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TMI Blog2015 (1) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... . The interpretation put forward by the Tribunal that TDS is income of the Department is misconceived. Therefore, in our view, restrained TDS could not have been deducted. Tribunal was not right in holding that appellants-assessees were liable to deduct tax at source as required under under Section 194A of the Act, in spite of the order of the Special Court. - Decided in favour of assessee. - TAX APPEAL NO. 955 of 2005 With TAX APPEAL NO. 956 of 2005 TO TAX APPEAL NO. 966 of 2005 - - - Dated:- 16-12-2014 - MR. KS JHAVERI AND MR. K.J.THAKER, JJ FOR THE APPELLANT : MR. S.N. SOPARKAR WITH MR. B.S. SOPARKAR WITH MRS SWATI SOPARKAR, ADVOCATE FOR THE RESPONDENT : MR SUDHIR M MEHTA, ADVOCATE JUDGEMENT Per: K S Jhaveri: 1. Since all these appeals arise from the common judgment and order of the Income Tax Appellate Tribunal, Ahmedabad, they are being disposed of by this common judgment. 2. By way of these appeals, the appellantassessees have challenged the common Judgment and order dated 08.09.2003 passed by the Income Tax Appellate Tribunal, Ahemabad, [for the the Tribunal ] in ITA Nos. 2263, 2264, 2268, 2269, 2273, 2274, 2278, 2279, 2283, 2284, 2288 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the 2nd respondents as owners thereof and that attachment of the said shares under the said Ordinance constitutes only a limited attachment restricted to the rights of the 2nd Respondents as pledges only of the said shares. (b) that it be declared that the 2nd Respondents and/or 1st Respondents and/or bound and liable to return to the respective petitioners said 3,50,000 shares listed in the schedules being Ex. A and B hereto against payment of balance debt in accordance with contractual terms to the 1st Respondent the 2nd Respondent or to such person as this Hon ble court directs; (c ) that without prejudice to prayer (b) above declared that out of said 3,50,000 shares to or the 2nd Respondents or to such person as the extent of 23.76 per cent thereof stand and have stood duly and validly redressed and that the petitioners, or such of them as may be held entitled, are entitled to forthwith to deliver of said 23.76 per cent shares out of 3,50,000 shares described in schedules being Ex. A and B hereto. (d) That the limited attachment in respect of 23.76 per cent of the said shares described in Ex. A and B be raised and/or be ordered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Exhibit B hereto or acting on the basis of relative transfer forms executed by the respective petitioners and handed over to the second Respondents in respect of the said 3,50,000 shares. (k) That the 5th Respondent by themselves their servants or agents be restrained from in any manner transferring from the names of the respective petitioners to the names of 3rd and/or 4th Respondents respectively or any one else the said 2,50,000 described in Exhibit A and/or 1,00,000 shares described in Ex. B or any part thereof and/or from acting on the basis of any transfer form/s lodged with them in relation to any of the said 3,50,000 shares described in Exhibit A and B hereto. (l) that pending the hearing and final disposal of this petition interim reliefs in terms of prayer (j) and (k) above be granted. (m) that pending the hearing and final disposal of this petition, the Court Receiver, High Court, Bombay or some other fit and proper person be appointed Receiver of said 3,50,000/- shares described in the schedules being Exh. A and B hereto and of the relative transfer forms and all rights and benefits attached to and incidental to the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by reason of the Special Court Act. In such cases even though the provisions of some other Act or contract lay down consequences for non-performance, the provisions of the Special Courts Act will prevail. This is because in such cases there would be a conflict between the provisions of the Special Courts Act and that other law and/or contract. In cases of such conflict, the provisions of the special Court Act must prevail. To take an example, under Section 234B of the Income Tax Act, every assessee is liable to pay advance tax. All parties were Notified between June, 1992 to August 1992. All of them would be liable to advance taxes for the financial year ending March 1992 and for the subsequent years. However, as seen earlier, taxes only upto Assessment Year 1992-93 and for the subsequent year. However, as seen earlier in priority. Those would have to rank as ordinary debts under Section 11(2)(c). this therefore, can only be released after the entire distribution has taken place. Even if the Notified party were to advance tax, the Court would refused it. Thus monies for payment of advance tax have not been released. Thus a Notified party has been prevented from paying advance tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed by the Apex Court in case of the petitioner on 12.09.1994 and 7.10.1994. On 13.05.1998, the Apex Court disposed of the both the appeals against the 1st ruling by dismissing the appeal. The Apex Court in paragraph No.26 and 26 observed as under:- 26. Every kind of tax liability of the notified person for any other period is not covered by Section 11(2) (a), although the liability may continue to be the liability of the notified persons. Such tax liability may be discharged either under the directions of the Special Court under Section 11(2)(c), or the taxing authority may recover the same from any subsequently acquired property of a notified person (vide Tejkumar Balakrishna Ruia v. A.K. Menon (1997) 9 SCC 123) or in any other manner from the notified person in accordance with law. The priority, however, which is given under Section 11(2)(a) to such tax liability only covers such liability for the period 1.4.1991 to 6.6.1992. 