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TMI Blog2015 (9) TMI 1663X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisos to Section 40(a)(ia) and Section 201 (1) of the Act is that as long as the Payee / resident has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the assessee would not be treated as a person in default. See CIT Vs. Ansal Land Mark Township (P) Ltd [2015 (3) TMI 403 - DELHI HIGH COURT] No doubt there is a mandatory requirement u/s 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfillment of the conditions as stipulated in the first proviso to Section 201(1). The first proviso to section 201(1) of the Act was inserted w.e.f. 1.7.2012. The Hon'ble Delhi High Court has categorically held that insertion of the second proviso to Section 40(a) (ia) also requires to be viewed in the same manner. According to Hon ble High Court this again is a proviso intended to benefit the Assessee. The Hon'ble High Court ruled that the second proviso to Section 40 (a) (ia) of the Act is declaratory and curative in nature and should be given retrospective effect fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or rationalization of tax deduction at source (TDS) and Tax Collection at Source (TCS) provisions. These provisions are declaratory and curative in nature and have retrospective effect from 1st April, 2005 being the date from which sub section (ia) to section 40(a) was inserted by Finance (No.2). Act, 2004 - the impugned demand created under section 206C(1C) / 206C(7) of the Act are, hereby deleted. The appeal of the assessee stands allowed. Levying the penalty u/s 271CA - HELD THAT:- Under section 271CA, the penalty is imposed for failure to collect tax at source. Since, we have held that there was no failure on the part of the assessee to collect tax at source, therefore, no penalty can be validly levied u/s 271CA of the Act. It is well settled law that the very basis on which penalty was levied, are deleted, there remains no basis at all for levying the penalty. Since, there was no failure on the part of the assessee to collect tax at source; therefore, there remains no basis at all for levying the penalty u/s 271CA of the Act. Accordingly, we allow the appeals and cancel the impugned penalty levied by the Assessing officer and confirmed by CIT(A) for all the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure to different parties but the assessee had not deducted tax on these payments. The Assessing officer also observed that during financial year 2008-09, the Person Responsible ( PR ) has received an amount of ₹ 7,36,10,000/- on account of toll fee for which no TDS was collected by the PR. Therefore, show cause notice was issued to the PR on 2.3.2012. In response to the said notice, the assessee furnished written submissions on 12.3.2012 which is reproduced by the Assessing officer at para 2.1 of the order. The Assessing officer did not accept the assessee s submissions that it was not liable to deduct tax at source. According to Assessing officer, if the payment made to builder / contractors as per the agreement are grants / loans then these amounts should have been reflected as capital expenditure whereas the assessee had shown these as Revenue expenditure. The Assessing officer also observed that after the expiry of the period mentioned in the above agreements, the assets are to be transferred to Government of Punjab and the assessee had signed all these agreements on behalf of the Government of Punjab. With these observations, the Assessing officer held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is held that the Assessing Officer was not right in holding that the appellant was required to deduct tax u/s 194C on the impugned payments and in treating the PR as 'assessee in default' u/s 201(1) and 201(1A) of the Act. The demand created u/s 201/201(1A) is accordingly deleted and all the grounds taken the appellant are allowed 6. We have heard the rival submissions and have also perused the materials available on record. Shri Deepak Aggarwal, Ld. Counsel for the assessee submitted that in the instant case the Concessionaire / Payee included the amount of grant made by the assessee in his return of income and had already paid taxes on the returned income as per the regularly followed accounting policy and, therefore, present case is squarely covered by the decision of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd