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TMI Blog2016 (12) TMI 1534X X X X Extracts X X X X X X X X Extracts X X X X ..... lant. 3. The question arises in the following facts. The assessee is a Board established under Section 18 of the Punjab Infrastructure (Development and Regulation) Act, 2002 (Punjab Act) and for the purposes of that Act. It is wholly controlled and managed by the Government of Punjab. The agreements which are the subject matter of this appeal have not been produced. That, however, need not detain the decision in the appeal. The facts stated in the orders of the authorities under the Income Tax Act, 1961 and the appeal are sufficient for the decision of the appeal. Suffice it to state that the assessee entered into a contract with a party for achieving its objects under the Punjab Act under various models such as the Build Operate and Transfer, Design Build Operate and Transfer and Operation and Management models. Under these models-contracts the payments are made to private parties referred to therein as concessionaires. 4. The first question that arises is whether under these contracts the assessee was bound to deduct tax at source (TDS) under Section 194C? The second question arises on the assessee's alternate submission that even assuming that it was liable to deduct tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... frain from answering that question in this appeal as in our view, it ought to be decided by the Tribunal in the first instance. There is a possibility of questions of fact arising. For instance, it would be necessary to consider whether the assessee was merely a nodal agency for the Government of Punjab or whether it was acting on its own on a principle to principle basis with the concessionaire. The answer to this issue may not depend only upon the terms of the agreement. 8. We will, therefore, proceed to answer the question raised in this appeal on the basis that Section 194C of the Act applies to the case requiring the assessee to deduct tax at source. 9. It would be convenient to set out Section 201 as it stood upto the assessment year 2011-12 from time to time for these appeals on the question before us concern the assessment years 2007-08 to 2011-12. We will first set out Section 201 at it applied upto the assessment year 2010-11 and then as it applied for the assessment year 2011-12. While doing so, we will include the first proviso to sub section (1) which was inserted by the Finance Act, 2012 with effect from 1st April, 2012 for it was contended on behalf of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the assessment year 2011-12, insofar as it is relevant, reads as under: - "Consequences of failure to deduct or pay. 201. [(1) Where any person, including the principal officer of a company- (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existing provisions of Chapter XVII-B of the Income-tax Act, a person is required to deduct tax on certain specified payments at the specified rates if the payment exceeds specified threshold. In case of non-deduction of tax in accordance with the provisions of this Chapter, he is deemed to be an assessee in default under section 201(1) in respect of the amount of such non-deduction. However, section 191 of the Act provides that a person shall be deemed to be assessee in default in respect of non/short deduction of tax only in cases where the payee has also failed to pay the tax directly. Therefore, the deductor cannot be treated as assessee in default in respect of non/short deduction of tax if the payee has discharged his tax liability. The payer is liable to pay interest under section 201(1A) on the amount of non/short deduction of tax from the date on which such tax was deductible to the date on which the payee has discharged his tax liability directly. As there is no one-to-one correlation between the tax to be deducted by the payer and the tax paid by the payee, there is lack of clarity as to when it can be said that payer has paid the taxes directly. Also, there is no cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ca Cola Beverage P. Ltd. vs. Commissioner of Income Tax [2007] 293 ITR 226 (SC). The supreme Court held as follows:- "10. Be that as it may, Circular No. 275/201/95-IT(B) dated 29.01.1997 issued by the Central Board of Direct Taxes, in our considered opinion, should put an end to the controversy. The circular declares "no demand visualized under Section 201(1) of the Income Tax Act should be enforced after the tax deductor has satisfied the officer in charge of TDS, that taxes due have been paid by the deductee assessee. However, this will not alter the liability to charge interest under Section 201(1-A) of the Act till the date of payment of taxes by the deductee assessee or the liability for penalty under Section 271-C of the Income Tax Act". The last sentence makes it clear that even if the deductee assessee has paid the tax dues, it would not alter the liability to charge interest under Section 201(1A) till the date of payment of taxes by the deductee assessee. It is further held that the same would not even affect the liability for penalty under Section 271C. Thus, even prior to the amendment on 1st July, 2012, the liability to pay interest under Section 201 (1A) was there e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mit. No such declaration was filed with the assessee by either of the two sister concerns. 