Deputy Commissioner of Income Tax, Pune v. Bharat Sanchar Nigam Ltd, Pune

ITA 983/PUN/2010 | misc
Pronouncement Date: 07-12-2011 | Result: Dismissed

Appeal Details

RSA Number 98324514 RSA 2010
Assessee PAN AABCB5576G
Bench Pune
Appeal Number ITA 983/PUN/2010
Duration Of Justice 1 year(s) 5 month(s) 2 day(s)
Appellant Deputy Commissioner of Income Tax, Pune
Respondent Bharat Sanchar Nigam Ltd, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 07-12-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 07-12-2011
Date Of Final Hearing 08-11-2011
Next Hearing Date 08-11-2011
Assessment Year misc
Appeal Filed On 05-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI I.C. SUDHIR JM AND SHRI D. KARUNAKARA RAO AM ITA NO. 983 AND 984/PN/2010: A.Y. 2006-07 AND 2007-08 DY. CIT TDS 1 PUNE APPELLANT VS. BHARAT SANCHAR NIGAM LTD. ADMINISTRATIVE BUILDING SATARA ROAD TELEPHONE EXCHANGE COMPLEX PUNE-411 009 PAN AABCB 5576 G RESPONDENTS APPELLANT BY : SHRI SUNIL PATHAK RESPONDENT BY : SHRI S.K. AMBASTHA DATE OF HEARING: 8-11-2011 DATE OF PRONOUNCEMENT: _____ -11-2011 ORDER PER D. KARUNAKARA RAO AM THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAINS T ORDER OF THE CIT(A) V PUNE DATED 31-3-2010 FOR A.Y. 2006-07 AND 2 007-08 CHALLENGING THE ORDERS OF THE CIT() IN CANCELLING THE ORDERS OF ITO (TD S) U/S 201 AND 201(1A) OF THE ACT. 2. THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKING OF GOV ERNMENT OF INDIA AND IS ENGAGED IN PROVIDING VARIOUS KINDS OF TELECOMMUNICATI ON SERVICES ON NATIONAL AND INTERNATIONAL COMMUNICATION NETWORK AND BASIC NEE DS. AN INQUIRY WAS CARRIED OUT IN THIS CASE FOR VERIFICATION OF COMPLIANCE WITH TDS PROVISIONS AS PER THE INCOME-TAX ACT. BASED ON THE INFORMATION GATHERE D DURING THE COURSE OF INQUIRY THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTI CES U/S 201(1) AND 201(1A) AND AFTER PERUSING THE DETAILS SUBMITTED BY THE ASSES SEE THE A.O ISSUED AN ORDER U/S 201(1) AND 201(1A) RAISING A DEMAND OF RS. 3 59 83 493/- FOR AY. FINANCIAL YEAR 2005-06 AND RS. 3 07 59 262/- FOR F.Y. 2006-07 RELEVANT TO THE ASSESSMENT YEARS 2006-07 AND 2007-08 RESPECTIVELY. AGGRIEVED BY THIS ORDER OF THE A.O. THE ASSESSEE WENT IN APPEAL BEFORE THE FIRS T APPELLATE AUTHORITY WHO ITA NO. 983 AND 984/PN/2010 BSNL PUNE A.Y. 2006-07 & 2007-08 PAGE 2 OF 5 CANCELLED THE ORDERS OF THE A.O BY RELYING ON THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 71 TO 77/PN/2009 ETC . DATED 29-5-2009. AGGRIEVED WITH THE SAME REVENUE FILED BY THE PRESENT APPEALS BEFORE US WITH THE COMMON GROUND FOR BOTH THE YEARS UNDER CONSIDERATION . 3. BEFORE US THE LEARNED DR FOR THE REVENUE RELIED ON THE ORDERS OF THE AO WHILE THE LEARNED AR FOR THE ASSESSEE RELIED ON THE ORD ERS OF THE CIT(A) STATING THAT THE SAID ORDER OF THE CIT(A) SHOULD BE SUSTAINE D IN ITS ENTIRETY. 