TMI Blog2016 (9) TMI 950X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary to the findings of the ld. CIT(A). In view of the above we do not find any reason to interfere in the order of the ld. CIT(A). Hence this ground of appeal of the revenue is dismissed. - ITA Nos. 46&47/Kol/2014, ITA No. 50/Kol/2014 - - - Dated:- 16-9-2016 - Shri Waseem Ahmed, Accountant Member And Shri K. Narasimha Chary, Judicial Member Assessee Shri Ravi Tulsiyan, FCA Department Shri R.P.Nag, Addl.CIT(DR) ORDER Per Waseem Ahmed, Accountant Member ITA Nos.46 47/Kol/2014(Assessee s Appeal)A.Y.2008-09 2009-10: These appeals by the assessee are against the order of Commissioner of Income Tax (Appeals)-I, Kolkata dated 29.08.2013. Assessments were framed by I.T.O.(TDS), Ward-59(4), Kolkata u/s 201(1)/201(1A) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 16.03.2011 for assessment years 2008-09 2009-10. The grounds raised by the assessee in both the appeals are as under:- 1. The appellate order passed by the CIT(A) is unwarranted, arbitrary, without proper reasons, invalid and bad in law, to the extent to which it is prejudicial to the interests of the appellant assessee. 2. On the facts and in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed U/S 201(1)/201(1A) by the learned TDS officer treating the assessee in default, the assessee filed an appeal before the learned CIT(A). 4.1. The learned CIT(A) upheld the order of the AO for charging the interest liability U/S 201(1A) of the Act amounting to ₹ 3,61,761. 5. Aggrieved with the order of the learned CIT(A), the assessee is in appeal before us. The ld. AR before us submitted that interest chargeable U/S 201(1A) is compensatory in nature, i.e., the Government is entitled to interest for the period during which the tax, which is the money belonging to the Government, was withheld by the assessee. This logic/ratio is true if the deductee -payee is liable to pay income tax. However, in the present case the deductee-payee i.e. MKJ Enterprises Ltd. had already included the impugned interest in its Total Income and paid the requisite tax on it. Further, as evident from the Income Tax Return filed for the assessment year under consideration M/s MKJ Enterprises Ltd has claimed refund of taxes. A copy of the ITR acknowledgment for the year is enclosed. As such, there was no shortfall for payment of taxes by MKJ Enterprises Ltd and as such there was no los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of material. The Revenue's appeals are directed only against the direction of the learned Commissioner of Income-tax (Appeals) for deletion of interest charged under section 201 (lA) of the Act for both the years after due verification of the facts that the recipient had already deducted tax at source in full. The provision of section 201 provides not only for collection of tax which had not been deducted but for levy and charge of interest also. If the tax had already been paid by the recipient on such income it may not be justified to recover the said amount of tax, but so far as the liability of interest is concerned, that cannot be considered to be non- existent on account of deposit of tax by the recipient at a subsequent or later stage. It was also held by the Hon'ble Rajasthan High Court at page 101 in the case of CIT v. Rathi Gum Industries [1995) 213 ITR 98 that the interest is to compensate the Revenue for the loss, which it had suffered on account of late receipt of the tax. The provisions of interest are mandatory and automatic and interest has to be paid from the date on which the tax was deductible till the date on which the tax is actually paid. We may also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payee) and as per the provisions of section 199 of the Act, whenever any person who deducts tax before making payment to another person pays the same to the Central Government, he pays the tax which is payable by the payee of the said amount. If the person on whose behalf tax was to be deducted at source had paid such taxes and that too at the time when it had become due, it would not be proper on the part of the Revenue to levy any interest under section 201 (lA). The assessee was a co-operative society which had entered into two contracts with RB for construction of its building. From the amount which was to be paid by the assessee-society to the contractor, the assessee did not deduct any amount of tax which it was required to deduct as per the provisions of section 194C of the Act. Though the assessee-society did not deduct the amount of tax as per the provisions of section 194C, the contractor had paid advance tax as well as tax on self-assessment with respect to the amount received by it from the assesseesociety. As the assessee-society had not deducted the tax at source, in the process of assessment of the income of the society for the assessment years 1974-75 to 1977- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the TDS on payments made to the deductee-assessee. It was submitted that the deductee-assessee has declared losses in the return of income filed for the year and as such failure to deduct TDS will not make the assessee as 'assessee in default'. However, interest U/S 201(1A) was charged by the learned AO and the same was sustained by the learned CIT(A). Aggrieved, the assessee went in appeal before the Hon'ble ITAT. The Hon bIe ITAT discussed the facts of the case in detail and held that, 21. Now we shall turn to the facts of the instant cases before us, wherein interest u/s 201(1A) was levied upon the assessees. It may be noted that interest s 201 (lA) is levied if there is any failure on the part of any assessee to deduct tax at source (TDS)/remit the same at the right point of time on the income paid by him. The TDS amount to be so deducted/remitted belongs to the revenue/Government. Hence, interest u/s 201 (lA) is charged; since the assessee is considered to be enjoying the TDS amount, which belongs to the Government, till the time he deducts and remits the same to the account of the Government. It is pertinent to note that the Tax so deducted at source is give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue is liable to pay interest u/s 244A of the Act to Mr. B. (B) If TDS was not deducted:- If TDS was not deducted by Mr. A on the interest payment made to Mr. B, then Mr. B would not claim any refund from the revenue. In that case, the question of payment of interest u/s 244A by the revenue to Mr. B does not arise. Since Mr. B has declared loss in his return of income, he is also not liable to pay any tax. In this situation, can it be said that Mr. A has withheld/enjoyed the tax amount belonging to the Government? The answer would be yes, only if Mr. B is liable to pay tax. In this example, Mr. B is not liable to pay any tax and hence question of 'withholding any tax money' belonging to revenue does not arise. Accordingly, it cannot be said that Mr. A has withheld/enjoyed the tax amount belonging to the Government. Even if he is compelled to deduct TDS, ultimately, the same is liable to refunded to Mr. B. Hence, under this kind of situation, it cannot be said that the Government is deprived of its fund or any loss was caused to the Government. 