TMI Blog2016 (8) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... - - Dated:- 9-3-2016 - S. Muralidhar And Vibhu Bakhru, JJ. For the Petitioner : Mr. M.S. Syali, Senior Advocate with Ms. Sonia Mathur, Mr. Aseem Mowar, Mr. Mayank Nagi, Mr. Rakshit Thakur, Ms. Husnal Syali and Mr. Tarun Singh, Advocates. For the Respondents : Mr. Anuj Aggarwal with Mr. Subhanshu Gupta, Advocates for UOI. Mr. Dileep Shivpuri, Senior Standing Counsel and Mr Zoheb Hossain, Junior Standing Counsel for the Revenue. W. P. (C) 8535/2011 CM APPLS 19305/2011, 9781/2012,W.P.(C) 8536/2011 CM APPLS 19307/2011, 9778/2012, W.P.(C) 8537/2011 CM APPLS 19309/2011, 9776/2012, W.P.(C) 8641/2011 CM APPLS 19537/2011, 10666/2013, W.P.(C) 8642/2011 CM APPL 19541/2011, W.P.(C) 8643/2011 CM APPL 19545/2011, W.P.(C) 8644/2011 CM APPL 19549/2011, W.P.(C) 8647/2011 CM APPL 19557/2011 JUDGMENT S. Muralidhar, J. 1. The common question that arises for consideration in these writ petitions concerns the validity of the action initiated by the Respondent Income Tax Department ('Department') against the Petitioners under Sections 201(1) and 201(1A) of the Income Tax Act, 1961 ( the Act ) for non-deduction of tax at source ( TDS ) for periods earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing out from the MRP price, which happens before the happening of the incident, i.e. recovery of the price from customers. 5. Accordingly to TTSL, in terms of the above arrangement, Section 194H of the Act concerning deduction of TDS towards commission or brokerages does not apply to the above transaction with the channel partners. TTSL filed its TDS return/statement under Section 200 of the Act in each of the relevant Assessment Years (AYs) [for WP (C) No. 8642/2011 the relevant AY being 2001-2002]. It may be noticed at this stage that the Karnataka High Court in a decision Bharti Airtel Ltd. Vs. Deputy Commissioner of Income-Tax (2015) 372 ITR 33 (Kar) held that no TDS is recoverable from the payments made by cell phone companies to the distributors where the products sold were pre-paid cards. 6. Section 201 as it stood prior to the amendment [which introduced sub-section (3) with effect from 1st April, 2010] did not contain a provision stipulating a time limit for initiation of the proceedings thereunder. The said provision reads as under: Consequences of failure to deduct or pay. 201. (1) Where any person, including the principal officer of a company,- (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was asked to explain why it should not be treated as an Assessee in default. After the reply was filed by the Assessee, the AO passed an order treating the said Assessee as an Assessee in default for the purposes of Section 201 of the Act and this was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. However, the Income Tax Appellate Tribunal ( ITAT ) came to the conclusion that the proceedings against the Assessee for treating it as an Assessee in default under Section 201 of the Act were not initiated within a reasonable period of time. 8. The Court in CIT vs. NHK Japan Broadcasting Corporation (supra) noted that there was no provision in the Act, which stipulated a time limit regarding initiation of the proceedings under Section 201 of the Act. It referred to Section 153(1)(a) of the Act, which required an assessment to be completed within two years from the end of the AY in which income was first assessable. It also noted that the ITAT had in a series of decisions taken the view that four years would be a reasonable time for initiating action, in case where no limitation is prescribed. In CIT vs. NHK Japan Broadcasting Corporation (supra), the ITAT had applie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be passed at any time on or before the 31st day of March, 2011. (4) The provisions of sub-clause (ii) of sub-section (3) of section 153 and of Explanation 1 to section 153 shall, so far as may, apply 'to the time limit prescribed in sub-section (3). 12. The Statement of Objects and Reasons of the Finance (No. 2) Bill, 2009 in relation to the amendment to Section 201 of the Act read as under: Sub-clause (b) of clause 65 seeks to provide time limit for passing of order under sub-section (1) of section 201 in case of resident tax payers. It provides that no order shall be made under sub-section (1) of section 201, deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax in the case of a person resident in India, at any time after the expiry of two years from the end of the financial year in which the statement is filed in a case wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artly, under sub-section (1A) of section 192, as the employee would not have paid tax on such perquisites, (c) the deductee is a non-resident as it may not be administratively possible to recover the tax from the non-resident. It is proposed to make these amendments effective from 1st April, 2010. Accordingly it will apply to such orders passed on or after the 1st April, 2010. 14. It is claimed that, therefore, as far as the Department was concerned it understood the insertion of the proviso to Section 201(3) as providing sufficient time for pending cases in respect of which the proceedings were to be completed by 31st March, 2011. 15. However, it appears that contrary to the above understanding by the Department itself depicted in the above circular issued by the CBDT, the Department understood the above amendment as permitting it to initiate proceedings under Section 201 of the Act for treating an Assessee as an Assessee in default even in respect of alleged failure to deduct TDS for a period more than four years earlier to 31st March, 2011. 