COMMISSIONER OF INCOME-TAX vs. RISHIKESH APARTMENTS CO.OP HOUSING SOCEITY LTD.

ITR/8/1986HC GujaratGJHC24010635198614 June 2001Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA7 pages
AI SummaryAllowed

What were the facts?

The assessee, Rishikesh Apartments Co.op Housing Society Ltd., entered into construction contracts with M/s. Ravi Builder. The assessee failed to deduct tax at source under Section 194C of the Income Tax Act, 1961, from payments made to the contractor. However, M/s. Ravi Builder paid advance tax and self-assessment tax on the income received from the assessee. For assessment years 1974-75 to 1977-78, the Assessing Officer charged interest under Section 201(1A) on the non-deducted tax. The Appellate Assistant Commissioner (AAC) partly allowed the appeal, holding that interest was not leviable for assessment years 1974-75 and 1975-76 because the contractor had paid sufficient advance and self-assessment tax. For the other two years, the AAC found the interest levy justified as the contractor had not paid sufficient advance tax. The Revenue appealed to the Tribunal, which upheld the AAC's order.

What did the High Court hold?

The High Court held that the Tribunal was right in law in holding that the tax paid by the contractor in its own case by way of advance tax and self-assessment tax should be deducted from the gross tax that the assessee society should have deducted under Section 194C while computing interest chargeable under Section 201(1A). The Court reasoned that Section 190 of the Act provides for tax payment by deduction at source, and Section 199 states that payment of tax by the deductor to the Central Government is treated as payment of tax on behalf of the payee. Therefore, the assessee's liability to deduct tax was not independent of the contractor's liability to pay tax. Since M/s. Ravi Builder had admittedly paid the tax on the income earned from the assessee, and in fact, had paid more advance tax than was payable for two of the assessment years, no loss had been caused to the Revenue. Levying interest under Section 201(1A) in such a scenario would result in the Revenue deriving undue benefit. The Court distinguished the case relied upon by the Revenue, CIT vs. M/s. Darshan Trading and Finance Pvt. Ltd., on the grounds that in that case, it was not established whether the person on whose behalf tax was to be paid had actually paid it. The Court answered the reference in the affirmative, in favour of the assessee.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the tax paid by the contractor (M/s. Ravi Builder) in its own case by way of advance tax and self-assessment tax should be deducted from the gross tax that the assessee (Rishikesh Apartments Co.op Housing Society Ltd.) should have deducted under Section 194C in computing interest chargeable under Section 201(1A) of the Act. Assessee's contention: The assessee argued that since M/s. Ravi Builder had admittedly discharged its tax liability on the income received from the assessee, no loss of revenue had occurred, and therefore, interest under Section 201(1A) should not be levied. The assessee relied on the principle that tax paid by the payee extinguishes the payer's liability to deduct and pay tax, and consequently, the interest liability. The assessee also pointed out that for two years, the contractor had paid more advance tax than was due, and for the other two years, the tax was paid late, which was accepted by the AAC. Revenue's contention: The Revenue contended that the assessee was duty-bound to deduct tax at source under Section 194C. Failure to do so constituted a default, making the assessee liable for interest under Section 201(1A) on the tax that ought to have been deducted. The Revenue relied on the judgment in CIT vs. M/s. Darshan Trading and Finance Pvt. Ltd. (1995 Tax L.R. 1203) to support its claim that the assessee was liable for interest.

Which sections of the Income-tax Act were involved?

Section 194C,Section 201(1A),Section 190,Section 199

AI-generated summary — verify with the full judgment below

))

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 8 of 1986

For Approval and Signature:

Hon'ble MR.JUSTICE A.R.DAVE and Hon'ble MR.JUSTICE D.A.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements?

2.

To be referred to the Reporter or not? : YES

3.

Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 194C

All 2,696 judgments and leading authorities on Section 194C →

Recent GST High Court judgments

Search GST case law →