Vs. CIT in [2007] 293 ITR 226 (SC), wherein the Hon'ble Supreme Court held that where the Payee has already paid tax on the income on which there was a short deduction of tax at source, recovery of tax cannot be made once again from the tax deductor. Shri Deepak Aggarwal, Ld. Counsel for the assessee sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble Delhi High Court has held that what is common to both the provisos to Section 40(a)(ia) and Section 201 (1) of the Act is that as long as the Payee / resident has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the assessee would not be treated as a person in default. The relevant observations of the Hon'ble Delhi High Court are as under:- 8. It is seen that the issue in these AYs arises in the context of the disallowance by the Assessing Officer of the payment made by the Respondent Assessee to Ansal Properties and Infrastructure Ltd. ( APIL‟) which payment, according to the Revenue, ought to have been made only after deducting tax at source under Section 194J of the Act. Before the ITAT, it was urged by the Assessee that in view of the insertion of the second proviso to Section 40(a) (ia) of the Act, the payment made could not have been disallowed. Reliance was placed on the decision of the Agra Bench of ITAT in ITA No. 337/Agra/2013 (Rajiv Kumar Agarwal v. ACIT) in which it was held that the second proviso to Section 40 (a) (ia) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst proviso to Section 201(1). The insertion of the second proviso to Section 40(a) (ia) also requires to be viewed in the same manner. This again is a proviso intended to benefit the Assessee. The effect of the legal fiction created thereby is to treat the Assessee as a person not in default of deducting tax at source under certain contingencies. 12. Relevant to the case in hand, what is common to both the provisos to Section 40 (a) (ia) and Section 201 (1) of the Act is that the as long as the payee/resident (which in this case is ALIP) has filed its return of income disclosing the payment received by and in which the income ITA No. 160 161/2015 Page 7 of 10 earned by it is embedded and has also paid tax on such income, the Assessee would not be treated as a person in default. As far as the present case is concerned, it is not disputed by the Revenue that the payee has filed returns and offered the sum received to tax. 8. The Hon'ble Delhi High Court has held insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from which sub clause (ia) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal 11. In this appeal the only ground raised by the Revenue is as under:- That the Ld. CIT(A), Chandigarh has erred in law treating M/s Rohan Rajdeep Tollways Ltd., is concessionaire and the project-Kiratpur Sahib-Una Road was awarded to M/s Rohan Rajdeep Tollways Ltdv on BOT basis thus the amount received by the PIDB was concession fee and not the Toll Fee, does not hold ground as the similar argument was rejected by the Ld.CIT(A), Chandigarh in the F.Y.2007-08 (A.Y.2008-09) (as mentioned by the Ld.CIT(A) in his order dated 13-10-22012 in appeal No.131/11-12). Further, even if this argument of the assessee is taken into consideration, then even in the light of decision of the Hon'ble Supreme Court in the case of M/s Hindustan Coca Cola Beverages (P) Ltd., vs. CIT 293 ITR 226 (SC) and amendment inserted by the Finance Act, 2012 w.e.f. 01.07.2012, the collector/deductor is not exempt from the chargeability of interest u/s 206C(7) of the Act and penalty provisions u/s 271CA and 221 of the Act. 12. During the course of TDS inspection and assessment proceedings u/s 206C (IC) / 206 C(7) of the Act it was noted that the assessee has received an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. The main contention of the assessee is that the project namely Kiratpursahib-Una Road project was awarded on Built Operate - Transfer (BOT) basis. Shri Deepak Agagrwal, Ld. Counsel for the assessee pointed out that the aforesaid project was awarded on BOT basis and the amount was received as commission fee and not as toll fee, therefore, the provisions of section 206C(7) cannot be applied to the amount received. The provisions of section 206C (IC) reads as under:- [1C) Every person, who grants a lease or a licence or enters into a contract or otherwise transfers any right or interest either in whole or in part in any