE ACT. SIMILAR FIND INGS HAVE BEEN GIVEN FOR FINANCIAL YEAR 2007-08 IN WHICH INTEREST OF `1 69 5 44/- HAS BEEN HELD TO BE PAYABLE BY THE ASSESSEE. 937-938-09-JBML 4 3.1 IN REPLY THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE PAYMENT OF COMMISSION IS IN THE NATURE OF PAYMENT OF SALARY AND IS PART AND PARCEL OF THE SALARY PAYABLE TO THE DIRECTORS. IN CASE OF SALARIES TAX IS DEDUCTIBLE AT THE TIME OF PAYMENT AND NOT AT THE TIME OF CREDITING TH E SAME TO THE COMMISSION PAYABLE ACCOUNT OR THE DIRECTORS ACCOUNT. T HE COMMISSION WAS PAYABLE ON THE BASIS OF PROFIT EARNED BY THE ASSESSEE COMPANY WHICH COULD BE ASCERTAINED ON FINALIZATION OF ACCOUNTS AN D CERTIFICATION THEREOF BY THE BOARD OF DIRECTORS. THIS COULD BE D ONE ONLY AFTER THE CLOSE OF THE FINANCIAL YEAR. SINCE THE COMMISSION WAS PAID BY W AY OF SALARY IN THE MONTH OF APRIL AND TAX DEDUCTED AT SOURCE WAS ALSO PAID IN THE SAME MONTH THERE IS NO LIABILITY TO PAY INTEREST U/S 201(1A). IN THIS CONNECTION RELIANCE HAS BEEN PLACED ON THE DISCUSSION IN PARAGRAPH NO. 5 OF THE IMPUGNED ORDER WHICH READS AS UNDER:- 5. I HAVE PERUSED THE FACTS AND CAREFULLY CONSIDERED THE SUBMISSIONS. THE ISSUE IS COVERED BY THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. TEJ QUEBECOR PRINTING LTD. (2006) 200 CTR 444 (DEL.). IN THAT CASE THE RESPONDEN T JOINT VENTURE COMPANY EMPLOYED ONE MR. LESTER GARNET A CANADIAN NATIONAL AT A FIXED REMUNERATION WITH PERQUISITE OF RENT-FREE ACCOMMODATION CAR WITH DRIVER AND A SERVANT. THE SAID EMPLOYEE FILED HIS INDIVIDUAL TAX RETURN AND WAS PAYING TAXES ON THE SAME U/S 140A OF THE ACT. THE ASSESSING OFFICER NOTICED FROM A PERUSAL OF THE BANK ACCOUNT OF THE EMPLOYEE AND THE TDS RETURN FILED BY THE ASSESSEE THAT NO SALARY HAD BEEN PAID TO 937-938-09-JBML 5 THE EMPLOYEE NOR ANY DEDUCTION U/S 192 MADE BY THE RESPONDENT-ASSESSEE. THE ASSESSING OFFICER ACCORDINGLY HELD THE ASSESSEE-COMPANY TO BE IN DEFAULT U/S 201(1) AND 201(1A) OF T HE ACT. LIABILITY ARISING ON ACCOUNT OF INTEREST AT 15 PER CENT PER ANNUM FOR DIFFERENT PERIODS FOR THE ASSESSMENT YEARS 1995-96 TO 1999-2000 WAS CONSEQUENTLY DETERMINED BY THE ASSESSING OFFICER IN TERMS OF AN ORDER DATED FEBRUARY 14 2001. AGGRIEVED BY THE SAID ORDER THE ASSESSEE APPEALED TO THE CIT(A) INTER ALIA CONTENDING THAT SINCE NO SALARY HAD BEEN PAID TO MR. GARNETT THERE WAS NO OBLIGATION FOR THE ASSESSEE TO DEDUCT TAX AT SOURC E ON THE SAME. THE FINDING RECORDED BY THE ASSESSING OFFICER TO THE EFFECT THAT THE ALLEGED CREDITS IN THE INDIAN BANK ACCOUNT TANTAMOUNT TO RECEIPT OF REMUNERATION BY THE EMPLOYEE WAS ALSO ASSAILED. THE MATTER TRAVELED TO CIT(A) AND THEREAFTER TO THE INCOME-TAX APPELLATE TRIBUNAL WHO DELIVERED A SPLIT DECISION. WHILE THE JUDICIAL MEMBER OF THE TRIBUNAL HELD THAT SINCE THE SALARY PAYABLE TO MR. GARNETT HAD NOT BEEN