4. WE HAVE PERUSED THE ORDER OF THE CIT(A) IN GENERAL A ND PARAS 21 AND 22 ON PAGES 11 AND 12 IN PARTICULAR. WE FIND THAT THE I SSUE RAISED BY THE REVENUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE C O-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 71 TO 77/ PN/2009 FR A.Y. 2002-03 TO 2008-09. FOR THE SAKE OF BREVITY THE RELEVANT OBSERVA TIONS AND THE FINDING OF THE TRIBUNAL ARE REPRODUCED AS UNDER: 5. THE ISSUE AS TO WHETHER OR NOT THE TAX IS REQUIRED TO BE DEDUCTED IN RESPECT OF COMMISSION PAID TO THE PCO OPERATORS HAS REC EIVED CONSIDERATION OF A CO-ORDINATE BENCH OF THIS TRIBUNAL. IN THE CASE OF ITO VS. ACCOUNTS OFFICER BHARAT SANCHAR NIGAM LTD. (ITA NO. 3996/DEL/2004) THE TRIBUNAL HAS UPHELD THE ACTION O F THE CIT(A) IN QUASHING MATERIALLY IDENTICAL DEMANDS RAISED ON THE A SSESSEE U/S 201 R.W.S. 194H. WHEN REVENUE AUTHORITIES SOUGHT PERMISSI ON OF THE COMMITTEE ON DISPUTES (CABINET SECRETARIAT) TO CHALLE NGE THE SAID ORDER BEFORE THE HONBLE HIGH COURT THE PERMISSION WAS DECLI NED BY THE COMMITTEE ON DISPUTES. THE MATTER HAS THUS RECEIVED FINALITY AT THAT STAGE. THIS DECISION OF THE TRIBUNAL HAS HOWEVER NOT BEEN FOLLOWED BY THE LEARNED CIT(A) ON THE GROUND THAT AT THE POINT OF TIME WHEN DECISION WAS DELIVERED BY THE TRIBUNAL PROVISO TO SECTION 194H WHICH WAS BROUGHT TO THE STATUTE VIDE FINANCE ACT 2007 W.E.F. 1 ST JUNE 2007 DID NOT EXIST. THIS PROVISO TO SECTION 194H PROVIDES THAT NO DEDUC TION SHALL BE MADE UNDER THIS SECTION ON ANY COMMISSION OR BROKERAGE PAYAB LE TO BHARAT SANCHAR NIGAM LTD OR MAHANAGAR TELEPHONE NIGAM LTD TO THEIR PUBLIC CALL OFFICE FRANCHISES. THE REASONING ADOPTED BY THE CIT (A) IS THAT SINCE THIS PROVISO IS EFFECTIVE FROM 1 ST JUNE 2007 IT MUST BE INFERRED THAT PRIOR TO 1 ST JUNE 2007 THE LIABILITY FOR TAX DEDUCTION U/S 194H DID ARISE. 6. EXPLAINING THE RATIONALE OF INSERTION OF THE AFORE SAID PROVISO TO SECTION 194H THE CENTRAL BOARD OF DIRECT TAXES VIDE CIRCULAR DATED 12 TH MARCH 2006 INTER ALIA OBSERVED AS FOLLOWS: 55.2 DEDUCTION OF TAX AT SOURCE IN CASES OF PAYEES WHOSE INCOME REMAINS BELOW TAXABLE LIMIT CREATES UNNE CESSARY PAPER WORK. PUBLIC CALL OFFICERS (PCO) FRANCHISES OF BHARAT SANCHAR NIGAM LIMITED AND MAHANAGAR TELEPHONE NIGAM LIMITED REPRESENT THIS CATEGORY AS VERY SMALL SUMS OF COMMISSION ARE RECE IVED BY ITA NO. 983 AND 984/PN/2010 BSNL PUNE A.Y. 2006-07 & 2007-08 PAGE 3 OF 5 THEM AND THERE WOULD BE VERY FEW CASES WHERE INCOME WO ULD BE ABOVE THRESHOLD EXEMPTION LIMIT. 55.3 THE FINANCE ACT 2007 HAS THEREFORE AMENDED THE SAID SECTION TO PROVIDE THAT TAX SHALL NOT BE DEDUCTED ON PAYMENTS OF COMMISSION OR BROKERAGE PAYABLE BY BHARAT SANCHAR NIGAM LIMITED OR MAHANAGAR TELEPHONE NIGAM LIMITED TO THEIR PUBLIC C ALL OFFICE FRANCHISES. 