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Income Tax Appellate Tribunal, DELHI BENCH “H”: NEW DELHI
Before: SHRI N.K. BILLAIYA & MS. ASTHA CHANDRA
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “H”: NEW DELHI
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No.4176/Del/2019 Asstt. Year: 2014-15 Hari Shankar Singhania Estate, Vs. JCIT, Patroit House, 3, Special Range-18 Bahadur Shah Zafar Marg, New Delhi. New Delhi – 110 002 PAN AAAAH9163Q (Appellant) (Respondent)
Assessee by: Shri V.P. Gupta, Advocate Department by : Shri M. Baranwal, CIT(DR) Date of Hearing 02.12.2022 Date of pronouncement 09 01.2023 O R D E R PER ASTHA CHANDRA, JM
The appeal by the assessee is directed against the order dated 13.03.2019 of the Ld. Commissioner of Income Tax Appeals-18, New Delhi (“CIT(A)”) pertaining to assessment year (“AY”) 2014-15.
The assessee has taken the following grounds of appeal:-
“1. That the Ld. CIT(A) erred in not directing the Assessing Officer to allow credit for tax deducted at source of Rs.15 lacs by JK Tyre and Industries Ltd. and JK Lakshmi Cement Ltd. while making payment of commission to Hari Shankar Singhania Estate with reference to PAN of the Estate in the facts of the case and the legal position. 2 That the CIT(A) also erred in observing while adjudicating the appeal of the Appellant that the amount of commission was taxable in the hands of Late Shri Hari Shankar Singhania through legal heirs and directing the AO to take appropriate remedial action without
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appreciating that it was not within his jurisdiction to make any such observation and in any case as per the provisions of Section 159 of the Act only the income earned / received up to the date of death i.e. 22.02.3013 could be assessed in the case of late Late Shri Hari Shankar Singhania through the legal heirs. 3. That the order passed by CIT(A) is unjustified, unreasonable and without considering correctly the factual and the legal position.” 3. The facts, briefly stated are that Shri Hari Shankar Singhania died on 22.02.2013. He was a Non-Executive Director of two companies, namely JK Lakshmi Cement Ltd. (“JKLC”) and JK Tyre & Industries Ltd. (“JK Tyre”). After his death, all assets and liabilities devolved to his Estate known as “Hari Shankar Singhania Estate”. The Executor of the Estate filed return of income of the Estate for the period from 23.02.2013 to 31.03.2013 in accordance with section 168 of the Income Tax Act, 1961 (the “Act”) for AY 2013-14. Return of income for the period 01.04.2012 to 22.02.2013 was also filed for AY 2013-14 in the individual capacity of Shri Hari Shankar Singhania which was signed by his brother Shri Bharat Hari Singhania as legal representative.
For AY 2014-15, return of Hari Shankar Singhania Estate was e-filed on 30.07.2014 declaring income of Rs. 1,57,38,262/-. The case was selected for scrutiny under CASS. During assessment proceedings, the Ld. Assessing Officer (“AO”) observed that the assessee has claimed TDS on commission income of Rs. 1,50,00,000/- deducted by deductor companies, namely JKLC and JK Tyre as per Form 26AS. However, the said commission income had not been offered for taxation by the assessee in the return. Vide order sheet entry dated 13.12.2016, the Ld. AO required the assessee to show cause why claim of TDS credit of Rs. 15,00,000/- be not disallowed as commission income has not been offered for taxation in the previous year 2013-14 relevant to AY 2014-15.
Vide letter dated 16.12.2016, the assessee furnished reply which has been reproduced by the Ld. AO in para 4.5 of the assessment order. The gist of the reply was that the payer companies were liable under section 194J to
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deduct TDS @10% on commission paid to Shri Hari Shankar Singhania. Since at the time of credit/payment of the commission Shri Hari Shankar Singhania was not alive, his PAN could not be used for the purpose of TDS. Therefore, the PAN of the assessee Estate was used for TDS resulting in the credit being reflected in Form 26AS of the assessee Estate which has been claimed in AY 2014-15.
The explanation of the assessee was not acceptable to the Ld. AO. According to him, the income by way of commission arose/accrued to the deceased Hari Shankar Singhania which is taxable in the hands of his legal heir/representative as per provisions of section 159 of the Act. Therefore, the legal heir/representative of Late Shri Hari Shankar Singhania is liable to furnish return of income of Late Shri Hari Shankar Singhania and to claim any of the tax credit available including TDS. Accordingly, the Ld. AO rejected the assessee’s claim of tax credit of Rs. 15,00,000/- as the corresponding commission income of Rs. 1.50 crores was not shown in the return.
Aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) who by recording his findings in paras 4.3 and 4.3.4 of the appellate order upheld the decision of the Ld. AO and in para 4.4 directed the Ld. AO to take remedial action for making assessment of commission of Rs.1,50,00,000/- on which TDS has been deducted by the two companies. For the sake of clarity, the findings of the Ld. CIT(A) are reproduced herein below:-
“4.3 I have considered the facts of the case and the submission2013 ft is observed that Late Shn Hari Shankar Smghania who expired on 22.02.2013 was due to get commission for the services rendered by h.im during the period from 01.04.2012 to 22.02.2013_to the two companies JK Lakshmi Cement Ltd. and JK Tyre & .Industries Ltd.. These two companies declared payment of commission of Rs. 90 lakhs and Rs. 60 lakhs respectively to Late Shn Han Shankar Singhania in the month of May 2013. Late Shri Han Shankar Sighania was Non Executive Chairman of the Board of Directors of both these companies At the time of payment of this commission of Rs. 1.50 crores, these companies deducted TDS of Rs. 15 lakhs by using the PAN of the Estate of Late Shn Hari Shankar Singhania i.e. the appellant. The appellant did not
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show this commission income of Rs. 1.50 crores in its Return of Income, in respect of which it has been stated by the AR that this income does not belong to the Estate. From the assessment order, it is observed that the AO has held this income of Rs. 1.50 crores is taxable in the hands of Late Shri Hari Shankar Singhania as represented by his legal heirs and the legal heirs of Late Shi Han Shankar Singhania are liable to furnish the Return of Income and are also liable to pay taxes in respect of the income of Late Shn Han Shankar Singhania, as if Shn Hari Shankar Singhania had not expired. Accordingly, the AO has disallowed the credit of TDS of Rs. 15 lakhs deducted by the two companies on the commission payment using the PAN of the appellant i.e. the Estate of Late Shn Han Shankar Singhania In the written - submission, the AR has claimed the credit for TDS by stating that after the death of Shn Hari Shankar Singhania, payment could be made to the Estate only and therefore, the deductor companies used the PAN of the Estate for deducting TDS. 4.3.1 In this regard, reference is made to Rule 37BA of the Income Tax Rule 1962 which contains the conditions for granting credit for TDS for the purposes of section 199 of the Act. The Rule reads as under: “Credit for tax deducted at source for the purposes of section 199. 37BA. (1) Credit for tax deduced at source and paid to the Central Government in accordance with the provisions of Chapter XVII, shall be given to the person to whom payment has been made or credit has been given (hereinafter referred to as deductee) on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorized by such authority. (2) (i) If the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for tax deducted at source shall be given to the other person and not the deductee: Provided that the deductee files a declaration with the dedukctor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1). (ii) The declaration filed by the deductee under clause (i) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person. (iii) The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in the information relating to deduction of tax referred to in sub-rule (1) and shall keep the declaration in his safe custody. (3) (i) Credit for tax deducted at source and paid to the Central Government shall be given for the assessment year for which such income is assessable. (ii) Where tax has been deducted at source and paid to the Central Government and the income is assessable over a number of years, credit for 4
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tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax. (4) Credit for tax deducted at source and paid to the account of the Central Government shall be granted on the basis of - i. the information relating to deduction of tax furnished by the deductor to the income- tax authority or the person authorized by such authority: and ii. the information in the return of income in respect of the claim for the credit, subject to verification in accordance with the risk management strategy formulated by the Board from time to time.” As per Rule 37BA(2)(i), where income is assessable in the hands of a person other than the deductee, credit for tax deducted at source shall be given to the other person and not the deductee. In this case, the AO has held that the income is assessable in the hands of the individual i.e. Late Shri Hari Shankar Singhania as represented by his legal heirs and not the Estate i.e. the appellant. Accordingly I am of the view that the appellant is not entitled to claim credit for TDS in respect of the income not assessable in its hands. - 4 3.2 In this regard, reference is made to the decision in the case of Jai Ambey wines, Ajmer vs Acit in which vide order dated 11 January, 2017 Hon’ble ITAT Jaipur has in ITA No. 676/JP/15 held as under: “ Rule 37BA(2)(i) of Income tax Rules as amended by the Income Tax (Bight amendment) Rules 2011 reads as under: ' "Where under any provisions of the Act, the whole or any part of income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of tax deducted at source, as the case may, shall be given to the other person and not to the deductee. Provided that the deductee files a declaration with the deductor and deductor reports the tax deduction in the name of the other person in the information relating to deduction referred to in sub-rule (1)." 