TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 1130
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....ing off the writ petition, the Hon'ble High Court has also granted permission to M/s Ssangyong Engg. & Construction Co Ltd., to move applications seeking intervention and also for stay of recovery of payment before the Tribunal. In compliance with the direction given by the Hon'ble High Court in its order dated 7.8.2013, we have taken the appeals of the assessee and are going to decide the issue on merits as under; intervention is also allowed to M/s. Ssangyong Engg. & Construction Co Ltd., South Korea. 3. From the record, we find that the ACIT (TDS) vide his orders u/s 201(1) and 201(1A) in respect of seven quarters falling in the financial year 2008-09 relevant to A. Yr. 2009-2010 has held the assessee, as person responsible for making payments to foreign contractor deducting tax at source and filing return u/s 206 of the Act. On verification, it was noticed that the assessee had made payment of contract worth Rs. 19,61,36,514/- and Rs. 56,18,92,676/- from 01/04/2008 to 30/06/2008 F. Y. 2008-09 to M/s Ssangyong Engg. & Construction Co Ltd., South Korea. The ACIT (TDS) held these payments were made without proper deduction of tax at source. On being asked to explain the reasons, ....
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.... decide not to deduct the tax at source and claim that this defiance of specific provisions of section 197(3) and (2) was bonafide and in good faith. He also held that being unaware of the law is no excuse as the assessee is a regular assessee and was well aware of the legal provisions. After referring to circular No. 774 dated 17/03/1999, the AO held the deductor to be an assessee in default @ 42.23% for short deduction of R.31,03,54,504/- for A. Yr. 2009-10 and levied interest u/s 201(1A) @1% of Rs. 10,86,24,076/- (A. Yr. 2009-10). Against this order of ACIT (TDS), the assessee approached to ld CIT(A). 4. Before the ld CIT(A), it was contended that the levy of tax @ 42.23% is contrary to the certificate of lower rate of tax issued to the payees and the said levy also overlooks the fact that there is no taxable income of the payee in any of the assessment year prior to, during or even after the year involved demonstrated by the assessment orders for A. Yr. 09-10 in the case of M/s Ssangyong Engg. & Construction Co Ltd. Submitting further, that the mandate of the Apex Court has been violated wherein, it has been categorically held time and again that the provisions relating to TDS....
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....7(1) that the certificate should have been obtained or the application made before the date of credit. As is required under the second proviso to Section 194C (3), a certificate obtained after the date of credit but in accordance with the mandate of the provisions of law should consequently be regarded as valid, effective and binding. The directions under certificate would, therefore, ensure to the benefit of both the payer as well as payee. As a result, the certificate obtained u/s.197(1) would continue to govern the transaction and the payments should be made in accordance with the mandate of the certificate. 6. In the impugned order, ld CIT(A) upheld the order of the Assessing Officer to the effect that ld ACIT had correctly considered the effectiveness of the certificate from the date of its issue and applying the rate of 42.23% on short deduction of tax holding the assessee to be in default u/s.201(1) & 201(1A). Against the above order of ld CIT(A), assessee is in further appeal before the Tribunal on the following grounds: "1. That, the Ld. CIT (Appeals), Jabalpur has erred both in law and in facts in holding that the certificate issued by the Competent Authority dated 30.....
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....1, 03, 54, 504/- and interest u/s 20l(l) amounting to Rs. 10, 86, 24, 076/- is not erroneous, arbitrary or unjustified and therefore Ld. ACIT (TDS), Jabalpur has not erred either in law or facts in imposing interest @l% u/s 201(1A) of IT Act in the impugned order passed for the year in question amounting to Rs. 10, 86, 24, 076/- on the short deduction of tax of Rs. 3, 61, 03, 54, 504/- on the payments covering period of 35 months from April 2008 to Feb 2011, made to the payee/ deductee M/s SsangYong Engg. & Constn. Co. Ltd., New Delhi during the FY 2008-09. 7. That Ld. C1T (A) has further erred in not allowing the alternate plea to the extent it pleaded before it therefore without prejudice to allowance of aforesaid alternate plea in the appellate order as raised before Ld C1T (A) and without prejudice to grounds aforesaid at Sr. No, 1 to 6 and without admitting any default, even if it is assumed that certificate dated 30.06.2008 is applicable protectively, even then the default should be confined only to 42.23% of Rs. 19,61,36,513/-which works out to Rs. 8,28,28,449/- only from which tax deducted of Rs. 41,42,335/- is to be further reduced and the interest u/s 201(1A) could hav....