7. WHILE THE AFORESAID AMENDMENT WAS STATED TO BE P ROSPECTIVELY IE. W.E.F. 1 ST JUNE 2007 IT CANNOT BE INFERRED THAT SO FAR AS PRIOR P ERIOD IS CONCERNED THE STAND TAKEN BY THE CENTRAL BOARD OF DIREC T TAXES IS THAT RECOVERIES FOR NON DEDUCTION U/S 194H R.W.S. 201 ARE TO BE MADE FOR THE SAME. THE ABOVE EXTRACTS FROM THE BOARD CIRCULAR WOULD SHOW THAT THE AMENDMENT IN THE SECTION 194H WAS BROUGHT ABOUT BECA USE AS ADMITTED BY THE CBDT ITSELF VERY FEW OF THE RECIPIENTS HAD A TAX LIABILITY. IT IS WELL SETTLED IN LAW THAT A TAX WITHHOLDING LIABILITY IS A VICARIOUS LIABILITY AS A PART OF TAX COLLECTION MECHANISM IN THE SENSE THAT WHEN THERE IS NO PRIMARY LIABILITY OF THE TAXPAYER PROXY LIABILITY OF T HE TAX DEDUCTOR ALSO DOES NOT SURVIVE. IN A SITUATION LIKE THE ONE WE ARE IN SEISIN OF IN WHICH THE CBDT ITSELF ACCEPTS THAT THERE IS HARDLY ANY PRIMA RY TAX LIABILITY OF THE RECIPIENTS OF INCOME IT IS HIGHLY CONTENTIOUS AN IS SUE WHETHER OR NOT VICARIOUS TAX WITHHOLDING LIABILITY CAN BE INVOKED. AS A MATTER OF FACT THE CENTRAL BOARD OF TAXES HAS TAKEN A STAND THAT THE DEM ANDS ARE NOT TO BE ENFORCED ON BSNL AND MTNL OFFICES EXCEPT IN THE CASE S WHERE TAXES HAVE BEEN DEDUCTED AT SOURCE BUT NOT PAID OVER TO THE REVE NUE. THIS ASPECT OF THE MATTER IS CLEARLY DISCERNABLE FROM THE FOLLOWING PUBLIC CIRCULAR ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES. INSTRUCTION NO. 3/2009; DATED MAY 8 2009 TDS ON COMMISSION PAID BY MTNL/BSNL TO OWNERS OF PC O UNDER SECTION 194H OF INCOME-TAX ACT 1961. A NUMBER OF REPRESENTATIONS HAVE BEEN RECEIVED FROM B SNL/MTNL AND FIELD FORMATIONS REGARDING RAISING OF/PENDING DEMAN DS FOR NON- DEDUCTION OF TAX AT SOURCE ON COMMISSION PAYMENTS TO THE FRANCHISES/PCO OWNERS BY MTNL AND BSNL PRIOR TO 1 ST JUNE 2007. THE MATTER WAS DISCUSSED BY THE BOARD RECENTLY AND IT HAS BEEN DECIDED THAT THE DEMANDS RAISED AGAINST MTNL/BSNL ON ACCOUNT OF NON- DEDUCTION OF TDS U/S 194H ON ALL SUCH COMMISSION PA YMENTS TO FRANCHISEE/PCO OWNERS ETC. MAY NOT BE ENFORCED TILL T HE MATTER IS SORTED OUT B THE BOARD. HOWEVER IN CASE MTNL/BSNL HAVE AL READY DEDUCTED TDS ON COMMISSION PAYMENTS TO THE PCO OWNERS ETC. BU T HAVE NOT DEPOSITED IT TO THE GOVT. ACCOUNTS BECAUSE OF INCORRE CT INTERPRETATIONS OF INSTRUCTION DATED 15 TH JULY 2002 THEY HAVE TO BE DIRECTED TO DEPOSIT SUCH SUMS IMMEDIATELY TO THE GOVT. ACCOUNT. 