2016 (5) TMI 215 - AT - Income Tax

TDS u/s 194H - whether the proceedings initiated by the DCIT(TDS) are barred by limitation or not? - Held that - the statute prescribes that the proceedings u/s 201 can be initiated by the TDS office within the period of 2 years from the end of the financial year in which statement referred to in sec.200 is filed or in cases where no statement is filed, within the period of 6 years from the end of the relevant financial year. In this case, the financial year involved is 2002-03 and no statements u/s 200 were filed. Therefore, the order u/s 201 should have been passed on or before 31/3/2009. In this case, order u/s 201(1) was passed on 28/5/2009. Thus the proceedings are barred by limitation. It is trite law that orders passed after the period of limitation cannot be sustained in the eyes of law. Accordingly, we hold that the order passed by the DCIT(TDS) is barred by limitation and cannot be sustained in the eyes of law. - Decided in favour of assessee

Summary

Issues Involved:
- Nature of payments made to Shri Chinnaswamy Raju
- Applicability of section 194-H of the Income-tax Act, 1961
- Validity of order passed by DCIT(TDS)
- Barred by limitation or not

Nature of payments made to Shri Chinnaswamy Raju:
The appellant, a software development company, purchased lands through Shri Chinnaswamy Raju. The Deputy Commissioner of Income-tax (TDS) determined that the payments to Shri Chinnaswamy Raju were in the nature of brokerage or commission under sec.194H of the IT Act, 1961. The DCIT(TDS) held the appellant as in default for not deducting tax at source on these payments. The CIT(A) upheld this view, considering the payments as commission and covered by sec.194H. However, since Shri Chinnaswamy Raju had paid tax on these amounts, no recovery was ordered from the appellant, except for interest u/s 201(1A) of the Act.

Applicability of section 194-H of the Income-tax Act, 1961:
The issue revolved around whether the payments to Shri Chinnaswamy Raju constituted commission falling under section 194-H. The DCIT(TDS) and CIT(A) concluded that the payments were indeed commission under the Act. The appellant challenged this interpretation, arguing that the conclusion was not supported by the sale deeds and that Shri Chinnaswamy Raju was merely a mediator. The authorities relied on how the payee showed the receipts in his tax return and overlooked the "No objection Certificate" issued to the payee under Chapter XX-C of the Act.

Validity of order passed by DCIT(TDS):
The main contention was whether the proceedings initiated by the DCIT(TDS) were barred by limitation. The relevant provision under section 201(3) of the Act stipulated a time limit for initiating such proceedings. In this case, the order u/s 201 was passed after the prescribed deadline, rendering it barred by limitation. The Tribunal held that orders passed after the limitation period cannot be sustained in the eyes of the law, thereby ruling in favor of the appellant on this issue.

Barred by limitation or not:
The Tribunal analyzed the statutory provisions regarding the time limit for initiating proceedings under section 201 of the Act. As the order by the DCIT(TDS) was passed after the expiration of the specified period, the Tribunal concluded that the proceedings were indeed barred by limitation. Accordingly, the order passed by the DCIT(TDS) was deemed unsustainable in the eyes of the law, leading to the allowance of the appeal filed by the appellant company.