2021 (1) TMI 681 - AT - Income Tax

Validity of order passed u/s 201(1)/201(1A) - As argued order u/s 201(1), 201(1A), passed beyond the period of limitation - HELD THAT - An identical issue has been considered by the Hon ble Gujarat High Court in Tata Teleservices Vs. Union of India 2016 (2) TMI 414 - GUJARAT HIGH COURT wherein it has been held that prior to section 201 was amended by Finance Act No.2 of 2009, no time limit was provided for passing an order u/s 201(1). But w.e.f. 01.04.2010, a time limit has been provided specifying that such order was to be passed within two years from the end of the financial year in which statements of TDS are filed. If no statement is filed, the order could be passed up to four years from the end of the financial year in which the amount is credited or paid. This judgment of the Hon ble Gujarat High Court has been followed by the Co-ordinate Benches of this Tribunal in Delhi and Mumbai. Therefore, we hold that the order u/s 201 (1)/201 (1A) for the first three quarters for Financial Year 2011-12 was passed beyond the limitation period and, therefore, the same is not a valid order in the eyes of law. Accordingly, the same is quashed. TDS u/s 194C OR 194J - Short deduction of TDS - payments/credit to M/s Conax Access Systems (Pvt.) - it is the assessee s contention that payments to this company were made under normal contractual obligations and that the services being provided by these two companies were general in nature and did not require any transfer of skill nor did make available any skill to the assessee - HELD THAT - AR has referred to invoices and agreements entered into with both the parties to buttress his arguments that the services rendered were not in the nature of technical services requiring any sharing/transferring of technical skill or knowledge. These evidences and explanations were submitted before the Assessing Officer as well as Ld. CIT (A). However, the Ld. CIT (A), notwithstanding the fact that in Financial year 2010-11 he had held that the payments were not in the nature of services falling under section 194J, not only ignored his appellate order in Financial Year 2010-11 but also chose to brush aside the explanations and evidences supplied by the assessee without examining the same in detail. We are informed that the Department s appeal against the order of the Ld. CIT (A) in Financial Year 2010-11 is pending before the Tribunal. In such circumstances, in the interest of substantial justice, we deem it fit to restore the issue of short deduction of tax at source and interest thereon in the fourth quarter of Financial Year 2011-12 to the file of the Ld. CIT (A) with a direction to pass a speaking order.

Summary

Issues Involved:
1. Applicability of TDS provisions under sections 194J vs. 194C.
2. Validity of the order passed under section 201(1)/201(1A) due to the limitation period.
3. Interest charged on alleged short deduction of TDS.
4. Consideration of evidence and explanations submitted by the assessee.
5. Impact of lower deduction certificates under section 197.
6. Application of CBDT Circular and Supreme Court judgment in Hindustan Coca Cola Beverages (P) Ltd. case.

Detailed Analysis:

1. Applicability of TDS Provisions under Sections 194J vs. 194C:
The primary contention of the assessee was that the payments made to various entities, including Conax Access Systems (Pvt.) Ltd., Tata Tele Services Ltd., and Cyquator Media Services Pvt. Ltd., were contractual in nature and should be subjected to TDS under section 194C at 2%, instead of 10% under section 194J. The assessee argued that the services provided did not involve any technical knowledge transfer or specialized services that would necessitate a higher TDS rate under section 194J. The Tribunal noted that the lower authorities did not adequately consider the agreements and invoices provided by the assessee, which indicated that the services were routine and standard.

2. Validity of the Order Passed under Section 201(1)/201(1A) Due to the Limitation Period:
The assessee raised additional legal grounds arguing that the order dated 30.03.2015 for the first three quarters of FY 2011-12 was beyond the prescribed limitation period of two years from the end of the financial year, as per section 201(3). The Tribunal accepted this contention, referencing the Hon’ble Gujarat High Court's judgment in Tata Teleservices Ltd. vs. Union of India, which established that orders passed beyond the limitation period are void. Consequently, the Tribunal quashed the order for the first three quarters of FY 2011-12.

3. Interest Charged on Alleged Short Deduction of TDS:
The assessee contested the interest charged under section 201(1A) on the alleged short deduction of TDS. The Tribunal noted that if the additional grounds regarding the limitation period were accepted, the interest liability would be significantly reduced. Furthermore, the Tribunal directed the lower authorities to reassess the interest charges, considering the nature of services and the applicable TDS rates.

4. Consideration of Evidence and Explanations Submitted by the Assessee:
The Tribunal observed that the lower authorities failed to adequately consider the evidence and explanations provided by the assessee, including agreements and invoices that demonstrated the nature of the services. The Tribunal emphasized the need for a detailed examination of these documents to determine the correct applicability of TDS provisions.

5. Impact of Lower Deduction Certificates under Section 197:
The assessee argued that lower deduction certificates issued under section 197 for payments to certain entities should be considered, and the revenue had accepted these certificates for payments liable to TDS under section 194C. The Tribunal acknowledged this argument and directed the lower authorities to consider the impact of these certificates on the TDS liability.

6. Application of CBDT Circular and Supreme Court Judgment in Hindustan Coca Cola Beverages (P) Ltd. Case:
The assessee cited the CBDT Circular No. 715 and the Supreme Court judgment in Hindustan Coca Cola Beverages (P) Ltd. vs. CIT, which stated that if the payee has discharged its tax liability, the payer cannot be held as an assessee in default for non/short deduction of TDS. The Tribunal directed the lower authorities to consider these precedents while reassessing the TDS liability.

Conclusion:
The Tribunal allowed both appeals for statistical purposes, quashing the order for the first three quarters of FY 2011-12 due to the limitation period and remanding the remaining issues to the CIT (A) for a detailed examination. The Tribunal emphasized the need for a speaking order that thoroughly considers the evidence and explanations provided by the assessee, ensuring substantial justice.