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Aayush NRI LEPL Health Care Pvt. Ltd. v/s Assistant Commissioner of Income-Tax

    IT. Appeal Nos. 10 & 11 of (Vizag.) of 2016

    Decided On, 18 October 2017

    At, Income Tax Appellate Tribunal Visakhapatnam

    By, THE HONOURABLE MR. V. DURGA RAO
    By, JUDICIAL MEMBER & THE HONOURABLE MR. D.S. SUNDER SINGH
    By, ACCOUNTANT MEMBER

    For the Appellant: G.V.N. Hari, AR. For the Respondent: D.J.P. Anand, DR.



Judgment Text

D.S. Sunder Singh, Accountant Member.

1. These appeals filed by the assessee are directed against order of the Commissioner of Income Tax (Appeals) CIT(A), Vijayawada vide ITA No. 53 and 54 of CIT(A) of VJA of 2014-15 dated 30.10.2015 for the assessment years 2013-14 & 2014-15.Since both the appeals involve the same issue on same facts, both the appeals are clubbed and heard together and decided in common order for the sake of convenience as under:

2. All the grounds of appeal are related to the levy of interest u/s 201(1A) of the Income Tax Act, 1961 (hereinafter called as 'the Act'). A survey by TDS wing of Income Tax Department u/s 133A of the Act was conducted in this case on 16.10.2011 and found that the assessee had made the payments of Rs. 88,43,193/- for the period ending 31.3.2013 and Rs. 87,04,620/- for the period from 1.4.2013 to 31.3.2013 but not deducted the TDS on the above payments. Therefore, the Assessing Officer (A.O.) Held that the assessee required to deduct the tax at source u/s 194J of the Act and accordingly treated the assessee as assessee in default and levied interest u/s 201 & 201(1A) of the Act to the extent of Rs. 8,84,319/- for the F.Y. 2012-13 and Rs. 8,70,462/- for the F.Y. 2013-14 and the interest u/s 201(1A) of the Act of Rs. 1,34,566/- for the F.Y. 2012-13 and Rs. 51,039/- for the F.Y. 2013-14 respectively for the assessee's failure to deduct the tax at source and non-remittance to Govt. account.

3. The assessee went on appeal before the CIT(A) and the Id. CIT(A) confirmed the action of the A.O. in treating the assessee as the assesse in default and Held that it required to deduct tax at source on the payments made to Dolphin Imaging Services u/s 194J of the Act. Further, the CIT(A) having found that the deductee has filed the return of income and offered receipts from the assessee in the returns of income, the Id. CIT(A) allowed relief to the assessee for the interest imposed u/s 201(1) of the Act and following the decision of Hon'ble High Court of Kolkata in the case of M/s. Kanoi Industries Pvt. Ltd. v. Commissioner of Income Tax (2003) ITR 261 ITR 488 (Cal) Held that the assessee is liable for interest u/s 201(1A) of the Act from the date of such tax is deductible to the date of furnishing of return of income by the deductee. Aggrieved by the order of the CIT(A), the assessee is in appeal before this Tribunal.

4. Appearing for the assessee, the Ld. A.R. argued that though the TDS was deductible from the payments made to the Dolphin Imaging Services, the deductee has filed the returns of income and offered the receipts in their income tax return. The deductees filed returns of income admitting the nil return. Even after admitting the receipts paid by the assessee, the income in the hands of the deductee was nil resulting to no tax liability. The interest u/s 201(1A) of the Act is compensatory in nature and in the deductee's case, since there was no advance tax liability thus the interest under section 201(1A) does not attract. Since there was no loss of revenue in the deductee's case the interest chargeable under section 201(1A), which is compensatory in nature is not applicable to the assessee. The Id. A.R. referring to the provisions of section 201 & 201(1A) of the Act argued that after the amendment of Act by insertion of proviso to section 201 of the Act, once the deductee files the return of income and admits the receipts, the deductor shall not be deemed to be assessee in default in respect of the tax required to be deducted in the case of the deductee. The similar provision was inserted in section 201(1A) of the Act also. The Id. A.R. further argued that in case the deductor is not treated as the assessee in default, the deductor is not liable to pay interest u/s 201(1A) of the Act. The Id. A.R. relied on the order of this Tribunal in the case of ITA No. 40 of Vizag of 2014 in the case of Manne Rajesh Kumar dated 6.9.2017 and the decision of ITAT Cochin bench in the case of Thomas Muthoot v. Dy. CIT (2013) 55 SOT 390 of (2012) 28 taxmann.com 25 (Cochin) and the decision of ITAT Lucknow in the case of Dy. Commissioner of Income Tax v. Sahara India Commercial (2015) 67 SOT 318 of (2014) 52 taxmann.com 383 (Lucknow - Trib.).

