2016 (9) TMI 760 - AT - Income Tax

TDS liability -period of limitation - CIT(A) held that instead of fixing the liability of TDS on 21% to be charged by the KIADB from the assessee for various services the liability should be restricted to 4% as per the revision order passed by the Government of Karnataka - Held that - It is seen that the AO himself has passed order u/s 201(1A) only in respect of first four years i.e. assessment years 2006-07 and 2008-09 to 2010-11. Hence it is seen that for financial years ending on or before 31-03-2010 no order has been passed by the AO u/s 201(1) of the IT Act and for these years he has passed orders u/s 201(1A) only. Now we have to decide as to whether these orders u/s 201(1A) are time barred or not because these were passed after expiry of 4 years from the end of the relevant assessment years. In the judgment in the case of CIT Vs Bharat Hotels Limited (2015 (12) TMI 1469 - KARNATAKA HIGH COURT ) it was held that the order passed u/s 201(1) and 201(1A) of the Act on 28.01.2008 for the AY 2002-03 is barred by limitation as the period of limitation would be four years from the end of the financial year in question. Respectfully following this judgment we hold that in the present case also the orders passed after the end of the financial year in question is time barred and hence the same is quashed. Such time barred orders are four i.e AY 2006-07 2008-09 2009-10 and 2010-11. Remaining three orders for AY 2011-12 to 2013-14 are not time barred even as per this judgment as these orders are passed in the month of March 1, 225.00 Crores to KIADB is not specified to be on account of land acquisition only it has to be held that such payment by the assessee to KIADB is a combined payment and it also included service charges and in that situation whether the income is accounted for by the payee i.e. KIADB is not relevant because it is settled principle of law by now that book entry is not decisive and since even now 4% service charges is payable and payment was made by the assessee company to KIADB for an amount in an excess of that 4 % the assessee was required to deduct TDS and if the assessee or the deductee felt that no TDS or lower TDS was deductible for any reason they should have approached the payee i.e. KIADB to grant a certificate for no deduction of TDS or low deduction of TDS and since this was not done by the assessee or the payee this contention is not acceptable that no TDS was deductible by the assessee company. Considering all these facts and in view of our above discussion we find no reason to interfere with the order of the ld. CIT(A) in any of the years out of his order for three years being AY 2011-12 to 2013- 14

Summary

Issues:
Assessment of TDS liability based on service charges, Time-barred orders under sections 201(1) and 201(1A) of the IT Act, Accrual of income to the deductee.

Assessment of TDS Liability:
The assessee entered into an agreement with KIADB for land acquisition for the Metro Rail Project, with service charges initially fixed at 21%. However, a revision by the Karnataka Government reduced the service charges to 4%. The AO assessed TDS liability at 21%, leading to an appeal by the assessee. The CIT(A) ruled in favor of the assessee, restricting the TDS liability to 4% as per the revised rates. The Tribunal upheld this decision, emphasizing that the revised 4% rate should be adopted for TDS calculation, as per the revised agreement.

Time-Barred Orders:
The Tribunal analyzed the time-barred nature of the orders passed under sections 201(1) and 201(1A) of the IT Act. Citing a judgment regarding the limitation period, the Tribunal held that orders passed beyond four years from the relevant assessment years were time-barred. Consequently, orders for certain assessment years (2006-07, 2008-09, 2009-10, and 2010-11) were deemed time-barred and quashed, while orders for subsequent years were considered within the limitation period and upheld.

Accrual of Income:
The Tribunal addressed the contention that no income had accrued to the deductee, emphasizing that the payment made by the assessee to KIADB was a combined payment, including service charges. The Tribunal highlighted that the payee's accounting of income was not decisive, and since the 4% service charges were payable, TDS was required. The Tribunal noted that the assessee should have obtained a certificate for no or lower TDS deduction if deemed necessary. Ultimately, the Tribunal found no grounds to interfere with the CIT(A)'s decision for the years within the order.

In conclusion, the Tribunal allowed the appeals for certain assessment years where the TDS liability was restricted to 4% as per the revised rates, while dismissing appeals for subsequent years. Additionally, the Tribunal addressed the time-barred nature of orders, quashing those passed beyond the limitation period and upholding others within the prescribed timeframe. The decision emphasized adherence to revised service charge rates and the necessity of TDS deduction based on the payment structure.