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....grossly erred in treating the very same order passed u/s.197(1) and rejecting the same being invalid on the one hand and being passed erroneously u/s.195(3) on the other hand, thus, erroneously held that the whole of the payment was liable to TDS @ 42.23%. As per ld Counsel, that in the return filed for the assessment year 2009-2010, the payee has disclosed the entire income in accordance with the provisions of the Act and the net result declared in the return was loss and the whole amount of TDS which was deducted by the assessee- National Highway Authority of India (NHAI) has been refunded to the payee/deductee M/s. Sang Yong Engineering Construction Company Ltd. 9. On the other hand, ld Sr. DR Shri Abhishek Sukla relied on the order passed by the lower authorities and contended that a certificate issued u/s.195/197 was operating only from the date of issue and not retrospective effect. He further contended that ACIT (TDS) had correctly considered the effectiveness of certificate from the date of its issue and applying the rate of 42.23% on the short deduction of tax at source holding the assessee to be in default. As per ld Sr.DR, charging of interest u/s.201(1)/201(1A) is cons....
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....nbsp;FY 2007-08 2.112% 30.06.08 FY 2008-09 1% 04.05.09 FY 2009- 10 0.75% 11.05.10 FY 2010 -11 0,75% 11. For the year in question, the assessee was subjected to provisions u/s 201(1) and 201(1A) in respect of payment made to M/s Ssangyong Engg. & Construction Co Ltd., by deeming the assessee in default. Aggrieved the assessee has preferred the appeal before ld CIT(A), who confirmed the order of the AO. The deductee/payee in the instant case had applied for certificate u/s.197(1) for lower deduction of tax in respect of payment credited/made vide application dated 10.6.2008 in Form-13. In response to which certificate of lower deduction was issued vide order dated 30.6.2008 mentioning therein period of validity of the order as assessment year 2009-2010. The ACIT(TDS) has questioned the applicability of the aforesaid order dated 30.6.2008 in respect of payment made prior to date of order i.e. 30.6.2008 and further held that the order u/s.197(1) had to be given effect from the date of receipt only. Section 197(2) provides that where any such certificate is issued the person responsible for paying such until such certificate is cancelled by the AO de....
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..../s SsangYong Engineering and Construction Company Ltd. Ld A.R. also placed on record the decision of ITAT Jaipur Bench in the case of Jaipur Vidyut Vitran Nigam Limited order dated 30th April, 2009, wherein, assessee was held to be not in default u/201(1)/201(1A), where the income of the recipient was not found to be taxable. In the case decided by the Jaipur Bench, similar payments have been made on which interest was charged for delay in deduction/payment of TDS. The Tribunal after considering all the facts held that no interest u/s.201(1A) is leviable on the assessee. Following was the precise observation of the Bench: "Tax deduction at source - Interest under section 201(IA) Tax not payable by Payee-Where RVPV to whom transmission charges were paid by assessee had no tax liability and. RVPN received refund of tax, out of payments made by others, there was, therefore, no loss of revenue to department account of non-deduction of TDS, no interest under Section 201 (IA) was, therefore, leviable. The provision of the Act is a measure to compensate the revenue for delay in payment of taxes. In the present case, RVPN to whom transmission charges are paid are assessed, with the sa....
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.... income has no liability of taxes and all the assessments of TRANSCO-recipient of income have been made u/s 143(3), and "NIL" tax liability was assessed. Assessment orders u/s 143(3) wherein Nil income tax liability was assessed for assessment year 2005-06 to 2008-09 were also placed on record. His further contention was that the Id, Assessing Officer failed to appreciate that in the present case there was no liability to pay tax on the deductee assessee. Even otherwise under Section 201(1A), the interest is payable "from the date on which such tax was deductible to the date on which such tax is actually paid". The legislature has used the words "actually paid" therefore, where there is no liability to pay any tax, there shall be no actual payment, resultantly, no interest is payable u/s 201(1A) of the Act. Therefore, once the levying of interest on the assessee for delay in deduction/ payment of tax is not justified. In this regard, we found that the CBDT has issued a circular No.- 275/201/95-IT(b) dated January 21,1997, which was relied upon by the Supreme Court, in the case of Hindustan Coca Cola Beverages Private Limited vs. CIT, 293 1TR 226 (S.C.) that "no demand visualized u/....
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....see in default u/s.201(1) of the Act in respect of payment made to M/s SsangYong Engineering and Construction Company Ltd. Since it is finally held that income of M/s SsangYong Engineering and Construction Company Ltd., was not liable to tax, there is no reason for payment of tax by M/s SsangYong Engineering and Construction Company Ltd. Interest under section 201(1A) is being charged for delay in payment of tax and same is consequential in nature. As per the decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage P. Ltd(supra), interest under section 201(1A) is payable "from the date on which such tax was deductible to the date on which such tax is actually paid". It means even if the assessee is not found to be in default u/s.201(1), its liability u/s.201(1A) will be there and interest will be payable from the date on which such tax was deductible to the date on which such tax is actually paid. However, 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 u/s.201(1A) since deductee is not required to pay any tax on its income which is, in fact, is a loss. In the instant case before us....