TMI Blog2008 (1) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... crores was deductible at source, ignoring that the perquisite arose to the assessee only in the month of February, 1999 and the salary payable to the assessee for the remaining part of the year was completely inadequate to cover the tax liability. He has also failed to appreciate that the tax which the employer could have been deducted at source in the financial year 1998-99 could not exceed the salary payable to the assessee in the months of February and March. 3. On the facts of the case and in the law the Ld. CIT(A) has erred in completely overlooked the fact that the assessee s employer M/s. Zee Tele Films Ltd. informed the assessee that the tax on the perquisite of Rs. 7.72 crores could not be covered by TDS from his salary hence he should pay his taxes directly." 4. On the facts of the case and in the law the Ld. CIT(A) has erred in deleting the interest under sections 234B 234C ignoring Supreme Court s judgment in the case of CIT v. A.H.M. Ghaswala 252 ITR." 3. Shri Devindra Shakar, CIT DR appeared on behalf of the revenue whereas Shri C.S. Aggarwal, Sr. Advocate along with Shri Sumit Jain, CA appeared on behalf of the assessee. 4. The issue involved in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 143(1)( a ). Application dated 4-3-2003 was filed on 24-3-2003. Through this application, it was contended that the income-tax on perquisite value of Rs. 7,72,00,000 comes to Rs. 2,31,60,000, which was liable to be deducted as TDS by the employer namely M/s. Zee Telefilms Ltd. and on failure on the part of the employer to deduct the same, this amount had to be paid by the assessee. It was submitted that advance tax liability of the assessee could not improve this amount which was required to be deducted by the employer as TDS. It was further submitted that under section 208/209 of the Income-tax Act for computation of the advance tax, the assessee is entitled to reduce the amount of tax which would be deductible at source. It was next submitted that perquisite granted to the assessee on account of Equity Stock Option Scheme is a perquisite and is obviously liable to TDS by the employer and in view of the decision of the ITAT in the case of Mitsui Engg. Shipbuilding Co. Ltd. v. Asstt. CIT [2001] 79 ITD 481 (Delhi), for making assessee liable to advance tax and while making estimate he shall reduce the amount of income-tax which would be deductible or collectible at source. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out by the Assessing Officer. In his letter dated 6-5-2003. As such, an inference is drawn that you have nothing to say in support of your application for rectification under section 154. In view of the aforesaid position of law, your application is hereby rejected." 10. The assessee came in appeal against the order of Assessing Officer dated 14-7-2003. For doing so he took various specific grounds. Before the learned CIT (Appeals) following pleas were raised by the assessee : (1)That non-payment of advance tax was due to the fact that the income being salary, declared in the return of income and assessed by the Assessing Officer was accordingly subject to deduction of Income-tax at source, which was not made by the employer. Thus, the short fall in the amount of income-tax, which was not deposited as advance tax, was on account of perquisite aspect as part of the salary in respect of which TDS was not deducted. (2)While processing the return, of income, the Assessing Officer levied interest under sections 234B and 234C at Rs. 29.04 lakhs and Rs. 3.56 lakhs respectively without giving any reason for the same. (3)That in view of the provisions contained under sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mistake is pointed out by the appellant. If the very levy of interest does not conform to the provisions of law and the Assessing Officer has mistakenly levied it, it would be unfair and contrary to the principles of natural justice to refuse to undo the mistake by postulating prospectively that the issue is debatable. It would be a patent example of double standards if Assessing Officer comes to the conclusion that interest is leviable by merely having a look at the assessment records and then refusing to rectify on the ground that this mistake is not apparent from record. I am inclined to agree with the contention of the appellant that it is not a debatable issue in the peculiar circumstances of the case and the judgment of Hon ble Calcutta High Court in Borhat Tea Co. Ltd. ( supra ) relied upon by the Assessing Officer is not applicable as has been pointed out by the learned AR. In that case the advance tax liability admittedly existed even after adjusting the entire TDS deductible and deducted in fact. Such is not the position in this case." 14. Before us, the findings of the learned CIT (Appeals) have been challenged by the revenue. 15. The learned DR while supportin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for deducting at source on the income chargeable to tax, no action can be taken to levy interest under section 234B on such person who received such income. Thus, there was no failure on the part of the assessee employee to pay advance tax and as such provisions of section 234B could not be invoked. In support of this contention, the assessee placed reliance on the decision of Special Bench of the ITAT in the case of Motorola Inc. v. Dy. CIT [2005] 95 ITD 269 (Delhi)(SB). (3)Since the employer failed to deduct tax on the value of perquisite, the assessee paid the tax on such income, since the liability to pay tax was that of the assessee irrespective of the fact that the assessee may not be liable to pay advance tax which was the liability of the employer. (4)That the argument of the revenue that since the shares were allotted on 1-2-1999, it was impossible for the employer to have deducted tax at source as the value of perquisite, was not mentioned or an amount where the employer could deduct tax or that the amount deductible in respect of such perquisite far exceeded the salary to be paid to the assessee after the allotment of shares, does not carry any force because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act remains on the person responsible to deduct tax and on this basis also, since the liability of the employer continued, there was no liability on the part of the assessee. In this regard, reliance was placed by the learned counsel on the decision of Hon ble Delhi High Court in the case of CIT v. Majestic Hotels Ltd. 204 ITR 330 ( sic ). 