SAHARA INDIA REAL ESTATE CORPORATION LTD.,LUCKNOW vs. DEPUTY COMMISSIONER OF INCOME TAX (TDS), LUCKNOW

ITA 189/LKW/2018Status: DisposedITAT Lucknow24 July 2026AY 2014-1585 pages
AI SummaryAllowed

What were the facts?

The appeals were filed by M/s Sahara India Real Estate Corporation Limited (SIRECL) and M/s Sahara Housing Investment Corporation Limited (SHICL) against orders of the CIT(A) for assessment years 2009-10 to 2014-15. The assessees had issued Unsecured Optionally Fully Convertible Debentures (OFCDs) by private placement. SEBI ruled that this was a public issue and directed refund. The Supreme Court upheld this, ordering a refund of Rs. 17,400 crores with 15% interest. The assessees deposited Rs. 5,120 crores with SEBI. The DCIT (TDS) raised demands under sections 201(1) and 201(1A) for unpaid TDS and interest, totaling approximately Rs. 5,881.66 crores, later revised to Rs. 5,896.44 crores. The CIT(A) dismissed the assessees' appeals.

What did the Tribunal hold?

The Tribunal held that the assessees cannot be held liable for failure to deduct tax at source. The reasoning was that the amounts paid were in satisfaction of a judgment debt arising from the Supreme Court's decree. Citing judicial precedents, the Tribunal stated that a judgment debt loses its original character, and no TDS is deductible from it in the absence of specific provisions. The Supreme Court's order mandated full payment to SEBI for refund to investors and did not direct any TDS deduction. SEBI was to act as an intermediary. Furthermore, the Tribunal noted that at the time of deposit, investors were not properly identifiable, which also negated the liability to deduct tax at source. Therefore, the assessees were not 'assessee in default'. The Tribunal allowed the grounds raised by the assessees.

What were the issues?

1. Whether the assessees are liable for unpaid TDS and interest under sections 201(1) and 201(1A) of the Income Tax Act, 1961, for amounts paid in compliance with the Supreme Court's order directing refund of OFCD subscriptions. Assessee's Contention: The assessees argued that the amounts paid were in satisfaction of a judgment debt arising from the Supreme Court's decree. They relied on precedents stating that a judgment debt loses its original character, and no TDS is deductible from it. They contended that the Supreme Court's order did not mandate TDS deduction and that SEBI was merely an intermediary. They also argued that investors were initially unidentifiable, negating the liability to deduct tax at source. Revenue's Contention: The revenue's arguments are not explicitly recorded in the provided text, but their action of raising demands under sections 201(1) and 201(1A) implies they believed TDS was deductible.

Which sections of the Income-tax Act were involved?

Section 201(1),Section 201(1A),Section 193,Section 73(1),Section 73(2),Section 73(2A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW

Before: SHRI. SUDHANSHU SRIVASTAVA & SHRI NIKHIL CHOUDHARY

For Appellant: Shri Percy Pardiwala, Sr. Advocate

PER BENCH:

The appeals in ITA Nos.184 to 189/LKW/2018 filed by M/s Sahara India Real Estate Corporation Limited, Lucknow are directed against a common order dated 13.02.2018 passed by the Learned Commissioner of Income Tax (Appeals)-4, Lucknow [Ld.

CIT(A)], for assessment years 2009-10 to 2014-15 whereas the ITA Nos.184 to 189/LKW/2018 & ITA Nos.190 to 194/LKW/2018 appeals in ITA Nos.190 to 194/LKW/2018 filed by M/s

The order continues below.

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