5. On the other hand, the Ld. Departmental Representative (D.R.) argued that the Ld. CIT(A) followed the order of Hon'ble Kolkata High Court in the case of M/s. Kanoi Industries Pvt. Ltd. 261 ITR 488 and the interest u/s 201(1A) of the Act is mandatory and there is no restriction such as reasonable cause for non-deduction or non-payment and therefore, the interest u/s 201(1A) of the Act is automatic and mandatory. The Id. D.R. further argued that the decision of Hon'ble ITAT in the case of Manne Rajesh Kumar in ITA No. 40 of Vizag of 2017 (supra) is distinguishable from the facts of the assessee's case since the Hon'ble ITAT decided the issue with regard to non-resident u/s 195 of the Act, following the Board circular No. 2 of 2014 with regard to the non-deduction of tax at source in the case of non-residents particularly with reference to section 195 of the Act. There is no similar instruction in the case of residents. Therefore, the case law relied upon by the Id. A.R. is not applicable in the assessee's case. Further, the Id. D.R. argued that the decisions of ITAT Cochin bench and the ITAT Lucknow bench are related to the assessment years 2003-04 to 2007-08. A proviso has been inserted in the Income Tax Act to section 201(1A) of the Act enabling the department to levy interest u/s 201(1A) of the Act from the date of such the tax is deductible to the date of furnishing the return of income by such resident without relating to resultant tax, thus whether the deductee's case results in to tax or not the interest u/s 201(1A) of the Act attract in deductor's case. It is for deductor's failure to deduct the tax at source and remit to Government account and does not depend on the tax liability of the deductee. Therefore, the Id. D.R. argued that the CIT(A) has rightly confirmed the interest chargeable u/s 201(1A) of the Act, which required to be up held.

6. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The assessee required to deduct tax at source on payments made to the Dolphin Imaging Services on the amounts of Rs. 88,43,193/- for the financial year 2012-13 and Rs. 87,04,620/- for the financial year 2013-14. The assessee has not deducted the tax at source and did not remit to the government account. There is no dispute with regard to the deductibility of tax at source. The Id. CIT(A) has decided in appeal that the assessee required to deduct tax at source on the payments made u/s 194J of the Act, which is not disputed by the assessee. The assessee's argument was the deductee has already filed the return of income and the tax liability in the hands of the deductee was nil, and not liable to payment of any tax, thus no loss of revenue and hence, the interest u/s 201(1A) of the Act does not attract in the assessee's case. The Id. A.R further argued that the interest u/s 201 & 201(1A) of the Act is compensatory in nature. Since the deductee's income was below taxable limit and need not pay any advance tax, the Id. A.R. contended that there is no loss to revenue and interest need not be charged u/s 201(1A) of the Act. The Id. A.R. taken the support of the decision of ITAT Cochin Bench in the case of Thomas Muthoot v. DCIT (supra) and the decision of Sahara India Commercial (2015) 67 SOT 318 of (2014) 52 taxmann.com 383 (Lucknow - Trib.) Lucknow bench. The Id. A.R. further argued that the decision of ITAT Lucknow bench was confirmed by the Hon'ble High Court of Allahabad. The Id. A.R. also taken the support of the decision of this Tribunal in the case of Manne Rajesh Kumar in ITA No. 40 of Vizag of 2017 dated 6.9.2017 and argued that when the deductee has no taxable income, the interest u/s 201(1A) of the Act is not exigible, accordingly, requested to allow the appeal of the assessee. We have gone through the decisions relied upon by the Id. A.R. The decision of this Tribunal in the case of Manne Rajesh Kumar (supra) is rendered following the circular No. 2 of 2014 of CBDT, wherein the CBDT has issued a specific circular not to treat the assessee in default in the case of non-resident u/s 195 of the Act. In the circular, the benefit was not extended to the resident. Therefore, the decision of this Tribunal in the case of Manne Rajesh Kumar (supra) is not applicable in the assessee's case. The decision of ITAT Cochin bench was rendered in relation to the assessment years 2007-08, 2006-07 & 2005-06 and the decision of ITAT Cochin bench was rendered for the assessment years 2003-04 to 2006-07. The Income Tax Act has been amended by inserting proviso to section 201(1A) of the Act, by the Finance Act, 2012, w.e.f. 1-7-2012. which reads as under :

"[(1A) Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,-

(i) At one percent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and

(ii) At one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, And such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200:

Provided that in case any person, including the principal officer of a company 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 but is not deemed to be an assessee in default under the first proviso to sub-section (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident."

7. The plain reading of the proviso to section 201(1A) of the Act makes it very clear that even though the assessee is not deemed to be assessee in default under first proviso to sub section (1), the interest under clause (i) shall be payable from the date on which such tax is deductible to the date of furnishing of return of income by such a resident. Therefore, the tax liability in the hands of the deductee has no relation or connection for charging the interest u/s 201(1A) of the Act. Mere non-deduction of tax at source and non-remittance to Government of India account attracts the interest u/s 201(1A) of the Act and that is the reason for which the provision has been inserted to charge interest from the date of the tax deductible to the date of furnishing of r

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eturn of income by the resident. Since the decisions relied upon by the Id. A.R. are related prior to insertion of the proviso u/s 201(1A) of the Act, the decisions relied upon by the assesse are not applicable in assessee's case. The decision of Kolkata High Court in the case of Kanoi Properties Pvt. Ltd. v. Commissioner of Income Tax 261 ITR 488 which was followed by the Ld. CIT(A) squarely applicable even after insertion of proviso. After insertion of the provision, the charging of interest from the date of the tax required to be deducted till the date of furnishing of return of income by the deductee is automatic and mandatory. Further the Hon'ble Madras High Court in the case of Commissioner of Income Tax v. Chennai Properties & Investments Ltd. (1999) 105 Taxman 346 of 239 ITR 435 (Mad.). expressed view that the interest paid u/s 201(1A) of the Act is not compensatory but penal in nature. Therefore, we hold that the interest is chargeable from the date of such tax is deductible to the date of furnishing of return of income and we uphold the order of the Id. CIT(A) and dismiss the appeals of the assesse. 8. In the result, the appeals filed by the assesse for the A.Ys 2013-14 and 2014-15 are dismissed.
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