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TMI Blog2011 (11) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... These appeals were earlier decided by our co-ordinate Bench vide order dated 28.9.2007. Not being satisfied with the decision of the Tribunal, the Revenue and the assessee preferred to file appeals and Cross-Objections respectively before the Hon ble Bombay High Court, and the Hon ble Court vide its order dated 16.11.2009 in Income-tax Appeal No 1322 Others of 1999 has set-aside the order of the Tribunal and restored the appeals to the file of the Tribunal for consideration afresh in accordance with law keeping all rival contentions on merit open. Accordingly, the captioned proceedings were listed and the rival parties have been heard at length. 4. The common abridged Grounds of appeal read as follows: On facts and in law, 1. The ld CIT(A) erred in confirming the following demand for the F.Ys 2001-02 to 2005-06:- Financial year TDS (Rs) Interest (Rs) Total (Rs) 2001-02 1,13,806/- 57,184/- 1,70,990/- 2002-03 2,20,49,258/- 71,10,867/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of LT aggregating to ₹ 215.89 crores for consideration paid by LT under the respective agreements. In terms of such agreements, LTF also agreed to discharge the sales-tax liability of LT by paying directly to the respective State Government authorities, the sales-tax deferred amount as and when it would fall due for payment. Thereafter, a tripartite agreement dated 30.3.2002 was entered between LT, LTF and the appellant-company whereby such liability was assigned to the appellant company. In terms of the said agreement, appellant received a sum of ₹ 85,99,03,736/-, being the agreed Net Present Value (NPV) of the said sales-tax deferral amount of ₹ 215.89 crores. In return, appellant assumed the obligation to discharge the sales-tax liability of LT over the years from 2002 to 2017. It may further be noticed that vide a subsequent agreement dated 1.9.2005, the earlier agreement dated 30.3.2002 was terminated and the appellant-company repaid LT the entire sum of ₹ 85,99,03,736/- together with the interest component of ₹ 40.89 crores on 2.9.2005. 7. In this factual background, the Assessing Officer noticed that LT alone was statutorily liable for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed to be an assessee in default within the meaning of section 201(1) of the Act. The plea of the assessee was that if the tax has already been paid by the payee in respect of an amount payable by the assessee payer, then assessee cannot be deemed to be an assessee in default under section 201(1) of the Act. 8. The Assessing Officer considered the submissions of the assessee and noticed that such amount totaling to ₹ 129.90 crores was not offered for tax by LT in its respective returns of income for the financial years 1999-2000 to 2001- 02, but the said amount has been brought to tax while finalizing the assessments under section 143(3) of the Act, and further that the assessments for the said years were a subject matter of appeal. The Assessing Officer rejected the contention of the assessee and treated it as an assessee in default under section 201(1) of the Act for not having deducted tax at source under section 194A of the Act and it was also held liable to pay interest under section 201(1A) of the Act for the delay in deduction of tax at source. The following discussion in the assessment order is worthy of notice: The assessee company has failed to dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 2002-03 as it is in those years, LT had entered into agreements with LTF to assign its sales-tax liabilities and hence, the question of taxing any income in the hands of LT arose only in such years and not in the latter years. On this basis, it is sought to be pointed out that though the payments are to be made by the assessee over the latter years, the income in the hands of LT on account of assignment of liability arose in the years when agreements were made with LTF. It is pointed out that the limited issue is as to whether the payee has paid the taxes and it is not necessary that in the hands of the payee, the year of taxability should be the same as the year of deductibility of the expenditure in the hands of payer of such income. In support of the submission at if the taxes has been paid by the payee, the question of recovering the amount of TDS from the payer would not arise, following decisions have been relied upon: (i) Hindustan Coca Cola Beverage P. Ltd. v CIT 293 ITR 226 (SC); (ii) Mahindra Mahindra Ltd. 313 ITR 263 (Mum)(AT)(SB); (iii) Merchant Shipping Services (P) Ltd. 135 TTJ 589 (Mum); and, (iv) Vodafone Essar Ltd. 135 TJ 385 (Mum) Further, a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of Hindustan Coca Cola Beverage P. Ltd. (supra). 