24. The facts analysed in Situation B is applicable to the facts prevailing in the instant cases. On the basis of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes. The facts of the case in Situation B above are squarely applicable to the facts of the appellant. In the present case, MKJ Enterprises Ltd was not liable to pay any tax and hence question of 'withholding any tax money' belonging to revenue does not arise. Accordingly, it cannot be said that the appellant has withheld/enjoyed the tax amount belonging to the Government to warrant the levy of interest U/S 201(1A) of the Act Further, in a recent decision of the ITAT, Panaji in the case of RBL Bank Ltd vs ITO (TDS) (ITA 329 to 331/PNJ/2015) (copy enclosed at Page 13-20 of the Paper Book) dated 24-11-2015, it was held that : We find that it is not in dispute that the recipient of interest income i. e. Visvesvaraya Technological University has filed its return of income and has included the interest paid by the assessee as its income in the said return of income. As per sec. 4 of the Income Tax Act, it is the recipient of interest who is liable to pay tax. The machinery of TDS provisions made in statute is to facilitate the collection of that tax which is the principally payable by the recipient of the income. The TDS is not a separate or independent tax. Onc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e must be adopted. This is a well-accepted rule of construction recognised by this Court in several of its decisions. CIT vs. Kulu Valley Transport Co. P. Ltd (1970) 77ITR 518 (SC): Interpretation of statutes-Taxing statute-Two views possible-If two views are possible, the view which is favourable to the assessee must be accepted while construing the provisions of a taxing statute. Held Even if two views are possible the view which is favourable to the assessee must be accepted while construing the provisions of a taxing statute. CIT vs. Madho Prasad Jatia (1976) 105 ITR 179 (SC) Interpretation of statutes-Ambiguous provisions-Admitting two interpretations-View which is favourable to subject should be adopted. It is well-settled that there is no equity about tax. The provisions of a taxing statute are clear and unambiguous, full effect must be given to them irrespective of any consideration of equity. Where, however, the provisions are couched in language which is not free from ambiguity and admits of two interpretations a view which is favourable to the subject should be adopted. The fact that such an interpretation is also in consonance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, Hon 'ble non jurisdictional High Court's judgment in favour of the assessee, in the light of this legal principle laid down by Hon 'ble Supreme Court, is to be preferred over the Hon 'ble non jurisdictional High Court not favourable to the assessee. In our humble understanding, it is only on this basis, without sitting in value judgment on the views expressed by a higher tier of judicial hierarchy, that the conflicting views of Hon'ble non jurisdictional High Courts can be resolved by us in a transparent, objective and predictable manner. Shri Mahila Sewa Sahakari vs ACIT (OSD) I.T.A. No. 62/Ahd/2014(copy enclosed at page 37-55 of the Paper Book) 5.3 The Hon'ble Coordinate Bench has noted that there is a divergent view between the Hon'ble Delhi High Court in the case of M/s. Vasisth Chay Vyapar Ltd. reported at 330 ITR 440, Delhi and the Hon'ble Madras High Court in the case of CIT vs. Sakthi Finance Ltd. reported at (2013) 31 taxmann.com 305 (Mad.), in respect of application of the judgement of the Hon'ble Apex Court rendered in the case of Southern Technology Ltd. (supra) on income recognition norms prescribed by R.B.I. The H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan attributable to such investments as business income. 2) That the increase of investments from 9.5 Cr. last year to 19.1 Cr. this year as evidenced from Schedule 14 to the P/L Account Balance Sheet, was due to conversion of shares of ₹ 8.5 Cr. written off from stock to investment as on 01.04.2004 and, therefore, interest claimed on purchase /stock of such investments should be disallowed. 3) That the appellant craves for leave to add, delete or modify any grounds of appeal before or at the time of hearing. The only issue raised by the revenue is that the ld. CIT(A) erred in deleting the addition made by the AO for ₹ 96,00,000/- on account of interest on loan attributable to the investments in securities for ₹ 19.1 crores. 11. The facts in brief as culled out from the order of the lower authorities and the documents are that the assessee in the present case is a limited company and engaged in the business of real estate development, trading in goods merchandise and securities. The assessee for the year under consideration has filed its return of income on dated 30th October, 2005 declaring business loss of ₹ 1,32,69,170/-. Thereaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 01.04.2004. The assessee till 31st March, 2005 has shown stock in trade of the shares for ₹ 8.5 crores. Therefore the interest paid on the loan is a business expenses and very much allowable for deduction. The ld. CIT(A) accordingly deleted the addition made by the AO by observing as under :- 3.2 I have examined the assessment order as well as the argument given by the A.R. of the appellant. I have also examined the ledger account of both Stock-in-trade as well as Investment. The appellant has also brought to my knowledge a letter addressed to the A.O. dt.18.12.2007 in which it has been stated at Para-5 that the shares of M/s. Santosh Industries Ltd. were not sold during the year but shown in Investment as on 31 03.2005. The ledger account also established that the conversion of shares of M/s. Santosh Industries Ltd. worth ₹ 8.50Crores was with effect from 31.03.2005 and not 1.4.2004 as wrongly presumed by the A.O. I am also in agreement with the argument of the A.R. of the appellant that disallowance u/s.14A can be made only when there is a tax free income. Reference in this context is being made to the decision of the Hon'ble Bombay High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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