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TMI Blog2025 (4) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... r and the TDS had been actually deducted based on the actual payments and consequently the creation of demand of Rs. 9,56,945/- u/s 201 and interest u/s 201(1A) Rs. 10,00,5371-, is arbitrary, unjust and bad in law. 3. That without prejudice to grounds No. 1 and 2 above, the alleged TDS not deducted by the assessee cannot be recovered from the assessee under the law and consequently the creation of demand of Rs. 19,57,4821-. including interest u/s 201(1A) of IT Act thereon, is arbitrary, unjust and bad in law. 4. That the above grounds of appeal are independent and without prejudice to one another. 2. The brief facts of the case as per the assessment order are as under:- 1. The case of the above deductor was taken up for verification under section 201(1)/201(1A) of the Income Tax Act, 1961 (hereinafter referred as to 'the act) on the basis of 3CD defaults. 2. The Company M/s Artemis Medicare Services Ltd is engaged in the business of consultancy services. 3. In order to verify the compliance by the deductor assessee with reference to TDS provisions under chapter XVII B of the Income Tax Act, 1961, proceedings u/s 201(1)(1A) of the Act, was initiated by issuing notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any further default of non-deduction/non-deposit of TDS comes to notice, the same shall be dealt with in a separate proceedings u/s 201(1) the Act and u/s 201(1A) the Act. 3. Against the above order, assessee preferred appeal before the ld. CIT(A), who confirmed the order of the AO. 4. Aggrieved with the aforesaid action of the ld. CIT(A), assessee is in appeal before us. 5. We have heard both the parties and perused the records. At the outset, Ld. Counsel for the assessee submitted that the issues in dispute are squarely covered in favour of the assessee by the decision of the ITAT, Delhi 'A' Bench decided in assessee's own case for the assessment year 2012-13 passed in ITA No. 554/Del/2016 alongwith CO No. 176/Del/2016 vide order dated 16.01.2024, hence, the same ratio may be followed in the instant case and the accordingly, the present appeal may be allowed. Per contra, Ld. DR did not controvert the aforesaid proposition of the Ld. AR for the assessee, but he relied upon the orders of the authorities below. 6. Upon careful consideration, we find that ITAT, Delhi 'A' Bench in assessee's own case for the assessment year 2012-13 passed in ITA No. 554/Del/2016 alongwith CO No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been duly deducted at source and remitted to the account of the Central Government. In respect of this year-end provision, the assessee had suo moto disallowed the expenses in the computation of its income. In these facts and circumstances, it was pleaded that the assessee could not be treated as 'assessee in default' u/s 201(1) of the Act and consequentially no interest could be levied u/s 201(1A) of the Act. 5. We find that the demand has been raised on the assessee treating it as an 'assessee in default' for the following expenses:- Nature of Expenses Section under which tax deductible Amount of Provision made Amount of tax deductible Advertisement and sales promotion exp. 194J 45,94,057 4,59,406 Legal and professional fee 194J 3,59,400 (5.00.000 - 1,40,600) 35,940 Interest on loan 194 A 36,59,014 3,65,901 Total 86,12,471 8,61,247 6. The assessee had stated that it had been regularly following the practice of making provisions for expenses for which parties are not identifiable or amounts payable were not identifiable or bills have not been received or the same have not been processed for payment/credit to the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are custodia legis, that is, funds in the custody of this Court. The interest on that account - although credited in the name of the Registrar General - are also funds that remain under the custody of this Court. The credit of interest to such account is, thus, not a credit to an account of a person who is liable to be assessed to tax. In this view, the petitioner would have no obligation to deduct tax, because at the time of credit there is no person assessable in respect of that income which may be represented by the interest accrued/paid in respect of the deposits. The words "credit of such income to the account of the payee" occurring in Section 194A of the Act have to be ascribed a meaning in conformity with the scheme of the Act and that would necessarily imply that deduction of tax bears nexus with the income of an assessee. 20. In absence of an assessee, the machinery of provisions for deduction of tax to his credit are ineffective. The expression "payee" under Section 194A of the Act would mean the recipient of the income whose account is maintained by the person paying interest. In the present case, although the FD is made in the name of the Registrar General, the accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds cannot be stated to be the recipient of income for the reasons stated above. 23. Deducting tax in the name of the litigant who deposits the funds with this Court would also create another anomaly because the amount deducted would necessarily lie to his credit with the income tax authorities. In other words, the tax deducted at source would reflect as a tax paid by that litigant/depositor. He, thus, would be entitled to claim credit in his return of income. The implications of this are that whereas this Court had removed the funds from the custody of a litigant/depositor by judicial orders, a part of the accretion thereon is received by him by way of Tax deducted at source. This is clearly impermissible because it would run contrary to the intent of judicial orders. 24. In the given circumstances, the writ petitions are allowed and the impugned notice dated 25.04.2012, the impugned circular bearing no. 8/2011 and the impugned order dated 10.03.2014 are set aside (emphasis supplied by us)" 7. We find that in the absence of an ascertainable amount and identifiable payee, the machinery provisions of recovering tax deducted at source falls flat because in either way, it does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case where the Assessee had contended that a lower TDS should be deducted, it would be open for the payer to make an application to the AO under the provisions of Section 195(2) of the Act, to determine an appropriate proportion of payment chargeable to tax. This decision of the Supreme Court is not an authority for the proposition that TAS has to be deducted and paid where there is neither any payment nor any acknowledgement of debt which reflects any accrual of income chargeable to tax or in cases where no income accrues or arises which is chargeable to tax under the Act. 25. It is not disputed that TLME also did not claim the aforesaid amount of royalty in question and no such amount had in fact been paid. Thus, where the parties by their understanding and conduct are ad-idem that no liability to pay any amount arises, it would not be open for the Revenue to insist on collection of any tax. In the case of CIT v. Shoorji Vallabhdas & Co. [1962] 46ITR 144 the Supreme Court had considered the case where the Assessee firm was a managing agent of inter alia two shipping companies and as per its agreements with the concerned shipping companies, was entitled to managing commission @1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh an entry to that effect might, in certain circumstances, have been made in the books of account. This is exactly what has happened in this court. Here too, the agreements within the previous year replaced the earlier agreements, and altered the rate in such a way as to make the income different from what had been entered in the books of account. A mere book-keeping entry cannot be income, unless income has actually resulted, and in the present case, by the change of the terms the income which accrued and was received consisted of the lesser amounts and not the larger. This was not a gift by the assessee firm to the managed companies. The reduction was a part of the agreement entered into by the assessee firm to secure a long-term managing agency arrangement for the two companies which it had floated." 26. In view of the aforesaid, we are of the view that the Assessee was not obliged to deduct tax at source. Accordingly, the question of law is answered in favour of the Assessee and against the Revenue and the appeal is dismissed. 27. In the circumstances, parties are left to bear their own costs. (emphasis supplied by us)" 8. In view of the aforesaid observations and resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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