2.7 The essence of the above stated provisions and corresponding rules is that the tax deducted at source (TDS) is nothing but tax, and credit for TDS should go to the person in whose hands the income is rightfully and finally assessed to tax in accordance with law irrespective of the person in whose hands the TDS has been deducted and TDS certificate has been issued at first place. If we look at the provisions of section 206C read with section 190 of the Act, the nature of tax collection at source (TCS) is exactly identical to TDS and it is in the nature of tax on income which has been collected at source in respect of specified business and the nature of goods as specified in section 206C of the Act. In light of above, the credit for TCS should be given to the assessee which is
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finally and lawfully assessed to tax in respect of the corresponding income on which TCS has been collected. The fact that there are no specific rules which have been provided in the Income tax Rules in respect of credit of TCS in such situations on the lines of Rule 37BA, in our view, doesn't disentitle the assessee to claim credit of TCS in whose hands the income is finally assessed to tax. The reason for the same is that the nature of TCS is nothing but tax which has been statutorily recognised in the Income tax Act and the Rules are enabling and procedural in nature and absence thereof cannot result in denial of credit of TCS. This issue also find supports from the decision of the Coordinate Bench in case of ACIT. Circle-2, Udaipur vs. Shri Krtshnalal Meel & party (supra). 2 8 In the instant case, the Id. AR has submitted that the income has been brought to toxin the hands of the assessee firm and accordingly the credit for TCS should be granted to the assessee firm. In this regard, we find that there is no findings of fact by the AO in this regard and in A.Y. 2012-13 the Id. CIT(A) has stated that '‘the claim of the appellant that all the income of partners of the firm, has been include in the income of the appellant is also not fully verifiable from the documents filed by the appellant.” 2 9 In light of above discussions, we set-aside the matter in both the years to the file of the AO with the directions to verify whether the corresponding income in respect of which TCS has been claimed by the assessee firm has been brought to tax in the hands of the assessee firm or not Where after due examination and verification, the AO find that the corresponding income has been brought to tax in the hands of the assessee firm, the AO is directed to allow credit for TCS in the hands of the assessee firm. (Emphasis supplied).” 4.3.3 Similarly, reference is also made to the decision of Hon’ble ITAT Mumbai in the case of Surendra S. Gupta vs Addl. CIT for AY 2010-11 vide Order dated 09th May 2018 in ITA.No.5791/Mum/2014 in which it has been held that- "7 2 So far as the decision of higher Judicial Authority is concerned, we find that Hon'bte Kerala High Court in CIT Vs. Smt. Pushpa Vijoy [19 Taxmann.com 157] has clinched the issue in the following manner:- “11. The question to be considered is whether the assessing officer was justified in refusing to give credit for tax payments based on TDS certificates issued by the Bank for the reason that income is not returned for assessment by the assesses m the assessment year following the year in which tax is recovered and paid by the Banks. We do not think there is any justification for assessees' claim because Section 199 of the Income Tax Act makes it clear that the assessee is entitled to credit based on TDS certificate only in the assessment year in which income from which tax is deducted is assessed Therefore, when the statute makes it mandatory that credit of tax based on TDS certificate is available only in the assessment year in which the income from which tax deducted at source is assessed, we do not know how the Tribunal can over-rule the statutory provisions
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and allow the claim. In our view, going by the practical difficulty to retain TDS certificates for several years until the interest is returned for assessment on cash basis, prudent assessees should return income on which tax is recovered and remitted by the payer in the assessment year following the year in which such income is subject to deduction of tax and remittance by the payer. The assessees who do not do it should follow Section 199 and Rule 37BA, retain the TDS certificates and c m credit in the assessment year in which such income is returned for assessment. 