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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Assessee by : Shri Behari Lal - Ld. AR Department by : Shri Neil Philip-Ld.DR सुनवाईक"तार"ख/ : 13/05/2019 Date of Hearing घोषणाक"तार"ख / : 25/06/2019 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member): - 1. Aforesaid appeal by assessee for Assessment Year [in short referred to as ‘AY’] 2009-10 contest the order of Ld. Commissioner of Income-Tax (Appeals)-2,Mumbai [in short referred to as ‘CIT(A)’], Appeal No.CIT(A)- 2 Cyrus Investment Private Ltd. Assessment Year-2009-10 2/IT/158/2016-17 dated 01/01/2018.The grounds raised by the assessee read as under:- 1.1 On the facts and circumstances of the case and in taw, the learned Commissioner of Income Tax (Appeals)-2, Mumbai had erred in confirming the order passed by the Assessing Officer u/s 154 of the Income Tax Act, 1961 dated 03/11/2016 withdrawing the TDS Credit of Rs.1,06,50,182/- and thereby raising a demand of Rs.1,26,23,560/- without taking into consideration the fact that all the TDS Certificates were issued in the name of the assessee and the Assessing Officer under intimation u/s 143{1) of the Income Tax Act,1961 dated 25/10/2010 and the order passed u/s 143(3) of the Income Tax Act,1961 dated 30/12/2011 after filing the Revised Return dated 25/03/2011 allowed the credit of TDS of Rs.109,31,445/-. 1.2 The learned Commissioner of Income Tax (Appeals)-2 failed to appreciate that the assessee received the entire income originally and tax was correctly deducted from the income received. M/s Shapoorji Pallonji and Company Limited has not claimed the TDS on the said income which they were allocated on the basis of composite scheme of arrangement approved by Honorable Bombay High Court and the Department cannot be allowed to retain the tax deducted at source as per the provision of law without credit being available to anybody. This is not the spirit and intention of law. 1.3 The learned Commissioner of Income Tax (Appeals)-2 has also ignored the fact that the TDS has been claimed at Rs.1,09,31,445/- by the appellant in the original as well as in the revised return in Form No. ITR-6. The figure of TDS of Rs.2,81,263/- inadvertently mentioned in the statement of computation of income filed during the scrutiny assessment proceedings does not tantamount to revision of the TDS claim by the appellant. Accordingly, the credit of TDS has been allowed by the Assessing in the order u/s 143(1) and 143(3) on the basis of TDS credit claimed in the original return as well as in the revised return is as per the provision of law and it does not require any rectification u/s 154 of the Act.”
2.1 Facts in brief are that the assessee being resident corporate assessee had filed its original return of income for impugned AY on 30/09/2009 declaring income of Rs.54.56 Lacs with claim of Tax deduction at Source [TDS] credit of Rs.109.31 Lacs. However, the return was revised on 25/03/2011 declaring loss of Rs.432.37 Lacs and the claim of TDS was reduced to Rs.2.81 Lacs in statement of computation of total income. The return was stated to be revised so as to give effect to composite scheme of arrangement approved by Hon’ble Bombay High Court between the assessee and another entity namely M/s Shapoorji Pallonji & Co. Ltd. [M/s Shapoorji]. As per the terms, certain specified assets & liabilities of the 3 Cyrus Investment Private Ltd. Assessment Year-2009-10 assessee were transferred to M/s Shapoorji and consequently, all profits & losses of these specified assets and liabilities were deemed to accrue in favor of that entity. Resultantly, the income of Rs.472 Lacs was transferred to the said entity. In other words, the income to the extent of Rs.472 Lacs was short offered by the assessee in the return of income. 2.2 In the above background, it was noted that although the income was short offered, however, full TDS credit of Rs.109.31 Lacs was irregularly allowed in assessment framed u/s 143(3) on 30/12/2011 as against correct TDS credit of Rs.2.81 Lacs as claimed by the assessee in the revised statement of computation of income. The said error of granting excess TDS credit was not set-right even while passing assessment order u/s 143(3) r.w.s 254 on 05/03/2016. Therefore, in terms of provisions of Section 154, Ld. AO proceeded to rectify the order passed u/s 143(3) r.w.s 254 and accordingly passed an order u/s 154 on 03/11/2016 so as to reduce the TDS credit as irregularly allowed. In the rectification order u/s 154, the excess TDS credit of Rs.106.50 Lacs was withdrawn and consequential demand was raised against the assessee.
