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Income Tax Appellate Tribunal, BANGALORE BENCH ‘B’, BANGALORE
Before: SHRI SUNIL KUMAR YADAV & SHRI A.K.GARODIA, ACCOUNANT MEMBER
O R D E R PER BENCH
All these appeals are filed by the assessee for the assessment years 2006-07 to 2013-14. Since common issues are involved in all these appeals, all these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.
The brief facts of the case are that the assessee had entered into an agreement with M/s Karnataka Industrial Areas Development Board (KIADB) for the purpose of acquisition of land for Phase-I of the Metro Rail Project towards construction of piers/portals via duct across the precints of Bengaluru region and the charges payable to KIADB was fixed as 21%. The assessee had paid an amount of Rs.1,225.00 Crores to M/s KIADB during the span of seven years for which the appeals are being decided by us.
Subsequently, the rate of service charges was revised to 4% vide copy of order dated 21-06-2012 and a High Powered Committee constituted by the Government of Karnataka held that 4% rate of service charges is on higher side and that the Finance Department should work out modalities for meeting the administrative expenses of KIADB towards land acquisition for the assessee. Under these facts, the AO passed the orders u/s 201(1A) for four years and u/s 201(1) and 201(1A) for three years. Being aggrieved the assessee carried the matter in appeal before the ld. CIT(A) and it was held by the ld. CIT(A) as per the impugned orders that the assessee is eligible for part relief and the demand for TDS should be restricted to service charges to be computed @t 4% instead of 21% computed by the AO.
It was submitted by the ld. AR of the assessee before us that the agreement between the assessee and the KIADB dated 20-06-2005 is available on page No.1 to 8 of the paper book and in particular, our attention was drawn to clause-1(ii) of the agreement available on page-2 of the paper book, as per which the assessee company was required to pay establishment charges at 10%, audit charges at 1% and Board’s service charges at 10% over the tentative cost of land. He also submitted that the order passed by Karnataka Government on 21-06-2012 revising the rate to 4% being the service charge, administration charge, audit charge payable by the assessee to KIADB at as against earlier 21% is available on page 63-64 of the paper book. He further submitted that the finding of the CIT(A) is incorrect because no income has accrued in the hands of the deductee, so no TDS should be deducted. He also submitted that reliance is being placed on the following judicial pronouncements;
i) E.D Sason & Co., Ltd Vs CIT 26 ITR 27(SC) ii)Shoorji Vallabhdas & Co Vs CIT 46 ITR 144(SC) iii) CIT Vs Birla Gwalior Pvt.Ltd 89 ITR 266(SC) iv) CIT Vs WExcel Industries Ltd., 358 ITR 295(SC) v) State Bank of Travancore Vs CIT 158 ITR 102(SC) vi) Morvi Industries Ltd., Vs CIT 82 ITR 835 (SC) vii) Godhara Electricity Co.Ltd.,CIT 225 ITR 746 (SC) viii) M/s P.G & W.Sawoo Pv.Ltd., Vs ACIT in Civil appeal No.4091 of 2016 arising out of SLP (Civil) Nos.6384 of 2009 dated 19/04/2016.
Reliance on these judgments was placed in support of this contention that the income tax is a tax on income and income has to be real income only and not hypothetical income.
At this juncture, the Bench wanted to know about the details of payments made by the assessee to KIADB and in reply, it was submitted that these details are available on page-9 of the paper book. Further the Bench wanted to know as to whether this payment of Rs.1,225.00 Crores paid by the assessee company to M/s KIADB during this period of seven years is on account of cost of land or various service charges or both and in reply, it was submitted by the ld. AR of the assessee that such break-up is not readily available. Thereafter, he submitted that in fact, no part of this amount was considered as income by KIADB and therefore, there is no requirement of deducting TDS on any part of this amount. He also drawn our attention to para-15 of the written submission, wherein it has been submitted by the ld. AR of the assessee that as per the judgment of the Hon’ble jurisdictional High Court rendered in the case of CIT Vs Bharat Hotels Limited in it has been held that where no time limit is prescribed for passing an order, the same has to be passed within a reasonable time and for the purpose of orders u/s 201 of the IT Act, the reasonable time should be four years from the end of financial year in question. Since all these orders were passed in the months of March/April, 2014 then at least for the financial years ending before 31-03-2010, all these orders of the AO should be held to be time barred.
