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TMI Blog2023 (5) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... of convenience. 3. Let us take up the appeal for the AY 2013-14 first. The only effective issue to be decided in the appeal for AY 2013-14 is as to whether the assessee could be treated as an 'assessee in default' within the meaning of section 201(1) of the Act and consequentially liable for interest u/s 201(1A) of the Act, in respect of non-deduction of tax at source on provision for expenses made at the end of the year, falling within the ambit of provisions of sections 194C, 194I and 194J of the Act. 4. We have heard the rival submissions and perused the material available on record. The case of the Revenue is that the assessee had made year-end provisions for expenses amounting to Rs.86,12,471/- on which tax was not deducted at source. The assessee was treated as 'assessee in default' in the sum of Rs.8,61,247/- u/s 201(1) of the Act and interest of Rs.8,00.548/- u/s 201(1A) of the Act. The ld. AO observed that the provision had been made on ad hoc basis in respect of various expenditures by the assessee. On the contrary, the assessee's case is that payees of these expenses are not identifiable and, hence, tax could not be deducted at source. The assessee also submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the paper book. This is not disputed by the revenue before us. The fact of the assessee deducting the tax at source in the succeeding year and remitting the same to the account of the Central Government on 02.05.2013, 30.05.2013, 05.07.2013 and 06.09.2013 are enclosed are enclosed in pages 33-37 of the paper book. We find that the issue in dispute is no longer res integra in view of the decision of the Hon'ble jurisdictional High Court in the case of UCO Bank vs. Union of India reported in 369 ITR 335 wherein it was held as under:- 18. In terms of Section 194A of the Act, the petitioner would, in the normal course, be obliged to deduct tax at source in respect of any credit or payment of interest on deposits made with it. However, in the present case, the question that needs to be addressed is whether Section 194A of the Act contemplates deduction of tax in a situation where the assessee is not ascertainable and the person in whose name the interest is credited is also, admittedly, not a person liable to pay tax under the Act. 19. The Registrar General of this Court is, clearly, not the recipient of the income represented by interest that accrues on the deposits made in his/h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssary implication of this situation is recovery of tax without the corresponding income being assessed in the hands of any assessee. The ultimate recipient of the funds from the FD would also not be able to avail of the credit of TDS. It is apparent that in absence of an ascertainable assessee the machinery of recovering tax by deduction of tax at source breaks down because it does not aid the charge of tax under Section 4 of the Act but takes a form of a separate levy, independent of other provisions of the Act. This is, clearly, impermissible. 22. The impugned circular proceeds on an assumption that the litigant depositing the money is the account holder with the petitioner bank and/or is the recipient of the income represented by the interest accruing thereon. This assumption is fundamentally erroneous as the litigant who is asked to deposit the money in Court ceases to have any control or proprietary right over those funds. The amount deposited vests with the Court and the depositor ceases to exercise any dominion over those funds. It is also not necessary that the litigant who deposits the money would be the ultimate recipient of those funds. As indicated earlier, the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Assessee and, concededly, no royalty for the period has been paid either. In the circumstances, we are unable to accept that any income had accrued or arisen or deemed to have accrued or arisen, which is chargeable to tax in the hands of TLME. It is not disputed that the agreement dated 1st January, 1997 was not acted upon at the material time. In the absence of any income chargeable to tax arising on account of royalty in the hands of TLME at the material time, the question of withholding TAS would not arise. 24. In our view, reliance placed by the Revenue on the decision of Transmission Corpn. of AP Ltd. (supra) is wholly misplaced. In that case, the Supreme Court had clarified that where payments of any amount(s) on account of trade payables (i.e. payments in the nature of Revenue) were made, the payer was obliged to deduct tax at the relevant rates on the entire amount paid and it was not open for the payer to deduct TAS at a lower amount on the ground that the income embedded in the payments made would be lower than the amounts paid. The Supreme Court had explained that it was not open for the payer to suo moto take a decision as to the quantum of income embedded i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded that larger commission had accrued during the relevant period and was thus assessable to tax. The Tribunal accepted the Assessee's contention and held that the income on account of larger commission had neither accrued nor was paid to the Assessee and, thus, was not chargeable to tax. The Bombay High Court agreed with the Tribunal, however, certified the case as fit under Section 66A(2) of the Income Tax Act, 1961, to be considered by the Supreme Court. The Supreme Court referred to the earlier decision of the Bombay High Court in CIT v. Chamanlal Mangaldas & Co. [1956] 29 ITR 987 (Bom.), which was approved by the Supreme Court in CIT v. Chamanlal Mangaldas & Co. [1960] 39 ITR 8 (SC) and held as under: - ".....Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in bookkeeping, an entry is made about a "hypothetical income", which does not materialise. Where income has, in fact, been received and is subsequently given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the assessee during the year under consideration. As stated above, we find that demand of Rs.14,41,781/- has been raised on the ground that the assessee had made short-deduction of tax at source on certain expenses. We find that the assessee had explained before the lower authorities that some of the payees had furnished low tax deduction certificate obtained u/s 197 of the Act from their TDS Officer and had furnished the same to the assessee. Accordingly, the assessee had deducted the tax at source in accordance with the rates prescribed in the low tax deduction certificate u/s 197 of the Act with effective date mentioned thereon. Hence, it was the case of the assessee that there was no short-deduction of tax made by the assessee at all and that all the taxes have been duly deducted and remitted in accordance with the provisions of Chapter XVII-B of the Act. We find that the ld.CIT(A) had merely directed the ld. AO to examine the same and decide the issue accordingly. The assessee is directed to produce the certificates obtained u/s 197 of the Act before the ld. AO to justify its case. Accordingly, the issue in respect of short-deduction of tax at source is hereby remi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd were duly placed on record before the lower authorities, which fact was not appreciated by the lower authorities. We find from the details placed on record in pages 133-134 of the paper book containing the details of payments made to Randstad India Ltd. and Team Lease Services Pvt. Ltd. totaling to Rs.1,70,71,786/-, which had been duly subjected to deduction of tax at source at the applicable rates prescribed under Chapter XVII-B of the Act. We find that a sum of Rs.54,71,186/- has been transferred by the assessee to 'Professional charges' separately. This clearly acts to prove that the professional expense of Rs.54,71,186/- is already included in the aggregate retainership fee amount of Rs.1,70,71,786/-. Hence, the contentions of the Revenue that professional expenses of Rs.54,71,186/- had not been subjected to deduction of tax at source, is factually incorrect. We direct the ld. AO to delete the demand raised on account of professional expenses both u/s 201(1) and u/s 201(1A) of the Act. 17. The next issue to be decided in this appeal is as to whether the assessee could be treated as an 'assessee in default' u/s 201(1) in the sum of Rs.10,27,285/- and liable for interest u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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