ACTUALLY PAID TO HIM NO OBLIGATION TO DEDUCT TAX AT SOURCE U/S 192 OF THE ACT ARO SE NOR WAS THE ASSESSEE LIABLE TO EITHER PAY TAX U/S 201 OR INTEREST U/S 201(1A) OF THE ACT. THE ACCOUNTANT MEMBER OF THE TRIB UNAL HOWEVER ADOPTED A DIFFERENT LINE OF REASONING AND OPINED THAT THE OBLIGATION TO DEDUCT TAX AT SOURCE AROSE EVEN IF THE SALARY PAYABLE TO THE EMPLOYEE WAS SIMPLY CREDITED INTO HIS ACCOUNT EVEN IF NOT ACTUALLY PAID. THE FOLLOWING QUESTION WAS IN THE FACE OF THAT DECISION REFERRED TO THE THIRD MEMBER U/S 255(4) OF T HE INCOME-TAX ACT.: WHETHER; ON THE FACTS OF THE CASE AND IN LAW THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE U/S 192 AND CONSEQUENTLY LIABLE TO PAY THE DEMAND OF TAX AND INTEREST U/S 201(1) AND 201(1A) OF THE ACT? 937-938-09-JBML 6 THE THIRD MEMBER AGREED WITH THE VIEW TAKEN BY THE JUDICIAL MEMBER OF THE TRIBUNAL AND OPINED THAT .THE OBLIGATION TO DEDUCT TAX AT SOURCE DID NOT ARISE IN THE INSTANT CASE AS THE SALARY PAYABLE TO MR. GARNETT HAD NOT BEEN ACTUALLY PAID TO HIM. WHILE SAYING SO THE THIRD MEMBER DISTINGUISHED THE DECISION OF THE SUPREME COURT IN RAGHAVA REDDI VS. CIT (1962) 44 ITR 720 RELIED UPON BY THE ACCOUNTANT MEMBER. THE THIRD MEMBER HELD THAT WHEREVER PARLIAMENT INTENDED DEDUCTION TO BE MADE AT SOURCE EVEN WITHOUT ACTUAL PAYMENT TO THE RECIPIENT IT HAD SPECIFICALLY PROVIDED FOR THE SAME AS WAS THE POSITION IN CASES FALLING U/S 193 194A 194C AND 195 ETC. RELIANCE WAS ALSO PLACED BY THE THIRD MEMBER UPON THE DECISION OF THE ANDHRA PRADESH HIGH COURT IN V.S.C. BABU VS. CHAIRMAN AND MANAGING DIRECTOR SYNDICATE BANK (2002) 253 ITR 1 WHERE THE SAID CO URT HAS TAKEN THE VIEW THAT FOR A DEDUCTION OF TAX AT SOURCE U/S 1 92 IT WAS NECESSARY THAT BOTH ACCRUAL OF SALARY AND ITS PAYMENT SHOULD COEXIST. IN ACCORDANCE WITH THE MAJORITY OPINION THE TRIBUNAL EVENTUALLY ALLOWED THE APPEALS FILED BY THE ASSESSEE- COMPANY IN TERMS OF ITS ORDER DATED OCTOBER 11 2004 IN THESE APPEALS. SECTION 192 OF THE INCOME-TAX ACT INTER ALIA REQUIRES ANY PERS ON RESPONSIBLE FOR PAYING ANY INCOME CHARGEABLE UNDER THE HEAD SALARIES TO DEDUCT INCOME-TAX ON THE AMOUNT PAYABLE AT THE STIPULATED RATE AT THE TIME OF PAYMENT. THE TERM PAYMENT HAS NOT BEEN DEFINED EITHER IN SECTION 192 OR AT ANY OTHER PLACE OF THE ACT. THE EXPRESSION SHALL THEREFORE HAVE TO BE GIVEN ITS ORDINARY LITERAL MEANING. IT FOLLOWS THAT THE PERSON MAKING THE PAYMENT CAN OR IS REQUIRED TO MAKE A DEDUCTION TOWARDS TAX AT SOURCE ONLY AT THE TIME OF MAKING SUCH PAYMENT. THE ACCRUAL OF 937-938-09-JBML 7 THE PAYMENT AND /THE ACTUAL ACT OF MAKING THE PAYMENT MUST BOTH EXIST IN ORDER THAT A DEDUCTION AT SOURCE MAY BE MADE. NO DEDUCTION AT SOURCE IS CONTEMPLATED U/S 192 IN CASES WHERE A PAYMENT TOWARDS SALARY HAS ACCRUED BUT IS NOT MADE. THIS POSITION BECOMES CLEARER IF WE REFER TO SIMILAR