The assessee agitated the same without any success before Ld. CIT(A), however, without any success, vide impugned order dated 01/01/2018. The assessee submitted that TDS certificates were in assessee’s name and the assessee had already refunded the Income Tax refund so received to M/s Shapoorji. The assessee also controverted the stand of Ld. AO by submitting that the assessee had not made any such claim of reduced TDS but inadvertently mentioned the figures of TDS as 4 Cyrus Investment Private Ltd. Assessment Year-2009-10 Rs.2,81,263/- in the computation of income. The same was sought to be fortified by the fact that the correct amount of TDS was mentioned in Income Tax Return Form ITR-6. The attention was also drawn to the fact that no prior notice was issued before passing order under Sec.154. However, the same could not find favor with Ld. CIT(A) who concluded that Ld. AO was justified in rectifying the mistake which crept in while framing the assessment. Aggrieved, the assessee is in further appeal before us.
The Ld. Authorized Representative for assessee, drawing our attention to the documents placed in the paper-book, submitted that the demand raised against the assessee was unjustified. Reliance has been placed on the decision of Hon’ble High court of Calcutta in CIT V/s Ganesh Narayan Brijlal Ltd. [147 DTR (Cal) 136], decision of Hon’ble Andhra Pradesh High Court CIT V/s Bhooratnam & Co. [357 ITR 396], decision of Hon’ble High Court of Delhi rendered in CIT V/s Relcom [133 DTR (del)82]. Per Contra, Ld. DR submitted that Ld. AO was justified in rectifying the mistake which crept while granting TDS credit to the assessee. 5.1 We have carefully heard the rival submissions and perused relevant material on record and deliberated on judicial pronouncements as cited before us. The material on record would reveal that the assessee filed its original return of income on 30/09/2009 declaring total income of Rs.54.56 Lacs and claimed TDS credit of Rs.109.31 Lacs. The return was processed u/s 143(1) on 25/10/2010 wherein the assessee was granted a refund of Rs.101.23 Lacs by giving TDS Credit of Rs.109.31 Lacs. Thereafter, the 5 Cyrus Investment Private Ltd. Assessment Year-2009-10 return was revised on 25/03/2011 declaring loss of Rs.433.60 Lacs wherein the TDS was again claimed for Rs.109.31 Lacs. However, the amount of TDS was reflected by the assessee as Rs.2.81 Lacs in the computation of income. The assessment was framed for the first-time u/s 143(3) on 30/12/2011 wherein the assessee was allowed full TDS credit of Rs.109.31 Lacs. In the said assessment, the assessee was saddled with disallowance u/s 14A which was contested up-to the level of this Tribunal. In the said order, the matter was restored back to the file of Ld. AO with certain directions. Pursuant to the said directions, an assessment was re-framed u/s 143(3) r.w.s. 254 on 05/03/2016 wherein the income was re-determined at Rs.394.48 Lacs. In the said assessment order, a direction was issued by Ld. AO to allow credit of prepaid taxes, after due verification. Pursuant to same, a demand notice u/s 156 has been issued on same day raising Nil demand against the assessee. 5.2 However, subsequently, fresh Income Tax Computation Form has been issued on 03/11/2016 u/s 154 wherein the TDS credit has been reduced to Rs.2.81 Lacs resulting into demand of Rs.126.23 Lacs against the assessee. Nothing on record would suggest that any notice for the same was ever issued to the assessee as envisaged by the provisions of Section 154(3). Therefore, the aforesaid rectification, in our opinion, was not carried out as per the procedure laid down in Section 154(3). 5.3 Proceeding further, prima facie, it appears that the return has been revised pursuant to composite scheme of arrangement including de-merger and amalgamation between the assessee and other entities as approved by 6 Cyrus Investment Private Ltd. Assessment Year-2009-10 Hon’ble Bombay High Court on 06/07/2010 determining the rights & obligations of the entities inter-se under the scheme. Further, the perusal of assessee’s Form 26AS reveal that the TDS of Rs.109.31 Lacs has been deducted against the PAN of the assessee and the assessee is entitled for the credit of the same. It is only because of the aforesaid scheme, certain assets & liabilities including corresponding profits & losses, has been transferred by the assessee to the other entity. The Ld. AR has submitted that the assessee has already refunded the proportionate Income Tax Refund to the other entity which would further strengthen the assessee’s claim to get full TDS credit as reflected in Form 26AS. 5.4 The Hon’ble High Court of Calcutta in the case of CIT V/s Ganesh Narayan Brijlal Ltd. [supra], after considering the provisions of Section 199 has held as under: - .
