Commissioner Of Income-Taxjalandhar-I, Jalandhar v. M/S. Northern Carriers P. Ltd.jalandhar

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ----- -Income tax Appeal No. 632 of 2009Date of decision: 20.7.2010 Commissioner of Income-taxJalandhar-I, Jalandhar Versus --- Appellant M/s. Northern Carriers P. Ltd.Jalandhar --- --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- PRESENT: Mr. Vivek Sethi, Standing Counsel for the Revenue. Mr. J.S. Bhasin, Advocatefor the assessee. --- AJAY KUMAR MITTAL, J. The Revenue has approached this Court under Section 260-Aof the Income-tax Act, 1961 (in short “the Act’) and prayed that thefollowing substantial questions of law arise in this appeal for theconsideration of this Court, from the order of the Income-tax AppellateTribunal, Amritsar Bench, Amritsar (for short “the Tribunal”) passed on30.4.2009, in Income-tax Appeal No. 380 (ASR)/2008 for the assessmentyear 2004-05: 1- Whether on the facts and in the circumstances of the casethe ITAT was right in law in dismissing the appeal ofrevenue after recalling its own order dated 20.11.2008allowing the appeal of the department.the ITAT was right in law in dismissing the appeal ofrevenue after recalling its own order dated 20.11.2008allowing the appeal of the department. 2- Whether on the facts and in the circumstances of the case,the ITAT was right in law in dismissing the appeal ofrevenue ignoring the provisions of section 199 of IncomeTax Act, 1961 according to which the assessee was notentitled for credit of TDS as the same cannot be treated aspayment of tax on behalf of the assessee from whoseincome the deduction was made.the ITAT was right in law in dismissing the appeal ofrevenue ignoring the provisions of section 199 of IncomeTax Act, 1961 according to which the assessee was notentitled for credit of TDS as the same cannot be treated aspayment of tax on behalf of the assessee from whoseincome the deduction was made. 3-Whether on the facts and in the circumstances of the casethe ITAT was right in law in allowing credit of TDS to theassessee on principle of consistency on the basis ofdecision of Hon’ble Supreme Court in the case of BergerPaints India Ltd. Vs. CIT, 266 ITR 99 ignoring that thefacts of the above case are entirely different from that ofassessee. In the case of Berger Paints the issue was relatedto inclusion of Excise duty in closing stock while in thecase of assessee it is allowing credit of TDS deducted onamount which is not shown as income by the assessee.the ITAT was right in law in allowing credit of TDS to theassessee on principle of consistency on the basis ofdecision of Hon’ble Supreme Court in the case of BergerPaints India Ltd. Vs. CIT, 266 ITR 99 ignoring that thefacts of the above case are entirely different from that ofassessee. In the case of Berger Paints the issue was relatedto inclusion of Excise duty in closing stock while in thecase of assessee it is allowing credit of TDS deducted onamount which is not shown as income by the assessee. 4-Whether on the facts and in the circumstances of the casethe ITAT was right in law in dismissing the appeal ofrevenue ignoring the decision of Hon’ble Supreme Courtin the case of British Paints India Ltd. recorded at 188 ITRthe ITAT was right in law in dismissing the appeal ofrevenue ignoring the decision of Hon’ble Supreme Courtin the case of British Paints India Ltd. recorded at 188 ITR 44, wherein it has been held that the Assessing Officer isnot bound to accept the claims of assessee on the groundthat the same had been accepted in the past.” The assessee, which is a transport company, filed return for 4-Whether on the facts and in the circumstances of the casethe ITAT was right in law in dismissing the appeal ofrevenue ignoring the decision of Hon’ble Supreme Courtin the case of British Paints India Ltd. recorded at 188 ITRthe ITAT was right in law in dismissing the appeal ofrevenue ignoring the decision of Hon’ble Supreme Courtin the case of British Paints India Ltd. recorded at 188 ITR 44, wherein it has been held that the Assessing Officer isnot bound to accept the claims of assessee on the groundthat the same had been accepted in the past.” The assessee, which is a transport company, filed return for the assessment year 2004-05 declaring income of Rs. 11,71,860/-. Thereturn was processed under Section 143(1) of the Act. The case was takenup for scrutiny by issuing notice under Section 143(2) of the Act. Duringassessment, it was noticed that the assessee had claimed certain credits oftax deducted at source (TDS) but the income on which TDS was deductedneither belonged to the assessee nor had been credited in its books ofaccounts. The assessing officer, thus, opined that the TDS credit soclaimed was in contravention of the provisions of Section 199(1) of