2012 (8) TMI 16 - AT - Income Tax

Non deduction of tax at source - demand raised and interest thereon - that assessee had applied for advertisement contracts which was called for by tender of AUDA Held that - CBDT vide Circular No,.275/201/95-IT(B) dated 29-1-1997 states no demand visualized u/s. 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 - the factual position as confirmed by CIT (A) that AUDA is subject to tax and is filing its return of income since the details of taxes and dates of payment of taxes by AUDA have not been examined by the AO while passing the order u/s. 201(1) r.w.s. 201(1A) & 221, in the interest of justice it is fit to refer the matter back to the file of A.O.

Summary

Issues:
1. Whether the assessee was liable to deduct TDS u/s.194-I for payments made to AUDA for advertising services.
2. Whether the provisions of Section 194C were applicable in the case instead of Section 194-I.
3. Whether the interest u/s. 201 and 201(1A) were correctly charged on the assessee for non-deduction of TDS.

Analysis:

Issue 1:
The appeal was filed against the order of Ld. CIT (A) upholding the Assessing Officer's decision that the assessee was required to deduct TDS u/s.194-I for payments to AUDA. The Revenue relied on CBDT circular No.715 and held the assessee liable for TDS. CIT (A) affirmed this decision, stating that the assessee failed to deduct TDS as required by law, leading to a demand for tax and interest.

Issue 2:
The ITAT provided partial relief to the assessee by analyzing the nature of the contract between the assessee and AUDA. It was determined that the provisions of Section 194C were applicable instead of Section 194-I, as the agreement was for displaying advertisements, not for renting land or buildings. The ITAT concluded that TDS under Section 194C was required, partially allowing the assessee's appeal.

Issue 3:
A subsequent Misc. Application highlighted the non-adjudication of the quantum of TDS and interest in the previous order. The assessee argued that the interest liability should be recalculated considering that AUDA had already paid taxes on the income received. The ITAT directed the Assessing Officer to reexamine the dates and details of tax payments by AUDA to determine the correct interest liability, citing the Hindustan Coca Cola case and CBDT Circular. The appeal was partly allowed, emphasizing the need for a reassessment based on the new information.

In conclusion, the ITAT's decision provided a nuanced analysis of the issues raised by the assessee, clarifying the applicability of TDS provisions and directing a reevaluation of interest liabilities based on the tax payments made by AUDA. The judgment emphasized the importance of accurate assessment and compliance with tax deduction requirements in such cases.