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TMI Blog2020 (5) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... or delay but the NHAI instead of paying it out of its own coffers illegally recovered the amount from IJMC-petitioner. The charge of interest was created on NHAI and not on the petitioner and therefore, the claim of the petitioner was not justifiable. Reasons assigned by the Revenue to decline refund of the interest under Section 201(1A) of the Act recovered from respondent No.3-NHAI on behalf of the petitioner is untenable, as after detailed scrutiny, the respondent No.2 found that the petitioner was assessed at loss and therefore, allowed the TDS credit in its favour. The TDS was refunded to the petitioner in accordance with law. No interest recovered from respondent No.3 under Section 201(1A) of the Act could be legally retained by the Revenue. In these circumstances, the interest under Section 201(1A) of the Act deducted and deposited by the respondent No.3 with the office of the ACIT (TDS), Jabalpur ought to have been refunded. Any payment of TDS by the deductor in respect of payment made to deductee-petitioner will entitle the deductee to get back such TDS with interest at the time of framing of assessment under Section 143(3) of the Act. In such eventuality, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntered into a works contract with respondent No.3/National Highways Authority of India (in short the NHAI ) on 09.04.2006 for construction of four lane road of Jhansi-Lakhnadon Section KM 132 to KM 187 on NH-26 in the State of Madhya Pradesh. The petitioner had obtained certificates from its Assessing Officer at New Delhi for deduction of tax at lower rate under Section 195/197 of the Income Tax Act, 1961 (for short the Act ) entitling the petitioner for deduction of tax at source at lower rate of 2.11% inclusive of surcharge and education cess on the contract amount payable during the Financial Years 2006-07 and 2007-08; 2.5% inclusive of surcharge and education cess for the Financial Years 2008-09 and 2009-10; and 4.5% plus surcharge and education cess for the Financial Year 2010-11 (Annexure P-2). According to the petitioner, the respondent No.3 had been deducting the tax at source on the basis of the said certificates and issuing TDS certificates to the petitioner but respondent No.1, in relation to the financial years 2007-08 and 2008-09, vide order dated 30.03.2011 sought to levy TDS @42.23% in respect of payments which were made to the petitioner. In turn, the respondent N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent No.3. 5. The respondent No.2 i.e. the Deputy Commissioner of Income Tax, New Delhi after detailed scrutiny vide orders passed under Sections 154/ 143(3)/143(1) dated 25.02.2016, 28.02.2016, 25.02.2016 and 29.02.2016 as contained in Annexure P-6 allowed the TDS credit in favour of the petitioner as it was found to have been assessed at loss. The respondent No.3 had issued letters dated 19.06.2012, 26.11.2013 and 31.07.2013 as contained in Annexure P-7, which shows deduction of TDS at higher rate and payment of the same along with interest to the respondent No.1. 6. The grievance of the petitioner is that despite the orders passed by the Assessing Officer and allowing TDS credit in favour of the petitioner the respondents No.1 and 2 have not refunded the amount of interest, which was deducted by the respondent No.3 and was paid to the respondent No.1. The petitioner has given the yearwise details of TDS and interest and claimed that it is entitled to refund of amount of interest to the tune of ₹ 3,62,70,639/-. The petitioner also preferred a writ petition forming subject matter of W.P. No.13284/2016 against non-refund of interest, which was disposed of vide order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the respondent No.3 is not directly concerned with the demand made by the petitioner. It has deposited the TDS and interest as per the demand of the Income Tax Department. Further, its appeal for refund of interest is also pending. 10. We have heard learned counsel for the parties at length and find that the present petition deserves to be allowed. 11. We proceed to examine the scope of relevant statutory provisions. Section 195 of the Act is a special provision for tax deduction at source from payments to non-residents. All payments except under the head salary are covered thereunder. Explanation appended to it makes it clear that even a credit to non-resident account or suspense account tantamounts to payment for the purposes of tax deduction at source. The relevant provision of Section 195 of the Act reads as under:- Other sums. 195. (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB or section 194LC (or section 194LD) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head Salaries shall, at the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficate is issued, the person responsible for paying any amount shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be. Once the certificate is issued, the person responsible for making payment shall be required to deduct the tax at the rate specified in the certificate in respect of payment to be made or has already been made, as the case may be for the period mentioned in the certificate. The relevant provisions of Section 197 of the Act are reproduced as under:- Certificate for deduction at lower rate. 197. (1) Subject to rules made under sub-section (2A), where, in the case of any income of any person (or sum payable to any person), income-tax is required to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force under the provisions of sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBB, 194LBC, 194M and 195, the Assessing Officer is satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax, as the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax. (1A) Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest, - (i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200; Provided that in case any person, including the principal officer of a company fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no justification for levy of interest under Section 201(1A) of the Act, as the same is consequential in nature. In other words, in a situation where deductee is not required to pay any tax on its income, there is no reason to hold the deductor in default under Section 201(1) and 201(1A) of the Act, as deductee is not required to pay any tax on its income, which is, in fact, a loss. 13. Adverting to the present factual matrix, in the instant case, assessment in the case of the recipient for the assessment years 2008-09, 2009-10, 2010- 11 and 2011-12 had been completed under Section 143(3) of the Act at a loss and the recipient of the income was, therefore, not required to pay any income-tax for the relevant assessment years. Accordingly, no occasion will arise for charging any interest from the date on which tax was deductible to the date on which tax is actually paid. The Revenue had recovered the following amounts from respondent No.3 deductor on account of interest under Section 201(1A) of the Act, which in turn had been paid by the petitioner to the deductor:- Assessment Year Interest 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lay but the NHAI instead of paying it out of its own coffers illegally recovered the amount from IJMC-petitioner. The charge of interest was created on NHAI and not on the petitioner and therefore, the claim of the petitioner was not justifiable. In view of the aforesaid elaborate discussion, in our opinion, the reasons assigned by the Revenue to decline refund of the interest under Section 201(1A) of the Act recovered from respondent No.3-NHAI on behalf of the petitioner is untenable, as after detailed scrutiny, the respondent No.2 found that the petitioner was assessed at loss and therefore, allowed the TDS credit in its favour. The TDS was refunded to the petitioner in accordance with law. Then, in that situation, no interest recovered from respondent No.3 under Section 201(1A) of the Act could be legally retained by the Revenue. In these circumstances, the interest under Section 201(1A) of the Act deducted and deposited by the respondent No.3 with the office of the ACIT (TDS), Jabalpur ought to have been refunded. 16. Therefore, in the facts and circumstances of the present case, any payment of TDS by the deductor in respect of payment made to deductee-petitioner will ..... X X X X Extracts X X X X X X X X Extracts X X X X
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