5. As against this, ld. DR of the revenue supported the order of the ld.
CIT(A).
We have considered rival submissions. First of all, we reproduce the finding of the ld.CIT(A) which are contained in para-4.3 and 5 of his order..
“4.3 From the cited judicial decisions, it is evident that interest u/s 201(1A) is to be levied if an assessee does not deduct the whole or part of tax. In the instant case, since the appellant did not deduct any tax from payments made to KIADB for services rendered by it to the appellant, it is held that the AO was right in levying interest u/s 201(1A) of the Act, on the appellant. Hence appeal on this grounds fails.
The other issue in the appeal is whether the AO was correct in holding 21% as the rate paid by the appellant to KIADB. In this context, it is noted that the appellant had entered into agreement M/s KIADB on 20-06-2005 which provided that a rate of 21% be charged by KIADB on the appellant for acquisition and handing over of land. The agreement got revised vide Govt. Order dated 21-06-2012 whereby a rate of 4% was agreed upon vide Govt. Order dated 21-06-2012, the AO is directed to adopt 4% as rate paid/payable to KIADB by the appellant”.
From the above paras of the order of the ld. CIT(A), it comes out that the ld. CIT(A) held that instead of fixing the liability of TDS on 21% to be charged by the KIADB from the assessee for various services, the liability should be restricted to 4% as per the revision order passed by the Government of Karnataka on 21-06-2012. It is seen that the AO himself has passed order u/s 201(1A) only in respect of first four years i.e. assessment years 2006-07 and 2008-09 to 2010-11. Hence it is seen that for financial years ending on or before 31-03-2010, no order has been passed by the AO u/s 201(1) of the IT Act and for these years, he has passed orders u/s 201(1A) only. Now, we have to decide as to whether these orders u/s 201(1A) are time barred or not because these were passed after expiry of 4 years from the end of the relevant assessment years. In the judgment of the Hon’ble jurisdictional High Court rendered in the case of CIT Vs Bharat Hotels Limited (Supra), it was held that the order passed u/s 201(1) and 201(1A) of the Act on 28.01.2008 for the AY: 2002-03 is barred by limitation as the period of limitation would be four years from the end of the financial year in question. Respectfully following this judgment, we hold that in the present case also, the orders passed after the end of the financial year in question is time barred and hence the same is quashed. Such time barred orders are four i.e AY: 2006-07, 2008-09, 2009-10 and 2010-11.
Remaining three orders for AY: 2011-12 to 2013-14 are not time barred even as per this judgment as these orders are passed in the month of March & April 2014.i.e before expiry of four years from the end of the financial year in question. Accordingly, we quash these four orders as time barred for AY:
2006-07, 2008-09, 2009-10 and 2010-11.
8. Regarding the second contention that no income has accrued to the deductee, we are of the considered opinion that the payment was made by the assessee to KIADB and since the payment of Rs.1,225.00 Crores to KIADB is not specified to be on account of land acquisition only, it has to be held that such payment by the assessee to KIADB is a combined payment and it also included service charges and in that situation, whether the income is accounted for by the payee i.e. KIADB is not relevant because it is settled principle of law by now that book entry is not decisive and since even now, 4% service charges is payable and payment was made by the assessee company to KIADB for an amount in an excess of that 4 %, the assessee was required to deduct TDS and if the assessee or the deductee felt that no TDS or lower TDS was deductible for any reason, they should have approached the payee i.e. KIADB to grant a certificate for no deduction of TDS or low deduction of TDS and since this was not done by the assessee or the payee, this contention is not acceptable that no TDS was deductible by the assessee company. Considering all these facts and in view of our above discussion, we find no reason to interfere with the order of the ld. CIT(A) in any of the years out of his order for three years being AY: 2011-12 to 2013- 14.
In the result, four appeals of the assessee for AY: 2006-07 & 2008- 09 to 2010-11 are allowed and remaining three appeals for AY: 2011-12 to 2013-14 are dismissed.
Order pronounced in the open court on the date mentioned on the caption page.