AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 950
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....it is prejudicial to the interests of the appellant assessee. 2. On the facts and in the circumstances of the case, the learned CIT(A) erred in holding that levy of interest u/s 201(lA) of the income-tax Act, 1961, is mandatory and in that view in confirming levy of interest u/s 201(lA) of the Act to the extent of Rs. 3,61,761/- (Rs.46,604/- for A.Y.2009-2010). 3. Without any prejudice to the above, in accordance to the Proviso to Section 201(lA) of the Act, the calculation of interest u/s 201(lA) of the Act, should have been limited upto the date of filing of the return of income for the year under consideration. 4. The appellant craves leave to amend, alter, modify, add to, abridge and/ or rescind any or all the above grounds in future." Shri Ravi Tulsiyan, FCA, Ld. Advocate appeared on behalf of assessee and Shri R.P.Nag, Addl. CIT(DR) Ld. Departmental Representative appeared on behalf of Revenue. 2. Since the issues involved in both the assessment years are same, therefore we deem it fit to dispose both the appeals by a consolidated order for the sake of convenience. Therefore we decided to treat ITA no. 46/Kol/2014 as lead case. ITA 46/Kol/2....
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....or payment of taxes by MKJ Enterprises Ltd and as such there was no loss to the Revenue as the tax was directly deposited by MKJ Enterprises Ltd to the credit of the Central Government and since MKJ Enterprises Ltd had claimed refund on the taxes so paid, it was entitled to claim refund U/S 244A of the Act. 6. On the other hand the ld. DR vehemently supported the order of the lower authorities. 7. We have heard the contentions of rival parties and perused the material available on record. From the foregoing discussion we find that the assessee has deducted TDS at a lower rate and accordingly the AO has charged the interest on the short deduction of TDS amount which was subsequently confirmed by the ld. CIT(A). Now the question before us arises so as to whether the interest is chargeable under the aforesaid facts & circumstances under section 201(1A) of the Act. In this regard, we find that that in a plethora of judgments, it has been held that in such situations where the recipient has no taxes payable at all and has claimed refund of taxes, no interest is to be charged from the defaulting deductor since the Revenue is required to refund of income tax along with due Interest.....
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....the tax was deductible till the date on which the tax is actually paid. We may also refer to the decision in CITv. Dhanalakshmy Weaving Works [2000} 245 ITR 13 (Ker). In this case, it was held that the purpose of the levy is to claim compensation on the amount which ought to have been deducted and deposited and has not been done by the assessee. The learned authorised representative had relied upon the decision of CIT v. Rishikesh Apartments Co-operative Housing Society Ltd. [2002} 253 ITR 310 (Guj). In this case, it was held that there was no question of levying any interest on the assessee as the amount which was payable to the Revenue had been duly paid. 7. After perusal of the facts of the case and relevant law as on the subject, we are of the opinion that learned CIT(A) had rightly held that interest under s. 201(1A) of the Act was to be deleted after due verification by the AO from the enclosures with supporting documents. In all the cases, the recipient of the income had claimed refund, which had arisen due to TDS. Therefore, we find no infirmity in the order of the learned CIT(A) and the same is hereby sustained. 3. When the assessee has paid more tax than....
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....e, in the process of assessment of the income of the society for the assessment years 1974-75 to 1977-78, the Assessing Officer charged interest under the provisions of section 201 (lA) of the Act, on the tax which was deductible by the assessee-society from the amount which was paid to the contractor. It was the case of the assessee that though no tax was deducted from the amount payable to the contractor, the contractor had already paid tax and, therefore, interest under the provisions of section 201 (lA) could not have been levied by the Revenue on the assessee but the said argument of the assessee did not find favour with the Assessing Officer. The assessee filed an appeal to the Appellate Assistant Commissioner. For two years, i.e., for the assessment years 1974-75 and 1975-76, sufficient advance tax and tax on self-assessment was paid by RB and, therefore, the Appellate Assistant Commissioner held that the levy of interest under the provisions of section 201 (lA) was not justified for those two years. So far as the other two assessment years were concerned, the contractor had not paid sufficient advance tax and, therefore, the Appellate Assistant Commissioner came to the conc....
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....he same to the account of the Government. It is pertinent to note that the Tax so deducted at source is given credit in the account of deductee- assessee. If the assessment of the deductee assessee results in refund of TDS amount, the Government shall refund the amount along with interest U/S 244A of the Act. The reason for paying interest U/S 244A is that the Government is considered to have enjoyed the amount, which it is not entitled to. Thus the interest is charged/paid as compensation for withholding/enjoying funds not belonging to the assessee/revenue. 22. Let us consider about exigibility of interest U/S 201 (lA) of the Act under the peculiar conditions prevailing in the instant cases, wherein the recipient of interest viz., the partnership firms have declared losses even after accounting for the interest paid by the assessees herein. Even if the assessees herein deduct and remit the TDS amount on the interest paid to the partnership firms, the same is liable to be refunded to the said partnership firms, as there is no tax liability in their respective hands. Under this situation, can it be said that the Government is deprived of the funds due to it or any loss is c....
