2009 (1) TMI 523 - AT - Income Tax

Summary

Issues Involved:
1. Whether the assessee was required to deduct tax at source from commission payments made to STD/PCO booth operators.
2. The necessity of obtaining clearance from the Committee on Disputes (CoD) before proceeding with litigation involving a PSU and a Government Department.
3. The Tribunal's power to grant stay on recovery of disputed tax demands in the absence of CoD clearance.

Issue-wise Detailed Analysis:

1. Requirement to Deduct Tax at Source:
The core issue in these appeals is whether the assessee was required to deduct tax at source from commission payments made to STD/PCO booth operators under section 194H of the Income-tax Act, 1961. The assessee contended that they had a strong prima facie case, supported by a decision from the Income-tax Appellate Tribunal Delhi Benches, which held that the assessee could not be treated as an assessee in default and that the tax withholding demands under section 201(1) and 201(1A) were legally unsustainable. Despite this, the CIT(A) upheld these demands. The assessee argued that the demands were frivolous and that coercive measures were being used by revenue authorities to collect these demands.

2. Clearance from the Committee on Disputes (CoD):
The Tribunal noted that the assessee had not yet obtained clearance from the CoD, as required by the guidelines laid down by the Hon'ble Supreme Court in the case of Oil & Natural Gas Commission v. Collector of Central Excise [1992] 104 CTR 31. The assessee submitted that the process to obtain CoD clearance had already been initiated. The Tribunal acknowledged that the delay in approaching the CoD does not make the action illegal, as held in CIT v. Oriental Insurance Co. Ltd. [2008] 304 ITR 551. The Tribunal also considered the judgment of the Hon'ble Delhi High Court in M.M.T.C. Ltd. v. Commissioner of Customs 2001 (130) ELT 33, which held that stay on recovery during the pendency of CoD reference should be considered by the Tribunal.

3. Tribunal's Power to Grant Stay:
The Departmental Representative argued that without CoD clearance, the Tribunal should not proceed with the matter and should summarily dismiss the stay petition. However, the Tribunal noted that this stand was contrary to the position taken by revenue authorities in other cases before Delhi Benches. The Tribunal referred to the judgment in CIT v. Bansi Dhar & Sons 1986 (24) ELT 193, where it was held that the Tribunal has the power to grant stay even when references are pending before higher courts. The Tribunal also cited the case of M.M.T.C. Ltd., where it was held that the Tribunal has the power to grant stay during the pendency of CoD reference.

The Tribunal concluded that it has the power and duty to grant stay on collection or recovery of demands impugned in appeals before it. The Tribunal also noted that when a reference is made to the CoD, the operation of the order under challenge is automatically suspended until the CoD resolves the dispute or grants clearance for litigation. Therefore, no formal order of stay is required, and the assessee can demonstrate to the Assessing Officer that they have approached the CoD to suspend the impugned orders and halt any recoveries.

Conclusion:
The Tribunal directed the revenue authorities not to resort to or continue with any coercive measures to recover the disputed demands for two weeks, allowing the assessee time to seek remedy through the CoD. The Tribunal emphasized that the assessee's operations as a public sector undertaking engaged in public utility service would be severely affected if their bank accounts remained frozen. The Tribunal also noted that the issue in appeal was covered in favor of the assessee by a decision of a co-ordinate Bench of the Tribunal. The stay applications were disposed of with directions for interim relief to enable the assessee to pursue the CoD clearance process.