theAct. Consequently, the assessing officer completed the assessment underSection 143(3) of the Act at the total income of Rs. 16,71,855/- wherein hedisallowed the credit of TDS amounting to Rs. 9,27,219/-. Appeal filed by the assessee challenging the assessment ordermet with partial success. The Commissioner of Income-tax (Appeal) [(forshort “CIT (A)], while allowing the appeal on 28.3.2008, made detailedobservations in the judgment which will be noticed in the latter paras ofthis order. The order of the CIT (A) was affirmed by the Tribunal. We have heard learned counsel for the parties and haveconsidered the submissions made by them. The primary question that arises for consideration by thisCourt is, whether the CIT (A) had rightly allowed the credit of tax-deductions at source to the assessee in respect of the deductions made by the persons who had made payment to it. The claim which was rejected bythe assessing officer with regard to credit of tax-deducted at source wasreversed by the CIT (A). The findings recorded by the CIT (A), are asunder: “I have carefully considered the submissions of the appellant,the report of the A.O. and the rejoinder/ further commentsfiled by the appellant. I have also gone through the detailsavailable on record. The facts reveal that the appellantappointed agents to operate on its behalf in certain areas from1.10.2003 whereas M/s. Hamira Goods Carriers based atHamira had been operating as agent of the appellant sincelong. The written agreement was executed by the appellantwith the agents and it was appellant who was providing GRsto all the agents and was getting in turn agency money and inthe case of Hamira Goods Carriers, it was getting 2.3% on thebilled amount in addition to Rs. 2.5 per builty and accountedthe same as its income. The GRs of the appellant being issuedby its agents the contracting parties deducted tax at source inthe name of the appellant with the result that form 16 wasissued in favour of the appellant who claimed TDS based onsaid forms. The AO on the basis that income co-relatable tothe said TDS certificates was not reflected rejected the claimfor TDS in the hands of appellant by referring to Section 199(1) of the Income Tax Act. The form 16 being issued in thename of appellant, M/s. Hamira Goods Company, the agent,who accounted the income, did not claim the credit for TDS as TDS certificates were in the name of appellant. Thus, thecredit for TDS was neither allowed in the hands of appellantnor in the hands of Hamira Goods Carrier who accounted theincome for taxation in their return which corresponds to thesaid TDS certificates. The AO did not allow the credit basedon the reasoning as mentioned in the order. as TDS certificates were in the name of appellant. Thus, thecredit for TDS was neither allowed in the hands of appellantnor in the hands of Hamira Goods Carrier who accounted theincome for taxation in their return which corresponds to thesaid TDS certificates. The AO did not allow the credit basedon the reasoning as mentioned in the order. The agent in the case of appellant, M/s. Hamira GoodsCarriers who credited the commission income to their profitand loss account in turn paid to the appellant agency money,the builty charges and also the royalty. While agency moneyand builty charges were paid in cash the royalty was creditedby the agent at the year end in the account of the appellant.The TDS certificates collected by the agent being handed overto the appellant the amount of the same was debited in theaccount of the appellant against the credit of the royalty in thebooks of the agent. Like in the case of Hamira Goods Carrierthe royalty which was received/credited in the P&L accountof appellant during the year was 7,13,030/- which was notactually paid but was adjusted against the amount of TDSwhich means it was directly relatable to the TDS. Its logicalfall-out is that if the TDS is allowed then royalty incomewould not remain income in the hands of the appellant whichwas already credited to the P & L account. The word used insection 199(1) is income and it is not “any sum” as mentionedin Section 194C (1) of the I.T. Act. The total freight paymentwhich was liable to TDS represented any sum and being not credited in the books of the appellant the AO did not allow thecredit for TDS u/s 199(1) of I.T. Act. But it was omitted toconsider that what the appellant has actually offered was‘income’ which was net of freight and which was receivedfrom the agent and it was directly co-relatable to the TDS.Neither in the case of Hamira Goods Carriers nor in the caseof the appellant, credit for TDS was allowed when the sameon being produced before the A.O. in the form of certificateissued u/s 203 of the I.T. Act its credit was admissible u/s 199(1) of I.T. Act as the income corresponding to the same wasalready