16. This question, after the amendment to Section 201 of the Act brought about by the Finance (No. 2) Act, 2009 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though, the Supreme Court had granted special leave and has apparently stated in its final order rejecting the Revenue s appeal that the question is left open, the mere circumstance that the Parliament did not spell out any time limit before it did eventually in 2009 - and subsequently in 2014 would not lead to the sequitur that this Court s ruling in NHK Japan requires consideration. In that judgment, the Division Bench had given various reasons, including the application of the rationale in Bhatinda District (supra). In NHK Japan, the Court had noticed that the facts in Bhatinda District (supra) judgment concern exercise of jurisdiction by a statutory authority in the absence of specific period of limitation. The Court in Bhatinda District (supra) held as follows: 17. It is trite that if no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period. What, however, shall be the reasonable period would depend upon the nature of the statute, rights and liabilities thereunder and other relevant factors. 18. Revisional jurisdiction, in our opinion, should ordinarily be exercised within a period of three years ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in default under Section 201 of the Court could be initiated for a period earlier than four years prior to 31st March, 2011. 18. Mr. M.S. Syali, the learned Senior Advocate for the Petitioners states that although the challenge in these petitions is also to the vires of the proviso to Section 201(3) of the Act as inserted by the Finance (No. 2) Act, 2009, the Petitioners would be satisfied if the interpretation sought to be advanced by them on the scope and ambit of proviso to sub-section (3) of Section 201 of the Act is accepted by the Court. In other words what has been canvassed on behalf of the Petitioners is that the proviso to Section 201(3) of the Act has to be read consistent with the law explained by the Court in CIT vs. NHK Japan Broadcasting Corporation (supra) and should be held not to permit the Department to initiate proceedings for declaring Assessees to be Assessees in default for a period more than four years prior to 31st March, 2011. 19. Mr. Dileep Shivpuri, the learned Senior Standing Counsel for the Revenue, however, seeks to advance a different line of argument. According to him the action taken by the Department was pursuant to a decision in CIT v. Id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Mr. Shivpuri, i.e., CIT v. Idea Cellular Ltd. (supra), there is no such finding or direction to the Department by the Court requiring it to initiate proceedings for declaring the Assessee to be an Assessee in default. The Court is, therefore, of the view that the reliance by the Department on Section 153(3)(ii) of the Act and the decision in CIT v. Idea Cellular Ltd. (supra) to justify initiation of the proceedings in the present case against the Petitioner is misconceived. 23. It was then contended by Mr. Shivpuri, that the decision in CIT vs. NHK Japan Broadcasting Corporation (supra) would not hold good after 1st April, 2010 and that the decision of this Court in CIT (TDS)-I v. CJ International Hotels Pvt. Ltd. (supra) was not correctly understood by the Petitioners herein. In his reading of the decision in CIT (TDS)-I v. CJ International Hotels Pvt. Ltd. (supra), the Court did not categorically state therein that the Department was prohibited from initiating proceedings in declaring an Assessee to be an Assessee in default for a period earlier than 31st March, 2011. 24. The Court is unable to agree with the above submission of Mr. Shivpuri. As the Court sees it, its de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we shall presently point out, binding on the Tax Department in administering or executing the provision enacted in sub-section (2), but quite apart from their binding character, they are clearly in the nature of contemporanea expositio furnishing legitimate aid in the construction of sub-section (2). The rule of construction by reference to contemporanea expositio is a well established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous. This rule has been succinctly and felicitously expressed in Crawford on Statutory Construction (1940 ed) where it is stated in paragraph 219 that administrative construction (i. e. contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overturned; such a construction, commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight; it is highly persuasive. The validity of this rule was also recognised in Baleshwar Bagarti v. Bhagirathi Dass (1914) ILR 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification in question, particularly in regard to the manner in which outstanding transactions were to be closed or liquidated. The principle of contemporanea expositio (interpreting a statute or any other document by reference to the exposition it has received from contemporary authority) can be invoked though the same will not always be decisive of the question of construction. (Maxwell 12th Edn. p.268). In Crawford on Statutory Construction (1940 Edn.) in para 219 (at pp. 393-395) it has been stated that administrative construction (i.e. contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overturned; such a construction, commonly referred to as practical construction, although not controlling, is nevertheless entitled to considerable weight; it is highly persuasive. In Baleshwar Bagarti v. Bhagirathi Dass (supra) the principle, which was reiterated in Mathura Mohan Saha y. Ram Kumar Saha 35 Ind Cas 305 has been stated by Mukerjee J. thus: It is a well-settled principle of construction that courts in construing a statute will give much weight to the interpretation put upo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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