Mr. Agarwal seeking to counter the submission advanced by Mr. Mazumder, drew our attention to sub-section (1) of Section 199 of the Income Tax Act, 1961, which provides as follows : "199. Credit for tax deducted. (1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit- holder, or of the shareholder, as the case may be."
6. Mr. Agarwal contended that in case, the assessee is interested in claiming the benefit of the tax deducted at source in its entirety, the assessee cannot avoid the liability to pay tax on the entire rental income. We have not been impressed by the submission advanced by Mr. Agarwal.
7. The assessee is undoubtedly an owner of the property but he is not an absolute owner. His ownership is restricted to a certain percentage of the right in the property. The assessee has collected the rent payable with respect to the property in its entirety and thereafter has passed on the rent including the amount deducted on account of the tax to the other co-owners. There is, as such, no reason why the assessee should not be entitled to enjoy the benefit of tax deducted at source. Mr. Agarwal did not dispute that the 7 Cyrus Investment Private Ltd. Assessment Year-2009-10 assessee has paid the share of the co-owners including the share in the amount of tax deducted at source.
In the facts of the case, we find no merit in the submission advanced by Mr. Agarwal. The question is, therefore, answered in the affirmative and against the revenue. The appeal is, as such, dismissed.
Similarly, Hon’ble Andhra Pradesh High Court CIT V/s Bhooratnam & Co. [supra] has held as under: - 17. In our view, the CIT (Appeals) and the Tribunal have rightly held that the assessee is entitled to the credit of the TDS mentioned in the TDS certificates issued by the contractor, whether the said certificate is issued in the name of the Joint Venture or in the name of a Director of the assessee company. They have considered the terms of the agreement dated 12-03-2003 among the parties to the joint venture and held that credit for TDS certificates cannot be denied to the assessee while assessing the contract receipts mentioned in the said certificates as income of the assessee. The income shown in the TDS certificates has either to be taxed in the hands of the joint venture or in the hands of the individual co-joint venturer. As the joint venture has not filed return of income and claimed credit for TDS certificates and the TDS certificates have not been doubted, credit has to be granted to the TDS mentioned therein for the assessee.
Rule 37BA is a procedural provision dealing with the manner of giving credit for tax deducted at source for the purposes of section 199. It therefore applies to pending proceedings. As observed in State of Madras v. Lateef Hamid & Co. AIR 1972 SC 1781, where a new procedure is prescribed by law, it governs all pending cases.
In Tikaram & Sons v. Commissioner of Sales Tax AIR 1968 SC 1286 it was held that alterations in the form of procedure are always retrospective, unless there is some good reason or other why they should not be. The amendment to Rule 37 BA mentioned above which has been introduced by the Income Tax (8th amendment) Rules, 2011 notified vide Notification No. 57/2011 dated 24-10-2011, being procedural in nature, would have retrospective effect and has to be given effect to.
The Revenue cannot be allowed to retain tax deducted at source without credit being available to anybody. If credit of tax is not allowed to the assessee, and the joint venture has not filed a return of income, then credit of the TDS cannot be taken by anybody. This is not the spirit and intention of law.
Therefore, in our view, the Assessing Officer erred in denying the benefit of the TDS mentioned in the TDS certificates filed by the assessees on the ground that the TDS certificate is issued in the name of the joint venture or a Director and not the assessee.