parking lot or toll plaza or mine or quarry, to another person, other than a public sector company (hereafter in this section referred to as licensee or lessee ) for the use of such parking lot or toll plaza or mine or quarry for the purpose of business shall, at the time of debiting of the amount payable by the licensee or lessee to the account of the licensee or lessee or at the time of receipt of such amount from the licensee or lessee in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the lic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirming the demand created under section 206C of the Income Tax Act, 1961 by treating the appellant as assessee in default under Section 206C(7) on the ground that the appellant was required to collect TCS on toll fee whereas as per the Appellant the concessionaire is responsible for overall operation and maintenance of the project facility and not merely granted the usance of the toll plaza therefore the demand created on this ground needs to be deleted and finding given as assessee in default may kindly be reversed. (b) That alternatively and without prejudice to the aforesaid the Appellant disputes the distinguishing factor raised by the Ld. CIT(A) in distinguishing the judgment passed by the Hon'ble Apex Court in the case of Hindustan Coca Cola Beverages (P) Ltd. Vs. Commissioner of income Tax 293 ITR 226, by holding that the said judgment was delivered in context of TDS provisions therefore not applicable on TCS. Further, the transaction is revenue neutral and there is no loss to revenue. 17. The Assessing officer passed an order u/s 206C(IC) / 206C(7) on 23.3.2012 wherein he has observed that during the course of TDS inspection and assessment proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident- (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed Shri Deepak Aggarwal Ld. Counsel for the assessee pointed out that the above proviso has been inserted to benefit the assessee. He further submitted that the amendment on similar lines have been made in the provisions to section 206C relating to TCS for clarifying the deemed date of charging of tax by the licensee or lessee lesses. Shr Deepak Aggarwal, Ld. Counsel for the assessee submitted that proviso to section 206C(6A) of the Act was inserted w.e.f. 1.7.2012. The proviso to section 206C(6A) reads as under:- Provided th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal filed by the Revenue is directed against the order dated 13.10.2012 of CIT(A), Chandigarh relating to assessment year 2007-08. 22. The only ground raised by the Revenue in this appeal reads as under:- The Ld. Commissioner of Income Tax{A), Chandigarh has erred in law in holding that the following payments was made to the parties detail below or not liable to TDS u/ s 194C of the I.T. Act, 1961:- S.No. Name of the Party Amount of contractual payment made during the year. 1 M/s Rohan Rajdeep Tollways Ltd. ₹ 684900000/- 2 M/s P.D. Aggrwal Infrastructure Ltd. ₹ 123060000/- 3 M/s Patiala Malaerkotla Tollways Ltd ₹ 132100,000/- Total ₹ 940060000 (2). The Ld. CIT(A), Chandigarh has not appreciated the facts that above expenditure has been booke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rected against the order dated 13.10.2012 of CIT(A), Chandigarh relating to assessment year 2008-09. 28. The only ground raised by the Revenue in this appeal reads as under:- The Ld. Commissioner of Income Tax{A), Chandigarh has erred in law in holding that the following payments was made to the parties detail below or not liable to TDS u/ s 194C of the I.T. Act, 1961:- S.No. Name of the Party Amount of contractual payment made during the year. 1 M/s Rohan Rajdeep Tollways Ltd. ₹ 22,57,00,000/- 2 M/s P.D. Aggrwal Infrastructure Ltd. ₹ 18,18,40,000/- 3 M/s Patiala Malaerkotla Tollways Ltd ₹ 10,63,00,000/- 4 M/s Chetak Enterprises (P) Ltd ₹ 33,89,00,000/- 5 M/s Telecommunications Consultant India Ltd., ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the assessee is directed against the order dated 13.10.2012 of CIT(A), Chandigarh relating to assessment year 2008-09. 34. The issue involved in this appeal relates to TCS. During the year under consideration the assessee had received an amount of ₹ 6,93,00,000/- on account of toll fee. As per the Assessing officer the assessee was required to collect tax at source u/s 206C of the Act on toll fee receipt, but no tax was collected. The assessee explained that M/s Rohan Rajdeep Tollways Ltd. had paid due taxes. The Assessing officer held that the assessee in default u/s 206C / 206C(7) of the Income-tax Act, 1961. On appeal, the CIT(A) upheld the order of the Assessing officer and, hence, the assessee in appeal before the Tribunal. 