THE COMMISSIONER OF INCOME TAX vs. CHIEF ELECTRICAL INSPECTOR

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ITA/440/2013HC KarnatakaKAHC01035973201329 January 2014Bench: B.MANOHAR,DILIP B.BHOSALE9 pages
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What did the High Court hold?

The High Court observed that the Revenue's appeals were filed based on an apprehension that the First Appellate Authority had remanded the matter for fresh consideration, an apprehension that the Revenue's counsel could not support. The Tribunal had dismissed the appeals filed before it, but made certain observations in paragraphs 10 and 11 which the Revenue sought to set aside. The High Court found that the directions issued by the First Appellate Authority deserved to be maintained, with a further direction to the Assessing Officer to pass consequential orders charging interest under Section 201(1A) of the Act after verifying whether the ESCOMs had paid the tax on the amounts received from the assessee. In light of this, the Revenue's counsel fairly stated that the Court need not enter into the merits of the case or address the substantial questions of law raised. The Court set aside the observations made in paragraphs 10 and 11 of the impugned order. The operative direction was for the Assessing Officer to pass consequential orders as per the directions of the First Appellate Authority in paragraphs 3.9 and 3.10 expeditiously.

What were the facts?

The Revenue (Commissioner of Income-tax, TDS and Assistant Commissioner of Income-Tax-TDS) filed these appeals against the orders of the Income-Tax Appellate Tribunal (Tribunal). The Tribunal had upheld the orders of the Commissioner of Income-tax (Appeals) which, in turn, confirmed the orders of the Assessing Officer. The assessee, Chief Electrical Inspector to the Government, had delegated the power to collect Electricity-tax to Electricity Supply Companies (ESCOMs). These ESCOMs collected Electricity-tax on behalf of the Government along with electricity charges. The Government compensated ESCOMs for this collection. The dispute arose whether the amounts paid by the Government to ESCOMs for tax collection constituted 'commission' and if the assessee should have deducted tax at source (TDS) on these payments. It was an admitted fact that ESCOMs had paid the tax on the amounts received. The First Appellate Authority directed the Assessing Officer to pass consequential orders charging interest under Section 201(1A) after verifying if ESCOMs had paid tax on the commission received.

What were the issues?

1. Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that an order passed under Section 201 of the Income Tax Act, 1961 (the Act) would not fall under Section 251(1)(a) of the Act but falls under Section 251(1)(c), and therefore, the Appellate Commissioner was competent to remand the proceedings, leading to a perverse finding? 2. Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that the provisions of Section 251(1)(a) of the Act are not applicable to orders passed under Section 201 of the Act? Assessee's contentions: The respondent-assessee stated they had no grievance against the order of the First Appellate Tribunal. The assessee did not dispute that the payments made to ESCOMs for collecting Electricity-tax amounted to commission. It was also an admitted fact that ESCOMs had paid the tax on these amounts to the Department. Revenue's contentions: The Revenue challenged the order of the First Appellate Authority, apprehending that the authority had remanded the matter for fresh consideration. However, the Revenue's counsel could not support this apprehension based on the order of the Appellate Authority. The Revenue also sought to set aside observations made by the Tribunal in paragraphs 10 and 11 of its order.

Which sections of the Income-tax Act were involved?

Section 201,Section 201(1A),Section 251(1)(a),Section 251(1)(c),Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 29TH DAY OF JANUARY 2014

PRESENT

THE HON’BLE MR. JUSTICE DILIP B.BHOSALE AND THE HON’BLE MR. JUSTICE B.MANOHAR

I.T.A. No.434/2013 C/W. I.T.A. NOS.448/2013, 447/2013, 446/2013, 441/2013, 440/2013, 439/2013, 438/2013, 437/2013, 436/2013, 449/2013 & 435/2013,

BETWEEN :

1.

The Commissioner of Income-tax TDS, No.59, HMT Bhavan, 4th Floor, Bellary Road, Ganganagar, Bangalore.

2.

The Assistant Commissioner Of Income-Tax-TDS, Circle-18(2), No.59, HMT Bhavan, 4th Floor, Bellary Road, Ganganagar, Bangalore- 560 032. …APPELLANTS (Common in all)

(By Sri.Aravind K.V., Adv.)

AND :

Chief Electrical Inspector To Government, Ground Floor, Mysugar Building, J.C.Road, Bangalore – 560 005. …RESPONDENT (Common in all)

(By Sri.T.K.Vedamurthy, HCGP) . . . .

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These I.T.As. are filed under Section 260A of the Income Tax Act, 1961 praying to (i) formulate the substantial questions of law stated therein, (ii) allow the appeal and set-aside the order passed by the Income Tax Appellate Tribunal, Bangalore Bench in I.T.A. Nos. 1486/Bang/2012, 1476/Bang/2012, 1477/Bang/2012, 1478/Bang/2012, 1479/Bang/2012, 1480/Bang/2012, 1481/Bang/2012, 1482, Bang/2012, 1483/Bang/2012, 1484/Bang/2012, 1475/Bang/2012 & 1485/Bang/ 2012 respectively, all dated 19.04.2013 confirming the order of the Appellate Commissioner and confirm the order passed by the Assistant Commissioner of Income Tax-TDS, Circle-18(2), Bangalore.

