TMI Blog2016 (2) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant date of passing of the order by the TDS Officer would establish that Sections 201 and 201[1A] of the Act were not applicable to the appellant's case. In the circumstances, the Assessee falls outside the scope of Section 194A read with Section 200 of the Act during the relevant assessment years. Thus, the consequential provisions of Section 201(1) and Section 201(1A) are not attracted. - Decided in favour of assessee - ITA Nos.750 and 758-759/2009 - - - Dated:- 2-2-2016 - N. K. Patil And S. Sujatha, JJ. For the Appellant : Sri. V. K. Gurunathan, Adv. For Sri.S. Parthasarathi For the Respondent : Sri. K. V. Aravind, Adv. JUDGMENT These appeals are filed by the assessee challenging the common order dated 03.07.2009 passed by the Income Tax Appellate Tribunal, B Bench, Bangalore ('Tribunal' for short) under Section 260-A of the Income Tax Act, 1961 (the 'Act' for short) relating to the assessment years 2005-06 to 2007-08. 2. Facts in brief are: The appellant is an undertaking of the Government of Karnataka engaged in power transmission. The appellant purchases electricity from various parties by entering into power purchase agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirming the orders passed by the Authorities. Being aggrieved by the said common order passed by the Tribunal for the assessment years in question, the assessee is before this Court. The matter was admitted on 20.11.2009 to consider the following substantial questions of law: 1. Whether in law, the Appellate Tribunal was justified in ignoring the evidence and submissions of the appellant with regard to mutual agreement between the appellant and the suppliers of power not to enforce the interest clause in the Power Purchase Agreement and thereby the appellant had no obligation to pay interest and consequently, had no obligation to deduct tax at source under Section 194A of the Act. 2. Whether in law, the Tribunal was justified in upholding the levy of tax u/S 201(1) and the interest u/S 201(1A) when the bonafides of the appellant had been proved for the non-deduction of tax at source if any u/s 194A of the Act? 5. Heard Sri Gurunathan, learned counsel appearing for the appellant as well as Sri K V Aravind, learned counsel appearing for the revenue and perused the material on record. 6. Learned counsel appearing for the appellant would contend that the following t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t source. The provisions of Section 201(1) contemplates who are all the persons who would have to face the consequences of: (1) failure to deduct tax (2) failure to pay the tax deducted at source to Government account. 11. Much emphasis is placed on the words 'if any such person' appearing in Section 201(1) of the Act to contend that any such person referred to in Section 200 covers only the following categories: (i) Any person who has deducted any sum (ii) Employer referred to in sub-section (1a) of Section 192, and (iii) another category of persons referred to in Section 194 i.e., a company which makes a dividend is liable to deduct TDS on dividend payments 12. Subsequent to passing of Finance Act, 2008, though with retrospective effect from 01.06.2002, the term 'any such person' that existed in the old provision was substituted by the terms 'any person'. A new clause, clause a of sub-section(1) of Section 201, who is required to deduct any sum in accordance with the provisions of this Act was introduced. The said Finance Bill, 2008 bringing in the above amendment with retrospective effect from 1.6.2002 received the assent of the Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t tax at source, such an interpretation being contrary to the intent of the Legislature. 16. Learned counsel would further distinguish the judgment of Erricson Communications (supra) contending that the said judgment was rendered in the context of Section 195 of the Act wherein. Section 195 of the Act imposes a statutory obligation on any person responsible for paying the non resident any sum 'chargeable under the provisions of the Act' which expression do not find place in Section 194-A of the Act. 17. It is further contended that [a] the tax deductor had failed to satisfy the Officer-in-charge of TDS that taxes due have been paid by the deductee-assessee; [b] the assessee company is in default for non compliance of TDS provision under Section 194A of the Act as held by the Tribunal. Any provision reversed in the account books belatedly in March 2007 for the assessment years in question would not come to the rescue of the Assessee to absolve him from deducting the tax at source under Section 194A of the Act. The Assessee-Company was under an obligation to deduct tax at source which it had failed to do so as evidenced from the Auditor's report and as such the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force : [Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section.] [Explanation.-For the purposes of this section, where any income by way of interest as aforesaid is credited to any account, whether called Interest payable account or Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] . 22. Section 201[1] of the Act reads thus: 1) If any such person referred to in Section 200 and in the cases referred to in section 194, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident- (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed. Provided further that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax. 24. By this amendment, the term 'any such person' is substituted with ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, Section 194A[1] of the Act would not be made applicable. In other words, if no income is attributable to the payee, there is no liability to deduct tax at source in the hands of the tax deductor. In view of the admitted fact that interest being not paid to the payees [suppliers] being reversed in the books of accounts, we are of the considered opinion that there would be no liability to deduct tax as no income accrued to the payees [suppliers]. It is true that in the case of Ericsson Communication Limited [supra], the Delhi High Court was dealing with the case of Section 195 of the Act wherein obligation of a person to deduct tax at source would be applicable to the 'income chargeable under the Act'. Absence of such words 'chargeable to tax' under the provisions of Section 194-A of the Act would not empower the authorities to invoke the provisions of Sections 201 and 201(1A) of the Act ignoring the words 'any income by way of interest'. 27. Yet another reason assigned by the Tribunal to reject the appeal filed by the Assessee is to the CBDT Circular No.275/201/95-IT[B] dated 29.1.1997. The relevant portion of the said circular reads thus: no d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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