OTHER PROVISIONS IN THE ACT LIKE SECTIONS 194B 194BB 194EE 194F AND 194L UNDER WHICH ALSO A DEDUCTION AT SOURCE IS ENVISAGED ONLY IF ACTUAL PAYMENT OF THE AMOUNT IS MADE TO THE PAYEE. IN CONTRADICTION TO THAT REQUIREMENT THERE ARE PROVISIONS IN THE ACT WHICH AUTHORIZE DEDUCTION AT SOURCE EVEN IN CASES WHERE THE PAYMENT IS EITHER MADE TO THE PAYEE OR CREDITED TO HIS ACCOUNT. THE PROVISIONS OF SECTIONS 193 194A 194C 194D 194E 194G 194H 194I 194J 194K 195 196A 196B 196C AND 196D ARE IN THIS REGARD RELEVANT. THE INFERENCE THEREFORE IS THAT WHEREVER PARLIAMENT INTENDED DEDUCTIONS TO BE MADE AT SOURCE ONLY AT THE TIME OF MAKING THE PAYMENT IT PROVIDED SO AND WHEREVER DEDUCTIONS WERE INTENDED TO BE MADE EVEN IF THE PAYMENT IS CREDITED TO THE ACCOUNT OF THE PAYEE IT MADE A SPECIFIC PROVISION TO THAT EFFECT. THE DISTINCTION BETWEEN /THE TWO CANNOT BE OBLITERATED BY INTERPRETING THE PROVISIONS OF SECTION 192 IN A MANNER WHICH WOULD AMOUNT TO REWRITING THE SAID PROVISIONS SO AS TO BRING THEM AT PAR WITH THE PROVISIONS THAT REQUIRE DEDUCTION AT THE TIME OF PAYMENT OR CREDIT OF THE AMOUNT TO THE PAYEES ACCOUNT. AGREEING WITH THE TRIBUNAL THE HONBLE HIGH COURT HELD THAT THE OBLIGATION TO DEDUCT TAX AT SOURCE DID NOT IN THE INSTANT CASE ARISE AS THE AMOUNT OF SALARY DUE TO THE EMPLOYEE HAD NOT BEEN PAID. 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MAD E BEFORE US. THE FACTS ARE THAT THE DIRECTORS ARE PAID SALARY AND COMMISSIO N TAXABLE 937-938-09-JBML 8 UNDER THE HEAD SALARIES. THE COMMISSION IS DEBITED IN THE ACCOUNT S ON A QUARTERLY BASIS. THEREFORE CERTAIN AMOUNTS HAVE BEEN DEBITED IN TH E MONTHS OF JUNE SEPTEMBER AND DECEMBER OF THE FINANCIAL YEAR. THE COMPUTATIO N OF COMMISSION PAYABLE IS MADE IN THE MONTH OF APRIL WHEN THE ACCOUNT S ARE FINALIZED AND APPROVED BY THE BOARD OF DIRECTORS. THE TAX IN RESP ECT OF THE WHOLE OF THE COMMISSION HAS BEEN PAID IN THE MONTH OF APRIL NEXT FOLLOWING THE FINANCIAL YEAR. THE QUESTION IS WHETHER THE ASSESSEE IS LIABLE TO PAY INTEREST U/S 201(1A) OF THE ACT? 4.1 THE PROVISION DEALING WITH TAX DEDUCTION AT SOURCE FROM SALARIES IS CONTAINED IN SUB SECTION (1) OF SECTION 192 WHICH READS AS UND ER:- 192: (1) ANY PERSON RESPONSIBLE FOR PAYING ANY INCOME CHARGEABLE UNDER THE HEAD SALARIES SHALL AT THE TIME OF PAYMENT DEDUCT INCOME-TAX ON THE AMOUNT PAYABLE AT THE AVERAGE RATE OF INCOME-TAX COMPUTED ON THE BASIS OF THE RATES IN FORCE FOR THE FINANCIAL YEAR IN WHICH THE PAYMENT IS MADE ON THE ESTIMATED INCOME OF THE ASSESSEE UNDER THE HEAD FOR THAT FINANCIAL YEAR. 4.2 HONBLE DELHI HIGH COURT DISCUSSED THIS MATTER IN THE CASE OF TEJ QUEBECOR PRINTER LIMITED (SUPRA) AT PAGE 448 OF THE REPORT IN PARAG RAPH NO.7 WHICH READS AS UNDER:- 7. SECTION 192 OF THE INCOME-TAX ACT INTER ALIA REQUIRES ANY PERSON RESPONSIBLE FOR PAYING ANY INCOME