Guru Angad Dev Veterinary Agricultural Science University, Ludhiana v. Commissioner Of Income Tax, Ludhiana

ITA No. 347 of 2011 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 347 of 2011 (O&M) Date of Decision: 10.2.2016 Guru Angad Dev Veterinary Agricultural Science University, Ludhiana ....Appellant. Versus Commissioner of Income Tax, Ludhiana ...Respondent. 1.Whether the Reporters of the local papers may be allowed to see the judgment?the judgment? 2.To be referred to the Reporters or not? 3.Whether the judgment should be reported in the Digest? CORAM:-HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MRS. JUSTICE RAJ RAHUL GARG. PRESENT: Mr. B.M. Monga, Advocate with Mr. Rohit Kaura, Advocate for the appellant. Mr. Denesh Goyal, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.Photocopy of Annexure P-8 filed along with CM No. 3127-CII of 2016 is taken on record subject to all just exceptions. CM standsdisposed of accordingly. 2.This order shall dispose of two appeals bearing ITA Nos.347 and 348 of 2011 as according to learned counsel for the parties, theissues involved therein are identical. For brevity, the facts are beingextracted from ITA No. 347 of 2011. 3.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) against the ITA No. 347 of 2011 order dated 27.4.2011 (Annexure A-3) passed by the Income TaxAppellate Tribunal, Chandigarh Bench “B”, Chandigarh (hereinafterreferred to as “the Tribunal”) in ITA No. 1453/CHANDI/2010, for theassessment year 2009-10. The appeals were admitted by this Courtvide order dated 13.8.2012 for consideration of the substantial questionsof law as mentioned in para 12 of the appeals which are as under:- 1.Whether on the facts and in the circumstancesof the case, the learned Tribunal is justified inupholding the orders of the authorities belowignoring that interest bearing advance cannotbe treated as payment for carrying out any workso as to attract Section 194C of IT Act, 1961,particularly when interest of ` 43.46 lacs hasaccrued to the appellant on the advance of` 6.97 crores, as per Annexure A-7?of the case, the learned Tribunal is justified inupholding the orders of the authorities belowignoring that interest bearing advance cannotbe treated as payment for carrying out any workso as to attract Section 194C of IT Act, 1961,particularly when interest of ` 43.46 lacs hasaccrued to the appellant on the advance of` 6.97 crores, as per Annexure A-7? 2. Whether the ITAT is justified in confirming theorder of authorities below holding the appellantas liable u/s 194C of the Act by being swayedby the word 'contract' mentioned in the MOUinstead of observing the real intention of theMOU and thereby treating the supervisingagency i.e. GLADA as a contractor who wasactually a specialized agency of the governmentto be paid for supervising the work as an arm ofthe appellant, and to make payments to thecontractors subject to deduction of tax at sourceon behalf of the appellant, as per clause 1(f) of ITA No. 347 of 2011-3- the MOU, Annexure A-4, which has duly beendeducted as per Annexure A-6?deducted as per Annexure A-6? 3.Whether the ITAT is justified in confirming theorder of authorities below holding the appellantas liable u/s 194C of the Act despite the factthat the appellant was not at all required todeduct the tax at source on payment of interestbearing advance to GLADA which is not anexpenditure on 'carrying our any work' andwhen any payment was made out of the saidadvance for 'carrying out the work' tax was dulydeducted at, Annexure A-6?order of authorities below holding the appellantas liable u/s 194C of the Act despite the factthat the appellant was not at all required todeduct the tax at source on payment of interestbearing advance to GLADA which is not anexpenditure on 'carrying our any work' andwhen any payment was made out of the saidadvance for 'carrying out the work' tax was dulydeducted at, Annexure A-6? 