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....ment. 24. The facts analysed in Situation B is applicable to the facts prevailing in the instant cases. On the basis of analysis made in situation B, we are of the view that the assessees herein are not liable to pay interest U/S 201 (lA) of the Act, if the recipient of interest, viz., the partnership firms, are not liable to pay tax on the impugned interest income. However, in the paper book filed before us, only copies of the returns of income filed by the partnership firms have been furnished It is not known whether the said returns of income were accepted as it is by the revenue or not, since copies of the assessment orders for relevant years, if any, were not filed before us. Hence, we are unable to examine, whether the said partnership firms were liable to pay tax on the impugned interest income or not, in the absence of the assessment orders. Hence these facts require verification at the end of the DCIT (FDS). If they are not liable to pay tax on the impugned interest income, then as per the discussions made in the foregoing paragraphs, these assessees are not liable to pay interest U/S 201 (lA) of the Act. 25. It may be noted that the prevailing rate oJ in....
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.... the collection of that tax which is the principally payable by the recipient of the income. The TDS is not a separate or independent tax. Once the recipient of the income has included, the income paid by the payer and disclosed the same to the Department and paid tax thereon as per computation made by the recipient or no tax was paid by the recipient of income because as per the recipient, its entire income is exempt or on which no tax is payable, then the income is disclosed to the Department by the principal person who is liable to pay tax thereon and in such cases, unless it can be shown that the due tax could not be recovered by the Department from the principal person, who was liable to TDS until then the payer of the income cannot be treated as "Assessee in Default". Applying the ratio of the above case decisions to the facts of the appellant's case, it is clear that since M/s. MKJ Enterprises Ltd has included the income from the appellant in the Return of Income filed for the subject assessment years paid taxes on the same and had claimed refund of taxes there is no loss to the Revenue even if the TDS was not deducted by the appellant. As such, interest U/S 201(1A) canno....
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....rom ambiguity and admits of two interpretations a view which is favourable to the subject should be adopted. The fact that such an interpretation is also in consonance with ordinary notions of equity and fairness would further fortify the Court in adopting such a course." Vodafone Essar Gujarat Limited vs ACIT (I.T.A. No.386/Ahd/11) (copy enclosed at page 21-36 of the Paper Book) 18. The choice of which of Hon'ble High Court to follow must, therefore, be made on some objective criterion. We have to, with our highest respect of all the Hon'ble High Courts, adopt an objective criterion for deciding as to which of the Hon 'ble High Court should be followed by us. We find guidance from the judgment of Hon'ble Supreme Court in the matter of CIT vs. Vegetable ITA. No.: 386 /Ahd/11 Assessment year: 2008-09 Products Ltd. [(1972) 88 ITR 192 (SC)]. Hon'ble Supreme Court has laid down a principle that "if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted" Although this principle so laid down was in the context of penalty, and Their Lordships specifically stated so in so many word....
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....ad.), in respect of application of the judgement of the Hon'ble Apex Court rendered in the case of Southern Technology Ltd. (supra) on income recognition norms prescribed by R.B.I. The Hon 'ble Coordinate Bench in view of the fact that there were divergent views of Hon 'ble Delhi High Court and Hon 'ble Madras High Court, applied the ratio of the Hon 'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. reported at (1973) 88ITR 192 (SC). In the present case also, there is no judgement by the Hon'ble Jurisdictional High Court, therefore for the same reasoning, we decide this issue in favour of the assessee and the AO is hereby directed to delete the addition. Thus, ground of assessee's appeal is allowed." CIT (TDS) vs. Reliance Engineering Associates (P.) Ltd. (2012) 80 CCH 0113 Guj HC (copy enclosed at Page 56-59 of the paper book) "It is settled law that where two interpretations are possible, the one which is favourable to the assessee should be adopted Appeal dismissed" 8. In view of above we find that it is settled law where two interpretations are possible, the one which is favourable to assessee should be adopted. A....
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....chandise and securities. The assessee for the year under consideration has filed its return of income on dated 30th October, 2005 declaring business loss of Rs. 1,32,69,170/-. Thereafter the case was processed u/s 143(1) of the Act and taken up for scrutiny. Accordingly notices u/s 143(2) and 143(1) were issued upon the assessee. The assessment was framed u/s 143(3) of the Act at an income of Rs.-36,69,170/- by disallowing the interest expenses for Rs. 96,00,000/-. The assessee for the year under consideration has shown the following figures in its balance sheet as on 31.3.2005 :- Source of Fund Application of fund Shareholder fund 11 crore Fixed asset Negligible Loan funds 17 crore Investment 19 crore Deferred Tax Asset 2 crore Current Assets (Net) 7 crore The AO during the assessment proceedings observed that the assessee has shown the investment as on 31.03.2004 for Rs. 9.6 crores and during the year it has increased by Rs. 9.5 crores. Accordingly the balance shown as investment at the end of the financial year 31.3.2005 was shown at Rs. 19.1 crore. The major reason for in....
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....y High Court, I am of the view that addition made u/s.14A for Rs. 96,00,000/- should be deleted." 13. Aggrieved by the order of the ld. CIT(A) the revenue is in appeal before us. The ld. DR before us submitted that it is very much clear from the balance sheet of the assessee as on 31.03.2005 that interest bearing loan has been utilized in the investment which were generating the income under the head "capital gain". Therefore the proportionate interest amount pertaining to the investment should be disallowed while working out the business profit of the assessee. The ld. DR further submitted that the shares held as stock in trade were converted into investment on dated 01.04.2004. Therefore the interest is not allowable under the business head. The ld. DR also requested to restore the matter to the AO for fresh adjudication to ascertain whether the shares held as stock in trade were converted as investment dated 01.04.2004. The ld. DR vehemently supported the order of the AO. 14. On the other hand, the ld. AR for the assessee before us filed a paper book which is running from pages 1 to 33 and submitted that the shares held as stock in trade were converted as investment in sha....