8. THE STAND TAKEN BY THE AUTHORITIES BELOW IS THUS CONTRARY TO THE STAND TAKEN BY THE CENTRAL BOARD OF DIRECT TAXES. WH ILE AUTHORITIES BELOW HAVE TAKEN A STAND THAT THE PROSPECTIVE AMENDMENT IN SECTION 194H BY ITSELF DEMONSTRATES THAT THE TAXES WERE REQUIRED TO BE DEDUCTED AT SOURCE ITA NO. 983 AND 984/PN/2010 BSNL PUNE A.Y. 2006-07 & 2007-08 PAGE 4 OF 5 IN RESPECT OF PCO COMMISSION FOR EARLIER YEARS THE CENT RAL BOARD OF DIRECT TAXES IS OF THE VIEW THAT EXCEPT IN CASES WHERE BSNL OR MTNL HAS DEDUCTED THE TAXES BUT NOT PAID OVER THE SAME TO TH E TREASURY DEMANDS ARE NOT TO BE ENFORCED TILL THE MATTER IS SORTED OUT B Y THE BOARD. WHEN SUCH IS THE STAND TAKEN BY THE CBDT ITSELF IT CANN OT BE SAID THAT IN VIEW OF THE INSERTION OF PROVISO TO SECTION 194H W.E.F. 1 ST JUNE 2007 IT IS BEYOND DOUBT OR CONTROVERSY THAT SO FAR AS THE PERIOD PRIOR TO THIS AMENDMENT IS CONCERNED THE TAX DEDUCTION AT SOURCE RE QUIREMENTS U/S 194H APPLIED ON PAYMENTS OF COMMISSION TO PCO FRANCH ISEES. LEARNED CIT(A) DID NOT THEREFORE HAVE ANY GOOD REASONS TO DI SREGARD THE BINDING JUDICIAL PRECEDENT. IT CANNOT BE OPEN TO A SUBORDINA TE OR COORDINATE JUDICIAL FORUM TO DISREGARD THE DECISION OF THIS TRIBUN AL IN ASSESSES OWN CASE MERELY ON THE GROUND THAT THE LATER AMENDMENT IN LAW W.E.F. 1 ST JUNE 2007 MUST BE INFERRED TO BE CLARIFYING THE POSIT ION PRIOR TO THE SAID AMENDMENT. THE DISTINCTION MADE OUT BY THE LEARNED C IT(A) THEREFORE DOES NOT MEET OUT APPROVAL. HAVING REGARD TO THE DISC USSIONS ABOUT THE IMPACT OF BCDT CIRCULARS WE MAY ALSO ADD THAT IT IS ONLY ELEMENTARY THAT THE CIRCULARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAXE S ARE BINDING ON THE ASSESSEE ONLY TO THE LIMITED EXTENT OF THESE CI RCULARS BEING BENEFICIAL IN NATURE. IN OTHER WORDS AN ASSESSEE CANNOT BE SADD LED WITH A LIABILITY ONLY ON THE GROUND THAT THE CIRCULAR ISSUED BY THE CBD T HOLDS SO; SUCH A LIABILITY HAS TO BE SUPPORTED BY THE CLEAR PROVISIONS OF STATUTE. REVENUE THUS CANNOT DERIVE ANY SUPPORT FROM RELIANCE ON THE CIRC ULARS ISSUED BY THE CBDT. 9. WE HAVE ALSO NOTED THAT THE COMMITTEE ON DISPUT ES VIDE MINUTES OF MEETING DATED 18 TH MARCH 2008 HAS DECLINED PERMISSION TO THE CBDT TO PURSUE LITIGATION AGAINST THE ASSESSEE ON THE GROU ND THAT NO QUESTIONS OF FACTS OR LAW WERE INVOLVED AND THEREBY ASKED THE CBDT TO LET THE MATTER REACH FINALITY BY ACCEPTING THE ORDER PASSED BY THE TRIBUNAL. IN THIS BACKGROUND WE ARE REMINDED OF THE OBSERVATIONS MA DE BY THE HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATA NG VS. CIT (193 ITR 321) THAT WE ARE AWARE OF THE FACT THAT STRICTL Y SPEAKING RES JUDICATA DOES NOT APPLY TO THE INCOME-TAX PROCEEDING S AND THAT AGAIN EACH YEAR BEING A UNIT WHAT IS DECIDED IN ONE YEAR MA Y OR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND THE PARTIES HAVE ALLOWED THAT POSITI ON TO BE SUSTAINED BY NOT CHALLENGING THE ORDER IT WOULD NOT BE APPROPRIATE TO ALTER THE POSITION IN THE SUBSEQUENT YEAR. THE FACTS OF THE PRESENT CA SE ARE THAT NOT ONLY FOR DIFFERENT ASSESSMENT YEARS BUT FOR THE SAME ASSESS MENT YEARS BUT IN RESPECT OF DIFFERENT UNITS OF THE ASSESSEE DIFFERENT TREATMENT IS BEING GIVEN SUCH