12 The finding of the Tribunal that there is no provision in the Income Tax Act or Rules to defer credit of tax in assessments based on TDS certificates obtained is really incorrect because sub-sections (1) and (3) of Section 199 read with Rule 37BA of the Income Tax Rules specifically authorise the assessee to retain TDS certificates and to produce it and claim credit in the year in which income on which recovery of tax made is returned for assessment. As of now, the Act does not provide that assessees should return the income for assessment, in the assessment year following the previous year in which tax is recovered at source and TDS certificate is issued by the payer and if so provided assessment and credit of tax will go together which will avoid botheration for the assessees as well as for the Departmental Officers. In our view, the provisions contained in sub-sections (1) and (3) of Section 199 read with Rule 37BA of the Income Tax Rules serve a purpose because if income is not assessable in the assessment year and at the same time assessees are entitled to credit of tax recovered and remitted in respect of such income, the Department will be compelled to refund the entire tax amount every year and along with it if refund is not made within three months from fling of return, mandatory interest will also payable, as provided under Section 243(1) of the Income Tax Act which Will defeat the purpose of TDS provisions in the Act. Therefore, we do not find any justification for the Tribunal to allow credit of tax based on TDS certificates without corresponding assessment, of income in the assessment years concerned which is against the statutory provision. We also do not find any merit in the contention of the respondents- assessees that the amount covered by TDS certificates itself should be treated as income of the previous year relevant for the assessment year concerned and the tax amount should be assessed as income by simultaneously giving credit for the full amount of tax remitted by the payer. In these cases, the entire interest credited should be assessed on maturity of the deposit and on payment by the bank, as the assessees are admittedly following cash system of accounting. However, in our view, if Section 145(1) is amended for assessment of income on which TDS is made in the assessment year following the year in which deduction is made irrespective of the system of accounting followed by the assessee, the same will avoid problems for the assessees and the Department. Based on the findings above, we allow the Departmental appeals by reversing the orders of the Tribunal and that of the first appellate authority and by .restoring the assessments denying credit of tax in the assessments for which corresponding income is not assessed. However, since we are allowing the Departmental Appeals, we leave it open to the respondents-assessees to claim credit based on the very same TDS
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certificates against the interest income assessed in the year in which such income is assessed. ’’ Upon perusal of Tribunal's order following former view, it appears that the aforesaid decision of Hon'ble Kerala High Court has not been considered while arriving at the decisions. Therefore, respectfully following the wisdom of higher judicial authority, we dismiss this ground of assessee's appeal since the conclusion drawn by Ld. CIT(A) was in consonance with the applicable statutory provisions and therefore require no interference on our part. 8. Resultantly, the assessee’s appeal stand partly allowed in terms of our above order. ” 4.3.4 In view of the above facts, discussion and the legal position as laid down by various authorities as discussed above, it is held that the AO has rightly denied the credit of TDS of Rs. 15 lakhs to the appellant in accordance with the provisions of section 199 of the Act read with Rule 37BA of the Income Tax Rules, 1962. Accordingly, the decision of the AO is upheld and the ground of appeal is dismissed.”
Being aggrieved, the assessee is before the Tribunal and all the grounds of appeal relate thereto.
The Ld. AR reiterated the same arguments which were advanced before the Ld. AO/CIT(A). He further submitted that the Ld. CIT(A) was not legally correct in directing the Ld. AO to take appropriate remedial action. It was not within his jurisdiction to make any such observation. His order is without considering correctly the factual and legal position of the case.
The Ld. CIT (DR) filed a written submission wherein after narrating the facts of the case, he emphasised that the impugned receipt of commission of Rs. 1.5 crores has neither been declared in the ITRs of Hari Shankar Singhania Estate, the assessee for AY 2013-14 or 2014-15 nor in the return filed by the legal heir of Shri Hari Shankar Singhania (individual) for AY 2013-14. However, the credit of corresponding TDS of Rs. 15,00,000/- has been claimed in the ITR for AY 2014-15 of the assessee, namely Hari Shankar Singhania Estate. In view of non disclosure of the impugned receipt of commission of Rs. 1.5 crores to tax, the Ld. CIT (DR) submitted that the Tribunal may give suitable direction to the AO under section 150 of the Act. In support of the above submission, the Ld. CIT (DR) placed reliance on the
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decision of the Hon’ble Supreme Court in Kapurchand Shrimal vs. CIT (1981) 7 Taxman 6 (SC) which has subsequently been affirmed by the Hon’ble Supreme Court in SG Asia Holdings (India) Pvt. Ltd. (TS-775-SC- 2019 (TP) ). The Ld. CIT (DR) also referred to the order dated 20.8.2020 of the Mumbai Bench of the Tribunal in ITA No. 6748/Mum/2017, 7257/Mum/2018 and 7246/Mum/2019 in the case of CLSA India Pvt. Ltd.
