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Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI Before Sh. N. K. Saini, AM and Ms. Suchitra Kamble, JM ITA No. 1936/Del/2015 : Asstt. Year : 2009-10 ITA No. 1937/Del/2015 : Asstt. Year : 2010-11 ITA No. 1938/Del/2015 : Asstt. Year : 2011-12 ITA No. 1939/Del/2015 : Asstt. Year : 2012-13 ITA No. 1940/Del/2015 : Asstt. Year : 2013-14 Manager Union Bank of India, Vs Income Tax Officer (TDS), Loharu Road, Bhiwani, C/o Shivraj Hisar Kumar Batra (Advocate), 310-A, Peer Je Mohalla, Rohtak (APPELLANT) (RESPONDENT) PAN No. AAACU0564G Assessee by : Sh. Shiv Raj Kumar Batra, Adv. Revenue by : Sh. Shiv Raj Singh, Sr. DR Date of Hearing : 23.11.2017 Date of Pronouncement : 30.11.2017 ORDER Per N. K. Saini, AM: These appeals by the assessee are directed against the consolidated orders dated 30.01.2015 for the assessment years 2009-10 to 2013-14 of ld. CIT(A), Hisar.
Since the issue involved is common in all these appeals which were heard together so these are being disposed off by this consolidated order for the sake of convenience and brevity.
ITA Nos. 1936 to 1940/Del/2015 2 Manager Union Bank of India 3. At the first instance, we will deal with the appeal in ITA No. 1936/Del/2015 for the assessment year 2009-10. Following grounds have been raised in this appeal: “1. That Ld. CIT Appeals Hissar has erred in law and facts of the case in making and upholding levy of interest u/s 201(1A) of the I.T. Act amounting to Rs. 2852609/- which is totally wrong and illegal. 2. That the Ld. CIT Appeals Hissar has further erred in law in not considering the fact that income of the deductee M/s Haryana Cricket Association Bhiwani is totally exempt and no TDS is deductable. When there is no liability of TDS hence there is no question of levy of any interest u/s 201(1A) of I.T. Act. Thus the order passed is totally wrong and illegal. 3. That the appellant, craves, leave to add, delete or amend any Ground or Grounds of appeal at the time or before the time of hearing.” 4. Facts of the case in brief are that the ITO(TDS) gathered information that Haryana Cricket Association, Bhiwani had FDRs of high amounts with Union Bank of India, Hansi Gate, Bhiwani pertaining to F.Ys. 2008-09 to 2011-12, but the bank had not deducted TDS on the payments of interest accrued on FDRs. Therefore, the ITO(TDS) issued a show cause notice to the assessee and after considering the reply of the assessee held that the person responsible did not deduct the TDS on the said interest as required u/s 194A of the Income Tax Act, 1961 (hereinafter referred to as the Act). The ITO(TDS) computed year wise quantum of short/non deduction of TDS on the FDRs as under:
ITA Nos. 1936 to 1940/Del/2015 3 Manager Union Bank of India S. F.Y. Amount of Intt. Paid/ TDS Intt. U/s Total (In No. FDR Credited required to 201(lA) to rupees) be deducted be charged @ 10% of the interest 1. 2008-09 48,98,13,553/- 3,45,77,121/- 34,57,712/- 28,52,609/- 63,10,321/- 2. 2009-10 6,40,58,11,507/- 4,92,48,368/- 49,24,836/- 34,72,007/- 83,96,843/- 3. 2010-11 98,90,00,000/- 5,50,59,860/- 55,05,986/- 22,29,922/- 77,35,908/- 4. 2011-12 84,15,00,000/- 5,95,11,040/- 59,51,104/- 24,99,462/- 84,50,566/- 5. 2012-13 89,50,00,000/- 3,80,09,861/- 38,00,986/- 9,12,235/- 47,13,221/- Gross Demand to be raised 23,64,06,250/- 2,36,40,624/- 1,19,66,235/- 3,56,06,859/-
Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the reason for non deduction of TDS was that the said FDRs belonged to Haryana Cricket Association, Bhiwani whose income was totally exempt being no profit making company who had also filed Form No. 15G duly signed by Treasurer for non deduction of TDS. Therefore, the assessee was not liable to deduct TDS on the interest accrued on FDRs belonging to Haryana Cricket Association whose income was totally exempt. It was further submitted that the Finance Act, 2012 has inserted a proviso to Section 201(1) of the Act w.e.f. 01.07.2012 which provides that a deductor cannot be deemed to be assessee in default in respect of non deduction of tax of a deductee where the deductee has paid income tax on this amount and has furnished his income tax return. It was stated that since the deductee filed its return of income u/s 139 of the Act, duly including therein the
