2003 (12) TMI 264 - AT - Income Tax

Tribunal orders tax refund to appellant, emphasizes no TDS cert obligation

Tata Engineering & Locomotive Co. Ltd. Versus Deputy Commissioner Of Income-Tax.

The Tribunal directed the Assessing Officer to refund the taxes already deposited by the appellant before filing the appeal under section 248 of the ... Commissioner Issues Involved:1. Whether an appellate authority can direct the refund of tax already deposited by an appellant in a successful appeal under section 248 of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Refund of Tax Deposited by Appellant in Successful Appeal under Section 248:The primary issue in this appeal was whether an appellate authority can direct the refund of tax already deposited by an appellant when the appeal under section 248 of the Income-tax Act, 1961 is successful. The Revenue argued that under sections 198 and 199 of the Act, tax deducted is considered income of the person from whose income the tax is deducted. Therefore, only that person can claim a refund.The CIT(A) had held that the appellant was not required to deduct tax at source for estimated local living expenses/out-of-pocket expenses. However, the CIT(A) declined to issue directions to refund the tax already deposited by the appellant, stating that any deduction made under section 195 and paid to the Central Government is treated as a payment of tax on behalf of the non-resident, and credit shall be given to the non-resident for the amount so deducted. Consequently, the appellant-company could not be treated as an assessee entitled to any refund under the Act.The Tribunal examined the provisions of sections 198, 199, and 248 of the IT Act. Section 198 specifies that tax deducted at source is deemed to be income received by the recipient for the purpose of computing income. Section 199 provides that any deduction made under section 195 is treated as a payment of tax on behalf of the person from whose income the deduction was made, and credit is given to that person upon the production of a TDS certificate under section 203. Section 248 allows a person who denies liability to deduct tax at source to appeal to the CIT(A) to be declared not liable to make such deduction.The Tribunal noted that the CIT(A) failed to appreciate that credit for taxes deducted at source is not automatic but dependent on the issuance of a TDS certificate, which was not issued in this case. The Tribunal also highlighted that once an appellant succeeds in an appeal under section 248, the Revenue authorities must proceed as if the appellant had no liability to make the deduction. Therefore, the successful appellant is not obligated to issue a TDS certificate.The Tribunal emphasized that interpreting the law to mean that the refund can only be granted to the person from whose payments tax was deducted would render an appeal under section 248 meaningless. The Tribunal referred to the principle of statutory interpretation that no word or expression in a statute should be considered redundant or superfluous. It cited precedents where courts have held that legal provisions should be interpreted to give them a sensible meaning and make them effective.The Tribunal further referenced the Supreme Court's observation that the powers of the appellate authority under section 251 are unrestricted and wide. It is the duty of judges to apply laws justly, even to cases not explicitly regulated by express dispositions. The Tribunal concluded that the CIT(A) erred in not directing the refund of taxes already deposited by the appellant.The Tribunal also invoked Article 265 of the Constitution of India, which states that no tax shall be levied or collected except by the authority of law. Taxes collected contrary to law must be refunded. Since the CIT(A) had held that the appellant was not liable to make the deduction and no TDS certificates were issued, the Tribunal found it appropriate to direct the Assessing Officer to refund the taxes deposited by the appellant.Conclusion:The Tribunal vacated the observations of the CIT(A) and directed the Assessing Officer to refund the taxes already deposited by the appellant before filing the appeal under section 248 of the Act. The appeal was allowed.