TMI Blog2011 (3) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... propose to deny the credit of tax paid in the earlier year on the same income - Held that:- it is unjust for the revenue to deny the credit of the taxes paid qua the very same transactions albeit under a bona fide belief in different year. - ITA No. 4033/Del/2009, ITA No. 4236/Del/2009 - - - Dated:- 18-3-2011 - R.P. Tolani, B.C. Meena, JJ. Ajay Vohra, Adv., for the Appellant Sangeeta Gupta, CIT-DR, for the Respondent ORDER R.P. Tolani J.M.: These are cross appeals, one by the assessee and the other by the revenue against the order of CIT(A)-XXIII, New Delhi dated 4-8-2009 relating to A.Y. 2000-01. 2. In assessee's appeal (ITA no. 4033/Del/01), following grounds are raised: "1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not holding that the proportionate amount of two-third of total value of ESOP as assessed by Ld. AO was not liable for assessment in the year under consideration as the same was under lock-in-period and did not carry any market value as held by Hon'ble Supreme Court in the case of Infosys Technologies Ltd. 297 ITR 167. 2. That in any case and in any view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in AY 1999-2000 as advance tax for AY 2000-01 and thereby not charging interest u/s 234B of the Act, for which no provision is existing under the Income Tax Act. 5. On the facts and on the circumstances of the case the Ld. CIT(A) has erred in allowing the credit for excess payment of tax in earlier year as advance tax in current year and thereby not charging interest u/s 234B of the act, which is contrary to the provisions of the Act. 6. The appellant craves leave to add, alter or amend any of the grounds of appeal before or during the course of hearing of the appeal." 4. Brief facts are: The assessee, who was, at the relevant time, the Managing Director of Zee Telefilms Ltd. ("Zee Telefilms") was offered options to purchase 2,00,000 equity shares of Zee Telefilms at the rate of Rs.212/- per share under an ESOP Scheme of Zee Telefilms on 01.02.1999. The said offer for purchase of options was exercised by countersigning the offer letter on the same date by the assessee. The market value of the share as on that date, i.e., 01.02.1999, was Rs. 598. Under the terms of the offer, one third of the shares were subject to a lock-in period of 1 year, another one-thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1999, being the date of Board approval, by following observations: "When specific provision is made in the Act to bring to charge the perquisite in the form of value of specified security allowed at a concessional rate, the same shall apply with full force and not at the discretion of the assessee to be taxed in earlier year. It is well settled that under the Act, the Assessing Officer must tax the right person and right person alone. By 'right person' is meant the person who is liable to be taxed, according to law, with respect to a particular income. The expression 'wrong person' is obviously used as the opposite of expression 'right person'. Merely because a wrong person is taxed with respect to a particular income, the Assessing Officer is not precluded from taxing the right person with respect to that income. Extending this analogy it can be said that when right person is to be taxed, the assessment should also be in the right year and not for any other year at the option of the assessee. Thus, even if the assessee voluntarily offered the perquisite value of share warrants for the assessment year 1999-2000, the Assessing Officer was not precluded from taxing the income in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned ACIT has not given adjustment of taxes already paid on the same income in the AY 1999-2000 while calculating the tax demand for the AY 2000-01. 3. That the learned ACIT ought to have adjusted excess taxes paid in the AY 2001-02 and AY 2002-03. 4. That the learned Assessing Officer has grossly erred in levying interest u/s 234B of the Income Tax Act. The AO failed to appreciate that perquisite for ESOPs was liable for deduction of Tax at Source ("Tax deductible") and also the fact that the excess taxes paid needs to be adjusted while calculating interest u/s 234B of the Income Tax act as has been held in the case of the appellant for the AY 1999-00 by the Hon'ble ITAT. 5. That the ld. AO failed to appreciate that interest u/s 234B of the Income Tax Act can be levied only if there is a loss to the revenue whereas in the instant case there is no such loss to the Government in view of the taxes already paid in the AY 1999-00 and subsequent years. 