ITA Nos. 1936 to 1940/Del/2015 4 Manager Union Bank of India income on which TDS should have been deducted, wherein exemption has been claimed u/s 11(3) of the Act and as per the return of income no income tax was payable by the deductee. Therefore, the assessee cannot be deemed to be an assessee in default as per the provisions contained in proviso to Section 201(1) of the Act. It was further submitted that the provision though inserted by Finance Act, 2012 w.e.f. 01.07.2012 but should have applicability with retrospective effect. It was also submitted that the CBDT has issued Instruction No. 275/201/95-IT(B) dated 29.01.1987 under which it has been stated that the demand for non/short deduction of tax should not be enforced against the payer if he satisfies the income tax authorities that such taxes have been paid by the payee. The reliance was placed on the following case laws: � Hindustan Coca Cola Beverage Pvt. Ltd. Vs CIT (2007) 293 ITR 226 (SC) � R.B. Jodha mal Kuthiala Vs VIT (1971) 82 ITR 570 (SC) 6. It was further submitted that the deductee is a registered company u/s 25 of Companies Act, registered u/s 12AA of the Act, its income is totally exempt u/s 11 of the Act and that even the AO himself passed an order u/s 143(3) of the Act for the assessment year 2010-11 wherein the income of the deductee being charitable company had been assessed at Nil income. It was stated that the assessee on the basis that the deductee had filed Form No. 15G and assessment order u/s 143(3) of the Act, did not deduct TDS on interest. It was thus submitted that there was no
ITA Nos. 1936 to 1940/Del/2015 5 Manager Union Bank of India liability to deduct TDS, so there was no question of levy of interest on TDS.
The ld. CIT(A) after considering the submissions of the assessee observed that the provision of Section 190(1) of the Act does not provide that tax is not deductible at source in case of any exempt income and does not say the tax is to be deducted on taxable income. He further observed that taxability of income u/s 11 of the Act was subject to various conditions and subject to assessment of income by the AO. So, the deductor cannot assume that since Haryana Cricket Association is registered u/s 12AA of the Act, so its income was non-taxable. The ld. CIT(A) observed that the only provisions available for lower rate of deduction and no tax deduction was according to certificate obtained from the Assessing Officer as per the provisions of Section 197 of the Act. Therefore, the assessee was liable for making TDS on the interest accrued on FDRs of the deductee. He also observed that on consequence of failure to deduct or pay TDS, the provisions of Section 201(1) of the Act provides that in such circumstances, the deductor will be deemed to be an assessee is default in respect of such tax. The ld. CIT(A) pointed out that the combined order for five financial years had been passed on 07.08.2013, thereore, the 1st proviso to Section
ITA Nos. 1936 to 1940/Del/2015 6 Manager Union Bank of India 201(1) of the Act was proviso inserted by Finance Act, 2012 was applicable for two financial years only. The ld. CIT(A) held that the ultimate liability for tax being not, there does not dilute the requirements for the non compliance of which interest is levied u/s 201(1A) of the Act, therefore, the interest charged u/s 201(1A) by the ITO(TDS) was justified. A reference was made to the following case laws: � CIT Vs Prem Nath Motors (P) Ltd. 253 ITR 705 (Del.) � Allied Motors 224 ITR 677 (SC) � Alom Extrusions 319 ITR 306 (SC) � Jubilee Investments & Industries Ltd. Vs ACIT 238 ITR 648 (Cal.) 8. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submission made before the authorities below and further submitted that the income of the deductee was totally exempt and no TDS was deductible. Therefore, when there was no liability of TDS, there was no question of levy of interest u/s 201(1A) of the Act.
In his rival submissions, the ld. DR strongly supported the orders of the authorities below.
