2019 (12) TMI 601 - AT - Income Tax

Non deduction of TDS on such lease rental payment and interest to the Noida Authority - assessee-in-default - demand was raised under section 201(1) and interest under section 201(1A) - HELD THAT - In the case of Rajesh projects (India) (P) Ltd 2017 (2) TMI 1109 - DELHI HIGH COURT has directed not to take any coercive method for recovery of the amount or penalty once the basic liability (with interest to be paid by the GNOIDA) is satisfied. It is clear that if the tax on the under dispute lease rental income along with the interest has been paid by the deductee, i.e., GNOIDA, no recovery can be made from the deductor. In the light of the ratio of the decision, in the instant case, the NOIDA authority is required to pay tax as well as interest if any corresponding to the lease rental paid the assessee. However, if such tax and interest are not paid by the NOIDA, the assessee cannot be exonerated from the liability under section 201(1) and 201(1A). We find that in the instant case, CIT(A) has deleted liability under section 201(1) of the Act but retained the interest liability under section 201(1A) of the Act. The first appellate authority in assessment year 2011- 12, has deleted the interest liability as held that Noida Authorities are under an obligation to comply with the provision of the law relating to TDS and also for making all related payments. In our opinion, if the interest has already been paid by the NOIDA Authority on the lease rental income corresponding to payment of the assessee no liability can be raised on the assessee u/s 201(1A) of the Act. This is a matter of verification and cannot be presumed. We feel it appropriate to restore this issue to the file of the AO for verifying the facts of interest paid on the tax liability by the Noida Authority, corresponding to lease rental paid by the assessee, and decide the issue in accordance with law. Grounds raised by the assessee are accordingly allowed for statistical purposes.

Summary

Issues:
1. Liability under proviso to section 201(1A) of the Act.
2. Applicability of first proviso to section 201(1) when assessee is not held as assessee-in-default.
3. Obligation of deductor based on High Court's decision.
4. Interest liability under section 201(1A) of the Act.

Analysis:

1. Liability under proviso to section 201(1A) of the Act:
The case involved the liability of the assessee, a real estate developer, for not deducting tax at source (TDS) on lease rental payment made to the Noida Authority. The Assessing Officer held the assessee as assessee-in-default and raised a demand under section 201(1) and interest under section 201(1A) of the Act. The CIT(A) deleted the liability under section 201(1) but upheld the interest liability under section 201(1A) based on the decision of the Hon'ble Delhi High Court in a similar case. The Tribunal noted the direction of the High Court not to pursue coercive methods for recovery once the basic liability is satisfied by the Noida Authority. The Tribunal directed the Assessing Officer to verify if the Noida Authority had paid the tax and interest, and if so, the assessee cannot be held liable under section 201(1A).

2. Applicability of first proviso to section 201(1) when assessee is not held as assessee-in-default:
The assessee argued that once the original demand under section 201(1) was deleted, and the assessee was not considered an assessee-in-default, the interest liability under section 201(1A) could not be enforced. The Tribunal agreed with the assessee, emphasizing that if the Noida Authority had paid the tax and interest, the assessee could not be held liable. The Tribunal highlighted the need for verification of the payment by the Noida Authority before imposing any liability on the assessee.

3. Obligation of deductor based on High Court's decision:
The Tribunal referred to the decision of the Hon'ble Delhi High Court in a similar case, where it was held that the deductor (Noida Authority) had an obligation to comply with TDS provisions and make related payments. This decision influenced the Tribunal's ruling that if the Noida Authority had fulfilled its tax and interest obligations, the assessee could not be burdened with the interest liability under section 201(1A) of the Act.

4. Interest liability under section 201(1A) of the Act:
The Tribunal analyzed the applicability of interest liability under section 201(1A) in the context of the Noida Authority's payment of tax and interest. It emphasized the need for verification of the actual payment by the Noida Authority before determining the assessee's liability. The Tribunal directed the Assessing Officer to re-examine the facts and decide the issue in accordance with law, providing the assessee with an opportunity to present relevant records. Ultimately, the Tribunal allowed the appeal of the assessee for statistical purposes, indicating a favorable outcome for the assessee based on the specific circumstances and legal precedents cited in the case.