2016 (9) TMI 56 - HC - Income Tax

TDS u/s 194A - demand created under section 201(1) and (1A) in respect of Punjab Infrastructure Development Board, treating the assessee in default for non deduction of tds - whether no automatic exemption is available, even if the assessee is exempted under section 10(23C)(iv) of the Act ? - ITAT deleted the demand - Held that - The Commissioner of Income-tax (Appeals) and the Tribunal on appreciation of material on record have concurrently recorded that if an organisation is exempted from payment of tax there was no need for deduction of tax at source by the assessee. Learned counsel for the Revenue was not able to demonstrate that the approach of the Commissioner of Income-tax (Appeals) and the Tribunal was erroneous or perverse or that the findings of fact recorded were based on misreading or misappreciation of evidence on record. The view of the Commissioner of Income-tax (Appeals) and the Tribunal is in conformity with the decision of the apex court in Hindustan Coca Cola Beverage P. Ltd. v. CIT 2007 (8) TMI 12 - SUPREME COURT OF INDIA , where it has been held as under Be that as it may, the Circular No. 275/201/95-IT(B), dated January 29, 1997, issued by the Central Board of Direct Taxes, in our considered opinion, should put an end to the controversy. The circular declares no demand visualized under section 201(1) of the Income- tax Act 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. However, this will not alter the liability to charge interest under section 201(1A) of the Act till the date of payment of taxes by the deductee-assessee or the liability for penalty under section 271C of the Income-tax Act . - Decided against revenue

Summary

Issues:
1. Whether the Income-tax Appellate Tribunal was right in law in deleting the demand created under section 201(1) and (1A) in respect of Punjab Infrastructure Development Board for not deducting tax at source under section 194A of the Act?
2. Whether the assessee was liable for additional demand under section 201(1) and (1A) of the Act for non-deduction of tax at source on interest payments?

Analysis:
1. The appeal was filed by the Revenue against the order of the Income-tax Appellate Tribunal (ITAT) deleting the demand created under section 201(1) and (1A) for not deducting tax at source in the case of Punjab Infrastructure Development Board. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals) who had partly allowed the appeal of the assessee and deleted the demand. The Commissioner found that tax deduction at source was not required for certain payments as they were exempt under specific sections of the Income-tax Act. The Tribunal affirmed the findings of the Commissioner, stating that no substantial question of law arose in the appeal. The judgment cited the decision in Hindustan Coca Cola Beverage P. Ltd. v. CIT [2007] 293 ITR 226 (SC) to support the view that if an organization is exempt from tax, there is no need for tax deduction at source.

2. The Assessing Officer had created a demand under sections 201(1) and (1A) of the Act for non-deduction of tax at source on interest payments made by the assessee. The Commissioner of Income-tax (Appeals) and the Tribunal examined the case and found that tax deduction was not required for certain payments as they fell under exemptions provided in the Act. The Commissioner confirmed the demand in one instance but deleted it in other cases where tax deduction was not necessary. The Tribunal upheld these findings after considering the material on record. The judgment emphasized that the approach of the Commissioner and the Tribunal was in line with the decision in Hindustan Coca Cola Beverage P. Ltd. v. CIT [2007] 293 ITR 226 (SC), which clarified the liability for tax deduction at source based on exemptions provided in the Act.

In conclusion, the High Court dismissed the appeal by the Revenue as no substantial question of law was found to arise from the case. The judgment highlighted the importance of considering exemptions under the Income-tax Act when determining the liability for tax deduction at source, as established by previous legal precedents.