2017 (1) TMI 54 - HC - Income Tax

Interest charge under Section 206C(7) - deductee assessee in the case of TDS had paid the tax or filed a nil return Held that - A plain reading of the Section indicates that the assessee is liable under sub-section (7). This is, of course, on the basis that the provisions of Section 206C(1C) are applicable to the assessee. We have today, by a separate order and judgment decided 2016 (12) TMI 1534 - PUNJAB AND HARYANA HIGH COURT which is also the assessee s case under Section 201 including sub-section (1A) thereof. On a parity of reasoning, this appeal also ought to be decided in favour of the Revenue. Moreover, even assuming that the judgment in Hindustan Coca Cola case (2007 (8) TMI 12 - SUPREME COURT OF INDIA ) applies to this case, the assessee s liability under subsection (7) cannot be applied on the basis thereof. The last sentence in paragraph No.10 quoted above makes it clear that where the deductee assessee in the case of TDS had paid the tax or filed a nil return. The demand for the principal amount cannot be enforced. However, this would not alter the liability to pay interest under Section 201(1A) or for penalty under Section 271(C). For the same reasons, therefore, even assuming that the liability to collect tax at source cannot be enforced on account of the deductee assessee, i.e. concessionaire in this case, having paid the tax, the liability for interest under sub-section (7) would not be affected. The appeals, are allowed, the impugned orders are set aside. The Tribunal shall, however, permit the assessee to raise its main contention namely that it was not liable to collect tax at source under Section 206 C (1C).

Summary

Issues:
- Appeal against Tribunal's order deleting interest charge under Section 206C(7) of the Income Tax Act, 1961 for Assessment Years 2008-09 to 2010-11.

Analysis:
The appeals raised a common question of law regarding the deletion of interest charge under Section 206C(7) of the Income Tax Act, 1961. The Tribunal allowed the respondents' appeal against the order of the CIT (Appeals) for the mentioned Assessment Years. The contract in question was a concessionaire agreement where the concessionaire was entitled to collect toll, with consideration payable to the assessee. The assessee argued it was a nodal agency for the Government of Punjab and not directly liable under Section 206C(1C). The Tribunal ruled in favor of the assessee based on the concessionaire's returns showing nil income or a loss, without considering the main contention of the applicability of Section 206C(1C) to the assessee.

The High Court decided the appeal in favor of the appellant, rejecting the assessee's alternative contention and answering the question of law in favor of the Revenue. The Court highlighted the liability imposed by Section 206C(1C) on the assessee if applicable. The Court referred to the judgment in Hindustan Coca Cola Beverage P. Ltd. vs. Commissioner of Income-Tax, emphasizing the liability for interest under Section 201(1A) even if the tax due has been paid by the deductee-assessee. The Court clarified that the liability for interest under sub-section (7) would not be affected by the deductee-assessee's tax payment.

The Court set aside the impugned orders and allowed the appeals, directing the Tribunal to permit the assessee to raise its main contention regarding the liability to collect tax at source under Section 206C(1C). The judgment was decided in favor of the appellant, emphasizing the liability under Section 206C(1C) and Section 206C(7) of the Income Tax Act, 1961.