TaxTMI 
TaxTMI 
2016 (8) TMI 1240
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....cial year 2001-02 (assessment year 2002-03). 3. The facts in brief giving rise to present dispute are as under. 4. The petitioner "Ghaziabad Development Authority (hereinafter referred to as "GDA") is a statutory body constituted under the provisions of the U. P. Urban Planning and Development Act, 1973 (hereinafter referred to as "Act, 1973") for the purpose of undertaking planned development within the area of Ghaziabad and others as notified by the State Government while constituting the GDA. 5. The petitioner in order to provide housing accommodation etc. borrows funds from various institutions from time to time. It also pays interest on the said borrowed sums. For the disputed period, the petitioner paid interest to the "Punjab National Bank Housing Finance Limited" (hereinafter referred to as "PNBHFL") and "Life Insurance Corporation Housing Finance Limited" (hereinafter referred to as "LICHFL") as follows : Sl. Financial year/ Amount of interest Amount of interest 1 2000-01/2001-02 8,13,07,509 2,05,11,232 2 2001-02/2002-03 6,64,22,867 1,67,00,556 6. The GDA did not deduct any TDS on the aforesaid amount of interest paid to the ....
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.... "194A. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities, shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct Income-tax thereon at the rates in force. Explanation.-For the purposes of this section, where any income by way of interest as aforesaid is credited to any account, whether called 'Interest payable account' or 'Suspense account' or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly." (emphasis added) 12. Sub-section (3) of section 194A provides circumstances where TDS is not deductible, and, at the relevant time, it read as under : "(3) The provisions of sub-section (1) shall not apply- (i) where the amount of such income or, as the case may be, the aggregate o....
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....ment and notified by it in this behalf in the Official Gazette ; (vii) to such income credited or paid in respect of deposits (other than time deposits made on or after the 1st day of July, 1995) with a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act) ; (viia) to such income credited or paid in respect of,- (a) deposits with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co- operative land development bank ; (b) deposits (other than time deposits made on or after the 1st day of July, 1995) with a co-operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking ; (viii) to such income credited or paid by the Central Government under any provision of this Act or the Indian Income-tax Act, 1922 (11 of 1922), or the Estate Duty Act, 1953 (34 of 1953), or the Wealth- tax Act, 1957 (27 of 1957), or the Gift-tax Act, 1958 (18 of 1958), or the Super Profits tax Act, 1963 (14 of 1963), or the Companie....
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....such person and in the cases referred to in section 194, the principal officer and the company of which he is the principal officer does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an 'assessee in default' in respect of the tax : Provided that no penalty shall be charged under section 221 from such person, principal officer or company unless the Assessing Officer is satisfied that such person or principal officer or company, as the case may be, has without good and sufficient reasons failed to deduct and pay the tax. (1A) Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub- section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest at fifteen per cent. per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. ....
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....and sufficient reasons. After declaring a person, who has failed to deduct tax, deemed "assessee in default", by virtue of sub-section (1) of section 201, the statute, though provided for imposition of penalty upon such person under section 221 but a safeguard is also provided in section 201 itself that such penalty shall not be leviable unless a positive finding is recorded by the Assessing Officer that failure to deduct tax was without good and sufficient reasons. This satisfaction is a jurisdictional issue for the purpose of imposing penalty upon such defaulter. In other words the language of the statute makes it clear that failure to deduct tax, even if it renders such defaulter, an "assessee in default", still such default will be treated to have been committed for valid and good reasons, unless otherwise recorded by the Assessing Officer for the purpose of imposing penalty. 20. In the present case, we are not informed that any procedure for imposition of penalty under section 221 has been initiated by the Assessing Officer against GDA meaning thereby we can safely assume that the Assessing Officer has not found any ground to hold that default on the part of GDA in non-dedu....
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....137 ITR 230 (MP), there was a default in deduction of TDS, tax on salary paid to employee by the employer. Regular assessment of employee was completed and he paid the entire tax due. The court, however, held that the principal liability for payment of Income-tax is on that person who receives income. Chapter XVII of the Act 1961, provides for deduction of tax at source. Under section 201(1) the Income-tax Officer could not demand tax from the employer in respect of alleged default in deduction of TDS when tax due was already paid by the employee and his regular assessment was completed. 24. Again a similar controversy arose in CIT v. Divisional Manager, New India Assurance Co. Ltd. [1983] 140 ITR 818 (MP) wherein there was a default on the part of the employer in deduction of TDS on salary paid to the employee. Regular assessment of the employee was completed and whatever amount of tax was found due, paid by him. The Income-tax Officer (TDS), however, demanded further tax from the employer in respect of tax, short deducted, relating to such employee. The court negatived the said demand of Income-tax Officer (TDS) and held that it had no jurisdiction under section 201 of the Act....
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....ituation contemplated by sub-section (2) of section 201 is found to exist, meaning thereby if tax is deducted but not paid at all. In such a case, the amount of tax as well as interest payable under sub- section (1A) shall be a charge upon the assets of such "assessee in default" but not otherwise, and not more than that. 29. The issue in our view has been finally settled in Hindustan Coca Cola Beverage Pvt. Ltd. v. CIT [2007] 293 ITR 226 (SC). Therein M/s. Hindustan Coca Cola Beverage Pvt. Ltd. (hereinafter referred to as "HCCBPL") entered into an agreement with M/s. Pradeep Oil Corporation for use of their premises for receipt, storage and dispatch of goods belonging to the aforesaid company. It also deducted tax under section 194C on warehousing charges paid to M/s. Pradeep Oil Corporation treating it to be a contractual demand hence deduction of TDS admissible under section 194C was 2 per cent. The Assessing Officer, however, took the view that warehousing charges are in the nature of rent as defined in Explanation to section 194 of the Act, 1961 therefore tax ought to have been deducted at 20 per cent. and not at 2 per cent. under section 194C as that was not applicable. Th....
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....Corporation). It is not disputed before us that the circular is applicable to the facts situation on hand . . . The impugned judgment of the High Court is accordingly set aside. The appeal is allowed with no order as to costs." 30. This court has also now sealed the issue finally in the judgment, Jagran Prakashan Ltd. v. Deputy CIT (TDS) [2012] 345 ITR 288 (All). The judgment was delivered by the hon'ble Ashok Bhushan, J. (as His Lordship then was) and have answered the aforesaid question, in para 87, as under (page 349) : "From the above provision, it is thus, clear that wherever the liability to pay tax was fastened on the person who failed to deduct the tax at source are specific provision was made for that purpose. In view of the foregoing discussions, we are of the considered opinion that in a case where tax has not been deducted at source, the short deducted tax cannot be realized from the deductor and the liability to pay such tax shall continue to be with the assessee direct, whose income is to be charged and a person who fails to deduct the tax at source, at best is liable for interest and penalty only. The above issues thus, are decided i....