AN INCONSISTENCY AND HYPER TECHNICAL APP ROACH PARTICULARLY WHEN THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKING IS RATHER INAPPROPRIATE AND IT IS CONTRARY TO THE SPRIT BEHIND FORMATION OF COM MITTEE ON DISPUTES IN THE CABINET SECRETARIAT. WHEN ON THE SAME SET OF FACTS AND WITHOUT ANY CHANGES IN LAW THE COMMITTEE ON DISPUTES HAVE DECLINED PERMISSION TO THE CENTRAL BOARD OF DIRECT TAXES TO PURSUE THE MATT ER AGAINST ASSESSEES GURGAON UNIT IT IS NOT APPROPRIATE TO RAIS E SIMILAR DEMANDS ON ASSESSEES OTHER UNITS. BE THAT AS IT MAY HAVING H ELD THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY TRIBUNALS ORDER AND THAT THE SAID ORDER HAS A BINDING PRECEDENCE VALUE FOR THAT REASON AL ONE THE APPEAL FILED BY THE ASSESSEE MUST BE ALLOWED. WE HAVE ALS O NOTED THAT THE ITA NO. 983 AND 984/PN/2010 BSNL PUNE A.Y. 2006-07 & 2007-08 PAGE 5 OF 5 DEMANDS RAISED IN THE CASE OF THE ASSESSEE ARE FROM 20 00-01 ONWARDS DESPITE THE FACT THAT THERE ARE UNAMBIGUOUS JUDICIAL PRECEDENTS BY MUMBAI SPECIAL BENCH OF THIS TRIBUNAL AS ALSO BY NON -JURISDICTIONAL HIGH COURTS TO THE EFFECT THAT DEMANDS RAISED UNDER SECTIO N 201(1) MUST BE RAISED WITHIN A REASONABLE TIME. HOWEVER WE HAVE NOT ADDRESSED OURSELVES TO THIS ASPECT OF THE MATTER AS THE ISSUE H AS BEEN DECIDED ON MERITS IN FAVOUR OF THE ASSESSEE. ONCE WE HAVE HELD THAT ON MERITS NO DEMANDS COULD HAVE BEEN RAISED U/S 201(1) R.W.S. 194H IT IS IMMATERIAL WHETHER OR NOT THE ORDERS ARE PASSED WITHIN REASONABLE TI ME FRAME. 5. FROM THE ABOVE IT IS EVIDENT THAT THE FINANCE AC T 2007 HAS INCORPORATED THIRD PROVISO TO SECTION 194H STATING NO DEDUCTION SHALL BE MADE UNDER THIS SECTION OF ANY COMMISSION OR BROKERAGE PAYABLE BY BSNL OR MTNL TO THEIR PCO FRANCHISEES. THE SAME IS RELEVANT FOR THE A.Y. 2008- 09. THE ISSUE IS WHETHER SIMILAR EXEMPTION IS APPLICABLE FOR THE ASSESSMENT YE AR PRIOR TO THE ASSESSMENT YEAR 2008-09. THIS ISSUE WAS ADJUDICATED IN FAVOUR O F THE ASSESSEE BY CO- ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CAS E IN ITA NO. 71 TO 77/PN/2009. IT HAS TAKEN SUPPORT FROM THE ORDER OF THE TRIBUNAL IN THE CASE OF ITO VS. ACCOUNTS OFFICER BSNL (ITA NO. 3996/DEL/200 4). CONSIDERING THE EXACT NATURE OF THE ISSUE WE ARE OF THE OPINION THAT THE C IT(A) WAS JUSTIFIED IN CANCELLING THE ORDERS OF THE A.O U/S 201 AND 201(1A) FOR THE YEARS UNDER CONSIDERATION. 6. IN THE RESULT BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 7 TH DECEMBER 2011. SD/- SD/- (I.C. SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED THE 7 TH DECEMBER 2011 ANKAM ITA NO. 983 AND 984/PN/2010 BSNL PUNE A.Y. 2006-07 & 2007-08 PAGE 6 OF 5 COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT-(TDS) PUNE 4. CIT (A)V PUNE 5. D.R. ITAT B BENCH BY ORDER SR. PRIVATE SECRETARY I.T.A.T PUNE