6. That the learned Assessing Officer has completely ignored the fact that 2/3rd shares were under lock in period and which do not have any perquisite value as per the judgment of the Apex Court in Infosys Technologies Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other consequential wrong actions arising merely because of the first wrong action. As per the Revenue, the appellant declared the income by way of perquisite in the wrong assessment year and consequently paid the income tax there on in the said year only. Now if the revenue wishes to correct the same then it has to be corrected for both the actions i.e. for the income as well as for taxes paid on the aid income. It is admittedly not the case even in any manner of the revenue that the income declared by the appellant in one year and the income assessed by the revenue in the other year is not on the same set of facts or is not arising from the same 2 lacs shares received as ESOP or the treatment is partial in one year or the remainder in the other. Thus it is an undisputed fact that the assessee declared the perquisite value of 2 lac shares of Zee Telefilms Ltd. in AY 1999-2000 and the assessing officer taxed the same in AY 2000-01. Thus the same income has been taxed in two years which is not permissible by law. Thus the said amount can be taxed in any one of the two years. If the Revenue is taxing the perquisite value in AY 2000-01, then the said income declared by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount of capital gain arising on said shares in AY 2001-02 and 2002-03 and adjust the excess tax paid in those years against the demand due for the year under consideration." 4.13. CIT(A) after considering the contentions and material available on record allowed assessee's grounds as under: i) Credit of taxes for 1999-2000 and A.Y. 2000-01: "5. I am inclined to accept the submissions of the assessee. As per the provisions of section 4, which is the charging section r.w.s. 5 and sections 15 and 17 of the Act, there is no mandate that the same transaction and the same income can be taxed twice. In Laxmipat Singhania vs. CIT (1969) 72 ITR 291 (SC), it has been observed by the Apex Court that it is the fundamental rule of law of taxation that unless otherwise expressly provided, income cannot be taxed twice. There is no such express provision, in the case in hand. Similarly, in CIT vs. R. Dalmia (1982) 135 ITR 346 (Del), the jurisdictional High Court has categorically held that t he taxing of the same item twice is not allowed in law. The Hon'ble Delhi High Court applied the decision in Sugden vs. Leeds Corporation (1913) 6 Tax Cases 211 (HL), to conclude that taxing tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form. It is a non-speaking order. Sine it is a nonspeaking order, it cannot be appreciated, that how and why the learned Assessing Officer has not adjusted the tax for assessment year 1999-2000. In Mohinder Singh Gill vs. Chief Election Commissioner AIR 1978 SC 851, it has been held that where a statutory functionary makes an order based on certain grounds, its validity must be judged by the reason so mentioned. In other words, the Hon'ble Apex Court has emphasized on the need for passing a speaking order. Similarly, in Mangalore Ganesh Bidi Box vs. CIT (2005) 273 ITR 56 (SC), the Apex Court has inter-alia stated as under:- "Recording of reasons is a part of fair procedure. Reasons are the harbinger between the mind of the maker of the decision in the controversy and the decision or conclusion arrived at. They substitute subjectivity with objectivity. As observed in Alexander Machinery (Dudely) Ltd. V. Crabtree (1974) ICR 120 Failure to give reasons amounts to denial of justice." Thus, on this ground also, the assessee deserves to succeed in Ground of Appeal no. 2." ii) Credit of taxes in respect of A.Y. 2001-02: "9. To reiterate, the sum and substance of the point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessing officer in charging interest u/s 234B. The assessing officer ahs charged interest of Rs. 1,10,68,519/- u/s 234B of the Act on the tax amount computed on the addition made on account of perquisite in respect of ESOP shares assessed by him. The appellant declared the said perquisite in the preceding assessment year 1999-2000 on the basis of the Circular no. 710 dated 24/07/95 which was valid and operative as on the date of acceptance of the offer for the said shares. The revenue accepted the said return of income u/s 143(1) of the Ct but since neither necessary advance tax thereon was paid nor the employer made requisite TDS, the revenue levied interest u/s 234B of the Act on the self assessment tax deposited. The appellant filed an appeal challenging the said levy on the plea that the said perquisite u/s 17(2) was subject to deduction of TDS and whether the employer made the same or not is not material as the appellant was not liable to deposit any advance tax thereon in terms of the sections 208 to 210 of the Act. The learned CIT(A) as well as the ITAT accepted the said plea of the appellant and deleted the said levy. Photocopies of the said two appellate orders are enc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 234B of the Act cannot be levied, a he was not an assessee liable to pay advance tax under section 208 of the Act. Reliance was placed on: - DCIT vs. Vijay V. Meghani (2005) 106 ITD 362 (Mum.); - Asia Satellite Telecommunications Co. Ltd. vs. DCIT (2003) 85 ITD 478 (Del.); - Sedco Forex International Drilling Inc. vs. DCIT (2000) 72 ITD 415 (Del.); - Mitsui Engg. and Shikpbuilding Co. Ltd. vs. ACIT (2001) 79 ITD 481 (Del.); - CIT vs. Damani Brothers (2003) 259 ITR 475 (SC); and - CIT v. Jindal Exports Ltd. and others (2009) 222 CTR (Del) 8. 