8. They could not have filed any such declaration, having regard to the substantial amount received by them as income during these assessment years, on which they have been assessed to tax. 9. The fact that the recipients pay advance tax is not an excuse for not deducting the tax at source. It is for the recipients of the interest payment to claim refund of the amount after such refund is found to be due after the assessment is made." We are in respectful agreement with the judgment and would only add a few words of our own. 13. The language of Section 201 is clear and unqualified. It indeed does not permit an assessee to decide for itself what the liability of the deductee assessee is or is likely to be. That is a matter for the assessing officer who assesses the returns of the deductee assessee. It is in fact not even possible for him to do so. He cannot ascertain with any degree of certainty as to the financial position of the deductee assessee. A view to the contrary would enable an assessee to prolong the matter indefinitely. If accepted, it may even entitle the assessee to contend t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to the State did not arise. The Circular referred to recognises the fact that once the payee remits the differential tax, the question of further recovery of the self-same sum from the payer did not arise and till the payment made by the dedutee assessee, interest would be charged. 16. Applying the said circular herein, with no liability thus arisen at the hands of the payee, the terminal point as regards the calculation of interest necessarily has to be given a meaningful interpretation. Given the fact that the interest levy is an automatic one, the determination on the ultimate liability of the payee company to pay or not to make payment being a procedural exercise has nothing to do with the liability of the assessee to deduct TDS. As such, the loss return filed by the payee company cannot be treated as a circumstance to be taken in in favour of the assessee company from not applying the provisions of Section 201(1A) of the Income Tax Act. On the facts herein, the only reasonable interpretation one can give to the provision under Section 201(1A) as regards the terminal point upto which interest has to be calculated would be the date on which the return has to be filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 reads as under: - "Certificate for deduction at lower rate. 197. (1) Subject to rules made under sub-section (2A), where, in the case of any income of any person or sum payable to any person, income-tax is required to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force under the provisions of section 194C, the Assessing Officer is satisfied that the total income of the recipient justifies the deduction of incometax at any lower rates or no deduction of income-tax, as the case may be, the Assessing Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate. (2) Where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be. (2A) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... road proposition that the TDS provisions which are in the nature of machinery provisions to enable collection and recovery of tax are independent of the charging provisions which determine the assessability in the hands of the assessee employee. Secondly, whether the home salary payment made by the foreign company in foreign currency abroad can be held to be "deemed to accrue or arise in India" would depend upon the in-depth examination of the facts in each case. If the home salary/special allowance payment made by the foreign company abroad is for rendition of services in India and if as in the present case of M/s Eli Lilly & Co. (India) (P) Ltd. no work was found to have been performed for M/s Eli Lilly Inc., Netherlands then such payment would certainly come under Section 192(1) read with Section 9(1)(ii). 89. As stated above, the post-survey operations revealed that no work stood performed for the foreign company by the four expatriates to the joint venture company in India and that the total remuneration paid was only for services rendered in India. In such a case the tax deductor assessee was statutorily obliged to deduct tax under Section 192(1) of the 1961 Act." What the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, the object is to recover the shortfall. As far as the period of default is concerned, the period starts from the date of deductibility till the date of actual payment of tax. Therefore, the levy of interest has to be restricted for the abovestated period only. It may be clarified that the date of payment by the employee concerned can be treated as the date of actual payment." It is true that in the first sentence of paragraph 91 the Supreme Court held that interest under Section 201(1A) can only be levied when a person is declared as an assessee in default. Mr.Agarwal relied upon this sentence and invited us to read the same with the first proviso to sub section (1) of Section 201 which provides that the persons mentioned therein shall not be deemed to be an assessee in default in respect of such tax if he has complied with the conditions stated in clauses (i) to (iii). It is necessary, however, to note the first sentence in paragraph 90 which states that sub sections (1) and (1A) of Section 201 are without prejudice to each other which means that the provisions of both the sub sections are to be considered independently without affecting the rights mentioned in either of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section 115WA." The definition of tax under Section 2(43) does not include interest. Even otherwise, considering the language of Section 201, it would have made no difference for tax and interest are provided for and dealt with separately. Thus, the liability of a person to pay interest under sub section (1A) as the main part stood prior to the amendment by Finance Act, 2010 w.e.f. 1st July, 2010 or upon the said amendment makes no difference. The only thing is that the liability to pay interest would be in accordance with sub section (1A) as it stood at the relevant time and for the assessment year concerned. 23. This view is not contrary to the observations of the Supreme Court in Eli Lilly's case (supra) in the first sentence of paragraph 91 that interest can only be levied when a person is declared as an assessee in default. In other words, the Supreme Court held that the liability to deduct the tax arises only in a case where the taxable income falls within the purview of the relevant section requiring the deduction of tax at source. The issue that we have just decided was neither r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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