17. We have carefully considered the entire material on record and the rival submissions. The liability to pay interest under section 234B arises when an assessee, who is liable to pay advance tax under section 208, has failed to pay such tax or where the advance tax paid by such assessee under the provisions of section 208 is less than 90 per cent of the assessed tax. 18. As per the provisions contained under section 208, advance tax is to be payable as computed in accordance with Chapter XVII. The computation of advance tax is to be made as per section 209. In view of provisions contained under section 209(1)( d ), the income-tax calculated under clauses ( a ), ( b ) and ( c ) shall be reduced by the amount of income-tax which would be deductible at source during the said financial year. This provision is as under : "209 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deductee. In relation to the liability of the payer, the Hon ble High Court has made the following observation : "There is no escape from the liability arising from section 201(1A) in case where the assessee does not deduct or does not pay after deduction the amount deducted. Interest at the stipulated rate is inevitable and can be legitimately recovered from the assessee in default. The submission, that the expression date on which such tax was actually paid must relate to the date when tax is paid by the assessee, needs notice only to be rejected. If tax has been paid by the deductee as is the position in the instant case, there is no question of the assessee paying the same over again either in full or part. Tax could be recovered from them only once. If that be so, interest must stop accruing, the moment the amount of tax is paid to the revenue. It is immaterial whether the tax is paid by the deductee or the assessee who had made the deduction. What is significant is that the interest which is compensatory in character is paid to the revenue till the date the amount of tax is actually deposited. That is precisely what has been done in the instant case. The order passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) for the reasons already stated cannot be upheld. The CIT(A) has also examined the merits of the assessee s claim that they are not liable to pay the advance tax and in the absence of any liability there is no default and hence no interest is chargeable under section 234B. On this aspect, no strong grounds have been made out on behalf of the department to doubt the correctness of the view taken by the Delhi and Mumbai Bench of the Tribunal in the orders cited supra. The language of section 209(1)( d ) of the Act supports the assessee s contention. All the payments made to the assessees are tax deductible at source (even assuming that they are taxable) as rightly held by the CIT(A) and also contended before us. In that case, having regard to the provisions of section 201(1) and 201(1A) to which our attention was drawn on behalf of the assessees, the assessees cannot be held to have committed default in paying the advance tax. They are entitled to take into account the tax which is deductible by the payer, though not actually deducted. Consequently, there is no liability to pay interest. The decision of the CIT(A) to cancel the interest under section 234B is upheld on merits." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot permissible when income was determined under section 115JA. The Assessing Officer rejected this application, but on appeal, the learned CIT (Appeals) deleted the interest. The ITAT, on further appeal, by the revenue held that the Assessing Officer should have entertained the assessee s application under section 154 and should have deleted the interest and having not done so, the levy of interest was to be cancelled. The ITAT has held as under : "The Assessing Officer had no jurisdiction to determine the liability of interest otherwise than as per the claims made by the assessee under section 143(1). In the instant case, not only the provisions of section 115JA came into play but also the assessee had a bona fide belief that it was not liable to pay any interest under section 234C. Therefore, while processing the return of the assessee under section 143(1), the Assessing Officer could not have entered into any interpretative exercise whole computing the tax or interest payable on the basis of the information emanating from return submitted by the assessee, under section 143(1)( a ). It was incumbent upon the Assessing Officer to have taken recourse to section 143(2) and regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon ble Supreme Court in the case of CIT v. A.H.M. Ghaswala 252 ITR 1 all the same the burden should be borne by the defaulter, who in this case is the employer and not the appellant. The appellant could not be expected to be in know of the default committed by his employer until the receipt of the TDS certificate in Form No. 16 in respect of his salary, from his employer. Immediately after coming to know that there has been a shortfall in the payment of his taxes he made the payment by self-assessment little realizing that he would be saddled with an interest demand that should legitimately have been fastened on to the employer. The Assessing Officer would have done well by intimating his counterpart in the TDS charge about the default committed by the employer for proceeding against the latter under the relevant provisions of law. 19. As regards levy of interest under section 234C that the Explanation under the said section itself speaks that while computing levy of such interest, income tax, which was deductible at source has to be reduced from the amount of estimated tax liability. Since in this case the entire shortfall of advance tax was on account of non-deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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