4.15. CIT(A) partly upheld the contention of the assessee for deletion of interest u/s 234B by following observations: "11. I have considered the impugned order as well as the submissions made by the assessee. The scope and ambit of ss. 234A, 234B and 234C has recently been spelt out in CIT v. Jindal Exports Ltd. and others (2009) 222 CTR (Del) 8. At page 32 and 33, it has, inter alia, been held as under:- "52. We are also of the view that ss. 234A, 234B and 234C are of the same genre. On going through these provisions, it is clear that interest is sought to be charged because the Government is denied of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [Decision of Apex Court in Dr. Prannoy Roy has been reported in (2009) 222 CTR 6 (SC). 12. In the case in hand, it is undoubted that in the Assessment year 1999-2000, the assessee has paid tax, on a computation, wherein the value of the shares have been taken at Rs. 386 per share. To this extent, the assessee has paid the tax, EVEN THOUGH THE LEARNED assessing Officer has taken the transaction as pertaining to Assessment year 2000-01. This has also been upheld by the Hon'ble ITAT. No refund has been granted for assessment year 1999-2000. Sine tax or part of it has already been paid by the assessee, voluntarily, the revenue has not been deprived of tax part of such amount. Further, since refund has not been granted, the assessee would also be eligible for interest in accordance with the decision of the Hon'ble Supreme Court in Sandvik Asia Ltd. v. Cit (2006) 280 ITR 643 (SC). After considering these two aspects i.e. payment of tax as made in assessment year 1999-2000 and the interest on the potential refund which should have accrued (as no refund has been issued), the interest under section 234B would have to be computed. While computing the interest, the date of payment of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 246 in the light of this well settled legal position. So far as the first submission, which relates to the nature of an order passed by the Income Tax Officer in consequence of orders of the appellate authorities with a view to giving effect to the directions contained therein, is concerned, it is difficult to hold that such an order is an administrative order. The power of the Income-tax Officer is to make assessment under section 143 or 144 of the Act. It is that assessment which is the subject-matter of appeal. The appellate authority, on an appeal against an order of assessment has power to confirm, reduce, enhance or annul the assessment or to set aside the assessment and refer the case back to the Incometax Officer for making a fresh assessment in accordance with the direction given by such authority (section 251). Evidently the effect of an appellate order is that the order either stands confirmed, reduced or enhanced or it stands annulled or set aside. In the case of confirmation, reduction or enhancement, the original order of assessment stands modified to the extent of the directions given by the appellate authority. In the case of annulment the order becomes non e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard to the assessee. CIT(A) ought to have decided this issue itself of taxing the 2/3rd lock in share perquisite on same value as of freely tradable shares. 9. Apropos ground no. 5, learned counsel contends that the ESOPs being perquisites of salary are liable to be subjected to TDS by employer u/s 192. Assessee declared perquisite value of ESOPs for A.Y. 1999-2000 and paid taxes thereon. The taxes paid in respect of perquisites for A.Y. 1999-2000 were only in respect of perquisites. When ITAT held that the perquisites were taxable in A.Y. 2000-01, it takes in its stride a natural corollary that the taxes paid qua these perquisites have intrinsic nature of being adjusted towards perquisites taxes. It does not lie with the revenue to tax ESOPs perquisite in A.Y. 2000-01 and not to give credit of taxes paid in A.Y. 1999-2000 specifically in this behalf and further levy the interest u/s 234B. 10. Learned counsel contends that while retaining the levy of interest u/s 234B, order of CIT(A) is not correct on following counts: (i) It has been admitted that the ESOPs are perquisites of salary and taxable