AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2011 (11) TMI 822
X X X X Extracts X X X X
X X X X Extracts X X X X
....sections 201(1) and 201(1A) of the Act respectively. 3. These appeals were earlier decided by our co-ordinate Bench vide order dated 28.9.2007. Not being satisfied with the decision of the Tribunal, the Revenue and the assessee preferred to file appeals and Cross-Objections respectively before the Hon'ble Bombay High Court, and the Hon'ble Court vide its order dated 16.11.2009 in Income-tax Appeal No 1322 & Others of 1999 has set-aside the order of the Tribunal and restored the appeals to the file of the Tribunal for consideration afresh in accordance with law keeping all rival contentions on merit open. Accordingly, the captioned proceedings were listed and the rival parties have been heard at length. 4. The common abridged Grounds of appeal read as follows: "On facts and in law, 1. The ld CIT(A) erred in confirming the following demand for the F.Ys 2001-02 to 2005-06:- Financial year TDS (Rs) Interest (Rs) Total (Rs) 2001-02 1,13,806/- 57,184/- 1,70,990/- 2002-03 2,20,49,258/- 71,10,867/- 2,91,60,125/- 2003-04 2,42,33,804/- 46,04,422/- 2,88,38,226/- 2004-05 2,64,75,036/- 18,53,250/- 2,83,28,286....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a tripartite agreement dated 30.3.2002 was entered between LT, LTF and the appellant-company whereby such liability was assigned to the appellant company. In terms of the said agreement, appellant received a sum of Rs. 85,99,03,736/-, being the agreed Net Present Value (NPV) of the said sales-tax deferral amount of Rs. 215.89 crores. In return, appellant assumed the obligation to discharge the sales-tax liability of LT over the years from 2002 to 2017. It may further be noticed that vide a subsequent agreement dated 1.9.2005, the earlier agreement dated 30.3.2002 was terminated and the appellant-company repaid LT the entire sum of Rs. 85,99,03,736/- together with the interest component of Rs. 40.89 crores on 2.9.2005. 7. In this factual background, the Assessing Officer noticed that LT alone was statutorily liable for discharging the payment of Rs. 215.89 crores under the deferral payment scheme to the sales-tax authorities. The Assessing Officer further noticed that in the Profit & Loss account submitted along with the respective returns of income, the appellant had debited the following amounts, which represented interest component under the head "Interest" payable to LT.:- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Act, and further that the assessments for the said years were a subject matter of appeal. The Assessing Officer rejected the contention of the assessee and treated it as an assessee in default under section 201(1) of the Act for not having deducted tax at source under section 194A of the Act and it was also held liable to pay interest under section 201(1A) of the Act for the delay in deduction of tax at source. The following discussion in the assessment order is worthy of notice: "The assessee company has failed to deduct tax at source u/s 194A of the I.T. Act, 1961 on the sum of Rs. 35.30 crores paid to L & T Ltd., during the assessment years 2002-03 to 2005-06 nor has the assessee company adduced any evidence that the payee company has offered for taxation the said amount of Rs. 35.30 crores in the respective years and hence the assessee company is deemed to be in default n terms of section 201(1) and is also liable to pay interest at the prescribed rates u/s 201(1A). Further in respect of the sum of Rs. 5.59 crores paid by the assessee company to L & T Ltd. on 2.9.2005, no TDS has also been made and for the same reasons the assessee company is treated in default u/s 201....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ibility of the expenditure in the hands of payer of such income. In support of the submission at if the taxes has been paid by the payee, the question of recovering the amount of TDS from the payer would not arise, following decisions have been relied upon: (i) Hindustan Coca Cola Beverage P. Ltd. v CIT 293 ITR 226 (SC); (ii) Mahindra & Mahindra Ltd. 313 ITR 263 (Mum)(AT)(SB); (iii) Merchant Shipping Services (P) Ltd. 135 TTJ 589 (Mum); and, (iv) Vodafone Essar Ltd. 135 TJ 385 (Mum) Further, a reference was also invited to page 146 of the Paper Book wherein is placed a letter dated 30.1.2006 issued by LT confirming that the taxes on assignment of sales-tax liability have already been recovered by the Department. It is, therefore, contended that the taxes having been recovered from the payee, there was no justification to treat the assessee in default for the purposes of TDS under section 201(1) of the Act. 12. Even with regard to the liability to pay interest under section 201(1A) of the Act, it is contended that the taxes due on such income have been recovered by the Department even before the due date of depositing of TDS, therefore, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Hon'ble Supreme Court in the case of Transmission Corporation of A.P. Ltd & Anr. V. CIT 239 587 (SC) 16. We have carefully considered the rival submissions. The primary controversy in the captioned appeals relates to the stand of the Revenue that the appellant company is "an assessee in default" under section 201(1) of the Act and is also liable to pay interest under section 201(1A) of the Act in relation to its failure to deduct tax at source under section 194A of the Act. The contention of the Revenue is that the assessee has failed to deduct tax at source under section 194A of the Act on the amounts of Rs. 35.30 crores paid to LT during the assessment years 2002-03 to 2005-06 and also in respect of Rs. 5.59 crores paid to LT on 2.9.2005 corresponding to the assessment year 2006-07. For the same reasons, the assessee is also held liable for payment of interest under section 201(1A) of the Act. 17. Section 201(1) of the Act envisages that where an assessee does not deduct or does not pay after so deducting fails to pay the whole or any part of the tax as required under the Act, then such an assessee shall be deemed to be an assessee in default in respect of such tax. Furt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he income stated to have been received from the appellant. Having regard to the parity of reasoning laid down by the Hon'ble Supreme court in the case of Hindustan Coca Cola Beverage P. Ltd., (supra) and as declared by the CBDT in its circular dated 29.1.1997 (supra), the aforesaid assertion by the assessee is required to be evaluated. Ostensibly, if the assessee succeeds in demonstrating that the deductee assessee, i.e. LT has paid taxes due on the impugned income, no liability contemplated by section 201(1) of the Act can be fastened on the assessee. Quite clearly on the basis of the material on record, it is evident that the payee, i.e. LT has been assessed on such income and that taxes thereon have also been recovered. In fact in the course of the hearing, when the learned Departmental Representative attempted to say that the said position was not emerging from record, the learned counsel vehemently referred to the position admitted by the Revenue in the course of the earlier proceedings before the Tribunal in this regard. In fact, the learned Counsel referred to an order passed by the Commissioner of Income-tax-I, Pune dated 9.11.2006 on the application of the assessee for sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The claim set-up by the assessee is that though LT has claimed such income as nontaxable in the returns of income filed, yet it had paid requisite taxes, which were enough to cover the demand arising on account of such amounts being treated as taxable in the subsequent assessment proceedings. Therefore, tax on such income is said to have been recovered much in advance before the assessee was required to deduct tax at source. 20. In this connection, the plea of the Revenue is two-fold. Firstly, the plea is that the taxes on the impugned income are claimed to have been paid by LT in assessment year 2000-01 to 2001-02 itself, whereas in this case the case set-up by the Assessing Officer is that the assessee was liable to deduct tax at source during the assessment years 2002-03 to 2006-07 (i.e. corresponding to financial years 2001-02 to 2005-06). Secondly, it is claimed that assessment of income during the course of assessment proceedings by the Assessing Officer does not tantamount to payment of taxes by the deductee assessee as envisaged in CBDT circular dated 29.1.1997 (supra). In our considered opinion, there is no dispute to the fact that the assessee came into the picture onl....