COMMISSIONER, CUTTACK MUNICIPAL CORPORATION,CUTTACK vs ITO(TDS), CUTTACK

Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK

Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR

Hearing: 12/10/2023Pronounced: 12/10/2023

O R D E R Per Bench : This is an appeal filed by the assessee against the order of the ld. CIT(A), Cuttack, dated 31.10.2019, passed in I.T.Appeal No.0398/2015- 16 for the assessment year 2014-2015.

The appeal of the assessee is delayed by 25 days for which the assessee has filed necessary application for condonation of delay and the affidavit. The reason for delay is mentioned to be on account of urinary infection and high blood pressure and the consequential medical treatment. The affidavit filed by the assessee has not been controverted by the revenue. Consequently, the delay in filing the present appeal is condoned and the appeal is disposed off on merits.

It was submitted by the ld. AR that the issue in the appeal was against holding the assessee as an assessee in default for non-deduction of tax u/s.194C of the Act on the payments made to Odisha State Police Housing & Welfare Corporation Ltd. and liable to pay tax u/s.201(1) of the Act along with interest u/s.201(1A) of the Act. It was the submission that the assessee being the Commissioner of Cuttack Municipal Corporation, who had been directed by the Govt. of Odisha to enter into an MOU with the executing agency of Odisha State Police Housing & Welfare Corporation Ltd. to construct 456 dwelling units (G+3) storied building for slum people at Tulasipur, Tala Sahi and & Andarpur, Cuttack under IHSDP Project Phase-II of Cuttack City. Ld. AR has placed before us the copy of minutes of the meeting held under the Chairmanship of Additional Chief Secretary of the Government of Odisha, H & UD Department, dated 05.10.2013, which reads as under :-

It was the submission that consequent to the direction by the Govt. of Odisha, the assessee entered into an agreement with Odisha State Police Housing & Welfare Corporation Ltd. on 22.11.2013. In the said MOU, the Odisha State Police Housing & Welfare Corporation Ltd. was to get the project executed. It was the submission that the assessee was only custodian of the funds on behalf of the Govt. of Odisha and the execution was done by the Odisha State Police Housing & Welfare Corporation Ltd., which was also a Govt. of Odisha undertaking. It was the submission that on account of the direction from the Government, the assessee had made payments for the project to Odisha State Police Housing & Welfare Corporation Ltd. No TDS has been deducted on the payments as it was not a contract between the assessee and Odisha State Police Housing & Welfare Corporation Ltd. It was the submission that on account of non-deduction of TDS, the AO on the basis of verification done by the Income Tax Officer (TDS) held that the assessee was liable to deduct TDS. It was the submission that as the TDS have not been deducted, the AO treated the assessee as assessee in default and passed the order u/s.201 & 201(1A) of the Act. It was the submission that the executing agency as per the directions of the Govt. of Odisha was the Odisha State Police Housing & Welfare Corporation Ltd. and the project was also of the Govt. of Odisha’s project under the Integrated Housing & Slum Development Programme (IHSDP). The funds were allotted by the Govt of Odisha and the assessee was only the conduit for the transfer of the funds to Odisha State Police Housing & Welfare Corporation Ltd.. It Odisha State Police Housing & Welfare Corporation Ltd. has filed its return of income and has also deducted the TDS on the payments made to its contractor. The necessary Form 26A along with necessary Annexures were also filed before us. A certificate to the effect has also been issued by MGGS & Associates, Chartered Accountants Firm confirming that they have examined the relevant documents, documents and records of the Odisha State Police Housing & Welfare Corporation Ltd. and that the receipt in respect of which the alleged TDS has not been deducted has been offered to tax in the total income of Odisha State Police Housing & Welfare Corporation Ltd. The said certificate are as follows :-

It was the submission that at the outset, the assessee was not liable to deduct TDS. In the alternative also the income having been offered to tax by Odisha State Police Housing & Welfare Corporation Ltd having been offered the amount of tax, no levy u/s.201 & 201(1A) of the Act is liable to be levied on the assessee in view of the decision of the ITAT Mumbai Bench of the Tribunal in the case of ICICI Securities Limited, passed in order dated 09.11.2022. He also placed reliance on the decision of Hon’ble Gujarat High Court in the case of Rishikesh Apartments Co-op. Housing Society Ltd., reported in [2002] 253 ITR 310 (Gujarat), wherein it has been held that if the tax was duly paid and that too at the time when it had become due, it would not be proper on the part of the revenue to levy any interest under section 201(1A) of the Act, especially when the contractor had paid more amount of tax by way of advance tax than what was payable by it. It was the submission that the levy as raised on the assessee u/s.201 & 201(1A) is liable to be deleted.

