2013 (11) TMI 807 - AT - Income Tax

Tribunal affirms rebate as commission under Section 194H, dismisses revenue's appeals

ASSTT COMMISSIONER OF INCOME TAX CIRCLE-18(2), BANGALORE Versus CHIEF ELECTRICAL INSPECTOR TO GOVERNMENT

ASSTT COMMISSIONER OF INCOME TAX CIRCLE-18(2), BANGALORE Versus CHIEF ELECTRICAL INSPECTOR TO GOVERNMENT - TMI Issues Involved:1. Applicability of Section 194H of the Income-tax Act, 1961 to the rebate paid by the respondent.2. Treatment of the respondent as an 'assessee in default' under Section 201(1) of the Act.3. Levy of interest under Section 201(1A) of the Act.4. Powers of the CIT(A) to remand the case for fresh assessment post the Finance Act, 2001 amendment.Issue-wise Detailed Analysis:1. Applicability of Section 194H of the Income-tax Act, 1961:The primary issue was whether the rebate given by the respondent to entities collecting electricity tax qualifies as 'commission' under Section 194H of the Income-tax Act, 1961. The Assessing Officer (AO) determined that the rebate was indeed a commission, necessitating tax deduction at source (TDS). The CIT(Appeals) confirmed this view, holding that the provisions of Section 194H were applicable, thereby treating the respondent as an 'assessee in default' under Section 201(1) of the Act.2. Treatment of the Respondent as an 'Assessee in Default' under Section 201(1):The respondent argued that since the recipients of the rebate had filed returns and paid taxes on the income received, the respondent should not be treated as an 'assessee in default.' The CIT(A) accepted this argument, directing the AO to verify the payment of taxes by the recipients and provide relief to the respondent accordingly. The Tribunal upheld this view, referencing the Supreme Court's decision in Hindustan Coca Cola Beverage P. Ltd. 293 ITR 226 (SC), which stated that once the deductee has filed returns and paid taxes, the tax should not be recovered again from the deductor.3. Levy of Interest under Section 201(1A):The CIT(A) confirmed the levy of interest under Section 201(1A), stating that it is mandatory and compensatory in nature. However, the interest should be calculated only up to the date of filing of returns by the deductees. The Tribunal agreed with this approach, directing the AO to verify the dates of filing and payment of taxes by the recipients and adjust the interest calculation accordingly.4. Powers of the CIT(A) to Remand the Case for Fresh Assessment:The revenue contended that the CIT(A) lacked the power to remand the case for fresh assessment post the Finance Act, 2001 amendment, which omitted the CIT(A)'s power to set aside assessments. The Tribunal clarified that proceedings under Section 201(1) are not akin to assessment proceedings and thus fall under Section 251(1)(c), which allows the CIT(A) to pass appropriate orders. The Tribunal further noted that the CIT(A)'s directions were not for a fresh assessment but for verifying tax payments by the recipients, which is permissible under the Act.Conclusion:The Tribunal dismissed the revenue's appeals, affirming the CIT(A)'s order. The Tribunal held that the rebate paid by the respondent qualifies as commission under Section 194H, but since the recipients had paid taxes on the income, the respondent should not be treated as an 'assessee in default.' The interest under Section 201(1A) was to be calculated only up to the date of filing of returns by the recipients. The Tribunal also upheld the CIT(A)'s power to direct the AO to verify tax payments, distinguishing it from setting aside an assessment for fresh proceedings.