We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is an admitted fact that the Haryana Cricket
ITA Nos. 1936 to 1940/Del/2015 7 Manager Union Bank of India Association who was having the FDRs with the assessee, is registered u/s 12AA of the Act and its income is exempt u/s 11 of the Act. The said fact has been admitted by the ld. CIT(A) who mentioned that income of the assessee u/s 143(3) of the Act for the assessment year 2010-11 had been assessed at Nil, considering the exemption provided u/s 11 of the Act. In the present case, it is noticed that there was no finding by the ITO(TDS) regarding the payment of tax by the deductee for the various financial years. In the present case, the ld. CIT(A) in paras 7.2 & 7.3 has clearly directed the ITO(TDS) that the relief for tax computed u/s 201(1) of the Act was available to the assessee subject to the verification by the ITO(TDS) about the tax liability of the deductee for each financial year. The said observation of the ld. CIT(A) is reproduced verbatim as under: “7.2 In the instant case, a combined order for five financial years from 2008-09 to 2012-13 have been passed on 07.08.2013 and the proviso was applicable for consideration for two financial years. However, the appellant has relied on the judgments of Hon'ble Supreme Court in the case of Allied Motors 224 ITR 677 and Alom Extrusions 319 ITR 306 to emphasize that the proviso inserted to provide remedy for unintended consequences may be considered to be clarificatory in nature having retrospective effect. Since, the ITO has passed a combined order after insertion of proviso, therefore, the effect of proviso is
ITA Nos. 1936 to 1940/Del/2015 8 Manager Union Bank of India considered to be extended to all financial years under consideration. It is noted that the deductor was under bonafide believe for non deduction of TDS on considering the Form 15G furnished by the deductee without realizing the admissibility of Form 15G by a company. Further, the appellant was under misconception that if the deductee have exempt income then there was no requirement to deduct TDS. Further, it is also a fact that the deductee has filed its return of income and assessment passed u/s 143(3) for A.Y. 2010-11 i.e. F.Y. 2009-10 has been assessed at nil considering the exemption provided u/s 11 of the I.T. Act and registration granted u/s 12AA of the Act. Further, on perusal of audit, report relevant to F.Y. 2012-13, it is noted that the income on account of interest has been accounted for by the deductee in its P&L account and balance sheet. Therefore, the deductee’s income is exempted as per provisions of section 11 subject to fulfillment of the conditions stipulated in section 11 of the Act. Further, the Hon'ble Supreme Court in the Hindustan Coca Cola Beverage Pvt. (supra) has referred to the circular issued by the CBDT and gave the judgment as under: "The circular No. 275/201/95-IT(B), dated 29-1- 1997 issued by the Central Board of Direct Taxes would put an end to the controversy. The circular declares that no demand visualized under section 201(1) should be enforced after the tax deductor has satisfied the officer-in-charge of TDS that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under section 201(1A) till the dale of payment of taxes by the deductee-assessee or the liability for penalty under section 271C."
ITA Nos. 1936 to 1940/Del/2015 9 Manager Union Bank of India
7.3 In view of above facts, I find that by virtue of proviso to section 201(1) the deductor may not be considered assessee in default in failing to deduct such tax. Moreover, in view of decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. (supra), the deductor cannot be treated as assesses in default as the tax is not recoverable from deductor to the extent if the same has been paid by the recipient. There are no findings by the ITO(TDS) regarding the payment of taxes by the deductee for various financial years. Though, the appellant has submitted that deductee's income is exempt u/s 11, however, in the absence of examination of facts for all financial years, the ITO(TDS) is directed to verify the tax liability for each financial year and find out the extent and quantum of the tax paid by the deductee. If, as per proviso to section 201(1) the tax amount as claimed from the deductor has been paid by the deductee or there was no liability to pay tax by the deductee then for that amount the deductor cannot be treated as assessee is default for respective financial years. Accordingly, the relief is available for tax computed u/s 201(1) to the appellant subject to the verification by the ITO(TDS) about the tax liability of the deductee for each financial year.” 11. From the above observations of the ld. CIT(A), it is clear that direction was given to the ITO(TDS) for verification, however, he had taken a contradictory stand while confirming the action of the AO. We, therefore, considering the contradictory stand taken by the ld. CIT(A), deem it
ITA Nos. 1936 to 1940/Del/2015 10 Manager Union Bank of India appropriate to set aside this issue back to the file of the AO to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee. The AO is also directed to verify as to whether there was any liability of the deductee to pay the tax or any tax has been paid. As regards to the applicability of the proviso inserted by Finance Act, 2012 is concerned, it is relevant to point out that the Hon’ble Supreme Court in the case of CIT Vs Alom Extrusions Ltd. (200) 319 ITR 306 (supra) has held as under: “When a proviso in a section is inserted to remedy unintended consequences and to make the section workable, the proviso which supplies an obvious omission therein is required to be read retrospectively in operation, particularly to give effect to the section as a whole.” 12. In the present case also, the proviso to Section 201(1) of the Act has been inserted to remedy unintended consequences to make the section workable, so it is required to be retrospective in operation. Therefore, in the instant case, if it is found that the deductee was not liable to pay any tax and the income earned as interest of the FDRs has been accounted for in the income, which is exempt then the assessee should not be treated as an assessee in default.
ITA Nos. 1936 to 1940/Del/2015 11 Manager Union Bank of India 13. In all other appeals for the assessment years 2010-11 to 2013-14, the facts are identical, therefore, our findings given in respect of assessment year 2009-10 shall apply mutatis mutandis.
In the result, all the appeals of the assessee are allowed for statistical purposes. (Order Pronounced in the Court on 30/11/2017)
Sd/- Sd/- (Suchitra Kamble) (N. K. Saini) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 30/11/2017 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5.DR: ITAT ASSISTANT REGISTRAR