2019 (6) TMI 1101 - HC - Income Tax

Limitation for passing order u/s.201(1) - TDS u/s 194 - deemed dividend u/s. 2(22)(e) - HELD THAT -Tax Appeal is admitted on the following substantial questions of law A Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal is right in dismissing the appeal of the Revenue without appreciating the fact that Section 201(3) of the Act was amended by the Finance Act, 2012 with retrospective effect from 01/04/2010 whereby the limitation wad substituted from four years to six years for passing the order u/s. 201/(1) of the Act where the TDS statement had not been filed. B Whether on the facts and circumstances of the case and in law, the Appellate Tribunal is right in dismissing the appeal of the Revenue without appreciating the fact that as per the amended provisions of Section 201(3) of the Act by the Finance Act, 2012 with retrospective effect from 01/04/2010 the limitation for passing order u/s.201(1) of the Act in the case of the assessee for the year A.Y. 201011 expires only 31/03/2016 i.e. within six years from the end of the financial year in which the loan of ₹ 2.07 crores was given to Shri Prakash Khatri, Chairman and Managing Director of the assessee company, who was holding 98.20% shareholding in company during the period under consideration, which was constituted as deemed dividend u/s. 2(22)(e) of the Act. C Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal is right in dismissing the appeal of the Revenue without appreciating the fact that the assessee had not deducted the tax at source as required under the provisions of Section 194 of the Act from the loan of ₹ 2.07 crores given to Shri Prakash Khatri, Chairman Managing Director of the assessee company, who was holding 98.20% shareholding in the company during the period under consideration, which was constituted as Deeded Dividend u/s. 2(22)(e) of the Act and accordingly clause (ii) of Section 201(3) of the Act as amended by the Finance Act, 2012 with retrospective effect from 01/04/2010 is applicable? D Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal is right in dismissing the appeal of the Revenue relying on TATA TELESERVICES VERSUS UNION OF INDIA 1 2016 (2) TMI 414 - GUJARAT HIGH COURT ?

Summary

Issues involved:
1. Interpretation of Section 201(3) of the Income Tax Act.
2. Application of retrospective amendments by the Finance Act, 2012.
3. Tax deduction at source under Section 194 of the Act.
4. Precedent set by the Gujarat High Court in Tele Services vs. Union of India.

Issue A - Interpretation of Section 201(3) of the Income Tax Act:
The High Court examined whether the Appellate Tribunal was correct in dismissing the appeal of the Revenue without considering the amendment to Section 201(3) of the Act by the Finance Act, 2012. The amendment extended the limitation period for passing orders under Section 201(1) from four years to six years in cases where the TDS statement had not been filed. The Court analyzed the impact of this amendment on the case in question and its implications on the timeline for issuing the order.

Issue B - Application of retrospective amendments by the Finance Act, 2012:
Another aspect considered was whether the Appellate Tribunal erred in dismissing the Revenue's appeal without recognizing the amended provisions of Section 201(3) by the Finance Act, 2012. The Court assessed the specific timeline related to the case, focusing on the loan given to an individual constituting deemed dividend under Section 2(22)(e) of the Act. The amendment's retrospective effect from 01/04/2010 and its influence on the limitation period for issuing orders under Section 201(1) were crucial factors analyzed by the Court.

Issue C - Tax deduction at source under Section 194 of the Act:
The Court deliberated on whether the Appellate Tribunal's decision to dismiss the Revenue's appeal was justified, given the failure of the assessee to deduct tax at the source as required under Section 194 of the Act. The loan amount provided to an individual, deemed as dividend under Section 2(22)(e), raised questions about the applicability of clause (ii) of Section 201(3) as amended by the Finance Act, 2012. The Court examined the implications of this non-compliance with TDS provisions on the case.

Issue D - Precedent set by the Gujarat High Court in Tele Services vs. Union of India:
Lastly, the Court analyzed the relevance of the precedent established in the case of Tele Services vs. Union of India by the Gujarat High Court. The decision in this case regarding the limitation period for passing orders under Section 201(1) of the Act was compared to the circumstances of the present case. The Court evaluated whether the Tribunal's reliance on this precedent was appropriate, considering the specific details and timeline of the current matter.

In conclusion, the judgment involved a detailed analysis of various legal provisions, retrospective amendments, compliance with tax deduction requirements, and the application of precedent to determine the correctness of the Appellate Tribunal's decision to dismiss the Revenue's appeal. The Court's thorough examination of these issues aimed to ensure a just and legally sound resolution in the case.