The Hon’ble High Court of Delhi, in CIT V/s Relcom [supra], has taken the same view and held as under: - 8 Cyrus Investment Private Ltd. Assessment Year-2009-10
6. Having heard the submissions made on behalf of the revenue and after a perusal the orders passed by the CIT(A) and the ITAT, we are of opinion that the said orders do not call for any interference and were warranted and justified in the facts and circumstances of the case. Before we proceed to elaborate on our reasons for the same, a perusal of Section 199 of the Act is necessary. Section 199 reads as follows: "199. Credit for tax deducted.
(1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be.
(2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made.
(3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and sub-section (2) and also the assessment year for which such credit may be given."
The revenue relies on the phrase "shall be treated as a payment of tax on behalf of the person from whose income the deduction was made" to contend that the assessee's TDS claim cannot be based on the receipts of M/s REPL. However, the assessee fairly admitted throughout the proceedings for its TDS claim of Rs.1,20,73,097/- that the benefit of such claim has not been availed by M/s. REPL. Therefore, the revenue, having assessed M/s REPL's income in respect to such TDS claim cannot now deny the assessee's claim on the mere technical ground that the income in respect of the said TDS claim was not that of the assessee, given that M/s Relcom (the assessee) and M/s REPL are sister concerns and M/s REPL has not raised any objection with regard to the assessee's TDS claim of Rs. 1,20,73,097/-.
8. This Court's reasoning is supported by a ruling of the Division Bench of the Andhra Pradesh High Court in CIT v. Bhooratnam & Co. [2013] 357 ITR 396/216 Taxman 6/29 taxmann.com 275 where the Court noted as follows: "In our view, the CIT (Appeals) and the Tribunal have rightly held that the assessee is entitled to the credit of the TDS mentioned in the TDS certificates issued by the contractor, whether the said certificate is issued in the name of the Joint Venture or in the name of a Director of the assessee company. They have considered the terms of the agreement dated 12-03-2003 among the parties to the joint venture and held that credit for TDS certificates cannot be denied to the assessee while assessing the contract receipts mentioned in the said certificates as income of the assessee. The 9 Cyrus Investment Private Ltd. Assessment Year-2009-10 income shown in the TDS certificates has either to be taxed in the hands of the joint venture or in the hands of the individual co-joint venturer. As the joint venture has not filed return of income and claimed credit for TDS certificates and the TDS certificates have not been doubted, credit has to be granted to the TDS mentioned therein for the assessee. ** ** ** The Revenue cannot be allowed to retain tax deducted at source without credit being available to anybody. If credit of tax is not allowed to the assessee, and the joint venture has not filed a return of income, then credit of the TDS cannot be taken by anybody. This is not the spirit and intention of law."(Emphasis Supplied) 9. At this stage, it is also relevant to note the provisions of Rule 37BA of the Income Tax Rules, 1962, which envisions grant of TDS credit to entities other than the deductee (herein, M/s REPL). We must clarify that we are not oblivious of the fact that Rule 37BA is not directly applicable in the facts of this case. The reliance placed on Rule 37BA is merely to demonstrate that in not all circumstances is TDS credit given to the deductee.
This Court relies upon the well-settled dictum that procedure is the handmaid of justice, and it cannot be used to hamper the cause of justice Sardar Amarjit Singh Kalra v. Pramod Gupta, [2003] 3 SCC 272. Therefore, the revenue's contention that the assessee, instead of claiming the entire TDS amount, ought to have sought a correction of the vendor's mistake, would unnecessarily prolong the entire process of seeking refund based on TDS credit.
In light of the aforesaid reasons, the question of law framed is answered against the revenue and the appeal is accordingly dismissed.
5.5 Drawing strength from the ratio of above binding judicial precedents, we hold that on the facts and circumstances, the assessee would be entitled to get the full credit of TDS as reflected in Form 26AS subject to verification of the fact that the corresponding claim of TDS has not been made by the other entity namely M/s Shapoorji. For the aforesaid limited purpose, the matter stand remitted back to the file of Ld. AO with a direction to the assessee to file the requisite documents / evidences, in this regard.
The appeal stands allowed for statistical purposes in terms of our above order.