27. At what point of time should this tax liability have become quantified by a legal assessment which is final and binding on the notified person concerned ? It is contended before us by some of the parties that only that li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of the said Act must prevail. The reasoning given in this behalf in the Order dated 20th February 1995 applies fully over here. 4.7. Thus, by the impugned judgment and order, the appellants-assessees were directed to deduct the tax at source and pay the same to the credit of the Central Government. Being aggrieved and dissatisfied with the same, the appellantsassessees have filed these appeals. 5. Mr. Soparkar, learned senior advocate for the appellants-assessees submitted that the appellants-assessees have an obligation to pay interest to the Custodian of FFSL, which is notified party. The Special Court conclusively held that the provisions of TDS do not apply to the alleged liability to pay interest to the Custodian by order dated 14.08.1993, 20.2.1995 and 9.9.1996 and 3.5.199. Therefore, he submitted that in view of the above orders, there is no question of the appellants being guilty of nondeduction of tax at source. 5.1. He further submitted that the Apex Court while admitting the appeals filed by the appellants and Syndicate Bank directed the parties to maintain status quo. Therefore, the appellants were not obliged to pay over the amount of TDS in a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and paid to the Central government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made. 5.6. Mr. Soparkar, learned senior advocate has strongly relied on the decision of the Bombay High Court in the case of Sir Joseph Kay, K.B.E. v. Commissioner Income Tax, reported in [1956] 29 ITR 774. 5.7. By relying on the above decision, learned senior counsel for the appellantsassessees submitted that all the authorities namely the Assessing Officer, the Commissioner of Income Tax (Appeals) and the Tribunal have committed grave error in directing the appellants-assessees to deduct TDS, which is contrary to order of the Special Court, which was confirmed by the Supreme Court. Therefore, he urged that this Court may allow these appeals and quash and set aside the the orders of all the authorities below. 6. On the other hand, Mr. Mehta, learned advocate for the respondent-revenue has supported the impugned judgment and order of the Tribunal and submitted that the submissions canvassed by the learned senior advocate for the appellants assessees does not deserve consideration since the order of restrainment was passed on 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the tax that is being discharged by the insurance companies. He say that the law imposes a liability upon the payer himself and it is that liability, a substantive liability, which is being discharged when the payer pays tax to the revenue in England. The contention therefore is put forward that what Sir Joseph kay is entitled to in view of this provision of law is not 500 pound but only 225 pound. Attention is drawn to the provisions of Section 18 of our Act and it is pointed out that the scheme of deduction under the two Acts is fundamentally different. It is said that under Section 18, although an obligation is cast upon the payer of salaries etc. to deduct the tax at the source, the person who is entitled to the salary still remains liable to pay the tax if the tax has not been deducted, and it is made clear by section 18 that the person deducting the tax at the source is deducting it on behalf of the person entitled to the salary. It is also pointed out that under section 18(4) it is expressly provided:- All sums deducted in accordance with the provisions of this section shall, for the purpose of computing the income of an assessee, be deemed to be income receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the actual facts that emerge in this reference. This is no extenguishment of the debt of part of it by statute. What the statute provides is that on the insurance companies statute. What the statute provides is that on the insurance companies paying 225 pound to Sir Joseph Kay the full debt is discharged because the insurance companies have retained 275 pound which are to be paid as tax on 500 pound. Therefore, this is not a case of extinguishment of part of the debt viz. 275 pound but a discharge of the debt in the manner provided by law. Nor is Mr. Palkhivala right when he contends that the debt is only partly paid and not fully paid. He says that even if there is no extinguishment, only part of the debt in fact has been paid to Sir Joseph Kay and that part is 225 pounds and not the whole of 500 pound. In substance the whole debt of 500 pound has been paid to Sir Joseph Kay. The mode of payment is this. 225 pounds have been actually paid in case to Sir Joseph Kay, and the balance of 275 pounds is retained by the insurance companies in order to pay the tax which is payable on the sum of 500 pound. It is difficult to understand how the position is different from what it would h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of tax in respect of something which is not his income. The answer given by Mr. Palkhivala is that the Income Tax Act of 1918, Schedule V, paragraph 17, statutorily makes the deduction which has been made by the payer of the annuity part of the total income of the annuitant, and it is because of this that the annuitant becomes entitled to claim the refund. But the very reason why the annuitant is allowed to include in his total income the deduction made by the payer is that the payer is paying tax out of the income of the annuitant and when the annuitant prepares a statement of his total income he is entitled to include in it what has been deducted out of his income for the purpose of payment of tax. Therefore, looking to the whole scheme both of deduction and of provisions with regard to refund, it is clear that the English law does not overlook or ignore the fact that the annuity payable is the income of the annuitant. Indeed it would be extraordinary if the British Parliament overlooked the obvious fact, and that the annuity being the income of the annuitant the easier and the more convenient way of rather than from the annuitant himself. But having made that provision it pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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