reflected. The appellant has not accounted the grossfreight and claimed against it the freight paid as it was done inthe case of Hamira Goods Carriers and the appellant only gotthe income in the form of agency commission and royalty asdiscussed above on the basis of written agreement withHamira Goods Carrier which was before the AO. At the mostgoing by AO’s logic what was further taxable was the incomereflected in the hands of Hamira Goods Carrier and havingalready accepted in its hands, the said income in the hands ofHamira Goods Carrier amounting to Rs. 98,484/- as per its P& L A/c can be taxed in the hands of the appellant. It isbecause the AO took it as case of transfer of business, thus,Section 61 of the I.T. Act was invokeable to include theincome of transferee with the income of appellant and the saidincome for the year comes at Rs. 98,484/- which makes theappellant eligible for credit for TDS as claimed in view of Section 199(1) of the I.T. Act. While holding the support isdrawn from Article 265 of the Constitution which prohibitslevy or collection of any tax except by authority of law andgoing by the facts it has to be given credit either in the handsof the appellant or its agents. As held above since the incomeappears in the hands of appellant the credit becomesadmissible in the hands of appellant. Herein I will like tomake reference to the decision of Hon’ble ITAT Delhi “C”Bench, Delhi, in the case of Escorts Ltd. Vs. DCIT ITA No.2436, 2437 and 2464/Delhi/2005 dated 11.5.2007 forassessment years 2001-02 to 2003-04, the decision in thecontext of Section 199 and reported at (2007) 15 SOT 368(Delhi) wherein it was held that “payer does not pay theamount of TDS as his own liability and he only acts as theagent of the Govt. or as trustee to collect the TDS for theGovt. free of cost. If no credit is to be given to the payerand/or to the payee, the Govt. would have no authority to treatthe same as tax and Article 265 does not empower the Govt tomake any levy or collection of tax not authorized by law. Itwould be, therefore, improper and even impermissible for theRevenue to allow the amount of TDS after having receivedand enjoyed the same. It cannot be ignored that every item ofTDS carries with it an obligation of trust and accountability toreturn the amount.” It was thus held therein that credit forTDS must in every case be given to the assessee from whoseincome tax was deducted at source and paid to the credit of the Central Govt. Therefore, going by the Article of theConstitution and the citation above and income reflected inthe hands of the agent having been treated as income of theappellant along with the agency income, builty charges andthe royalty as representing the income of the appellant,therefore, u/s 199(1) of the I.T. Act the TDS claimed gets co-relatable to the said income and the appellant becomeseligible to get the credit for the same. Same is the positionregarding other agents of the appellant as mentioned by theAO per annexure to the order. Moreover, principle ofconsistency is referred to as reported in 266 ITR 99 (SC)Berger Paints India Ltd. Vs. CIT. In earlier years forassessment year 1995-96 and 1998-99 in the case of appellantby completing regular assessment under Section 143(3) of I.T.Act the credit for TDS was never disputed and was allowedon the same pattern. Therefore, rule of consistency requirethat the same is also eligible in the year under consideration.Moreover, the AO has disallowed credit for TDS even inrespect of the transactions prior to 30.09.2004 when thetransportation work was assigned to other agents, other thanHamira Goods Carriers and the same is, therefore, factuallyincorrect. Therefore, AO’s conclusion not to allow credit forTDS in terms of Section 199(1) of I.T. Act is vacated.” The said findings were affirmed by the Tribunal on 30.4.2009,in the appeal preferred by the Revenue. Learned counsel for the appellant-Revenue tried in vain topersuade this Court to re-appreciate the evidence and record a findingdifferent than the one done by the appellate authorities below. He,however, could not point out any illegality or perversity in the concurrentfindings recorded by the authorities below which may warrant interferenceby this Court. Under similar facts, the assessee had been granted credit ofTDS under Section 199 of the Act in the assessment years 1995-96 and1998-99. Further, the case is regarding giving credit of TDS to an assesseeand it is not disputed that the burden of TDS has been borne by theassessee. Under such circumstances, the benefit of TDS should also begiven to the assessee. In our opinion, the questions claimed by the Revenue are notsubstantial questions of law. The appeal is consequently dismissed. (AJAY KUMAR MITTAL) JUDGE July 20, 2010*rkmalik* (ADARSH KUMAR GOEL) JUDGE