CHARGEABLE UNDER THE HEAD SALARIES TO DEDUCT INCOME-TAX ON THE AMOUNT PAYABLE AT 937-938-09-JBML 9 THE STIPULATED RATE AT THE TIME OF PAYMENT. THE TERM PAYMENT HAS NOT BEEN DEFINED EITHER IN SECTION 192 OR AT ANY OTHER PLACE OF THE ACT. THE EXPRESSION SHALL THEREFORE HAVE TO BE GIVEN ITS ORDINARY LITERAL MEANING. IT FOLLOWS THAT THE PERSON MAKING THE PAYMENT CAN OR IS REQUIRED TO MAKE A DEDUCTION TOWARDS TAX AT SOURCE ONLY AT THE TIME OF MAKING SUCH PAYMENT. THE ACCRUAL OF THE PAYMENT AND THE ACTUAL ACT OF MAKING THE PAYMENT MUST BOTH EXIST IN ORDER THAT A DEDUCTION AT SOURCE MAY BE MADE. NO DEDUCTION AT SOURCE IS CONTEMPLATED U/S 192 IN CASES WHERE A PAYMENT TOWARDS SALARY HAS ACCRUED BUT IS NOT MADE. THIS POSITION BECOMES CLEARER IF WE REFER TO SIMILAR OTHER PROVISIONS IN THE ACT LIKE SS. 194B 194BB 194EE 194F AND 194L UNDER WHIC H ALSO A DEDUCTION AT SOURCE IS ENVISAGED ONLY IF ACTUAL PAYMENT OF THE AMOUNT IS MADE TO THE PAYEE. IN CONTRADICTION TO THAT REQUIREMENT THERE ARE PROVISIONS IN THE ACT WHICH AUTHORIZE DEDUCTION AT SOURCE EVEN IN CASES WHERE THE PAYMENT IS EITHER MADE TO THE PAYEE OR CREDITED TO HIS ACCOUNT. THE PROVISIONS OF SS. 193 194A 194C 194D 194E 194G 194H 194-I 1 94J 194K 195 196A 196B 196C AND 196D ARE IN THIS REGARD RELEVANT. THE INFERENCE THEREFORE IS THAT WHEREVER THE PARLIAMENT INTENDED DEDUCTIONS TO BE MADE AT SOURCE ONLY AT THE TIME OF MAKING THE PAYMENT IT PROVIDED SO AND WHEREVER DEDUCTIONS WERE INTENDED TO BE MADE EVEN IF THE PAYMENT IS CREDITED TO THE ACCOUNT OF THE PAYEE IT MADE A SPECIFIC PROVISION TO THAT EFFECT. THE DISTINCTION BETWEEN THE TWO CANNOT BE OBLITERATED BY INTERPRETING THE PROVISIONS OF S. 192 IN A MANNER WHICH WOULD AMOUNT TO REWRITING THE SAID PROVISION SO AS TO BRING THEM AT PAR WITH THE PROVISIONS THAT REQUIRE DEDUCTIONS AT THE TIME OF PAYMENT OR CREDIT OF THE AMOUNT TO THE PAYEES ACCOUNT. THE DECISION OF THE ANDHRA PRADESH HIGH COURT IN SYNDICATE BANKS CASE (SUPRA) TAKES A SOMEWHAT SIMILAR VIEW. 937-938-09-JBML 10 4.3 FROM THE AFORESAID DECISION IT IS CLEAR THAT THE LIABILITY TO DEDUCT AND PAY TAX IN CASE OF SALARY ARISES ON THE PAYMENT THEREOF AND NOT THE D EBIT THEREOF TO THE ACCOUNTS. RESPECTFULLY FOLLOWING THIS DECISION I T IS HELD THAT THE LEARNED CIT(A) WAS RIGHT IN DELETING THE INTEREST CHARGED BY TH E ASSESSING OFFICER FOR BOTH THE YEARS. 5. IN RESULT BOTH THE APPEALS ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 25.02.2011. SD/- SD/- ( I.P. BANSAL ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 25/02/2011 NS COPY FORWARDED TO:- 1. INCOME TAX OFFICER TDS WARD GURGAON. 2. JAY BHARAT MARUTI LTD. PLOT NO.5 MARUTI JOINT VENTURE COMPLEX GURGAON. 3. THE CIT 4. THE CIT (A) NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DELHI. TRUE COPY 937-938-09-JBML 11 BY ORDER (ITAT NEW DELHI).