2018 (4) TMI 1596 - HC - Income Tax

TDS liability on assessee university - employer employee relationship - whether the assessee appellant University would be liable for non deduction of TDS for the financial period 2007-2008 even when the assessee appellant University itself came to be incorporated on 13.09.2013? - demand created against the assessee appellant University for the financial period 2007-2008 as barred by limitation - Held that - The law which was applicable on the completion of financial year is applicable in the facts of the case and for assessment year 2007-08, the assessment year will expire on 31st March, 2008 which was over. Even if the view canvassed by Mr. Mathur, counsel for the respondent is taken into consideration, the financial year expired on 31st March, 2008. In that view of the matter in view of decisions in Tata Teleservices 2016 (2) TMI 414 - GUJARAT HIGH COURT which was followed in Troikaa Pharmaceuticals Ltd. Vs. Union of India & ors., 2016 (3) TMI 285 - GUJARAT HIGH COURT , we are of the opinion that question No.2 is required to be answered in favour of assessee. On question No.1, the assessee-University has come into existence in the year 2013 and it has never made the payment during the assessment year under consideration as it was not in existence. In that view of the matter, the view taken by both the authorities is not correct. In that view of the matter, finding arrived at by the original authority is required to be accepted. The issue is answered in favour of assessee. Demand of interest u/s 201(1A) - recipient of such income had discharged the applicable tax - Held that - If the tax was duly paid and that too at the time when it had become due, it would not be proper on the part of the Revenue to levy any interest under Section 201(1A) of the Act especially when Builder had paid more amount of tax by way of advance tax than what was payable by it. As the amount of tax payable by the contractor had already been paid by it and that too in excess of the amount which was payable by way of advance tax, in our opinion, the Tribunal was absolutely right in holding that the tax paid by the contractor in its own case, by way of advance tax and self-assessment tax, should be deducted from the gross tax that the assessee should have deducted under Section 194C of the Act while computing interest chargeable under Section 201(1A) - Assessee s appeal allowed. See DCIT (International Taxation) Jaipur Vs. M/s. National Highway Authority of India

Summary

Issues Involved:
1. Liability for non-deduction of TDS by the University.
2. Demand against the University being barred by limitation.
3. Interest demand under Section 201(1A) of the Income Tax Act.

Detailed Analysis:

1. Liability for Non-Deduction of TDS:
The primary issue was whether the University, which came into existence on 13.09.2013, could be held liable for non-deduction of TDS for the financial period 2007-2008. The Tribunal had held the University liable despite the absence of an employer-employee relationship during that period. The University contended that it could not be held responsible as it was not in existence during the relevant period, and the liability, if any, should be attributed to the Rajasthan Agriculture Research Institute, which was under Swami Keshwanand Agriculture University, Bikaner at that time. The High Court found that since the University was established only in 2013, it could not have made any payments during the financial year 2007-2008, and thus, the Tribunal's decision was incorrect. Therefore, the question was answered in favor of the assessee, establishing that the University was not liable for the non-deduction of TDS for the period in question.

2. Demand Barred by Limitation:
The second issue was whether the demand created against the University for the financial period 2007-2008 was barred by limitation. The High Court referred to the applicable law and concluded that the assessment year for 2007-2008 would have expired on 31st March 2008. The Court cited the decisions in Tata Teleservices and Mtroikaa Pharmaceuticals Ltd., which supported the view that the limitation period had expired. Consequently, the demand was deemed barred by limitation, and this question was also answered in favor of the assessee.

3. Interest Demand Under Section 201(1A):
The third issue was whether the Tribunal was correct in confirming the demand of interest under Section 201(1A) of the Income Tax Act, where the recipient of the income had already discharged the applicable tax. The High Court referred to its previous decision in DCIT (International Taxation) Jaipur Vs. M/s. National Highway Authority of India, which held that if the recipient of the income had already paid the tax, the payer could not be held liable for interest under Section 201(1A). This principle was applied to the present case, and the Court concluded that since the pensioners had paid the due income tax, the demand for interest was unjustified. Therefore, this question was also answered in favor of the assessee.

Conclusion:
All questions were answered in favor of the assessee, and the appeal was allowed. The High Court concluded that the University was not liable for non-deduction of TDS for the financial period 2007-2008, the demand was barred by limitation, and the interest demand under Section 201(1A) was not justified since the tax had already been paid by the recipients.