TMI Blog2015 (12) TMI 1469X X X X Extracts X X X X X X X X Extracts X X X X ..... tion had already been taken, but was meant for only such cases which were pending at the time of insertion of sub-section (3) to Section 201 of the Act. Thus, for the reasons given above, we find that the Tribunal was correct in holding that the order passed under Sec.201 (1) and (1A) of the Act on 28.1.2008 for the assessment year 2002-03, would be barred by limitation as the period of limitation would be four years from the end of the financial year in question. - Decided in favour of the respondent assessee and against the Revenue. Liability to interest under Section 201(1A) - ITAT held that the assessee was liable to pay interest under Section 201(1A) of the Act for not deducting TDS, from the date when the payment was made by the assessee to the Recipient, till the date the tax was deposited by the Recipient - Held that:- 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 inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling 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 ₹ 1.37 crores; plus ₹ 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 admitted position is that on the said amount, neither any tax was deducted at source, nor the same was reflected in the return filed by the assessee under Section 206 of the Act. The assessment of the Recipient company for the relevant assessment year 2002-03 was completed under Section 143(3) of the Act on 28.2.2005, which was within the period prescribed under Section 153 of the Act. Besides this, the return of income of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. 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 have been reframed, as follows: 1. Whether the Tribunal was correct in holding that the order passed under Section 201(1) and 201(1A) of the Act dated 28.1.2008 for the assessment year 2002-03 is barred by limitation? 2. Whether the Tribunal was correct in holding that the assessee was liable to pay interest under Section 201(1A) of the Act for not deducting TDS, from the date when the payment was made by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 (i) Two years from the end of the financial year in which the statement is filed in a case where the statement referred to in Section 200 has been filed; (ii) Four years from the end of the financial year in which payment is made or credit is given, in any other case: Provided that such order for a financial year commencing on or before the 1st day of April, 2007 may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 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 assessee has submitted that when no limitation is provided, limitation would be a reasonable period and not unlimited period. According to him, reasonable period would be as provided under Section 153(1) of the Act, which is two years from the end of the assessment year in which the income was first assessable, that is, three years from the end of the financial yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is well settled that when there is no period of limitation prescribed for taking action under any provision of law, the same should be taken within a reasonable period, which would depend upon the facts of the case and the provisions of the Act under which action has to be taken. This is necessary, also because if any right has accrued in favour of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, and not by the payer. It is thus the liability of the Recipient and not the payer. However, under the Income Tax Act, a provision has been made requiring the payer to deduct the tax from the account of the Recipient and deposit the same with the Department. In the present case, what we notice is that the respondent assessee had not deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 the Finance (II) Bill, 2009, it was clearly stated that to provide sufficient time for pending cases, it is proposed to provide that such proceedings for a financial year beginning from 1st April, 2007 and earlier years can be completed by the 31st March, 2011 . As such, the memorandum itself clarified that the proviso is fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctually 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 deducted i.e., from the date of payment by the payer to the Recipient. The liability to pay interest would end on the date when such tax has been deposited by the Recipient, either by way of advance tax or along with the return of income. Interest, herein, being compensatory in nature, cannot be thus charged for th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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