COMMISSIONER OF INCOME TAX vs. M/S UNISONS HOTELS LTD.

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ITA/395/2005HC DelhiDLHC01059380200501 March 2018Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE A. K. CHAWLA2 pages
AI SummaryAllowed

What did the High Court hold?

The tribunal held that interest under Section 201(1A) is compensatory, not penal, aligning with the Supreme Court's decision in Commissioner of Income Tax v. M/s Eli Lilly & Company. Therefore, the question of law was answered in favour of the Revenue.

What were the facts?

The appeals involved a common question of law regarding the nature of interest under Section 201(1A) of the Income Tax Act. Similar appeals were previously disposed of in favour of the Revenue.

What were the issues?

The key issue was whether interest under Section 201(1A) of the Income Tax Act is penal or compensatory in nature.

Which sections of the Income-tax Act were involved?

Section 201(1),Section 201(1A)

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$~2-4 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 395/2005

ITA 1055/2005

ITA 666/2005

COMMISSIONER OF INCOME TAX DEL ..... Appellant

versus

M/S UNISONS HOTELS LTD.

..... Respondent

Present: Mr. Rahul Chaudhary and Ms. Vibhuti Malhotra, Advs. for the appellant in ITA 395/2005.

Mr. Puneet Rai, Standing Counsel for the appellant in ITA 1055/2005 & ITA 666/2005.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE A. K. CHAWLA

O R D E R %

01.03.2018

In all these appeals, a common question of law was framed on 18.1.2016, when these appeals were directed to be listed alongwith the other appeals (ITA 345/2005 and ITA 347/2005). After quoting the question of law on 27.07.2017, the said two appeals (ITA 345/2005 and ITA 347/2005) and another appeal (ITA 358/2005) were disposed of in favour of the respondent. The question of law framed in those appeals was in identical terms, also by the same order of 18.01.2016. The Court in its order (of 27.07.2017),

while disposing of the said three appeals) held inter alia, as follows :

“2. Learned counsel for the Appellant/Revenue has drawn the attention of this Court to the decision of the Supreme Court in Commissioner of Income Tax v. M/s Eli Lilly & Company (India) 312 ITR 225 (2009) (SC) in which it was held that interest under Section 201 (1A) of the Income Tax Act 1961 ('Act') is a compensatory measure for withholding the tax which ought to have gone to the exchequer. It has further been observed that the object underlying Section 201(1) of the Act is to recover the tax. In the case of short deduction, the object is to recover the shortfall.

3.

The impugned order of the ITAT which holds that Section 201 (1) and 201 (1A) of the Act are 'penal' in nature is plainly contrary to the above decision of the Supreme Court. Accordingly, Question (1) above is answered in negative i.e. in favour of Revenue and against the Assessee.

4.

Since the Question (1) is answered in the negative, Question (2) does not arise for consideration.”

For the above reasons, following the decision of the Supreme Court in Commissioner of Income Tax vs. Eli Lilly & Company (India), 312 ITR 225 (2009) SC (quoted in the order in the other appeals),the question of law is answered in favour of the Revenue and against the assessee. The appeals are therefore, allowed.

S. RAVINDRA BHAT, J

A. K. CHAWLA, J MARCH 01, 2018 rc

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