TaxTMI 
TaxTMI 
TaxTMI 
2016 (8) TMI 1474
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee entered into an agreement with its subsidiary company M/s. Haldia Riverside Estates Limited (hereinafter referred to as 'HREL') for the purpose of residential accommodation of the employees of the assessee. Under the aforesaid agreement, the assessee paid a sum of Rs. 8,89,74,146/- during the assessment year to HREL under the following heads: Particulars Amount (Rs.) Rent 3,97,05,637.00 License Fees 3,60,00,000.00 Infrastructure Charges reimbursed 1,25,85,093.00 Other Recoveries 6,83,416.00 Total: 8,89,74,146.00 The assessee deducted tax of Rs. 4,06,982/- @ 1.025% (including surcharge) on the rent element at a lower rate, on the basis of a certificate issued by the ACIT, Cir.-7, Kolkata authorizing HPCL, the deductor through an order dt. 01.07.2003 to deduct tax at a lower rate of 1%. It was submitted that HREL, the Deductee, was assessed to NIL tax for the year in question by the ACIT, Cir.-7, Kolkata on a total loss of Rs. 2,82,83,400/-. According to the deductor, following the principle laid down in the case of Hindusthan Coca Cola Beverage (P) Ltd., Vs. CIT (2007) 293 ITR 226 (SC), where the payee is not liable to Income Tax, the payer cannot be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ounting to Rs. 8,89,74,146/- at the applicable rates. However, by applying CBDT Circular No.275 dt. 29.01.1997, demand visualized u/s 201 (1) of the Act is not enforceable, as the deductor has proved at this stage that there was no tax due to be paid by the deductee for the relevant year. HPCL will, however, be liable to pay interest to be charged u/s 201(1A) of the Act till the date of filing the Income Tax Return by HREL, as prior to that date, it was not possible to know that HREL had no liability to tax. In actual, an amount of Rs. 4,06,982/- was deducted by HPCL as TDS. Amount of interest payable u/s. 201(1A) would thus be arrived at after deducting the amount of TDS actually deducted and deposited from the amount of TDS which should have been done and taking into account the period between the date of payment to date of filing the return by the deductee ( i.e. 28.10.2004) and charged interest u/s 201(1A) of the Act to the tune of Rs. 7,88,598/-. 4. Before the ld CITA , the assessee submitted that it cannot be treated as 'assessee in default' as it was having full knowledge of the affairs of the deductee and the fact that the deductee was its 100% subsidiary and having knowl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....DS provisions mandates deduction of tax at source on the payments made by assessee to parties if it falls within the deductible limits prescribed u/s 194I of the Act. The purpose of TDS is to ensure that the Government is not deprived of its due taxes in time. Moreover, recovery of taxes through TDS is one of the tax collection mechanism formulated by the Government. If the payer (assessee herein) fails to deduct tax at source in respect of certain eligible payments , then the payer assessee could be treated as 'assessee in default' and the said tax could be recovered from the payer assessee on behalf of the payee. But in the instant case, there is no resultant tax liability in the hands of the payee due to huge losses. In such circumstances, normally it is expected that the payee should approach the TDS officer by preferring an application in Form No. 13 seeking for lower / nil deduction certificate u/s 197(1) of the Act. In the instant case, section 197(1) certificate has been obtained by the payee only from 1.7.2003 wherein the deductors have been directed to deduct 1% TDS on payments made to payees in respect of payments not exceeding Rs. 409.34 lakhs and hence the ld AO held t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the subsidiary company does not have any tax liability pursuant to the assessment framed on it by the income tax department u/s 143(3) of the Act which is also part of the paper book filed by the assessee. 6.2. The primary conditions to be satisfied before treating the payer assessee as 'assessee in default' are as below:- (a) There should be a payment made by the payer assessee to the payee which would be treated as income in the hands of the payee. In the instant case, the payee had duly shown the amounts received from the payer assessee as its income in its returns. (b) The payment made by the payer should fall within the eligible payments warranting deduction of tax at source. In the instant case, certain payments definitely fall within the ambit of eligible payments warranting deduction of tax at source but the same has not been fully complied by the payer. In fact the assessee had deducted tax at source and remitted the same to the Central Government for part of the period and for part of the amounts as stated in the assessment order. (c) The payee has not paid the taxes on the amounts received from the payer. In the instant case, the question of payment of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Co-ordinate Bench of this tribunal in the case of Ramakrishna Vedanta Math vs ITO reported in (2003) 55 SOT 417 (Kol) wherein it was held that :- 8. The plea is indeed well taken. Learned Counsel is quite right in his submission that, as a result, of the judgement of the Hon'ble Allahabad High Court in Jagran Prakashan Ltd vs DCIT reported in (2012) 21 taxmann.com 489 (All) and in the absence of anything contrary thereto from Hon'ble Jurisdictional High Court , there is a paradigm shift in the manner in which recovery provisions under section 201(1) can be invoked. As observed by Their Lordships, the provisions of section 201(1) cannot be invoked and the ' tax deductor cannot be treated an assessee in default till it is found that assessee has also failed to pay such tax directly'. Once this finding about the non payment of taxes by the recipient is held to a condition precedent to invoking section 201(1), the onus is on the Assessing Officer to demonstrate that the condition is satisfied. No doubt the assessee has to submit all such information about the recipient as he is obliged to maintain under the law, once this information is submitted, it is for the Assessing Officer t....