4.Put shortly, the facts necessary for adjudication of theinstant appeal as narrated therein may be noticed. Theappellant/assessee entered into Memorandum of Understanding (MOU)on 24.3.2007 (Annexure A-4) with Punjab Urban Development Authoritypresently known as Greater Ludhiana Area Development Authority(GLADA), Ludhiana for supervision of the building project at theUniversity Campus on behalf of the appellant. The project was initiatedin the year 2007 and as per clause 3 of the MOU, interest bearingadvance was forwarded by the appellant to the GLADA with a clearunderstanding that when any payment is made to the contractorsexecuting the work, the GLADA will deduct the tax at source and the taxas per certificate dated 5.8.2010 (Annexure A-5) has been deducted bythe GLADA. On 3.12.2009, a TDS inspection was carried out by therevenue. A show cause notice dated 31.12.2009 was issued to theassessee to explain as to why TDS on amount of ` 11,67,79,805/-, ITA No. 347 of 2011-4- ` 1,26,000/- and ` 2,74,000/- was not deducted under Section 194C ofthe Act at the time of issuance of cheques to GLADA and as to whyinterest under Section 201(1A) of the Act be not charged. The IncomeTax Officer, TDS-II, Ludhaia vide order dated 15.2.2010 (Annexure A-1)passed under Section 201(1) of the Act created demand of ` 29,46,570/-including interest of ` 2,67,870/- under Section 201(1A) of the Act. Theassessee filed an appeal against the order, Annexure A-1, before theCommissioner of Income Tax (Appeals) [for brevity “the CIT(A)”]. TheCIT(A) vide order dated 15.10.2010 (Annexure A-2) upheld the order,Annexure A-1, and dismissed the appeal. Feeling dissatisfied, theassessee filed an appeal before the Tribunal who vide order dated27.4.2011 (Annexure A-3) dismissed the appeal. Hence, the instantappeals. 5.Learned counsel for the appellant-assessee relied upon thecertificate dated 5.9.2012 (Annexure P-8) issued by GLADA, confirmingthat the interest on payments received from Guru Angad Dev Veterinary& Animal Sciences University (GADVASU) for deposit works ofGADVASU during the financial years 2007-08 and 2008-09 relevant tothe assessment years 2008-09 and 2009-10, respectively have beenadded in the income of the GLADA and the income tax due on suchinterest amount has been paid. It has further been certified that TDShas been deducted and deposited wherever applicable on paymentsmade to the contractors in lieu of GADVASU work executed/done. 6.It was urged by learned counsel for the appellant that thematter is required to be remitted to the Assessing Officer to ascertain theveracity of factual matrix contained in Annexure P-8 and in case it isfound to be correct, then in view of the judgments of the Supreme Court ITA No. 347 of 2011 -5- in Hindustan Coca-Cola Beverage (P) Ltd. v. Commissioner ofIncome Tax (2007) 293 ITR 226 (SC); Karnataka High Court inChildren's Education Society v. Deputy Commissioner of IncomeTax (TDS) (2009) 319 ITR 409 (Kar.) and of this Court inCommissioner of Income Tax v. The Chief Electoral Officer,Chandigarh, ITR No. 183 of 1999 decided on 23.11.2010, no tax liabilitycould be created or sustained against the assessee for non-deduction oftax at source. 7.On the other hand, learned counsel for the revenuesupported the orders passed by the authorities below and prayed fordismissal of the appeals. 8.We have heard learned counsel for the parties and findsubstance in the submission of learned counsel for the appellant. ITA No. 347 of 2011 -5- in Hindustan Coca-Cola Beverage (P) Ltd. v. Commissioner ofIncome Tax (2007) 293 ITR 226 (SC); Karnataka High Court inChildren's Education Society v. Deputy Commissioner of IncomeTax (TDS) (2009) 319 ITR 409 (Kar.) and of this Court inCommissioner of Income Tax v. The Chief Electoral Officer,Chandigarh, ITR No. 183 of 1999 decided on 23.11.2010, no tax liabilitycould be created or sustained against the assessee for non-deduction oftax at source. 7.On the other hand, learned counsel for the revenuesupported the orders passed by the authorities below and prayed fordismissal of the appeals. 8.We have heard learned counsel for the parties and findsubstance in the submission of learned counsel for the appellant. 9.In view of the submission of learned counsel for the parties,it is considered appropriate that the matter is referred back to theAssessing Officer to examine and verify the factual matrix as urged bylearned counsel for the appellant. Accordingly, the impugned orderspassed by the Assessing Officer (Annexure A-1), the CIT(A) (AnnexureA-2) and the Tribunal (Annexure A-3) are set aside. The matters areremanded to the Assessing Officer for examining the veracity ofAnnexure P-8 and decide the issue afresh in accordance with law.Needless to say that nothing observed hereinbefore shall be taken to beexpression of opinion on the merits of the controversy. (AJAY KUMAR MITTAL)JUDGE February 10, 2016 gbs (RAJ RAHUL GARG) JUDGE