Commissioner Of Income Tax (Tds), Chandigarh v. M/S Parle Biscuits Pvt. Ltd

ITA No. 207 of 2012 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA No. 207 of 2012 (O&M) Date of decision: 28.01.2013 Commissioner of Income Tax (TDS), Chandigarh ...Appellant versus M/s Parle Biscuits Pvt. Ltd. ..Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTAHON'BLE MS. JUSTICE RITU BAHRI Present:-Mr. Yogesh Putney, Advocatefor the appellant.Mr. Girish K. Dave, Advocate,Mr. Satyen Sethi, Advocate and Mr. Ashim Aggarwal, Advocatefor the respondent. HEMANT GUPTA, J. (ORAL) The present appeal under Section 260A of the Income TaxAct, 1961 (for short 'the Act') is against an order dated 07.03.2012 passedby the Income Tax Appellate Tribunal, Delhi Bench 'F' New Delhi (for short'the Tribunal) in ITA No. 100/Del/2012, whereby the Revenue's appeal wasdismissed holding that the tax deduction certificates were validly issuedunder Section 197, therefore, the order passed by the Commissioner ofIncome Tax (Appeals), Rohtak does not warrant any interference. The Revenue has framed the following substantial questions of law in the present appeal: “(i)Whether on the facts as well as in law, the Hon'ble IncomeTax Appellate Tribunal, Delhi Bench, New Delhi has erred in law in deleting the demand of Rs.55,80,301/- created on a/c of shortdeduction of tax from the payment of Rs.46,83,10,501/- made toeight different parties of contract work done by him. (ii)Whether on the facts and in the circumstances of the case,the Hon'ble Tribunal was on the facts and in the circumstances ofthe case the ld. CIT(A), Rohtak has erred in law holding that “theconcerned A.O may not be aware of the existence of various TANsof the deductors and the concerned A.O of the deductee generallyissue certificate u/s 197 on the registered office of the deductor,whereas the certificates u/s 197 is issued by the A.O in the nameof the deductor only as requested by the deductee applicant.” The assessee has given contract of executing the works tovarious persons, making it liable to deduct tax on the rate prescribedunder Section 194C of the Act. Eight of the contractors, executing worksfor the assessee, furnished certificates as contemplated under Section 197(2) of the Act addressed to Parle Biscuits Pvt. Ltd., Mumbai for deductionof tax on lower rate than the specified in Section 194C of the Act. Theassessee made a deduction of tax at the rates so specified in suchcommunications acting on certificates issued by the Assessing Officer ofthe contractors. The learned Assessing Officer found that there is shortdeduction of tax as the Parle Biscuits Pvt. Ltd., Mumbai has a separate TaxDeduction Account Number (TAN) than the Parle Biscuits Pvt. Ltd.,Bahadurgarh, which implies that the assessee and Parle Biscuits Pvt. Ltd.,Mumbai are separate entities for the purpose of deduction of tax at source.Consequently, passed an order of raising demand against the assessee forthe violations of Section 194C of the Act. In appeal by the assessee, the Commissioner of Income Tax (Appeals), Rohtak returned a finding that since the geniuneness of the issue of certificates under Section 197 of the Act has not been doubted bythe Assessing Officer, therefore, there is no justification to hold that theassessee is in default merely on the ground that the said certificate wasnot issued in the name of Bahadurgarh unit. The said order was affirmedby the Tribunal. Learned counsel for the appellant has vehemently argued thatit is the responsibility of the assessee to deduct the tax at source inrelation to the work executed, but since the tax was not deducted in termsof Section 194C of the Act, therefore, the order passed by the AssessingOfficer has been wrongly set aside by the Commissioner of Income Tax(Appeals), Rohtak and upheld by the Tribunal. (Appeals), Rohtak returned a finding that since the geniuneness of the issue of certificates under Section 197 of the Act has not been doubted bythe Assessing Officer, therefore, there is no justification to hold that theassessee is in default merely on the ground that the said certificate wasnot issued in the name of Bahadurgarh unit. The said order was affirmedby the Tribunal. Learned counsel for the appellant has vehemently argued thatit is the responsibility of the assessee to deduct the tax at source inrelation to the work executed, but since the tax was not deducted in termsof Section 194C of the Act, therefore, the order passed by the AssessingOfficer has been wrongly set aside by the Commissioner of Income Tax(Appeals), Rohtak and upheld by the Tribunal. We find that the argument raised is not tenable. In terms ofSection 194C of the Act, any person responsible for paying any sum forcarrying out any work, is liable to deduct tax at the time of credit of suchsum to the account of the contractor. Section 197 of the Act contemplatesissuance of certificate to the person responsible for paying the income fordeduction of tax at the rate lower than the prescribed under Section 194C.The relevant Sections read as under: “194C. (1) Any person responsible for paying any sum to anyresident (hereafter in this section referred to as the contractor) forcarrying out any work (including supply of labour for carrying outany work) in pursuance of a contract between the contractor and aspecified person shall, at the time of credit of such sum to theaccount of the contractor or at the time of payment thereof in cashor by issue of a cheque or draft or by any other mode, whichever isearlier, deduct an amount equal to - (i) one per cent where the payment is being made or credit isbeing given to an individual or a Hindu undivided family; being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hinduundivided family, of such sum as income tax on incomecomprised therein. 