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TMI Blog2015 (12) TMI 1469X X X X Extracts X X X X X X X X Extracts X X X X ..... crores per annum was to be paid as a minimum guarantee payment to KKFHPL. The dispute in the present appeal is with regard to the assessee not having deducted the tax at source (TDS), as was required under Section 194 I of the Income Tax Act, 1961 (for short 'Act'). The assessee was thus held liable for the consequences for failure of deduction of TDS provided under Section 201 of the Act. It is not disputed that the assessee has been filing its return in the prescribed format provided under Section 206 of the Act with regard to deduction of tax made at source. For the relevant assessment period, although certain other tax deductions made at source were declared, but neither tax deduction at source (TDS) was made with regard to said payment by the assessee to KKFHPL, nor was any such declaration made in its return. The payment of licence fee made by the assessee to KKFHPL, under the lease agreement for the relevant period, amounted to Rs. 1.37 crores; plus Rs. 24.90 crores, which was further paid by the assessee as upfront fee to the KKFHPL (hereinafter also referred as Recipient) on which the Revenue claims that tax was to be deducted at source, which was not done. Thus, the admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue on merits by stating that in case its finding in respect of limitation was reversed, the matter on merits stood decided. The Tribunal, on merits, thus held that "If the deductee assessee has paid advance tax after considering the licence fee then no interest u/s 201(1A) will be chargeable, as the Board Circular has mentioned that interest u/s 201(1A) is to be charged till the date of payment of tax by the deducteeassessee. Hence, the issue of computation of interest u/s 201(1A) for the asst. year 2002-03 will have to be worked again by the Assessing Officer in respect of licence fee. Since we have held that the assessee was required to deduct tax at source from the upfront amount and therefore, the Assessing Officer was right in raising demand u/s 201 and 201(1A). However, this is without prejudice to our earlier finding that the order for the asst. years 2002-03 and 2003-04 are barred by limitation." Challenging the said order of the Tribunal, this appeal has been filed by the Revenue. Though the appeal has been admitted on the questions of law, as mentioned in the order dated 2.6.2010, but by consent of learned counsel for the parties, the questions of law to be considered h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, has failed to deduct and pay such tax. (1A) Without prejudice to the provisions of subsection (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 - (i) at one percent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted and (ii) at one and one-half percent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of Section 200. Sub-section (3) as it was inserted by Finance (No.2) Act, 2009 with effect from 1.4.2010 is also reproduced below: (3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was served. According to him, Section 147 of the Act would apply for computing the reasonable period and not Section 153(1) of the Act, and since notice under Section 148 could be served up to six years from the end of the relevant assessment year (in cases where the amount involved is more than Rs. 1 lakh) coupled with Section 153(2) of the Act providing one year time for passing the order of assessment, reassessement or recomputation in which the notice under Section 148 was served, the same would amount to seven years from the end of the financial year and he thus contends that reasonable period of limitation under Section 201 of the Act should also be seven years from the end of the relevant financial year. Learned counsel has also relied on the proviso to sub-section (3) of Section 201 of the Act which provides that such order for financial year commencing on or before 1.4.2007 may be passed at any time on or before 31.3.2011. He thus contends that in any case, for initiating proceedings for the assessment year 2002-03 (which falls before 1.4.2007), the proceedings could be completed on or before 31.3.2011. Per contra, Sri Rupesh Jain, learned counsel for respondent assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be exercised at any time; rather it should be exercised within a reasonable time. It is so because the law does not expect a settled thing to be unsettled after a long lapse of time. Where the legislature does not provide for any length of time within which the power of revision is to be exercised by the authority, suo motu or otherwise, it is plain that exercise of such power within reasonable time is inherent therein" As early as in the year 1969, the Apex Court, in the case of State of Gujarat Vs Patel Raghav Natha & Ors AIR 1969 SC 1297, has held that where there is no period of limitation prescribed, the same should be done within a reasonable time, and the length of reasonable time must be determined on the facts of the case. Then, in the year 1989, again the Apex Court in the case of Government of India Vs Citadel Fine Pharmaceuticals & Ors (1990) 184 ITR 467, while dealing with the case relating to excise duty, has held that 'in the absence of any period of limitation, it is settled that every authority is to exercise the power within a reasonable time..... What would be the reasonable time would depend on the facts of each case'. Thus, we can safely say that the law i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s relied on the said judgment and thus held that four years period would be a reasonable period of time for initiating action. Though learned counsel for the appellants / Revenue has vehemently argued that in view of the decision of the Apex Court in the case of Uttam Namdeo Mahale Vs Vithal Deo & Ors AIR 1997 SC 2695, when no period is prescribed in a Statute, then by necessary implication, action could be taken at any time, we are, however, of the view that the said case is distinguishable on facts, as the case before the Apex Court was a case of execution of an order of ejectment, whereas the case before us is one under the Income Tax Act, where action has to be taken for TDS having not been deducted and deposited. The law in this regard is well settled that where no limitation is provided, then the period of limitation would be a reasonable period of time, depending upon the facts of each case. The facts of the case before the Apex Court in the case of Uttam Namedeo Mahale (supra) were different from the facts of the case in hand. The provision for tax deduction at source is only a mechanism for collection of tax, which is to be actually paid by the Recipient of the money, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment under Sections 147 and 148 of the Act would be on a completely different footing, and therefore, would not merit consideration. However, keeping in view the fact that the Tribunal, in various decisions, had taken the view that four years period would be a reasonable period of time to initiate action, the Delhi High Court held that where no limitation was prescribed (as under Section 201 of the Act), reasonable period would be four years. Following such decision of the Delhi High Court, the Tribunal also held that four years period would be a reasonable period for initiating action under Section 201 of the Act. Much reliance was placed by the learned counsel for the Revenue on the proviso added to sub-section (3) of Section 201 of the Act, which provides that such order for a financial year commencing on or before 1.4.2007 may be passed at any time on or before 31.3.2011. It is noteworthy that the words used in the said proviso are 'may be passed', which means, it relates to something to be done in future, and not what has already been done, in which case, the words ought to have been 'may have been passed', which are not there. In the memorandum explaining the provisions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct 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 'one percent for every month or part of a month 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 and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of Section 200." The said sub-section clearly provides that interest would be payable from the date on which such tax was deductible, i.e., the date when payment was made by the assessee to the Recipient; till the date on which such tax was actually paid, i.e., tax was deposited by the Recipient. As we have already noticed above, the provision for tax deduction at source is only a mechanism for collection of tax by the payer, even though the liability to pay tax is that of the Recipient. The provision for payment of interest under sub-section (1A) of Section 201 of the Act is only of compensatory nature. It cannot be a means to penalise the payer. The provision for payment of interest would arise from the date when it ought to have been dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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