35. It is observed that while deciding a similar issue in the case of assessee for assessment year 2009-10 in ITA No. 880/Chd/2013, we have held that assessee cannot be treated as assessee in default u/s 206C/ 206C(7) of the Act. Shri Deepak Aggarwal, Ld. Counsel for the assessee submitted that facts of the present year and submissions are similar to that of assessment year 2009-10. In that view of the matter, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Hindustan Coca Cola Beverages (P) Ltd., vs. CIT 293 ITR 226 (SC) and amendment inserted by the Finance Act, 2012 w.e.f. 01.07.2012, the collector/deductor is not exempt from the chargeability of interest u/s 206C(7) of the Act and penalty provisions u/s 271CA and 221 of the Act. 41. Shri Deepak Aggarwal, Ld. Counsel for the assessee pointed out that facts of the present year are similar to that of assessment year 2009-10 in ITA No. 882/Chd/2013. For the detailed reasons given in the order for assessment year 2009-10, we do not find any merit in this appeal. Accordingly, we dismiss the appeal of the Revenue. 42. In the result, appeal of the Revenue is dismissed. ITA No. 881/Chd/2013 assessee s appeal 43. In this appeal the assessee has raised the following ground:- 1. (a) That the Id. CIT(A) was not justified in confirming the demand created under section 206C of the Income Tax Act, 1961 by treating the appellant as assessee in default under Section 206C(7) on the ground that the appellant was required to collect TCS on toll fee whereas as per the Appellant the concessionaire is responsible for overall operation and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4/Chd/2013, we do not find any merit in the appeal of the Revenue. Accordingly, we dismiss the same. 48. In the result, appeal of the Revenue is dismissed. ITA No. 884/Chd/2013 Revenue s appeal 49. The only ground raised by the Revenue reads as under:- That the Ld. CIT(A), Chandigarh has erred in law treating M/s Rohan Rajdeep Tollways Ltd., is concessionaire and the project-Kiratpur Sahib-Una Road was awarded to M/s Rohan Rajdeep Tollways Ltdv on BOT basis thus the amount received by the PIDB was concession fee and not the Toll Fee, does not hold ground as the similar argument was rejected by the Ld.CIT(A), Chandigarh in the F.Y.2007-08 (A.Y.2008-09) (as mentioned by the Ld.CIT(A) in his order dated 13-10-22012 in appeal No.131/11-12). Further, even if this argument of the assessee is taken into consideration, then even in the light of decision of the Hon'ble Supreme Court in the case of M/s Hindustan Coca Cola Beverages (P) Ltd., vs. CIT 293 ITR 226 (SC) and amendment inserted by the Finance Act, 2012 w.e.f. 01.07.2012, the collector/deductor is not exempt from the chargeability of interest u/s 206C(7) of the Act and penalty pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer and, hence, the assessee is in appeal before the Tribunal. 55. It is observed that while deciding the assessee s appeal in ITA Nos. 9/Chd/2013, 880/Chd/2013, 881/Chd/2013, 884/Chd/2013 (referred to above) for assessment years 2008-09, 2009-10, 2010-11 and 2011-12 respectively held that the assessee was not required to collect tax at source and it had not committed any default under the provisions of Chapter XVII-BB of the Income-tax Act, 1961. Under section 271CA, the penalty is imposed for failure to collect tax at source. Since, we have held that there was no failure on the part of the assessee to collect tax at source, therefore, no penalty can be validly levied u/s 271CA of the Act. It is well settled law that the very basis on which penalty was levied, are deleted, there remains no basis at all for levying the penalty. Since, there was no failure on the part of the assessee to collect tax at source; therefore, there remains no basis at all for levying the penalty u/s 271CA of the Act. Accordingly, we allow the appeals and cancel the impugned penalty levied by the Assessing officer and confirmed by CIT(A) for all the assessment years under considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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