These I.T.As. coming on for admission, this day, Dilip B.Bhosale, J., delivered the following:

JUDGMENT

These income-tax appeals are directed against the common orders passed by the Income-tax Appellate Tribunal (for short `the Tribunal’) and the Commissioner of Income-tax (Appeals)-II, Bangalore (for short `the First Appellate Authority’) against the orders dated 19.04.2013 and 10.10.2011 respectively. The appeals before the First Appellate Authority were preferred by the respondent-assessee – the Chief

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Electrical Inspector to the State Government whilst the appeals before the Tribunal were filed by the Revenue.

2.

The substantial questions of law raised in these appeals read thus: 1. Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that the order passed u/s. 201 would not fall u/s.251(1)(a) of the Act, but falls u/s. 251(1)(c) and hence the Appellate Commissioner is competent to remand the proceedings and recorded a perverse finding?

2.

Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that the provisions of Section 251(1)(a) of the Act are not applicable to the orders passed u/s. 201 of the Act?

3.

Briefly stated, the facts leading to these appeals, are that the respondent-assessee had delegated its power for collection of Electricity-tax to the Electricity Commissioners, who are also supplying

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electricity to BESCOM, GESCOM, MESCOM, HESCOM AND CESCOM (for short “ESCOM”). In addition to the electricity charges on the electricity supplied by these ESCOMs, they also collected Electricity-tax on behalf of the Government, which they remit to the Government and the Government in turn pay them certain sum to compensate towards the expenses incurred by them for collecting tax. Therefore, the question was : whether the amounts paid to the ESCOMs by the assessee could be treated as Commission? The findings of the Assessing Officer, the First Appellate Authority and the Tribunal are concurrent insofar as this question is concerned. All the authorities have concurrently held that the payment made by the Government to the ESCOMs for collecting Electricity-tax amounts to commission. The learned counsel for the respondent-assessee does not dispute this finding recorded by the authorities below including the Tribunal. The controversy was whether the assessee should have deducted tax at source while making payment to the ESCOMs for collecting Electricity-tax. Admittedly, the assessee did not deduct

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the tax at source while making the payment as aforestated. At the same time, it is admitted fact that that the ESCOMs, on receipt of the said amount from the assessee have paid the tax to the Department. It is in this backdrop the First Appellate Authority, after considering the facts of the case in the light of the relevant provisions, ultimately directed the Assessing Officer to pass consequential orders charging interest under Section 201(1A) of the Income tax Act (for short `the Act’). It also appears from the observations made in paragraph 3.9 and 3.10 in the order of the First Appellate Authority that it directed the Assessing Officer to verify whether the ESCOMs paid tax on the amounts received from the assessee for collecting Electricity-tax. The observations made by the First Appellate Authority in paragraph 3.9 and 3.10 read thus: “3.9 In this regard, the appellant has furnished copies of the returns of income of the payees for the relevant assessment years. The contentions of the appellant appears to be correct. In such a case, TDS u/s. 201 need not be collected once again from the appellant. The AO is directed to work out the

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relief to the appellant u/s. 201(1) after verifying the payment of taxes, if any, due as per the returns of income of the payees relied upon by the appellant.

3.10 As regards interest levied u/s. 201(1A), which is mandatory and compensatory in nature, the same would remain and stands confirmed. However, the appellant has put forward the contention that the deductees have filed returns of income declaring the commission income therein and paid the tax thereon. The AO is directed to verify the dates of filing of returns of income and payment of taxes by the payees and, accordingly, interest u/s 201(1A) is to be charged up to the date of filing of such returns of income by the deductees for the respective years in question. The AO is, therefore, directed to pass consequential orders charging interest u/s 201(1A) accordingly.”

4.

The learned counsel for the respondent- assessee submits that they do not have any grievance against the order of the First Appellate Tribunal.

5.

Mr.K.V.Aravind, learned counsel appearing for the appellant, on the other hand submits that the

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Revenue challenged the order of the First Appellate Authority under the impression that the First Appellate Authority remanded the matter to the Assessing Officer for its consideration afresh. Though he so submitted, he could not support the apprehension, so expressed on the basis of the order of the First Appellate Authority. Even we do not find any such direction in the order of the Appellate Authority.

6.

The appeals filed before the Tribunal in view of the apprehension, as aforementioned, were dismissed by the Tribunal. The Tribunal however, made certain observations in paragraphs 10 and 11, which, in our opinion were unnecessary. Mr. Aravind K.V., learned counsel for the appellants submits that if the observations made in paragraphs 10 and 11 are set- aside, perhaps, that will serve the purpose of the Revenue.

Mr. T.K.Vedamurthy, learned HCGP appearing for the respondent-assessee has not opposed this submission.

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7.

We also find that directions issued by the First Appellate Authority deserves to be maintained with further direction to the Assessing Officer to pass consequential orders charging interest under Section 201-(1A) of the Act. In view thereof, the learned counsel appearing for the appellant fairly states, we need not enter into merits of the case and address the substantial questions raised in these appeals. As a matter of fact, in view of the peculiar facts and circumstances of the case, the substantial questions, as raised, do not arise for reconsideration. Hence, we pass the following: ORDER The Assessing Officer, as per the directions issued by the First Appellate Authority and confirmed by the Tribunal shall pass consequential orders charging interest under Section 201(1A) of the Act after verifying whether the ESCOMs have paid the tax on the amounts received by them from the respondent-Assessee. In other words, the Assessing Officer shall pass consequential orders as per the directions issued by the

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First Appellate Authority in paragraph 3.9 and 3.10 expeditiously. We set-aside the observations made in paragraphs 10 and 11 in the impugned order. With these observations, appeals are disposed of.

Sd/- JUDGE

Sd/- JUDGE

SPS

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