u/s 17(2) of the I.T. Act as salary income. Employer is under an obliga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of income-tax which would be deductible or collectible at source during the said financial year under any provision of this Act from any income (as computed before allowing any deductions admissible under this Act) which has been taken into account in computing the current income or, as the case may be, the total income aforesaid; and the amount of income-tax as so reduced shall be the advance tax payable. In terms of Section 192 of the Act, the employer is under an obligation to deduct income-tax at source on the amount of income of his employees under the said "salary". The said section reads as under: "192. Salary (1) Any person responsible for paying any income chargeable under the head "Salaries" shall, at the time of payment, deduct incometax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year. ..." For the year under consideration i.e. AY 2000-01, benefit arising to any employee in the form of any security allotted to such employee, either free of cost or at a concessional price, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Tidewater Marine International Inc. ITA no. 4612/Del/07. - Mitsubishi Corporation v. ADIT ITA no. 1492/D/2009 - BHGPE Kinhill Joint Venture v. ADIT (2008) 23 SOT 209 - SNC Lkaalin International Inc. v. DDIT (2008) 26 SOT 155 (Del. ITAT) - Asia Satellite Telecommunications v. DCIT 85 ITD 478 (Del. ITAT). 11. CIT(A) has given a clear finding that refund has not been granted to assessee for A.Y. 1999-2000, which clearly implies that no interest was paid to assessee, therefore, the levy of interest u/s 234B has been partly confirmed on erroneous assumptions. 12. Learned DR is heard, who supports the order of CIT(A) on above issues and contends that the Delhi High Court judgment in the case of DIT vs. Jacabs Civil Incorporated (supra), is in respect of TDS on non-residents where the assessee is an Indian resident. 13. In reply, the learned counsel for the assessee contends that applicability of sections 209 and 192 is same in respect of resident and nonresident assessees and therefore the ratio of decision of Hon'ble Delhi High Court applies with full force to assessee's case. 14. We have heard rival contentions and have gone through the relevant mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o doubt, if the person (payer) who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments, the non-resident is not absolved from payment of taxes thereupon. However, in such a case, the non-resident is liable to pay tax and the question of payment of advance tax would not arise. This would be clear from the reading of s. 191 along with s. 209(1)(d). For this reason, it would not be permissible for the Revenue to charge any interest under s. 234B. The Tribunal has rightly held that the assessee was not liable to pay any interest under s. 234B. CIT vs. Sedco Forex International Drilling Co. Ltd. and Ors. (2004) 186 CTR (Uttaranchal) 144: (2003) 264 ITR 320 (Uttaranchal), CIT vs. Madras Fertilizers Ltd. (1984) 149 ITR 703 (Mad) and Director of IT (International Taxation) vs. NGC Network Asia LLC (2009) 222 CTR (Bom) 86: (2009) 18 DTR (Bom) 203 relied on." 14.2. We find merit in the argument of the learned counsel for the assessee that there is no difference between a resident and non-resident assessee about levy of interest u/s 234B, therefore, we are unable to accept the revenue's argument that ratio of decision in the case of Jac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and equity. When the order of taxability is in question, it will not be fair on the part of the revenue to tax the item and deny the credit which is paid in some other year by the assessee under a bona fide belief. Besides, ITAT can pass such order which it deems fit to ensure that a just and proper assessment is framed on the assessee which includes chargeability of interest and credit of taxes. 17. We have heard rival contentions and perused the material available on record. In our view when the issue is in respect of chargeability of particular source of income and if the revenue chooses to tax the source in a particular year at variance with assessee's claim, it is unjust for the revenue to deny the credit of the taxes paid qua the very same transactions albeit under a bona fide belief in different year. In our view the controversy in question pertains to year of taxability of perquisites and valuation of perquisites which leads to the amount of capital gains. We are unable to find any infirmity in the order of CIT(A), which is based on proper appreciation of facts, just and proper considerations. It has been observed that refund of taxes for A.Y. 1999-2000 was not given ..... X X X X Extracts X X X X X X X X Extracts X X X X
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