PUNJAB INFRASTRUCTURE DEVELOPMENT BOARD, CHANDIGARH vs. COMMISSIONER OF INCOME TAX (TDS) CHANDIGARH

ITA/408/2019HC Punjab & HaryanaPHHC01104129201920 November 2024Author: MR. JUSTICE SANJEEV PRAKASH SHARMA,MR. JUSTICE SANJAY VASHISTH7 pages
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What were the facts?

The appellant, Punjab Infrastructure Development Board (PIDB), a statutory body, filed these appeals against the orders of the Income Tax Appellate Tribunal (ITAT) for assessment years 2007-08 to 2010-11. The Assessing Officer treated PIDB as an assessee in default for failing to collect Tax at Source (TCS) under Section 206C of the Income Tax Act, 1961, on toll fee and concession fee collected. This led to the levy of interest under Section 206C(7) and penalties under Section 271CA. The CIT(A) and ITAT confirmed the levies. The dispute centers on whether PIDB was obligated to collect TCS and, if not, whether penalties were leviable. The appeals were heard together.

What did the High Court hold?

The High Court allowed the appeals. On the first issue, the Court found that the appellant, PIDB, was justified in acting as a nodal agency and that the agreements executed between the Government of Punjab and the Concessionaire could not be ignored. The Court held that the Tribunal had erroneously concluded that PIDB itself was liable for collecting the toll fee and concession fee. The Court reasoned that the actual activity performed by the Board, irrespective of the wording of the agreement, indicated it was acting as a grantor. Therefore, the findings of the Tribunal regarding the levy of penalties under Section 271CA were found to be without basis. On the second issue, referencing the Supreme Court's decision in CIT vs. Eli Lilly and Company (India) Pvt. Ltd., the Court held that Section 271C (and by extension, 271CA) is not mandatory and no penalty shall be imposed if the assessee proves a reasonable cause for the failure. The Court found that in the present case, the deduction of tax at source was not on account of bonafide reasons, and therefore, the imposition of penalty was wholly uncalled for. Accordingly, the penalties imposed under Section 271CA for the financial years 2007-08 to 2010-11 were quashed and set aside.

What were the issues?

1. Whether the appellant, Punjab Infrastructure Development Board (PIDB), was required to collect Tax at Source (TCS) under Section 206C of the Income Tax Act, 1961, on toll fee and concession fee collected, and consequently, whether it was an assessee in default. - Assessee's contention: PIDB argued that it was not required to collect TCS as it acted as a nodal agency and the agreements were on a principal-to-principal basis. It also contended that amendments to Section 201 and Section 206C of the Act, effective from 2012, clarified that a deductor would not be in default if the payee discharged their tax liability directly, and that it had reasonable cause for not collecting TCS. - Revenue's contention: The revenue supported the orders passed by the Tribunal, asserting that interest under Section 206C(7) and penalties under Section 271CA were correctly levied. 2. Whether the penalty imposed under Section 271CA of the Act was leviable in the given circumstances. - Assessee's contention: PIDB argued that since it was not required to collect TCS, the penalty under Section 271CA was unwarranted. It relied on Supreme Court's decision in CIT vs. Eli Lilly and Company (India) Pvt. Ltd. to argue that penalty under Section 271C (similar to 271CA) is not mandatory and not leviable if there is a reasonable cause. - Revenue's contention: The revenue supported the Tribunal's decision upholding the penalty.

Which sections of the Income-tax Act were involved?

Section 206C,Section 206C(7),Section 271CA,Section 271C,Section 273B,Section 201,Section 201(1A)

AI-generated summary — verify with the full judgment below

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Present:

SANJEEV P

adjudication. statutory bo Development the Income appellant aga No. 408 of 2019 HE HIGH COURT OF PUNJA CHANDIGARH Date of Pro No. 408 of 2019 (O&M) b Infrastructure Development Bo

versus missioner of Income Tax (TDS), C

No. 410 of 2019 (O&M) b Infrastructure Development Bo

versus missioner of Income Tax (TDS), C No. 411 of 2019 (O&M) b Infrastructure Development Bo

versus missioner of Income Tax (TDS), C No. 412 of 2019 (O&M) b Infrastructure Development Bo

versus missioner of Income Tax (TDS), C HON’BLE MR. JUSTICE SAN HON’BLE MR. JUSTICE SAN Mr. Deepak Aggarwal, Advocat Mr. Amanpreet Singh, Senior St Department. PRAKASH SHARMA, J. These are four appeals which h The appellant - Punjab Infrastr dy enacted under Section 18 t & Regulation Act, 2002. These Tax Act, 1961 (for short, ‘the ainst the order passed by the In -1- AB AND HARYANA AT Reserved on : 11.11.2024 nouncement : 20.11.2024

The order continues below.

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