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TMI Blog2016 (8) TMI 1474X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, AR For the Respondent : Shri Sallong Yaden, Addl. CIT ORDER Per Shri M. Balaganesh, AM: This appeal by assessee is arising out of order of CIT(A)-I, Kolkata vide appeal No. 22/CIT(A)-I/C-57/2010-11 dated 03.08.2013. Assessment was framed by DCIT, Circle-57, Kolkata u/s.201(1)/201(1A) read with section 194I of the Income tax Act, 1961 (hereinafter referred to as the "Act") for AY 2004-05 vide his order dated 29.03.2010. 2. The only issue to be decided in this appeal is as to whether the interest u/s 201(1A) of the Act could be charged in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is a domestic company registered under the Companies Act, 1956 and has a petrochemicals plant at Haldia District, Midnapore, West Bengal for the manufacture and sale of petrochemical products. During the assessment year 2004-05, the assessee entered into an agreement with its subsidiary company M/s. Haldia Riverside Estates Limited (hereinafter referred to as 'HREL') for the purpose of residential accommodation of the employees of the assessee. Under the aforesaid agreement, the assessee paid a sum of ₹ 8,89,74,146/- during the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Officer-in-Charge of the TDS that taxes due have been paid by the deductee assessee. It further clarified that it would not alter the liability to charge interest u/s 201(1A) of the Act till the date of payment of taxes by the deductee assessee or the liability for penalty u/s 271C of the I. T. Act. In the instant case the deductee had not paid any tax as it filed a loss return and there was no tax liability. But the fact remains that the assessee deductor, could not have any prior knowledge about such loss return to be filed by the deductee, and as such it was liable to deduct tax at source while making payment to HREL. In reality also HPCL, the deductor, deducted tax at source on the purported rent payment to HREL as per its own statement dt. 23.10.2008, and deposited the same with the Government. Accordingly it was liable to deduct tax at source from the total payment made to HREL amounting to ₹ 8,89,74,146/- at the applicable rates. However, by applying CBDT Circular No.275 dt. 29.01.1997, demand visualized u/s 201 (1) of the Act is not enforceable, as the deductor has proved at this stage that there was no tax due to be paid by the deductee for the relevant year. HPCL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. CIT(A)-1 erred in law and facts in upholding the order treating the Appellant as 'assessee in default' u/s. 201(1) of the Act. 3. That the proceedings initiated and the impugned order is barred by limitation." 6. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee. The ld AR argued that there was no liability to deduct tax at source on the payments made to its subsidiary company in as much as the subsidiary company had incurred huge losses which is quite evident from the Assessment order of the subsidiary company i.e. M/s Haldia Riverside Estates Ltd u/s 143(3) dated 22.12.2006 for the Asst Year 2004-05. From the said order it could be seen that there would be no resultant tax payable by the subsidiary company. In response to this, the ld DR vehemently supported the orders of the lower authorities. We find that the TDS provisions mandates deduction of tax at source on the payments made by assessee to parties if it falls within the deductible limits prescribed u/s 194I of the Act. The purpose of TDS is to ensure that the Government is not deprived of its due taxes in time. Moreover, recovery of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that this interest is to be calculated from the due date of deduction / payment of expenses warranting TDS till the date of deduction / payment, as the case may be, at the respective interest rates. Admittedly, this interest is calculated on the tax that is due to be paid. When there is no tax due to be paid , then there cannot be any charging of interest u/s 201(1A) of the Act. We find that section 201(1A) of the Act specifies interest has to be paid "on the amount of such tax" as per section 201(1) of the Act. Such tax specified in section 201(1) of the Act should admittedly be 'tax due to the Government'. As already held that there is no tax due to the Government from the side of the payee (subsidiary company) in view of subsisting losses, the existence of a primary liability of tax payments from the side of the payee is conspicuously absent in the instant case. The revenue had not controverted the fact that the subsidiary company does not have any tax liability pursuant to the assessment framed on it by the income tax department u/s 143(3) of the Act which is also part of the paper book filed by the assessee. 6.2. The primary conditions to be satisfied before treating the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has also failed to pay such tax directly, then, such person shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default within the meaning of sub-section (1) of section 201, in respect of such tax.]" Hence, it could be safely concluded from the aforesaid reading of the provisions of section 191 of the Act, that it is only when tax is not paid both by the deductor and the deductee, that the deductor be treated as assessee in default and he shall remain so until the tax is paid either by him or by the deductee. In the instant case, where there was no tax at all payable at any point in time , then the assessee deductor cannot be treated as 'assessee in default' for any period whatsoever and consequently interest u/s 201(1A) of the Act cannot be computed on the assessee. The computation mechanism itself fails in the instant case. 6.4. We find that the Co-ordinate Bench of this tribunal in the case of Ramakrishna Vedanta Math vs ITO reported in (2003) 55 SOT 417 (Kol) wherein it was held that :- 8. The plea is indeed well taken. Learned Counsel is quite right in his submission that, as a result, of the judgement of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome has not paid due taxes thereon. In the absence of the statutory powers to requisition any information from the recipient of income, the assessee is indeed not always able to obtain the same. The provisions to make good the shortfall in collection of taxes may thus end up being invoked even when there is no shortfall in fact. On the other hand, once assessee furnishes the requisite basic information, the Assessing Officer can very well ascertain the related facts about payment of taxes on income of the recipient directly from the recipients of income. It is not the revenue's case before us that , on the facts of this case, such an exercise by the Assessing Officer is not possible. It does put an additional burden on the Assessing Officer before he can invoke section 201(1) but that's how Hon'ble High Court has visualized the scheme of Act and that's how , therefore, it meets the end of justice. In the instant case, it is proved beyond doubt that the deductee does not have any liability to pay tax as could be evident from the scrutiny assessment order u/s 143(3) of the Act for the Asst Year 2004-05 enclosed in pages 50 to 52 of the paper book. This fact was also placed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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