197.(1)[Subject to rules made under sub-section (2A),[where, in the case 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 forceunder the provisions of sections 192,193, [194,] 194A, [194C,]194D, [194G] [,194H] [,194I] [,194J] [,194K] [,194LA,] and 195,the Assessing Officer is satisfied that the total income of therecipient justifies the deduction of income tax at any lower rates orno 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 personresponsible for paying the income shall, until such certificate iscancelled by the [Assessing] Officer deduct income that the ratesspecified in such certificate or deduct no tax, as the case may be. [(2A) The Board may, having regard to the convenience ofassessees and the interests of revenue, by notification in the OfficialGazette, make rules specifying the case in which, and thecircumstances under which, an application may be made for thegrant of a certificate under sub-section (1) and the conditionssubject to which such certificate may be granted and providing forall other matters connected therewith.]” Section 204(iii) of the Act defines the expression “personresponsible for paying” appearing in Section 194C of the Act. The relevantclause reads as under:- “204. xxxxxxxxx (iii)[in the case of credit, or, as the case may be, payment] ofany other sum chargeable under the provisions of this Act, thepayer himself, or, if the payer is a company, the company itselfincluding the principal officer thereof;” The procedure for obtaining certificate for deduction at lower Section 204(iii) of the Act defines the expression “personresponsible for paying” appearing in Section 194C of the Act. The relevantclause reads as under:- “204. xxxxxxxxx (iii)[in the case of credit, or, as the case may be, payment] ofany other sum chargeable under the provisions of this Act, thepayer himself, or, if the payer is a company, the company itselfincluding the principal officer thereof;” The procedure for obtaining certificate for deduction at lower rates or lower deduction of tax is prescribed in Rule 28AA of the IncomeTax Rules, 1962. Sub clause 4 of the said Rule contemplates that the saidcertificate issued in terms of Section 197(1) of the Act is valid only withregard to person responsible for deducting the tax and specified therein.Sub clause (5) of Rule 28AA contemplates that the certificate shall bedirected to the person responsible for deducting the tax under advice tothe person who made an application for issue of such certificate. Therelevant provisions of the Rules reads as under: “28AA. (1) Where the Assessing Officer, on an application madeby a person under sub-rule (1) of rule 28 is satisfied that existingand estimated tax liability of a person justifies the deduction of taxat lower rate or no deduction of tax, as the case may be, theAssessing Officer shall issue a certificate in accordance with theprovisions of sub-section (1) of Section 197 for deduction of tax atsuch lower rate or no deduction of tax. xxxxxx (3) The certificate shall be valid for such period of the previousyear as may be specified in the certificate, unless it is cancelled bythe Assessing Officer at any time before the expiry of the specifiedperiod. (4) The certificate shall be valid only with regard to the personresponsible for deducting the tax and named therein. (5) The certificate shall be issued direct to the person responsible for deducting the tax under advice to the person who made anapplication for issue of such certificate.” In terms of above said provisions, the Assessing Officer of thecontractors have furnished certificate under Section 197 of the Act to the Principal Officer of the Parle Biscuits Pvt Ltd, Mumbai. Such certificate is interms of clause (iii) of Section 204 of the Act. Such certificate mandatesthe persons to whom such certificate is issued to deduct tax at a ratelower than the prescribed rate under Section 194C of the Act. Merely because the assessee has got separate TAN for Bahadurgarh unit and forMumbai unit, will not render the certificate issued under Section 197(2) asredundant. Such certificate is to be issued to the Principal Officer of theCompany as the person responsible for deduction of tax and not to anyother person or unit of the assessee. Therefore, the order passed by theCommissioner of Income Tax (Appeals) Rohtak and affirmed by theTribunal cannot be said to be suffering from any illegality in any manner. Consequently, we do not find any merit in the present appeal.The same is dismissed. (HEMANT GUPTA) JUDGE January 28, 2013G.Arora/Vimal ( RITU BAHRI ) JUDGE