We have carefully considered the submissions of the parties and perused the material available in the records. The undisputed fact is that during the previous year (on 22.02.2013) relevant to the AY 2013-14 Shri Hari Shankar Singhania died. Sub-section (3) of Section 159 of the Act ordains that the legal representative of the deceased shall, for the purposes of the Act, be deemed to be an assessee. Sub-section (1) of Section 159 provides that legal representative shall be liable to pay any sum which the deceased would have been liable to pay, if he had not died in the like manner and to the same extent as the deceased. Sub-section (2) of Section 159 further provides that for making an assessment etc. of the income of the deceased, all the provisions of the Act, inter alia shall apply. In pursuance to the above provisions of the Act, the legal representative of Late Shri Hari Shankar Singhania filed a return of income for AY 2013-14 for the period 1.4.2012 to 22.2.2013. It is an admitted position that in this return filed on 27.09.2013 income by way of commission from two companies JKLC and JK Tyres in which Late Shri Hari Shankar Singhania was Non-Executive Director aggregating to Rs.1,50,00,000/- was not declared. It is alleged that the above two companies declared the said commission in the month of May, 2013 for the services rendered by the deceased before his death. Nonetheless the impugned commission, though declared after his death but well before the due date of filing return for AY 2013-14, was income earned by Late Shri Hari Shankar Singhania for services rendered by him to the two companies before his death and therefore includible in his return filed by the legal representative for AY 2013-14 which admittedly has not been done and thus escaped assessment.
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The impugned commission receipt of Rs. 1,50,00,000/- has not even been declared in the return filed by the assessee at hand, namely Hari Shankar Singhania Estate for AY 2014-15 in accordance with the provisions of section 168 of the Act. But TDS of Rs. 15 lakhs as reflected in Form 26AS has been claimed. This has been denied by the Revenue Authorities.
Section 199 of the Act deals with credit for tax deducted at source. It says that any tax deducted and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made and that the CBDT may frame rules for the purpose of giving credit including giving credit to a person other than the person from whose income the deduction was made and also the assessment year for which such credit may be given.
CBDT has framed Rule 37BA of the Income Tax Rules, 1962 which contains the conditions for granting credit for TDS for the purposes of section 199 of the Act. The Ld. CIT(A) has extracted Rule 37BA in para 4.3.1 of his appellate order which we have reproduced earlier. The Ld. CIT(A) took notice of the decision dated 11.01.2017 of Jaipur Bench of the Tribunal in ITA No. 676/JP/15 in Jai Ambey Wines, Ajmer vs. ACIT in which the Tribunal refers to the Rule 37BA(2)(i) of the Income Tax Rules, 1962 as amended by the Income Tax (Eight amendment) Rules, 2011 and observed that the essence of the provisions of the Section 199 r.w. corresponding Rules is that the tax deducted at source (TDS) is nothing but tax, and credit for TDS should go the person in whose hands the income is rightfully and finally assessed to tax in accordance with law irrespective of the person in whose hands the TDS has been deducted and TDS Certificate has been issued at first place. We are in agreement with above observation of Jaipur Bench of the Tribunal.
In the case at hand, the assessee Hari Shankar Singhania Estate has claimed TDS of Rs. 15,00,000/- in respect of the impugned commission income of Rs. 1,50,00,000/- which is not its income and not declared in its return for AY 2014-15. The Ld. AO/CIT(A) both held that the impugned 10
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commission income of Rs. 1,50,00,000/- on which tax of Rs. 15,00,000/-has been deducted at source is taxable in the hands of Late Shri Hari Shankar Singhania as represented by his legal heirs and that the legal heirs of Late Shri Hari Shankar Singhania are liable to furnish the return of income and are also liable to pay taxes in respect of the income of Late Shri Hari Shankar Singhania. We agree. However, as stated earlier, the impugned commission income of Rs. 1,50,00,000/- has escaped assessment as in the return of income filed by the legal representative of Late Shri Hari Shankar Singhania on 27.09.2013 for AY 2013-14, the said commission income has not been declared.
In the light of the factual matrix of the case and legal position set out above, we are of the opinion that in the interest of justice, it would be fair and just if we direct the Ld. AO to re-open the assessment of Late Shri Hari Shankar Singhania (Individual) for AY 2013-14 to bring to tax the impugned commission income of Rs. 1,50,00,000/- and allow the credit of TDS of Rs. 15,00,000/-. In so far as the assessee, Hari Shankar Singhania Estate is concerned, it shall abide by the procedure laid down under section 199 of the Act r.w. Rule 37BA(2)(i) of the Income Tax Rules, 1962 as amended by the Income Tax (Eight amendment) Rules, 2011 to enable the Ld. AO to give credit of TDS of Rs. 15,00,000/- in the hands of Late Shri Hari Shankar Singhania (Individual) in AY 2013-14.
We order accordingly. The direction given by the Ld. CIT(A) to the Ld. AO is modified to the extent indicated in para 16 above.
In the result, for statistical purposes the appeal of the assessee is partly allowed.
Order pronounced in the open court on 9th January, 2023.
sd/- sd/- (N.K. BILLAIYA) (ASTHA CHANDRA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 09/01/2023
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Veena Copy forwarded to - 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi
Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr. PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr. PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order