2013 (9) TMI 1130 - AT - Income Tax

Addition u/s 201(1) and 201(1A) - Held that - In the instant case before us since the deductee M/s SsangYong Engineering and Construction Company Ltd. is being assessed at loss no tax is payable by the deductee. Accordingly no occasion will arise for charging interest from the date on which such tax was deductible to the date on which such tax is actually paid. Direction of charging of interest u/s.201(1A) in the instant case will not serve any purpose insofar as the recipient of income was held to be not liable to pay any tax on its income as per assessment framed u/s.143(3). Therefore any payment of TDS by the assessee in respect of payment made to deductee M/s SsangYong Engineering and Construction Company Ltd will entitle the deductee to get back such TDS with interest at the time of framing assessment u/s.143(3) of the Act. Thus it is not a fit case for holding the assessee deductor in default u/s.201(1) nor for interest u/s.201(1A) of the Act.

Issues Involved:
1. Applicability of TDS certificates issued under Section 197(1) retrospectively.
2. Jurisdiction of ACIT (TDS) in rejecting the order passed under Section 197(1).
3. Validity and effect of the TDS certificates issued.
4. Determination of short deduction of TDS.
5. Consideration of the payee's tax liability and refund status.
6. Imposition of interest under Section 201(1A).
7. Alternative plea regarding the extent of default and interest calculation.
8. Consideration of issues raised in the rejoinder to the remand report.
9. Judicial pronouncements relied upon by the appellant.
10. Comparison with previous appellate orders.

Detailed Analysis:

1. Applicability of TDS Certificates Issued Under Section 197(1) Retrospectively:
The tribunal examined the applicability of the certificate for lower deduction of tax issued under Section 197(1) dated 30.06.2008. It was clarified that the certificate was valid for the financial year 2008-09 and applied to payments made from 01.04.2008 to 31.03.2009. The tribunal noted that Section 197 and corresponding rules do not suggest that the certificate would not apply to payments made prior to its issuance. Therefore, the tribunal concluded that the lower deduction certificate should be applicable retrospectively for the entire financial year.

2. Jurisdiction of ACIT (TDS) in Rejecting the Order Passed Under Section 197(1):
The tribunal found that the ACIT (TDS) exceeded his jurisdiction by rejecting the certificate issued under Section 197(1) on the grounds that it was not communicated to the payer and was issued in violation of Rule 28AA. The tribunal emphasized that once a certificate is issued, it remains valid until withdrawn or canceled by a process known to law, and the payer is mandated to deduct tax in accordance with the certificate.

3. Validity and Effect of the TDS Certificates Issued:
The tribunal held that the certificates issued under Section 197(1) were valid and effective for the periods specified therein. The tribunal noted that the certificates were never canceled and were in compliance with the directions issued by the AO. The tribunal also observed that the payee had been incurring losses and had no taxable income, reinforcing the validity of the lower deduction certificates.

4. Determination of Short Deduction of TDS:
The tribunal found that the ACIT (TDS) incorrectly applied a higher rate of 42.23% for short deduction of tax. The tribunal noted that the deductor had acted in compliance with the certificates issued under Section 197(1) and had deducted tax at the rates specified in the certificates. Therefore, the determination of short deduction was not justified.

5. Consideration of the Payee's Tax Liability and Refund Status:
The tribunal noted that the payee, M/s SsangYong Engineering and Construction Co Ltd., had disclosed its income and was assessed at a loss for the relevant assessment year. The tribunal emphasized that since the payee had no tax liability and had received a refund of the tax deducted at source, there was no loss of revenue to the department. Consequently, the tribunal held that the deductor should not be treated as in default under Section 201(1).

6. Imposition of Interest Under Section 201(1A):
The tribunal referred to the Supreme Court's decision in Hindustan Coca Cola Beverage P. Ltd vs CIT, which held that interest under Section 201(1A) is payable from the date the tax was deductible to the date it was actually paid. However, since the payee had no tax liability, the tribunal concluded that no interest under Section 201(1A) should be charged in this case.

7. Alternative Plea Regarding the Extent of Default and Interest Calculation:
The tribunal considered the alternative plea that even if the certificate dated 30.06.2008 was applicable prospectively, the default should be confined to the period before the issuance of the certificate. The tribunal noted that the payee's return for the relevant assessment year showed a loss, and the tax deducted had been refunded. Therefore, the tribunal held that no interest should be levied under Section 201(1A).

8. Consideration of Issues Raised in the Rejoinder to the Remand Report:
The tribunal observed that the issues raised in the rejoinder to the remand report were not adequately addressed by the lower authorities. The tribunal emphasized the need to consider all relevant issues and submissions made by the appellant.

9. Judicial Pronouncements Relied Upon by the Appellant:
The tribunal noted that the judicial pronouncements relied upon by the appellant, including the decisions of the Supreme Court and various High Courts, supported the appellant's case. The tribunal emphasized the importance of considering these precedents in reaching a decision.

10. Comparison with Previous Appellate Orders:
The tribunal distinguished the present case from previous appellate orders, noting that the facts and circumstances were different. The tribunal emphasized that each case should be decided based on its specific facts and the applicable legal principles.

Conclusion:
The tribunal allowed the appeals filed by the assessee, holding that the assessee should not be treated as in default under Section 201(1) and that no interest should be charged under Section 201(1A). The tribunal emphasized the validity of the TDS certificates issued under Section 197(1) and the absence of any tax liability for the payee.

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