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TMI Blog2010 (4) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... n loan and Section 194A in that case would not be applicable, is not justified Whether there is no tax liability payable by the payee or the creditor in whose account interest was credited, a demand can now be raised u/s 201(1) against the assessee for failure to deduct tax at source - In this connection, a reference may be made to a decision of Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages (P) Ltd. vs CIT, (2007 -TMI - 1676) (SC) – It was held that Haryana State Agriculture Marketing Board has already discharged its liability, no demand as raised by the AO u/s 201(1) can now be imposed against the present assessee – Hence present appeals are disposed of X X X X Extracts X X X X X X X X Extracts X X X X ..... e (which is though not a acceptable fact) revenue is deprived of utilization of this account from the date of its deduction to the date of issue of refund. This loss of revenue, however, gets compensated only through the levy of interest u/s 201(1A) of the I.T. Act. 4. We have heard both the parties and have perused the material on record. In these two years, the AO has passed the order u/s 201(1) and 201(1A) by holding that the assessee has failed to deduct tax at source on the interest accrued on loan taken from Haryana State Agriculture Marketing Board, Panchkula. In the financial year 2005-06 relevant to the Asstt. Year 2006-07, the AO has noted the following entries made by the assessee in its books: Loan from Boards: O.B. Rs.27,62 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------------- Rs.58,04,547/- ----------------- 6. On appeal, the ld. CIT (A) cancelled the AO's order passed u/s 201(1) and 201(1A) by the AO by giving following reasons: (i) That in the light of exemption u/s 11 & 12 granted to M/s Haryana State Agriculture Marketing Board, Panchkula, there was no tax liability payable by the creditor and as such, no default can be envisaged within the meaning of Section 201(1) and 201(1A) of the Act on the part of the assessee inasmuch as practically, there was no loss to the revenue and even if the demand is raised that would turn out to be a redundant. (ii) The assessee credited merely a notional interest on loan taken from M/s Haryana State Agriculture Marketing Board, and in the books the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry was made only for notional interest accrued on loan and Section 194A in that case would not be applicable, is not justified. 9. Now coming to the question as to whether there is no tax liability payable by the payee or the creditor in whose account interest was credited, a demand can now be raised u/s 201(1) against the assessee for failure to deduct tax at source. In this connection, a reference may be made to a decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages (P) Ltd. vs CIT, (2007) 293 ITR 226 (SC) where it has been held that where the recipient has already discharged his tax liability and filed his return of income, the deductee could not be called upon to pay the amount u/s 201(1) if the tax has alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability to charge tax u/s 201(1A) till the date of payment of taxes by the deductee or this will not alter the liability of penalty u/s 271C of the Act. We, therefore, restore the matter back to the file of the AO to ascertain as to whether the tax liability of the deductee has been in the meantime discharged in respect of the income on which tax was deductible by the assessee. In case, it transpires that the tax due from the deductee, have been paid by deductee, the demand raised by the AO u/s 201(1) shall remain vacated. However, the AO shall be at liberty to examine the issue afresh from the standpoint of charging interest u/s 201(1A) after examining the facts of the present case. The assessee shall produce all necessary details before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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