In reply, ld. Sr.DR vehemently supported the order of the ld. CIT(A). ld.Sr. DR on an earlier occasion has also filed written submission which reads as follows :-

1. 1. Interest would be levied U/S 201 (1A) even in case of the payee (deductee) having paid income tax on the income from the payment with no, or short, TDS. [Singapore Airlines Ltd. (2022) 449 ITR 203 (SC) (Attached)' .] 2. Authorised AO to receive form no. 26A and the mode of furnishing it now are CPC- TDS and electronic respectively.

3. Filing of the. form no.26A for furnishing the accountant certificate ulr 31ACB of Income Tax Rules read with the first proviso to s. 201(1) of Income Tax Act in the form of additional evidence is not in accordance with the notification (enclosure ii) no. 11/2016 dtd. 02112/2016 [F.No. DGIT(S)/CPC/TDS/Notification 2016-17] on the subject of 'procedure for furnishing and verification of form no. 26A for removing the default of ... non deduction of tax at source' by the Principal Director General of Income Tax (Systems) [PDGIT (Sys.)] ulr 31ACB(2) of Income Tax Rules.

4. The notification cited above and enclosed herewith also authorises the person to furnish the form no.26A to, apart from the DGIT (Sys.) u/r 31ACB(1) of Income Tax Rules. The authorised persons do not include the jurisdictional Assessing Officer assessing income (lAO), the CIT(A) or the ITAT.

5. The notification also specifies, u/r 31ACB(2) of Income Tax Rules, the mode of furnishing the form no.26A to be not physical but' Electronic' now.

6. The procedure for furnishing and verification of form no. 26A specified under the notification does not include offline submission of a physical certificate by the 'Accountant' to the assessee- deductor. It includes roles for the 'Accountant' also apart from that of the assessee-deductor at multiple portals like the efiling and NSDL/TRACES. The role of the assessee-deductor includes submitting request for no- deduction transactions, entering and submitting no-deduction transactions, authorising the 'Accountant' who has completed his role, submitting the form under digital signature and . payment of the mandatory interest under the proviso to s. 201(lA) of Income Tax Act upon reprocessing of the assessee- deductor's TDS statement with modified non-deduction. The role of the 'Accountant' includes registration, filling in his certificate in the form of the annexure to the form no. 26A in respect of the concerned deductee and submitting it under digital signature.

[Notification no. 1112016 dtd. 0211212016 F. no. DGIT(S)I CPC(TDS)I Notification/20 16-17 (Attachedj'' .] i,Encl.: As above 7. It was the submission that the arguments of the assessee have been considered by the ld. CIT(A) and the same had been rejected in page 3 of the order of the ld.CIT(A). It was the submission that the contract had been entered between Cuttack Municipal Corporation and Odisha State Police Housing & Welfare Corporation Ltd and the assessee being the Chairman of the Cuttack Municipal Corporation, was required to deduct TDS.

We have considered the rival submission. At the outset, what is noticed is that the Government has treated the Odisha State Police Housing & Welfare Corporation Ltd as the executing agency. The Commissioner, Cuttack Municipal Corporation, had nothing to do with the project other than to obey the direction issued by the Government through Additional Chief Secretary to the Government of Orissa. The Government had directed the Cuttack Municipal Corporation to execute the MOU with Odisha State Police Housing & Welfare Corporation Ltd and that the necessary funds shall be realized to the executing agency. When the assessee is a State Government and the State Government has made a payment to the Corporation which is duly owned by the State Government and under the control of the State Government, it cannot be said that there is a contract between the assessee and the executing agency. The Cuttack Municipal Corporation does not have any executable contract right with Odisha State Police Housing & Welfare Corporation Ltd. The

COMMISSIONER, CUTTACK MUNICIPAL CORPORATION,CUTTACK vs. ITO(TDS), CUTTACK