15. On the other hand, the learned Departmental Representative, appearing for the Revenue has supported the orders of the authorities below by pointing out that the assessee has been rightly held liable for dues in terms of section 201(1) and 201(1A) of the Act. Even with regard to the plea of the assessee that the taxes on such income have been duly paid by the payee, i.e. LT, it is submitted that the onus was on the assessee to demonstrate that the payee has paid the taxes and in this connection, reliance has been placed on the judgment of the Hon ble Supreme Court in the case of Transmission Corporation of A.P. Ltd Anr. V. CIT 239 587 (SC) 16. We have carefully considered the rival submissions. The primary controversy in the captioned appeals relates to the stand of the Revenue that the appellant company is an assessee in default under section 201(1) of the Act and is also liable to pay interest under section 201(1A) of the Act in relation to its failure to deduct tax at source under section 194A of the Act. The contention of the Revenue is that the assessee has failed to deduct tax at source under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stan Coca Cola Beverage P. Ltd (supra) as also the CBDT Circular No 275/201/95-IT(B) dated 29.1.1997. The Hon ble Supreme Court appreciated the Circular dated 29.1.197 (supra) to the effect that no demand visualized under section 201(1) of the Act is liable to be enforced after the tax deductor satisfies the Assessing Officer that taxes due have been paid by the deductee assessee. The assessee has asserted all along that notwithstanding that it was being held to be an assessee in default, there could be no recovery of tax alleged to be in default once again from the appellant considering that LT had already paid taxes on the income stated to have been received from the appellant. Having regard to the parity of reasoning laid down by the Hon ble Supreme court in the case of Hindustan Coca Cola Beverage P. Ltd., (supra) and as declared by the CBDT in its circular dated 29.1.1997 (supra), the aforesaid assertion by the assessee is required to be evaluated. Ostensibly, if the assessee succeeds in demonstrating that the deductee assessee, i.e. LT has paid taxes due on the impugned income, no liability contemplated by section 201(1) of the Act can be fastened on the assessee. Quite clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of tax as determined by LT in its return of income merely got reduced once such amount was held as liable to tax by the Assessing Officer in the assessment proceedings. Pertinently, the assessment orders of LT for the assessment year 2000-01 and 2001-02, copies of which are placed at pages 56- 71, show that sums of ₹ 51,60,87,976/- and ₹ 50,17,98,460/- respectively on account of gain in extinguishment of debt having been assessed to tax and refunds determined thereafter. 19. We have also perused the letter of confirmation dated 30.1.2006 issued by LT in this regard, which is placed in the Paper Book at pages 146 to 147. The claim set-up by the assessee is that though LT has claimed such income as nontaxable in the returns of income filed, yet it had paid requisite taxes, which were enough to cover the demand arising on account of such amounts being treated as taxable in the subsequent assessment proceedings. Therefore, tax on such income is said to have been recovered much in advance before the assessee was required to deduct tax at source. 20. In this connection, the plea of the Revenue is two-fold. Firstly, the plea is that the taxes on the impugned income are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecovered by the Revenue from the deductee assessee or not? In this connection, the assessments of LT for assessment years 2000-01 and 2001-02 finalised on 31.3.2003 and 23.3.2004 respectively bring out amounts of ₹ 51,60,87,976/- and ₹ 50,17,98,460/- respectively has been assessed on account of extinguishment of debt and refund determined thereafter. Quite clearly, the aforesaid assessments were furnished by the assessee before the Assessing Officer also to substantiate its plea that the taxes relevnt to the impugned sums have been recovered in the assessments of the payee, i.e. LT. Similarly the confirmation letter dated 30.1.2006 issued by LT, a copy of which is in the Paper Book was also before the lower authorities establishing the stand of the assessee. In view of the aforesaid, in our view, having regard to the judgment of the Hon ble Supreme Court in the case of Hindustan Coca Cola Beverage P. Ltd. (supra) as also CBDT Circular dated 29.1.2007, once taxes on the subjected sums have been recovered from the payee assessee, thereafter assessee cannot be treated as an assessee in default under section 201(1) of the Act for non-deduction of tax at source on such amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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