COMMISSIONER OF INCOME TAX vs. M/S P.S.E.B.

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ITA/516/2006HC Punjab & HaryanaPHHC01089185200606 December 2010Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL2 pages
AI SummaryRemanded

What did the High Court hold?

The High Court noted that the issue was covered by its previous order dated June 28, 2010, in related cases concerning the same assessee. In those cases, the revenue's appeals were dismissed, holding that interest could only be charged up to the date the surcharge was paid, not for the period thereafter. The Assessing Officer was given liberty to make necessary calculations. The present case's ITAT order had referred to a pending writ petition where recovery was stayed, making the issue academic, and liberty was given to the revenue to proceed in light of the writ petition's decision. Since the writ petition has now been decided, the revenue is at liberty to proceed in accordance with the High Court's judgment dated June 28, 2010.

What were the facts?

The revenue, Commissioner of Income Tax, Patiala, appealed against an order of the Income Tax Appellate Tribunal (ITAT) dated February 24, 2005, concerning assessment year 1988-89. The assessee, M/s Punjab State Electricity Board, Patiala, had accepted deposits for fundraising and failed to deduct surcharge on interest paid. A demand was raised under Section 201(1A) read with Section 193 of the Income Tax Act, 1961. The CIT(A) had upheld the assessee's plea that the recipients of interest had already paid their taxes, and the recipients were nationalized banks and public undertakings, causing no loss to the revenue. The ITAT had dismissed the revenue's appeal. The High Court noted that the matter was covered by its previous order dated June 28, 2010, in related cases involving the same assessee.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding that charging of interest was invalid because the High Court had stayed the recovery of demand, despite the provisions for charging interest being mandatory in nature (Section 201(1A) read with Section 193 of the Income Tax Act, 1961)? Assessee's contention: The ITAT held that charging interest was invalid due to the stay on recovery of demand, implying the issue was academic. The recipients of interest had already paid their taxes, and there was no loss to the revenue as they were nationalized banks and public undertakings. Revenue's contention: The revenue argued that provisions for charging interest are mandatory and should be applied irrespective of a stay on recovery, implying the ITAT erred in invalidating the interest charge.

Which sections of the Income-tax Act were involved?

Section 260A,Section 201(1A),Section 193

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No. 516 of 2006 Date of decision: 6.12.2010 The Commissioner of Income Tax , Patiala -----Appellant Vs. M/s Punjab State electricity Board, Patiala. ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Jatinder Joshi, Advocate for the appellant. Mr. Pankaj Jain, advocate for the respondent. Adarsh Kumar Goel,J.

1.

The revenue has preferred this appeal under Section 260A of the Income Tax Act, 1961 (for short, ‘the Act’) against the order passed by the Income Tax Appellate Tribunal Chandigarh Bench ‘B’ Chandigarh dated 24.2.2005 in ITA No.439/Chandi/1997 for the assessment year 1988- 89, proposing to raise following substantial question of law:- “Whether on the facts and in the circumstances of the case, the ITAT is right in law in holding that charging of interest in this case is invalid since the Hon’ble High Court has stayed the recovery of demand whereas provisions for charging of interest are mandatory in nature?

2.

The assessee is a State Electricity Board. It accepted certain deposits for raising funds but failed to deduct surcharge on the amount paid by way of interest. On that account, demand was raised under section 201 (1A) read with section 193 of the Act. On appeal, the CIT(A) upheld the plea of the assessee that the persons to whom interest was paid had already deposited the tax. The recipients of the interest were nationalised and commercial banks and public undertakings and thus, there was no loss caused to the revenue. The appeal of the revenue against the said order has been dismissed by the Tribunal.

3.

We have heard learned counsel for the parties and perused the record.

4.

It is not disputed by learned counsel for the parties that the matter is covered by order passed by this Court dated 28.6.2010 in the case of the assessee being CWP No.16418 of 1994 and ITA Nos.104, 106 and 109 of 2002. The appeals of the revenue were dismissed against order of the Tribunal holding that interest could be charged only upto to the date the surcharge due was actually paid and not for the period after the payment. The Assessing Officer was given liberty to make necessary calculation in the light of the said finding. The writ petition of the assessee was dismissed as infructuous in view of adjudication of the issue during pendency of the writ petition.

5.

In the present case, the Tribunal has referred to pendency of the writ petition wherein recovery of demand had been stayed on account of which the issue was held to be academic. Liberty was given to the revenue to proceed in the matter in the light of the decision of the writ petition.

6.

In view of the fact that the writ petition has been decided, the revenue is at liberty to proceed in the matter in the light of judgment of this Court dated 28.6.2010. 7. The appeal is accordingly disposed of. (Adarsh Kumar Goel) Judge December 6, 2010

(Ajay Kumar Mittal) ‘gs’ Judge 2

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